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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998 COMMISSION FILE NUMBER 1-10728
UNITED STATES FILTER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 33-0266015
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
40-004 COOK STREET, PALM DESERT, CA 92211
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (760) 340-0098
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
4 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2001 NEW YORK STOCK EXCHANGE
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation 8-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in the definitive proxy statement
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of June 26, 1998 was approximately $3,641,104,471.
The number of shares of Common Stock outstanding on June 26, 1998 was
161,565,388 shares.
Documents incorporated by reference:
Notice of 1998 Annual Meeting and Proxy Statement (Part III of Form 10-K).
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PART I
ITEM 1--BUSINESS
GENERAL
United States Filter Corporation (the "Company"), is a leading global
provider of industrial, municipal, commercial and consumer water and
wastewater treatment systems, products and services, with an installed base of
systems that the Company believes is one of the largest worldwide. The Company
offers a single-source solution to its customers through what the Company
believes is the industry's broadest range of cost-effective systems, products,
services and proven technologies. In addition, the Company markets a broad
line of waterworks distribution products and services. The Company has one of
the industry's largest networks of sales and service and distribution
facilities through more than 2,000 locations, including over 1,100 franchised
dealerships, 833 Company-owned or leased facilities and manufacturing plants
in 94 countries. The Company capitalizes on its large installed base,
extensive distribution network and manufacturing capabilities to provide
customers with ongoing local service and maintenance. The Company is a leading
provider of outsourced water services, including the operation of water and
wastewater treatment systems at customer sites. In addition, the Company is
actively involved in the development of privatization initiatives for
municipal water treatment facilities throughout the world and, specifically,
in the United States, Mexico and Canada. The Company also owns a significant
amount of properties with appurtenant water rights in the Western and
Southwestern United States, substantially all of which are leased to
agricultural tenants.
The Company's principal executive offices are located at 40-004 Cook Street,
Palm Desert, California 92211 and its telephone number is (760) 340-0098. In
this report, references to the Company or U.S. Filter shall mean United States
Filter Corporation and its subsidiaries, unless the context requires
otherwise.
Since 1991, the Company has acquired more than 150 United States based and
international businesses. These acquisitions have enabled the Company to
expand significantly the segments of the water and wastewater treatment
industry and water-related industries in which it participates, to complement
its technologies, products or services, to enter into additional geographic
areas and serve additional industries, municipalities, governments and other
customers and to expand its installed base, service network, range of products
and technologies and global distribution network. The Company intends to
actively seek additional acquisitions that enhance its geographic network,
customer base, and range of product offerings, technologies, markets and
industries served, or that provide opportunities to implement the Company's
one-stop-shop approach in terms of technology, distribution or service.
Kinetics. Effective December 31, 1997, the Company acquired The Kinetics
Group, Inc. ("Kinetics") in exchange for 5,803,803 shares of common stock of
the Company. Kinetics is a leading United States manufacturer and supplier of
sophisticated high-purity process piping systems for the handling of gases,
water and chemicals. Such systems are provided primarily to the
microelectronics, pharmaceutical and biotechnology industries, and are
critical to these operations. For its fiscal year ended September 30, 1997,
Kinetics' revenues were $387.8 million.
Memtec. The Company completed the acquisition of Memtec Limited ("Memtec")
in December 1997 for a total cash purchase price of $397.2 million. Memtec
designs and manufactures large volume membrane-based systems featuring
Memtec's proprietary microfiltration ("CMF") technology. It also designs and
manufactures an extensive range of products and systems worldwide that are
used in the filtration of liquid and gas streams in a wide variety of
industrial, municipal and commercial applications. For its fiscal year ended
June 30, 1997, Memtec's revenues were $243.6 million.
Culligan. Subsequent to the Company's fiscal year end, on June 15, 1998, the
Company acquired Culligan Water Technologies, Inc. ("Culligan"). Culligan is a
leading manufacturer and distributor of water purification and treatment
products and services for consumer, commercial and industrial applications.
Products and services offered by Culligan range from those designed to solve
residential water problems, such as filters for tap water
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and household water softeners, to equipment and services for commercial and
industrial customers, such as ultrafiltration and microfiltration products.
Culligan also offers desalination systems and portable deionization services
("PDS") designed for commercial and industrial applications. In addition,
Culligan sells and licenses dealers to sell five-gallon bottled water under
the Culligan trademark. Culligan has been an active participant in the water
purification and treatment industry since 1936, and its Culligan(R),
Everpure(R), Ametek(R) and Bruner(R) brands are among the most recognized in
the industry. For its fiscal year ended January 31, 1998, Culligan's revenues
were $505.7 million.
Bass Properties. In September 1997, the Company acquired more than 47,000
acres of land with appurtenant water rights (the "Properties") in the Western
and Southwestern United States from interests principally owned by affiliates
of the Bass family of Fort Worth, Texas. The Properties were acquired in
exchange for 8,000,000 shares of the Company's common stock and non-
transferable warrants to purchase 1,200,000 shares of common stock. The
substantial majority of the Properties are located in Imperial County,
California within the Imperial Irrigation District, and substantially all of
the Properties are currently leased to agricultural tenants.
THE WATER TREATMENT INDUSTRY
Global population growth, economic expansion, scarcity of available water
resources, heightened public concern about water quality and growing
regulatory and legislative requirements have resulted in continued growth in
demand for water and wastewater treatment. In addition to the need for potable
water, industrial companies require treated water for most manufactured
products, whether as an ingredient in the finished product or as part of the
manufacturing process. Accordingly, most manufacturers utilize water treatment
systems to purify their incoming, or "process", water. Public water
departments and private water companies, responsible for providing potable
water, employ water treatment technology to purify their water supply.
Furthermore, government regulations require most industrial companies and
municipalities to treat their outgoing wastewater.
Customers of the water and wastewater treatment industry can be classified
into three broad categories: (i) industrial and commercial businesses, which
include companies in such markets as pharmaceuticals, microelectronics,
automotive, power generation, chemical processing, oil and metal finishing;
(ii) municipal and private suppliers of public water and wastewater services;
and (iii) individual consumers of bottled water, household point-of-use
products, such as domestic filtration systems and parts, and water softening
and conditioning equipment.
Industrial and Commercial Users. Industrial and commercial users have a
significant need for treated water because it is a necessary component in many
products and industrial and other processes. The quality of water varies
dramatically across geographic regions, and water contains impurities that, if
untreated, can render it effectively useless for most industrial purposes. The
use of untreated water in manufacturing processes can result not only in
inconsistent product quality, but also in substantial equipment degradation,
which can lead to costly maintenance or replacement costs. Consequently, most
manufacturers treat their process water in order to maintain a consistently
acceptable degree of purity. For example, treated water is an integral
component of many consumer goods and is used in the manufacture of
pharmaceutical products, microelectronics and chemicals. Food and beverage
manufacturers require water with consistent quality to preserve uniformity of
taste and appearance in their products. As a result of these process
specifications, industrial customers often require a broad range of treatment
technologies to treat their process water.
In addition to treating their process water to ensure product quality,
industrial users are often required to treat their wastewater. Government
regulations regarding the disposal of aqueous industrial waste, combined with
public concern regarding industrial pollution, have led to increased awareness
on the part of businesses and public utilities as to the benefits of
wastewater treatment and waste minimization. In response to higher water
prices and rising wastewater discharge fees, industrial manufacturers have
also become aware of the cost-effectiveness of recycling their wastewater. As
a result of these factors, industrial companies increasingly require complex
systems and equipment to treat and recycle process water and wastewater.
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Municipal Users. Public awareness and governmental concern regarding the
increasing scarcity of water, the quality of drinking water, and the potential
health hazards associated with waste products discharged into the environment,
have resulted in legislation, regulation and enforcement requiring strict
standards for potable water and restrictions on the discharge of pollutants in
municipal wastewater.
The Company believes that, in many areas of the United States and throughout
the world, aged municipal water and wastewater treatment infrastructure is
operating at or near capacity, is in need of substantial capital expenditures
and is not well-equipped to satisfy increasing regulatory and legislative
requirements. In addition, many municipalities are experiencing reduced
economic resources. The Company believes that, as a result, many such
customers are seeking innovative solutions to their water treatment needs,
such as improved technologies and equipment, and various outsourcing and
service options, such as contract operations and privatization. Privatization
involves the transfer of ownership and operation of water and wastewater
treatment facilities to companies capable of providing such services on a
long-term basis.
Individual Consumers. The market for individual consumers consists of
bottled water, point-of-use products, such as residential filtration systems
and parts, and water softening and conditioning equipment installed at the
point of entry to a household water system. Consumers' needs vary by
geographic location as a result of differing water qualities and level of
economic development. This segment of the industry is highly fragmented, and
the Company believes there are thousands of participants in the water
conditioning and point-of-use products markets.
PRODUCTS AND SERVICES
NORTH AMERICAN PROCEsS WATER GROUP
The Company's North American Process Water Group provides single-source
solutions for the treatment of industrial process water through what the
Company believes to be the industry's broadest range of treatment systems,
services and proven technologies.
Products
The North American Process Water Group designs, engineers, manufactures and
installs pre-engineered and customized systems for the treatment of industrial
process water utilizing a broad range of physical, biological and chemical
treatment technologies that can be combined and configured to meet wide-
ranging customer needs. The Company's process water systems range from a pre-
packaged 0.5 liter-per-minute laboratory unit to a custom-designed boiler
feedwater system that delivers thousands of gallons of high-purity water per
minute.
The separation processes and technologies utilized by the Company in process
water treatment equipment and systems include, among others, cross-flow
filtration (including reverse osmosis, ultrafiltration and microfiltration),
media filtration (including microfiltration, particle filtration and ceramic
filtration), ion exchange, continuous deionization ("CDI"), electrodialysis,
carbon adsorption, biological processes, oxidation, disinfection, aeration,
coagulation, flocculation, evaporation and crystallization. The Company's
proprietary CDI process uses ion exchange resins, ion exchange membranes and
an electrical current to produce high-purity water continuously, without the
need for strong chemicals such as sulfuric acid and caustic soda required in
typical ion exchange regeneration systems.
The water treatment equipment and systems sold by the North American Process
Water Group are designed, engineered and assembled by the Company from one or
more pieces of equipment and a variety of other components manufactured by the
Company or purchased from third-party vendors. Larger industrial process water
treatment systems can be trailer- or skid-mounted, or permanently installed on
the customer's premises. Turnkey systems are generally designed and installed
within 24 months following acceptance of a customer order. On such projects,
the Company typically enters into lump-sum contracts under which the Company
receives payments throughout the contract term based on a predetermined
schedule.
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The Company's principal United States manufacturing facilities for the
design, engineering, fabrication and assembly of reverse osmosis, media
filtration and ion exchange process water treatment systems are located in
Rockford, Illinois; Whittier, California; Colorado Springs, Colorado;
Plantsville, Connecticut; and St. Genevieve, Missouri. These facilities
aggregate approximately 392,300 square feet, and typically include sales,
service and office space in addition to manufacturing capacity. The Company's
CDI equipment is assembled at its facility in Lowell, Massachusetts.
Laboratory and analytical testing for the North American Process Water Group
is done at the Rockford and Lowell facilities, and research and development is
centered at Lowell.
The North American Process Water Group also manufactures and sells
replacement parts required to support treatment systems manufactured by both
the Company and, to a limited extent, its competitors. In addition, the
Company markets consumables, such as membranes, ion exchange resin and carbon,
to its customers.
Services
The North American Process Water Group is a leading provider of SDI and PDS
for industrial and commercial users. SDI and PDS are terms given to portable
water deionization treatment equipment that uses ion exchange resins as the
filtration medium to produce high-purity water. Resin is retrieved and
transported by a Company service representative to a Company regeneration
plant for chemical recharging when it is exhausted. In the United States, the
Company operates 27 regeneration plants in 16 states. Deionization is widely-
used in commercial and industrial applications and provides the Company with a
recurring source of revenues and the opportunity to market its systems and
other services to its existing service deionization customer base. The
Company, through its carbon reactivation facility located in Parker, Arizona,
also has the ability to recycle spent carbon utilized in water treatment
systems sold by the Company.
Customer Markets
The markets for the North American Process Water Group's products and
services span many industries. Systems and products manufactured at United
States facilities are also marketed and sold throughout the world and, in
particular, Europe, Asia and Latin America, as well as in North America.
The North American Process Water Group's high-purity water treatment systems
are marketed to customers in the pharmaceutical/biotechnology, food and
beverage and medical/laboratory/research markets. Ultra-high-purity systems
are offered for the microelectronics industry, where the removal of
contaminants at a microscopic level is required. Other industrial markets for
the Company's process water treatment products and technologies include a wide
variety of applications in the automotive, chemical and petrochemical, metal
finishing, power generation, oil field and refinery, pulp and paper and mining
industries, all of which require improved or customized water in their
manufacturing or other industrial processes.
NORTH AMERICAN WASTEWATER GROUP
The Company's North American Wastewater Group is a leading provider of
systems and services to treat and recycle municipal and industrial wastewater,
and for the treatment of drinking water. It also provides liquid hazardous
waste treatment and recovery services.
Products
The North American Wastewater Group designs, engineers, manufactures and
installs equipment and systems for wastewater treatment by municipalities and
industrial and commercial customers, and for the treatment of drinking water,
utilizing a wide range of treatment technologies, including many of those
employed by the Company in process water applications. See "North American
Process Water Group--Products". Systems and products also are offered for the
treatment of municipal and industrial sludge and biosolids through dewatering,
thickening, conditioning, composting and drying techniques. In addition, the
Company provides systems to remove solids from liquid streams through the use
of self-cleaning bar filter screens, grinders, macerators, conveyors and
compactor systems. The Company also supplies material and equipment to
wastewater customers for the control and monitoring of hydrogen sulfide odor.
Time intervals for installation of
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completed equipment and systems sold by the North American Wastewater Group
can range from six months to two years after acceptance of the Company's bid,
depending upon the nature and complexity of the project. Replacement parts and
consumables are marketed and sold to North American Wastewater Group customers
as well.
The Company's broad range of technologies enables the North American
Wastewater Group to offer industrial customers products and systems for
removing from liquid waste streams heavy metals and other inorganic solids,
organics, toxic wastes, nitrogen compounds and solids, and free and emulsified
grease and oil. The Company's large volume fluid purification systems based on
its proprietary CMF membranes are particularly effective in the removal of
chlorine-resistant water-borne pathogens for both wastewater and potable water
applications, while also providing high tolerance to feed stream variation and
requiring minimal use of chemicals and human resources. Evaporation and
crystallization technologies are used to clean and recycle wastewater,
particularly in zero liquid discharge industrial applications. The Company's
significant disinfection and biological treatment capabilities, including
fixed-film and suspended growth systems that utilize microorganisms for
nitrification and denitrification, specific organic destruction, BOD/COD
reduction and nutrient removal, are critical in municipal wastewater and
sewage treatment. The Company offers cryptosporidium giardia cyst removal,
nitrate removal, reverse osmosis desalination and water softening
technologies, as well as intake screens, aerators, clarifiers and disinfection
feed equipment to private and municipal providers of drinking water.
Biological, chemical, carbon adsorption and fluidized bed technologies are
offered to customers which require groundwater remediation systems or landfill
leachate treatment. Landfill leachate treatment systems are designed to treat
or eliminate wastewater drainage into groundwater and surrounding waterways.
The North American Wastewater Group manufactures a variety of equipment and
products for inclusion in its systems. Components for these systems are also
purchased from third party vendors. The Company's principal North American
facilities for the manufacture and assembly of wastewater treatment products
and systems are located in Madison, Indiana; Bradley, Illinois; Waukesha,
Wisconsin; Rothschild, Wisconsin; Thomasville, Georgia; Vineland, New Jersey;
Waterboro, South Carolina; Ames, Iowa; Edwardsville, Kansas; Warrendale,
Pennsylvania; Billerica, Massachusetts; Sarasota, Florida and Holland,
Michigan. These facilities aggregate approximately 1,030,000 square feet,
including, in most cases, sales and office space as well as manufacturing
capacity. Design and engineering for North American Wastewater Group products
is performed at the Warrendale location, as well as at facilities in
Naperville, Illinois and Pittsburgh, Pennsylvania. Laboratory and analytical
testing, including treatability studies, are conducted at the Warrendale and
Rothschild plants, and at Company facilities in Roseville, Minnesota; Parker,
Arizona and Vernon, California.
The Company also manufactures automation and control systems for municipal
water and wastewater treatment equipment using liquid level pressure and flow
sensors, automatic pump controllers/alternators and remote control technology
capabilities at a plant in St. Paul, Minnesota.
Services
Contract Operations. The Company provides services under more than 200
municipal and industrial wastewater treatment plant maintenance and operation
contracts, including plant start-up assistance, plant operations and
maintenance, planning and management, training of plant supervisors, operators
and laboratory and maintenance personnel, refining process systems, management
systems for process control, and plant diagnostic evaluations and energy
audits. The Company also provides specialty repair and cleaning services for
industrial wastewater management equipment. The Company's maintenance and
operation contracts generally range in length from three to 10 years and often
provide the owner of the facility with renewal options. The majority of such
contracts are fixed price or lump sum contracts. In addition to operation and
maintenance of customer-owned facilities, the Company also offers the option
of Company-owned wastewater treatment facilities designed, constructed, owned
and operated by the Company adjacent to or within industrial customers'
facilities.
Privatization. The Company is actively involved in the development of
privatization initiatives for municipal wastewater treatment facilities. In
July 1995, a subsidiary of the Company was the first to acquire a publicly-
owned wastewater treatment plant in the United States pursuant to Executive
Order 12803 issued in
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1992, which was intended to facilitate the privatization of municipal
facilities. The agreement provides for a subsidiary of the Company to operate
the 4.5 million gallon per day MCD Franklin Wastewater Treatment Plant in
Franklin, Ohio for a period of 20 years and to expand the facility as needed
to meet future population growth.
Outsourced Water. The North American Wastewater Group's service business
also includes short- and long-term contracts for the construction and
operation of customer-owned process water treatment systems, ongoing service
and maintenance of existing process water treatment systems and mobile process
water treatment services. The Company's outsourcing programs involve standard
products and custom-designed systems installed and operated on the customers'
sites by the Company's trained service technicians. Service contracts range in
length depending on type of service from one to five years and are on a fixed-
price basis, subject to adjustments for inflation and other cost increases.
The Company also offers customers the opportunity to outsource their water
purification requirements through Company-owned and operated on-site water
treatment systems. These contracts range in length from three to 20 years. In
1995, the Company formed Treated Water Outsourcing ("TWO"), a joint venture
with Nalco Chemical Company ("Nalco"), to finance, build, own and operate
process water treatment systems at customer sites under long-term contracts.
Nalco, a leader in water chemistry, supplies the chemicals necessary for TWO's
water treatment systems, while the Company supplies the capital equipment,
design and service functions to meet TWO's customers' needs. TWO has access to
Nalco's extensive sales force and customer base. Nalco and the Company each
provide advisory and administrative services in order to assist TWO in bid and
contract preparation and marketing.
Resource Recovery. Another component of the Company's service business is
its hazardous waste treatment facilities located in Roseville, Minnesota and
Vernon, California. The Roseville facility operates a Resource Conservation
and Recovery Act ("RCRA") permitted Part B centralized treatment and recovery
facility. The Vernon facility operates a similar RCRA Part B facility. These
facilities receive and treat wastes generated primarily by the metal finishing
industry and printed circuit board manufacturers, and recover from these
wastes and sell reusable chemicals and metals. These facilities offer the
Company's customers a cost-effective recovery approach that reduces processing
costs, the quantity of sludge generated and the environmental exposure
associated with industrial waste. The Company also operates a facility in
Parker, Arizona, which is authorized under Section 3005 of RCRA for the
reactivation of spent carbon. The Company is currently negotiating the final
terms and conditions for a RCRA Part B permit for such facility.
Customer Markets
Municipalities in North America, Europe, Asia and Latin America are a
significant market for systems and products manufactured by the North American
Wastewater Group in the United States. Municipal sewage plants often utilize
three stages of treatment (primary, secondary and tertiary) before discharge
to the environment. The Company offers wastewater and biosolids treatment
systems to address those requirements. In addition, the Company's media
filtration, reverse osmosis and ion exchange technologies have the capability
of adding a fourth stage of treatment of municipal wastewater by removing
remaining contaminants to a purity level that allows water to be recycled and
reused in industrial applications. These technologies can reduce the impact of
industrial growth in communities where water tables are low.
Systems produced by the North American Wastewater Group are marketed to a
variety of industrial customers. Markets include the pulp and paper, chemical,
petrochemical, mining, power generation, meat and poultry, food processing,
automotive, metal finishing and microelectronics industries. The recycle/reuse
systems offered by the Company permit zero liquid discharge applications,
providing industrial customers with the ability to circulate treated water
back into plant processes, thereby reducing water usage, operating costs and
discharges to the environment. The Company also offers outsourced water
services to customers in these markets, including financing, operating and
maintaining process water treatment systems at customer sites, and providing
mobile water treatment services on an emergency or short-term basis. In
addition, prepackaged sewage treatment systems are sold to commercial and
residential land developers, as well as industrial plants.
The North American Wastewater Group also sells both custom-engineered and
pre-assembled treatment systems to municipal and private providers of drinking
water.
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WATERWORKS DISTRIBUTION GROUP
The Company's Waterworks Distribution Group markets a broad line of water
distribution and sewer and stormwater collection equipment and supplies,
including underground pipe, pipe fittings, valves, fire hydrants, water meters
and other related equipment necessary to underground construction. The
Waterworks Distribution Group purchases more than 32,000 products from
approximately 2,000 manufacturers and suppliers. Certain products manufactured
by the Company also are sold by the Waterworks Distribution Group, as well as
through the Company's other sales channels. The Company believes it is one of
the largest suppliers of water distribution and sewer products in the United
States.
The Waterworks Distribution Group's products are marketed primarily to
contractors and municipalities through a network in the United States of more
than 135 service centers located in 30 states. Each service center covers a
radius of up to 200 miles, and maintains an inventory of water and sewer
products that are sold to the industry at large. More than 95% of orders are
filled and shipped from the service centers on the date that the order is
requested by the customer. Products are transported to customers through a
fleet of more than 500 vehicles, with larger orders being shipped direct from
the manufacturer.
All of the Waterworks Distribution Group's locations are electronically
linked through on-line systems. These systems give the individual service
centers the ability to utilize inventory located throughout the United States
to service their accounts. The system also includes an inventory management
system which ensures that sufficient levels of inventory are available at each
service center. The Waterworks Distribution Group also offers municipalities
on-line computer access that allows the customer to place orders, review
quotations, check inventory and shipment status and confirm invoices.
The Waterworks Distribution Group also provides various services to its
customers, including automatic meter reading installations; water meter
testing, repair and certification; fire hydrant maintenance and replacement;
manhole rehabilitation; pipeline taps; valve installations, repairs,
replacement and testing; and on-the-job heavy duty polyethylene fusion
capabilities.
NORTH AMERICAN CONSUMER AND COMMERCIAL GROUP
Consumer
The Company's North American Consumer and Commercial Group is a leading
manufacturer and distributor of water purification and treatment products to
residential customers in North America. The Company's consumer products and
services address residential water problems, including the removal of lead,
cysts and other health-related contaminants, the elimination of chlorine and
unpleasant odors and tastes and the softening of water by the ion exchange
process. The North American Consumer and Commercial Group also bottles, sells
and delivers five-gallon bottled water to homes and businesses, principally on
a route basis. The Company also supplies water filtration products and systems
to commercial enterprises.
The North American Consumer and Commercial Group, through its independent
dealers and Company-owned outlets, sells, installs and services a wide range
of products which address household water problems. These products include
point-of-use filtration units for improving the quality of drinking water,
which utilize media filtration, reverse osmosis and/or carbon filter
processes. These products are designed to be installed in basements or
garages, under sinks or directly at the point of use. The Company also markets
a line of point-of-use filtration systems for recreational vehicles. Point-of-
use systems are designed to reduce or remove from household water dirt and
other sediment, rust, lead, chlorine, sulfur, off-tastes, odors, and other
chemicals and microscopic impurities, including parasitic protozoan cysts. In
1988, the Company's Culligan subsidiary became the first to receive
certification from the independent National Sanitation Foundation ("NSF")
under NSF's standard for residential reverse osmosis drinking water systems.
Culligan has since developed many proprietary reverse osmosis systems to
improve the quality of drinking water, including the latest model of The Good
Water Machine(TM) Drinking Water System that utilizes the reverse osmosis
process to filter tap water three times before it comes out of the faucet.
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The North American Consumer and Commercial Group also sells water softening
and conditioning equipment and other products installed at the point of entry
to a residential water system, designed to soften hard water by reducing or
removing minerals through ion exchange technology. Household automatic water
softeners and portable exchange water conditioners have constituted a large
portion of the business of the Company's Culligan subsidiary since its
inception in 1936.
The North American Consumer and Commercial Group also manufactures and sells
a line of water filtration products for sale through department stores, mass
retailers and home centers. These products include faucet mount filters,
under-counter systems, refrigerator water/ice maker filter systems and a
sediment and rust reduction whole-house filtration system. A designer glass
pitcher filtration system and monitored faucet mount systems were introduced
in the fiscal year ended March 31, 1998 ("fiscal 1998"). The Company's
Culligan subsidiary has entered into marketing partnerships with a major
appliance manufacturer to provide a refrigerator water/ice maker filtration
system and with Moen Incorporated to develop Moen(R) faucet products
incorporating the Company's water filtration assemblies.
The North American Consumer and Commercial Group's more than 750 independent
franchised dealers and more than 115 Company-owned businesses serving the
North American market provide complete solutions to household water problems
through testing, product selection, installation, monitoring and service.
Franchised dealers generally purchase all their requirements for water
treatment products from the Company, including equipment for sale, rental or
use in their portable exchange service programs. Generally, approximately one-
half of a franchised dealer's or Company-owned business' revenues are derived
from rental and service income from existing customers. The Company also
offers financing of systems to residential customers.
The principal design, manufacturing and assembly facilities for consumer
products in North America are located in Northbrook, Illinois; Wesmont,
Illinois; Sheboygan, Wisconsin; Regina, Saskatchewan, Canada and Mississauga,
Ontario, Canada. These facilities aggregate approximately 730,000 square feet.
The Northbrook facility also includes approximately 100,000 square feet of
office space and laboratories for testing and analysis of water samples.
Household products for the European market are also manufactured and assembled
at the Northbrook facility.
The Company sells water in five-gallon bottles on a route basis through its
residential and commercial distribution network, and in a limited number of
shopping centers on a walk-up basis. Purified drinking water is produced at
over 100 Company-owned, franchised or licensed bottling locations and sold
through over 500 dealers and Company-owned branches in the United States. The
Company receives royalty payments from its licensed producers and franchised
dealers based on sales volume. The North American Consumer and Commercial
Group's representatives typically pick up for refill and deliver the five-
gallon bottles to a customer's home or office on a regular route. Customers
rent the bottled water dispensers from the Company or the franchised dealers.
In addition, at a small number of locations in Texas and Florida, the Company
also sells purified water by refilling customer-supplied containers at
shopping center locations. Consumer water filtration and water-quality related
products are also sold at these locations. Through a recent acquisition, the
Company also has established a base in the self-fill vend segment in food,
drug and convenience stores. The Company currently does not participate to any
significant extent in any other segment of the bottled water market.
The North American Consumer and Commercial Group also assembles and sells
water bottling plant equipment, including semi-automatic, adjustable fill
tables, bottling machines, injection systems for minerals, chemicals and
flavors, and ozone and repressurization post-treatment systems for bacterial
control in a 4,800 square foot facility in Santa Ana, California.
Commercial
The North American Consumer and Commercial Group designs, manufactures,
sells, installs and services a wide range of products to address the water
problems of commercial enterprises. These products include filtration systems,
reverse osmosis units, water softeners, deionizers and high quality
ultrafiltration and microfiltration products capable of producing ultrapure
water.
9
<PAGE>
Commercial users require water treatment systems that remove dissolved
minerals, such as calcium, magnesium, iron or manganese, and health-related
contaminants from the available water supply and are capable of treating large
quantities of water on a cost-effective basis. The Company's commercial
products use technologies similar to its residential products, but that afford
greater capacity, durability and effectiveness and allow customers increased
flexibility for customization. For example, the Company's filters, deionizers
and softeners provide food and beverage manufacturers with consistently high
quality water enabling them to preserve uniformity of taste and appearance in
their products, reduce health-related contaminants and minimize equipment
maintenance costs. Other commercial enterprises such as airlines, hotels,
restaurants, car washes, laundromats, office buildings and apartment complexes
use the Company's products to condition, filter, deionize and otherwise treat
large quantities of water.
The Company's Everpure subsidiary is a leading supplier of water filtration
products to the food service industry. Everpure's line of food service water
filtration products includes systems for post-mix beverage dispensers, ice
machines, coffee makers, steamers and vending machines that are designed to
treat all levels of water contamination and to ensure that consumer products
such as coffee, soups or ice are of the highest quality. Everpure(R) systems
also decrease maintenance costs and extend the life of water-using equipment
by removing dirt and other abrasive particles that can damage the internal
workings of such equipment. Everpure(R) products are used extensively in many
major food and beverage retailers, including McDonalds's(R), Burger King(R)
and Starbucks(R), as well as convenience store chains around the world,
including 7-Eleven(R) and Circle K(R).
Sales, installation and service for the commercial market are primarily
through the North American Consumer and Commercial Group's distribution
network for consumer and commercial products. In addition, there are over 250
distributors and authorized agents in the United States, Western Europe and
other locations that distribute Everpure(R) water filtration products and over
30 independent distributors throughout the United States that distribute the
Novatech Water Filtration products. Products for the commercial market are
manufactured and assembled at the Northbrook, Wesmont, Sheboygan and
Mississauga facilities of the North American Consumer and Commercial Group.
FILTRATION AND SEPARATION GROUP
The Company's Filtration and Separation Group includes the businesses
acquired through the acquisition of Memtec, other than the Memcor division
(which is included in the North American Wastewater Group), and also includes
the Company's ceramic membrane and metal screens businesses.
The Filtration and Separation Group designs, engineers, manufactures and
markets a broad range of proprietary and standard disposable filters and
filter housings for the fine filtration of liquid and gas streams. The Company
produces cartridge and bag filters in a variety of configurations using four
primary types of filtration media: textile fibers, non-woven sheet, meltblown
polymers and proprietary asymmetric membranes. The Company's filters and
filter housings are sold primarily into the chemical processing, coatings, oil
and gas, food and beverage and electronics markets. They are manufactured at
Company facilities in Baltimore, Maryland and Lyon, France.
The Filtration and Separation Group also designs and manufactures a wide
range of fine metallic fiber filter media, elements, housings and valves for
applications in environments where extreme heat, pressure or corrosive
chemicals are present. These products currently are marketed principally to
polymer manufacturers and airbag manufacturers. The Company's metallic fiber
filters also are used in catalyst containment; in the filtration and
purification of hot gases; in the filtration of ink in ink jet printer
cartridges; and in a variety of non-filtration applications. These products
are manufactured at an approximately 278,400 square foot facility in DeLand,
Florida.
The Filtration and Separation Group also manufactures and markets a wide
range of depth filters, a targeted range of pre-filter cartridges in pleated
and wound configurations, proprietary membrane filters and associated
filtration products. These filters are manufactured at an approximately
245,600 square foot facility in Bad
10
<PAGE>
Krenzbach, Germany, and are sold primarily into the food and beverage, fine
chemicals and pharmaceuticals markets.
The Company manufactures Membralox(R) ceramic membranes in France and
Germany that are used to permit the achievement of selective separations in
extreme operating environments.
The Filtration and Separation Group produces and installs profile wire
screens for groundwater applications, oil and gas wells, food processing and
coal/mineral processing. These welded, continuous-slot screen products are
designed and manufactured at a 188,800 square foot facility in New Brighton,
Minnesota as well as facilities in Brisbane, Australia; Ternay, France;
Ahmedabad, India; Hyderabad, India; Dublin, Ireland; Yokohama, Japan and
Auckland, New Zealand.
INDUSTRIAL PRODUCTS AND SERVICES GROUP
The Company's Industrial Products and Services Group is the leading domestic
producer of sophisticated high-purity process piping systems for the handling
of gases, water and chemicals. The Company also performs retrofits and
expansions of these systems for its installed base of customers, typically as
recurring contract revenue. Such systems are provided primarily to the
microelectronics, pharmaceutical and biotechnology industries, where they are
critical to operations. The Company's orders and contracts for these systems
range from several thousand to tens of millions of dollars and vary from
components and fabricated assemblies to entire manufacturing systems.
The Industrial Products and Services Group's piping assemblies must meet
strict purity and documentation requirements and are typically pre-fabricated
at a Company cleanroom and other fabricating facilities or on construction
sites in cleanrooms. In order to meet the strict requirements for welding, the
Company uses automatic orbital welding machines which employ microprocessors
to control all aspects of the welding operation. The Company typically does
not manufacture commodity pipes or fittings. The Industrial Products and
Services Group offers its customers turnkey and design/build operations,
including engineering and design, quality assurance and control and program
management services and the manufacturing of specialty components.
The Industrial Products and Services Group also manufactures a line of
surface finishing and preparation systems for use by a variety of industrial
customers, including foundries, steel processors, aircraft manufacturing,
automobile producers and rubber and plastics producers, in cleaning and
finishing metal and other materials. The Company manufactures portable, fully-
enclosed units for finishing difficult-to-clean surfaces such as concrete
surfaces, ship decks and hulls. These systems capture the emissions
particulate generated by such operations, preventing contamination of the
environment.
INTERNATIONAL PROCESS AND WASTEWATER GROUP
The Company has substantial sales and significant operations outside the
United States, principally in Europe, the Asia Pacific region, Latin America
and the Middle East. Information regarding the amounts of revenue, operating
profit and identifiable assets attributable to each of the Company's
geographic areas and export sales is described in the Notes to Consolidated
Financial Statements included in Item 8 of this Form 10-K.
Europe, the Middle East and Africa
Process water and wastewater treatment equipment and systems are designed,
engineered, serviced and manufactured at over 50 facilities in more than 15
countries throughout Europe, the Middle East and Africa. This broad presence
allows the Company to provide systems that respond to important local
differences in environmental legislation, water quality, availability and
treatment cost. A wide range of separation processes and treatment
technologies are employed in these systems, including most of those utilized
by the North American Process Water Group and the North American Wastewater
Group in the United States. The Company's systems and products are sold
internationally to municipalities for drinking water purification, sewage
treatment and sludge handling. The Company also has a wide variety of
industrial customers in the pharmaceutical, food
11
<PAGE>
and beverage, power generation, metal finishing, chemical, petrochemical and
automotive markets. Manufacturing facilities in Europe for industrial and
municipal water and wastewater treatment equipment and systems include plants
in Tarbes, France; Almelo, the Netherlands; Stoke-on-Trent, United Kingdom;
Ransbach-Baumbach, Germany; Soresina, Italy; and Madrid, Spain.
The Company also provides deionization services for industrial and
laboratory users throughout western Europe, operating regeneration plants in
the United Kingdom, France, the Netherlands, Germany and Spain. Also as part
of its service business in Europe, the Company operates two municipal water
treatment plants in Italy serving more than 1.5 million people under long-term
contracts.
Asia Pacific
Through manufacturing facilities in Australia, Singapore, Taiwan, Japan, and
India, and regeneration facilities in Singapore, Malaysia and the Philippines,
the Company supplies a variety of process water and wastewater treatment
products and services, including SDI, to microelectronics manufacturers and
other industrial, commercial and municipal customers in the Asia Pacific
region. In addition, water, wastewater and sewage treatment systems designed
and manufactured at these locations and in the United States and Europe are
marketed through engineering and sales offices in Australia, New Zealand,
Singapore, Malaysia, Australia, Indonesia, The Peoples Republic of China,
Taiwan, Japan, Korea and India. Accordingly, the Company can offer a full
range of project capabilities in the Asia Pacific region, from the supply of
standard equipment to design/build and outsourcing projects. In addition to
the Company's local engineering and sales offices, the Company's products and
systems are marketed throughout the Asia Pacific region through a network of
manufacturers' representatives.
Latin America
The Company markets process water and wastewater treatment systems
engineered and assembled by the North American Process Water Group and the
North American Wastewater Group, through sales locations in Mexico, Venezuela,
Brazil, Puerto Rico and Argentina. In Mexico, the Company also has a
manufacturing facility where pumps and other equipment are made for sale
around the world. The Company operates an SDI business that is focused on
industrial and commercial customers throughout Mexico. The Company also owns
and operates two concessions for wastewater treatment facilities under long
term contracts for the cities of Cuernavaca and Yautepec, Mexico. These
wastewater systems were designed, manufactured, and installed by the Company.
Consumer and Commercial Group
The International Process and Wastewater Group also sells, installs and
services a broad range of household and consumer water filtration products
through a network of 240 independent dealers and distributors and 70 Company-
owned businesses throughout Europe and in other international markets. In
addition, the Company's Everpure subsidiary supplies water filtration
equipment to the food service industry in most western European countries and
Japan. Consumer and commercial water filtration equipment is manufactured by
the Company at facilities in Bologna, Italy and Barcelona, Spain. Everpure has
facilities in Atsugi, Japan and Hwertic, Belgium that do light assembly and
also warehouse and sell products manufactured in the United States.
SALES AND MARKETING
The Company maintains a worldwide distribution network of sales and service
facilities, a global network of manufacturers' representatives and
international representatives, and numerous distributors and licensees.
North American Process Water and Wastewater Groups. Sales and marketing
responsibilities for the North American Process Water Group and North American
Wastewater Group are divided across five geographic regions in the United
States. Each industrial, commercial and municipal sales prospect is reviewed
to determine which of the Company's engineering and manufacturing resources
should be utilized to best meet the customer's
12
<PAGE>
needs. Technical support is available across the Company to assist marketing
personnel in working with the end-user to select the appropriate technology
for a given application.
North American Process Water Group products and systems are sold
predominantly through a direct sales force. The North American Wastewater
Group's sales are made principally through a network of independent
manufacturer's representatives. The Company's manufacturer's representatives
are independent businesses which are paid on a commission basis and in certain
cases have the exclusive right to sell the Company's products and systems in a
specified geographical area. The Company provides both engineering and
marketing support to its manufacturer's representatives. A portion of the
Company's revenues are derived from recommendations by independent engineers
and consultants who advise the ultimate customer.
North American Consumer and Commercial Group. The North American Consumer
and Commercial Group distributes and services its products through a network
of independent franchised dealers, Company-owned businesses, independent water
treatment dealers, plumbing wholesalers, consumer retailers and food, drug and
convenience stores operating throughout the United States and Canada. The
franchised dealers range from small local operations involving only a few
employees to large multiple-site operations. Each franchised dealer and
Company-owned business is assigned a primary area of geographic responsibility
(typically, a local community or metropolitan area), although the territories
are not exclusive. Certain of the franchised dealers and Company-owned
business locations, particularly the larger ones, are capable of providing
standard and special order products and services to the commercial market. The
Company also has a network of distributors and authorized agents for its
Everpure(R) water filtration products.
The Company provides its franchised dealers and branch operations with a
variety of services, including training, education and technical assistance.
The Company employs technical service engineers who travel throughout the
United States assisting with water quality needs. Commercial job
specifications and proposals are supported by applications and technical
engineers located at the Northbrook facility. In addition, the Company
provides the franchised dealers with significant marketing services and
support, including an extensive co-operative advertising program. A finance
subsidiary of the Company provides intermediate-term loans to franchised
dealers for equipment placed on rental or lease.
International Process and Wastewater Group. Sales of process water and
wastewater treatment systems and products outside the United States are
conducted through a direct sales force and international representatives. In
addition, a number of licensees manufacture and sell certain of the Company's
products in Europe, Asia, Africa, Australia and Mexico. The Company provides
technical support to these licensees and is either paid a royalty on sales or
participates in the sale directly.
Consumer and commercial water filtration products are distributed throughout
Europe and in other international locations through a network of independent
dealers and distributors and Company-owned businesses. Water filtration
equipment for the food service industry outside the United States is also
marketed directly to fast food and convenience store chains and equipment
manufacturers.
Other Groups. The Waterworks Distribution Group's equipment and supplies are
marketed by Company-employed salesmen. Salesmen call directly on customers
within their assigned territories and work with architects, engineers and
government agencies to assist customers in determining their product needs.
The Filtration and Separation Group's products are distributed through a
worldwide network of both independent distributors and Company-employed sales
personnel.
The Industrial Products and Services Group markets its systems principally
through a direct sales force. Sales outside the United States may also be made
by representatives of partnering companies.
13
<PAGE>
RAW MATERIALS AND SUPPLIES
Raw materials, primarily steel, plastics, filtration media, ion exchange
resins, membranes, cartridges and component parts such as pumps and valves,
and products purchased for resale by the Waterworks Distribution Group, are
available from a number of sources. The Company has not experienced difficulty
in obtaining the materials, components and supplies used in its operations.
BACKLOG AND SEASONALITY
The Company had the following backlog as of March 31, 1997 and 1998, which
includes capital equipment purchase orders and revenues expected to be
generated during the next 12 months under certain long-term contracts. The
capital equipment orders are scheduled for delivery and installation during
the following 12 months and are believed by management to be firm.
<TABLE>
<CAPTION>
AMOUNT
DATE (IN THOUSANDS)
---- --------------
<S> <C>
March 31, 1997............................................ $783,217
March 31, 1998............................................ $944,869
</TABLE>
The rate of booking new orders varies from month to month. In addition, the
orders have varying delivery schedules, and the Company's backlog as of any
particular date may not be representative of actual revenues for any
succeeding period. There is no material backlog for water distribution
equipment and supplies since these orders normally are shipped within one to
ten days following receipt of an order. Backlog also is not a meaningful
measure of ongoing business in the filtration and separation and the consumer
and commercial water businesses.
Certain of the Company's contracts for engineered products and services
provide for progress payments during the engineering and manufacturing period.
The balance is due upon acceptance or start-up, or, in the case of most
municipal and governmental purchasers, 90 to 180 days after delivery and
installation. Demand for most of the Company's products and services is not
typically affected by seasonal changes. The Waterworks Distribution Group's
operations are affected by winter weather in parts of the United States, and
generally can be expected to generate lower sales in the third and fourth
fiscal quarters.
PRODUCT DEVELOPMENT; PATENTS, TRADEMARKS AND LICENSES
In order to provide its customers with cost-effective water treatment
solutions, the Company offers a wide variety of filtration and purification
technologies. The Company uses its own research and development, augmented by
customer-funded, vendor-funded and government-funded research spending, in
order to provide its customers with advanced products. In addition, the
Company uses its analytical laboratories to perform water analyses and to test
the effectiveness of filtration media and techniques in order to enhance the
Company's capability to design systems tailored specifically for the
particular needs of customers. The Company's product development expenditures
for the fiscal years ended March 31, 1996, 1997 and 1998 were approximately
$6.5 million, $8.3 million and $15.9 million, respectively.
The Company currently owns a significant number of patents in the United
States and in various countries worldwide. Although the Company believes that
the patents and trademarks associated with the Company's various product lines
are of value, it does not consider any of them to be essential to its
business.
Trademarks and brand name recognition are important to the Company,
particularly in the North American Consumer and Commercial Group. The Company
has registered its trademarks and believes that there is significant value
associated with them. The loss of the Culligan trademark could have a material
adverse effect on the Company.
14
<PAGE>
COMPETITION
All of the industries in which the Company competes are highly competitive,
and most are fragmented, with numerous regional and local participants. There
are competitors of the Company in certain industries that are divisions or
subsidiaries of companies that have significantly greater resources than the
Company.
The process water and wastewater treatment industry is fragmented, with
numerous regional participants in the United States and in countries
throughout the world that are limited in their current geographic focus. This
fragmentation is primarily due to local differences in water quality and
supply, different levels of demand for water resulting from varying
concentrations of industry and population, customer relationships and local
governmental regulation. Most participants in the water and wastewater
treatment industry provide a limited number of treatment technologies, a
limited number of products or services, or focus on a particular industry.
While the number of industry participants ranges from several large companies
to hundreds of small local companies, there are few competitors in the
industry that offer a full range of water and wastewater treatment equipment,
technologies and services. The Company believes it offers the industry's
broadest range of cost-effective treatment systems, services and proven
technologies.
The process water and wastewater treatment industry is highly competitive.
The Company knows of no reliable statistics that provide a basis from which to
estimate the Company's relative competitive position in these industries. The
Company's process water treatment business competes in the United States and
internationally principally on the basis of product quality and
specifications, technology, reliability, price, customized design and
technical qualifications, reputation and prompt availability of local service.
The Company's wastewater treatment business competes in the United States and
internationally largely on the basis of the same factors, except that pricing
considerations can be predominant among competitors that have sufficient
technical qualifications, particularly in the municipal contract bid process.
The residential water industry is also highly competitive and fragmented.
The Company competes in this market with companies with national distribution
networks, businesses with regional scope and local product assemblers or
service companies, as well as retail outlets. The Company believes that there
are thousands of participants in the residential water business. The consumer
products business competes principally on the basis of price, product quality
and "taste," service, distribution capabilities, geographic presence and
reputation.
In connection with the marketing of waterworks distribution equipment and
supplies, the Company competes not only with a large number of independent
wholesalers and with other distribution chains similar to the Company, but
also with manufacturers who sell directly to customers. The principal methods
of competition for the Company's waterworks distribution business include
prompt local service capability, product knowledge by the sales force and
service branch management, and price. Due to the various sources and methods
of competition and types of products sold by the Company, the Company knows of
no reliable statistics upon which there might be based an estimate of the
Company's relative competitive position in this market.
The Company's filtration and separation business competes in the United
States and internationally principally on the basis of price, technical
expertise, product quality and responsiveness to customer needs, including
service and technical support. The high-purity process piping systems business
within the Company's Industrial Products and Services Group competes in the
United States and internationally principally on the basis of reputation,
previous project experience, the ability to meet system specifications and
project deadlines and price. The surface finishing and preparation business
within that Group competes principally on the basis of reputation, product
offering, service and technical capabilities.
PRODUCT WARRANTIES; INsURANCE
The Company generally offers one-year product warranties on its equipment,
and many of the Company's consumer products carry a limited lifetime warranty.
In some instances the warranties may be for shorter or longer periods,
consistent with market practices. Performance guarantees apply to most of the
Company's systems. The costs incurred by the Company to date under its product
warranties and systems guarantees have not been material.
15
<PAGE>
The Company maintains insurance for itself and its principal United States
based and international subsidiaries in amounts and with coverages which the
Company believes to be adequate and appropriate for the covered risks.
EMPLOYEES
As of March 31, 1998, the Company had approximately 18,500 full-time
employees assigned to the Company's various worldwide offices and facilities.
Certain of the Company's United States employees at 22 plants are covered by
collective bargaining agreements, the terms of which expire between June 1998
and November 2003. Certain of the Company's non-United States based employees
also are covered by statutory and other contractual arrangements. The Company
believes that its relationships with the unions and with its non-represented
employees are good.
16
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- ---
<C> <C> <S>
Richard J. Heckmann.............. 54 Chairman of the Board of Directors,
Chief Executive Officer and President
Nicholas C. Memmo................ 36 President and Chief Operating Officer--
North American Process Water Group
Andrew D. Seidel................. 36 President and Chief Operating Officer--
North American Wastewater Group
Harry K. Hornish, Jr. ........... 53 President and Chief Operating Officer--
Waterworks Distribution Group
Calvin R. Hendrix................ 47 President and Chief Operating Officer--
North American Consumer and Commercial
Group
Kenneth I. Wellings.............. 51 President--U.S. Filter International
Andrew Denver.................... 49 President and Chief Operating Officer--
Filtration and Separation Group
David J. Shimmon................. 39 President and Chief Operating Officer--
Industrial Products and Services Group
Thierry Reyners.................. 53 President and Chief Operating Officer--
European Water and Wastewater Group
Kevin L. Spence.................. 41 Executive Vice President and Chief
Financial Officer
Damian C. Georgino............... 37 Executive Vice President, General
Counsel and Corporate Secretary
Michael J. Reardon............... 44 Executive Vice President and Chief
Administrative Officer
Tim L. Traff..................... 39 Executive Vice President--Corporate
Development
James W. Dierker................. 35 Vice President, Controller and
Treasurer
Michael E. Hulme, Jr. ........... 36 Assistant General Counsel and Assistant
Secretary
</TABLE>
Richard J. Heckmann was elected Chairman of the Board of Directors, Chief
Executive Officer and President of the Company on July 16, 1990. Mr. Heckmann
was a Senior Vice President at Prudential-Bache Securities in Rancho Mirage,
California from January 1982 to August 1990. He joined the U.S. Small Business
Administration in 1977 and served as Associate Administrator for Finance and
Investment from 1978 to 1979. Prior thereto he was founder and Chairman of the
Board of Tower Scientific Corporation, a manufacturer of custom prosthetic
devices, which was sold to Hexcel Corporation in 1977. He is also a director
of United Rentals, Inc., USA Waste Services, Inc. and K2, Inc.
Nicholas C. Memmo was appointed President and Chief Operating Officer of the
North American Process Water Group of the Company in February 1998. From July
1995 to February 1998, Mr. Memmo served as Executive Vice President--Process
Water of the Company and from March 1994 to July 1995, Mr. Memmo served as
Senior Vice President and General Manager of U.S. Filter/Ionpure Inc. From
December 1992 to March 1994, Mr. Memmo served as Senior Vice President Sales &
Marketing of the Company. Mr. Memmo received a B.S. degree in chemical
engineering from Drexel University, and completed an M.B.A. program at the
John E. Anderson Graduate School of Management at UCLA.
Andrew D. Seidel was appointed President and Chief Operating Officer--North
American Wastewater Group in February 1998, having previously served as
Executive Vice President--Wastewater Group since July 1995, and as Senior Vice
President--Wastewater Group and General Manager of U.S. Filter, Inc.,
Warrendale,
17
<PAGE>
Pennsylvania, from September 1993 to July 1995. He had previously served as
Vice President--Membralox Group of the Company since December 8, 1992. Mr.
Seidel received a B.S. degree in chemical engineering from the University of
Pennsylvania, and completed an M.B.A. program at the Wharton School, the
University of Pennsylvania in 1990. Mr. Seidel is also a member of the
management board of TWO.
Harry K. Hornish, Jr. was appointed President and Chief Operating Officer--
Waterworks Distribution Group in February 1998, having previously served as
Executive Vice President--Distribution Group since February 20, 1997.
Beginning in November 1991, Mr. Hornish had served as President of the Utility
Supply Group, Inc. ("USG") subsidiary of CertainTeed Corporation
("CertainTeed"), a leading manufacturer of building materials for new
construction and remodeling. Mr. Hornish led a buyout of USG from CertainTeed
in 1994. Mr. Hornish continued to serve as President of USG until October 25,
1996, when the Company acquired USG. Mr. Hornish holds a B.A. in Political
Science and Business Administration from Marshall University. Mr. Hornish is
also a director of Cameron Ashley Building Products Inc.
Calvin R. Hendrix was appointed President and Chief Operating Officer--North
American Consumer and Commercial Group in June 1998. Mr. Hendrix had
previously served as Group President--North America of Culligan since February
1997. From September 1993 to January 1997, he served as Vice President--
General Manager of the Irrigation Division of The Toro Company, a leader in
turf and landscape products and services. For more than five years previous to
joining Toro, Mr. Hendrix was President of Thermador Corporation, a major
kitchen appliance company; and Group Product Manager with the Frito-Lay
division of PepsiCo. Mr. Hendrix received BBA and MBA degrees from the
University of North Carolina at Charlotte.
Kenneth I. Wellings was appointed President--U.S. Filter International in
June 1998. Mr. Wellings had previously served as Group President--
International of Culligan since January 1997. From August 1995 to January
1997, Mr. Wellings served as Vice President, International of Culligan and
from August 1994 to August 1995, he served as Vice President, European
Operations. From 1991 to 1994, he was employed with Culligan as General
Manager, Retail Division.
Andrew Denver was appointed President and Chief Operating Officer--
Filtration and Separation Group in February 1998. In 1987 Mr. Denver joined
Memtec Limited as President and Chief Operating Officer, where he was
responsible for managing all aspects of Memtec's operation including research
and development, manufacturing, marketing and sales. Mr. Denver graduated with
Honors in Chemistry from the University of Manchester and achieved a
Distinction in his MBA at the Harvard Business School. Mr. Denver was a
founding member and Director of the Australian Environment Management Export
Corporation (AUSTEMEX) and was inaugural Chairman of the Board for the first
two years. He was a founding member and Director of the Environment Management
Industry Association of Australia (EMIAA).
David J. Shimmon was appointed President and Chief Operating Officer--
Industrial Products and Services Group in February 1998. Mr. Shimmon has
served as President of Kinetics since March 1996, as Chief Operating Officer
and a Director of Kinetics since October 1990, and had served as Chief
Financial Officer of Kinetics since 1991 and as Executive Vice President of
Kinetics from October 1990 to March 1996.
Thierry Reyners was appointed President and Chief Operating Officer--
European Water and Wastewater Group in February 1998, having previously served
as Executive Vice President--European Group since July 1995, and as Senior
Vice President--Europe from March 1994 to July 1995. He had previously been
Senior Vice President--European Sales since December 1, 1993, the date the
Company acquired Ionpure. Mr. Reyners served as Vice President and General
Manager--Europe of Ionpure Technologies Corporation from 1990 to December
1993. Mr. Reyners has a Ph.D. in Organic Chemistry from the Research Institute
in Natural Substances, University of Orsay, France and an M.B.A. from INSEAD,
Fontainebleau, France.
Kevin L. Spence was appointed Executive Vice President and Chief Financial
Officer of the Company in February 1998, having served as Vice President of
the Company since December 1991 and as Chief Financial Officer of the Company
since January 1992. Prior to that, Mr. Spence served as Treasurer of the
Company from February 17, 1992 until June 9, 1995. Mr. Spence is a certified
public accountant and received a B.S. in Business Administration in 1978 from
the University of Southern California.
18
<PAGE>
Damian C. Georgino was appointed Executive Vice President, General Counsel
and Corporate Secretary of the Company in February 1998, having served as Vice
President, General Counsel and Secretary of the Company since August 1995.
From September 1992 through July 31, 1995, he served as General Attorney with
Aluminum Company of America ("Alcoa"), where his primary responsibilities
included mergers and acquisitions and serving as chief legal counsel for
several growing international manufacturing and service businesses. Mr.
Georgino received a B.S. degree in economics and political science from
Dickinson College in 1982 and received a JD/MBA joint degree from Emory
University in 1986.
Michael J. Reardon was appointed Executive Vice President and Chief
Administrative Officer of the Company in February 1998, having served as
Executive Vice President of the Company since June 1995, and having previously
served as Executive Vice President and Chief Operating Officer, and prior to
that as the Chief Financial Officer and Secretary of the Company. From May
1995 to April 1996, Mr. Reardon served as President of Arrowhead Industrial
Water, Inc. a subsidiary of the Company. He became President and General
Manager of Illinois Water Treatment, Inc., a subsidiary of the Company, in
March 1992. Mr. Reardon is a member of the management board of TWO. In June
1978, Mr. Reardon received a B.S. in Business Administration from California
State Polytechnic University, and from 1994 to 1995 attended the Kellogg
Management Institute, Northwestern University.
Tim L. Traff was appointed Executive Vice President--Corporate Development
in February 1998, having served as a Senior Vice President of the Company
since December 1992, and as Vice President--Corporate Development since March
1992. Mr. Traff received a B.S. degree in business economics from the
University of Minnesota.
James W. Dierker was appointed Vice President, Controller and Treasurer on
June 9, 1995. From July 1985 to June 1995 he was with KPMG Peat Marwick LLP,
and was a senior manager with that firm at the time of his departure. Mr.
Dierker is a certified public accountant, and received a B.S. degree in
business administration with an emphasis in accounting from California State
Polytechnic University.
Michael E. Hulme, Jr. was appointed Assistant General Counsel and Assistant
Secretary on February 13, 1996. From December 1994 through January 1996, he
served as Vice President/Corporate Counsel of Forte Hotels, Inc., formerly a
wholly owned subsidiary of Forte Plc, and from October 1992 through December
1994 as Corporate Counsel of Forte Hotels, Inc. His primary responsibilities
included hotel and real estate development, acquisition and sale transactions.
Mr. Hulme received a B.A. degree in economics from the University of
California at Davis in 1983 and received a JD from the University of Southern
California in 1986.
ITEM 2--PROPERTIES
The Company has a global network of approximately 833 sales, service and
distribution facilities and 85 manufacturing plants. Because the Company has
grown by acquisition, the Company's facilities vary in terms of age and
condition, but management generally believes that these facilities are
suitable and adequate for their respective operations. Many of the Company's
manufacturing facilities operated at or near their productive capacities
during fiscal 1998.
The Company's corporate headquarters is located in a Company-owned office
building in Palm Desert, California, with 20,500 square feet of floor space. A
description of the Company's other principal facilities is included in Item 1
of this Form 10-K. Approximately 53% of the Company's manufacturing facilities
are owned, with the remainder under leases expiring from July 31, 1998 through
April 30, 2026, in most cases with Company options to renew. Of the Company's
36 regeneration plants, 12 are owned and the majority of the remainder are
held under short-term leases. In most cases, the Company's 85 manufacturing
and 36 regeneration plants include sales and service offices. The Company also
owns or leases various small production facilities and numerous sales, service
and warehousing facilities not described in this Form 10-K. A small number of
the Company's facilities are subject to mortgages securing notes payable due
in fiscal years 1999 and 2013.
19
<PAGE>
ITEM 3--LEGAL PROCEEDINGS
Various lawsuits, claims and proceedings have been or may be instituted or
asserted against the Company, including those pertaining to environmental,
product liability and safety and health matters. While the amounts claimed may
be substantial, the ultimate liability cannot now be determined because of the
considerable uncertainties that exist. Therefore, it is possible that results
of operations or liquidity in a particular period could be materially affected
by certain contingencies. However, based on facts currently available,
management believes that the disposition of matters that are pending or
asserted will not have a materially adverse effect on the financial position
of the Company. Information regarding certain environmental contingencies is
incorporated herein by reference to Item 7 of this Form 10-K under the caption
"Certain Trends and Uncertainties--Potential Environmental Risks".
ITEM 4--SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5--MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE AND HOLDERS OF COMMON STOCK
The common stock of the Company is listed on the New York Stock Exchange and
traded under the symbol "USF." The following table sets forth for the fiscal
periods indicated the high and low sales prices of the common stock as
reported on the New York Stock Exchange Composite Tape. No cash dividends were
paid on the common stock during such periods. The amounts below have been
adjusted to reflect a three for two split of the common stock effective July
15, 1996.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal year ended March 31, 1997
1st Quarter................................................. $23.75 $18.42
2nd Quarter................................................. 34.75 18.50
3rd Quarter................................................. 36.25 30.38
4th Quarter................................................. 39.00 28.88
Fiscal year ended March 31, 1998
1st Quarter................................................. $33.38 $25.75
2nd Quarter................................................. 43.19 26.94
3rd Quarter................................................. 44.44 27.63
4th Quarter................................................. 36.44 28.75
</TABLE>
On June 26, 1998, the last reported sales price for the common stock as
reported on the New York Stock Exchange Composite Transactions Tape was $26.75
per share. The number of holders of record of the Common Stock on June 26,
1998 was approximately 4,258.
DIVIDENDS
The Company currently intends to retain earnings to provide funds for the
operation and expansion of its business and accordingly does not anticipate
paying cash dividends on the Common Stock in the foreseeable future. Any
payment of cash dividends on the Common Stock in the future will depend upon
the Company's financial condition, earnings, capital requirements and such
other factors as the Board of Directors deems relevant. The Company's Amended
and Restated Multicurrency Credit Agreement, dated as of October 20, 1997,
imposes, and future debt or equity instruments or securities of the Company
may impose, restrictions on the Company's ability to pay dividends.
20
<PAGE>
ITEM 6--SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of the Company are derived from the
Company's audited Consolidated Financial Statements and related Notes thereto.
Each fiscal year of the Company is ended March 31. The selected consolidated
financial data should be read in conjunction with and is qualified in its
entirety by the Company's Consolidated Financial Statements and related Notes
thereto and other financial information included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,(1)
--------------------------------------------------
1994(2) 1995(3) 1996(4) 1997(5) 1998(6)
-------- ------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues................... $620,709 830,765 1,090,745 1,764,406 3,234,580
Cost of sales.............. 500,731 658,834 836,973 1,376,615 2,456,173
-------- ------- --------- --------- ---------
Gross Profit............. 119,978 171,931 253,772 387,791 778,407
Selling, general and
administrative expenses... 115,979 131,210 192,387 316,190 573,002
Purchased in-process
research and development.. -- -- -- -- 299,505
Merger, restructuring,
acquisition and other
related charges........... -- -- -- 5,581 141,109
-------- ------- --------- --------- ---------
115,979 131,210 192,387 321,771 1,013,616
-------- ------- --------- --------- ---------
Operating income (loss).. 3,999 40,721 61,385 66,020 (235,209)
Other income (expenses):
Interest expense......... (5,570) (8,807) (16,280) (26,509) (53,887)
Other.................... (6,953) 1,611 5,923 3,678 4,900
-------- ------- --------- --------- ---------
(12,523) (7,196) (10,357) (22,831) (48,987)
-------- ------- --------- --------- ---------
Income (loss) before
income tax expense
(benefit)............... (8,524) 33,525 51,028 43,189 (284,196)
Income tax expense
(benefit)................. (5,751) 8,904 20,329 10,681 15,583
-------- ------- --------- --------- ---------
Net income (loss)........ $ (2,773) 24,621 30,699 32,508 (299,779)
======== ======= ========= ========= =========
PER COMMON SHARE DATA: (7)
Basic:
Net income (loss)........ $ (0.11) 0.68 0.62 0.51 (3.13)
======== ======= ========= ========= =========
Weighted average number
of common
shares outstanding...... 31,267 35,198 48,369 64,082 95,909
======== ======= ========= ========= =========
Diluted:
Net income (loss)........ $ (0.11) 0.66 0.61 0.49 (3.13)
======== ======= ========= ========= =========
Weighted average number
of common
shares outstanding...... 31,267 43,707 49,668 66,531 95,909
======== ======= ========= ========= =========
CONSOLIDATED BALANCE SHEET
DATA (END OF PERIOD):
Working capital............ $113,105 135,079 159,148 515,152 591,776
Total assets............... $430,206 583,633 1,003,316 2,397,563 3,597,844
Notes payable and long-term
debt, including current
portion................... $ 41,398 65,192 74,848 86,066 710,282
Convertible subordinated
debt...................... $ 60,000 105,000 200,000 554,000 554,000
Shareholders' equity....... $171,758 200,548 407,390 1,045,830 1,293,410
</TABLE>
21
<PAGE>
- --------
(1) The historical consolidated financial data for the fiscal years ended
March 31, 1994, 1995, 1996 and 1997 have been restated to include the
accounts and operations of Kinetics which was merged with the Company in
December 1997, and accounted for as a pooling of interests. Separate
results of operations of each of the Company and Kinetics for the years
ended March 31, 1994 through March 31, 1998 are presented below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31
-------------------------------------------------
1994(2) 1995(3) 1996(4) 1997(5) 1998(6)
--------- ------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES
Company (as previously
reported)................. $ 475,236 600,832 812,322 1,376,601 3,234,580
Kinetics................... 145,473 229,933 278,423 387,805 --
--------- ------- --------- --------- ---------
$ 620,709 830,765 1,090,745 1,764,406 3,234,580
========= ======= ========= ========= =========
OPERATING INCOME (LOSS)
Company (as previously
reported)................. $ (2,358) 28,047 45,382 82,913 (235,209)
Kinetics................... 6,357 12,674 16,003 (16,893) --
--------- ------- --------- --------- ---------
$ 3,999 40,721 61,385 66,020 (235,209)
========= ======= ========= ========= =========
NET INCOME (LOSS)
Company (as previously
reported)................. $ (7,892) 15,267 21,967 46,197 (299,779)
Kinetics................... 5,119 9,354 8,732 (13,689) --
--------- ------- --------- --------- ---------
$ (2,773) 24,621 30,699 32,508 (299,779)
========= ======= ========= ========= =========
NET INCOME (LOSS) PER
COMMON SHARE(7):
Basic:
As previously reported... $ (0.34) 0.50 0.50 0.79 (3.13)
As restated.............. $ (0.11) 0.68 0.62 0.51 (3.13)
Diluted:
As previously reported... $ (0.34) 0.50 0.49 0.77 (3.13)
As restated.............. $ (0.11) 0.66 0.61 0.49 (3.13)
</TABLE>
(2) The fiscal year ended March 31, 1994 includes four months of results of
Ionpure Technologies Corporation and IP Holding Company ("Ionpure"),
acquired December 1, 1993 and accounted for as a purchase. Selling,
general and administrative expenses for the year ended March 31, 1994
reflect four months of integration of Ionpure, certain charges totaling
$2.4 million related to the rationalization of certain wastewater
operations and write-off certain intangibles in the Company's Continental
Penfield subsidiary totaling $3.7 million. In addition, the year ended
March 31, 1994 includes a charge of $8.9 million to reflect a plan to
shutdown and reorganize certain operations of Davis.
(3) The fiscal year ended March 31, 1995 includes the results of operations of
Smogless S.p.A., Crouzat S.A., Sation S.A., Seral Erich Alhauser GmbH and
the Cereflo ceramic product line from the dates of their respective
acquisitions, accounted for as purchases.
(4) The fiscal year ended March 31, 1996 includes the results of operations of
The Permutit Company Limited and The Permutit Company Pty Ltd., Interlake
Water Systems, Arrowhead Industrial Water Inc. and Polymetrics Inc. from
the dates of their respective acquisitions, accounted for as purchases.
Selling, general and administrative expenses for the year ended March 31,
1996 includes charges totaling $3.2 million related to the write-down of
certain patents and equipment of Zimpro.
(5) The fiscal year ended March 31, 1997 includes the results of operations of
USG, WaterPro, WSMG, and PED from the dates of their respective
acquisitions, accounted for as purchases. The year ended March 31, 1997
also includes merger expenses of $5.6 million, related to the acquisition
of Davis, which was accounted for as a pooling of interests. Costs of
goods sold for the year ended March 31, 1997 including charges recorded by
Kinetics totaling $26.0 million related to certain unreimbursed project
costs. Selling, general and administrative expenses for the year ended
March 31, 1997 includes charges totaling $6.8 million for increases in
Kinetics allowance for doubtful accounts, the write-off of certain
receivables the write-down of certain assets and the establishment of
certain accruals.
22
<PAGE>
(6) The fiscal year ended March 31, 1998 includes the results of operations
for Memtec from the date of its acquisition on December 9, 1997, accounted
for as a purchase. The year ended March 31, 1998 also includes a charge of
$299.5 million related to the acquisition from Memtec of certain in-
process research and development projects that had not reached
technological feasibility and that had no alternative future uses.
Additionally, the Company recorded charges totaling $141.1 million related
to a restructuring plan that the Company implemented concurrent with the
acquisitions of Memtec and Kinetics. Cost of goods sold for the year ended
March 31, 1998 includes charges recorded by Kinetics totaling $13.7
million related to certain unreimbursed project costs. Selling, general
and administrative expenses for the year ended March 31, 1998 includes
charges recorded by Kinetics totaling $3.6 million related to increases in
Kinetics allowance for doubtful accounts, the write-off of certain
receivables, the write down of certain assets and the establishment of
certain accruals.
(7) Net income (loss) per common share amounts are computed in accordance with
SFAS 128 after dividends on the Series A Preferred Stock of $.7 million
for the fiscal year ended March 31, 1994, $.7 million for the fiscal year
ended March 1995 and $.5 million for the Fiscal year ended March 31, 1997
The Series A Preferred Stock was converted into shares of Common Stock in
March 1996.
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The discussion contained in this Item 7 should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto included
elsewhere in this Form 10-K.
GENERAL
Since July 1991, the Company has acquired and integrated more than 150
businesses with substantial expertise in the design and manufacture of systems
of the filtration and treatment of water and wastewater. Due to the magnitude
of these acquisitions and the integration of the acquired operations with the
Company's existing businesses, results of operations for prior periods are not
necessarily comparable to or indicative of results of operation for current or
future periods.
RESULTS OF OPERATIONS
In December 1997 a subsidiary of the Company merged with Kinetics, in a
transaction accounted for as pooling of interests. Historical consolidated
financial data for the fiscal years ended March 31, 1994 through March 31,
1997 have been restated to reflect this acquisition.
The following table sets forth for the periods indicated certain items in
the Selected Consolidated Financial Data as a percentage of total revenues:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31,
-------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Revenues.............................................. 100.0% 100.0% 100.0 %
Cost of sales......................................... 76.7% 78.0% 75.9 %
Gross profit.......................................... 23.3% 22.0% 24.1 %
Selling, general and administrative expenses.......... 17.6% 17.9% 17.7 %
Purchase in-process research and development.......... -- -- 9.3 %
Merger, restructuring, acquisition and other related
charges.............................................. -- 0.3% 4.4 %
Operating income (loss)............................... 5.6% 3.7% (7.2)%
Interest expense...................................... 1.5% 1.5% 1.7 %
Net income (loss)..................................... 2.8% 1.8% (9.3)%
</TABLE>
23
<PAGE>
The following table sets forth a percentage breakdown of the Company's sales
by product category for the past three fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
MARCH 31,
----------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Sales by product category:
Capital equipment......................................... 50% 52% 46%
Services and operations................................... 25% 24% 25%
Distribution.............................................. 25% 24% 27%
Retail and consumer products.............................. -- -- 2%
</TABLE>
TWELVE MONTHS ENDED MARCH 31, 1998 ("FISCAL 1998") COMPARED WITH TWELVE MONTHS
ENDED MARCH 31, 1997 ("FISCAL 1997")
Revenues
Revenues for fiscal 1998 were $3.2 billion, an increase of $1.4 billion from
$1.8 billion for the comparable period of the prior fiscal year. This 83.3%
increase was due primarily to acquisitions completed by the Company after
fiscal 1997. For fiscal 1998 revenues from capital equipment sales represented
46% of total revenues, while revenues from services and operations represented
25% of total revenues, revenues from distribution represented 27% of total
revenues and revenues from retail and consumer products represented 2% of
total revenues. The percentage of revenues from capital equipment sales
decreased in the current year due to the Company's emphasis on the recurring
revenues of the distribution business and the establishment of the higher
margin retail and consumer products business.
Gross Profit
Gross profit increased 100.7% to $778.4 million for fiscal 1998 from $387.8
million for the comparable period of the prior fiscal year. Total gross profit
as a percentage of revenue ("gross margin") was 24.1% for fiscal 1998 compared
to 22.0% for the comparable period of the prior fiscal year. The increase in
the gross margin can be attributed primarily to the incurrence of certain
unreimbursed project costs at Kinetics during fiscal 1997 after restatement
for the acquisition of Kinetics in the current period accounted for as a
pooling of interests.
Selling, General and Administrative Expenses
For fiscal 1998, selling, general, and administrative expenses, excluding
purchased in-process research and development and merger, restructuring,
acquisition and other related charges ("certain charges"), increased $256.8
million to $573.0 million as compared to the $316.2 million in the comparable
period in the prior year. The increase in these expenses can be attributed
primarily to the addition of sales and administrative personnel accompanying
the Company's acquisitions during the period. During fiscal 1998, selling,
general and administrative expenses, excluding certain charges, were 17.7% of
revenues compared to 17.9% for the comparable period in the prior year.
Purchased In-Process Research and Development
On December 9, 1997, the Company, through a wholly-owned subsidiary,
completed its tender offer ("Offer") to purchase all of the outstanding
ordinary shares of Memtec. The purchase price was $36.00 per share. The
Company acquired certain shares in privately negotiated and open market
purchases prior to the Offer resulting in a total cash purchase price of
approximately $397.2 million (including transaction costs of $10.6 million).
The purchase price was allocated to the assets and liabilities of Memtec based
on their estimated respective fair values. The Company also acquired from
Memtec certain in-process research and development projects that had not
reached technological feasibility and that had no alternative future uses.
Such projects were valued by an independent appraiser using a risk adjusted
cash flow model under which expected future cash flows were discounted, taking
into account risks related to existing and future markets and assessments of
the life expectancy of such projects. The estimated market value of such in-
process research and development (R&D) projects was $299.5 million and was
expensed at the acquisition date.
24
<PAGE>
In addition, the Company also acquired from Memtec and its subsidiaries
(consisting of Memcor, Fluid Dynamics, Filterite, and Seitz) developed
technologies including large volume purification product lines; membrane
systems for water purification and waste treatment; metal fiber product lines
for industrial applications involving elevated pressures, temperatures and
corrosive environments; disposable product lines for industrial applications;
and depth media product lines for the pharmaceutical and food and beverage
industries.
As a result of the degree of competition in the filtration industry and the
use of technological change as a competitive tool, a significant proportion of
Memtec's technology will be superseded, although the rate of change varies
significantly across the markets addressed. Memtec's R&D initiatives are
therefore targeted at superseding current products. Memtec has a range of
ongoing R&D projects in each of its product lines. Certain of these projects
are directed at next generation products for existing market applications
while others are directed at new market opportunities where Memtec's
technological base may be applicable.
Memcor R&D projects are primarily directed at enhanced microfiltration
products capable of cost effectively addressing larger scale applications or
more chemically aggressive environments. These R&D projects are at the
laboratory to pilot stage of development and require a number of years of
additional work before full introduction to the market of a product is likely.
Other Memcor R&D projects seek to utilize Memtec's knowledge of
electrochemical processes to enter new markets ranging from high quality water
production to environmental sensors. These R&D projects are also at the
laboratory to pilot stage and similarly require a number of years of
additional R&D before a product may be available for launching.
Fluid Dynamics R&D projects are directed at developing new applications for
Memtec's proprietary metallic media. The media enables precise fine filtration
in a range of hostile environments as well as having unique conductive
properties. These R&D projects are at the laboratory stage of development and
require additional research ranging from twelve months to several years
depending upon the particular product before any market launch is possible.
Filterite R&D projects center around its two proprietary technologies--the
unique Filterite highly assymetric membrane and the cold melt spinning
technology. R&D projects are examining expansion of product offerings from
these core technologies. These projects require further materials science
laboratory work followed by manufacturing prototyping and tailoring to market
applications--a process which will range from eighteen months to several
years.
Seitz R&D is directed at next generation filtration technologies for the
food and beverage and chemicals industries drawing on the core technologies of
Seitz. These R&D projects are predominantly at the pilot stage, requiring
extensive trialing evaluation and development based on the trialing before
market launches are possible.
Failure to complete these R&D projects successfully and on time would open
the way for competitors to introduce alternate technologies, with consequent
implications for Memtec's revenues. To be successful in most cases, the R&D
projects must be developed from laboratory or pilot scale models to full scale
products capable of production within a quality accredited manufacturing
process. The existing R&D projects are expected to be completed and
commercialized over the next ten years with expected R&D and project related
expenditures of approximately $275 million over such ten year period. The
expenditures will be expensed or capitalized in accordance with generally
accepted accounting principles.
The valuation process distinguished between R&D projects with no alternate
uses or values and those with alternate uses. Predominantly all R&D projects
are at a stage of development where the progress to date is not applicable to
any other use within Memtec nor is it saleable to any third party known to
management.
Merger, Restructuring, Acquisition and Other Related Charges
As of December 31, 1997, the Company completed the acquisition of Kinetics
in a tax-free reorganization, which was accounted for as a pooling of
interests. Concurrent with the acquisitions of Kinetics and Memtec, the
Company designed and implemented a restructuring plan to streamline its
manufacturing and production base, improve efficiency and enhance its
competitiveness. The restructuring plan resulted in a pre-tax charge of
25
<PAGE>
$141.1 million. The plan identifies certain products and technologies acquired
in conjunction with the Memtec transaction that supersede products and
technologies acquired in earlier acquisitions of membrane related businesses.
As a result certain carrying amounts of goodwill and other intangible assets
were determined to be impaired by approximately $55.0 million in accordance
with Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121"). SFAS 121 requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. In determining the
amount of the impairment of these assets, the Company valued the assets using
the present value of estimated expected future cash flows using discount rates
commensurate with the risks involved. The restructuring plan also included
closing or reconfiguring of certain facilities and reducing the work force by
approximately 350 employees, most of whom work in the facilities to be closed.
Included in merger, restructuring, acquisition and other related charges are
the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Write-down of goodwill and other intangible assets............ $ 54,950
Asset write-offs, including equipment and facilities.......... 47,887
Merger, integration and other acquisition costs............... 21,135
Severance and related costs................................... 17,137
--------
Total....................................................... $141,109
========
Cash charges.................................................. $ 36,431
Non-cash charges.............................................. 104,678
--------
Total....................................................... $141,109
========
</TABLE>
After an income tax benefit of $34.5 million, the charges detailed above
totaling $440.6 million reduced earnings by $406.1 million. Approximately
$15.4 million of merger and restructuring related charges are included in
accrued liabilities at March 31, 1998. Additional costs to complete the
restructuring plan are not expected to be material.
The write-down of assets as a result of the restructuring plan (including
assets of business' whose products were superseded by Memtec's products) will
not have a material affect on the Company's consolidated results of operations
in the future.
Operating Income (Loss)
For fiscal 1998, the Company recorded an operating loss of $235.2 million as
compared to operating income of $66.0 million in the comparable period in the
prior year. The operating loss can be attributed to the recording of charges
for purchased in-process research and development and merger, restructuring,
acquisition and other related charges as detailed above. Before the impact of
these charges, operating income for fiscal 1998 was $205.4 million or 6.4% of
revenue. For fiscal 1997, operating income before merger expenses was 4.1% of
revenues. The improvement in operating margin before certain charges can be
attributed primarily to improvements in gross margin as described above.
Interest Expense
Interest expense increased to $53.9 million for fiscal 1998 from $26.5
million for the corresponding period in the prior year. Interest expense for
fiscal 1998 consisted primarily of interest on the Company's: (i) 6%
Convertible Subordinated Notes issued on September 18, 1995 due 2005; (ii)
4.5% Convertible Subordinated Debentures issued on December 11, 1996 due 2001;
(iii) borrowings under Kinetics' long-term line-of-credit; (iv) 8.0% Senior
Subordinated Debentures issued by Kinetics; (v) borrowings under Memtec's
long-term line-of-credit; (vi) Senior Guaranteed Notes issued by Memtec
bearing interest at rates ranging from 7.7% to 8.0%;
26
<PAGE>
(viii) other long-term debt bearing interest at rates ranging from 2.0% to
10.1% and (viii) borrowings under the Company's Senior Credit Facility. At
March 31, 1998, the Company had cash, cash equivalents and short-term
investments of $48.9 million.
Income Tax Expense
Income tax expense increased to $15.6 million in fiscal 1998 from $10.7
million in the corresponding period in the prior year. Before certain charges
the Company had income tax expense of $50.1 or an effective tax rate of 32.0%
for fiscal 1998 as compared to 24.7% in the corresponding period in the prior
year.
Net Income (Loss)
For fiscal 1998 net income before certain charges increased $69.8 million to
$106.3 million from $36.5 million before certain charges for the same period
in the prior year. After certain charges net loss in fiscal 1998 was $299.8
million as compared to net income of $32.5 million for fiscal 1997. Net income
per common share for fiscal 1997 and 1998 were as follows:
<TABLE>
<CAPTION>
1997 1998
----- ------
<S> <C> <C>
Basic...................................................... $0.51 $(3.13)
Diluted.................................................... $0.49 $(3.13)
</TABLE>
TWELVE MONTHS ENDED MARCH 31, 1997 ("FISCAL 1997") COMPARED WITH TWELVE MONTHS
ENDED MARCH 31, 1996 ("FISCAL 1996")
Revenues
Revenues for fiscal 1997 were $1,764.4 million, an increase of $673.7
million from $1,090.7 for the comparable period of the prior fiscal year. This
61.8% increase was due primarily to acquisitions completed by the Company
after fiscal 1996. For fiscal 1997, revenues from capital equipment sales
represented 52% of total revenues, while revenues from services and operations
represented 24% of total revenues and revenues from distribution represented
24% of total revenues.
Gross Profit
Gross profit increased 52.8% to $387.8 million for fiscal 1997 from $253.8
million for the comparable period of the prior fiscal year. Total gross profit
as a percentage of revenue ("gross margin") was 22.0% for fiscal 1997 compared
to 23.3% for the comparable period of the prior fiscal year. The decrease in
gross margin is due primarily to the incurrence of certain unreimbursed
project costs at Kinetics during the fiscal year ended March 31, 1997 after
restatement for the acquisition of Kinetics in the current period accounted
for as a pooling of interests.
Selling, General and Administrative Expenses
For fiscal 1997, selling, general, and administrative expenses, excluding
merger expenses, increased $123.8 million to $316.2 million as compared to the
$192.4 million in the comparable period in the prior year. The increase in
these expenses can be attributed primarily to the addition of sales and
administrative personnel accompanying the Company's acquisitions after fiscal
1996. During fiscal 1997, selling, general and administrative expenses,
excluding Davis merger expenses, were 17.9% of revenues compared to 17.6% for
the comparable period in the prior year. The increase was primarily due to
Kinetics recording certain charges in selling, general and administrative
expenses during the fiscal year ended March 31, 1997 for the write-off of
certain receivables, the write-down of certain assets, the increase in
Kinetics allowance for doubtful accounts and the establishment of certain
accruals. These charges are included in fiscal 1997 after restatement for the
acquisition of Kinetics in the current period accounted for as a pooling of
interests.
Excluding Davis merger expenses, operating income as a percentage of
revenues decreased to 4.1% for fiscal 1997 from 5.6% for the corresponding
period in fiscal 1996 due primarily to the decrease in the gross margin.
27
<PAGE>
Merger Expenses
Merger expenses were incurred during fiscal 1997 relating to the Company's
acquisition of Davis which was accounted for as a pooling of interests. These
merger expenses, which totaled $5.6 million, consisted primarily of investment
banking fees, printing, stock transfer fees, legal fees, accounting fees,
governmental filing fees and certain other costs related to existing Davis
pension plans and change of control payments.
Interest Expense
Interest expense increased to $26.5 million for fiscal 1997 from $16.3
million for the corresponding period in the prior year. Interest expense for
fiscal 1997 consisted primarily of interest on the Company's: (i) 5%
Convertible Debentures due 2000 (all of which were, as of October 25, 1996,
converted into shares of Common Stock); (ii) 6% Convertible Subordinated Notes
due 2005 issued on September 18, 1995; (iii) 4.5% Convertible Subordinated
Debentures due 2001 issued on December 11, 1996; (iv) 8% Senior Subordinated
Notes issued by Kinetics; (v) borrowings under the Company's bank line of
credit and (vi) borrowings under Kinetics' line of credit. At March 31, 1997,
the Company had cash, cash equivalents and short-term investments of
$137.3 million.
Income Tax Expense
Income tax expense decreased to $10.7 million in fiscal 1997 from $20.3
million in the corresponding period in the prior year. The Company's effective
tax rate for fiscal 1997 was 24.7% as compared to 39.8% in the corresponding
period in the prior year. At March 31, 1997, the Company had net operating
loss carryforwards of approximately $16.4 million in France for which
financial statement benefit was recognized in fiscal 1997.
Net Income
For fiscal 1997, net income increased $1.8 million to $32.5 million from
$30.7 million for the same period in the prior year. Excluding Davis merger
expenses, net income totaled $36.5 million, an increase of 19.1% over fiscal
1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are cash and other working capital,
cash flow generated from operations and borrowings under the Company's Senior
Credit Facility. At March 31, 1998, the Company had working capital of $591.8
million including cash and short-term investments of $48.9 million. The
Company's long-term debt at March 31, 1998, was $554.0 million consisting of
$140.0 million of 6.0% Convertible Subordinated Notes due 2005 and $414.0
million of 4.5% Convertible Subordinated Notes due 2001. The Company also had
other long-term debt totaling $135.5 million consisting of $60.0 million of
Senior Guaranteed Notes issued by Memtec bearing interest at rates ranging
from 7.7% to 8.0% and other long-term debt of $75.5 million bearing interest
at rates ranging from 2.0% to 10.1%.
As of March 31, 1998, the Company had a Senior Credit Facility which
provides credit facilities to the Company of up to $750.0 million, of which
there were outstanding borrowings of $544.1 million and outstanding letters of
credit of $40.7 million. Borrowings under the Senior Credit Facility bear
interest at variable rates of up to 0.45% above certain Eurocurrency rates or
0.15% above BankBoston's base rate. The Senior Credit Facility is subject to
customary and usual terms.
In connection with the acquisitions of Kinetics and Memtec, the Company
assumed through its subsidiaries two additional loan agreements with banks.
One agreement provides a revolving line-of-credit with borrowings of up to
$100.0 million, of which no amounts were outstanding at March 31, 1998.
Borrowings under this agreement bear interest at the bank's reference rate or
other interest rate options that the subsidiary may select. The other
agreement is a Multi-Option, Multi-Currency Master Facility that provides
borrowings of up to $60.0 million, of which $30.7 million was outstanding as
of March 31, 1998. Borrowings under this agreement bear interest at LIBOR plus
0.75%. The Company anticipates that it will terminate these two agreements
during fiscal 1999.
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<PAGE>
Subsequent to the Company's Fiscal year end, on May 15, 1998, the Company
issued $500,000,000 6.375% Remarketable or Redeemable Securities due 2011
(Remarketing Date May 15, 2001) and $400,000,000 6.50% Remarketable or
Redeemable Securities due 2013 (Remarketing Date May 15, 2003) (collectively,
the "ROARS"). The net proceeds from the sale of the ROARS, including a premium
payment to the Company by NationsBanc Montgomery Securities LLC, were $913.6
million. The net proceeds were used to repay indebtedness outstanding under
the Senior Credit Facility, indebtedness assumed in the acquisition of Memtec,
and a portion of the indebtedness assumed in the acquisition of Culligan.
The Company believes its current cash position, cash flow from operations,
and available borrowings under the Company's line-of-credit will be adequate
to meet its anticipated cash needs from working capital, revenue growth,
scheduled debt repayment and capital investment objectives for at least the
next twelve months.
CERTAIN TRENDS AND UNCERTAINTIES
The Company and its representatives may from time to time make written or
oral forward-looking statements, including statements contained in the
Company's filings with the United States Securities and Exchange Commission
and in its reports to stockholders. In connection with the "Safe Harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the
Company is hereby identifying important factors that could cause actual
results to differ materially from those contained in any forward-looking
statement made by or on behalf of the Company; any such statement is qualified
by reference to the following cautionary statements.
Acquisition Strategy. In pursuit of its strategic objective of becoming the
leading global single-source provider of water and wastewater treatment
systems and services, the Company has, since 1991, acquired more than 150
United States based and international businesses. The Company plans to
continue to pursue acquisitions that expand the segments of the water and
wastewater treatment and water-related industries in which it participates,
complement its technologies, products or services, broaden its customer base
and geographic areas served and/or expand its global distribution network, as
well as acquisitions which provide opportunities to further and implement the
Company's one-stop-shop approach in terms of technology, distribution or
service. The Company's acquisition strategy entails the potential risks
inherent in assessing the value, strengths, weaknesses, contingent or other
liabilities and potential profitability of acquisition candidates and in
integrating the operations of acquired companies. In addition, the Company's
acquisition of Memtec was accomplished through an unsolicited tender offer,
and the Company could make other such acquisitions. The level of risk
associated with such acquisitions is generally greater because frequently they
are accomplished, as was the case with the acquisition of Memtec, without the
customary representations or due diligence typical of negotiated transactions.
Although the Company generally has been successful in pursuing acquisitions,
there can be no assurance that acquisition opportunities will continue to be
available, that the Company will have access to the capital required to
finance potential acquisitions, that the Company will continue to acquire
businesses or that any business acquired will be integrated successfully or
prove profitable.
International Transactions. The Company has made and expects it will
continue to make acquisitions and expects to obtain contracts in markets
outside the United States. In addition, a substantial portion of the business
of a wholly owned subsidiary of the Company includes non-U.S. sales. While
these activities may provide important opportunities for the Company to offer
its products and services internationally, they also entail the risks
associated with conducting business internationally, including the risk of
currency fluctuations, slower payment of invoices, the lack in some
jurisdictions of well-developed legal systems, nationalization and possible
social, political and economic instability. In particular, the Company has
significant operations in Asia which have been and may in the future be
adversely affected by current economic conditions in that region. While the
full impact of this economic instability cannot be predicted, it could have a
material adverse effect on the Company's revenues and profitability.
Reliance on Key Personnel. The operations of the Company are dependent on
the continued efforts of senior management, in particular Richard J. Heckmann,
the Company's Chairman of the Board, President and Chief Executive Officer.
The Company has entered into an employment agreement with Mr. Heckmann and the
Company is considering employment agreements for other members of senior
management, most of whom do
29
<PAGE>
not currently have such agreements, although such members have yet to be
determined. There can be no assurance that the Company will enter into
employment agreements with members of senior management. Should any of the
Company's senior managers be unable or choose not to continue in their present
roles, the Company's prospects could be adversely affected.
Profitability of Fixed Price Contracts. A significant portion of the
Company's revenues are generated under fixed price contracts. To the extent
that original cost estimates are inaccurate, scheduled deliveries are delayed
or progress under a contract is otherwise impeded, revenue recognition and
profitability from a particular contract may be adversely affected. The
Company routinely records upward or downward adjustments with respect to fixed
price contracts due to changes in estimates of costs to complete such
contracts. There can be no assurance that future downward adjustments will not
be material.
Cyclicality, Seasonality and Possible Earnings Fluctuations. The sale of
capital equipment within the water treatment industry is cyclical and
influenced by various economic factors including interest rates and general
fluctuations of the business cycle. A significant portion of the Company's
revenues are derived from capital equipment sales. While the Company sells
capital equipment to customers in diverse industries and in global markets,
cyclicality of capital equipment sales and instability of general economic
conditions, including those currently unfolding in Asian markets, could have a
material adverse effect on the Company's revenues and profitability.
The sale of water and wastewater distribution equipment and supplies is also
cyclical and influenced by various economic factors including interest rates,
land development and housing construction industry cycles. Sales of such
equipment and supplies are also subject to seasonal fluctuation in temperate
climates. The sale of water and wastewater distribution equipment and supplies
is a significant component of the Company's business. Cyclicality and
seasonality of water and wastewater distribution equipment and supplies sales
could have a material adverse effect on the Company's revenues and
profitability.
The Company's high-purity process piping systems have been sold principally
to companies in the semiconductor and, to a lesser extent, pharmaceutical and
biotechnology industries, and sales of those systems are critically dependent
on these industries. The success of customers and potential customers for
high-purity process piping systems is linked to economic conditions in these
respective industries, which in turn are each subject to intense competitive
pressure and are affected by overall economic conditions. The semiconductor
industry in particular has historically been, and will likely continue to be,
cyclical in nature and vulnerable to general downturns in the economy. The
semiconductor and pharmaceutical industries also represent significant markets
for the Company's water and wastewater treatment systems. Downturns in these
industries could have a material adverse effect on the Company's revenues and
profitability.
Operating results from the sale of high-purity process piping systems also
can be expected to fluctuate significantly as a result of the limited pool of
existing and potential customers for these systems, the timing of new
contracts, possible deferrals or cancellations of existing contracts and the
evolving and unpredictable nature of the markets for high-purity process
piping systems.
As a result of these and other factors, the Company's operating results may
be subject to quarterly or annual fluctuations. There can be no assurance that
at any given time the Company's operating results will meet or exceed stock
market analysts' expectations, in which event the market price of the common
stock could be adversely affected.
Potential Environmental Risks. The Company's business and products may be
significantly influenced by the constantly changing body of environmental laws
and regulations, which require that certain environmental standards be met and
impose liability for the failure to comply with such standards. The Company is
also subject to inherent risks associated with environmental conditions at
facilities owned, and the state of compliance with environmental laws, by
businesses acquired by the Company. While the Company endeavors at each of its
facilities to assure compliance with environmental laws and regulations, there
can be no assurance that the
30
<PAGE>
Company's operations or activities, or historical operations by others at the
Company's locations, will not result in cleanup obligations, civil or criminal
enforcement actions or private actions that could have a material adverse
effect on the Company.
In that regard, at a Connecticut ion exchange resin regeneration facility
(the "South Windsor Facility") operated by a wholly owned subsidiary of the
Company (the "South Windsor Subsidiary"), acquired by the Company in October
1995 from Anjou International Company ("Anjou"), U.S. federal and state
environmental regulatory authorities issued certain notices of violation
alleging multiple violations of applicable wastewater pretreatment standards.
The South Windsor Subsidiary has reached an agreement with the U.S. Attorney's
Office and the U.S. Environmental Protection Agency ("USEPA") to settle all
agency claims and investigations relating to this matter entering into a plea
agreement pursuant to which the South Windsor Subsidiary will plead guilty to
a single violation of the Clean Water Act. The settlement includes a payment
of $1.36 million, including a criminal penalty of $1.0 million and annual
environmental compliance audits at the South Windsor Facility for five years.
The Company believes that this settlement will conclude this matter in its
entirety; however, the settlement does not include a formal release of all
liabilities in this regard. The Company has certain rights of indemnification
from Anjou which may be available with respect to this matter pursuant to the
laws of the State of New York or the Stock Purchase Agreement dated as of
August 30, 1995 among the Company, Anjou and Polymetrics, Inc.
In addition to the foregoing, the Company's activities as owner and operator
of certain hazardous waste treatment and recovery facilities are subject to
stringent laws and regulations and compliance reviews. Failure of these
facilities to comply with those regulations could result in substantial fines
and the suspension or revocation of the facility's hazardous waste permit. The
Company serves as contract operator of various municipal and industrial
wastewater collection and treatment facilities, which were developed and are
owned by governmental or private entities. The Company also operates other
facilities, including service deionization centers and manufacturing
facilities, that discharge wastewater in connection with routine operations.
Under certain service contracts and applicable environmental laws, the Company
as operator of such facilities may incur certain liabilities in the event
those facilities experience malfunctions or discharge wastewater which does
not meet applicable permit limits and regulatory requirements. In some cases,
the potential for such liabilities depends upon design or operational
conditions over which the Company has limited, if any, control. In other
matters, the Company has been notified by the USEPA that it is a potentially
responsible party under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA") at certain sites to which
the Company or its predecessors allegedly sent waste in the past. It is
possible that the Company could receive other such notices under CERCLA or
analogous state laws in the future. Based on sites which are currently known
to the Company that may require remediation, the Company does not believe that
its liability, if any, relating to such sites will be material. However, there
can be no assurance that such matters will not be material. In addition, to
some extent, the liabilities and risks imposed by environmental laws on the
Company's customers may adversely impact demand for certain of the Company's
products or services or impose greater liabilities and risks on the Company,
which could also have an adverse effect on the Company's competitive and
financial position.
In 1995, Culligan purchased an equity interest in Anvil Holdings, Inc. As a
result of this transaction, Culligan assumed certain environmental liabilities
associated with soil and groundwater contamination at Anvil Knitwear's
Asheville Dyeing and Finishing Plant (the "Plant") in Swannanoa, North
Carolina. Since 1990, Culligan has delineated and monitored the contamination
pursuant to an Administrative Consent Order entered into with the North
Carolina Department of Environment, Health and Natural Resources related to
the closure of an underground storage tank at the site. Groundwater testing at
the Plant and at two adjoining properties has shown levels of a cleaning
solvent believed to be from the Plant that are above action levels under state
guidelines. The Company has begun remediation of the contamination. The
Company currently estimates that the costs of future site remediation will
range from up to $1.0 million to $1.8 million and that it has sufficient
reserves for the site cleanup. The Company anticipates that the potential
costs of further monitoring and corrective measures to address the groundwater
problem under applicable laws will not have a material adverse effect on the
financial position or the results of operations of the Company. However,
because the full extent of
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<PAGE>
the required cleanup has not been determined, there can be no assurance that
this matter will not have a material adverse effect on the Company's financial
position or results of operations.
Certain of the Company's facilities contain or in the past contained
underground storage tanks which may have caused soil or groundwater
contamination. At one site formerly owned by Culligan, the Company is
investigating, and has taken certain actions to correct, contamination that
may have resulted from a former underground storage tank. Based on the amount
of contamination believed to have been present when the tank was removed, and
the probability that some of the contamination may have originated from nearby
properties, the Company believes, although there can be no assurance, that
this matter will not have a material adverse effect on the Company's financial
position or results of operations.
Competition. All of the markets in which the Company competes are highly
competitive, and most are fragmented, with numerous regional and local
participants. There are competitors of the Company in certain markets that are
divisions or subsidiaries of companies that have significantly greater
resources than the Company. Competitive pressures, including those described
above, and other factors could cause the Company to lose market share or could
result in significant price erosion, either of which could have a material
adverse effect upon the Company's financial position, results of operations
and cash flows. See "Business--Competition."
Potential Risks Related to Water Rights and Water Transfers. The Company
recently acquired more than 47,000 acres of agricultural land (the
"Properties"), situated in the Southwestern United States, the substantial
majority of which are in Imperial County, California (the "IID Properties")
located within the Imperial Irrigation District (the "IID"). Substantially all
of the Properties are currently leased to third party agricultural tenants,
including prior owners of the Properties. The Company acquired the Properties
with appurtenant water rights, and is actively seeking to acquire additional
properties with water rights, primarily in the Southwestern and Western United
States. The Company may seek in the future to transfer water attributable to
water rights appurtenant to the Properties, particularly the IID Properties
(the "IID Water"). However, since the IID holds title to all of the water
rights within the IID in trust for the landowners, the IID would control the
timing and terms of any transfers of IID Water by the Company. The
circumstances under which transfers of water can be made and the profitability
of any transfers are subject to significant uncertainties, including
hydrologic risks of variable water supplies, risks presented by allocations of
water under existing and prospective priorities, and risks of adverse changes
to or interpretations of U.S. federal, state and local laws, regulations and
policies. Transfers of IID Water attributable to water rights appurtenant to
the IID Properties (the "IID Water Rights") are subject to additional
uncertainties. Allocations of Colorado River water, which is the source of all
water deliveries to the IID Properties, are subject to limitations under
complex international treaties, interstate compacts, U.S. federal and state
laws and regulations, and contractual arrangements and, in times of drought,
water deliveries could be curtailed by the U.S. government. Further, any
transfers of IID Water would require the approval of the U.S. Secretary of the
Interior. Even if a transfer were approved, other California water districts
and users could assert claims adverse to the IID Water Rights, including but
not limited to claims that the IID has failed to satisfy U.S. federal law and
California constitutional requirements that IID Water must be put to
reasonable and beneficial use. A finding that the IID's water use is
unreasonable or nonbeneficial could adversely impact title to the IID Water
Rights and the ability to transfer IID Water. Water transferred by the IID to
metropolitan areas of Southern California, such as San Diego, currently would
be transported through aqueducts owned or controlled by the Metropolitan Water
District, a quasi-governmental agency (the "MWD"). The transportation cost for
any transfer of IID Water and the volume of water which the MWD can be
required to transport at any time are subject to California laws of uncertain
application, some aspects of which are currently in litigation. The
uncertainties associated with water rights could have a material adverse
effect on the Company's future profitability.
Technological and Regulatory Risks. Portions of the water and wastewater
treatment business are characterized by changing technology, competitively
imposed process standards and regulatory requirements, each of which
influences the demand for the Company's products and services. Changes in
regulatory or industrial requirements may render certain of the Company's
treatment products and processes obsolete.
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<PAGE>
Acceptance of new products may also be affected by the adoption of new
government regulations requiring stricter standards. The Company's ability to
anticipate changes in technological and regulatory standards and to develop
successfully and introduce new and enhanced products on a timely basis will be
a significant factor in the Company's ability to grow and to remain
competitive. There can be no assurance that the Company will be able to
achieve the technological advances that may be necessary for it to remain
competitive or that certain of its products will not become obsolete. In
addition, the Company is subject to the risks generally associated with new
product introductions and applications, including lack of market acceptance,
delays in development or failure of products to operate properly. The market
growth potential of acquired in-process research and development is subject to
certain risks, including costs to develop and commercialize such products, the
cost and feasibility of production of products utilizing the applicable
technologies, introduction of competing technologies and market acceptance of
the products and technologies involved.
There can be no assurance that the Company's existing or any future
trademarks or patents will be enforceable or will provide substantial
protection from competition or be of commercial benefit to the Company. In
addition, the laws of certain non-United States countries may not protect
proprietary rights to the same extent as do the laws of the United States.
Successful challenges to certain of the Company's patents or trademarks could
materially adversely affect its competitive and financial position.
Municipal Water and Wastewater Business. A significant percentage of the
Company's revenues is derived from municipal customers. While municipalities
represent an important part of the water and wastewater treatment industry,
contractor selection processes and funding for projects in the municipal
sector entail certain additional risks not typically encountered with
industrial customers. Competition for selection of a municipal contractor
typically occurs through a formal bidding process which can require the
commitment of resources and
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<PAGE>
greater lead times than industrial projects. In addition, this segment is
dependent upon the availability of funding at the local level, which may be
the subject of increasing pressure as local governments are expected to bear a
greater share of the cost of public services.
Year 2000 Risks. The Year 2000 issue concerns the potential exposures
related to the automated generation of business and financial misinformation
resulting from the application of computer programs which have been written
using two digits, rather than four, to define the applicable year of business
transactions. Most of the Company's operating systems with Year 2000 issues
have been modified to address those issues; accordingly, management does not
anticipate any significant costs, problems or uncertainties associated with
becoming Year 2000 compliant. The Company is currently developing a plan
intended to assure that its other internal operating systems with Year 2000
issues are modified on a timely basis. Suppliers, customers and creditors of
the Company and Culligan also face similar Year 2000 issues. A failure to
successfully address the Year 2000 issue could have a material adverse effect
on the Company's business or results of operations.
Impact of Recently Issued Accounting Standards. In June 1997, the Financial
Accounting Standards Board ("FASB") issued a new statement titled "Reporting
Comprehensive Income". The new statement is effective for fiscal years
beginning after December 15, 1997. The Company is currently evaluating its
options for disclosure under this new standard and will implement the
statement during its fiscal year ending March 31, 1999.
In June 1997, FASB also issued a new statement titled "Disclosures about
Segments of an Enterprise and Related Information". The new statement is
effective for fiscal years beginning after December 15, 1997. The Company is
currently evaluating its options for disclosure under this new standard and
will implement the statement during its fiscal year ending March 31, 1999.
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Part IV, Item 14 of this Annual Report for the
information required by Item 8.
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<PAGE>
UNITED STATES FILTER CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report--KPMG Peat Marwick LLP......................... 36
Report of Independent Auditors--Ernst & Young LLP........................... 37
Financial Statements:
Consolidated Balance Sheets as of March 31, 1997 and 1998................. 38
Consolidated Statements of Operations for the Years Ended
March 31, 1996, 1997 and 1998............................................ 39
Consolidated Statements of Shareholders' Equity for the
Years Ended March 31, 1996, 1997 and 1998................................ 40
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1996, 1997 and 1998............................................ 41
Notes to Consolidated Financial Statements................................ 42
Independent Auditors' Report on Schedule.................................... 67
Schedule:
Schedule II -- Valuation and Qualifying Accounts.......................... 68
</TABLE>
35
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
United States Filter Corporation:
We have audited the accompanying consolidated balance sheets of United
States Filter Corporation and subsidiaries as of March 31, 1997 and 1998, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended March 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We did not audit the
consolidated financial statements of The Kinetics Group, Inc., a wholly owned
subsidiary, as of March 31, 1997, which statements reflect total assets
constituting 7 percent in 1997, and total revenues constituting 26 percent and
22 percent in 1996 and 1997, respectively, of the related consolidated totals.
Those consolidated financial statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for The Kinetics Group, Inc., is based solely on the report
of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of United States Filter Corporation
and subsidiaries as of March 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 1998, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Orange County, California
June 1, 1998
36
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
The Kinetics Group, Inc.
We have audited the consolidated balance sheets of the Kinetics Group, Inc.
as of September 30, 1996 and 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years
in the period ended September 30, 1997 (not presented separately herein).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Kinetics
Group, Inc. at September 30, 1996 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended September 30, 1997 in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Walnut Creek, California
January 16, 1998
37
<PAGE>
UNITED STATES FILTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 135,144 48,673
Short-term investments................................ 2,158 241
Accounts receivable, less allowance for doubtful
accounts of $27,095 at March 31, 1997 and $33,370 at
March 31, 1998....................................... 572,940 728,486
Costs and estimated earnings in excess of billings on
uncompleted contracts................................ 130,310 217,935
Inventories........................................... 245,201 386,100
Prepaid expenses...................................... 8,931 15,481
Deferred taxes........................................ 53,152 131,618
Other current assets.................................. 17,086 47,416
---------- ---------
Total current assets................................ 1,164,922 1,575,950
---------- ---------
Property, plant and equipment, net...................... 319,687 806,475
Investment in leasehold interests, net.................. 23,230 21,699
Costs in excess of net assets of businesses acquired,
net.................................................... 788,096 1,027,481
Other assets............................................ 101,628 166,239
---------- ---------
$2,397,563 3,597,844
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 274,653 335,232
Accrued liabilities................................... 275,537 434,028
Current portion of long-term debt..................... 11,956 79,171
Billings in excess of costs and estimated earnings on
uncompleted contracts................................ 61,441 90,073
Other current liabilities............................. 26,183 45,670
---------- ---------
Total current liabilities........................... 649,770 984,174
---------- ---------
Notes payable........................................... 42,646 574,806
Long-term debt, excluding current portion............... 31,464 56,305
Convertible subordinated debt........................... 554,000 554,000
Deferred taxes.......................................... 12,198 51,849
Other liabilities....................................... 61,655 83,300
---------- ---------
Total liabilities................................... 1,351,733 2,304,434
---------- ---------
Shareholders' equity:
Preferred stock, authorized 3,000 shares.............. -- --
Common stock, par value $.01. Authorized 300,000
shares; issued and outstanding 80,334 and 107,422 at
March 31, 1997 and 1998, respectively................ 803 1,074
Additional paid-in capital............................ 1,013,734 1,577,847
Currency translation adjustment....................... (19,491) (51,329)
Retained earnings (accumulated deficit)............... 50,784 (234,182)
---------- ---------
Total shareholders' equity.......................... 1,045,830 1,293,410
Commitments and contingencies...........................
---------- ---------
$2,397,563 3,597,844
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE>
UNITED STATES FILTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues............................ $ 1,090,745 1,764,406 3,234,580
Costs of sales...................... 836,973 1,376,615 2,456,173
------------- ------------ ------------
Gross profit.................... 253,772 387,791 778,407
------------- ------------ ------------
Selling, general and administrative
expenses........................... 192,387 316,190 573,002
Purchased in-process research and
development........................ -- -- 299,505
Merger, restructuring, acquisition
and other related charges.......... -- 5,581 141,109
------------- ------------ ------------
192,387 321,771 1,013,616
------------- ------------ ------------
Operating income (loss)......... 61,385 66,020 (235,209)
------------- ------------ ------------
Other income (expense):
Interest expense.................. (16,280) (26,509) (53,887)
Interest and other income......... 5,923 3,678 4,900
------------- ------------ ------------
(10,357) (22,831) (48,987)
------------- ------------ ------------
Income (loss) before income tax
expense........................ 51,028 43,189 (284,196)
Income tax expense.................. 20,329 10,681 15,583
------------- ------------ ------------
Net income (loss)............... $ 30,699 32,508 (299,779)
============= ============ ============
Net income (loss) per common share:
Basic........................... $ 0.62 0.51 (3.13)
============= ============ ============
Diluted......................... $ 0.61 0.49 (3.13)
============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE>
UNITED STATES FILTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK RETAINED
------------------ ----------------- ADDITIONAL CURRENCY EARNINGS
NUMBER OF NUMBER OF PAID-IN TRANSLATION (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT) TOTAL
--------- -------- --------- ------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1995................... 1,065 $ 25,577 30,054 $ 224 151,707 (2,026) 1,603 177,085
Restatement for
acquisition of Kinetics
acquired through
pooling of interests... -- -- 5,804 58 18,984 -- 4,421 23,463
----- -------- ------- ------- --------- ------- -------- ---------
Balance at March 31,
1995, restated......... 1,065 25,577 35,858 282 170,691 (2,026) 6,024 200,548
Compensation related to
excess of fair value of
director stock options
over exercise price.... -- -- -- -- 112 -- -- 112
Conversion of preferred
shares to common
shares................. (926) (22,936) 2,083 14 22,922 -- -- --
Redemption of Series B
convertible preferred
stock.................. (139) (2,641) -- -- (2,068) -- -- (4,709)
Issuance of common stock
in connection with
acquisitions........... -- -- 2,453 16 36,284 -- -- 36,300
Shares issued through
public offering net of
offering costs of
$6,106................. -- -- 10,350 69 97,325 -- -- 97,394
Conversion of
subordinated debt to
common stock........... -- -- 3,750 25 44,975 -- -- 45,000
Dividends paid on
preferred stock........ -- -- -- -- -- -- (715) (715)
Exercise of common stock
options................ -- -- 488 3 3,678 -- -- 3,681
Issuances of common
stock to acquire
assets................. -- -- 224 2 2,974 -- -- 2,976
Currency translation
adjustment............. -- -- -- -- -- 3,862 -- 3,862
Shareholders' equity
transactions of
Kinetics and other
entities prior to
merger................. -- -- -- -- 2,438 -- (10,196) (7,758)
Net income.............. -- -- -- -- -- -- 30,699 30,699
----- -------- ------- ------- --------- ------- -------- ---------
Balance at March 31,
1996................... -- -- 55,206 411 379,331 1,836 25,812 407,390
Exercise of common stock
options................ -- -- 659 7 6,081 -- -- 6,088
Issuance of common stock
in connection with
acquisitions........... -- -- 7,686 76 196,548 -- -- 196,624
Issuance of common stock
to pay off
indebtedness........... -- -- 271 2 6,741 -- -- 6,743
Par value of shares
issued in connection
with three-for-two
stock split............ -- -- -- 143 (143) -- -- --
Shares issued through
public offering, net of
offering costs of
$17,154................ -- -- 11,804 118 356,036 -- -- 356,154
Conversion of
subordinated debt to
common stock........... -- -- 4,389 43 58,535 -- -- 58,578
Issuance of common stock
to acquire assets...... -- -- 319 3 5,894 -- -- 5,897
Shareholders' equity
transactions of
Kinetics and other
entities prior to
merger................. -- -- -- -- 4,711 -- (7,536) (2,825)
Currency translation
adjustment............. -- -- -- -- -- (21,327) -- (21,327)
Net income.............. -- -- -- -- -- -- 32,508 32,508
----- -------- ------- ------- --------- ------- -------- ---------
Balance at March 31,
1997................... -- -- 80,334 803 1,013,734 (19,491) 50,784 1,045,830
Exercise of common stock
options................ -- -- 506 5 5,536 -- 5,541
Issuance of common stock
in connection with
acquisitions........... -- -- 26,536 265 527,955 -- -- 528,220
Shareholders' equity
transactions of
Kinetics and other
entities prior to
merger................. -- -- -- -- 29,480 -- 14,813 44,293
Issuance of common stock
to acquire assets...... -- -- 46 1 1,142 -- -- 1,143
Currency translation
adjustment............. -- -- -- -- -- (31,838) -- (31,838)
Net loss................ -- -- -- -- -- -- (299,779) (299,779)
----- -------- ------- ------- --------- ------- -------- ---------
Balance at March 31,
1998................... -- $ -- 107,422 $ 1,074 1,577,847 (51,329) (234,182) 1,293,410
===== ======== ======= ======= ========= ======= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
40
<PAGE>
UNITED STATES FILTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $ 30,699 32,508 (299,779)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Deferred income taxes......................... (4,932) 1,732 (27,308)
Depreciation.................................. 25,224 35,969 64,682
Amortization.................................. 7,245 14,674 28,322
Write-off of purchased in-process research and
development and goodwill..................... -- -- 352,025
Provision for doubtful accounts............... 5,929 5,536 7,620
(Gain) loss on sale or disposal of property
and equipment................................ (260) (15) 11,549
Stock and stock option compensation........... 112 -- --
Increase in closure reserves and write-off of
intangible assets............................ 768 -- --
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable.... (39,603) (23,364) 16,736
Increase in costs and estimated earnings in
excess of billings on uncompleted contracts.. (8,471) (53,302) (37,337)
Increase in inventories....................... (5,468) (29,136) (30,500)
Increase in prepaid expenses and other assets. (5,359) (43,913) (46,658)
Increase in accounts payable and accrued
expenses..................................... 4,473 37,885 4,890
Increase (decrease) in billings in excess of
costs and estimated earnings on uncompleted
contracts.................................... (2,110) 8,182 (10,154)
Increase (decrease) in other liabilities...... (1,612) (2,564) 2,063
-------- -------- --------
Net cash provided by (used in) operating
activities................................. 6,635 (15,808) 36,151
-------- -------- --------
Cash flows from investing activities:
Investment in leasehold interests............... (8,347) -- --
Purchase of property, plant and equipment....... (38,335) (56,834) (127,592)
Proceeds from disposal of equipment............. 7,670 6,301 7,500
(Purchase) sale of short-term investments....... 9,871 (374) 1,923
Payment for purchase of acquisitions, net of
cash acquired.................................. (206,936) (586,059) (461,174)
-------- -------- --------
Net cash used in investing activities....... (236,077) (636,966) (579,343)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from sale of common stock.......... 97,783 356,154 --
Net proceeds from sale of convertible
subordinated debt.............................. 136,249 403,650 --
Proceeds from exercise of common stock options.. 3,681 6,088 5,541
Principal payments of debt...................... (71,909) (13,393) (51,885)
Dividends paid on common and preferred stock.... (9,988) (3,901) (50)
Payment to repurchase Series B preferred stock.. (4,709) -- --
Net proceeds from borrowings on notes payable... 76,990 11,590 503,115
-------- -------- --------
Net cash provided by financing activities... 228,097 760,188 456,721
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents................................ (1,345) 107,414 (86,471)
Cash and cash equivalents at beginning of year... 29,075 27,730 135,144
-------- -------- --------
Cash and cash equivalents at end of year......... $ 27,730 135,144 48,673
======== ======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest.......... $ 16,463 21,472 45,548
======== ======== ========
Cash paid during the year for income taxes...... $ 11,275 14,936 24,882
======== ======== ========
Noncash investing and financing activities
consisted of the following:
Common stock issued:
Conversion of subordinated debt............... $ 45,000 60,000 --
Purchase of property or equipment............. 2,976 5,897 1,143
Property, plant and equipment exchanged for
receivables.................................... 5,318 -- --
-------- -------- --------
$ 53,294 65,897 1,143
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
41
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1996, 1997 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
United States Filter Corporation and wholly owned subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
REVENUE RECOGNITION
Method of Accounting for Contracts
The accounting records of the Company are maintained and income is reported
for financial reporting and income tax purposes for long-term contracts under
the percentage-of-completion method of accounting. Under this method, an
estimated percentage for each contract, based on the cost of work performed to
date that has contributed to contract performance compared to the total
estimated cost, is applied to the contract price and recognized as revenue.
Provision is made for the entire amount of future estimated losses on
contracts in progress in the period such losses are determined. Claims for
additional contract compensation due the Company are not reflected in the
accounts until the year in which such claims are allowed, except where
contract terms specifically provide for certain claims.
Contract costs include all direct material and labor and indirect costs
related to contract performance. General and administrative expenses are
charged to expense as incurred.
Products and Services
Sales of other products and services are recorded as products are shipped or
services rendered.
INCOME TAXES
Deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
tax rates in effect for the year in which the differences are expected to
reverse.
United States income taxes are not provided on the undistributed earnings of
its non-U.S. subsidiaries as such earnings are intended to be indefinitely
reinvested in those operations.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in a functional currency other than U.S.
dollars are translated into U.S. dollars at the current rate of exchange
existing at period-end and revenues and expenses are translated at the average
monthly exchange rates. Translation adjustments are included as a separate
component of shareholders' equity. Transaction gains and losses included in
net income (loss) are immaterial. The effects of exchange rate changes on cash
are immaterial as of March 31, 1997 and 1998 and for each of the years in the
three year period ended March 31, 1998.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
42
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated on the
straight-line method over the estimated useful lives of the respective assets
which range from three to 25 years. Leasehold improvements are amortized on
the straight-line method over the lesser of their estimated useful lives or
the related lease term.
COSTS IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED
Costs in excess of net assets of businesses acquired are amortized on the
straight-line method over a 20- to 40-year life. The Company evaluates the
recoverability of these costs based upon expectations of non-discounted cash
flows of each subsidiary.
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Investments in unconsolidated joint ventures are accounted for using the
equity method. The Company's share of earnings or losses from these joint
ventures is reflected in income and dividends are credited against the
investment when received.
NET UNAMORTIZED DEBT ISSUANCE COSTS
Net unamortized debt issuance costs, aggregating $16.9 million and $11.2
million at March 31, 1997 and 1998, respectively, have been deferred and are
being amortized over the term of the related debt ranging from five to ten
years.
WARRANTIES
The Company's products are generally warrantied against defects in material
and workmanship for a period of one year. The Company has accrued for
estimated future warranty costs.
ENVIRONMENTAL EXPENDITURES
Expenditures for environmental protection are expensed or capitalized, as
appropriate. Costs associated with remediation activities are expensed.
Liabilities are recorded when remedial efforts are probable and the costs can
be reasonably estimated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, short-term investments,
accounts receivable, accounts payable, and accrued liabilities approximate
fair value because of the short maturity of these instruments. The carrying
amount of the Company's revolving credit facility approximates its fair value
because the interest rate on the instrument changes with market interest
rates. The fair value of the Company's long-term debt (including current
portion) is estimated to be equal to the carrying amounts based on quoted
market prices for similar issues or on the current rates offered to the
Company for debt of the same remaining maturities.
43
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is computed based on the weighted average
number of shares outstanding and in accordance with SFAS No. 128 "Earnings Per
Share". Dilutive securities consisting of convertible preferred stock,
convertible subordinated debt and common stock options are included in the
computation of income (loss) per diluted share when their effect is dilutive.
Accordingly, "Basic EPS" and "Diluted EPS" were calculated as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
BASIC
Net income (loss) applicable to
common shares.................. $ 30,699 32,508 (299,779)
Dividends on preferred stock.... (536) -- *** -- ***
------------- ----------- -------------
$ 30,163 32,508 (299,779)
============= =========== =============
Weighted average common shares
outstanding.................... 48,369 64,082 95,909
============= =========== =============
Basic income (loss) per common
share.......................... $ 0.62 0.51 (3.13)
============= =========== =============
DILUTED
Net income (loss) applicable to
common shares.................. $ 30,163 32,508 (299,779)
Add:
Effect on net income (loss) of
conversions of convertible
subordinated debt............ -- * -- * -- *
------------- ----------- -------------
Adjusted net income (loss)
applicable to common shares.... $ 30,163 32,508 (299,779)
============= =========== =============
Weighted average common shares
outstanding.................... 48,369 64,082 95,909
Add:
Exercise of options........... 1,299 2,449 -- **
Assumed conversion of
subordinated debt............ -- * -- * -- *
------------- ----------- -------------
Adjusted weighted average common
shares outstanding............. 49,668 66,531 95,909
============= =========== =============
Diluted income (loss) per common
share.......................... $ 0.61 0.49 (3.13)
============= =========== =============
</TABLE>
- --------
* The calculation of diluted EPS for the years ended March 31, 1996, 1997 and
1998 does not assume conversion of subordinated debt as its effect would be
antidilutive to income (loss) per common share.
** The calculation of diluted EPS for the year ended March 31, 1998 does not
assume the exercise of options as the effect would be antidilutive to loss
per common share. Under the treasury stock method, the exercise of all
outstanding options would have increased the weighted average number of
shares by 2,449 for the year ended March 31, 1998.
*** On March 4, 1996, the preferred shareholder tendered its Series A
Preferred Stock for conversion into Company common stock thus eliminating
further dividends.
RECLASSIFICATIONS
Certain amounts in the 1997 consolidated financial statements have been
reclassified to conform with the 1998 presentation.
(2) CASH AND CASH EQUIVALENTS
Cash equivalents consist of demand deposits and certificates of deposit with
original maturities of 90 days or less.
44
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) SHORT-TERM INVESTMENTS
Short-term investments consist of highly liquid municipal issues available
for sale with original maturities of more than 90 days when purchased, and are
carried at amortized cost, which approximates market value.
(4) INVENTORIES
Inventories at March 31, 1997 and 1998 consist of:
<TABLE>
<CAPTION>
1997 1998
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.............................................. $ 56,830 108,870
Work-in-process............................................ 58,619 92,089
Finished goods............................................. 129,752 185,141
--------- -------
$ 245,201 386,100
========= =======
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at March 31, 1997 and 1998 consist of:
<TABLE>
<CAPTION>
1997 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land................................................... $ 20,697 250,668
Buildings and improvements............................. 110,925 262,520
Equipment.............................................. 199,240 333,190
Furniture and fixtures................................. 65,415 102,108
Vehicles............................................... 14,477 21,449
Construction in progress............................... 18,668 35,714
--------- ---------
429,422 1,005,649
Less accumulated depreciation.......................... (109,735) (199,174)
--------- ---------
$ 319,687 806,475
========= =========
</TABLE>
(6) INVESTMENT IN LEASEHOLD INTERESTS
The Company has concession agreements to operate wastewater treatment plants
in Mexico. The terms of the concessions are approximately 15 to 18 years, as
amended, and include monthly payments to be received by the Company at various
prices per cubic meter of sewage treated at the facilities based upon the
Company's initial investments, fixed operating expenses and variable operating
expenses. The Company is amortizing the investments on a straight-line basis
over the terms of the concessions. Accumulated amortization at March 31, 1997
and 1998 totaled $3.2 million and $4.7 million, respectively. The investments
are stated at cost which is not impaired based on projected non-discounted
future cash flows.
(7) COSTS IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED
Costs in excess of net assets of businesses acquired and accumulated
amortization at March 31, 1997 and 1998 consists of the following:
<TABLE>
<CAPTION>
1997 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Costs in excess of net
assets of businesses
acquired............... $ 811,054 1,073,155
Less accumulated
amortization........... (22,958) (45,674)
--------- ---------
$ 788,096 1,027,481
========= =========
</TABLE>
45
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) OTHER ASSETS
Other assets at March 31, 1997 and 1998 consist of:
<TABLE>
<CAPTION>
1997 1998
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Investment in joint ventures at equity..................... $ 10,645 7,761
Long-term receivables and advances......................... 7,837 4,953
Other assets at amortized cost:
Developed technology..................................... -- 56,587
Deferred debt costs...................................... 16,939 11,154
Operating permits and development costs.................. 5,994 10,054
Patents.................................................. 3,074 4,990
Other.................................................... 57,139 70,740
--------- -------
$ 101,628 166,239
========= =======
</TABLE>
The above amounts reflect accumulated amortization of $3.8 million and $7.4
million at March 31, 1997 and 1998, respectively.
(9) ACQUISITIONS
Fiscal 1998 Acquisitions
As of December 31, 1997, a wholly-owned subsidiary of the Company completed
the acquisition of The Kinetics Group, Inc. ("Kinetics") in a tax-free
reorganization. In connection with the acquisition, the Company issued
5,803,803 shares of the Company's common stock for all of the outstanding
common stock of Kinetics (0.5824 share of the Company's common stock for each
outstanding share and each outstanding option or other right to acquire a
share of Kinetics common stock). In addition, the Company assumed
approximately $50.0 million of third party institutional debt.
Kinetics, based in Santa Clara, California, is a provider and manufacturer
of sophisticated high-purity process piping systems and is also a leading
integrator in the United States of high-purity water, fluid and gas handling
systems that are critical to the pharmaceutical, biotechnology and micro
electronics industries.
46
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
This transaction has been accounted for as a pooling of interests and,
accordingly, the consolidated financial statements and notes thereto for all
periods presented have been restated to include the accounts of Kinetics. In
restating the Company's historical financial statements for the pooling of
interests with Kinetics, the Company's balance sheet as of March 31, 1997 was
combined with Kinetics audited balance sheet as of September 30, 1997. The
results of the Company for the fiscal year ended March 31, 1997 were combined
with historical results of Kinetics for the year ended September 30, 1997;
historical results of the Company for the year ended March 31, 1996 were
combined with historical results of Kinetics for the year ended September 30,
1996. Accordingly, results of Kinetics for the six month period ended
September 30, 1995 (including revenue of $106.9 million and net income of $2.8
million) are not included in the combined results of operations presented
herein. Concurrent with the Company's merger, Kinetics year end was recast to
March 31. Accordingly, results of Kinetics for the six month period ended
September 30, 1997 (including revenue of $227.4 million and a net loss of $8.5
million) are included in both the restated historical results for the year
ended March 31, 1997 and the results for the year ended March 31, 1998.
Separate results of operations of the combined entities for the years ended
March 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
--------------------
1996 1997
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
U.S. Filter (as previously reported).................... $ 812,322 1,376,601
Kinetics................................................ 278,423 387,805
---------- ---------
Combined............................................ $1,090,745 1,764,406
========== =========
Net income (loss):
U.S. Filter (as previously reported).................... 21,967 46,197
Kinetics................................................ 8,732 (13,689)
---------- ---------
Combined............................................ $ 30,699 32,508
========== =========
Net income per common share:
Basic:
As previously reported................................ $ 0.50 0.79
========== =========
As restated........................................... $ 0.62 0.51
========== =========
Diluted:
As previously reported................................ $ 0.49 0.77
========== =========
As restated........................................... $ 0.61 0.49
========== =========
</TABLE>
Separate unaudited results of operations of U.S. Filter and Kinetics for the
period during the year ended March 31, 1998 proceeding the mergers between
U.S. Filter and Kinetics are included in the Consolidated Statement of
Operations for the year ended March 31, 1998 as follows:
<TABLE>
<CAPTION>
REVENUES NET LOSS
---------- --------
<S> <C> <C>
U.S. Filter................................................ $2,009,767 (325,791)
Kinetics................................................... 336,786 (11,510)
---------- --------
Nine Months ended December 31, 1997...................... $2,346,553 (337,301)
========== ========
</TABLE>
47
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Merger expenses incurred to consummate the Kinetics transaction totaled $4.3
million consisting of investment banking, printing, stock transfer, legal,
accounting, governmental filing fees and certain other transaction costs and
are included in merger, restructuring, acquisition and other related charges
in the accompanying Consolidated Statement of Operations for the year ended
March 31, 1998.
On December 9, 1997, the Company, through a wholly-owned subsidiary,
completed its tender offer ("Offer") to purchase all of the outstanding
ordinary shares of Memtec Limited ("Memtec"). The total cash purchase price
was $397.2 million (including transaction costs of $10.6 million). Memtec is
incorporated under the law of the State of New South Wales, Australia and has
worldwide operations. Memtec is a leader in the designing, engineering,
manufacturing and marketing of an extensive range of filtration products and
systems, focusing on two principal areas of the filtration market: industrial
filtration and water filtration. Memtec had revenues of approximately $243.6
million and net income of approximately $7.5 million for the year ended June
30, 1997. The purchase price was allocated to the assets and liabilities of
Memtec based on their estimated respective fair values. The value of developed
technology was approximately $57.2 million, and is being amortized on a
straight-line basis over 25 years. The value of other intangible assets
including patents, trademarks, license and distribution fees was approximately
$7.3 million, and is being amortized over periods ranging from 5 to 12 years.
The Company also acquired from Memtec certain in-process research and
development projects that had not reached technological feasibility and that
had no alternative future uses. Such projects were valued by an independent
appraiser using a risk adjusted cash flow model under which expected future
cash flows were discounted using rates ranging from 31.9% to 45.9%. The
discount rates were determined by various internal and external factors
including general economic and industry economic conditions, cost and
availability of capital, product completion and technology risk, competition
and market acceptance. The future cash flows were based on significant
estimates of revenues, cost of goods sold, operating expenses, research and
development expenses, capital expenditures, depreciation and interest charges
on financed capital expenditures over the next ten years. The estimates of
these items included significant assumptions regarding (i) revenue growth,
which was assumed to grow from no revenue in the current period for the
projects currently in-process to substantially all of the revenue for the
Memtec subsidiary over the ten year period as the projects in-process supplant
or supersede the current Memtec product offerings; (ii) gross margin, which is
projected to improve approximately 5% by the end of the ten year period as the
new projects with higher gross margins supplant or supersede the current
Memtec product offerings; (iii) operating expenses as a percentage of sales,
which were projected to be 20%. The estimated market value of such in-process
research and development projects was $299.5 million and was expensed at the
acquisition date. The allocation of the purchase price of Memtec is final and
is not expected to change materially subsequent to March 31, 1998.
The acquisition of Memtec has been accounted for as a purchase and,
accordingly, the results of Memtec's operations have been included in the
consolidated financial statements of the Company from the date of acquisition.
Summarized below are the unaudited pro forma results of operations of the
Company as though Memtec had been acquired as of April 1, 1997:
<TABLE>
<CAPTION>
1998
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
Revenues.............................................. $ 3,403,083
===========
Net loss.............................................. $ (309,170)
===========
Net loss per common share:
Basic............................................... $ (3.22)
===========
Diluted............................................. $ (3.22)
===========
</TABLE>
48
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Concurrent with the merger with and into Kinetics and the acquisition of
Memtec, the Company designed and implemented a restructuring plan to
streamline its manufacturing and production base, improve efficiency and
enhance its competitiveness. The restructuring plan resulted in a pre-tax
charge of $141.1 million. The plan identifies certain products and
technologies acquired in conjunction with the Memtec transaction that
supersede products and technologies acquired in earlier acquisitions of
membrane related businesses. As a result certain carrying amounts of goodwill
and other intangible assets were determined to be impaired by approximately
$55.0 million in accordance with SFAS No. 121, which requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. In
determining the amount of the impairment of these assets, the Company valued
the assets using the present value of estimated expected future cash flows
using discount rates commensurate with the risks involved. The restructuring
plan also included closing or reconfiguring of certain facilities and reducing
the work force by approximately 350 employees, most of whom work in the
facilities to be closed.
Included in merger, restructuring, acquisition and other related charges
are the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Write-down of goodwill and other intangible assets........... $ 54,950
Asset write-offs, including equipment and facilities......... 47,887
Merger, integration and other acquisition costs.............. 21,135
Severance and related costs.................................. 17,137
--------
Total merger, restructuring, acquisition and other related
charges................................................... $141,109
========
Cash charges................................................. $ 36,431
Non-cash charges............................................. 104,678
--------
$141,109
========
</TABLE>
Approximately $15.4 million of merger and restructuring related charges are
included in accrued liabilities at March 31, 1998. Additional costs to
complete the restructuring plan are not expected to be material. After an
income tax benefit of $34.5 million, the charges detailed above totaling
$440.6 million reduced earnings by $406.1 million.
During the year ended March 31, 1998, the Company completed other
acquisitions with an aggregate purchase price, including acquisition costs, of
approximately $861.0 million, consisting of $80.0 million in cash and the
delivery of approximately 26,515,000 shares of Company common stock. The
excess of fair value of net assets acquired was approximately $263.8 million,
and is being amortized on a straight-line basis over 40 years.
Fiscal 1997 Acquisitions
On October 25, 1996, the Company acquired all of the outstanding capital
stock of the Utility Supply Group, Inc. ("USG") pursuant to an Agreement and
Plan of Merger. The purchase price for the acquisition of USG, including
acquisition costs, was approximately $40 million, consisting of the repayment
of $18.3 million of USG long-term debt paid in cash and the delivery of
771,157 shares of Company common stock.
USG, headquartered in Waco, Texas, is a distributor of water and wastewater
related products and services to industrial and municipal customers throughout
the United States.
The acquisition of USG has been accounted for as a purchase and,
accordingly, the results of operations of USG are included in the Company's
consolidated statements of operations from the date of acquisition. The excess
of fair value of net assets acquired was approximately $18 million, and is
being amortized on a straight-line basis over 40 years.
49
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On October 28, 1996, the Company acquired all of the outstanding capital
stock of WaterPro Supplies Corporation ("WaterPro") pursuant to a Stock
Purchase Agreement. The purchase price for the acquisition of WaterPro,
including acquisition costs, was approximately $91 million, consisting of
3,201,507 shares of Company common stock.
WaterPro, headquartered in Edina, Minnesota is a national distributor of
water and wastewater related products and services for municipal water, sewer
authorities and underground contractors, and has locations throughout the
United States.
The acquisition of WaterPro has been accounted for as a purchase and,
accordingly, the results of operations of WaterPro are included in the
Company's consolidated statements of operations from the date of acquisition.
The excess of fair value of net assets acquired was approximately $29 million,
and is being amortized on a straight-line basis over 40 years.
On December 2, 1996, pursuant to an Amended and Restated Purchase and Sale
Agreement dated September 14, 1996 between the Company and Wheelabrator Water
Technologies Inc. ("Seller"), the Company completed the acquisition of the
capital stock of certain of the Seller's subsidiaries and certain other
entities, and substantially all of the assets and liabilities of certain other
subsidiaries, collectively Wheelabrator's Water Systems and Manufacturing
Group ("WSMG"). The purchase price, as amended, for the acquisition of WSMG,
including acquisition costs, was approximately $374 million and was paid
entirely in cash.
WSMG provides a broad range of water and wastewater engineering, technology
and systems. The acquisition of WSMG has been accounted for as a purchase and,
accordingly, the results of operations of WSMG are included in the Company's
consolidated statements of operations from the date of acquisition. The excess
of fair value of net assets acquired was approximately $308 million and is
being amortized on a straight-line basis over 40 years.
On January 6, 1997, pursuant to a Purchase and Sale Agreement dated October
7, 1996, between the Company and United Utilities PLC ("Seller"), the Company
completed the acquisition of the capital stock of certain other subsidiaries,
collectively, the Process Equipment Division ("PED") of Seller. The purchase
price for the acquisition of PED, including acquisition costs, was
approximately $166 million in cash and 1,320,312 shares of Company stock.
PED provides a broad range of water and wastewater engineering, technology
and systems. The acquisition of PED has been accounted for as a purchase and,
accordingly, the results of operations of PED are included in the Company's
consolidated statements of operations from the date of acquisition. The excess
of fair value of net assets acquired was approximately $108 million and is
being amortized on a straight-line basis over 40 years.
Supplementary information related to the acquisitions of USG, WaterPro, WSMG
and PED is as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
Assets acquired.................................................. $1,018,537
Liabilities assumed.............................................. (318,059)
Common stock issued.............................................. (139,025)
----------
Cash paid........................................................ 561,453
Fees and expenses................................................ 3,001
Less cash acquired............................................... (11,039)
----------
Net cash paid.................................................. $ 553,415
==========
</TABLE>
50
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Summarized below are the unaudited pro forma results of operations of the
Company as though Memtec, USG, WaterPro, WSMG and PED had been acquired on
April 1, 1996:
<TABLE>
<CAPTION>
1997
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
Revenues............................................... $2,743,614
==========
Net income............................................. $ 37,637
==========
Net income per common share:
Basic................................................ $ 0.48
==========
Diluted.............................................. $ 0.46
==========
</TABLE>
During the year ended March 31, 1997, the Company completed other
acquisitions with an aggregate purchase price, including acquisition costs, of
approximately $77 million, consisting of $19.0 million in cash and the
delivery of 2,392,768 shares of Company common stock. The excess of fair value
of net assets acquired was approximately $65 million, and is being amortized
on a straight-line basis over 40 years.
(10) CONTRACT BILLING STATUS
Information with respect to the billing status of contracts in process at
March 31, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Contract costs incurred to date..................... $ 971,292 1,348,386
Estimated profits................................... 160,949 255,347
---------- ----------
Contract revenue earned to date..................... 1,132,241 1,603,733
Less billings to date............................... (1,063,372) (1,475,871)
---------- ----------
Cost and estimated earnings in excess of billings,
net................................................ $ 68,869 127,862
========== ==========
The above amounts are included in the accompanying consolidated balance
sheets as:
<CAPTION>
<S> <C> <C>
Costs and estimated earnings in excess of billings
on uncompleted contracts........................... $ 130,310 217,935
Billings in excess of costs and estimated earnings
on uncompleted contracts........................... (61,441) (90,073)
---------- ----------
$ 68,869 127,862
========== ==========
</TABLE>
Accounts receivable include retainage which has been billed, but is not due
pursuant to retainage provisions in construction contracts until completion of
performance and acceptance by the customer. This retainage aggregated $21.7
million and $16.1 million at March 31, 1997 and 1998, respectively.
Substantially all retained balances are collectible within one year.
51
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) LONG-TERM DEBT
Long-term debt at March 31, 1997 and 1998 consists of the following:
<TABLE>
<CAPTION>
1997 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Mortgage notes payable, secured by land and buildings,
interest rates ranging from 2.0% to 10.0%, due in 1999
through 2013.......................................... $ 13,304 11,676
Guaranteed bank notes, interest rates ranging from 2.0%
to 9.2%, due in 1999 through 2004..................... 1,631 61,416
Unsecured notes payable, interest rates ranging from
3.8% to 10.1%, due in 1999 through 2008............... 24,954 62,384
Other.................................................. 3,531 --
-------- -------
43,420 135,476
Less current portion................................... (11,956) (79,171)
-------- -------
$ 31,464 56,305
======== =======
</TABLE>
The aggregate maturities of long-term debt for each of the five years
subsequent to March 31, 1998 are as follows: 1999, $79.2 million; 2000, $13.9
million; 2001, $9.1 million; 2002, $7.1 million; 2003, $4.2 million; and
thereafter, $22.0 million.
The Company has a long-term, unsecured revolving line of credit with a bank
of up to $750.0 million, of which $544.1 million was outstanding at March 31,
1998 and is included in notes payable in the accompanying consolidated balance
sheet. The line of credit expires December 2001 and bears interest at 0.15%
above the bank's base rate or at variable rates of up to 0.45% above certain
Eurocurrency rates. The line of credit is subject to certain covenants for
which the Company was in compliance at March 31, 1998. At March 31, 1998,
$40.7 million of standby letters of credit were issued under this line of
credit.
In connection with the acquisitions of Kinetics and Memtec, the Company
assumed through its subsidiaries two additional loan agreements with banks.
One agreement provides a revolving line-of-credit with borrowings of up to
$100.0 million, of which no amounts were outstanding at March 31, 1998.
Borrowings under this agreement bear interest at the banks reference rate or
other interest rate options that the subsidiary may select. The other
agreement is a Multi-Option, Multi-Currency Master Facility that provides
borrowings of up to $60.0 million, of which $30.7 million was outstanding as
of March 31, 1998. Borrowings under this agreement bear interest at LIBOR plus
0.75%. The Company anticipates that it will terminate these two agreements
during fiscal 1999.
(12) CONVERTIBLE SUBORDINATED DEBT
On December 11, 1997, the Company sold $414.0 million aggregate principal
amount of 4.5% Convertible Subordinated Debentures due December 15, 2001 (the
"Debentures"). The Debentures are convertible into common stock at any time
prior to maturity, redemption or repurchase at a conversion price of $39.50
per share, subject to adjustments in certain circumstances. The Debentures are
not redeemable prior to December 15, 1999, at which time the Debentures become
redeemable at the option of the Company, in whole or in part, at specified
redemption prices plus accrued and unpaid interest to the date of redemption.
Interest is payable semi-annually on June 15 and December 15, commencing June
15, 1997.
On September 18, 1995 the Company sold $140.0 million aggregate principal
amount of 6% Convertible Subordinated Notes due September 15, 2005 (the
"Notes"). The Notes are convertible into common stock at any time prior to
maturity, redemption or repurchase at a conversion price of $18.33 per share,
subject to
52
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
adjustment in certain circumstances. The Notes are not redeemable prior to
September 23, 1998 at which time the Notes become redeemable at the option of
the Company, in whole or in part, at specified redemption prices plus accrued
and unpaid interest to the date of redemption. Interest is payable semi-
annually on March 15 and September 15 of each year, commencing on March 15,
1996.
Effective August 31, 1994, the Company issued $45.0 million of convertible
subordinated debt with common stock purchase warrants in connection with the
acquisition of Smogless. On September 18, 1995, these warrants to purchase 3.8
million shares of Company common stock were exercised in exchange for the
delivery of the $45.0 million principal amount of subordinated debt.
On October 20, 1993, the Company issued $60.0 million aggregate principal
amount of 5% convertible subordinated debentures due October 15, 2000. As of
October 25, 1996, all of such debentures were converted into a total of
approximately 4.4 million shares of Company common stock pursuant to the terms
of the debentures.
(13) ACCRUED LIABILITIES
Accrued liabilities at March 31, 1997 and 1998 consist of the following:
<TABLE>
<CAPTION>
1997 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued job costs and customer deposits..................... $ 75,108 96,802
Payroll, benefits and related taxes......................... 71,157 95,504
Relocation and closure costs................................ 41,088 96,019
Warranty.................................................... 25,727 42,089
Future remediation.......................................... 10,625 2,760
Sales commissions........................................... 10,014 15,630
Sales, property and other taxes............................. 9,647 38,379
Interest.................................................... 7,978 9,494
Other....................................................... 24,193 37,351
-------- -------
$275,537 434,028
======== =======
</TABLE>
(14) INCOME TAXES
Income tax expense (benefit) from continuing operations for the years ended
March 31, 1996, 1997 and 1998 consist of:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current.......................................... $ 9,569 5,806 (10,091)
Deferred......................................... 2,584 2,342 21,451
State:
Current.......................................... 2,393 2,904 (1,442)
Deferred......................................... (542) (768) 3,064
Non-U.S.:
Current.......................................... 4,085 5,821 (7,123)
Deferred......................................... 2,240 (5,424) 9,724
------- ------ -------
$20,329 10,681 15,583
======= ====== =======
</TABLE>
53
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total income tax expense (benefit) differed from the amounts computed by
applying the U.S. Federal corporate tax rate of 34% for 1996 and 35% for 1997
and 1998 to income (loss) from continuing operations before income taxes as a
result of the following:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Expected income tax provision.................... $17,350 15,116 (99,469)
Permanent differences............................ 1,573 2,302 1,969
Non-deductible expenses related to purchased in-
process research and development and merger,
restructuring, acquisition and other related
charges......................................... -- -- 113,949
State franchise tax, net of Federal tax benefit.. 1,641 1,937 1,623
Change in balance of valuation allowance......... (3,351) (10,796) (1,941)
Difference in U.S. tax rate and foreign tax
rates........................................... 2,032 1,762 (548)
Other............................................ 1,084 360 --
------- ------- -------
$20,329 10,681 15,583
======= ======= =======
</TABLE>
As of March 31, 1998, the Company has net operating loss carryforwards in
France of approximately $14.0 million with an indefinite carryforward period
for which income tax benefit was recognized during fiscal 1997. Any benefit of
the French loss carryforward was required to be shared equally between the
Company and Alcoa until March 31, 1997. As of March 31, 1998, the Company also
had net operating loss carryforwards in other non-U.S. countries of
approximately $126.5 million which expire from 1999 to indefinite.
Additionally, as of March 31, 1998, the Company has recognized the future
benefit of net operating loss carryforwards generated from Liquipure of $14.4
million. These loss carryforwards expire from 2002 to 2007. These operating
loss carryforwards can be used only against future taxable income of
Liquipure.
The Company also has available, at March 31, 1998, other net operating loss
carryforwards for U.S. Federal income tax purposes of approximately $68.3
million which expire in 2007 to 2011.
54
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The sources and tax effects of temporary differences between the financial
statement carrying amounts and tax basis of assets and liabilities are as
follows:
<TABLE>
<CAPTION>
1997 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Operating loss carryforwards............................ $ 36,514 87,449
Inventory............................................... 8,044 6,940
Allowance for doubtful accounts......................... 6,250 9,018
Warranty................................................ 2,656 6,793
Vacation................................................ 1,465 4,492
Other accruals.......................................... 33,495 51,268
Tax credits............................................. 276 258
Other................................................... 1,049 13,009
-------- -------
89,749 179,227
Valuation allowance..................................... (20,659) (44,440)
-------- -------
Total deferred tax assets............................. 69,090 134,787
Deferred tax liabilities:
Depreciation and amortization........................... 12,658 33,292
Prepaid expenses........................................ 353 360
Long-term contracts..................................... 11,123 4,625
Other................................................... 4,002 16,741
-------- -------
28,136 55,018
-------- -------
Net deferred tax assets............................... $ 40,954 79,769
======== =======
</TABLE>
The Company believes that it is more likely than not that the net deferred
tax assets, including Federal net operating loss carryforwards, will be
realized prior to their expiration. This belief is based on recent and
anticipated future earnings and, in part, on the fact that the Company has
completed several acquisitions during and including the three years ended
March 31, 1998 of companies with strong earnings potential. A valuation
allowance of $44.4 million at March 31, 1998 has been provided primarily for
state and foreign net operating losses which may not be realized prior to
expiration.
(15) SHAREHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
In January 1992 and September 1994, the Company issued 880,000 shares of a
new Series A Cumulative Convertible Preferred Stock and 185,185 shares of a
new Series B Convertible Preferred Stock, respectively, in connection with
acquisitions. On September 18, 1995, the Company repurchased and canceled
139,518 shares of Series B Preferred stock for $4.7 million and converted
45,667 shares of Series B Preferred Stock into 102,750 shares of Company
common stock. On March 4, 1996, the holder of the Company's Series A Preferred
Stock tendered the 880,000 preferred shares for conversion into 1,980,000
shares of Company Common Stock pursuant to terms of the security.
COMMON STOCK
On July 15, 1996, the Company paid in the form of stock dividends a three-
for-two split of the Company's common stock. All references herein to income
(loss) per common share and other common stock information in the accompanying
consolidated financial statements and notes thereto have been restated to
reflect those splits.
55
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On December 11, 1996, the Company sold 11,804,206 shares of its common stock
at $31.625 per share. The net proceeds to the Company, after underwriting
discounts and commissions and other related expenses, were $356.1 million.
On May 3, 1995, the Company sold 10,350,000 shares of its common stock at
$10.00 per share. The net proceeds to the Company, after underwriting
discounts and commissions and other related expenses, were $97.3 million.
OPTIONS
Under the Company's 1991 Employee Stock Option Plan (the "Plan"), the
exercise price of options granted is equal to their fair market value at the
date of grant and the maximum term of the option may not exceed 10 years. If
the optionee is a holder of more than 10% of the outstanding common stock of
the Company, the option price per share is increased to at least 110% of fair
market value, and the option term is limited to 5 years. The total number of
shares of common stock available under the Plan is 7,131,250 shares. Each
option granted becomes exercisable on a cumulative basis, 25% six months
following the date of grant and 25% on each subsequent anniversary of the
grant date until fully vested.
Under the Company's 1991 Director Stock Option Plan (the "Directors Plan"),
the exercise price of options granted was equal to the higher of $2.00 below
the market price or 60% of the market price on the date of grant. Effective
April 1, 1996 the Directors Plan was amended to grant options equal to their
fair market value at the date of grant. Under the Plan, each director of the
Company who is not a full-time employee of the Company will receive each year
an option to purchase 12,000 shares of common stock. The total number of
shares available under the Directors Plan is 562,500 shares. Compensation
expense of $.1 million was recorded in fiscal 1996 related to the Directors
Plan.
The per share weighted-average fair value of stock options granted during
fiscal 1996, 1997 and 1998 was $5.93, $9.49 and $12.87 respectively, on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 1996, 1997 and 1998:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate.................................... 6.3% 6.3% 5.7%
Expected dividend yield.................................... -- -- --
Expected stock price volatility............................ 41.9% 41.9% 44.9%
Expected remaining life in years........................... 5 5 5
</TABLE>
56
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company continues to apply APB Opinion No. 25 in accounting for its Plan
and the Directors' Plan and, accordingly, no compensation cost has been
recognized for its stock options in the consolidated financial statements. Had
the Company determined compensation cost based on the fair value at the grant
date for its stock options under SFAS No. 123, the Company's net income (loss)
and net income (loss) per common share would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------
1996 1997 1998
------------ -------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss)
As reported....................... $ 30,699 32,508 (299,779)
============ =========== =============
Pro forma......................... $ 28,057 23,650 (311,899)
============ =========== =============
Net income (loss) per common share:
Basic:
As reported..................... $ 0.62 0.51 (3.13)
============ =========== =============
Pro forma....................... $ 0.58 0.37 (3.25)
============ =========== =============
Diluted:
As reported..................... $ 0.61 0.49 (3.13)
============ =========== =============
Pro forma....................... $ 0.56 0.36 (3.25)
============ =========== =============
</TABLE>
Pro forma net income (loss) and net income (loss) per common share reflects
only options granted after April 1, 1995. Therefore, the full impact of
calculating compensation cost for stock options under SFAS No. 123 is not
reflected in the pro forma net income (loss) and net income (loss) per common
share amounts presented above because compensation reflected over the options'
vesting period of 10 years and compensation cost for options granted prior to
April 1, 1995 is not considered. The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options that do not
have vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions including
the expected stock price volatility. Because the Company's stock options have
characteristics significantly different from those of traded options and
because changes in the subjective input assumptions can materially affect the
value of an estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.
57
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Transactions involving the Plan and Directors Plan are summarized as
follows:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
SHARES EXERCISE PRICE VALUE
--------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at March 31, 1995........... 2,636,058 $1.35 to 10.95 $ 27,038
Options granted..................... 1,425,759 1.35 to 18.67 14,838
Options exercised................... (487,886) 1.35 to 10.95 (3,678)
Options canceled.................... (20,626) 8.53 to 10.58 (183)
--------- -------------- --------
Balance at March 31, 1996........... 3,553,305 1.35 to 18.67 38,015
Options granted..................... 2,129,572 12.02 to 34.88 39,909
Options exercised................... (659,210) 1.35 to 26.25 (11,886)
Options canceled.................... (27,415) 4.97 to 13.83 (309)
--------- -------------- --------
Balance at March 31, 1997........... 4,996,252 1.35 to 34.88 65,729
Options granted..................... 1,656,850 26.00 to 37.75 49,220
Options exercised................... (505,846) 1.35 to 27.25 (5,539)
Options canceled.................... (20,976) 13.83 to 30.25 (417)
--------- -------------- --------
Balance at March 31, 1998........... 6,126,280 $1.35 to 37.75 $108,993
========= ============== ========
</TABLE>
At March 31, 1997 and 1998, the number of options exercisable was 2.2
million and 3.0 million, respectively.
The following table summarizes certain information regarding options
outstanding at March 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
RANGE OF NUMBER AVERAGE AVERAGE
EXERCISE PRICE OF OPTIONS REMAINING LIFE EXERCISE PRICE
-------------- ---------- -------------- --------------
<S> <C> <C> <C>
$ 1.35 to 11.63 1,860,274 6.1 years $ 7.62
12.02 to 22.75 2,092,856 8.4 15.88
26.00 to 37.75 2,173,150 9.0 28.33
-------------- --------- --------- ------
$ 1.35 to 37.75 6,126,280 7.9 years 17.79
============== ========= ========= ======
</TABLE>
In connection with the options and convertible subordinated debt, the
Company has reserved approximately 19.1 million shares at March 31, 1998 for
future issuance.
(16) RETIREMENT PLANS
Pursuant to the terms of a collective bargaining agreement, one of the
Company's U.S. subsidiaries has a defined benefit pension plan covering
substantially all of its hourly employees. Pension plan benefits are generally
based upon years of service and compensation. The Company's funding policy is
to contribute at least the minimum amounts required by the U.S. Employee
Retirement Income Security Act of 1974 ("ERISA") or additional amounts to
assure that plan assets will be adequate to provide retirement benefits. Plan
assets are invested in broadly diversified portfolios of government
obligations, mutual funds and fixed income and equity securities. The
accumulated benefit obligation under this plan is not material to the
consolidated financial statements.
A subsidiary of the Company provides pension and health and welfare benefits
to employees who are members of the United Association of Journeymen and
Apprentices of the Plumbing and Pipefitting Industry of
58
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the United States and Canada (the "Pipefitters Union") under multiemployer
defined benefit plans. Contributions to the Pipefitters Union pension and
health and welfare plans were not material to the Company's financial position
as of March 31, 1997 and 1998 nor to its results of operations for each of the
years in the three year period ended March 31, 1998.
The Company has a defined contribution plan (under IRC Section 401(k))
covering substantially all U.S. salaried and hourly participating employees
which provide for contributions based primarily upon compensation levels and
employee contributions. The Company funds its contributions to these plans as
provided by ERISA. Defined contribution plan expense to the Company was $1.6
million, $3.8 million and $7.6 million for the years ended March 31, 1996,
1997 and 1998, respectively.
(17) BUSINESS SEGMENT DATA AND EXPORT SALES
The Company's sole business segment is the design, manufacture, operation,
distribution and service of equipment and supplies for filtration, water
treatment and wastewater treatment for industrial, municipal, commercial and
retail customers. No individual customers accounted for 10% or more of revenue
in fiscal 1996, 1997 and 1998. Export sales were $58.6 million, $85.4 million
and $112.7 million in fiscal 1996, 1997 and 1998, respectively.
Information about the Company's operations in different geographic locations
for the years ended March 31, 1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues from unaffiliated customers:
United States.............................. $ 875,792 1,342,496 2,384,744
Non-U.S.................................... 214,953 421,910 849,836
---------- --------- ---------
$1,090,745 1,764,406 3,234,580
========== ========= =========
Operating income (loss):
United States.............................. $ 44,565 38,535 66,628
Non-U.S.................................... 16,820 27,485 (301,837)
---------- --------- ---------
$ 61,385 66,020 (235,209)
========== ========= =========
Income (loss) before income taxes
United States.............................. $ 37,635 21,578 22,449
Non-U.S.................................... 13,393 21,611 (306,645)
---------- --------- ---------
$ 51,028 43,189 (284,196)
========== ========= =========
Identifiable assets:
United States.............................. $ 701,649 1,695,336 2,374,206
Non-U.S.................................... 301,667 702,227 1,223,638
---------- --------- ---------
$1,003,316 2,397,563 3,597,844
========== ========= =========
</TABLE>
(18) COMMITMENTS AND CONTINGENT LIABILITIES
COMMITMENTS
The Company and its subsidiaries lease certain facilities and equipment
under various noncancelable long term and month-to-month leases. These leases
are accounted for as operating leases. Rent expense aggregated $10.5 million,
$16.3 million and $41.9 million in 1996, 1997 and 1998, respectively.
59
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the future minimum annual rental commitments as of March 31,
1998, under operating leases follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
--------------
(IN THOUSANDS)
<S> <C>
Fiscal year ending:
1999...................................................... $ 32,119
2000...................................................... 25,649
2001...................................................... 19,227
2002...................................................... 14,452
2003...................................................... 10,279
Thereafter................................................ 33,102
--------
Total minimum lease payments................................ $134,828
========
</TABLE>
CONTINGENT LIABILITIES
In December of 1995, allegations were made by federal and state
environmental regulatory authorities of multiple violations in connection with
wastewater discharges at a facility owned by the Company. The Company as part
of its acquisition of Polymetrics, Inc. on October 2, 1995 acquired the
facility. The Company has rights of indemnity from the seller which could be
available if monetary damages and penalties are incurred in connection with
any alleged violations occurring prior to the Company's acquisition of
Polymetrics. In the opinion of management, the ultimate liability that may
result from the above matter will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
Legal proceedings pending against the Company consist of litigation
incidental to the Company's business and in the opinion of management, based
in part upon the opinion of counsel, the outcome of such litigation will not
materially affect the Company's consolidated financial position or results of
operations.
(19) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET INCOME
(LOSS) PER SHARE
NET INCOME -------------------
REVENUES GROSS PROFIT (LOSS) BASIC DILUTED
-------- ------------ ---------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1997
First quarter............. $295,153 71,707 9,379 0.17 0.16
Second quarter............ $336,060 69,488 71 -- --
Third quarter............. $463,423 93,687 6,328 0.10 0.09
Fourth quarter............ $669,770 152,909 16,730 0.21 0.20
1998
First quarter............. $693,533 150,314 12,703 0.15 0.15
Second quarter............ $823,593 190,110 24,091 0.27 0.26
Third quarter............. $829,427 207,534 (374,095) (3.71) (3.71)
Fourth quarter............ $888,027 230,449 37,522 0.35 0.34
</TABLE>
60
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(20) SUBSEQUENT EVENTS
Remarketable or Redeemable Securities Issuance. On May 15, 1998, the Company
issued $500,000,000 6.375% Remarketable or Redeemable Securities due 2011
(Remarketing Date May 15, 2001) and $400,000,000 6.50% Remarketable or
Redeemable Securities due 2013 (Remarketing Date May 15, 2003) (collectively,
the "ROARS"). The net proceeds from the sale of the ROARS, including a premium
payment to the Company by NationsBanc Montgomery Securities LLC, were $913.6
million. The net proceeds were used to repay indebtedness outstanding under
the Senior Credit Facility, indebtedness assumed in the acquisition of Memtec,
and a portion of the indebtedness assumed in the acquisition of Culligan.
Culligan Acquisition. On June 15, 1998, a wholly owned subsidiary of the
Company and Culligan Water Technologies, Inc. ("Culligan") consummated a
merger and acquisition in a tax-free reorganization contemplated under and
pursuant to a definitive Agreement and Plan of Merger (the "Merger Agreement")
by and among the Company, Palm Water Acquisition Corp. ("Merger Sub"), a
wholly owned subsidiary of the Company and Culligan. Pursuant to the Merger
Agreement, Merger Sub has been merged with and into Culligan (the "Merger").
The Company issued approximately 48.5 million shares of the Company's common
stock for all of the outstanding common stock of Culligan (1.875 shares of the
Company's common stock for each outstanding share and each outstanding option
or other right to acquire a share of Culligan common stock, par value $.01).
In addition, the Company assumed approximately $491.7 million of third party
institutional debt. The Merger will be accounted for as a pooling of
interests.
Culligan is a leading manufacturer and distributor of water purification and
treatment products and services for household, consumer, and commercial
applications. Products and services offered by Culligan range from those
designed to solve residential water problems, such as filters for tap water
and household softeners, to equipment and services, such as ultrafiltration
and microfiltration products. Culligan also offers desalination systems and
protable deionization services ("PDS"), designed for commercial and industrial
applications. In addition, Culligan sells and licenses its dealers to sell
under the Culligan trademark five-gallon bottled water.
61
<PAGE>
ITEM 9--CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required by this Item (other than the information regarding
executive officers set forth at the end of Item 1 of Part I of this Form 10-K)
will be contained in the Company's definitive Proxy Statement for its 1998
Annual Meeting of Stockholders under the captions "Election of Directors" and
"Security Ownership--Section 16(a) Beneficial Ownership Reporting Compliance,"
and is incorporated herein by reference.
ITEM 11--EXECUTIVE COMPENSATION
The information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1998 Annual Meeting of Stockholders under
the captions "Election of Directors" and "Executive Compensation," and is
incorporated herein by reference.
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1998 Annual Meeting of Stockholders under
the caption "Security Ownership," and is incorporated herein by reference.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
62
<PAGE>
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS:
The following report and financial statements are filed as part of this Form
10-K:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report--KPMG Peat Marwick LLP.................. 36
Report of Independent Auditors--Ernst & Young LLP.................... 37
Consolidated Balance Sheets as of March 31, 1997 and 1998............ 38
Consolidated Statements of Operations--Years Ended March 31, 1996,
1997 and 1998....................................................... 39
Consolidated Statements of Shareholders' Equity--Years Ended March
31, 1996,
1997 and 1998....................................................... 40
Consolidated Statements of Cash Flows--Years Ended March 31, 1996,
1997 and 1998....................................................... 41
Notes to Consolidated Financial Statements........................... 42
</TABLE>
(A)(2) FINANCIAL STATEMENT SCHEDULE:
See (d) below.
(A)(3) EXHIBITS:
The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<C> <S>
2.1 Stock Purchase Agreement dated August 30, 1995 among United States
Filter Corporation, Anjou International Company and Polymetrics, Inc.
(incorporated by reference to Exhibit 1.0 to Form 8-K dated October 2,
1995 (File No. 1-10728)).*
2.2 Offer by USFC Acquisition Inc., a wholly owned subsidiary of United
States Filter Corporation to purchase all of the ordinary shares and
American Depositary Shares in Memtec Limited dated as of October 25,
1997 (incorporated by reference to Exhibit 2.1 to Form 8-K dated
September 19, 1997 (File No. 1-10728)).*
2.3 Agreement for Sale and Purchase of Partnership Interests by and among
Western Farm & Cattle Company, California Land & Cattle Company, N.N.
Investors, L.P., ST Ranch GenPar, Inc., FW Ranch Partners, L.P. and
United States Filter Corporation dated as of August 3, 1997
(incorporated by reference to Exhibit 2.1 to Form 8-K dated August 4,
1997 (File No. 1-10728)).*
2.4 Merger Agreement dated as of December 31, 1997, among United States
Filter Corporation, U.S. Filter/KG Acquisition Corp., The Kinetics
Group, Inc., The Bianco Family 1991 Trust Dated February 1, 1991, David
J. Shimmon and BT Capital Partners, Inc. (incorporated by reference to
Exhibit 2.1 to Form 8-K dated January 16, 1998 (File No. 1-10728)).*
2.5 Agreement and Plan of Merger, dated as of February 9, 1998, by and among
United States Filter Corporation, Palm Water Acquisition Corp. and
Culligan Water Technologies, Inc. (incorporated by reference to Exhibit
2.1 to Form 8-K dated February 9, 1998 (File No. 1-10728)).*
3.0 Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3.01 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 (File No. 1-10728)).
3.1 Restated Bylaws (incorporated by reference to Exhibit 3.3 to
Registration Statement on Form S-1 (No. 33-41089)).
4.0 6% Convertible Subordinated Notes Indenture dated as of September 18,
1995 between United States Filter Corporation and The First National
Bank of Boston, as Trustee (incorporated by reference to Exhibit 4.3 to
Registration Statement on Form S-3 (No. 33-63281)).
</TABLE>
63
<PAGE>
<TABLE>
<C> <S>
4.1 4 1/2 % Convertible Subordinated Notes Indenture dated as of December
17, 1996 between United States Filter Corporation and State Street
Bank and Trust Company of California, N.A., as Trustee (incorporated
by reference to Exhibit 4.1 to Registration Statement on Form S-3 (No.
333-14281)).
4.2 Debt Securities Indenture dated as of May 19, 1998 between United
States Filter Corporation and The Bank of New York, as Trustee.
4.3 First Supplemental Indenture dated as of May 19, 1998, between United
States Filter Corporation and The Bank of New York, supplementing the
Indenture dated as of May 19, 1998.
4.4 Amended and Restated Multicurrency Credit Agreement, dated as of
October 20, 1997, among United States Filter Corporation, BankBoston,
N.A. ("BKB"), DLJ Capital Funding, Inc. ("DLJ"), ABN AMRO Bank N.V.,
Los Angeles International Branch, Banque Paribas ("Paribas"), The Bank
of New York ("BNY"), Bank of America National Trust and Savings
Association ("BOA"), The Sumitomo Bank, Limited (Los Angeles Branch),
Fleet Bank, N.A. ("Fleet"), The Industrial Bank of Japan, Limited (Los
Angeles Agency), Banque Nationale De Paris ("BNP"), Deutsche Bank AG,
New York and/or Cayman Islands Branches ("Deutsche Bank"), The Long-
Term Credit Bank of Japan Ltd. (Los Angeles Agency), Union Bank of
California, N.A. ("Union"), The Sanwa Bank Limited, Los Angeles Branch
("Sanwa"), NationsBank, N.A. ("NationsBank"), BHF-BANK
Aktiengesellschaft, The Sakura Bank, Limited and Credito Italiano,
with DLJ as Documentation Agent, NationsBank as Syndication Agent,
BOA, Deutsche Bank and Union as Co-Agents, BNY, Fleet, Paribas, BNP
and Sanwa as Lead Managers and BKB as Managing Agent (incorporated by
reference to Exhibit 4.01 to Registration Statement on Form S-4 dated
November 6, 1997 (File No. 333-39711)).
4.5 Transfer, Registration and Other Rights Agreement dated as of August
31, 1994 by and among United States Filter Corporation, Laidlaw
International Investments (Luxembourg) S.A., Laidlaw Investments
(Barbados) Ltd., Marfit, S.p.A., Laidlaw, Inc. and Ing. Gilberto
Cominetta (incorporated by reference to Exhibit 2.5 to Form 8-K dated
October 4, 1994 (File No. 1-10728)).
4.6 Letter Dated May 29, 1996 from Laidlaw Inc. to United States Filter
Corporation, amending the Transfer, Registration and Other Rights
Agreement dated as of August 31, 1994 (incorporated by reference to
Exhibit 4.4 to Form 10-K for the year ended March 31, 1996 (File No.
1-10728)).
4.7 Transfer, Registration Rights and Governance Agreement among United
States Filter Corporation, Western Farm & Cattle Company, N.N.
Investors, L.P., California Land & Cattle Company, ST Ranch GenPar,
Inc. and FW Ranch Partners, L.P. dated as of September 17, 1997
(incorporated by reference to Exhibit 2.2 to Form 8-K dated as of
September 17, 1997 (File No. 1-10728)).
4.8 Warrant Agreement dated as of September 17, 1997 by and among United
States Filter Corporation, Western Farm & Cattle Company, California
Land & Cattle Company, N.N. Investors, L.P., ST Ranch GenPar, Inc. and
FW Ranch Partners, L.P. (incorporated by reference to Exhibit 4.1 to
Form 8-K dated September 17, 1997 (File No. 1-10728)).
4.9 Registration Rights Agreement dated as of February 9, 1998 by and
among United States Filter Corporation, Apollo Investment Fund, L.P.
and Lion Advisors, L.P. (incorporated by reference to Exhibit 99.4 to
Form 8-K dated February 9, 1998 (File No. 1-10728)).
4.10 First Amendment to Amended and Restated Multicurrency Credit Agreement
dated as of February 3, 1998.
4.11 Second Amendment to Amended and Restated Multicurrency Credit
Agreement dated as of March 20, 1998.
10.1 License Agreements dated November 22, 1989 between Millipore
Corporation, Millipore Investment Holdings Limited and IP Holding
Company (incorporated by reference to Exhibit 10.4 to Form 10-K for
the year ended March 31, 1994 (File No. 1-10728)).
10.2 United States Filter Corporation 1991 Employees Stock Option Plan, as
amended through June 12, 1997 (incorporated by reference to Exhibit
4.02 to Form 10-Q for the quarter ended September 30, 1997 (File No.
1-10728)).**
</TABLE>
64
<PAGE>
<TABLE>
<C> <S>
10.3 United States Filter Corporation 1991 Directors Stock Option Plan, as
amended through September 13, 1996 (incorporated by reference to
Exhibit 10.0 to Form 10-Q for the quarter ended September 30, 1996
(File No. 1-10728)).**
10.4 Form of Executive Retention Agreement (incorporated by reference to
Exhibit 10.6 to Form 10-K for the year ended March 31, 1995 (File No.
1-10728)).**
10.5 Form of Executive Retirement Plan (incorporated by reference to
Exhibit 10.7 to Form 10-K for the year ended March 31, 1995 (File No.
1-10728)).**
10.6 Annual Incentive Compensation Plan Summary (incorporated by reference
to Exhibit 10.6 to Form 10-K for the year ended March 31, 1996 (File
No. 1-10728)).**
10.7 Employment Agreement dated October 25, 1996 between Harry K. Hornish,
Jr. and United States Filter Corporation (incorporated by reference to
Exhibit 10.7 to Form 10-K for the year ended March 31, 1997 (File No.
1-10728)).**
10.8 Employment Agreement dated as of January 1, 1998 between Richard J.
Heckmann and United States Filter Corporation.**
10.9 United States Filter Corporation Management Deferred Compensation
Plan, as amended through January 1, 1998.**
10.10 United States Filter Corporation Executive Severance Pay Plan.**
10.11 Employment Agreement dated September 19, 1997 between Thierry Reyners
and USF Euroholding, S.A. (incorporated by reference to Exhibit 10.1
to Form 10-Q for the quarter ended December 31, 1997 (File No. 1-
10728)).**
12.1 Statement re computation of ratio of earnings to fixed charges.
21.0 Schedule of Subsidiaries.
23.0 Independent Auditors' Consent--KPMG Peat Marwick LLP.
23.1 Report of Independent Auditors'--Ernst & Young LLP.
27.0 Financial Data Schedule.
</TABLE>
- --------
* Certain exhibits and schedules to the Exhibits incorporated by reference
herein have been omitted in accordance with Item 601(b)(2) of Regulation S-
K. A copy of any omitted exhibit or schedule will be furnished to the
Commission upon request.
** Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10-K.
(B) REPORTS ON FORM 8-K:
The Company filed two reports on Form 8-K (and four amendments to reports on
Form 8-K) during the quarter ended March 31, 1998 as follows:
Form 8-K dated January 16, 1998 (as amended on Forms 8-K/A dated February
6, 1998 and March 4, 1998);
Amendments to Form 8-K dated December 9, 1997 on Forms 8-K/A dated February
6, 1998 and March 4, 1998.
65
<PAGE>
The first report, dated January 16, 1998, reported the consummation of the
acquisition by the Company of all of the outstanding capital stock of The
Kinetics Group, Inc. ("Kinetics") pursuant to Item 2. Two amendments to this
report (and two amendments to a report on Form 8-K dated December 9, 1997
relating to the acquisition of the outstanding capital stock of Memtec Limited
("Memtec")) were filed on February 6 and March 4, 1998. The two amendments
filed on February 6, 1998 included the following financial statements (and
notes thereto) of Memtec and Kinetics:
Memtec
Consolidated Statements of Income for the years ended June 30, 1995,
1996 and 1997
Consolidated Balance Sheets as of June 30, 1996 and 1997
Consolidated Statements of Shareholders' Equity for the years ended
June 30, 1995, 1996 and 1997
Consolidated Statements of Cash Flows for the years ended June 30,
1995, 1996 and 1997
Condensed Consolidated Statements of Operations for the three months
ended
September 30, 1996 and 1997 (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 1997 (audited) and
September 30, 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows for the three months
ended
September 30, 1996 and 1997 (unaudited)
Kinetics
Consolidated Balance Sheets as of September 30, 1997 and 1996
Consolidated Statements of Operations for the years ended September 30,
1997 and 1996
Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended September 30,
1997 and 1996
The two amendments filed on February 6, 1998 also included pro forma
financial information (and notes thereto) for the Company, including an
Unaudited Pro Forma Combined Balance Sheet as of September 30, 1997; Unaudited
Pro Forma Combined Statement of Operations for the fiscal years ended March
31, 1997, June 30, 1997 and September 30, 1997 and the six months ended
September 30, 1997. The two amendments filed on March 4, 1998 amended such pro
forma financial information.
Form 8-K dated February 9, 1998.
The second report, dated February 9, 1998, reported that the Company, a
wholly-owned subsidiary of the Company and Culligan Water Technologies, Inc.,
had entered into an Agreement and Plan of Merger dated as of February 9, 1998.
This report was filed pursuant to Item 5.
(C) EXHIBITS:
See (a) (3) above.
(D) FINANCIAL STATEMENT SCHEDULE:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report on Schedule............................ 67
SCHEDULE
II Valuation and Qualifying Accounts............................... 68
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the United States Securities and Exchange Commission have been
omitted because such schedules are not required under the related instructions
or are inapplicable or because the information required is included in the
consolidated financial statements or notes thereto.
66
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors and Shareholders
United States Filter Corporation:
The audits referred to in our report dated June 1, 1998 included the related
financial statement schedule as of March 31, 1997 and 1998, and for each of
the years in the three-year period ended March 31, 1998, included in the
annual report on Form 10-K of United States Filter Corporation. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits and the report of other auditors. In our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
KPMG Peat Marwick LLP
Orange County, California
June 26, 1998
67
<PAGE>
SCHEDULE II--UNITED STATES FILTER CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE-YEARS ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ACQUIRED AMOUNTS BALANCE
BEGINNING THROUGH CHARGED TO AMOUNTS AT END
DESCRIPTION OF PERIOD ACQUISITION EXPENSE WRITTEN OFF OF PERIOD
----------- ---------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended March 31,
1998:
Allowance for Doubtful
Accounts............... $27,095 $ 7,159 $7,620 $(8,504) $33,370
======= ======= ====== ======= =======
Year Ended March 31,
1997:
Allowance for Doubtful
Accounts............... $11,365 $14,437 $5,536 $(4,243) $27,095
======= ======= ====== ======= =======
Year Ended March 31,
1996:
Allowance for Doubtful
Accounts............... $ 5,528 $ 2,063 $5,929 $(2,155) $11,365
======= ======= ====== ======= =======
</TABLE>
68
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the United States
Securities Exchange Act of 1934, the Registrant has duly caused this Annual
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED STATES FILTER CORPORATION
By: /s/ Richard J. Heckmann
-----------------------------------
Richard J. Heckmann
Chairman of the Board, Chief
Executive Officer
and President
Date: June 29, 1998
Pursuant to the requirements of the United States Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard J. Heckmann Chairman of the Board, Chief June 29, 1998
____________________________________ Executive Officer and
Richard J. Heckmann President and a Director
/s/ Kevin L. Spence Executive Vice President and June 29, 1998
____________________________________ Chief Financial Officer
Kevin L. Spence (Principal Accounting
Officer)
/s/ Michael J. ReaRdon Executive Vice President and June 29, 1998
____________________________________ Chief Administrative Officer
Michael J. Reardon and a Director
/s/ Nicholas C. Memmo President and Chief June 29, 1998
____________________________________ Operating Officer-North
Nicholas C. Memmo American Process Water Group
and a Director
/s/ James E. Clark Director June 29, 1998
____________________________________
James E. Clark
/s/ John L. Diederich Director June 29, 1998
____________________________________
John L. Diederich
/s/ Robert S. Hillas Director June 29, 1998
____________________________________
Robert S. Hillas
/s/ Arthur B. Laffer Director June 29, 1998
____________________________________
Arthur B. Laffer
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ardon E. Moore Director June 29, 1998
____________________________________
Ardon E. Moore
/s/ Alfred E. Osborne, Jr. Director June 29, 1998
____________________________________
Alfred E. Osborne, Jr.
/s/ J. Danforth Quayle Director June 29, 1998
____________________________________
J. Danforth Quayle
/s/ C. Howard Wilkins, Jr. Director June 29, 1998
____________________________________
C. Howard Wilkins, Jr.
</TABLE>
70
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
4.2 Debt Securities Indenture dated as of May 19, 1998 between United
States Filter Corporation and The Bank of New York, as Trustee.
4.3 First Supplemental Indenture dated as of May 19, 1998, between
United States Filter Corporation and The Bank of New York,
supplementing the Indenture dated as of May 19, 1998.
4.10 First Amendment to Amended and Restated Multicurrency Credit
Agreement dated as of February 3, 1998.
4.11 Second Amendment to Amended and Restated Multicurrency Credit
Agreement dated as of March 20, 1998.
10.8 Employment Agreement dated as of January 1, 1998 between Richard
J. Heckmann and United States Filter Corporation.**
10.9 United States Filter Corporation Management Deferred Compensation
Plan, as amended through January 1, 1998.**
10.10 United States Filter Corporation Executive Severance Pay Plan.**
12.1 Statement re computation of ratio of earnings to fixed charges.
21.0 Schedule of Subsidiaries.
23.0 Independent Auditors' Consent--KPMG Peat Marwick LLP.
23.1 Consent of Independent Auditors--Ernst & Young LLP.
27.0 Financial Data Schedule.
</TABLE>
- --------
** Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10-K.
71
<PAGE>
EXHIBIT 4.2
UNITED STATES FILTER CORPORATION
AND
THE BANK OF NEW YORK, AS TRUSTEE
---------------
INDENTURE
---------------
Dated as of May 19, 1998
DEBT SECURITIES
================================================================================
<PAGE>
UNITED STATES FILTER CORPORATION
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF
1939 AND INDENTURE, DATED AS OF MAY 19, 1998
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
- --------------------------- -----------------
<S> <C>
(S)310(a)(1)..................................... 608
(a)(2)..................................... 608
(a)(3).......................... Not Applicable
(a)(4).......................... Not Applicable
(a)(5)..................................... 608
(S)311(a)........................................ 609
(b)........................................ 605
(S)312(a)................................... 605, 703
(b)................................... 701, 702
(c)........................................ 702
(S)313(a)..................................... 703(a)
(b)(1).......................... Not Applicable
(b)(2).................................. 703(b)
(c)..................................... 703(c)
(d)..................................... 703(c)
(S)314(a)(1)..................................... 704
(a)(2)..................................... 704
(a)(3)..................................... 704
(a)(4).................................... 1005
(b)............................. Not Applicable
(c)(1)..................................... 102
(c)(2)..................................... 102
(c)(3).......................... Not Applicable
(d)............................. Not Applicable
(e)........................................ 102
(S)315(a)..................................... 601(a)
(b)........................................ 602
(c)..................................... 601(b)
(d)..................................... 601(c)
(d)(1)....................... 601(a)(1), (c)(1)
(d)(2)............................... 601(c)(2)
(d)(3)............................... 601(c)(3)
(e)........................................ 514
(S)316(a)(1)(A)............................. 502, 512
(a)(1)(B).................................. 513
(a)(2).......................... Not Applicable
(b)........................................ 508
(c)............................. Not Applicable
(S)317(a)(1)..................................... 503
(a)(2)..................................... 504
(b)....................................... 1003
(S)318(a)........................................ 108
- ------------------
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARTIES................................................... 1
RECITALS.................................................. 1
ARTICLE ONE............................................... 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION... 1
SECTION 101. Definitions................................. 1
Act.................................................. 2
Additional Amounts................................... 2
Affiliate............................................ 2
Agent Member......................................... 2
Authenticating Agent................................. 2
Authorized Newspaper................................. 2
Bankruptcy Law....................................... 2
Bearer Security...................................... 2
Board of Directors................................... 2
Board Resolution..................................... 3
Business Day......................................... 3
Capital Stock........................................ 3
Commission........................................... 3
Company.............................................. 3
Company Request and Company Order.................... 3
Consolidated Net Worth............................... 3
Corporate Trust Office............................... 3
Corporation.......................................... 3
Coupon............................................... 3
Default.............................................. 3
Defaulted Interest................................... 4
Disqualified Capital Stock........................... 4
Dollars" or "$....................................... 4
Event of Default..................................... 4
Exchange Act......................................... 4
Global Securities.................................... 4
GAAP................................................. 4
Holder............................................... 4
Indenture............................................ 4
Interest............................................. 4
Interest Payment Date................................ 4
Institutional Accredited Investor.................... 5
Issue Date........................................... 5
Maturity............................................. 5
Non-U.S. Person...................................... 5
Officers' Certificate................................ 5
Offshore Physical Securities......................... 5
Opinion of Counsel................................... 5
Original Issue Discount Security..................... 5
Outstanding.......................................... 5
Paying Agent......................................... 6
Person............................................... 6
Physical Securities................................. 6
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Place of Payment.................................... 6
Predecessor Security................................ 7
Preferred Stock..................................... 7
Private Placement Legend............................ 7
Qualified Institutional Buyer or QIB................ 7
Redemption Date..................................... 7
Redemption Price.................................... 7
Registered Security................................. 7
Regular Record Date................................. 7
Regulation S........................................ 7
Responsible Officer................................. 7
Restricted Security................................. 7
Resale Restriction Termination Date................. 8
Security or Securities.............................. 8
Securities Act...................................... 8
Security Register and Security Registrar............ 8
Special Record Date................................. 8
Stated Maturity..................................... 8
Subsidiary.......................................... 8
Trustee............................................. 8
Trust Indenture Act................................. 8
United States....................................... 9
United States Alien................................. 9
U.S. Depository or Depository....................... 9
U.S. Government Obligation.......................... 9
U.S. Physical Securities............................ 9
Vice President...................................... 9
Voting Stock........................................ 9
SECTION 102. Compliance Certificates and Opinions....... 10
SECTION 103. Form of Documents Delivered to Trustee..... 10
SECTION 104. Acts of Holders............................ 11
SECTION 105. Notices etc. to Trustee and Company........ 13
SECTION 106. Notice to Holders of Securities; Waiver.... 14
SECTION 107. Language of Notices, etc................... 15
SECTION 108. Conflict with Trust Indenture Act.......... 15
SECTION 109. Effect of Headings and Table of Contents... 15
SECTION 110. Successors and Assigns..................... 15
SECTION 111. Separability Clause........................ 15
SECTION 112. Benefits of Indenture...................... 15
SECTION 113. Governing Law.............................. 16
SECTION 114. Legal Holidays............................. 16
ARTICLE TWO.............................................. 16
SECURITY FORMS........................................... 16
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 201. Forms Generally..............................................................16
SECTION 202. Form of Trustee's Certificate of Authentication..............................17
ARTICLE THREE..............................................................................20
THE SECURITIES.............................................................................20
SECTION 301. Amount Unlimited; Issuable in Series.........................................20
SECTION 302. Denominations................................................................23
SECTION 303. Execution, Authentication, Delivery and Dating...............................23
SECTION 304. Temporary Securities.........................................................25
SECTION 305. Registration, Transfer and Exchange..........................................25
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.............................29
SECTION 307. Payment of Interest; Interest Rights Preserved...............................30
SECTION 308. Persons Deemed Owners........................................................32
SECTION 309. Cancellation.................................................................32
SECTION 310. Computation of Interest......................................................32
SECTION 311. Cusip Numbers................................................................33
ARTICLE FOUR...............................................................................33
DEFEASANCE, SATISFACTION AND DISCHARGE.....................................................33
SECTION 401. Legal Defeasance and Covenant Defeasance......................................33
SECTION 403. Satisfaction and Discharge of Indenture......................................35
SECTION 404. Application of Trust Money...................................................37
ARTICLE FIVE...............................................................................37
REMEDIES...................................................................................37
SECTION 501. Events of Default............................................................37
SECTION 502. Acceleration of Maturity; Rescission and Annulment...........................39
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee..............40
SECTION 504. Trustee May File Proofs of Claim.............................................41
SECTION 505. Trustee May Enforce Claims Without Possession of Securities or Coupons.......42
SECTION 506. Application of Money Collected...............................................42
SECTION 507. Limitation on Suits..........................................................42
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest....43
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 509. Restoration of Rights and Remedies........................................... 43
SECTION 510. Rights and Remedies Cumulative............................................... 44
SECTION 511. Delay or Omission Not Waiver................................................. 44
SECTION 512. Control by Holders of Securities............................................. 44
SECTION 513. Waiver of Past Defaults...................................................... 44
SECTION 514. Undertaking for Costs........................................................ 45
SECTION 515. Waiver of Stay, Extension or Usury Laws...................................... 45
ARTICLE SIX................................................................................ 46
THE TRUSTEE................................................................................ 46
SECTION 601. Certain Duties and Responsibilities.......................................... 46
SECTION 602. Notice of Defaults........................................................... 47
SECTION 603. Certain Rights of Trustee.................................................... 47
SECTION 604. Not Responsible for Recitals or Issuance of Securities....................... 49
SECTION 605. May Hold Securities.......................................................... 49
SECTION 606. Money Held in Trust.......................................................... 49
SECTION 607. Compensation and Reimbursement............................................... 49
SECTION 608. Corporate Trustee Required; Eligibility...................................... 50
SECTION 609. Resignation and Removal; Appointment of Successor............................ 50
SECTION 610. Acceptance of Appointment by Successor....................................... 52
SECTION 611. Merger, Conversion, Consolidation or Succession to Business.................. 53
SECTION 612. Appointment of Authenticating Agent.......................................... 54
SECTION 613. Trustee's Application for Instructions from the Company...................... 56
ARTICLE SEVEN.............................................................................. 56
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.......................................... 56
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.................... 56
SECTION 702. Preservation of Information; Communications to Holders....................... 56
SECTION 703. Reports by Trustee........................................................... 57
SECTION 704. Reports by Company........................................................... 57
ARTICLE EIGHT.............................................................................. 58
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
MERGER, CONSOLIDATION AND SALE OF ASSETS............................. 58
SECTION 801. Merger, Consolidation and Sale of Assets................ 58
SECTION 802. Rights and Duties of Successor Corporation............. 59
SECTION 803. Officers' Certificate and Opinion of Counsel........... 60
ARTICLE NINE......................................................... 60
SUPPLEMENTAL INDENTURES.............................................. 60
SECTION 901. Supplemental Indentures without Consent of Holders..... 60
SECTION 902. Supplemental Indentures with Consent of Holders........ 61
SECTION 903. Execution of Supplemental Indentures................... 62
SECTION 904. Effect of Supplemental Indentures...................... 62
SECTION 905. Conformity with Trust Indenture Act.................... 63
SECTION 906. Reference in Securities to Supplemental Indentures..... 63
ARTICLE TEN.......................................................... 63
COVENANTS............................................................ 63
SECTION 1001. Payment of Principal, Premium, if any, and Interest... 63
SECTION 1002. Maintenance of Office or Agency....................... 63
SECTION 1003. Money for Securities Payments to be Held in Trust..... 65
SECTION 1004. Additional Amounts.................................... 66
SECTION 1005. Statement as to Compliance............................. 67
SECTION 1006. Waiver of Certain Covenants........................... 67
SECTION 1007......................................................... 68
ARTICLE ELEVEN....................................................... 68
REDEMPTION OF SECURITIES............................................. 68
SECTION 1101. Applicability of Article.............................. 68
SECTION 1102. Election to Redeem; Notice to Trustee................. 68
SECTION 1103. Selection by Trustee of Securities to be Redeemed..... 68
SECTION 1104. Notice of Redemption.................................. 69
SECTION 1105. Deposit of Redemption Price........................... 70
SECTION 1106. Securities Payable on Redemption Date................. 70
SECTION 1107. Securities Redeemed in Part........................... 71
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
ARTICLE TWELVE....................................................................... 71
SINKING FUNDS........................................................................ 71
SECTION 1201. Applicability of Article.............................................. 71
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities................. 72
SECTION 1203. Redemption of Securities for Sinking Fund............................. 72
ARTICLE THIRTEEN..................................................................... 73
REPAYMENT AT THE OPTION OF HOLDERS................................................... 73
SECTION 1301. Applicability of Article.............................................. 73
ARTICLE FOURTEEN..................................................................... 73
MEETINGS OF HOLDERS OF SECURITIES.................................................... 73
SECTION 1401. Purposes for Which Meetings May Be Called............................. 73
SECTION 1402. Call, Notice and Place of Meetings.................................... 73
SECTION 1403. Persons Entitled to Vote at Meetings.................................. 74
SECTION 1404. Quorum; Action........................................................ 74
SECTION 1405. Determination of Voting Rights; Conduct and Adjournment of Meetings... 75
SECTION 1406. Counting Votes and Recording Action of Meetings....................... 75
ARTICLE FIFTEEN...................................................................... 76
MISCELLANEOUS PROVISIONS............................................................. 76
SECTION 1501 Securities in Foreign Currencies....................................... 77
</TABLE>
vi
<PAGE>
INDENTURE, dated as of May 19, 1998 between UNITED STATES FILTER
CORPORATION, a Delaware corporation (hereinafter called the "Company"), having
its principal office at 40-004 Cook Street, Palm Desert, California 92211, and
THE BANK OF NEW YORK, a New York banking corporation, as Trustee (hereinafter
called the "Trustee"), having its Corporate Trust Office at 101 Barclay Street,
Floor 21 West, New York, New York 10286.
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its debentures, notes
or other evidences of indebtedness (hereinafter called the "Securities"),
unlimited as to principal amount, to bear such rates of interest, to mature at
such time or times, to be issued in one or more series, and to have such other
provisions as shall be fixed as hereinafter provided.
The Company has duly authorized the execution and delivery of this
Indenture and all things necessary to make this Indenture a valid agreement of
the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the sum of one dollar
duly paid by the Company to the Trustee, the receipt of which is hereby
acknowledged, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles and,
<PAGE>
except as otherwise herein expressly provided, the term "generally accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms used principally in Article Four or Six are defined in those
Articles.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Additional Amounts" means any additional amounts which are required by a
Security or pursuant to a Board Resolution, under circumstances specified
therein, to be paid by the Company in respect of certain matters, including,
without limitation, taxes imposed on certain Holders, and liquidated damages in
connection with any registration rights.
"Affiliate" has the same meaning as given to that term in Rule 405 under
the Securities Act or any successor rule thereunder.
"Agent Member" means a member of, or participant in, the Depository.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 612 to act on behalf of the Trustee to authenticate Securities of one
or more series.
"Authorized Newspaper" means a newspaper, in an official language of the
country of publication or in the English language, customarily published on each
Business Day, whether or not published on Saturdays, Sundays or holidays, and of
general circulation in the place in connection with which the term is used or in
the financial community of such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications may be
made in the same or in different newspapers in the same city meeting the
foregoing requirements and in each case on any Business Day.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or
foreign law for relief of debtors.
"Bearer Security" means any Security in the form established pursuant to
Section 201 which is payable to its bearer.
"Board of Directors" means either the Board of Directors of the Company or
a committee thereof authorized to take action with respect to matters arising
under this Indenture.
2
<PAGE>
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Business Day" means any day other than a day on which banking institutions
in The City of New York, New York or in the City of Palm Desert, California are
authorized or required by law to close, except as may otherwise be provided in
the form of Securities of any particular series pursuant to the provisions of
this Indenture.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible or exchangeable into such
equity.
"Commission" means the U.S. Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties on such date.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" and "Company Order" mean, respectively, a written request
or order signed in the name of the Company by the Chairman of the Board, the
President, a Vice President or the Treasurer, and by an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Consolidated Net Worth" of any Person means the stockholders' equity of
such Person, determined on a consolidated basis in accordance with GAAP, less
(without duplication) amounts attributable to Disqualified Capital Stock of such
Person.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be administered, which office
on the date of this Indenture is located at 101 Barclay Street, Floor 21 West,
New York, New York 10286.
"Corporation" includes corporations, associations, limited liability
companies and business trusts.
"Coupon" means any interest coupon appertaining to a Bearer Security.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
3
<PAGE>
"Defaulted Interest" has the meaning specified in Section 307.
"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible or exchangeable or for which it is exercisable, is, or
upon the happening of an event or the passage of time or both would be, required
to be redeemed or repurchased (including at the option of the holder thereof) by
such Person or any of its Subsidiaries, in whole or in part, on or prior to the
Stated Maturity of the applicable series of Securities.
"Dollars" or "$" or any similar reference means the currency of the United
States, except as may otherwise be provided in the form of Securities of any
particular series pursuant to the provisions of this Indenture.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Global Securities" means Securities issued in global form.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or such other statements by such other
entity as may be approved by a significant segment of the accounting profession
of the United States, as are in effect from time to time.
"Holder", when used with respect to any Security, means in the case of a
Registered Security, a Person in whose name the Security is registered in the
Security Register and in the case of a Bearer Security, the bearer thereof and,
when used with respect to any coupon, means the bearer thereof.
"Indenture" means this instrument as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof, and includes each Officers'
Certificate delivered to the Trustee pursuant to Section 303.
"Interest", when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity, and, when used with respect to a Security which provides for the
payment of Additional Amounts pursuant to Section 1004, includes such Additional
Amounts.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the applicable Securities.
4
<PAGE>
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Issue Date" means the date of original issuance of a Security.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an installment of such principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption, request for redemption or
otherwise.
"Non-U.S. Person" means a person who is not a U.S. Person, as defined in
Regulation S.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President, a Vice President or the Treasurer, and by an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered
to the Trustee.
"Offshore Physical Securities" means Securities offered and sold in
offshore transactions in reliance on Regulation S, issued in registered form.
"Opinion of Counsel" means a written opinion of counsel, who may (except as
otherwise expressly provided in this Indenture) be an employee of or counsel for
the Company or other counsel reasonably acceptable to the Trustee.
"Original Issue Discount Security" means a Security issued pursuant to this
Indenture which provides for declaration of an amount less than the principal
thereof to be due and payable upon acceleration pursuant to Section 502.
"Outstanding", when used with respect to Securities means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities and any coupons
thereto appertaining; provided, that if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has
been made; and
5
<PAGE>
(iii) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall be presented to the
Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders of Securities for quorum purposes, the principal amount of
an Original Issue Discount Security that may be counted in making such
determination and that shall be deemed to be Outstanding for such purposes shall
be equal to the amount of the principal thereof that could be declared to be due
and payable pursuant to the terms of such Original Issue Discount Security at
the time of the taking of such action by the Holders (assuming that an event
giving rise to such declaration had occurred) of such requisite principal amount
is evidenced to the Trustee as provided in Section 104(a); and, provided
further, that Securities owned beneficially by the Company or any other obligor
upon the Securities or any Affiliate of the Company or such other obligor, other
than Securities purchased in connection with the distribution or trading
thereof, shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which a Responsible Officer of the Trustee actually knows to be so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Physical Securities" means the Offshore Physical Securities and the U.S.
Physical Securities.
"Place of Payment" when used with respect to the Securities of any series,
means the place or places where the principal of (and premium, if any) and
interest on the Securities of that series are payable as specified pursuant to
Section 301.
6
<PAGE>
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
lost, destroyed, mutilated or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen coupon pertains shall be deemed to evidence
the same debt as the lost, destroyed, mutilated or stolen Security or the
Security to which a mutilated, destroyed, lost or stolen coupon pertains.
"Preferred Stock", as applied to the Capital Stock of any corporation or
the equity securities of any trust, means Capital Stock of any class or classes
(however designated) which is preferred as to the payment of dividends or
distributions or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such corporation or trust over shares
of Capital Stock of any other class of such corporation or trust.
"Private Placement Legend" has the meaning specified in Section 203.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in Rule
144A under the Securities Act.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price",when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed as determined pursuant to the
provisions of this Indenture.
"Registered Security" means any Security established pursuant to Section
201 which is registered in a Security Register.
"Regular Record Date" for the interest payable on a Registered Security on
any Interest Payment Date means the date, if any, specified in such Security as
the "Regular Record Date".
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee, means any
vice president (whether or not designated by a number or a word or words added
before or after the title "vice president"), the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer, or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
7
<PAGE>
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Security constitutes a Restricted Security.
"Resale Restriction Termination Date" means, in the case of a series of
Securities sold without registration under the Securities Act, the date which is
two years after the date of original issue of such series of Securities.
"Security" or "Securities" means any Security or Securities, as the case
may be, authenticated and delivered under this Indenture.
"Securities Act" means the U.S. Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest on the
Registered Securities of any series means a date fixed by the Trustee pursuant
to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security or a coupon representing such installment of interest as the
fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such with respect to
one or more series of Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean each Person who is then a Trustee
hereunder, and if at any time there is more than one such Person, "Trustee" as
used with respect to the Securities of any series shall mean the Trustee with
respect to the Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
and any reference herein to the Trust Indenture Act or a particular provision
thereof shall mean such Act or provision, as the case may be, as amended or
replaced from time to time or as
8
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supplemented from time to time by rules or regulations adopted by the Commission
under or in furtherance of the purposes of such Act or provision, as the case
may be.
"United States" means the United States of America (including the States
and the District of Columbia), its territories and possessions and other areas
subject to its jurisdiction.
"United States Alien" means any Person who, for U.S. Federal income tax
purposes, is a foreign corporation, a non-resident alien individual, a non-
resident alien fiduciary of a foreign estate or trust, or a foreign partnership
one or more of the members of which is, for U.S. Federal income tax purposes, a
foreign corporation, a non-resident alien individual or a nonresident alien
fiduciary of a foreign estate or trust.
"U.S. Depository" or "Depository" means, with respect to the Securities of
any series issuable or issued in whole or in part in the form of one or more
Global Securities, the Person designated as U.S. Depository by the Company
pursuant to Section 301, which must be a clearing agency registered under the
Exchange Act, and, if so provided pursuant to Section 301 with respect to the
Securities of any series, any successor to such Person. If at any time there is
more than one such Person, "U.S. Depository" shall mean, with respect to any
series of Securities, the qualifying entity which has been appointed with
respect to the Securities of that series.
"U.S. Government Obligation" means non-callable direct obligations of, and
non-callable obligations guaranteed by, the United States of America for the
payment of which the full faith and credit of the United States of America is
pledged.
"U.S. Physical Securities" means Securities offered and sold in reliance on
any other exemption from registration other than exemption from registration in
reliance on Rule 144A, and Securities offered and sold in reliance on Rule 144A,
in the form of permanent certificated Securities in registered form.
"Vice President" when used with respect to the Company shall mean any Vice
President of the Company whether or not designated by a number or a word or
words added before or after the title "Vice President".
"Voting Stock" means stock of the class or classes having general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of a corporation; provided that, for the
purposes hereof, stock which carries only the right to vote conditionally on the
happening of an event shall not be considered voting stock whether or not such
event shall have happened.
SECTION 102. Compliance Certificates and Opinions.
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Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such condition or covenant
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
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should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing. If, but only if, Securities of a series are
issuable as Bearer Securities, any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this
Indenture to be given or taken by Holders of Securities of such series may,
alternatively, be embodied in and evidenced by the record of Holders of
Securities of such series voting in favor thereof, either in person or by
proxies duly appointed in writing, at any meeting of Holders of Securities
of such series duly called and held in accordance with the provisions of
Article Fourteen, or a combination of such instruments and any such record.
Except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments or record or both are
delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments and any such record (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Holders signing such instrument or instruments and so
voting at any such meeting. Proof of execution of any such instrument or of
a writing appointing any such agent, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and
(subject to Section 601) conclusive in favor of the Trustee and the Company
and any agent of the Trustee or the Company, if made in the manner provided
in this Section. The record of any meeting of Holders of Securities shall
be proved in the manner provided in Section 1406.
Without limiting the generality of this Section 104, unless otherwise
established in or pursuant to a Board Resolution or set forth or determined
in an Officers' Certificate or established in one or more indentures
supplemental hereto pursuant to Section 301, a Holder, including a U.S.
Depository that is a Holder of a Global Security, may make, give or take,
by a proxy or proxies duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided
in this Indenture to be made, given or taken by Holders, and a U.S.
Depository that is a Holder of a Global Security may provide its proxy or
proxies to the beneficial owners of interests in any such Global Security
through such U.S. Depository's standing instructions and customary
practices.
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The Company may fix a record date for the purpose of determining the
Persons who are beneficial owners of interests in any permanent Global
Security held by a U.S. Depository entitled under the procedures of such
U.S. Depository to make, give or take, by a proxy or proxies duly appointed
in writing, any request, demand, authorization, direction, notice, consent,
waiver or other action provided in this Indenture to be made, given or
taken by Holders. If such a record date is fixed, the Holders on such
record date or their duly appointed proxy or proxies and only such Persons
shall be entitled to make, give or take such request, demand,
authorization, direction, notice, consent, waiver or other action, whether
or not such Holders remain Holders after such record date. No such
request, demand, authorization, direction, notice, consent, waiver or other
action shall be valid or effective if made, given or taken more than 90
days after such record date.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient and in accordance with such reasonable rules as
the Trustee may determine; and the Trustee may in any instance require
further proof with respect to any of the matters referred to in this
Section.
(c) The ownership of Registered Securities and the principal amount
and serial numbers of Registered Securities held by any Person and the date
of holding the same shall be proved by the Security Register.
(d) The principal amount and serial numbers of Bearer Securities held
by any Person and the date of holding the same may be proved by the
production of such Bearer Securities or by a certificate executed, as
depositary, by any trust company, bank, banker or other depositary
reasonably acceptable to the Company, wherever situated, if such
certificate shall be deemed by the Trustee to be satisfactory, showing that
at the date therein mentioned such Person had on deposit with such
depositary, or exhibited to it, the Bearer Securities therein described; or
such facts may be proved by the certificate or affidavit of the Person
holding such Bearer Securities, if such certificate or affidavit is deemed
by the Trustee to be satisfactory. The Trustee and the Company may assume
that such ownership of any Bearer Security continues until (1) another
certificate or affidavit bearing a later date issued in respect of the same
Bearer Security is produced, or (2) such Bearer Security is produced to the
Trustee by some other Person, or (3) such Bearer Security is surrendered in
exchange for a Registered Security, or (4) such Bearer Security is no
longer Outstanding. The principal amount and serial numbers of Bearer
Securities held by the Person so executing such instrument or writing and
the date of holding the same may also be proved in any other manner which
the Trustee deems sufficient.
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(e) If the Company shall solicit from the Holders of any Registered
Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, by Board Resolution,
fix in advance a record date for the determination of Holders of Registered
Securities entitled to give such request, demand, authorization, direction,
notice, consent, waiver or other Act, but the Company shall have no
obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of Registered
Securities of record at the close of business on such record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Outstanding Securities have authorized or agreed or
consented to such request, demand, authorization, direction, notice,
consent, waiver or other Act, and for that purpose the Outstanding
Securities shall be computed as of such record date; provided that no such
authorization, agreement or consent by the Holders of Registered Securities
on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than six
months after the record date.
(f) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done or suffered to be done by the
Trustee, any Security Registrar, any Paying Agent or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
SECTION 105. Notices etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of Holders or other document provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, postage prepaid, via certified mail, return receipt
requested, to the Company addressed to the attention of its Treasurer at
the address of its principal office specified in the first paragraph of
this instrument or at any other address previously furnished in writing to
the Trustee by the Company.
SECTION 106. Notice to Holders of Securities; Waiver.
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Except as otherwise expressly provided herein or in the form of Securities
of any particular series pursuant to the provisions of this Indenture, where
this Indenture provides for notice to Holders of Securities of any event,
(1) such notice shall be sufficiently given to Holders of Registered
Securities if in writing and mailed, first-class postage prepaid, to each
Holder of a Registered Security affected by such event, at his address as
it appears in the Security Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such
notice; and
(2) such notice shall be sufficiently given to Holders of Bearer
Securities, if any, if published in an Authorized Newspaper in The City of
New York and, if the Securities of such series are then listed on any stock
exchange outside the United States, in an Authorized Newspaper in such city
as the Company shall advise the Trustee that such stock exchange so
requires, on a Business Day at least twice, the first such publication to
be not earlier than the earliest date and not later than the latest date
prescribed for the giving of such notice.
In any case where notice to Holders of Registered Securities is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder of a Registered Security shall affect the
sufficiency of such notice with respect to other Holders of Registered
Securities or the sufficiency of any notice to Holders of Bearer Securities
given as provided herein. In case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable to give such
notice by mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.
In case by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Securities as provided
above, then such notification to Holders of Bearer Securities as shall be given
with the approval of the Trustee shall constitute sufficient notice to such
Holders for every purpose hereunder. Neither failure to give notice by
publication to Holders of Bearer Securities as provided above, nor any defect in
any notice so published, shall affect the sufficiency of any notice mailed to
Holders of Registered Securities as provided above.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders of Securities shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 107. Language of Notices, etc.
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Any request, demand, authorization, direction, notice, consent, election or
waiver required or permitted under this Indenture shall be in the English
language, except that, if the Company so elects, any published notice may be in
an official language of the country of publication.
SECTION 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the Trust Indenture Act or with a provision of the Trust
Indenture Act, the latter provision shall control.
SECTION 109. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 110. Successors and Assigns.
All covenants and agreements in this Indenture by the parties hereto shall
bind the successors and assigns of such parties, whether so expressed or not.
SECTION 111. Separability Clause.
In case any provision in this Indenture or in the Securities or coupons
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 112. Benefits of Indenture.
Nothing in this Indenture or in the Securities or coupons, express or
implied, shall give to any Person, other than the parties hereto, any Security
Registrar, any Paying Agent and their successors hereunder and the Holders of
Securities or coupons, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 113. Governing Law.
This Indenture and the Securities and coupons shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflicts of laws provisions thereof.
SECTION 114. Legal Holidays.
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In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or the Securities or
coupons other than a provision in the Securities which specifically states that
such provision shall apply in lieu of this Section) payment of interest or any
Additional Amounts or principal (and premium, if any) need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day, except that if such next succeeding Business Day is in the next succeeding
calendar year, then on the immediately preceding Business Day, at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date or at the Stated Maturity, and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Registered Securities, if any, of each series and the Bearer
Securities, if any, of each series, the related coupons, if any, and temporary
Global Securities, if any, shall be in the form established by or pursuant to a
Board Resolution or in one or more indentures supplemental hereto, shall have
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture or any indenture supplemental hereto and
may have such letters, numbers or other marks of identification and such legends
or endorsements placed thereon as may, consistently herewith, be determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
Unless otherwise provided as contemplated by Section 301 with respect to
any series of Securities, the Securities of each series shall be issuable in
registered form without coupons. If so provided as contemplated by Section 301,
the Securities of a series also shall be issuable in bearer form, with or
without interest coupons attached.
The definitive Securities and coupons shall be printed, lithographed or
engraved or produced by any combination of these methods on a steel engraved
border or steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities or coupons, as conclusively
evidenced by their execution of such Securities or coupons.
SECTION 202. Form of Trustee's Certificate of Authentication.
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
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THE BANK OF NEW YORK,
as Trustee
Dated: By
------------------ --------------------------
Authorized Signatory
SECTION 203. Restrictive Legend. Each Restricted Security will contain a
restrictive legend (the "Private Placement Legend") containing substantially the
following language:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE ISSUE DATE
HEREOF, ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT UPON THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE TRUSTEE
AND THE COMPANY, SUBJECT IN EACH OF THE FOREGOING CASES, TO A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY BEING
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
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SECTION 204. Special Transfer Provisions.
(a) The following provisions shall apply with respect to the registration
of any proposed transfer of a Security constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person:
(i) the Security Registrar shall register the transfer of any
Security constituting a Restricted Security, whether or not such
Security bears the Private Placement Legend, if (x) the requested
transfer is after the applicable Resale Restriction Termination Date
and the transferor certifies that the Restricted Security was not
acquired from the Company or an Affiliate of the Company less than two
years prior to the date of the proposed transfer or (y) in the case of
a transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons) or a transfer to a Non-U.S. Person, the
proposed transferee has delivered to the Security Registrar a
certificate in the form approved by the Company; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Security, upon receipt by the
Security Registrar of (x) the certificate, if any, required by
paragraph (i) above and (y) instructions given in accordance with the
Depository's and the Security Registrar's procedures,
whereupon (a) the Security Registrar shall reflect on its books and records
the date and (if the transfer does not involve a transfer of outstanding
Physical Securities) a decrease in the principal amount of the applicable
Global Security in an amount equal to the principal amount of the
beneficial interest in such Global Security to be transferred, and (b) the
Company shall execute and the Trustee shall authenticate and deliver one or
more Physical Securities of like tenor and amount.
(b) The following provisions shall apply with respect to the
registration of any proposed transfer of a Security constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons)
(i) the Security Registrar shall register the transfer of any
Security constituting a Restricted Security, whether or not such
Security bears the Private Placement Legend, if (x) the requested
transfer is after the second anniversary of the Issue Date; provided,
however, that neither the Company nor any Affiliate of the Company has
held any beneficial interest in such Security, or portion thereof, at
any time on or prior to the second anniversary of the Issue Date or
(y) such transfer is being made by a proposed transferor who has
checked the box provided for on the form of Security stating, or has
otherwise advised the Company and the Security Registrar in writing,
that the sale has been made in compliance with the
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provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Security stating, or has
otherwise advised the Company and the Security Registrar in writing,
that it is purchasing the Security for its own account or an account
with respect to which it exercises sole investment discretion and that
it and any such account is a QIB within the meaning of Rule 144A, and
is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical Securities which
after transfer are to be evidenced by an interest in the Global
Security, upon receipt by the Security Registrar of written
instructions given in accordance with the Depository's and the
Security Registrar's procedures, the Security Registrar shall register
the transfer and reflect on its books and records the date and an
increase in the principal amount of the Global Security in an amount
equal to the principal amount of the Physical Securities to be
transferred, and the Trustee shall cancel the Physical Securities so
transferred.
(c) Upon the registration of transfer, exchange or replacement of
Securities not bearing the Private Placement Legend, the Security Registrar
shall deliver Securities that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Security Registrar shall deliver
only Securities that bear the Private Placement Legend unless (i) the
circumstance contemplated by paragraph (a) (i) (x) of this Section 204
exist or (ii) there is delivered to the Security Registrar an Opinion of
Counsel satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act
or (iii) such Security has been sold pursuant to an effective registration
statement under the Securities Act.
(d) By its acceptance of any Security bearing the Private Placement
Legend, each Holder of such a Security acknowledges the restrictions on
transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to this Section 204 for a period
of three years. The Company shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Security Registrar.
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ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and set forth in an Officers'
Certificate or established in one or more indentures supplemental hereto:
(1 the title of the Securities and the series in which such
Securities shall be included;
(2 any limit upon the aggregate principal amount of the Securities
of such title or the Securities of such series which may be authenticated
and delivered under this Indenture (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Securities of the series pursuant to Section 304, 305, 306, 906
or 1107);
(3 whether Securities of the series are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both; any
restrictions applicable to the offer, sale or delivery of Bearer Securities
and the terms upon which Bearer Securities of the series may be exchanged
for Registered Securities of the series and vice versa; and whether any
Securities of the series are to be issuable initially in global form and,
if so, (i) whether beneficial owners of interests in any such Global
Security may exchange such interests for Securities of such series of like
tenor of any authorized form and denomination and the circumstances under
which any such exchanges may occur, if other than in the manner specified
in Section 305, and (ii) the name of the depository or the U.S. Depository,
as the case may be, with respect to any Global Security;
(4 the date as of which any Bearer Securities of the series and any
temporary Global Security representing Outstanding Securities of the series
shall be dated if other than the date of original issuance of the first
Security of the series to be issued;
(5 if Securities of the series are to be issuable as Bearer
Securities, whether interest in respect of any portion of a temporary
Bearer Security in global form (representing all of the Outstanding Bearer
Securities of the series) payable in respect of an Interest Payment Date
prior to the exchange of such temporary Bearer Security for
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definitive Securities of the series shall be paid to any clearing
organization with respect to the portion of such temporary Bearer Security
held for its account and, in such event, the terms and conditions
(including any certification requirements) upon which any such interest
payment received by a clearing organization will be credited to the Persons
entitled to interest payable on such Interest Payment Date;
(6 the date or dates on which the principal of such Securities is
payable;
(7 the rate or rates at which such Securities shall bear interest,
if any, or any method by which such rate or rates shall be determined, the
date or dates from which such interest shall accrue, the Interest Payment
Dates on which such interest shall be payable and the Regular Record Date
for the interest payable on Registered Securities on any Interest Payment
Date, whether and under what circumstances Additional Amounts on such
securities shall be payable in respect of specified taxes, assessments or
other governmental charges withheld or deducted and, if so, whether the
Company has the option to redeem the affected Securities rather than pay
such Additional Amounts, and the basis upon which interest shall be
calculated if other than that of a 360 day year of twelve 30-day months;
(8 the place or places, if any, in addition to or other than the
Borough of Manhattan, The City of New York, where the principal of (and
premium, if any) and interest on or Additional Amounts, if any, payable in
respect of such Securities shall be payable;
(9 the period or periods within which, the price or prices at which
and the terms and conditions upon which such Securities may be redeemed, in
whole or in part, at the option of the Company;
(10 the obligation, if any, of the Company to redeem or purchase
such Securities pursuant to any sinking fund or analogous provisions or at
the option of a Holder thereof and the period or periods within which, the
price or prices at which and the terms and conditions upon which such
Securities shall be redeemed or purchased, in whole or in part, pursuant to
such obligation, and any provisions for the remarketing of such Securities;
(11 the denominations in which Registered Securities of the series,
if any, shall be issuable if other than denominations of $1,000 and any
integral multiple thereof, and the denominations in which Bearer Securities
of the series, if any, shall be issuable if other than the denomination of
$5,000;
(12 if other than the principal amount thereof, the portion of the
principal amount of such Securities which shall be payable upon declaration
of acceleration of the Maturity thereof pursuant to Section 502;
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(13 if other than such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public or
private debts, the coin or currency, including composite currencies, in
which payment of the principal of (and premium, if any) and interest, if
any, on and Additional Amounts in respect of such Securities shall be
payable;
(14 if the principal of (and premium, if any) or interest, if any, on
and Additional Amounts in respect of such Securities are to be payable, at
the election of the Company or a Holder thereof, in a coin or currency,
including composite currencies, other than that in which the Securities are
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made;
(15 if the amount of payments of principal of (and premium, if any)
or interest, if any, on and Additional Amounts in respect of such
Securities may be determined with reference to an index, formula or other
method or based on a coin or currency other than that in which the
Securities are stated to be payable, the manner in which such amounts shall
be determined;
(16 the right, if any, of the Company to defer payments of interest
by extending the interest payment periods and specify the duration of such
extension, the Interest Payment Dates on which such interest shall be
payable and whether and under what circumstances additional interest on
amounts deferred shall be payable;
(17 the limitation, if any, on the Company's right to pay dividends
on, make distributions with respect to, or redeem, purchase or acquire, or
make a liquidation payment with respect to, any of its Capital Stock or
comparable equity interest;
(18 if the Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary Security
of such series) only upon receipt of certain certificates or other
documents or satisfaction of other conditions, then the form and terms of
such certificates, documents or conditions; and
(19 any other terms of such Securities (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series and the coupons appertaining to Bearer
Securities of such series, if any, shall be substantially identical except as to
denomination and the rate or rates of interest, if any, Stated Maturity, the
date from which interest, if any, shall accrue and except as may otherwise be
provided in or pursuant to such Board Resolution and set forth in such Officers'
Certificate or in any such indenture supplemental hereto. All Securities of any
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one series need not be issued at the same time, and unless otherwise provided, a
series may be reopened for issuances of additional Securities of such series.
If any of the terms of the Securities of any series are established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of such series.
SECTION 302. Denominations.
Unless other denominations and amounts may from time to time be fixed by or
pursuant to a Board Resolution or an indenture supplemental hereto, the
Registered Securities of each series, if any, shall be issuable in registered
form without coupons in denominations of $1,000 and any integral multiple
thereof and the Bearer Securities of each series, if any, shall be issuable in
the denomination of $5,000.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, President, Chief Financial Officer, a Vice President or its
Treasurer and attested by its Secretary or one of its Assistant Secretaries.
The signature of any of these officers on the Securities may be manual or
facsimile. Coupons shall bear the facsimile signature of the Treasurer or any
Assistant Treasurer of the Company.
Securities and coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series, together with any
coupons appertaining thereto, executed by the Company to the Trustee for
authentication, together with the Board Resolution and Officers' Certificate or
supplemental indenture with respect to such Securities referred to in Section
301 and a Company Order for the authentication and delivery of such Securities,
and the Trustee in accordance with the Company Order and subject to the
provisions hereof shall authenticate and make available for delivery such
Securities. In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,
(a) the form and terms of such Securities and coupons, if any, have
been established in conformity with the provisions of this Indenture;
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(b) that all conditions precedent to the authentication and delivery
of such Securities, together with the coupons, if any, appertaining
thereto, have been complied with and that such Securities and coupons, when
authenticated and delivered by the Trustee and issued by the Company in the
manner and subject to any conditions specified in such Opinion of Counsel,
will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting the enforcement of creditors' rights and to general equity
principles,
(c) that all laws and requirements in respect of the execution and
delivery by the Company of such Securities and coupons, if any, have been
complied with; and
(d) as to such other matters as the Trustee may reasonably request.
The Trustee shall not be required to authenticate such Securities if the
issue of such Securities pursuant to this Indenture will affect the Trustee's
own rights, duties or immunities under the Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee or if
the Trustee being advised by counsel determines that such action may not
lawfully be taken.
Each Registered Security shall be dated the date of its authentication.
Each Bearer Security and any temporary Bearer Security in global form shall be
dated as of the date specified as contemplated by Section 301.
No Security or coupon appertaining thereto shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose, unless there
appears on such Security a certificate of authentication substantially in the
form provided for in Section 202 or 612 executed by or on behalf of the Trustee
by the manual signature of one of its authorized signers, and such certificate
upon any Security shall be conclusive evidence and the only evidence that such
Security has been duly authenticated and delivered hereunder. Except as
permitted by Section 306 or 307, the Trustee shall not authenticate and deliver
any Bearer Security unless all appurtenant coupons for interest then matured
have been detached and cancelled.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute and deliver to the Trustee, and upon Company Order the Trustee shall
authenticate and make available for delivery in the manner provided in Section
303, temporary Securities of such series which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued, in registered form, or, if authorized, in bearer form with one or
more
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coupons or without coupons, and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities. In the case of
Bearer Securities of any series, such temporary Securities may be in global
form, representing all of the Outstanding Bearer Securities of such series.
Except in the case of temporary Securities in global form, which shall be
exchanged in accordance with the provisions thereof, if temporary Securities of
any series are issued, the Company will cause definitive Securities of that
series to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities of such series shall be
exchangeable for definitive Securities of such series containing identical terms
and provisions upon surrender of the temporary Securities of such series at an
office or agency of the Company maintained for such purpose pursuant to Section
1002, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series (accompanied by any unmatured coupons
appertaining thereto), the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a like
principal amount of definitive Securities of authorized denominations of the
same series containing identical terms and provisions; provided, however, that
no definitive Bearer Security, except as provided pursuant to Section 301, shall
be delivered in exchange for a temporary Registered Security; and provided,
further, that a definitive Bearer Security shall be delivered in exchange for a
temporary Bearer Security only in compliance with the conditions set forth
therein. Unless otherwise specified as contemplated by Section 301 with respect
to a temporary Global Security, until so exchanged the temporary Securities of
any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series.
SECTION 305. Registration, Transfer and Exchange.
With respect to the Registered Securities of each series, if any, the
Company shall cause to be kept at an office or agency of the Company maintained
pursuant to Section 1002, a register (herein sometimes referred to as the
"Security Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of the Registered
Securities of each series and of transfers of the Registered Securities of each
series. Such office or agency shall be the "Security Registrar" for the
Registered Securities, if any, of each series of Securities. In the event that
the Trustee shall not be the Security Registrar, it shall have the right to
examine the Security Register at all reasonable times.
Upon surrender for registration of transfer of any Registered Security of
any series at any office or agency of the Company maintained for that series
pursuant to Section 1002, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, in the name of the designated
transferee or transferees, one or more new Registered Securities of the same
series, of any authorized denominations, of a like aggregate principal amount
bearing a number not contemporaneously outstanding and containing identical
terms and provisions.
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At the option of the Holder, Registered Securities of any series may be
exchanged for other Registered Securities of the same series containing
identical terms and provisions, in any authorized denominations, and of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at
any such office or agency. Whenever any Registered Securities are so
surrendered for exchange, the Company shall execute and the Trustee shall
authenticate and make available for delivery the Registered Securities which the
holder making the exchange is entitled to receive.
At the option of the Holder, Bearer Securities of any series may be
exchanged for Registered Securities of the same series containing identical
terms and provisions, of any authorized denominations and aggregate principal
amount, upon surrender of the Bearer Securities to be exchanged at any such
office or agency, with all unmatured coupons and all matured coupons in default
thereto appertaining. If the Holder of a Bearer Security is unable to produce
any such unmatured coupon or coupons or matured coupon or coupons in default,
such exchange may be effected if the Bearer Securities are accompanied by
payment in funds acceptable to the Company and the Trustee in an amount equal to
the face amount of such missing coupon or coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if there
is furnished to them such security or indemnity as they may require to save each
of them and any Paying Agent harmless. If thereafter the Holder of such
Security shall surrender to any Paying Agent any such missing coupon in respect
of which such a payment shall have been made, such Holder shall be entitled to
receive the amount of such payment; provided, however, that, except as otherwise
provided in Section 1002, interest represented by coupons shall be payable only
upon presentation and surrender of those coupons at an office or agency located
outside the United States. Notwithstanding the foregoing, in case a Bearer
Security of any series is surrendered at any such office or agency in exchange
for a Registered Security of the same series and like tenor after the close of
business at such office or agency on (i) any Regular Record Date and before the
opening of business at such office or agency on the relevant Interest Payment
Date, or (ii) any Special Record Date and before the opening of business at such
office or agency on the related date for payment of Defaulted Interest, such
Bearer Security shall be surrendered without the coupon relating to such
Interest Payment Date or proposed date of payment, as the case may be (or, if
such coupon is so surrendered with such Bearer Security, such coupon shall be
returned to the person so surrendering the Bearer Security), and interest or
Defaulted Interest, as the case may be, will not be payable on such Interest
Payment Date or proposed date for payment, as the case may be, in respect of the
Registered Security issued in exchange for such Bearer Security, but will be
payable only to the Holder of such coupon when due in accordance with the
provisions of this Indenture.
If expressly provided with respect to the Securities of any series, at the
option of the Holder, Registered Securities of such series may be exchanged for
Bearer Securities upon such terms and conditions as may be provided with respect
to such series.
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Whenever any Securities are so surrendered for exchange, the Company shall
execute and the Trustee shall authenticate and deliver the Securities which the
Holder making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any Global Security shall be exchangeable only if
(i) the Depository is at any time unwilling or unable to continue as Depository
and a successor depository is not appointed by the Company within 60 days, (ii)
the Company executes and delivers to the Trustee a Company Order to the effect
that such Global Security shall be so exchangeable, or (iii) an Event of Default
has occurred and is continuing with respect to the Securities of the applicable
series. If the beneficial owners of interests in a Global Security are entitled
to exchange such interests for Securities of such series, of like tenor and
principal amount and of any authorized form and denomination, as specified as
contemplated by Section 301, then without unnecessary delay but in any event not
later than the earliest date on which such interests may be so exchanged, the
Company shall deliver to the Trustee definitive Securities of that series in
aggregate principal amount equal to the principal amount of such Global Security
executed by the Company. On or after the earliest date on which such interests
may be so exchanged, such Global Securities shall be surrendered from time to
time by the U.S. Depository or such other depository as shall be specified in
the Company Order with respect thereto or pursuant to Section 204, and in
accordance with instructions given to the Trustee and the U.S. Depository or
such depository, as the case may be (which instructions shall be in writing but
need not comply with Section 102 or be accompanied by an Opinion of Counsel), as
shall be specified in the Company Order or pursuant to Section 204 with respect
thereto to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or in part, for definitive Securities of the same series
without charge. The Trustee shall authenticate and make available for delivery,
in exchange for each portion of such surrendered Global Security, a like
aggregate principal amount of definitive Securities of the same series of
authorized denominations and of like tenor as the portion of such Global
Security to be exchanged which (unless the Securities of the series are not
issuable both as Bearer Securities and as Registered Securities, in which case
the definitive Securities exchanged for the Global Security shall be issuable
only in the form in which the Securities are issuable, as specified as
contemplated by Section 301) shall be in the form of Bearer Securities or
Registered Securities, or any combination thereof, as shall be specified by the
beneficial owner thereof; provided, however, that no such exchanges may occur
during a period beginning at the opening of business 15 days before any
selection of Securities of that series to be redeemed and ending on the relevant
Redemption Date; and provided, further, that (unless otherwise specified as
contemplated by Section 301) no Bearer Security delivered in exchange for a
portion of a Global Security shall be mailed or otherwise delivered to any
location in the United States. Promptly following any such exchange in part,
such Global Security shall be returned by the Trustee to such depository or the
U.S. Depository, as the case may be, or such other depository or U.S. Depository
referred to above in accordance with the instructions of the Company referred to
above. If a Registered Security is issued in exchange for any portion of a
Global Security after the close of business at the office or agency where such
exchange occurs on (i) any Regular Record Date and before the opening of
business at
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such office or agency on the relevant Interest Payment Date, or (ii) any Special
Record Date and before the opening of business at such office or agency on the
related proposed date for payment of interest or Defaulted Interest, as the case
may be, interest will not be payable on such Interest Payment Date or proposed
date for payment, as the case may be, in respect of such Registered Security,
but will be payable on such Interest Payment Date or proposed date for payment,
as the case may be, only to the Person to whom interest in respect of such
portion of such Global Security is payable in accordance with the provisions of
this Indenture.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange or redemption shall (if so required by the Company or
the Security Registrar for such series of Security presented) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and such Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 906 or 1106 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange any Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 1103 and ending
at the close of business on the day of such mailing, or (ii) to register the
transfer of or exchange any Registered Security so selected for redemption in
whole or in part, except, in the case of any Security to be redeemed in part,
the portion thereof not to be redeemed, or (iii) to exchange any Bearer Security
so selected for redemption except that such a Bearer Security may be exchanged
for a Registered Security of that series, provided that such Registered Security
shall be immediately surrendered for redemption with written instruction for
payment consistent with the provisions of this Indenture.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security or a Security with a mutilated coupon
appertaining to it is surrendered to the Trustee, the Company shall execute and
the Trustee shall authenticate and make available for delivery in exchange
therefor a new Security of the same series containing identical terms and of
like principal amount and bearing a number not contemporaneously
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outstanding, with coupons corresponding to the coupons, if any, appertaining to
the surrendered Securities.
If there be delivered to the Company and to the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security or coupon,
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security or coupon has been acquired by a
bona fide purchaser, the Company shall execute and upon its request the Trustee
shall authenticate and make available for delivery, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a new Security of the same series containing
identical terms and of like principal amount and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains.
In case any such mutilated, destroyed, lost or stolen Security or coupon
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security or coupon; provided,
however, that payment of principal of (and premium, if any) and any interest on
Bearer Securities shall, except as otherwise provided in Section 1002, be
payable only at an office or agency located outside the United States and,
unless otherwise specified as contemplated by Section 301, any interest on
Bearer Securities shall be payable only upon presentation and surrender of the
coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee and its counsel) connected therewith.
Every new Security of any series, with its coupons, if any, issued pursuant
to this Section in lieu of any destroyed, lost or stolen Security, or in
exchange for a Security to which a destroyed, lost or stolen coupon appertains,
shall constitute an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security and its coupons, if any,
or the destroyed, lost or stolen coupon shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series and their
coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities or coupons.
SECTION 307. Payment of Interest; Interest Rights Preserved
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Interest on any Registered Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall, if so provided in
such Security, be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest. In case a Bearer Security of any series is
surrendered in exchange for a Registered Security of such series after the close
of business (at an office of agency in a Place of Payment for such series) on
any Regular Record Date and before the opening of business (at such office or
agency) on the next succeeding Interest Payment Date, such Bearer Security shall
be surrendered without the coupon relating to such Interest Payment Date and
interest will not be payable on such Interest Payment Date in respect of the
Registered Security issued in exchange for such Bearer Security, but will be
payable only to the Holder of such coupon when due in accordance with the
provisions of this Indenture.
Any interest on any Registered Security of any series which is payable, but
is not punctually paid or duly provided for, on any Interest Payment Date for
such Registered Security (herein called "Defaulted Interest") shall forthwith
cease to be payable to the Holder on the relevant Regular Record Date by virtue
of having been such Holder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in Clause (1) or (2) below:
(1 The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Registered Securities affected (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each such Registered Security and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder of such Registered
Securities at his address as it appears in the Security Register not less
than 10 days prior to such Special Record Date. The Trustee may in the
name and at the expense of the Company, cause a similar notice to be
published at least once in a newspaper, customarily published in the
English language on each Business Day and of general circulation in the
Borough of Manhattan, The City of New
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York, but such publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been
mailed as aforesaid, such Defaulted Interest shall be paid to the Persons
in whose names such Registered Securities (or their respective Predecessor
Securities) are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following Clause (2).
In case a Bearer Security of any series is surrendered at the office or
agency in a Place of Payment for such series in exchange for a Registered
Security of such series after the close of business at such office or
agency on any Special Record Date and before the opening of business at
such office or agency on the related proposed date for payment of Defaulted
Interest, such Bearer Security shall be surrendered without the coupon
relating to such proposed date of payment and Defaulted Interest will not
be payable on such proposed date of payment in respect of the Registered
Security issued in exchange for such Bearer Security, but will be payable
only to the Holder of such coupon when due in accordance with the
provisions of this Indenture.
(2 The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which such Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause,
such payment shall be deemed practicable by the Trustee.
At the option of the Company, interest on Registered Securities of any
series that bear interest may be paid by mailing a check to the address of the
person entitled thereto as such address shall appear in the Security Register.
Subject to the foregoing provisions of this Section and Section 305, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue interest, which were carried by such other
Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Registered Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Registered Security is registered as the
owner of such Registered Security for the purpose of receiving payment of
principal of (and premium, if any) and (subject to Sections 305 and 307)
interest on and Additional Amounts with respect to such Registered Security and
for all other purposes whatsoever, whether or not such Registered Security be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
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The Company, the Trustee and any agent of the Company or the Trustee may
treat the bearer of any Bearer Security and the bearer of any coupon as the
absolute owner of such Security or coupon for the purpose of receiving payment
thereof or on account thereof and for all other purposes whatsoever, whether or
not such Security or coupon be overdue, and neither the Company, the Trustee nor
any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. Cancellation.
All Securities and coupons surrendered for payment, redemption,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee, and any such Securities and coupons and Securities and coupons
surrendered directly to the Trustee for any such purpose shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities and coupons held by the Trustee shall be returned by the Trustee to
the Company.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for Securities
of any series, or as set forth in any supplemental indenture, interest on the
Securities of each series shall be computed on the basis of a 360 day year of
twelve 30-day months or, for any period shorter than a full three months, on the
basis of the actual number of days elapsed in such period.
SECTION 311. Cusip Numbers
The Company in issuing Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of redemption
and that reliance may be placed only on the other identification numbers printed
on the Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers. The Company will promptly notify the Trustee of
any change in "CUSIP" numbers.
ARTICLE FOUR
DEFEASANCE, SATISFACTION AND DISCHARGE
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SECTION 401. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option, by a Board Resolution, at any
time, elect to have either paragraph (b) or (c) below be applicable to all
outstanding Securities of a series upon compliance with the conditions set forth
in Section 402.
(b) Upon the Company's exercise of the option set forth in this
paragraph (b), the Company shall, subject to the satisfaction of the conditions
set forth in Section 402, be deemed to have been discharged from its obligations
with respect to all Outstanding Securities of a series on and after the date
that the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by the
Outstanding Securities of a series, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 404 hereof and the other Sections
of this Indenture referred to in clauses (i) and (ii) below, and to have
satisfied all its other obligations under and with respect to such Securities
and this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following provisions, which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of such Securities to receive
solely from the trust fund described in Section 404 hereof, and as more fully
set forth in such Section, payments in respect of the principal of and premium,
if any, and interest on such Securities when such payments are due and (ii) the
Company's obligations with respect to such Securities under Sections 305, 306,
404 and 606. The Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise of the option set forth in this
paragraph (c), the Company shall, subject to the satisfaction of the conditions
set forth in Section 402, be released from its obligations under the covenants
contained in Article Ten hereof and which may be contained in any Supplemental
Indenture with respect to all Outstanding Securities of a series on and after
the date that the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and such Securities shall thereafter be deemed not to be
"outstanding" for the purposes of any Act of Holders (and the consequences of
any thereof) in connection with such covenants, but shall continue to be deemed
to be "outstanding" for all other purposes hereunder (it being understood that
such Securities shall not be deemed outstanding for accounting purposes). For
this purpose, Covenant Defeasance means that, with respect to the Outstanding
Securities of a series, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event or Default under Section 501
hereof, but, except as specified above, the remainder of this Indenture and such
Securities shall be unaffected thereby. In addition, upon the Company's
exercise of the option set forth in this paragraph (c), subject to the
satisfaction of the conditions set forth in Section 402 hereof, those
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events described in Section 501 (except those events described in Sections
501(1), (2), (5) and (6)) shall not constitute Events of Default.
SECTION 402. Conditions to Legal Defeasance and Covenant Defeasance
The following shall be the conditions to the application of either
Section 401(b) or 401(c) hereof to the Outstanding Securities of a series:
(a) The Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, U.S. Dollars or U.S. Government Obligations, or
a combination thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on such Securities on the stated
date for payment thereof or on the applicable redemption date, as the case may
be, of such principal or installment of principal of or interest on such
Securities; provided, that the Trustee shall have received an irrevocable
written order from the Company instructing the Trustee to apply such U.S.
Dollars or the proceeds of such U.S. Government Obligations to said payments
with respect to such Securities;
(b) In the case of an election under Section 401(b) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel confirming
that (A) the Company has received from, or there has been published by, the U.S.
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm that
the Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) In the case of an election under Section 401(c) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel confirming
that the Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Securities of a series pursuant to this
Article Four concurrently with such incurrence or with respect to Sections
501(5) and (6), at any time in the period ending on the 91st day after the date
of such deposit);
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of or constitute a default under this Indenture or any other
material agreement or
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instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent (other than, in the case of such legal opinion, paragraph (f) as to
which such counsel need express no opinion) provided for or relating to the
Legal Defeasance or the Covenant Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that assuming no intervening bankruptcy or insolvency of
the Company between the date of deposit and the 91st day following the deposit
and that no Holder is an insider of the Company, after the 91st day following
the deposit, the trust funds will not be subject to the effect of any applicable
Bankruptcy Law.
SECTION 403. Satisfaction and Discharge of Indenture.
Upon the direction of the Company by a Company Order, this Indenture shall
cease to be of further effect (except as to any surviving rights of registration
of transfer or exchange of Securities herein expressly provided for and any
right to receive Additional Amounts, as provided in Section 1004), and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(1 either
(A all Securities theretofore authenticated and delivered and
all coupons appertaining thereto (other than (i) coupons appertaining
to Bearer Securities surrendered for exchange for Registered
Securities and maturing after such exchange, whose surrender is not
required or has been waived as provided in Section 305, (ii)
Securities and coupons which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 306, (iii)
coupons appertaining to Securities called for redemption and maturing
after the relevant Redemption Date, whose surrender has been waived as
provided in Section 1106, and (iv) Securities and coupons for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
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(B all such Securities and, in the case of (i) or (ii) below,
any such coupons appertaining thereto not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) if redeemable at the option of the Company, are to be
called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company, and the Company, in the case of (i), (ii) or (iii)
above, has deposited or caused to be deposited with the Trustee
as trust funds in trust for the purpose an amount sufficient to
pay and discharge the entire indebtedness on such Securities and
coupons not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest
and any Additional Amounts with respect thereto to the date of
such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2 the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3 the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
In the event there are Securities of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to
Securities of all series as to which it is Trustee and if the other conditions
thereto are met. In the event there are two or more Trustees hereunder, then
the effectiveness of any such instrument shall be conditioned upon receipt of
such instrument from all Trustees hereunder.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 404 and the last
paragraph of Section 1003 shall survive such satisfaction and discharge.
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SECTION 404. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Sections 402 and 403 shall be held in
trust and applied by it, in accordance with the provisions of the Securities,
the coupons and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and any interest and Additional Amounts for whose payment such
money has been deposited with the Trustee; but such money need not be segregated
from other funds except to the extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon or any Additional
Amounts payable in respect of any Security of that series when such
interest or Additional Amounts becomes due and payable, and continuance of
such default for a period of 30 days; or
(2) default in the payment of the principal of (and premium, if any,
on) any Security of that series when it becomes due and payable at
Maturity; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Security of that series; or
(4) default in the performance or breach of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with or which has been expressly included in this
Indenture solely for the benefit of Securities of series other than that
series), and continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series a
written notice specifying
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such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(5) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or for any
substantial part of its property, or ordering the winding-up or liquidation
of its affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(6) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for any substantial
part of its property, or shall make any general assignment for the benefit
of creditors, or shall fail generally to pay its debts as they become due
or shall take any corporate action in furtherance of any of the foregoing;
or
(7) a default occurs under any bond, mortgage, indenture (including
this Indenture) or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness for money borrowed of
the Company or any Subsidiary of the Company, whether such indebtedness now
exists or shall hereafter be created, which default (a) is caused by a
failure to pay principal on such indebtedness prior to the expiration of
the grace period provided in such indebtedness (a "Payment Default") or (b)
results in the acceleration of such indebtedness, prior to its express
maturity, and in each case, the principal amount of any such indebtedness
together with the principal amount of any other such indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $25 million or more; or
(8) any other Event of Default provided with respect to Securities of
that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal of all the Securities of
that series, or such lesser amount as may be provided for in the Securities of
that series, to be due and payable immediately, by a notice in writing to the
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Company (and to the Trustee if given by the Holders), and upon any such
declaration such principal or such lesser amount shall become immediately due
and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on and any Additional
Amounts payable in respect of all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates borne by or
provided for in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest and Additional Amounts
at the rate or rates borne by or provided for in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which has become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any instalment of interest on
or any Additional Amounts payable in respect of any Security when such
interest or Additional
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Amounts shall have become due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at its Maturity,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities and coupons, if any, the whole amount then due and
payable on such Securities and coupons for principal (and premium, if any) and
interest and Additional Amounts, if any, with interest upon the overdue
principal (and premium, if any) and, to the extent that payment of such interest
shall be legally enforceable, upon overdue installments of interest or any
Additional Amounts, at the rate or rates borne by or provided for in such
Securities, and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series and any
related coupons by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
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(i) to file and prove a claim for the whole amount, or such lesser
amount as may be provided for in the Securities of that series, of
principal (and premium, if any) and interest and any Additional Amounts
owing and unpaid in respect of the Securities and to file such other papers
or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents or
counsel) and of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each Holder of
Securities and coupons to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders of Securities and coupons, to pay to the Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel and any other amounts due the Trustee under
Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
or coupon any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or coupons or the rights of any Holder thereof or to
vote in respect of the claim of any Holder of a Security or coupon in any such
proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities
or Coupons.
All rights of action and claims under this Indenture or any of the
Securities or coupons may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or coupons or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery or judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee and its agents
and counsel, be for the ratable benefit of the Holders of the Securities and
coupons in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (and premium,
if any), interest or any Additional
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Amounts, upon presentation of the Securities or coupons, or both, as the case
may be, and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and its agents
and counsel under Section 607;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities and coupons for principal (and premium, if any) and interest and
any Additional Amounts payable in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the aggregate amounts due and payable on
such Securities and coupons for principal (and premium, if any), interest
and Additional Amounts, respectively;
THIRD: The balance, if any, to the Company.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series or any related coupons shall have
any right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other such
Holders or Holders of any other series or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right
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under this Indenture, except in the manner herein provided and for the equal and
ratable benefit of all such Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security or coupon shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Sections 305 and 307) interest on and any Additional Amounts in respect of such
Security or payment of such coupon on the respective Stated Maturity or
Maturities expressed in such Security or coupon (or, in the case of redemption,
on the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder of a Security or coupon has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the Trustee
and the Holders of Securities and coupons shall be restored severally and
respectively to their former positions hereunder and all rights and remedies of
the Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities or coupons in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders of Securities or coupons is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security or
coupon to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders of Securities or coupons may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders of Securities or coupons, as the case may be.
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SECTION 512. Control by Holders of Securities.
The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Securities of
such series; provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) such direction is not unduly prejudicial to the rights of other
Holders of Securities of such series.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series and any related coupons waive any past default
hereunder or under any Supplemental Indenture with respect to such series and
its consequences, except a default
(1) in the payment of the principal of (and premium, if any) or
interest on or Additional Amounts payable in respect of any Security of
such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security or
coupon by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit, other than the Trustee, of an undertaking to pay the costs of such
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suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, including the Trustee, having due regard to the merits and good faith
of the claims or defenses made by such party litigant, but the provisions of
this Section shall not apply to any suit instituted by the Company, the Trustee
or by any Holder, or group of Holders, holding in the aggregate more than 10% in
principal amount of the Outstanding Securities of any series or to any suit
instituted by any Holder of any Security or coupon for the enforcement of the
payment of the principal of (and premium, if any) or interest on or any
Additional Amounts in respect of any Security or the payment of any coupon on or
after the respective Stated Maturities expressed in such Security (or, in the
case of redemption, on or after the Redemption Date) or interest on any overdue
principal of any Security.
SECTION 515. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties, and only such
duties, as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee or any predecessor Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions (whether in their original or facsimile form) furnished to
the Trustee and conforming to the requirements of this Indenture; but
in the case of any such certificates or opinions which by any
provisions hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same
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to determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of any
facts or mathematical calculations stated therein).
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct
of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of a majority in principal amount of the
Outstanding Securities of any series, relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred upon the Trustee
under this Indenture with respect to the Securities of such series;
and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section.
SECTION 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit by mail to all
Holders of Securities of such
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series entitled to receive reports pursuant to Section 703(c) notice of such
default hereunder known to the Trustee, unless such default shall have been
cured or waived; provided, however, that, except in the case of a default in the
payment of the principal of (and premium, if any) or interest on or any
Additional Amounts with respect to any Security of such series or in the payment
of any sinking fund instalment with respect to Securities of such series, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interests of the Holders of Securities and
coupons of such series; and provided, further, that in the case of any default
of the character specified in Section 501(4) with respect to Securities of such
series, no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would become,
an Event of Default with respect to Securities of such series.
SECTION 603. Certain Rights of Trustee.
Except as otherwise provided in Section 601:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note or other paper or document (in its
original or facsimile form) reasonably believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order (other than
delivery of any Security to the Trustee for authentication and delivery
pursuant to Section 303 which shall be sufficiently evidenced as provided
therein) and any resolution of the Board of Directors shall be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, conclusively rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
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(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Securities of any series or any related coupons
pursuant to this Indenture, unless such Holders shall have offered to the
Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company personally or by agent or
attorney at the sole cost of the Company and shall incur no additional
liability of any kind by reason of such inquiry or investigation;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificate of authentication, and in any coupons shall be taken as the
statements of the Company, and the Trustee or any Authenticating Agent assumes
no responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Securities or
coupons. The Trustee or any Authenticating Agent shall not be accountable for
the use or application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and coupons and, subject
to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise deal with
the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
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Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such compensation as the
parties shall agree to in writing from time to time for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee, any predecessor Trustee and
their respective agents for, and to hold them harmless against, any and all
loss, liability, claim, damage or expense (including taxes other than taxes
based on the income of the Trustee) incurred without negligence, bad faith
or intentional misconduct on their part, arising out of or in connection
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending themselves against any claim
or liability in connection with the exercise or performance of any of their
powers or duties hereunder.
As security for the performance of the obligations of the Company under
this Section the Trustee shall have a lien prior to the Securities of any series
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the payment of principal of (or premium, if any) or
interest on Securities.
SECTION 608. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder that is a corporation (or
other person permitted to so act by the Commission) permitted by the Trust
Indenture Act to act as trustee under an indenture qualified under the Trust
Indenture Act and that has a combined capital and surplus (computed in
accordance with Section 310(a)(2) of the Trust Indenture Act) of at least
$50,000,000. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section or Section 310(a)(5) of the Trust
Indenture Act, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
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SECTION 609. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 610.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If
the instrument of acceptance by a successor Trustee required by Section 610
shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may at the
expense of the Company petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by the Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series delivered to
the Trustee and to the Company. If the instrument of acceptance by a
successor Trustee required by Section 610 shall not have been delivered to
the Trustee within 30 days after the giving of such notice of removal, the
removed Trustee may at the expense of the Company petition any court of
competent jurisdiction for the appointment of a successor Trustee with
respect to such series.
(d) If at any time:
(1) the Trustee shall fail to comply with the obligations imposed
upon it under Section 310(b) of the Trust Indenture Act with respect
to Securities of any series after written request therefor by the
Company or by any Holder of a Security who has been a bona fide Holder
of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 608 and
shall fail to resign after written request therefor by the Company or
by any such Holder of a Security, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove
the Trustee with respect to all Securities or the Securities of such
series, or (ii) subject to Section
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315(e) of the Trust Indenture Act, any Holder of a Security who has been a
bona fide Holder of a Security of any series for at least six months may,
on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to
all Securities of such series and the appointment of a successor Trustee or
Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting or if a vacancy shall occur in the office of Trustee for any other
cause, with respect to the Securities of one or more series, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those series (it being
understood that any such successor Trustee may be appointed with respect to
the Securities of one or more or all of such series and that at any time
there shall be only one Trustee with respect to the Securities of any
particular series) and shall comply with the applicable requirements of
Section 610. If, within one year after such resignation, removal or
incapacitation, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by the Act of
the Holders of a majority in principal amount of the Outstanding Securities
of such series delivered to the Company and the then Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 610,
become the successor Trustee with respect to the Securities of such series
and to that extent supersede the Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders of Securities and accepted
appointment in the manner required by Section 610, any Holder of a Security
who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any
series by mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of Registered Securities, if any, of such series as
their names and addresses appear in the Security Register and, if
Securities of such series are issued as Bearer Securities, by publishing
notice of such event once in an Authorized Newspaper in each Place of
Payment located outside the United States. Each notice shall include the
name of the successor Trustee with respect to the Securities of such series
and the address of its Corporate Trust Office.
SECTION 610. Acceptance of Appointment by Successor.
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(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the predecessor
Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the predecessor Trustee shall become effective
and such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of the
predecessor Trustee; but, on the request of the Company or the successor
Trustee, such predecessor Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee
all the rights, powers and trusts of the predecessor Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and
money held by such predecessor Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company,
the predecessor Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of the
predecessor Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates, (2) if the
predecessor Trustee is not resigning or being removed with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
predecessor Trustee with respect to the Securities of that or those series
as to which the predecessor Trustee is not resigning or being removed shall
continue to be vested in the predecessor Trustee, and (3) shall add to or
change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by
more than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the
same trust, that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee and that no Trustee shall be
responsible for any notice given to, or received by, or any act or failure
to act on the part of any other Trustee hereunder, and upon the execution
and delivery of such supplemental indenture the resignation or removal of
the predecessor Trustee shall become effective to the extent provided
therein, such predecessor Trustee shall with respect to the Securities of
that or those series to which the appointment of such successor Trustee
relates have no further responsibility for the exercise of rights and
powers or for the performance of the duties and obligations vested in the
Trustee under this Indenture other than as hereinafter expressly set forth,
and each such successor Trustee without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and
duties of the predecessor Trustee with respect to the Securities of that or
those series to which the appointment of such predecessor Trustee relates;
but, on request of the Company or any successor Trustee, such predecessor
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Trustee shall duly assign, transfer and deliver to such successor Trustee,
to the extent contemplated by such supplemental indenture, the property and
money held by such retiring Trustee hereunder with respect to the
Securities of that or those series to which the appointment of such
successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article and the Trust Indenture Act.
SECTION 611. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article and the Trust Indenture Act, without the execution or filing of any
paper or any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the Trustee then
in office, any successor to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 612. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original
issue, exchange, registration of transfer, partial redemption or pursuant to
Section 306, and Securities so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent must be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority.
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If such Authenticating Agent publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. If
at any time an Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which must be acceptable to the Company and shall (i) mail written notice
of such appointment by first-class mail, postage prepaid, to all Holders of
Registered Securities, if any, of the series with respect to which such
Authenticating Agent will serve, as their names and addresses appear in the
Security Register, and (ii) if Securities of the series are issued as Bearer
Securities, publish notice of such appointment at least once in an Authorized
Newspaper in the place where such successor Authenticating Agent has its
principal office if such office is located outside the United States. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 607.
The provisions of Sections 308, 604 and 605 shall be applicable to each
Authenticating Agent.
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If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
Dated: ................. By ............................
As Authenticating Agent
By ............................
Authorized Signatory
If all of the Securities of any series will not be originally issued at one
time, and if the Trustee does not have an office capable of authenticating
Securities upon original issuance located in a Place of Payment where the
Company wishes to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested in writing (which writing need not comply
with Section 102) by the Company, shall appoint in accordance with this Section
612 an Authenticating Agent having an office in such Place of Payment designated
by the Company with respect to such series of Securities.
SECTION 613. Trustee's Application for Instructions from the Company.
Any application by the Trustee for written instructions from the Company
may, at the option of the Trustee, set forth in writing any action proposed to
be taken or omitted by the Trustee under this Indenture and the date on and/or
after which such action shall be taken or such omission shall be effective.
Subject to Section 601 hereof and the Trust Indenture Act, the Trustee shall not
be liable for any action taken by, or any omission of, the Trustee in accordance
with such application on or after the date specified in such application (which
date shall not be less than three business days after the date any officer of
the Company actually receives such application, unless any such officer shall
have consented in writing to any earlier date) unless prior to taking any such
action (or the effective date in the case of an omission), the Trustee shall
have received written instructions in response to such application specifying
the action to be taken or omitted.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
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The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not later than fifteen days after the Regular
Record Date for interest for each series of Securities, a list, in such
form as the Trustee may reasonably require, of the names and addresses of
the Holders of Registered Securities of such series as of such Regular
Record Date, or if there is no Regular Record Date for interest for such
series of Securities, semi-annually, upon such dates as are set forth in
the Board Resolution or indenture supplemental hereto authorizing such
series, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished,
provided, however, that, so long as the Trustee is the Security Registrar, no
such list shall be required to be furnished.
SECTION 702. Preservation of Information; Communications to Holders.
The Trustee shall comply with the obligations imposed upon it pursuant to
Section 312 of the Trust Indenture Act.
Every Holder of Securities or coupons, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company, the Trustee,
any Paying Agent or any Security Registrar shall be held accountable by reason
of the disclosure of any information as to the names and addresses of the
Holders of Securities in accordance with Section 312 of the Trust Indenture Act,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under Section 312(b) of the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) Within 60 days after April 30 of each year commencing with April
30, 1999 if required by Section 313(a) of the Trust Indenture Act, the
Trustee shall transmit, pursuant to Section 313(c) of the Trust Indenture
Act, a brief report dated as of such date with respect to any of the events
specified in said Section 313(a) which may have occurred since the later of
the immediately preceding April 30 and the date of this Indenture.
(b) The Trustee shall transmit the reports required by Section 313(b)
of the Trust Indenture Act at the times specified therein.
(c) Reports pursuant to this Section shall be transmitted in the
manner and to the Persons required by Sections 313(c) and 313(d) of the
Trust Indenture Act. The
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Company will notify the Trustee when any series of Securities are listed on
any securities exchange.
SECTION 704. Reports by Company.
The Company shall:
(1) File with the Trustee, within 30 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the Exchange
Act; or, if the Company is not required to file information, documents or
reports pursuant to either of said sections, then it shall prepare in
accordance with the rules and regulations prescribed from time to time by
the Commission, such of the supplementary and periodic information,
documents and reports which would have been required pursuant to Section 13
of the Exchange Act, in respect of a security listed and registered on a
national securities exchange and shall file a copy thereof with the Trustee
within 30 days after such supplementary and periodic information, documents
and reports would have been required to be filed with the Commission;
(2) File with the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(3) Transmit within 30 days after the filing thereof with the Trustee,
in the manner and to the extent provided in Section 703(c) with respect to
reports pursuant to Section 703(a), such summaries of any information,
documents and reports required to be filed by the Company pursuant to
paragraphs (1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
(4) Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall
not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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ARTICLE EIGHT
MERGER, CONSOLIDATION AND SALE OF ASSETS
SECTION 801. Merger, Consolidation and Sale of Assets.
The Company shall not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and the Company's Subsidiaries) to any
Person, unless: (i) either (a) the Company shall be the surviving or continuing
corporation or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition all or
substantially all of the Company's assets (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any state thereof or the District of Columbia and (y) expressly assumes, by
supplemental indenture (in form and substance satisfactory to the Trustee)
executed and delivered to the Trustee, the due and punctual payment of the
principal of, (and premium, if any) and interest on and Additional Amounts with
respect to all of the Securities and the performance of every covenant of the
Securities, this Indenture and any related agreement referred to herein, in a
Board Resolution or in any indenture supplemental hereto on the part of the
Company to be performed or observed; (ii) immediately after giving effect to
such transaction and the assumption provided for in clause (i)(b)(y) above, the
Company or such Surviving Entity, as the case may be, shall have a Consolidated
Net Worth equal to at least 90% of the Consolidated Net Worth of the Company
immediately prior to such transaction; (iii) immediately before and immediately
after giving effect to such transaction and the assumption provided for in
clause (i)(b)(y) above, no default or Event of Default shall have occurred and
be continuing; and (iv) the Company or the Surviving Entity shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition, and if a supplemental indenture is required in connection
with such transaction, such supplemental indenture, comply with the applicable
provisions of this Indenture and that all conditions precedent in this Indenture
relating to such transaction have been satisfied.
The transfer (by lease, assignment, sale or otherwise in a single
transaction or series of transactions) of all or substantially all of the assets
of one or more Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the assets of the Company, shall be
deemed to be the transfer of all or substantially all of the assets of the
Company.
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SECTION 802. Rights and Duties of Successor Corporation.
In case of any such consolidation, merger, sale, assignment, transfer,
lease, conveyance or other disposition and upon any such assumption by the
Surviving Entity, such Surviving Entity shall succeed to and be substituted for
the Company, with the same effect as if it had been named herein as the party of
the first part, and the predecessor corporation, except in the event of a lease,
shall be relieved of any further obligation under this Indenture and the
Securities and coupons. Such Surviving Entity thereupon may cause to be signed,
and may issue either in its own name or in the name of the Company, any of the
Securities and coupons issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of such
Surviving Entity instead of the Company, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities and coupons which previously shall
have been signed and delivered by the officers of the Company to the Trustee for
authentication, and any Securities or coupons which such Surviving Entity
thereafter shall cause to be signed and delivered to the Trustee for that
purpose. All the Securities and coupons so issued shall in all respects have
the same legal rank and benefit under this Indenture as the Securities and
coupons theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities and coupons had been issued at the
date of execution hereof.
In case of any such consolidation, merger, sale, assignment, transfer,
lease, conveyance or other disposition, such changes in phraseology and form
(but not in substance) may be made in the Securities and coupons thereafter to
be issued as may be appropriate.
SECTION 803. Officers' Certificate and Opinion of Counsel.
The Trustee, subject to the provisions of Sections 601 and 603, may receive
an Officers' Certificate and an Opinion of Counsel as conclusive evidence that
any such consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition, and any such assumption, complies with the provisions of this
Article.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders of Securities or coupons, the Company,
when authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
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(1) to evidence the succession of a Surviving Entity to the Company,
and the assumption by any such Surviving Entity of the covenants of the
Company herein and in the Securities contained; or
(2) to add to the covenants of the Company, for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add to or change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of (or
premium, if any, on) Registered Securities or of principal of (or premium,
if any) or any interest on Bearer Securities, to permit Registered
Securities to be exchanged for Bearer Securities or to permit the issuance
of Securities in uncertificated form, provided, that any such action shall
not adversely affect the interests of the Holders of Securities of any
series or any related coupons in any material respect; or
(4) to establish the form of terms of Securities of any series as
permitted by Sections 201 and 301; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 610 (b); or
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture and which shall not be inconsistent
with the provisions of this Indenture which shall not adversely affect the
interest of the Holders of Securities of any series or any related coupons
in any material respect; or
(7) to add to, delete from or revise the conditions, limitations and
restrictions on the authorized amount, terms or purposes of issue,
authentication and delivery of Securities, as herein set forth.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture,
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by the Act of said Holders delivered to the Company and the Trustee, the
Company, and the Trustee may enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders of Securities of such series under this
Indenture or any Supplemental Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) other than in the manner specified in any agreement entered into
contemporaneously with the issuance of such series of Securities, change
the Stated Maturity of the principal of or any installment of principal of
or interest on any Security; or reduce the principal amount thereof or the
rate of interest thereon or any Additional Amounts payable in respect
thereof or any premium payable upon the redemption thereof; or change the
obligation of the Company to pay Additional Amounts pursuant to Section
1004 (except as contemplated by Section 801(i) and permitted by Section
901(1)); or reduce the amount of the principal of an Original Issue
Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 502; or change any
Place of Payment where or the coin or currency in which any Security or any
principal therefor, premium or interest thereon is payable; or impair the
right to institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date); or
(2) reduce the percentage in principal amount of the Outstanding
Securities of such series, the consent of whose Holders is required for any
such supplemental indenture or the consent of whose Holders is required for
any waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences provided for in this
Indenture; or reduce the requirements of Section 1404 for quorum or voting,
or
(3) modify any of the provisions of this Section, or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby.
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
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It shall not be necessary for any Act of Holders of Securities under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 601) shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
and of any coupons appertaining thereto shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest.
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The Company, for the benefit of the Holders of each series of Securities,
will duly and punctually pay the principal of (and premium, if any) and interest
on and any Additional Amounts payable in respect of the Securities of such
series in accordance with the terms of such series of Securities, any coupons
appertaining thereto and this Indenture. Any interest due on and any Additional
Amounts payable in respect of Bearer Securities on or before Maturity, other
than Additional Amounts, if any, payable as provided in Section 1004 in respect
of principal of (or premium, if any, on) such a Security, shall be payable only
upon presentation and surrender of the several coupons for such interest
installments as are evidenced thereby as they severally mature.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series (but not Bearer
Securities, except as otherwise provided below, unless such Place of Payment is
located outside the United States) may be presented or surrendered for payment,
where Securities of that series may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company in respect of
the Securities of that series and this Indenture may be served. If Securities
of a series are issuable as Bearer Securities, the Company will maintain,
subject to any laws or regulations applicable thereto, an office or agency in a
Place of Payment for such series which is located outside the United States
where Securities of such series and the related coupons may be presented and
surrendered for payment (including payment of any Additional Amounts payable on
Securities of such series pursuant to Section 1004); provided, however, that if
the Securities of such series are listed on The Stock Exchange of the United
Kingdom and the Republic of Ireland or the Luxembourg Stock Exchange or any
other stock exchange located outside the United States and such stock exchange
shall so require, the Company will maintain a Paying Agent in London, Luxembourg
or any other required city located outside the United States, as the case may
be, so long as the Securities of such series are listed on such exchange. The
Company will give prompt written notice to a Responsible Officer of the Trustee
of the location, and any change in the location, of such office or agency. If
at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, except that Bearer Securities of that
series and the related coupons may be presented and surrendered for payment
(including payment of any Additional Amounts payable on Bearer Securities of
that series pursuant to Section 1004) at the place specified for the purpose
pursuant to Section 301, and the Company hereby appoints the Trustee as its
agent to receive all such presentations, surrenders, notices and demands.
Except as otherwise provided in the form of Bearer Security of any
particular series pursuant to the provisions of this Indenture, no payment of
principal, premium or interest on Bearer Securities shall be made at any office
or agency of the Company in the United States or by check mailed to any address
in the United States or by transfer to an account maintained
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with a bank located in the United States; provided, however, that payment of
principal of and any premium and interest in U.S. dollars (including Additional
Amounts payable in respect thereof) on any Bearer Security may be made at the
Corporate Trust Office of the Trustee in the Borough of Manhattan, The City of
New York if (but only if) payment of the full amount of such principal, premium,
interest or Additional Amounts at all offices outside the United States
maintained for the purpose by the Company in accordance with this Indenture is
illegal or effectively precluded by exchange controls or other similar
restrictions.
The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in each Place of Payment for Securities of a series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency. Unless otherwise set forth in a Board Resolution or indenture
supplemental hereto with respect to a series of Securities, the Company hereby
designates as the Place of Payment for each series of Securities the Borough of
Manhattan, The City of New York, and initially appoints the Trustee at its
Corporate Trust Office as the Company's office or agency for each of such
purposes in such city.
SECTION 1003. Money for Securities Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, on or prior to each due date of the principal of (and
premium, if any) or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of its action
or failure so to act.
The Company will cause each Paying Agent for any series of Securities other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will
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(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of that series) in the making of any
payment of principal (and premium, if any) or interest on the Securities of
that series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Except as otherwise provided in the form of Securities of any particular
series pursuant to the provisions of this Indenture, any money deposited with
the Trustee or any Paying Agent or then held by the Company, in trust, for the
payment of the principal of (and premium, if any) or interest on any Security of
any series and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall be paid to the
Company on Company Request or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security or any coupon appertaining
thereto shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof and all liability of the Trustee or such Paying
Agent with respect to such trust money and all liability of the Company as
trustee thereof shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once in an Authorized Newspaper in
each Place of Payment or to be mailed to Holders of Registered Securities, or
both, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication
or mailing, any unclaimed balance of such money then remaining will be repaid to
the Company.
SECTION 1004. Additional Amounts.
(a) If the Securities of a series provide for the payment of Additional
Amounts, the Company will pay to the Holder of any Security of such series or
any coupon appertaining thereto Additional Amounts as provided therein.
Whenever in this Indenture there is
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mentioned, in any context, the payment of the principal of (or premium, if any)
or interest on or in respect of any Security of any series or any related coupon
or the net proceeds to be received on the sale or exchange of any Security of
any series, such mention shall be deemed to include mention of the payment of
Additional Amounts provided for in this Section to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof
pursuant to the provisions of this Section and such Security and express mention
of the payment of Additional Amounts (if applicable) in any provisions hereof
shall not be construed as excluding Additional Amounts in those provisions
hereof where such express mention is not made.
(b) If the Securities of a series are issuable as Bearer Securities and
provide for the payment of Additional Amounts, at least 10 days prior to the
first Interest Payment Date with respect to that series of Securities (or if the
Securities of that series will not bear interest prior to Maturity, the first
day on which a payment of principal (and premium, if any) is made), and at least
10 days prior to each date of payment of principal (and premium, if any) or
interest if there has been any change with respect to the matters set forth in
the below-mentioned Officers' Certificate, the Company will furnish the Trustee
and the Company's principal Paying Agent or Paying Agents, if other than the
Trustee, with an Officers' Certificate instructing the Trustee and such Paying
Agent or Paying Agents whether such payment of principal (and premium, if any)
or interest on the Securities of that series shall be made to Holders of
Securities of that series or the related coupons who are United States Aliens
without withholding for or on account of any tax, assessment or other
governmental charge described in the Securities of that series. If any such
withholding shall be required, then such Officers' Certificate shall specify by
country the amount, if any, required to be withheld on such payments to such
Holders of Securities or coupons and the Company will pay to the Trustee or such
Paying Agent the Additional Amounts required by this Section. The Company will
indemnify the Trustee and any Paying Agent for, and hold them harmless against,
any loss, liability or expense reasonably incurred without negligence, bad faith
or intentional misconduct on their part arising out of or in connection with
actions taken or omitted by any of them in reliance on any Officers' Certificate
furnished pursuant to this Section.
SECTION 1005. Statement as to Compliance
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year, a written statement, which need not comply with Section 102,
signed by the Chairman of the Board, the President or a Vice President and by
the Treasurer, an Assistant Treasurer, the Controller or an Assistant Controller
of the Company, stating, as to each signer thereof, that
(a) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision, and
(b) to the best of his knowledge, based on such review, (i) the Company has
fulfilled all of its obligations under this Indenture throughout such year,
or, if there has
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been a default in the fulfillment of any such obligation, specifying each
such default known to him and the nature and status thereof, and (ii) no
event has occurred and is continuing which is, or after notice or lapse of
time or both would become, an Event of Default, or, if such an event has
occurred and is continuing, specifying each such event known to him and the
nature and status thereof.
SECTION 1006. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Sections 1003 to 1005, inclusive or any
covenants contained in any Supplemental Indenture, with respect to the
Securities of any series if before the time for such compliance the Holders of
at least a majority in principal amount of the Outstanding Securities of such
series shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
SECTION 1007. Calculation of Original Issue Discount.
The Company shall file with the Trustee promptly at the end of each
calendar year (i) a written notice specifying the amount of original issue
discount (including daily rates and accrual periods) accrued on the Outstanding
Securities of any series as of the end of such year and (ii) such other specific
information relating to such original issue discount as may then be relevant
under the Internal Revenue Code of 1986, as amended from time to time.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Redemption of Securities of any series at the option of the Company as
permitted or required by the terms of such Securities shall be made in
accordance with the terms of such Securities and this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
a Company Order. In case of any redemption at the election of the Company of
less than all of the Securities of any series with the same issue date, interest
rate and Stated Maturity, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a
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shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities of such series to be
redeemed.
SECTION 1103. Selection by Trustee of Securities to be Redeemed.
If less than all the Securities of any series with the same issue date,
interest rate and Stated Maturity are to be redeemed, the particular Securities
to be redeemed shall be selected not more than 60 days prior to the Redemption
Date by the Trustee from the Outstanding Securities of such series not
previously called for redemption by such method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions of the principal amount of Registered Securities of such series;
provided, however, that no such partial redemption shall reduce the portion of
the principal amount of a Registered Security of such series not redeemed to
less than the minimum denomination for a Security of that series established
pursuant to Section 302.
The Trustee shall promptly notify the Company and the Security Registrar
(if other than itself) in writing of the Securities selected for redemption and,
in the case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section 106,
not less than 30 nor more than 60 days prior to the Redemption Date, unless a
shorter period is specified in the Securities to be redeemed, to the Holders of
Securities to be redeemed. Failure to give notice by mailing in the manner
herein provided to the Holder of any Registered Securities designated for
redemption as a whole or in part, or any defect in the notice to any such
Holder, shall not affect the validity of the proceedings for the redemption of
any other Securities or portions thereof.
Any notice that is mailed to the Holder of any Registered Securities in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not such Holder receives the notice.
All notices of redemption shall fully identify the Securities (including
the Cusip Number), if any, and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
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(3) if less than all Outstanding Securities of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amount) of the particular Securities to be redeemed,
(4) in case any Registered Security is to be redeemed in part only,
the notice which relates to such Security shall state that on and after the
Redemption Date, upon surrender of such Security, the Holder of such
Security will receive, without charge, a new Registered Security or
Registered Securities of authorized denominations for the principal amount
thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed, and, if applicable,
that interest thereon shall cease to accrue on and after said date,
(6) the place or places where such Securities, together in the case of
Bearer Securities with all coupons appertaining thereto, if any, maturing
after the Redemption Date, are to be surrendered for payment of the
Redemption Price, and
(7) that the redemption is for a sinking fund, if such is the case.
A notice of redemption published as contemplated by Section 106 need not
identify particular Registered Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on and any Additional
Amounts with respect to all the Securities or portions thereof which are to be
redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall on the Redemption Date become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest and the coupons for such
interest appertaining to any Bearer Securities so to be redeemed, except to
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the extent provided below, shall be void. Upon surrender of any such Security
for redemption in accordance with said notice, together with all coupons, if
any, appertaining thereto maturing after the Redemption Date, such Security
shall be paid by the Company at the Redemption Price, together with accrued
interest (and any Additional Amounts) to the Redemption Date; provided, however,
that installments of interest on Bearer Securities whose Stated Maturity is on
or prior to the Redemption Date shall be payable only upon presentation and
surrender of coupons for such interest at an office or agency located outside
the United States except as otherwise provided in Section 1002; and provided,
further, that installments of interest on Registered Securities whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be accompanied
by all appurtenant coupons maturing after the Redemption Date, such Security may
be paid after deducting from the Redemption Price an amount equal to the face
amount of all such missing coupons, or the surrender of such missing coupon or
coupons may be waived by the Company and the Trustee if there be furnished to
them such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall
surrender to the Trustee or any Paying Agent any such missing coupon in respect
of which a deduction shall have been made from the Redemption Price, such Holder
shall be entitled to receive the amount so deducted; provided, however, that
interest (and any Additional Amounts) represented by coupons shall be payable
only upon presentation and surrender of those coupons at an office or agency
located outside of the United States except as otherwise provided in Section
1002.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate prescribed therefor in the
Security.
SECTION 1107. Securities Redeemed in Part.
Any Registered Security which is to be redeemed only in part shall be
surrendered at any office or agency of the Company maintained for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by the Holder thereof or his attorney duly
authorized in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Registered Security or Securities of the same series, containing identical
terms and provisions, of any authorized denomination as requested by such Holder
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered. If a Security in
global form is so surrendered, the Company shall execute, and the Trustee shall
authenticate and deliver to the U.S. Depository or other depository for such
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Security in such global form as shall be specified in the Company Order with
respect thereto to the Trustee, without service charge, a new Security in global
form in a denomination equal to and in exchange for the unredeemed portion of
the principal of the Security in global form so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series, except as otherwise permitted or
required by any form of Security of any series issued pursuant to this
Indenture.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Securities of such series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 1202. Each sinking fund payment shall be applied to the redemption
of Securities of any series as provided for by the terms of Securities of such
series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company may, in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of any series, if provided for by the
terms of such series, (1) deliver Outstanding Securities of such series (other
than any of such Securities previously called for redemption or any of such
Securities in respect of which cash shall have been released to the Company),
together in the case of any Bearer Securities of such series with all unmatured
coupons appertaining thereto, and (2) apply as a credit Securities of such
series which have been redeemed either at the election of the Company pursuant
to the terms of such series of Securities or through the application of optional
sinking fund payments pursuant to the terms of such Securities or otherwise
acquired by the Company; provided that such Securities have not been previously
so credited. Such Securities shall be received and credited for such purpose by
the Trustee at the Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly. If as a result of the delivery or credit
of Securities of any series in lieu of cash payments pursuant to this Section
1202 the principal amount of Securities of such series to be redeemed in order
to exhaust the aforesaid cash payment shall be less than $100,000, the Trustee
need not call Securities of such series for redemption, except upon Company
Request, and such cash payment shall be held by the Trustee or a Paying Agent
and applied to the next succeeding sinking fund payment; provided, however, that
the Trustee or such Paying Agent
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shall at the request of the Company from time to time pay over and deliver to
the Company any cash payment so being held by the Trustee or such Paying Agent
upon delivery by the Company to the Trustee of Securities of that series having
an unpaid principal amount equal to the cash payment requested to be released to
the Company.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing mandatory sinking fund
payment for that series pursuant to the terms of that series, the portion
thereof, if any, which is to be satisfied by payment of cash and the portion
thereof, if any, which is to be satisfied by delivering and crediting Securities
of that series pursuant to Section 1202, and the optional amount, if any, to be
added in cash to the next ensuing mandatory sinking fund payment, and will also
deliver to the Trustee any Securities to be so credited and not theretofore
delivered. If such Officers' Certificate shall specify an optional amount to be
added in cash to the next ensuing mandatory sinking fund payment, the Company
shall thereupon be obligated to pay the amount therein specified. Not less than
30 days before each such sinking fund payment date the Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 1103 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Company in the manner provided in
Section 1104. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
1106 and 1107.
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article.
Securities of any series which are repayable at the option of the Holders
thereof before their Stated Maturity shall be repaid in accordance with the
terms of the Securities of such series. The repayment of any principal amount
of Securities pursuant to such option of the Holder to require repayment of
Securities before their Stated Maturity, for purposes of Section 309 shall not
operate as a payment, redemption or satisfaction of the indebtedness represented
by such Securities unless and until the Company, at its option, shall deliver or
surrender the same to the Trustee with a directive that such Securities be
cancelled. Notwithstanding anything to the contrary contained in this Article
Thirteen, in connection with any repayment of Securities, the Company may
arrange for the purchase of any Securities by an agreement with one or more
investment bankers or other purchasers to purchase such Securities by paying to
the Holders of such Securities on or before the close of business on the
repayment date an amount not less than the repayment price payable by the
Company on repayment of such
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Securities, and the obligation of the Company to pay the repayment price of such
Securities shall be satisfied and discharged to the extent such payment is so
paid by such purchasers.
ARTICLE FOURTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1401. Purposes for Which Meetings May Be Called.
If Securities of a series are issuable as Bearer Securities, a meeting
of Holders of Securities of such series may be called at any time and from time
to time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series.
SECTION 1402. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of
Securities of any series for any purpose specified in Section 1401, to be
held at such time and at such place as the Trustee shall determine. Notice
of every meeting of Holders of Securities of any series, setting forth the
time and the place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be given, in the manner provided in
Section 106, not less than 21 nor more than 180 days prior to the date
fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution,
or the Holders of at least 25% in principal amount of the Outstanding
Securities of any series shall have requested the Trustee to call a meeting
of the Holders of Securities of such series for any purpose specified in
Section 1401, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
arranged the first publication of the notice of such meeting within 21 days
after receipt of such request or shall not thereafter proceed to cause the
meeting to be held as provided herein, then the Company or the Holders of
Securities of such series in the amount above specified, as the case may
be, may determine the time and the place for such meeting and may call such
meeting for such purposes by giving notice thereof as provided in
subsection (a) of this Section.
SECTION 1403. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities of any
series, a Person shall be (1) a Holder of one or more Outstanding Securities of
such series, or (2) a Person appointed by an instrument in writing as proxy for
a Holder or Holders of one or more Outstanding Securities of such series by such
Holder or Holders. The only Persons who shall
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be entitled to be present or to speak at any meeting of Holders of Securities of
any series shall be the Persons entitled to vote at such meeting and their
counsel, any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION 1404. Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities of a series shall constitute a quorum for a meeting of
Holders of Securities of such series; provided, however, that if any action is
to be taken at such meeting with respect to a consent or waiver which this
Indenture expressly provides may be given by the Holders of a specified
percentage in aggregate principal amount of the Outstanding Securities of a
series that is less or greater than a majority in principal amount of the
Outstanding Securities of such series, then, with respect to such action (and
only such action) the Persons entitled to vote such lesser or greater percentage
in principal amount of the Outstanding Securities of such series shall
constitute a quorum. In the absence of a quorum within 30 minutes of the time
appointed for any such meeting, the meeting shall, if convened at the request of
Holders of Securities of such series, be dissolved. In any other case the
meeting may be adjourned for a period of not less than 10 days as determined by
the chairman of the meeting prior to the adjournment of such meeting. In the
absence of a quorum at any such reconvened meeting, such reconvened meeting may
be further adjourned for a period of not less than 10 days as determined by the
chairman of the meeting prior to the adjournment of such reconvened meeting.
Notice of the reconvening of any adjourned meeting shall be given as provided in
Section 1402(a), except that such notice need be given only once not less than
five days prior to the date on which the meeting is scheduled to be reconvened.
Notice of the reconvening of an adjourned meeting shall state expressly the
percentage, as provided above, of the principal amount of the Outstanding
Securities of such series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted by the affirmative vote of the Holders of a majority
in principal amount of the Outstanding Securities of that series; provided,
however, that, except as limited by the proviso to Section 902, any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action which this Indenture expressly provides may be made,
given or taken by the Holders of a specified percentage, which is less or
greater than a majority in principal amount of the Outstanding Securities of a
series, may be adopted at a meeting or an adjourned meeting duly reconvened and
at which a quorum is present as aforesaid by the affirmative vote of the Holders
of such specified percentage in principal amount of the Outstanding Securities
of that series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related coupons,
whether or not present or represented at the meeting.
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SECTION 1405. Determination of Voting Rights; Conduct and Adjournment of
Meetings.
(a) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities of any series in regard to proof of
the holding of Securities of such series and of the appointment of proxies
and in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the conduct of the
meeting as it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Securities shall be proved
in the manner specified in Section 104 and the appointment of any proxy
shall be proved in the manner specified in Section 104 or by having the
signature of the person executing the proxy witnessed or guaranteed by any
trust company, bank or banker authorized by Section 104 to certify to the
holding of Bearer Securities. Such regulations may provide that written
instruments appointing proxies, regular on their face, may be presumed
valid and genuine without the proof specified in Section 104 or other
proof.
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders of Securities as provided in Section
1402(b), in which case the Company or the Holders of Securities of the
series calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Persons entitled
to vote a majority in principal amount of the Outstanding Securities of
such series represented at the meeting.
(c) At any meeting of the Holders of Securities of a series, each
Holder of a Security of such series or proxy shall be entitled to one vote
for each $1,000 principal amount of Securities of such series held or
represented by him; provided, however, that no vote shall be cast or
counted at any meeting in respect of any Security challenged as not
Outstanding and ruled by the chairman of the meeting to be not Outstanding.
The chairman of the meeting shall have no right to vote, except as a Holder
of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1402 at which a quorum is present may be adjourned from
time to time by Persons entitled to vote a majority in principal amount of
the Outstanding Securities of such series represented at the meeting; and
the meeting may be held as so adjourned without further notice.
SECTION 1406. Counting Votes and Recording Action of Meetings.
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The vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or of
their representatives by proxy and the principal amounts and serial numbers of
the Outstanding Securities of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in triplicate of all votes cast at the meeting. A record, at least in
triplicate, of the proceedings of each meeting of Holders of Securities of any
series shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1402 and, if
applicable, Section 1404. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
ARTICLE FIFTEEN
MISCELLANEOUS PROVISIONS
SECTION 1501 Securities in Foreign Currencies.
Whenever this Indenture provides for (i) any action by, or the
determination of any of the rights of, Holders of Securities of any series in
which not all of such Securities are denominated in the same currency, or (ii)
any distribution to Holders of Securities, in the absence of any provision to
the contrary in the form of Security of any particular series, any amount in
respect of any Security denominated in a currency other than United States
dollars shall be treated for any such action or distribution as that amount of
United States dollars that could be obtained for such amount on such reasonable
basis of exchange and as of the record date with respect to Registered
Securities of such series (if any) for such action, determination of rights or
distribution (or, if there shall be no applicable record date, such other date
reasonably proximate to the date of such action, determination of rights or
distribution) as the Company may specify in a written notice to the Trustee or,
in the absence of such written notice, as the Trustee may determine.
* * * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture, to be
duly executed as of the day and year first above written:
UNITED STATES FILTER
CORPORATION
By:
-------------------------
Name:
Attest:
-------------------
Secretary
THE BANK OF NEW YORK,
as Trustee
By:
-------------------------
Name:
Title:
Attest:
-------------------
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EXHIBIT 4.3
UNITED STATES FILTER CORPORATION
AND
THE BANK OF NEW YORK
Trustee
_________________________________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of May 19, 1998
Supplementing the Indenture
Dated as of May 19, 1998
_________________________________________
$900,000,000
$500,000,000 6.375% Remarketable or Redeemable Securities ("ROARS/SM/")
Due 2011
(Remarketing Date May 15, 2001)
$400,000,000 6.50% Remarketable or Redeemable Securities ("ROARS/SM/")
Due 2013
(Remarketing Date May 15, 2003)
/SM/ Service mark of NationsBanc Montgomery Securities LLC
<PAGE>
SUPPLEMENTAL INDENTURE, dated as of the 19th day of May, 1998, between
United States Filter Corporation, a Delaware corporation (the "Company"), and
The Bank of New York, a New York banking corporation, as trustee (the
"Trustee").
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture dated as of May 19, 1998 (the "Original Indenture" and,
together with this First Supplemental Indenture, the "Indenture") providing for
the issuance by the Company from time to time of its debt securities to be
issued in one or more series (in the Original Indenture and herein called the
"Securities"); and
WHEREAS, the Company, in the exercise of the power and authority
conferred upon and reserved to it under the provisions of the Original
Indenture, has duly determined to make, execute and deliver to the Trustee this
First Supplemental Indenture to the Original Indenture in order to establish the
forms and terms of, and to provide for the creation and issue of two series of
Securities designated as the 6.375% Remarketable or Redeemable Securities (the
"6.375% ROARS/SM/")/1/ due May 15, 2011 (the "6.375% ROARS Maturity Date") and
the 6.50% Remarketable or Redeemable Securities (the "6.50% ROARS") due May 15,
2013 (the "6.50% ROARS Maturity Date") under the Original Indenture in the
aggregate principal amount of $900,000,000; and
WHEREAS, all things necessary to make the 6.375% ROARS and the 6.50%
ROARS, when executed by the Company and authenticated and delivered by the
Trustee and issued upon the terms and subject to the conditions hereinafter and
in the Indenture set forth, against payment therefor, the valid, binding and
legal obligations of the Company and to make this First Supplemental Indenture a
valid, binding and legal agreement of the Company, have been done;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH that, in
order to establish the terms of two series of Securities designated as the
"6.375% Remarketable or Redeemable Securities due May 15, 2011" and the "6.50%
Remarketable or Redeemable Securities due May 15, 2013", and for, and in
consideration of, the premises and of the covenants contained in the Original
Indenture and in this First Supplemental Indenture and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, it is covenanted and agreed as follows:
- --------------
/1/"ROARS/SM/" is a Service mark owned by NationsBanc Montgomery Securities LLC
2
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ARTICLE ONE
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions. Each capitalized term that is used herein
-----------
and is defined in the Original Indenture shall have the meaning specified in the
Original Indenture unless such term is otherwise defined herein.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by, or under direct or indirect common
control with, such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Applicable Spread" has the meaning specified in Section 204.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, at the
time of determination, the present value (discounted at the interest rate
implicit in such transaction in accordance with GAAP) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Base Rate" has the meaning specified in Section 204.
"Bid" has the meaning specified in Section 204.
"Beneficial Owner" has the meaning specified in Section 204.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" has the meaning specified in Section 203.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation
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shall be the capitalized amount of such obligation determined in accordance with
GAAP.
"Comparable Treasury Issues" has the meaning specified in Section 204.
"Comparable Treasury Price" has the meaning specified in Section 204.
"Consolidated Tangible Assets" means Total Assets less the sum of (a) the
total book value of all assets of the Company and its Subsidiaries properly
classified as intangible assets under GAAP, including such items as goodwill,
the purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, customer lists, brand names,
copyrights, patents and licenses, and rights with respect to the foregoing, and
(b) all amounts representing any write-up in the book value of any assets of the
Company or its Subsidiaries resulting from a revaluation thereof subsequent to
the date of the Company's then most recent audited financial statements.
"Convertible Notes" means the 6% Convertible Subordinated Notes due 2005 of
the Company and the 4 1/2% Convertible Subordinated Notes due 2001 of the
Company.
"Currency Agreement" means, with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or of which such Person is a beneficiary.
"Determination Date" has the meaning specified in Section 204.
"Dollar Price" has the meaning specified in Section 204.
"DTC" has the meaning specified in Section 204.
"DTC Participant" shall mean any person that has an account with DTC through
which a Beneficial Owner may acquire, directly or indirectly, an interest in the
ROARS.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Incur" means issue, assume, guarantee, incur or otherwise become liable for;
provided, however, that any Indebtedness or Capital Stock of a Person existing
at the time such Person becomes a Subsidiary of another Person (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Person at the time it becomes such a Subsidiary; provided, further,
however, that in the case of a discount security, neither the accrual of
interest nor the accretion
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of original issue discount shall be considered an Incurrence of Indebtedness,
but the entire face amount of such security shall be deemed Incurred upon the
issuance of such security. The term "Incurrence" when used as a noun shall have
a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of determination
(without duplication), (i) the principal of and premium (if any) in respect of
(A) indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable; (ii) all Capital Lease
Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) the amount of all
obligations of such Person with respect to the redemption, repayment or other
repurchase of any Disqualified Capital Stock or, with respect to any Subsidiary
of such Person, any Preferred Stock (but excluding, in each case, any accrued
dividends); and (iv) all obligations of the type referred to in clauses (i) and
(iii) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations as described above at such date; provided, however, that the amount
outstanding at any time of any Indebtedness issued with original issue discount
shall be deemed to be the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.
"Interest Payment Date" has the meaning specified in Section 203.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect the Company or any Subsidiary of the Company against fluctuations in
interest rates.
"Interest Rate to Maturity" has the meaning specified in Section 203.
"Issue Date" means the date on which the ROARS are originally issued.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
however, that, as to any such arrangement in corporate form, such corporation
shall
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not, as to any Person of which such corporation is a Subsidiary, be considered
to be a Joint Venture to which such Person is a party.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Notification Date" has the meaning specified in Section 204.
"Offering Circular" has the meaning specified in Section 205.
"Permitted Liens" means any (i) Liens arising by reason of (x) operation of
law in favor of carriers, warehousemen, landlords, mechanics, materialmen,
laborers, employees or suppliers in existence for less than 120 days or for more
than 120 days which are not yet delinquent or are being contested in good faith
by negotiations or by appropriate proceedings which suspend the collection
thereof or (y) any interest or title of a lessor under any lease; (ii) Liens in
favor of the Company; (iii) Liens on property of a Person existing at the time
such Person is acquired by, merged into or consolidated with the Company or any
Subsidiary of the Company; provided that such Liens were not incurred in
contemplation of such acquisition, merger or consolidation and do not extend to
any assets other than those of the Person acquired by, merged into or
consolidated with the Company or any such Subsidiary; (iv) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company; provided that such Liens were not incurred in contemplation of such
acquisition; (v) Liens existing on the date of the Indenture; (vi) Liens to
secure taxes, assessments and other government charges or claims for labor,
material or supplies (x) in respect of obligations which are not overdue or (y)
which are currently being contested in good faith by appropriate proceedings if
the Company has set aside on its books adequate reserves with respect thereto,
if required, and if no proceedings have been commenced to foreclose any such
Lien; (vii) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or other
social security obligations; (viii) Liens in respect of judgments or awards
which have been in force for less than the applicable period for taking an
appeal, so long as execution is not levied thereunder, or in respect of which
the Company or one of its Subsidiaries, as the case may be, at the time in good
faith is prosecuting an appeal or proceedings for review and in respect of which
the Company and its Subsidiaries have maintained reserves in an amount
satisfactory to the Company; (ix) encumbrances consisting of easements, rights
of way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's Liens
under leases to which the Company or any Subsidiary of the Company is a party,
and other minor liens or encumbrances none of which in the opinion of the
Company or such Subsidiary interferes materially
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with the use of the property affected in the ordinary conduct of the business of
the Company or such Subsidiary and which defects do not individually or in the
aggregate have a material adverse effect on the business of the Company and its
Subsidiaries on a consolidated basis; (x) Liens securing Indebtedness in respect
of performance bonds, bankers' acceptances, and surety or appeal bonds entered
into by the Company or its Subsidiaries in the ordinary course of their
business; (xi) Liens securing Hedging Obligations consisting of Interest Rate
Agreements and Currency Agreements entered into in the ordinary course of
business and not for the purpose of speculation; (xii) Liens securing
Indebtedness arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business; provided that such Indebtedness is extinguished within five business
days of Incurrence; (xiii) Liens securing Indebtedness of the Company and its
Subsidiaries arising from agreements providing for indemnification, adjustment
of purchase price or similar obligations, in any case Incurred in connection
with the disposition of any assets of the Company or any such Subsidiary (other
than guarantees of Indebtedness Incurred by any Person acquiring all or any
portion of such assets for the purpose of financing such acquisition), in a
principal amount not to exceed the gross proceeds actually received by the
Company or any such Subsidiary in connection with such disposition; and (xiv)
Liens securing Indebtedness in an aggregate principal amount together with all
Liens securing other Indebtedness of the Company and its Subsidiaries
outstanding on the date of such Incurrence (other than Liens set forth in
clauses (i) through (xiii) above), not exceeding 15% of Consolidated Tangible
Assets.
"Principal" of any Indebtedness (including a ROARS) means the principal of
such Indebtedness plus the premium, if any, payable on such Indebtedness which
is due or overdue or is to become due at the relevant time.
"Reference Corporate Dealer" has the meaning specified in Section 204.
"Reference Treasury Dealer" has the meaning specified in Section 204.
"Reference Treasury Dealer Quotations" has the meaning specified in Section
204.
"Regular Record Date" has the meaning specified in Section 203.
"Remaining Scheduled Payments" has the meaning specified in Section 204.
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"Remarketing Agreement" means the agreement, dated as of May 19, 1998, which
sets forth the rights and obligations of the Company and the Remarketing Dealer
with respect to the remarketing of the ROARS.
"Remarketing Dates" means May 15, 2001 for the 6.375% ROARS and May 15, 2003
for the 6.50% ROARS.
"Remarketing Dealer" means NationsBanc Montgomery Securities LLC or its
successors.
"ROARS" has the meaning specified in Section 201.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or one of its Subsidiaries
transfers such property to a Person and the Company or such Subsidiary leases it
from such Person.
"Stated Maturity" means, with respect to any instrument, the date specified in
such instrument as the fixed date on which the final payment of principal of
such instrument is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase,
redemption or repayment of such instrument at the option of the holder thereof
upon the happening of any contingency unless such contingency has occurred).
"Stated Maturity Date" means either May 15, 2011 for the 6.375% ROARS or May
15, 2013 for the 6.50% ROARS.
"Total Assets" means the total consolidated assets of the Company and its
Subsidiaries, as shown on the most recent balance sheet (excluding the footnotes
thereto) of the Company.
"Treasury Rate" has the meaning specified in Section 204.
SECTION 102. Section References. Each reference to a particular
------------------
section set forth in this First Supplemental Indenture shall, unless the context
otherwise requires, refer to this First Supplemental Indenture.
8
<PAGE>
ARTICLE TWO
TITLE AND TERMS OF THE ROARS
SECTION 201. Title of the ROARS. Pursuant to Sections 301 and 901 of
------------------
the Original Indenture, this First Supplemental Indenture hereby establishes two
series of Securities designated as the "6.375% Remarketable or Redeemable
Securities due May 15, 2011" and the "6.50% Remarketable or Redeemable
Securities due May 15, 2013" of the Company (collectively, the "ROARS").
SECTION 202. Amount and Denominations; DTC. The aggregate principal
-----------------------------
amount of ROARS that may be issued under this First Supplemental Indenture is
limited to $500,000,000 for the 6.375% ROARS and $400,000,000 for the 6.50%
ROARS.
The ROARS shall be issuable only in fully registered global book-entry form
and shall initially be registered in the name of The Depositary Trust Company
("DTC") or its nominee which shall be the "U.S. Depository" and sole "Holder"
thereof.
SECTION 203. Interest To Remarketing Date. The 6.375% ROARS and the
----------------------------
6.50% ROARS shall bear interest at 6.375% and 6.50% per annum, respectively, for
the period from May 19, 1998 to the Remarketing Date applicable to such series
of ROARS. If a series of ROARS is purchased by the Remarketing Dealer on the
applicable Remarketing Date, on and after such Remarketing Date such series of
ROARS shall bear interest at the rate determined by the Remarketing Dealer in
accordance with the procedures set forth below (the "Interest Rate to
Maturity").
The ROARS shall bear interest from May 19, 1998 payable semi-annually on May
15 and November 15 of each year (each an "Interest Payment Date"), commencing
November 15, 1998, to the persons in whose name the ROARS are registered at the
close of business on the preceding May 1 and November 1, respectively (whether
or not a Business Day) (each a "Regular Record Date"); provided, however, that
interest payable on the applicable Remarketing Date and on the applicable Stated
Maturity Date shall be paid to the person to whom principal is payable. Interest
payments shall be in the amount of interest accrued from and including the next
preceding Interest Payment Date (or from and including May 19, 1998 if no
interest has been paid or duly provided for with respect to the ROARS) to but
excluding the relevant Interest Payment Date, Remarketing Date or Stated
Maturity Date, as the case may be. "Business Day" means any day that is not a
day on which banking institutions in New York, New York are authorized or
obligated by law or executive order to close.
SECTION 204. Remarketing and Determination of Interest Rate to
-------------------------------------------------
Maturity. The Remarketing Dealer's obligations set forth herein shall be
- --------
performed pursuant to the Remarketing Agreement.
9
<PAGE>
(a) Mandatory Tender. If the Remarketing Dealer gives notice to the
----------------
Company and the Trustee no earlier than the tenth Business Day and no later than
4:00 p.m., New York City time, on the fifth Business Day prior to the
Remarketing Date applicable to a series of ROARS, of its intention to purchase
such series of ROARS for remarketing (the "Notification Date"), each of the
ROARS in such series shall be automatically tendered, or deemed tendered, to the
Remarketing Dealer for purchase on such Remarketing Date, except in certain
circumstances described in Section 205. The applicable ROARS Purchase Price
shall be paid by the Remarketing Dealer and the Company shall pay accrued
interest, if any, on such series of ROARS to such the Remarketing Date. If a
series of ROARS is tendered for remarketing, the Remarketing Dealer shall sell
the total aggregate principal amount of such series of ROARS on the applicable
Remarketing Date for the applicable Dollar Price to the Reference Corporate
Dealer providing the lowest Bid. If two or more Reference Corporate Dealers
provide the lowest Bid, the Remarketing Dealer shall sell such series of ROARS
to such of those Reference Corporate Dealers as it determines in its sole
discretion. If the Remarketing Dealer elects to remarket a series of ROARS, the
obligation of the Remarketing Dealer to purchase such series of ROARS on the
applicable Remarketing Date is subject to the conditions set forth in the
Remarketing Agreement. If for any reason the Remarketing Dealer does not
purchase all of such series of ROARS on the applicable Remarketing Date, the
Company shall be required to redeem such series of ROARS at a price equal to the
principal amount thereof plus all accrued and unpaid interest, if any, on such
series of ROARS to such Remarketing Date.
(b) Remarketing. The Interest Rate to Maturity shall be established by
-----------
the Remarketing Dealer in accordance with the following procedures:
(i) Interest Rate to Maturity. The Interest Rate to Maturity on a
-------------------------
series of ROARS purchased by the Remarketing Dealer on the applicable
Remarketing Date shall be determined by the Remarketing Dealer by 3:30 p.m., New
York City time, on the third Business Day immediately preceding such Remarketing
Date (the "Determination Date") to the nearest one hundred-thousandth (0.00001)
of one percent per annum, and shall be equal to the sum of 5.6825% per annum in
the case of the 6.375% ROARS (the "6.375 % ROARS Base Rate") and 5.6825% per
annum in the case of the 6.50% ROARS (the "6.50% ROARS Base Rate" and, together
with the "6.375% ROARS Base Rate", each a "Base Rate") and the Applicable
Spread, which shall be based on the Dollar Price of the applicable series of
ROARS, except under certain circumstances, as set forth in Section 12 of the
Remarketing Agreement.
10
<PAGE>
For this purpose, the following terms shall have the following meanings:
"Applicable Spread" for a series of ROARS shall be the lowest Bid, expressed
as a spread (in the form of a percentage or in basis points) above the Base
Rate, obtained by the Remarketing Dealer at 3:30 p.m., New York City time, on
the relevant Determination Date from the Bids quoted to the Remarketing Dealer
by five Reference Corporate Dealers. A "Bid" shall be an irrevocable offer to
purchase the total aggregate outstanding principal amount of the applicable
series of ROARS at the relevant Dollar Price, but assuming (i) an issue date
that is the Remarketing Date applicable to such series of ROARS, with settlement
on such date without accrued interest, (ii) a maturity date that is the Stated
Maturity Date applicable to such series of ROARS and (iii) a stated annual
interest rate equal to the relevant Base Rate plus the spread bid by the
applicable Reference Corporate Dealer. If fewer than five Reference Corporate
Dealers submit bids as set forth in this subsection (b) (i) of Section 204, then
the Applicable Spread shall be the lowest such Bid obtained as set forth in this
subsection (b) (i) of Section 204. The Interest Rate to Maturity for each
series of ROARS announced by the Remarketing Dealer, absent manifest error,
shall be binding and conclusive upon the actual purchasers of such series of
ROARS (the "Beneficial Owners") and Holders of such series of ROARS, the Company
and the Trustee.
"Comparable Treasury Issues" for a series of ROARS means the U.S. Treasury
security or securities selected by the Remarketing Dealer as having an actual or
interpolated maturity or maturities comparable to the remaining term of the
series of ROARS being purchased by the Remarketing Dealer.
"Comparable Treasury Price" for a series of ROARS means, with respect to the
applicable Remarketing Date, (i) the offer prices for the Comparable Treasury
Issues (expressed in each case as a percentage of its principal amount) at 12:00
noon, New York City time, on the applicable Determination Date, as set forth on
"Telerate Page 500" (or such other page as may replace Telerate Page 500); or
(ii) if such page (or any successor page) is not displayed or does not contain
such offer prices on such Determination Date, (a) the average of the Reference
Treasury Dealer Quotations (as defined) for such Remarketing Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(b) if the Remarketing Dealer obtains fewer than four such Reference Treasury
Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated as "Telerate Page 500" on Dow
Jones Markets (or such other page as may replace Telerate Page 500 on such
service) or such other service displaying the offer prices described in clause
(i) above as may replace Dow Jones Markets. "Reference Treasury Dealer
Quotations" means, with
11
<PAGE>
respect to each Reference Treasury Dealer and the applicable Remarketing Date,
the offer prices for the Comparable Treasury Issues (expressed in each case as a
percentage of its principal amount) quoted in writing to the Remarketing Dealer
by such Reference Treasury Dealer by 3:30 p.m., New York City time, on the
applicable Determination Date.
"Dollar Price" means, with respect to each series of ROARS, the present value,
as of the applicable Remarketing Date, of the Remaining Scheduled Payments for
such series of ROARS discounted to the applicable Remarketing Date, on a semi-
annual basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate.
"Reference Corporate Dealer" means five leading dealers of publicly traded
debt securities, including debt securities of the Company, which shall be
selected by the Company. The Company shall advise the Remarketing Dealer of its
selection of the Reference Corporate Dealers no later than five Business Days
prior to the applicable Remarketing Date. One of such Reference Corporate
Dealers selected by the Company shall be NationsBanc Montgomery Securities LLC
if it then is the Remarketing Dealer.
"Reference Treasury Dealer" means each of NationsBanc Montgomery Securities
LLC; Donaldson, Lufkin & Jenrette Securities Corporation; Salomon Brothers Inc;
Merrill Lynch, Pierce, Fenner & Smith Incorporated and another dealer to be
selected by the Company and their respective successors; provided, that if any
of the foregoing or their affiliates ceases to be a primary U.S. Government
securities dealer (a "Primary Treasury Dealer"), the Remarketing Dealer shall
substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to a series of ROARS, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only, that would be due after the applicable
Remarketing Date to and including the applicable Stated Maturity Date; provided
that if the applicable Remarketing Date is not an Interest Payment Date with
respect to such series of ROARS, the amount of the next succeeding scheduled
interest payment thereon, calculated at the Base Rate, shall be reduced by the
amount of interest accrued thereon, calculated at such Base Rate only, to the
applicable Remarketing Date.
"Treasury Rate" for a series of ROARS means, with respect to the applicable
Remarketing Date, the rate per annum equal to the semi-annual equivalent yield
to maturity or interpolated (on a day count basis) yield to maturity of the
Comparable Treasury Issues, assuming a price for the Comparable Treasury Issues
12
<PAGE>
(expressed as a percentage of their principal amounts) equal to the Comparable
Treasury Price for such Remarketing Date.
(ii) Notification of Results; Settlement. Provided the Remarketing
-----------------------------------
Dealer has previously notified the Company and the Trustee on the relevant
Notification Date of its intention to purchase a series of ROARS on the
applicable Remarketing Date, the Remarketing Dealer shall notify the Company,
the Trustee and the Depository by telephone, confirmed in writing, by 4:00 p.m.,
New York City time, on the applicable Determination Date, of the Interest Rate
to Maturity for such series of ROARS.
SECTION 205. Redemption of ROARS. (a) Mandatory Redemption. The
------------------- --------------------
Company shall be required to redeem a series of ROARS as a whole on the
applicable Remarketing Date at a price equal to 100% of the aggregate principal
amount of such series of ROARS plus all accrued and unpaid interest, if any, on
such series of ROARS to the applicable Remarketing Date (the "ROARS Purchase
Price") in the event that (i) the Remarketing Dealer for any reason does not
notify the Company of the Interest Rate to Maturity by 4:00 p.m., New York City
time, on the applicable Determination Date, or (ii) prior to such Remarketing
Date, the Remarketing Dealer has resigned and no successor has been appointed on
or before such Determination Date, or (iii) at any time after the Remarketing
Dealer elects on the applicable Notification Date to remarket such series of
ROARS, the Remarketing Dealer elects to terminate the Remarketing Agreement in
accordance with the terms thereof, or (iv) the Remarketing Dealer does not give
notice to the Company and the Trustee on such Notification Date of its intention
to purchase such series of ROARS for remarketing on such Remarketing Date, or
(v) the Remarketing Dealer for any reason does not deliver the applicable ROARS
Purchase Price to the Trustee by 2:00 p.m., New York City time, on the Business
Day immediately preceding such Remarketing Date or does not purchase all of such
series of ROARS by 2:00 p.m., New York City time, on such Remarketing Date, or
(vi) the Company for any reason fails to redeem such series of ROARS following
its election to effect such redemption as set forth in Section 205(b) below.
(b) Optional Redemption. If the Remarketing Dealer elects to remarket a
--------------------
series of ROARS, the Company shall notify the Remarketing Dealer and the
Trustee, not later than 4:00 p.m., New York City time, on the Business Day
immediately preceding the applicable Determination Date, if the Company
irrevocably elects to exercise its right to redeem such series of ROARS, in
whole, on the applicable Remarketing Date. If the Company so elects to redeem a
series of ROARS, the Company shall redeem such series of ROARS as a whole on the
applicable Remarketing Date at a price equal to 100% of the aggregate principal
13
<PAGE>
amount of such series of ROARS plus all accrued and unpaid interest, if any, on
such series of ROARS to such Remarketing Date.
SECTION 206. Form and Other Terms of the ROARS. Attached hereto as
---------------------------------
Exhibit A is a form of the ROARS, which form is hereby established as the form
in which the ROARS shall be executed, authenticated and delivered in accordance
with the provisions of, and shall in all respects be subject to, the terms,
conditions and covenants of the Indenture and this First Supplemental Indenture.
All of the terms and provisions set forth in Exhibit A are incorporated herein
by reference.
SECTION 207. Culligan Repurchase Right. If the merger of Palm Water
-------------------------
Acquisition Filter Corporation, a Delaware corporation and wholly-owned
subsidiary of the Company ("Subcorp"), into Culligan Water Technologies, Inc., a
Delaware corporation ("Culligan"), has not been consummated on or before
December 31, 1998 on terms substantially similar to those contained in the
Agreement and Plan of Merger, dated as of February 9, 1998 (the "Culligan Merger
Agreement"), by and among the Company, Subcorp and Culligan, except for such
changes therein as would not materially adversely affect the Holders of the
ROARS, (the "Culligan Event"), each Holder of ROARS shall have the right (the
"Repurchase Right"), at such Holder's option, to require the Company to
repurchase all of such Holder's ROARS, or any portion thereof, on the date (the
"Repurchase Date") fixed by the Company that is not less than 45 days nor more
than 60 days after the date of the Company Notice (as defined below) at a price
equal to 100% of the principal amount of the ROARS validly tendered and not
withdrawn, plus accrued and unpaid interest, if any, to the Repurchase Date (the
"Repurchase Price").
Within 30 days after the occurrence of the Culligan Event, the Company shall
send, by first class mail, to the Trustee and to each Holder of the ROARS a
notice (the "Company Notice") of the occurrence of the Culligan Event and the
Repurchase Right arising as a result thereof, setting forth, among other things,
the terms and conditions of, and the procedures required for the exercise of,
the Repurchase Right (the "Repurchase Offer"). Such Company Notice shall contain
all instructions and materials necessary to enable the Holders to tender ROARS
pursuant to the Repurchase Offer. Such notice shall state:
(1) that the Repurchase Offer is being made pursuant to this Section
207 and that all ROARS validly tendered and not withdrawn will be accepted
for payment;
(2) the Repurchase Price and the Repurchase Date;
(3) that any ROARS not tendered will continue to accrue interest if
interest is then accruing;
14
<PAGE>
(4) that, unless the Company defaults in making payment therefor, any
ROARS accepted for payment pursuant to the Repurchase Offer shall cease to
accrue interest after the Repurchase Date;
(5) that Holders electing to have ROARS purchased pursuant to the
Repurchase Offer will be required to deliver at or before the close of
business on the Repurchase Date a written notice either to the Company or
an agent designated by the Company for such purpose (the "Offer Agent")
and the Trustee of the Holder's exercise of the Repurchase Right specifying
the ROARS with respect to which such right is being exercised;
(6) that Holders will be entitled to withdraw their election if the
Offer Agent receives, not later than close of business on the Repurchase
Date, a written notice setting forth the name of the Holder, the principal
amount of the ROARS the Holder delivered for repurchase and a statement
that such Holder is withdrawing its election to have such ROARS purchased;
(7) that Holders whose ROARS are purchased only in part will be issued
new ROARS in a principal amount equal to the unpurchased part or of the
ROARS surrendered; provided, however, that each new ROARS issued shall be
in a principal amount of $100,000 or integral multiples of $1,000 for
amounts in excess thereof; and
(8) the circumstances and relevant facts regarding such Culligan
Event.
On or before the Repurchase Date, the Company shall (i) accept for
payment ROARS or portions thereof tendered pursuant to the Repurchase Offer,
(ii) deposit with the Offer Agent U.S. Dollars sufficient to pay the Repurchase
Price of all ROARS or portions thereof so tendered and accepted and (iii)
deliver to the Trustee ROARS so accepted together with an Officers' Certificate
stating the ROARS or portions thereof being purchased by the Company. The Offer
Agent shall promptly mail or deliver to the Holders of ROARS so accepted payment
in an amount equal to the Repurchase Price and the Company shall execute and
issue, and the Trustee shall promptly authenticate and mail or deliver to such
Holders, new ROARS equal in principal amount to any unpurchased portion of the
ROARS surrendered. Any ROARS not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Repurchase Offer as soon as practicable after the
Repurchase Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of
15
<PAGE>
ROARS pursuant to the Repurchase Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Culligan Repurchase Right"
provisions of this Supplemental Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations relating to such Repurchase Offer by virtue thereof.
ARTICLE THREE
ADDITIONAL COVENANTS
With respect to the ROARS, the following shall be additional
covenants:
SECTION 301. Limitation on Liens. The Company shall, and shall
--------------------
cause each of its Subsidiaries to, promptly secure (on the basis set forth
below) the Company's obligations under the ROARS in the event that the Company
or such Subsidiary creates, incurs or suffers to exist a Lien of any nature
whatsoever, other than a Permitted Lien, on any property of the Company or any
Subsidiary of the Company (including Capital Stock of any such Subsidiary),
whether owned at the Issue Date or thereafter acquired, which secures
Indebtedness that ranks pari passu with or is subordinated to the ROARS. In the
event such Lien secures Indebtedness that ranks pari passu with the ROARS, the
ROARS shall be secured on an equal and ratable basis with the obligation so
secured until such time as such obligation is no longer secured by such Lien. In
the event such Lien secures Indebtedness that ranks subordinate to the ROARS,
the ROARS shall be secured on a basis senior to the obligation so secured to the
same extent as the ROARS rank senior in right of payment to such subordinated
Indebtedness, until such time as such obligation is no longer secured by such
Lien.
SECTION 302. Limitation on Affiliate Transactions. (a) The Company
-------------------------------------
shall not, and shall not permit any Subsidiary of the Company to, enter into or
permit to exist any transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with any Affiliate of the Company
(an "Affiliate Transaction") unless the terms thereof (i) are materially no less
favorable to the Company or such Subsidiary than those that could be obtained at
the time of such transaction in arm's-length dealings with a Person who is not
such an Affiliate, (ii) if such Affiliate Transaction (or series of related
Affiliate Transactions) involve aggregate payments in an amount in excess of
$10,000,000 in any one year, (x) comply with the terms set forth in clause (i)
and (y) have been approved by a majority of the disinterested members of the
Board of Directors and (iii) if
16
<PAGE>
such Affiliate Transaction (or series of related Affiliate Transactions) involve
aggregate payments in an amount in excess of $20,000,000 in any one year, (x)
comply with the terms set forth in clause (ii) and (y) have been determined by a
nationally recognized investment banking, accounting or qualified appraisal firm
to be fair, from a financial standpoint, to the Company and its Subsidiaries.
(b) The provisions of Section 302(a) shall not prohibit (i) any issuance
of securities or any payments, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements, stock option and stock
ownership plans and other stock-based employee compensation in the ordinary
course of business and approved by the Board of Directors, (ii) the grant of
stock options or similar rights to employees, officers and directors of the
Company or any Subsidiary of the Company in the ordinary course of business and
pursuant to plans approved by the Board of Directors, (iii) loans or advances to
employees, officers or directors in the ordinary course of business of the
Company and its Subsidiaries, (iv) fees, compensation or employee benefit
arrangements paid to and indemnity provided for the benefit of directors,
officers or employees of the Company or any Subsidiary of the Company in the
ordinary course of business, (v) any Affiliate Transaction between the Company
and a Subsidiary or Joint Venture of the Company, or between any such
Subsidiaries or Joint Ventures (so long as the other stockholders of any such
participating Subsidiaries or Joint Ventures which are not wholly owned
Subsidiaries of the Company are not themselves Affiliates of the Company) and
(vi) any transactions effected pursuant to agreements in effect on the Issue
Date; provided, that such transactions are effected pursuant to the terms of
such agreements as in effect on the Issue Date.
SECTION 303. Maintenance of ROARS in Book-Entry Form.
---------------------------------------
Notwithstanding any provision to the contrary set forth in the Indenture, the
Company shall (i) use its best efforts to maintain the ROARS in book-entry form
with DTC or any successor thereto and to appoint a successor Depository to the
extent necessary to maintain the ROARS in book-entry form, and (ii) waive any
discretionary right it otherwise has under the Indenture to cause the ROARS to
be issued in certificated form.
ARTICLE FOUR
MISCELLANEOUS PROVISIONS
Neither the Company nor any of its Subsidiaries or Affiliates shall
defease, purchase or otherwise acquire, or enter into any agreement to defease,
17
<PAGE>
purchase or otherwise acquire, any of the ROARS prior to the remarketing thereof
by the Remarketing Dealer.
The Trustee makes no undertakings or representations in respect of,
and shall not be responsible in any manner whatsoever for and in respect of, the
validity or sufficiency of this First Supplemental Indenture or the proper
authorization or the due execution hereof by the Company or for or in respect of
the recitals and statements contained herein, all of which are made solely by
the Company.
Except as expressly amended hereby, the Indenture shall continue in
full force and effect in accordance with the provisions thereof and the
Indenture is in all respects hereby ratified and confirmed. This First
Supplemental Indenture and all its provisions shall be deemed a part of the
Indenture in the manner and to the extent herein and therein provided.
This First Supplemental Indenture shall be governed by, and construed
in accordance with, the laws of the State of New York.
This First Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute one and the same instrument.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
UNITED STATES FILTER CORPORATION
By: ________________________________
Name:
Title:
ATTEST:
By: ________________________________
(Corporate Seal)
THE BANK OF NEW YORK,
As Trustee
By: ________________________________
Name:
Title:
ATTEST:
By: ________________________________
(Corporate Seal)
19
<PAGE>
STATE OF _______________)
COUNTY OF ______________)
On the _____ day of ________, 1998, before me personally came
_______________________, to me known, who, being by me duly sworn, did depose
and say that he is _________________ of United States Filter Corporation, one of
the corporations described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and he signed his name thereto by like authority.
_________________________________
Notary Public, State of _________
[Notarial Seal]
STATE OF NEW YORK )
)
COUNTY OF ___________ )
On the ___ day of _______, 1998, before me personally came
_____________________, to me known, who, being by me duly sworn, did depose and
say that he is _________________ of ______________ _______________ one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and he signed his name thereto by like authority.
________________________________
Notary Public, State of New York
[Notarial Seal]
20
<PAGE>
Exhibit A
FORM OF ROARS
[TO COME]
21
<PAGE>
Exhibit 4.10
FIRST AMENDMENT TO
AMENDED AND RESTATED
MULTICURRENCY CREDIT AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT
(this "First Amendment") is made and entered into as of February 3, 1998, by and
among UNITED STATES FILTER CORPORATION, a Delaware corporation with its chief
executive office at 40-004 Cook Street, Palm Desert, California 92211 (the
"Borrower"), BANKBOSTON, N.A., f/k/a The First National Bank of Boston, a
national banking association having its principal place of business at 100
Federal Street, Boston, Massachusetts 02110 ("BKB"), DLJ CAPITAL FUNDING, INC.
("DLJ"), ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL BRANCH, BANQUE PARIBAS
("Paribas"), THE BANK OF NEW YORK ("BNY"), BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, successor by merger to Bank of America Illinois ("BOA"),
THE SUMITOMO BANK, LIMITED (LOS ANGELES BRANCH), FLEET BANK, N.A. ("Fleet"),
NATIONSBANK, N.A. ("NationsBank"), THE INDUSTRIAL BANK OF JAPAN, LIMITED (LOS
ANGELES AGENCY), BANQUE NATIONALE DE PARIS ("BNP"), DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES ("Deutsche Bank"), THE LONG-TERM CREDIT BANK OF
JAPAN LTD. (LOS ANGELES AGENCY), UNION BANK OF CALIFORNIA, N.A. ("Union"), THE
SANWA BANK LIMITED, LOS ANGELES BRANCH ("Sanwa"), BHF-BANK AKTIENGESELLSCHAFT,
THE SAKURA BANK, LIMITED, CREDITO ITALIANO, THE FUJI BANK, LIMITED, WELLS FARGO
BANK, NATIONAL ASSOCIATION, and any other financial institutions which become
party to the Credit Agreement (defined below) in accordance with (S)22 thereof
(each a "Lender" and, collectively, the "Lenders"), BKB as Managing Agent, DLJ
as Documentation Agent, NATIONSBANK as Syndication Agent, BOA, DEUTSCHE BANK,
and UNION as Co-Agents, and BNY, FLEET, PARIBAS, BNP, and SANWA as Lead
Managers. Capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Credit Agreement.
WHEREAS, the Borrower, the Lenders, and the Agents entered into an Amended
and Restated Multicurrency Credit Agreement dated as of October 20, 1997 (as
amended and in effect from time to time, the "Credit Agreement"), pursuant to
which the Lenders extended credit to the Borrower on the terms set forth
therein;
WHEREAS, the Borrower, the Lenders, and the Agents have agreed to amend the
Credit Agreement as set forth herein;
<PAGE>
-2-
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. Amendment to (S)11.1(f) (Restrictions on Indebtedness). Section
------------------------------------------------------
11.1(f) is hereby amended by inserting the words "or subordinate" after the
words "pari passu" therein.
2. Amendment to (S)11.5 (Restricted Distributions and Redemptions).
---------------------------------------------------------------
Section 11.5 is hereby amended by adding the following proviso to the end of the
last sentence thereof: "provided, however, that to the extent such provisions
-------- --------
exist in any documents governing Indebtedness of acquired companies, the
Borrower shall have six (6) months to cause such provisions to be removed from
such documents or to discharge the Indebtedness evidenced thereby."
3. Amendment to (S)11.7 (Negative Pledges). Section 11.7 is hereby
---------------------------------------
amended by adding the following to the end thereof: "provided, however, that to
-------- -------
the extent such provisions exist in the documents governing Indebtedness of
acquired companies, the Borrower shall have six (6) months to cause such
provisions to be removed from such documents or to discharge the Indebtedness
evidenced thereby, provided further, that notwithstanding the foregoing, the
-------- -------
Borrower shall not be required to discharge such Indebtedness or to cause such
provisions to be removed from such documents within such six month period if
prepayment is prohibited under such documents or would result in a prepayment
penalty (including any cash collateral required to secure outstanding letters of
credit) in excess of $5,000,000, and if such provisions are enforceable under
applicable law. Notwithstanding the foregoing, any Indebtedness which is
permitted under this (S)11.7, together with other Indebtedness permitted under
(S)11.1(g), shall not exceed in the aggregate the greater of $100,000,000 or 5%
of Consolidated Tangible Assets of the Borrower and its Subsidiaries."
4. Waiver. The Agents and the Lenders agree to waive any past Default or
------
Event of Default due to noncompliance with (S)(S)11.5 and 11.7 as a result of
the Borrower's acquisitions of ownership interests in Memtec Limited and The
Kinetics Group, Inc., provided that the Borrower is in full compliance with all
-------- ----
other provisions of the Credit Agreement, and provided further that the Borrower
-------- -------
is hereinafter in full compliance with (S)(S)11.5 and 11.7 as amended hereby.
5. No Event of Default. The Borrower represents and warrants to the
-------------------
Agents and the Lenders that no Default or Event of Default has occurred and is
continuing other than those expressly waived under (S)4 hereof.
6. Ratification, etc. Except as expressly amended hereby, the Credit
------------------
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in
<PAGE>
-3-
full force and effect. This First Amendment and the Credit Agreement shall
hereafter be read and construed together as a single document, and all
references in the Credit Agreement, any other Loan Document or any agreement or
instrument related to the Credit Agreement shall hereafter refer to the Credit
Agreement as amended by this First Amendment.
7. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
8. Counterparts. This First Amendment may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
9. Effectiveness. This First Amendment shall become effective upon its
-------------
execution and delivery by the Borrower and the Majority Lenders.
[Signature Pages Follow]
<PAGE>
-4-
IN WITNESS WHEREOF, each of the undersigned has duly executed this First
Amendment under seal as of the date first set forth above.
THE BORROWER
- ------------
UNITED STATES FILTER
CORPORATION
By: /s/ Kevin L. Spence
------------------------
Kevin L. Spence
Senior Vice President
THE LENDERS:
- -----------
BANKBOSTON, N.A., f/k/a DLJ CAPITAL FUNDING, INC.,
The First National Bank of Boston, individually and as
individually and as Managing Agent Documentation Agent
By: /s/ Lindsay W. McSweeney By:
------------------------ ------------------------
Lindsay W. McSweeney Name:
Vice President Title:
ABN AMRO BANK N.V., LOS DEUTSCHE BANK AG, NEW
ANGELES INTERNATIONAL YORK AND/OR CAYMAN
BRANCH ISLANDS BRANCHES,
individually and as Co-Agent
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
<PAGE>
-5-
THE BANK OF NEW YORK, BANK OF AMERICA
individually and as Lead Manager NATIONAL TRUST AND
SAVINGS ASSOCIATION
(successor by merger to
By: /s/ Jonathan Rollins Bank of America Illinois),
------------------------ individually and as Co-Agent
Jonathan Rollins
Assistant Vice President By:
------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED FLEET BANK, N.A., individually
(LOS ANGELES BRANCH) and as Lead Manager
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
CREDITO ITALIANO BANQUE NATIONALE DE
PARIS, individually and as Lead
Manager
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
NATIONSBANK, N.A., THE LONG-TERM CREDIT
individually and as Syndication Agent BANK OF JAPAN LTD. (LOS
ANGELES AGENCY)
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
<PAGE>
-6-
UNION BANK OF THE SANWA BANK LIMITED,
CALIFORNIA, N.A., LOS ANGELES BRANCH,
individually and as Co-Agent individually and as Lead Manager
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
BANQUE PARIBAS, BHF-BANK
individually and as Lead Manager AKTIENGESELLSCHAFT
By: /s/ Lynne A. Lueders By:
------------------------ ------------------------
Lynne A. Lueders Name:
Director Title:
By: /s/ Stanley P. Berkman By:
------------------------ ------------------------
Stanley P. Berkman Name:
Managing Director Title:
Western Region
THE SAKURA BANK, LIMITED THE INDUSTRIAL BANK OF
JAPAN, LIMITED (LOS
ANGELES AGENCY)
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
WELLS FARGO BANK THE FUJI BANK, LIMITED
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
<PAGE>
Exhibit 4.11
SECOND AMENDMENT TO
AMENDED AND RESTATED
MULTICURRENCY CREDIT AGREEMENT
------------- ------ ---------
This SECOND AMENDMENT TO AMENDED AND RESTATED MULTICURRENCY CREDIT
AGREEMENT (this "Second Amendment") is made and entered into as of March 20,
1998, by and among UNITED STATES FILTER CORPORATION, a Delaware corporation with
its chief executive office at 40-004 Cook Street, Palm Desert, California 92211
(the "Borrower"), BANKBOSTON, N.A., f/k/a The First National Bank of Boston, a
national banking association having its principal place of business at 100
Federal Street, Boston, Massachusetts 02110 ("BKB"), DLJ CAPITAL FUNDING, INC.
("DLJ"), ABN AMRO BANK N.V. (f/k/a ABN Amro Bank N.V., Los Angeles International
Branch), Banque Paribas ("Paribas"), THE BANK OF NEW YORK ("BNY"), BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, successor by merger to Bank of
America Illinois ("BOA"), THE SUMITOMO BANK, LIMITED (LOS ANGELES BRANCH), FLEET
BANK, N.A. ("Fleet"), NATIONSBANK, N.A. ("NationsBank"), THE INDUSTRIAL BANK OF
JAPAN, LIMITED (LOS ANGELES AGENCY), BANQUE NATIONALE DE PARIS ("BNP"), DEUTSCHE
BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES ("Deutsche Bank"), THE LONG-
TERM CREDIT BANK OF JAPAN LTD. (LOS ANGELES AGENCY), UNION BANK OF CALIFORNIA,
N.A. ("Union"), THE SANWA BANK LIMITED, LOS ANGELES BRANCH ("Sanwa"), BHF-BANK
AKTIENGESELLSCHAFT, THE SAKURA BANK, LIMITED, CREDITO ITALIANO, THE FUJI BANK,
LIMITED, WELLS FARGO BANK, NATIONAL ASSOCIATION, and any other financial
institutions which become party to the Credit Agreement (defined below) in
accordance with (S)22 thereof (each a "Lender" and, collectively, the
"Lenders"), BKB as Managing Agent, DLJ as Documentation Agent, NATIONSBANK as
Syndication Agent, BOA, DEUTSCHE BANK, and UNION as Co-Agents, and BNY, FLEET,
PARIBAS, BNP, and SANWA as Lead Managers. Capitalized terms used herein without
definition shall have the meanings assigned to such terms in the Credit
Agreement.
WHEREAS, the Borrower, the Lenders, and the Agents entered into an Amended
and Restated Multicurrency Credit Agreement dated as of October 20, 1997 (as
amended and in effect from time to time, the "Credit Agreement"), pursuant to
which the Lenders extended credit to the Borrower on the terms set forth
therein;
WHEREAS, the Borrower, the Lenders, and the Agents have agreed to amend the
Credit Agreement as set forth herein;
<PAGE>
-2-
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. Amendment to Definitions. Section 1.1 is hereby amended by adding the
------------------------
following definition in proper alphabetical order:
Year 2000 Problem. The risk that computer applications used by the
-----------------
Borrower may be unable to recognize and properly perform date-
sensitive functions involving certain dates prior to, and any date
after, December 31, 1999.
2. Amendment to (S)10.4 (Financial Statements, Certificates and
------------------------------------------------------------
Information). Section 10.4(b) is hereby amended by substituting "60" for "45"
- ------------
therein, and Section 10.4(d) is hereby amended by substituting the words "within
60 days of" for the words "promptly with."
3. Amendment to (S)9 (Representations and Warranties). Section 9 is
--------------------------------------------------
hereby amended by adding the following (S)9.19 to the end thereof:
(S)9.19 Year 2000 Problem. The Borrower is in the process of
-----------------
reviewing the areas within its business and operations that could be
adversely affected by, and is developing strategies to deal with, the
Year 2000 Problem. Based on such review, the Borrower has formed the
business judgment that the Year 2000 Problem will not have a material
adverse effect on the business and operations of the Borrower.
4. Amendment to (S)11.1 (Restrictions on Indebtedness). Section 11.1(g)
---------------------------------------------------
is hereby amended by substituting "$150,000,000" for "$100,000,000" and by
substituting "7%" for "5%" therein. Section 11.1 is further amended by adding
the following subsection (h) to the end thereof:
(h) to the extent not otherwise permitted under (S)11.1(g),
Indebtedness of any Person acquired by the Borrower in a Permitted
Acquisitions, provided that (i) after giving effect to such Permitted
Acquisition, no Default or Event of Default shall then exist, (ii)
such Indebtedness was in existence prior to such Permitted Acquisition
and was not incurred in contemplation thereof, (iii) such Indebtedness
is discharged no later than six months after consummation of the
Permitted Acquisition, and (iv) at no time shall such
<PAGE>
-3-
Indebtedness, together with all Indebtedness permitted under
(S)11.1(g), exceed 10% of Consolidated Tangible Assets.
5. Amendment to (S)11.2 (Restrictions on Liens). Section 11.2 is hereby
--------------------------------------------
amended by adding the following subsection (i) to the end thereof:
(i) Liens securing Indebtedness permitted by (S)11.1(h), provided
that such liens encumber only the assets of such Person acquired by
the Borrower in a Permitted Acquisition and provided further that such
liens shall be discharged no later than six months after consummation
of the Permitted Acquisition, and satisfactory evidence of such
discharge shall be delivered to the Agent promptly thereafter.
6. Waiver. The Agents and the Lenders agree to waive, only for the
------
fiscal quarter ending December 31, 1997, any Default or Event of Default which
occurred in such quarter due to noncompliance with (S)11.1(g) solely to the
extent that such noncompliance resulting from the assumption of Indebtedness in
an aggregate amount of $119,036,000 in connection with the Borrower's
acquisitions of ownership interests in Memtec Limited and The Kinetics Group,
Inc., as reflected in Schedule D to the Borrower's Compliance Certificate for
the quarter ending December 31, 1997, provided that the Borrower is in full
-------- ----
compliance with all other provisions of the Credit Agreement, and provided
--------
further that the Borrower is in full compliance with (S)11.1 as amended hereby.
- -------
7. No Event of Default. The Borrower represents and warrants to the
-------------------
Agents and the Lenders that no Default or Event of Default has occurred and is
continuing other than that expressly waived under (S)6 hereof.
8. Ratification, etc. Except as expressly amended hereby, the Credit
------------------
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Second Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement, any other Loan Document or any
agreement or instrument related to the Credit Agreement shall hereafter refer to
the Credit Agreement as amended by this Second Amendment.
9. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
<PAGE>
-4-
10. Counterparts. This Second Amendment may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
11. Effectiveness. This Second Amendment shall become effective upon its
-------------
execution and delivery by the Borrower and the Majority Lenders.
[Signature Pages Follow]
<PAGE>
-5-
IN WITNESS WHEREOF, each of the undersigned has duly executed this Second
Amendment under seal as of the date first set forth above.
THE BORROWER
- ------------
UNITED STATES FILTER
CORPORATION
By: /s/ Kevin L. Spence
---------------------
Kevin L. Spence
Senior Vice President
THE LENDERS:
- -----------
BANKBOSTON, N.A., f/k/a DLJ CAPITAL FUNDING, INC.,
The First National Bank of Boston, individually and as
individually and as Managing Agent Documentation Agent
By: By:
--------------------- ---------------------
Lindsay W. McSweeney Name:
Vice President Title:
ABN AMRO BANK N.V., LOS DEUTSCHE BANK AG, NEW
ANGELES INTERNATIONAL YORK AND/OR CAYMAN
BRANCH ISLANDS BRANCHES,
individually and as Co-Agent
By: By:
--------------------- ---------------------
Name: Name:
Title: Title:
By: By:
--------------------- ---------------------
Name: Name:
Title: Title:
<PAGE>
-6-
THE BANK OF NEW YORK, BANK OF AMERICA
individually and as Lead Manager NATIONAL TRUST AND
SAVINGS ASSOCIATION
(successor by merger to
By: /s/ Jonathan Rollins Bank of America Illinois),
------------------------ individually and as Co-Agent
Jonathan Rollins
Assistant Vice President By:
------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED FLEET BANK, N.A., individually
(LOS ANGELES BRANCH) and as Lead Manager
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
CREDITO ITALIANO BANQUE NATIONALE DE
PARIS, individually and as Lead
Manager
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
NATIONSBANK, N.A., THE LONG-TERM CREDIT
individually and as Syndication Agent BANK OF JAPAN LTD. (LOS
ANGELES AGENCY)
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
<PAGE>
-7-
UNION BANK OF THE SANWA BANK LIMITED,
CALIFORNIA, N.A., LOS ANGELES BRANCH,
individually and as Co-Agent individually and as Lead Manager
By: /s/ A. Pasha Moghaddam By:
------------------------ ------------------------
Name: A. Pasha Moghaddam Name:
Title: V.P. Title:
BANQUE PARIBAS, BHF-BANK
individually and as Lead Manager AKTIENGESELLSCHAFT
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
THE SAKURA BANK, LIMITED THE INDUSTRIAL BANK OF
JAPAN, LIMITED (LOS
ANGELES AGENCY)
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION THE FUJI BANK, LIMITED
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
SUNTRUST BANK, CENTRAL
FLORIDA, N.A.
By:
------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.8
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1, 1998,
between United States Filter Corporation (the "Company") and Richard J. Heckmann
(the "Employee").
WITNESSETH
WHEREAS, Employee is currently Chairman of the Board of Directors, Chief
Executive Officer and President of the Company; and
WHEREAS, the Company desires to insure the continued availability to the Company
of the Employee's services, managerial skills and business experience, and the
Employee is willing to render such services, all upon and subject to the terms
and conditions contained in this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants set
forth in this Agreement, the Company and the Employee agree as follows:
1. EMPLOYMENT AND EMPLOYMENT TERM.
------------------------------
(a) EMPLOYMENT.
Subject to the terms and provisions set forth in this Agreement, the
Company hereby employs the Employee during the Employment Term (as
hereinafter defined) as the Chief Executive Officer and President of
the Company, and agrees
1
<PAGE>
to use its best efforts to cause the Employee to be a director and
Chairman of the Board of Directors of the Company (the "Board")
during the Employment Term, and the Employee hereby accepts such
employment.
(b) EMPLOYMENT TERM.
The period of employment under this Agreement (the "Employment Term")
shall be deemed to have commenced as of January 1, 1998 (the
"Effective Date") and shall continue for a period of sixty-three (63)
full calendar months thereafter, as herein provided. On May 1, 1998,
and on the first day of each month thereafter, the Employment Term
shall be automatically extended by one full calendar month. The
Employment Term shall continue until the expiration of all automatic
extensions affected as aforesaid unless and until it ceases or is
terminated sooner as provided in this Agreement.
2. POSITIONS, RESPONSIBILITIES AND DUTIES.
--------------------------------------
(a) IN GENERAL.
During the Employment Term, the Employee shall be employed as, and
the Company shall at all times cause the Employee to be, the Chief
Executive Officer and President of the Company. In addition to such
positions, the Company shall use its best efforts to ensure that the
Employee is at all
2
<PAGE>
times during the Employment Term a director and the Chairman of the
Board. In such positions, the Employee shall have the duties,
responsibilities and authority normally associated with the office
and position of chairman, director, chief executive officer and
president of a publicly traded corporation. No other employee of the
Company shall have authority and responsibilities that are equal to
or greater than those of the Employee. The Employee shall report
solely and directly to the Board and all other officers and other
employees shall report directly to the Employee or the Employee's
designees.
(b) TIME.
During the Employment Term, the Employee shall devote such time as is
reasonably necessary to perform the duties associated with his
offices and positions as set forth herein and shall use his best
efforts to perform faithfully and efficiency the duties and
responsibilities contemplated by this Agreement; provided however,
that the Employee shall not be required to perform any duties and
responsibilities which would be likely to result in non-compliance
with or violation or breach of any applicable law or regulation.
Notwithstanding the foregoing, the Employee may devote reasonable
time to activities other than those required under this Agreement,
including the
3
<PAGE>
supervision of his personal investments, and activities involving
professional, charitable, educational, religious and similar types of
organizations, speaking engagements, membership on the boards of
directors of other orations, and similar type activities, to the
extent that such over activities do not materially inhibit or
prohibit the performance of the Employee's duties under this
Agreement or conflict in any material way with the business of the
Company; provided however, that the Executive shall not serve on the
board of any business or hold any over position unto any business
without the consent of the Board.
3. COMPENSATION AND BENEFITS.
-------------------------
(a) BASE SALARY.
During the Employment Term, the Employee shall receive a base salary
("Base Salary"), payable in accordance with the Company's payroll
practices generally applicable to the Company's senior executives, of
$500,000 per annum. Such Base Salary shall be reviewed for increase
(but not decrease) in the sole discretion of the Compensation
Committee of tile Board not less frequently the annually during the
Employment Term. In conducting any such annual review, the
Compensation Committee of the Board shall take
4
<PAGE>
into account any change in the Employee's responsibilities, increases
in the compensation of other senior executives of the Company or of
its competitors or over comparable executes and companies, the
performance of the Employee and other pertinent factors. If so
increased, such increased Base Salary shall then constitute "Base
Salary" for purposes of this Agreement.
(b) INCENTIVE COMPENSATION.
(i) During the Employment Term, the Employee shall be entitled to
participate in all incentive compensation plans and programs
maintained by the Company for the benefit of senior
executives. Such plans and programs, in the aggregate, shall
provide the Employee win compensation opportunities at least
as favorable as the most favorable of such opportunities
provided by the Company to the Employee under such plans and
programs as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable
to the Employee, as provided at any time thereafter to the
Employee or other senior executives of the Company.
(ii) Without limiting the foregoing, for each fiscal year of the
Company ending with or within the Employment Term, the
Employee shall be paid an annual incentive of not less than
sixty percent (60%) of his base salary
5
<PAGE>
(subject to such performance goals as the Company and the
Employee may from time to time negotiate in good faith). Each
such annual incentive shall be paid at the same time that
annual incentives are generally paid to the Company's other
senior executives, but no later than the end of the third
month of the fiscal year next following the fiscal year for
which such annual incentive is paid, unless the Employee shall
elect to defer the receipt thereof.
(c) EMPLOYEE BENEFITS.
During the Employment Term, the Employee and/or the Employee's
family, as the case may be, shall be entitled to participate in all
employee benefit plans and programs provided or maintained by the
Company (including, without limitation, pension, profit sharing,
savings, medical, disability, life and accident plans and programs
and the United States Filter Corporation Executive Severance Pay
Plan). Such plans and programs, in the aggregate, shall provide the
Employee and/or the Employee's family, as the case may be, with
benefits at least as favorable as the most favorable of such benefits
provided by the Company to or in respect of the Employee under such
plans and programs as in effect at
6
<PAGE>
any time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Employee, as provided at any time
thereafter to or in respect of the Employee or over senior executives
of the Company.
(d) VACATION AND FRINGE BENEFITS.
(i) During the Employment Term, the Employee shall be entitled to
paid vacation and fringe benefits at least as favorable as the
most favorable plans and programs of the Company for the
Employee under such plans and programs as in effect at any
time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Employee, as in
effect at any time thereafter for the Employee or other senior
executives of the Company.
(ii) Without limiting the foregoing, during the Employment Tenn,
the Company will lease the Employee an automobile for the
Employee's business and private use, the make and model of
which shall be at least comparable to the make and model
provided to the Employee immediately preceding the Effective
Date, and the Company will pay all deposit requirements,
servicing and maintenance costs, insurance premiums and the
cost of the
7
<PAGE>
gasoline for authorized business use. (The term of any one
such automobile lease shall not exceed thirty-six months other
than at the discretion of the Employee.)
(e) OFFICE AND SUPPORT STAFF.
During the Employment Term, the Employee shall be entitled to an
office or offices of a size and with furnishings and other
appointments, and to personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the
Employee by the Company at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter to the Employee or other
senior executives of the Company.
(f) EXPENSE REIMBURSEMENT
During the Employment Term, the Employee shall be entitled to receive
prompt reimbursement for all usual, customary and reasonable,
business-related expenses incurred by the Employee in performing his
duties and responsibilities hereunder in accordance with the
practices and procedures of the Company as in effect and applied
immediately prior to the Effective Date, or, if more favorable to the
Employee, as in effect at any time thereafter with respect to the
Employee or other senior Executives of the Company.
8
<PAGE>
(g) INDEMNIFICATION.
The Company shall maintain directors and officers liability insurance
in commercially reasonable amounts (as reasonably determined by the
Board), and the Employee shall be covered under such insurance to the
same extent as other directors and senior executives of the Company.
The Employee shall be eligible for indemnification by the Company
under the Company by-laws as currently in effect, and the Company
agrees that it shall not take any action that would impair the
Employee's rights to indemnification under the Company by-laws, as
currently in effect.
4. TERMINATION OF EMPLOYMENT.
-------------------------
(a) TERMINATION DUE TO DEATH OR DISABILITY.
The Company may terminate the Employee's employment hereunder due to
Disability (as hereinafter defined). In the event of the Employee's
death or a termination of the Employee's employment by the Company
due to Disability, the Employee or his estate or his legal
representative, as the case may bet shall be entitled to receive:
(i) any unpaid Base Salary through the Date of Termination;
(ii) an immediate prorated annual incentive for the fiscal year
in which the Date of
9
<PAGE>
Termination occurs equal to the minimum annual incentive
(determined without regard to any performance goals) provided
by Section 3(b)(ii) multiplied by a fraction, the numerator of
which is the number of days such fiscal year through the Date
of Termination and the denominator of which is 365;
(iii) an immediate lump sum amount equal to the sum of (A)
two times the minimum annual incentive (determined
without regard to any performance goals) provided by
Section 3(b)(ii) plus (B) twenty-four (24) times the
monthly rate of Base Salary at the rate in effect on
the Date of Termination;
(iv) any deferred compensation (including, without limitation,
interest or other credits on such deferred amounts), any
accrued vacation pay and any reimbursement for expenses
incurred but not yet paid prior to such Date of Termination;
and
(v) any other compensation or benefits which may be owed or
provided to or in respect of the Employee in accordance with
the terms and provisions of this Agreement or any plans and
programs of the Company.
For purposes of this Agreement, "Disability" means the Employee's
inability to render, for a period
10
<PAGE>
of six consecutive months, services hereunder by reason of permanent
disability, as determined by the written medical opinion of an
independent medical physician mutually acceptable to the Employee and
the Company. If the Employee and the Company cannot agree as to such
an independent medical physician each shall appoint one medical
physician and those two physicians shall appoint a third physician
who shall make such determination.
(b) TERMINATION BY THE COMPANY FOR CAUSE.
The Company may terminate the Employee's employment hereunder for
Cause (as hereinafter defined). If the Company terminates the
Employee's employment hereunder for Cause, the Employee shall be
entitled to receive;
(i) any unpaid Base Salary through the Date of Termination;
(ii) an immediate prorated annual incentive for the fiscal year in
which the Date of Termination occurs, equal to the minimum
annual incentive (determined without regard to any performance
goals) provided by Section 3(b)(ii) multiplied by a fraction,
the numerator of which is the number of days in such fiscal
year through the Date of Termination and the denominator of
which is 365;
(iii) any deferred compensation (including,
11
<PAGE>
without limitation, interest or other credits on such deferred
amounts), any accrued vacation pay and any reimbursement for
expenses incurred but not yet paid prior to such Date of
Termination; and
(iv) any other compensation or benefits which may be owed or
provided to or in respect of the Employee in accordance with
the terms and provisions of this Agreement or any plans and
programs of the Company.
The Employee shall be given written notice authorized by a vote of at
least a majority of the members of the Board that the Company
intends to terminate the Employee's employment for Cause;
provided, however, that following a Change of Control (as
hereinafter defined), such written notice must be authorized by a
vote of at least 75% of the members of the Board. Such written
notice shall specify the particular act or acts, or failure to
act, which is/are the basis for the decision to so terminate the
Employee's employment for Cause. The Employee, together with his
legal counsel, shall be given the opportunity within thirty (30)
calendar days of the receipt of such notice to meet with the
Board to defend such act or acts, or failure to act, and, if such
act or failure to act is correctable, the Employee shall
12
<PAGE>
be given 30 business days after such meeting to correct such act or
failure to act. If such act or failure to act is not correctable or
upon failure of the Employee, within such latter thirty (30) day
period, to correct such act or failure to act, the Employee's
employment by the Company shall automatically be terminated for Cause
as of the date determined in accordance with this Agreement. Anything
herein to the contrary notwithstanding, if, following a termination
of the Employee's employment by the Company for Cause based upon the
conviction of the Employee for a felony, such conviction is
overturned on appeal, the Employee shall be entitled to the payments
and benefits that the Employee would have received as a result of a
termination of the Employee's employment by the Company without
Cause.
For the purposes of this Agreement, "Cause" means (A) the Employee is
convicted of a felony involving moral turpitude or (B) the Employee,
in carrying out his duties and responsibilities under this Agreement,
is guilty of gross neglect or gross misconduct resulting, in either
case, in material economic harm to the Company, and such conduct is
not cured within thirty (30) days of the Company providing written
notice to the Employee, unless such act, or failure to act, was
believed by the Employee in good faith to be in
13
<PAGE>
the best interests of the Company.
(c) TERMINATION WITHOUT CAUSE OR TERMINATION FOR GOOD REASON.
The Company shall be permitted to terminate the Employee's employment
hereunder without Cause, and the Employee shall be permitted to
terminate his employment hereunder for Good Reason (as hereinafter
defined). If the Corporation terminates the Employee's employment
hereunder without Cause, other than due to death or Disability, or if
the Employee effects a termination for Good Reason, the Employee
shall be entitled to receive:
(i) any unpaid Base Salary through the Date of Termination;
(ii) an annual incentive for the fiscal year in which the Date of
Termination occurs;
(iii) any deferred compensation (including, without limitation,
interest or other credits on the deferred amounts, any accrued
vacation pay and reimbursement for expenses incurred but not
paid prior to such termination of employment; and
(iv) any other compensation or benefits which may be owed or
provided to the Employee in accordance with the terms and
provisions of this Agreement or any plans and programs of the
Company, including but not limited to the
14
<PAGE>
United States Filter Corporation Executive Severance Pay Plan.
For purposes of this Agreement, "Good Reason" means and shall be
deemed to exist if, without the prior express written consent of
the Employee, (A) the Employee suffers a reduction in duties,
responsibilities or effective authority associated with his
titles and positions as set forth and described in this Agreement
or is assigned any duties or responsibilities inconsistent in any
material respect therewith; (B) the Company fails to
substantially perform any material term or provision of this
Agreement; (C) the Employee's compensation or benefits provided
for hereunder is decreased; (D) the Company's principal execute
office or the Employee's office is relocated to a location more
than fifty (50) miles from its location on the Effective Date;
(E) the Company fails to obtain the full assumption of this
Agreement by a successor entity in accordance with the Agreement;
(F) the Company purports to terminate the Employee's employment
for Cause and such purported termination of employment is not
effected in accordance with the requirements of this Agreement.
The determination of the amount of any compensation and benefits
or other payments to be paid or provided to or in respect of the
Employee hereunder shall be determined without
15
<PAGE>
regard to any reduction therein constituting Good Reason.
(d) VOLUNTARY TERMINATION
The Employee may effect a Voluntary Termination of his employment
hereunder. A "Voluntary Termination" shall mean a termination of
employment by the Employee on his own initiative other than (i) a
termination due to Disability or (ii) a termination for Good Reason.
A Voluntary Termination shall not be deemed to be a breach of this
Agreement and shall entitle the Employee to all of the rights and
benefits which the Employee would be entitled in the event of a
termination of his employment by the Company for Cause.
(e) CHANGE OF CONTROL
(i) In the event the Employee's employment with the Company is
terminated without Cause or for Good Reason following a Change
of Control, Employee shall receive the compensation and
benefits under this Agreement as if he had terminated his
employment hereunder for Good Reason, (except that the amounts
payable is accordance untie Sections 4(c)(i) and (ii) shall be
paid within five days of such termination in an undiscounted
lump sum).
(ii) "Change of Control" shall mean the occurrence of any of the
following:
16
<PAGE>
(A) the acquisition by any person (including any syndicate or
group deemed to be a "person" under Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any successor provision
to either of the foregoing, of "beneficial ownership"
directly or indirectly, of shares of capital stock of the
Company entitling such person to exercise 50% or more of
the total voting power of all "Voting Shares" of the
Company;
(B) during any year or any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such
period constitute the Board, and any new director (other
than a director designated by a person who has entered
into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of
this definition) whose election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the
directors then still in office who either were directors
at the beginning
17
<PAGE>
of the period or whose election or nomination for
election was previously so approved (hereinafter referred
to as "Continuing Directors"), cease for any reason to
constitute at least a majority thereof;
(C) any consolidation of the Company with, or merger of the
Company into, any other person, any merger of another
person into the Company, or any sale or transfer of all
or substantially all of the assets of the Company to
another person (other than (x) a consolidation or merger
which does not result in any reclassification,
conversion, exchange or cancellation of outstanding
shares of capital stock other than shares of capital
stock owned by any of the parties to the consolidation or
merger or (y) a merger which is effected solely to change
the jurisdiction of incorporation of the Company or (z)
any consolidation with or merger of the Company into a
wholly owned subsidiary, or any sale or transfer by the
Company of all of substantially all of its assets to one
or more of its wholly owned subsidiaries in any one
18
<PAGE>
transaction or a series of transactions; or
(D) the stockholders of the Company approve a plan of
complete liquidation of the Company.
Notwithstanding the foregoing, unless otherwise determined by
the Board of Directors, no change in control of the Company
shall be deemed to have occurred if (x) the Employee is a
member of a group which first announces a proposal which, if
successful, would result in a Change of Control, which
proposal (including any modifications thereof) is ultimately
successful, or (y) the Executive acquires a two percent or
more equity interest in the entity which ultimately acquires
the Company pursuant to the transaction described in (x) of
this paragraph.
"Beneficial Ownership" shall be determined in accordance with
Rule 13d-3 promulgated under the Exchange Act, except that a
person shall be deemed to be the "beneficial owner" of all
securities that such person has the right to acquire, whether
such right is exercisably immediately or only after the
passage of time.
"Voting Share" means all outstanding shares
19
<PAGE>
of any class or classes (however designated) of capital stock
of the Company entitled to vote generally in the election of
the Board of Directors of the Company.
(iii) If any payment or benefit to which the Employee becomes
entitled pursuant to this Agreement will be subject to the tax
imposed by section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code") (or any similar tax that may hereafter
be imposed) (the "Excise Tax"), the Company shall pay to the
Employee at the time specified below, an additional amount
(the "Gross-up Payment") such that the net amount retained by
the Employee, after deduction of any Excise Tax on the Total
Payments (as hereinafter defined) and any federal, state and
local income tax and Excise Tax upon the payment provided for
by this subsection, shall be equal to the Total Payments. For
purposes of determining whether any of such payments or
benefits will be subject to the Excise Tax, and the amount of
such Excise Tax, (if) any over payments or benefits received
or to be received by the Employee in connection with a Change
20
<PAGE>
of Control or his termination of employment, whether pursuant
to the terms of this Agreement or otherwise (which together
with the payments and benefits pursuant to this Agreement,
constitute the "Total Payments") shall be treated as
"parachute payments" within the meaning of section 280G(b)(2)
of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) shall be treated as subject to
the Excise Tax, unless in the opinion of tax counsel selected
by the Company's independent auditors and acceptable to the
Employee such other payments or benefits (in whole or in part)
do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning
of section 280G(b)(4) of the Code in excess of the base amount
within the meaning of section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (B) the amount of the
Total Payments which shall be treated as subject to the Excise
Tax shall be equal to the lesser
21
<PAGE>
of (1) the total amount of the Total Payments or (2)
the amount of excess parachute payments within the
meaning of section 280G(b)(l) (after applying paragraph
(A), above), and (C) the value of any non-cash benefits
or any deferred payment or benefit shall be determined
by the Compass independent auditors in accordance with
the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the
Gross-Up Payment, the Employee shall be deemed to pay
federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation
in the sate and locality of his residence on the Date
of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of
such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than
the amount taken into account hereunder at the time of
termination of his employment, the Employee shall repay
22
<PAGE>
to the Company at the time that the amount of such
reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state
and local income tax imposed on the Gross-Up Payment
being repaid by him if such repayment results in
reduction in Excise Tax and/or a federal and state and
local income tax deduction) plus interest on the amount
of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into
account hereunder at the time of the Employee's
termination of employment (including by reason of any
payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest payable with
respect to such excess) at the time that the amount of
such excess is finally determined. If the mounts of any
payments under this Agreement cannot
23
<PAGE>
be finally determined on or before the payment date
otherwise scheduled for payment, the Company shall pay
to the Employee on such date an estimate, as determined
in good faith by the Company, of the minimum amount of
such payment and shall pay the reminder of such
payments (together with interest at the rate provided
in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined, but in no event later
than the thirtieth day after the Date of Termination.
In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company
to the Employee payable on the fifth day after demand
by the Company (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
(f) CONTINUATION OF EMPLOYEE BENEFITS.
Upon the termination of the Employee's employment hereunder for
whatever reason, the Company shall continue, for such period
after the Date of Termination as it is required (or would be
required absent the requirement in Section 4(e)(i) to pay a lump
sum) in accordance with this Section
24
<PAGE>
4, to continue to pay Base Salary to or in respect of the
Employee, to cover the Employee and/or the Employee's family
under Dose life, disability, accident and health insurance
benefits that revere applicable to the Employee on the Date of
Termination at the same benefit levels and on the same terms and
conditions then in effect; provided however, that such coverage
shall be no less favorable than that to which the Employee and/or
his family was entitled immediately prior to his Date of
Termination or, if applicable, the occurrence of any event
constituting Good Reason; and further provided that in the event
Employee's employment hereunder is terminated for Disability,
such coverage shall continue for twenty-four (24) months
following the Date of Termination. In the event that the Employee
and/or the Employee's family's participation in any such program
is barred, the Company shall arrange to provide the Employee
and/or the Employee's family with benefits substantially similar
to those which the Employee and/or the Employee's family would
otherwise have been entitled to receive under such plans and
programs Mom which continued participation is barred. Following
the continuation period described in this subsection, the
Employee and the Employee's family shall be entitled to elect
continuation coverage under
25
<PAGE>
Section 601 et. seq. of the Employee Retirement Income Security
Act.
(g) EQUITY BASED AWARDS.
In the event of the termination of the Employee's employment
hereunder other than pursuant to Section 4(b) or (d), any vesting
or service requirements under any outstanding stock option or
restricted stock awards then held by the Employee shall be deemed
fully satisfied as of the Date of Termination. Anything herein or
in any other agreement, plan or program to the contrary
notwithstanding, in the event of the termination of the
Employee's employment hereunder for whatever reason, all
outstanding vested stock options held by the Employee as of the
Date of Termination, including any for which vesting has been
accelerated pursuant to this Section, shall remain exercisable
for the balance of the respective terms thereof.
(h) NO MITIGATION OR OFFSET.
The Company agrees that, if the Employee's employment with the
Company terminates, the Employee is not required to seek other
employment or to attempt in any way to reduce any amounts payable
to or in respect of the Employee by the Company pursuant to this
Agreement. Further, the amount of any payment or benefit provided
for in this Agreement shall not be reduced by an
26
<PAGE>
compensation earned by the Employee as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Employee to the Company, or
otherwise.
(i) NOTICE OF TERMINATION.
(i) Any termination of the Employee's employment by the Company
(over than due to death) shall be communicated by a notice of
termination to the other party hereto given in accordance with
this Agreement (the "Notice of Termination"). The Notice of
Termination shall be given (A) in the case of a termination for
Cause, within 90 business days after a director of the Company
(excluding the Employee) has actual knowledge of the events
giving rise to such purported termination, (B) in the case of a
termination for Good Reason, within 180 days of the Employee's
having actual knowledge of the event or events constituting Good
Reason; (C) in the case of termination for Disability, not later
than 30 days prior to the date the Company reasonably expects the
six month period referred to in Section 4(a) to expire; and (D)
in the case of Voluntary Termination, not later than 150 days
prior to the date of termination specified in such notice. Such
notice shall (X) indicate the specific termination provision in
this Agreement relied
27
<PAGE>
upon, (Y) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Employee's employment uncles the provision so indicated,
as applicable, and (Z) if the Date of Termination is other
than the date of actual receipt of such notice, specify the
date on which the Employee's employment is to be terminated
(which date shall not be earlier than the date on which such
notice is actually received).
(ii) If within fifteen (15) days after any Notice of Termination
is given, or, if later, prior to the Date of Termination (as
determined without regard to this Section) the party
receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the
Date of Termination shall be extended until the earlier of
(A) the date on which the Employment Term ends or (B) the
date on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final
judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired
and no appeal has been perfected); provided however, that
the Date
28
<PAGE>
of Termination shall be extended by a notice of dispute
given by the Employee only if such notice is given in good
faith and the Employee pursues the resolution of such
dispute with reasonable diligence. If the Date of
Termination is extended in accordance with this Section, the
Company shall continue to pay the Employee his full
compensation and benefits in effect when the notice giving
rise to the dispute was given (including, but not limited
to, Base Salary) and continue the Employee's participation
in all employee benefit plans in which the Employee was
participating and, on the same terms and conditions as, when
the notice giving rise to the dispute was given, until the
Date of Termination, as determined in accordance with this
Section. The determination of the amount of any compensation
and benefits or odder payments to be paid or provided to or
in respect of the Employee hereunder shall be determined
without regard to any reduction therein constituting Good
Reason. Amounts paid under this Section are in addition to
all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this
Agreement.
(iii) For purposes of this Agreement, "Date of
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<PAGE>
Termination" means (A) in the case of a termination for
which a Notice of Termination is required the date of actual
receipt of such Notice of Termination, or if later, the date
specified therein, as the case may be, (B) in the case of
Disability, the last day of the six month period referred to
in Section 4(a), and (C) in all other cases, the actual date
on which the Executive's employment terminates during the
Term of Employment.
5. ENFORCEMENT OF AGREEMENT; DEFENSE OF ACTIONS.
--------------------------------------------
If the Employee determines that it is necessary or desirable for him
to retain legal counsel or incur other costs and expenses in
connection with either enforcing party and all of his rights under
this Agreement or defending against any allegations by the Company of
breach of this Agreement by him, the Employee shall be entitled to
recover from the Company reasonable attorneys' fees, costs and
expenses incurred by him in connection with such enforcement or
defense. Such payments shall be made by the Company to the Employee
(or directly to the Employee's attorney) promptly following submission
to the Company of appropriate documentation evidencing the incurrence
of such attorneys' fees, costs, and expenses. The Employee's rights to
payments under this Section shall not be affected by the final outcome
of any dispute with the Corporation; provided however,
30
<PAGE>
that to the extent that the court shall determine that under the
circumstances recovery by the Employee of all or a part of any such
fees and costs and expenses would be unjust or inappropriate, the
Employee shall not be entitled to such recovery.
6. PROTECTIVE COVENANTS.
--------------------
(a) COMPENSATION BENEFITS IF SECTION 6 (b) OR (c) ARE BREACHED.
The Employee agrees that if during the Employment Term, and for a
period of one year thereafter, he (i) in any manner (except as
provided below), directly or indirectly, though any parson, firm
or corporation, alone or as a member of a partnership or as an
officer, director, stockholder, investor or employee of or
consultant to any other corporation or enterprise or otherwise
engages or assists any other person, firm, corporation or
enterprise in engaging in any business then being conducted by
the Company (but not later than as of the Date of Termination) in
any geographic area in which the Company is then conducting such
business or (ii) breaches his obligations under Section 6(b) or
(c), any compensation benefits to which the Employee would
otherwise have been entitled shall be suspended for one year, or,
if less, the remaining balance of the period unto respect to
which the Employee,
31
<PAGE>
would be so entitled to such payment and benefits, which payments
and benefits shall be deemed immediately forfeited. Nothing
herein shall prohibit the Employee from being a stockholder in a
mutual fund or a diversified investment company or a passive
owner of not more than two percent of the outstanding stock of
any class of a corporation any equity securities of which are
publicly traded, so long as the Employee has no active
participation in the business of such corporation. Clause (i) of
this subsection shall not apply following the Employment Term if
the Employee is terminated without Cause or terminates for Good
Reason following a Change of Control.
(b) NO SOLICITATION OF EMPLOYEES.
The Employee further agrees that during the Employment Term and
for one year thereafter, he shall not, in any manner, directly or
indirectly induce or attempt to induce any employee of the
Company to terminate or abandon his or her employment for any
purpose whatsoever. This subsection (b) shall not apply following
the Employment Term if the Employee is terminated without Cause
or terminates for Good Reason following a Change of Control.
(c) NON-DISCLOSURE.
The Employee shall not, at any time during the Employment Term or
thereafter, make use of or
32
<PAGE>
disclose, directly or indirectly, any trade secret, customer
lists or other confidential or secret information of the Company
not available to the public generally or to the competitors of
the Company ("Confidential information), except to the extent
that such Confidential Information becomes a matter of public
record or is otherwise available to the general public, other
than as a result of any act or omission of the Employee, or is
required to be disclosed by any law, regulation or order of any
court or regulatory commission, department or agency. Promptly
following the Date of Termination, the Employee shall surrender
to the Company all records, memoranda, notes, plans, reports,
computer tapes and software and other documents and data relating
to any Confidential Information or the business of the Company
that he may then possess or have under his control (together with
all copies thereon; provided however, that the Employee may
retain copies of such documents as are necessary for the
preparation of his federal or state income tax returns.
(d) FALSE, DEFAMATORY, OR DISPARAGING STATEMENTS.
The Employee agrees that, while he is employed by the Company,
and after his Date of Termination, he shall not make any false,
defamatory or disparaging statements about the Company, or the
33
<PAGE>
officers or directors of the Company that are reasonably likely
to cause material damage to the Company, or the officers or
directors of the Company. While the Employee is employed by the
Company, and after his Date of Termination, the Company agrees
that neither the officers nor the directors of the Company shall
make any false, defamatory or disparaging statements about the
Employee that are reasonably likely to cause material damage to
the Executive.
(e) INJUNCTIONS TO PREVENT BREACHES OF PROTECTIVE COVENANTS.
The parties hereto agree that the Company would be damaged
irreparably in the event of any provision of paragraphs (b), (c)
or (d), next above, were not performed by the Employee in
accordance with their respective terns or were otherwise breached
and that money damages would be an inadequate remedy for any such
nonperformance or breach. Therefore, the Company or its
successors or assigns shall be entitled, in addition to any other
rights and remedies existing in their favor, to an injunction or
injunctions to prevent any breach or threatened breach of any
such provisions and to enforce such provisions specifically
(without posting a bond or other security). The parties hereto
agree that the Employee would be damaged irreparably in the event
of any provision
34
<PAGE>
of paragraph (d), next above, were not performed by the Company
in accordance with its or were otherwise breached and that money
damages would be an inadequate remedy for any such nonperformance
or breach. Therefore, the Employee shall be entitled, in addition
to any other rights and remedies existing in his favor, to an
injunction or injections to prevent any breach or threatened
breach of any such provisions and to enforce such provision
specifically (without posting a bond or other security).
7. SUCCESSORS.
----------
(a) THE EMPLOYEE.
This agreement is personal to the Employee and, without the prior
express written consent of the Company, shall not be assignable
by the Employee, except that the Employee's rights to receive any
compensation or benefits under this Agreement may be transferred
or disposed of pursuant to testamentary disposition, intestate
succession or pursuant to a domestic relations order of a court
of competent jurisdiction. This Agreement shall inure to the
benefit of and be enforceable by the Employee's heirs,
beneficiaries and/or legal representatives.
(b) THE COMPANY.
This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and
35
<PAGE>
assigns. The Company shall require any successor to all or
substantially all of the business and/or assets of the Company,
whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form ant
substance satisfactory to the Employee, expressly to assume and
agree to perform this Agreement in the same manner and to the
same extent as the Company would be required to perform if no
such succession had taken place.
8. MISCELLANEOUS.
-------------
(a) APPLICABLE LAW.
This Agreement shell be governed by and construed in accordance
with the laws of the State of California, applied without
reference to principles of conflict of laws.
(b) AMENDMENTS.
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) NOTICES.
All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other park or
by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
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<PAGE>
If to Employer: UNITED STATES FILTER CORPORATION
40-004 Cook Street
Palm Desert, CA 92211
If to Employee: RICHARD J. HECKMANN
72551 Clancy Lane
Rancho Mirage, CA 92270
With a Copy to: LAZOF & COSS
Attn: Ronald C. Lazof, Esq.
4590 MacArthur Boulevard,
Suite 390
Newport Beach, CA 92660
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notices and
communications shall be effective when actually received by the
addressee.
(d) WITHHOLDING.
The Company may withhold from any amounts payable under this
Agreement such federal, state or local income taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(e) SEVERABILITY.
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(f) CAPTIONS.
The captions of this Agreement are not part of the
37
<PAGE>
provisions hereof and shall have no force or effect.
(g) BENEFICIARIES/REFERENCES.
The Employee shall be enabled to select (and change) a
beneficiary or beneficiaries to receive any compensation or
benefit payable hereunder following the Employee's death, and may
change such election, in either case by giving the Company
written notice thereof. In the event of the Employee's death or
a judicial determination of his incompetence, reference in this
Agreement to the Employee shall be deemed, where appropriate, to
refer to other beneficiary(ies), estate or his legal
representative(s).
(h) ENTIRE AGREEMENT.
This Agreement will contain the entire agreement between the
parties concerning the subject matter hereof and will supersede
all prior agreements, understandings, discussions, negotiations
and undertakings, whether written or oral, between the parties
with respect to the subject matter hereof, other than the
Executive Retention Agreement (to the extent provided herein).
However, nothing in this Agreement shall adversely affect the
Employee's rights to benefits accrued prior to the Effective
Date, and, except as contemplated hereby, the Employee's rights
with respect to stock options and restricted stock granted prior
38
<PAGE>
to the Effective Date shall be governed by the respective stock
options and restricted stock agreements relating thereto.
(i) ARBITRATION.
Company and Employee agree that any controversy or dispute
arising out of or in connection with this Agreement, its
interpretation, performance of termination, shall upon demand of
a party, be submitted to and decided by binding arbitration. The
arbitration shall be conducted pursuant to Part 3, Title 9 of the
California Code of Civil Procedure Sections 1280-1288.8.
-------------------------------------------------------
Discovery, including depositions for the purpose of discovery,
shall be broadly permitted, and the provisions of the California
----------
Code of Civil Procedure Section 1283.05 shall apply. Any demand
-----------------------
to arbitrate shall be deemed to have been made on the date
actually received by the party upon whom it is served, and, for
the purposes of the statute of limitations, shall have the same
effect as it suit had been filed on the date the demand is made.
The arbitration shall occur in Orange County, California, before
a single retired or former judge of the Superior Court of the
State of California, or the Court of Appeals of the State of
California. The parties shall agree upon an arbitrator within
ten (10) days after the demand is made, and if the parties fail
to so agree, then
39
<PAGE>
any of them may apply to the Court for an order appointing an
arbitrator meeting the requirements of this section. The
arbitrator's decision shall be rendered in ninety (90) days after
the hearing and the decision of the arbitrator shall be final and
binding and shall be subject to confirmation, correction or
vacation in accordance with the provisions of California Code of
------------------
Civil Procedure Sections 1285-1287.4. Any application, petition,
---------------
or other proceeding (A) to enforce the award or the provisions of
this Agreement, (B) to the extent that the arbitrator does not
have the power or authority to resolve or grant the relief
sought, and/or (C) for provisions or equitable relief pending
appointment of the arbitrator, shall be commenced in the
appropriate State or Federal Court having jurisdiction in Orange
County, California, and the parties hereby consent to
jurisdiction and venue in such Courts.
(j) REPRESENTATION.
The Company represents and warrants that it is fully authorized
and empowered to enter into this Agreement and Mat the
performance of its obligations under this Agreement will not
violate any agreement between the Company and any other person,
firm or organization or any applicable laws or regulations.
(k) SURVIVORSHIP.
40
<PAGE>
The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement or the Employee's
employment hereunder to the extent necessary to the intended
preservation of such rights and obligations.
41
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date set
forth opposite their signatures herein below.
EMPLOYER:
--------
UNITED STATES FILTER CORPORATION,
a California corporation
DATED: ____________, 1998 By:_______________________________
Its:______________________________
(title)
EMPLOYEE:
--------
DATED: ____________, 1998 By:_______________________________
RICHARD J. HECKMANN
42
<PAGE>
EXHIBIT 10.9
PARTICIPATION AGREEMENT AND DEFERRAL ELECTION
U.S.FILTER
Management Deferred Compensation Plan
* * *
1997
- --------------------------------------------------------------------------------
Please print your full name below: Print your Social Security Number below:
_________________________________ ________________________________________
- --------------------------------------------------------------------------------
This Agreement is entered into between United States Filter Corporation (the
"Company") and the Employee, pursuant to the United States Filter Corporation
Management Deferred Compensation Plan (the "Plan").
=====================================-------------------------------------------
1. Provisions of the Plan
I hereby acknowledge receipt of a copy of the Plan Highlights. In addition, I
acknowledge having read and understood the provisions of the Plan respecting the
entitlement to and calculation of benefits, and that the Plan may be amended or
terminated only by the Board of Directors at any time in accordance with its
terms. All of the terms and conditions of the Plan are contained in the Plan
Document.
=====================================-------------------------------------------
2. Election to Participate
I hereby elect to defer the following portion of my compensation, which is to be
credited to my Account (minimum annual total deferral of $5,000; specify a
dollar or percentage amount):
Deferral of Base Compensation: You may defer up to 25% of your total 1997
-----
base compensation.
__________ of annual base compensation, (optional) not to exceed: $_______.
Deferral of Bonus: Beginning in the December enrollment period you will be
able to defer bonuses.
=====================================-------------------------------------------
3. Expected Deferral Level
For Company planning purposes, I expect to defer the following amounts and
understand that this estimate is non-binding (minimum annual total deferral of
$5,000; specify a dollar or percentage amount. Although you will not be
permitted to make your election to defer bonuses until the December enrollment
period, please estimate how much of your bonus you will likely elect defer in
December.):
Salary:____________ for _______ years beginning in 1998.
Bonus: ____________ for _______ years beginning in 1998.
====================================--------------------------------------------
4. Investment Selection
I hereby designate the following investment selection for amounts to be
contributed to my Account and acknowledge that I may change my investment mix on
a quarterly basis. I also acknowledge that no money is actually being
contributed to the funds I designate, and that my investment selection is used
solely as an index for determining earnings or losses on my Account. (Investment
allocations must be in whole percents, and your total investment allocation must
equal 100%. See the Portfolio Roadmap accompanying your enrollment materials and
the Manulife prospectus for complete information about each portfolio.)
<TABLE>
<CAPTION>
Equity Index, Balanced and Equity funds: Money Market and Fixed Income funds:
<S> <C> <C> <C>
Equity Index (S&P 500): % Money Market (Manulife): %
----------- ----------
Balanced fund (Founders): % Investment Quality Bond (Wellington): %
----------- ----------
Value Fund (MAS*): % Strategic Bond (Solomon Brothers): %
----------- ----------
Blue Chip Growth Fund (T. Rowe Price): % High Yield Bond (MAS*): %
----------- ----------
Emerging Growth (Walburg Pincus): % Real Estate Securities (Manulife): %
----------- ----------
Science & Technology (T. Rowe Price): %
-----------
Worldwide Growth (Founders): %
-----------
International Stock Fund (T. Rowe Price): % * Miller Anderson & Sherrerd, LLP
-----------
</TABLE>
(over)
<PAGE>
=====================================-------------------------------------------
5. Retirement Income Benefit
I acknowledge that this election may be changed no more than once yearly, and
that it must be at least one year prior to the first day of the year of my
retirement to make a change. I further acknowledge that, under Treasury
Department regulations adopted in 1996, there may be potential adverse income
tax consequences if I elect to receive a lump sum of 5 annual payments (see the
Plan Highlights, question 30). I hereby request that my Retirement Income
Benefit be paid in the following manner (check one);
[_] Lump-sum Payment [_] 5 Annual Payments* [_] 10 Annual Payments*
[_] 15 Annual Payments*
* If you choose a stream of payments, your declining Account balance will
continue to earn interest based upon your chosen investment mix. If, at
retirement or any time after retirement, you wish to change your designation
from annual payments to a sump-sum payment, your distribution will be subject
to a 10% penalty, which will be forfeited to the Company.
=====================================-------------------------------------------
6. In-service Distributions
I hereby elect to receive payments from this Plan as specified below. Any
amounts not paid as in-service, termination or survivor benefit distributions
are paid as retirement benefits pursuant to my Retirement Income Benefit
election in item 5. In addition, I acknowledge that I may not receive more than
one In-service Distribution in any one calendar year and that all In-service
Distributions are subject to income taxes in effect during the year received.
(If more space is needed, attach a separate sheet. Distributions may be
scheduled for any date on or after January 1, 2000. Note that this is an
election you may only make upon your initial enrollment in the Plan; therefore,
you should take into account the amount of future deferrals you will make when
scheduling your In-service Distributions.)
Amount of Distribution
Distribution Date (mo/yr) (specify either a dollar or percentage amount)
- ------------------------- ----------------------------------------------
___________/_____________ _____________________ of Account Balance.
___________/_____________ _____________________ of Account Balance.
___________/_____________ _____________________ of Account Balance.
___________/_____________ _____________________ of Account Balance.
Note: At any time, you may, at your sole discretion, withdrawn up to an amount
equal to your Account Balance minus a penalty of 10% of the amount
withdrawn (the amount of the penalty is forfeited to the Company). You may
also extend or cancel any In-service Distribution at least one year prior
to the first day of the calendar year in which the originally scheduled
distribution would take place.
=====================================-------------------------------------------
7. Pre-retirement Termination Payout
I hereby request that, in the event that I terminate employment with the
Company for reasons other than death or disability prior to eligibility for
retirement benefits, my Account Balance should be paid in the following manner
and acknowledge that I may not change this election after I make it (check one):
---
[_] Lump sum [_] 3 annual installments*
* Your Account Balance will continue to earn interest based upon your chosen
investment mix, and you will be permitted to change your investment mix
quarterly.
=====================================-------------------------------------------
8. Acknowledgement of Benefits
I hereby agree on my own behalf and on behalf of ny Beneficiaries to accept
those benefits under the Plan to which I and my Beneficiaries may become
entitled and to be bound by all of the terms and conditions of the Plan. I
acknowledge that I may look solely to the Company for payment of all benefits
under the Plan and that, to the extent that the Company has set aside any assets
to pay benefits in the future, the assets are subject to the claims of general
creditors of the Company.
__________________________________________________
Employee Signature Date
_______________________________________________________________________
Employer Signature Title Date
Please send this form to:
Joy Gaetano
Vice President Human Resources
United States Filter Corporation
40-004 Cook Street
Palm Desert, CA 92211
<PAGE>
EXHIBIT 10.10
UNITED STATES FILTER CORPORATION
EXECUTIVE SEVERANCE PAY PLAN
<PAGE>
THIS UNITED STATES FILTER CORPORATION EXECUTIVE SEVERANCE PAY PLAN (this
"PLAN"), adopted on June 9, 1998 effective as of January 1, 1998, by UNITED
STATES FILTER CORPORATION, a Delaware corporation (the "COMPANY"), is a welfare
benefit plan which is designed to provide payments upon severance to certain
executives of the Company.
W I T N E S S E T H:
ARTICLE I
TITLE AND DEFINITIONS
1.1 TITLE.
This Plan shall be known as the "United States Filter Corporation
Executive Severance Pay Plan."
1.2 DEFINITIONS.
Whenever the following terms are used in this Plan, with the first
letter capitalized, they shall have the meanings specified below.
"Cause" shall mean (a) for an Eligible Executive other than the
Company's Chief Executive Officer, a termination of employment on the grounds of
the Eligible Executive's personal dishonesty, willful misconduct, breach of
fiduciary duty involving personal profit, intentional and continuing failure to
perform stated duties or willful violation of any law, rule or regulation (other
than traffic violations or similar minor offenses) and (b) for the Company's
Chief Executive Officer, "Cause" as defined in the Employment Agreement between
the Company and the Chief Executive Officer. For purposes hereof, no act or
failure to act, on the part of an Eligible Executive, shall be considered
"willful" unless it is done, or omitted to be done, by an Eligible Executive in
bad faith or without reasonable belief that an
2
<PAGE>
Eligible Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based on authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or based upon the advice of counsel to the Company shall be
conclusively presumed to be done, or omitted to be done, by an Eligible
Executive in good faith and in the best interests of the Company. In addition,
if the Eligible Executive's employment is terminated for Cause within one year
following a Change of Control, an Eligible Executive other than the Company's
Chief Executive Officer shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Eligible Executive a
copy of a resolution, duly adopted by the affirmative vote of not less than 75%
of the entire membership of the Board of Directors of the Company (the "Board")
at a meeting of the Board (after reasonable notice to the Eligible Executive and
an opportunity for the Eligible Executive, together with his or her counsel, to
be heard by the Board), finding that, in the good faith opinion of the Board,
the Eligible Executive's termination is for Cause and specifying the particulars
thereof in detail. Such finding shall be subject to a complete and de novo
review as to reasonableness and good faith. For the Company's Chief Executive
Officer, the procedure contained in the Employment Agreement between the Company
and the Chief Executive Officer shall apply in determining whether termination
was for "Cause."
"Change of Control" shall mean the occurrence of any of the following:
(i) the acquisition by any person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the U.S.
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision to either of the foregoing) of "beneficial ownership" (as
determined in accordance with Rule 13d-3 promulgated under the Exchange Act,
except that a person shall be deemed to be a "beneficial owner" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of shares of capital stock of the Company entitling such person to
exercise 50% or more of the total voting power of all outstanding shares of any
class or classes (however designated) of capital stock of the Company entitled
to vote generally in the election of the Board;
3
<PAGE>
(ii) during any year or any period of two consecutive years (not
including any period prior to the execution of this Plan), individuals who at
the beginning of such period constitute the Board, and any new director (other
than a director designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (i), (iii) or (iv) of
this definition) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;
(iii) any consolidation of the Company with, or merger of the Company
into, any other person, any merger of another person into the Company, or any
sale or transfer of all or substantially all of the assets of the Company to
another person, other than (x) a consolidation or merger that does not result in
any reclassification, conversion, exchange or cancellation of outstanding shares
of capital stock other than shares of capital stock owned by any of the parties
to the consolidation or merger; (y) a merger that is effected solely to change
the jurisdiction of incorporation of the Company; or (z) any consolidation with
or merger of the Company into a wholly-owned subsidiary, or any sale or transfer
by the Company of all or substantially all of its assets to one or more of its
wholly-owned subsidiaries in any one transaction or a series of transactions;
or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company.
Notwithstanding the foregoing, unless otherwise determined by the Board, no
change in control of the Company shall be deemed to have occurred for purposes
of determining an Eligible Executive's eligibility to receive Severance Benefits
under this Plan if (x) the Eligible Executive is a member of a group that first
announces a proposal which, if successful, would result in a Change of Control,
which proposal (including any modifications thereof) is ultimately successful,
or (y) the Eligible Executive acquires a two percent or more equity
4
<PAGE>
interest in the entity that ultimately acquires the Company pursuant to the
transaction described in (x) of this paragraph.
"Committee" shall mean the committee appointed by, and serving at the
pleasure of, the Compensation Committee of the Board.
"Company" shall mean United States Filter Corporation, a Delaware
corporation, and any subsidiary of United States Filter Corporation.
"Base Salary" shall mean an Eligible Executive's rate of base pay from
the Company which is set forth in the Eligible Executive's Employment Agreement,
as adjusted from time to time.
"Eligible Executive" shall mean an employee of the Company whose name
appears on the list of Company executives, attached hereto as Exhibit A, which
shall be updated from time to time. To receive Severance Benefits, an Eligible
Executive must also meet the requirements set forth in Section 2.1.
"Employment Agreement" shall mean the agreement between the Company
and an Eligible Executive, setting forth the terms of his or her employment.
"ERISA" shall mean the U.S. Employee Retirement Income Security Act of
1974, as amended from time to time.
"Good Reason" shall mean (a) for an Eligible Executive other than the
Company's Chief Executive Officer, without the prior written consent of an
Eligible Executive, (i) an Eligible Executive's compensation or benefits is
decreased, other than an immaterial decrease in benefits uniformly applicable to
substantially all full-time Company employees, (ii) an Eligible Executive
suffers a reduction in duties, responsibilities or effective authority
associated with his or her titles and
5
<PAGE>
positions as set forth and described in an Eligible Executive's Employment
Agreement or is assigned any duties or responsibilities inconsistent in any
material respect therewith, (iii) the Company fails to substantially perform any
material term or provision in the Plan or an Eligible Executive's Employment
Agreement, (iv) the principal office of an Eligible Executive is relocated by
more than fifty (50) miles from its location as of the date this Plan is
executed, (v) the Company fails to obtain the full assumption of the Plan and an
Eligible Executive's Employment Agreement by a successor entity, or (vi) the
Company purports to terminate an Eligible Executive's employment for Cause and
such purported termination of employment is not effected in accordance the terms
of an Eligible Executive's Employment Agreement or this Plan, and (b) for the
Company's Chief Executive Officer, "Good Reason" as defined in the Employment
Agreement between the Company and the Chief Executive Officer.
"Plan" shall mean the United States Corporation Executive Severance
Pay Plan, now in effect or hereafter amended.
"Severance Benefit" shall mean the benefit provided under Section 3.1.
"Severance Date" shall mean the last day on which an Eligible
Executive of the Company completes an hour of service for the Company.
6
<PAGE>
ARTICLE II
ELIGIBILITY
2.1 ELIGIBILITY REQUIREMENTS.
An Eligible Executive shall be entitled to a Severance Benefit
hereunder only if:
(a) The Committee determines, pursuant to its powers and duties under
Section 4.1, that the Eligible Executive's employment with the Company was
terminated (i) by the Company without Cause, or (ii) by the Eligible Executive
for Good Reason. An Eligible Executive shall not be entitled to a Severance
Benefit if his or her employment with the Company terminated as a result of
death or disability.
(b) During the term of his employment with the Company and for a
period of 12 months from the date of termination, the Eligible Executive does
not (except as provided below) in any manner directly or indirectly, though any
person, firm or corporation, alone or as a member of a partnership or as an
officer, director, stockholder, investor or employee of or consultant to any
other corporation or enterprise or otherwise engage or assist any other person,
firm, corporation or enterprise in engaging in any business then being conducted
by the Company (but not later than as of the date of termination) in any
geographic area in which the Company is then conducting such business. This
subsection (b) shall not apply following the term of employment if the Eligible
Executive is terminated without Cause or terminates for Good Reason following a
Change of Control.
(c) The Eligible Executive does not (except as provided below) during
the term of his employment with the Company and for one year thereafter, in any
manner, directly
7
<PAGE>
or indirectly induce or attempt to induce any employee of the Company to
terminate or abandon his or her employment for any purpose whatsoever (other
than for poor performance of an employee employed by the Company at such time).
This subsection (c) shall not apply following the term of employment if the
Eligible Executive is terminated without Cause or terminates for Good Reason
following a Change of Control.
(d) The Eligible Executive shall not, at any time during the term of
his employment with the Company or thereafter, make use of or disclose, directly
or indirectly, any trade secret, customer lists or other confidential or secret
information of the Company not available to the public generally or to the
competitors of the Company ("Confidential Information"), except to the extent
that such Confidential Information becomes a matter of public record or is
otherwise available to the general public, other than as a result of any act or
omission of the Eligible Executive, or is required to be disclosed by law,
regulation or order of any court or regulatory commission, department or agency.
ARTICLE III
BENEFITS PAYABLE UNDER THE PLAN
3.1 SEVERANCE BENEFITS PAYABLE UNDER THE PLAN.
(a) GENERALLY APPLICABLE BENEFIT. The Severance Benefit payable to an
Eligible Executive (other than the Chief Executive Officer) shall be sum of the
amounts described in (1) and (2) below:
(1) The sum of his Base Salary for the balance of the term of
his Employment Agreement, plus the target annual incentive bonus scheduled for
the year in which employment terminated (determined without regard to any
performance goals) times the number of full and partial years (determined on the
basis of days, assuming a year of 365 days) remaining in the term of the
Employment Agreement.
8
<PAGE>
(2) If an Eligible Executive becomes entitled to severance
benefits hereunder, the Company shall, at its expense, engage a nationally
recognized employee benefits consulting firm to estimate the value of the
health, life insurance, disability and accident insurance plans or programs
covering the Eligible Executive and his dependents prior to the termination of
employment. The amount payable under this subsection (3) shall be a cash lump
sum equal to the greater of the present value of such coverage for the remaining
term of the Eligible Executive's Employment Agreement, or 1.5 times the present
value of one year of such coverage.
(b) BENEFIT FOR CHIEF EXECUTIVE OFFICER. The Severance Benefit
payable to the Chief Executive Officer shall be the sum of his Base Salary for
the balance of the term of his Employment Agreement, plus the target annual
incentive bonus scheduled for each year following the year in which employment
terminated for the balance of the term of the Employment Agreement (determined
without regard to any performance goals.)
9
<PAGE>
3.2 PAYMENT OF SEVERANCE BENEFITS.
(a) Payment of the Severance Benefit under this Plan to an Eligible
Executive shall be made within thirty (30) days after the Eligible Executive's
termination of employment. The Severance Benefit shall be paid in the form of a
single lump sum in cash.
(b) If the Eligible Executive does not comply with any or all of the
requirements of Sections 2.1(c), 2.1(d) or 2.1(e), any remaining unpaid
Severance Benefit shall be irrevocably forfeited.
(c) If the Eligible Executive dies after a qualifying termination of
employment but before his or her entire Severance Benefit has been paid, the
Severance Benefit shall be paid within thirty (30) days from the date of death
to the estate or personal representative of the Eligible Executive.
10
<PAGE>
ARTICLE IV
PLAN ADMINISTRATION
4.1 POWERS AND DUTIES OF THE COMMITTEE.
The Company shall be the Plan Administrator (as defined in Section
3(16)(A) of ERISA). The Company delegates its duties under the Plan to the
Committee. The Committee and its delegates shall be named fiduciaries of this
Plan to the extent required by ERISA. The Committee shall enforce this Plan in
accordance with its terms, and shall be charged with the general administration
of this Plan. The Committee shall have all powers and duties necessary to
accomplish its purposes, including but not by way of limitation, the power to do
any of the following:
(a) To determine all questions relating to the eligibility of
Eligible Executives to receive payments hereunder;
(b) To construe and interpret the terms and provisions of this Plan
in accordance with Section 4.5;
(c) To determine and compute the amount and timing of payments
payable to Eligible Executives;
(d) To issue directions to the Company concerning all benefits that
are to be paid from the Company's general assets pursuant to the provisions of
this Plan, and warrant that all such directions are in accordance with this
Plan;
(e) To maintain all the necessary records for the administration of
this Plan;
11
<PAGE>
(f) To provide for disclosure of all information and filing or
provision of all reports and statements to Eligible Executives or governmental
bodies as shall be required by ERISA;
(g) To make and publish such rules for the regulation of this Plan as
are not inconsistent with the terms hereof; and
(h) To establish claims procedures consistent with regulations of the
Secretary of Labor for presentation of claims by Eligible Executives for Plan
benefits, consideration of such claims, review of claim denials and issuance of
decisions on review. Such claims procedures at a minimum shall consist of the
following:
(1) The Committee or its delegates shall notify Eligible
Executives of their right to claim benefits under the claims procedures,
shall make forms available for filing of such claims, and shall provide the
name of the person or persons with whom such claims should be filed.
(2) The Committee or its delegates shall establish procedures
for action upon claims initially made and the communication of a decision
to the claimant promptly and, in any event, not later than 90 days after
the date of the claim, unless special circumstances require an extension of
time for processing the claim. If an extension is required, notice of the
extension shall be furnished to the claimant prior to the end of the
initial 90-day period, which notice shall indicate the reasons for the
extension and the expected decision date. The extensions shall not exceed
90 days. The claim may be deemed by the claimant to have been denied for
purposes of further review described below in the event a decision is not
furnished to the claimant within the period described in the preceding
three sentences. Every claim for benefits which is denied shall be denied
by written notice setting forth in a manner calculated to be understood by
the claimant (i) the specific reason or reasons for the denial, (ii)
specific reference to any provisions of this Plan on which denial is based,
(iii) description of
12
<PAGE>
any additional material or information necessary for the claimant to
perfect his or her claim with an explanation of why such material or
information is necessary, and (iv) an explanation of the procedure for
further review of the denial of the claim under this Plan.
(3) The Committee shall establish a procedure for review of
claim denials, such review to be undertaken by the Committee. The review
given after denial of any claim shall be a full and fair review with the
claimant or the claimant's duly authorized representative having 60 days
after receipt of denial of the claim to request such review, having the
right to review all pertinent documents and having the right to submit
issues and comments in writing.
(4) The Committee shall establish a procedure for issuance of a
decision by it not later than 60 days after receipt of a request for a
review of a claim denial by a claimant unless special circumstances exist,
such as the need to hold a hearing or require a longer period of time, in
which case a decision shall be rendered as soon as possible but not later
than 120 days after receipt of the claimant's request for review. The
decision on review shall be in writing and shall include specific reasons
for the decision written in a manner calculated to be understood by the
claimant with specific reference to any provisions of this Plan on which
the decision is based.
4.2 TRANSMITTAL OF INFORMATION.
In order to enable the Committee to perform its functions under this
Plan, the Company shall supply full and timely information to the Committee on
all matters relating to the Base Salary of Eligible Executives, their
employment, retirement, death, or the cause for termination of employment and
such other pertinent facts as may be required.
13
<PAGE>
4.3 REPORTS.
Upon request of the Company, the Committee shall prepare, or cause to
be prepared, and shall submit to the Chief Executive Officer of the Company a
report with respect to the administration of this Plan that fully informs the
Chief Executive Officer of the discharge by the Committee of its
responsibilities under this Plan.
4.4 COMPENSATION, EXPENSES, INDEMNITY AND LIABILITY.
(a) The members of the Committee and its delegates shall serve
without compensation for their services hereunder.
(b) The Committee is authorized at the expense of the Company to
employ such legal counsel, and make use of such clerical or other personnel, as
it may deem advisable to assist in the performance of its duties hereunder.
(c) To the extent permitted by applicable law, the Company shall
indemnify and save harmless the Committee and each member thereof, and any
person to whom the Committee has delegated its duties under this Plan against
any and all expenses, liabilities and claims, including legal fees paid to
defend against such liabilities and claims, arising out of their discharge of
responsibilities in good faith under this Plan, excepting only expenses,
liabilities and claims arising out of willful misconduct. This indemnity shall
not preclude such further indemnities as may be available under insurance
purchased by the Company or provided by the Company under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, as such
indemnities are permitted under state law. Payments with respect to the
indemnity and payments of expenses or fees shall be made from the general assets
of the Company.
14
<PAGE>
4.5 MANNER OF ADMINISTERING.
Prior to a Change of Control, the Committee shall have full discretion
to construe and interpret the terms and provisions of this Plan and to determine
the eligibility for and amount of benefits under this Plan, which interpretation
or construction shall be final and binding on all parties, including but not
limited to the Company and any Eligible Executive, except as otherwise provided
by law. Following a Change of Control, the Committee shall not have
discretionary authority concerning this Plan, and any determinations of the
Committee following a Change of Control shall be reviewed on a de novo basis.
4.6 ARBITRATION.
Any disputes arising under this Plan shall be resolved in accordance
with the arbitration provisions of the Eligible Executive's Employment
Agreement.
ARTICLE V
AMENDMENT AND SUCCESSION
5.1 AMENDMENTS.
The Board shall have the right to amend this Plan from time to time
and to amend further or cancel any such amendment; provided, however, that the
Board shall not have the right to amend this Plan, nor shall the Board amend,
discontinue, cancel or terminate this Plan without the prior written approval of
an Eligible Executive. Any such amendment shall be effective in the manner and
at the time therein set forth, and the Company and all employees of the Company
shall be bound thereby; provided, however, that no such amendment shall be
effective with respect to an Eligible Executive whose employment was terminated
prior to the date of adoption of such amendment, and no such amendment following
a Change of Control may (a) reduce any benefit to which an Eligible Executive is
or may become entitled, or (b) change the eligibility requirements for benefits
hereunder.
15
<PAGE>
5.2 SUCCESSORS.
This Plan shall inure to the benefit of and be binding upon the
Company and its successors and assigns. Upon a Change of Control, the Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform this Plan in the
same manner and to the same extent that the Company would be required to perform
if no such succession had taken place. For purposes hereof, the "Company" shall
be deemed to include any successor to the Company's business and/or assets as
aforesaid which assumes and agrees to perform this Plan or an Eligible
Executive's Employment Agreement by operation of law or otherwise.
ARTICLE VI
MISCELLANEOUS
6.1 LIMITATION ON ELIGIBLE EXECUTIVES' RIGHTS.
Neither eligibility nor payments made under this Plan shall give any
Eligible Executive the right to be retained in the Company's employ. Inclusion
under this Plan will not give any Eligible Executive any right to claim any
benefit hereunder except to the extent such right is expressly provided herein
or in an Eligible Executive's Employment Agreement.
16
<PAGE>
6.2 UNSECURED GENERAL CREDITOR.
All Eligible Executives and their heirs, successors, assigns and personal
representatives shall have no legal or equitable rights, claims or interest in
any specific property or assets of the Company with respect to benefits payable
under this Plan. No assets of the Company shall be held under any trust, or
held in any way as collateral security for the fulfillment of the obligations of
the Company under this Plan. The Company's assets shall be, and remain, the
general, unpledged, unrestricted assets of the Company. The Company's
obligation under this Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay money in the future, and the rights of all
Eligible Executives shall be no greater than those of unsecured general
creditors.
6.3 WITHHOLDING.
There shall be deducted from each payment under this Plan all taxes that are
required by applicable law or regulation to be withheld by the Company with
respect to such payment. The Company shall have the right to reduce any payment
by the amount of cash sufficient to provide the amount of said taxes.
6.4 RESTRICTION AGAINST ALIENATION.
None of the benefits, payments, proceeds or claims of any Eligible Executive
shall be subject to any claim of any creditor and, in particular, the same shall
not be subject to attachment or garnishment or other legal process by any
creditor, nor shall any such Eligible Executive have any right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits or payments
or proceeds which he or she may expect to receive, contingently or otherwise,
under this Plan.
6.5 GOVERNING LAW.
This Plan shall be construed, administered, and governed in all respects under
17
<PAGE>
applicable federal law, and to the extent that federal law is inapplicable,
under the laws of the State of California; provided, however, that if any
provision is susceptible to more than one interpretation, such interpretation
shall be given thereto as is consistent with this Plan being a welfare benefit
plan within the meaning of Section 3(1) of ERISA. If any provision of this Plan
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective. Although it is intended that this entire Plan constitutes a welfare
plan within the meaning of Section 3(1) of ERISA, if this Plan is deemed to
provide pension benefits to any Eligible Executive, then the portion of the Plan
providing pension benefits shall be deemed a separate plan. Such separate plan,
if any, is intended to satisfy Section 201(2) of ERISA.
6.6 HEADINGS, ETC., NOT PART OF AGREEMENT.
Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.
6.7 REORGANIZATION OF COMPANY.
In the event of the dissolution, merger, consolidation, or reorganization of
the Company, this Plan shall (subject to the right of the Company to amend or
terminate this Plan) continue to be maintained by the Company's successor which
upon such succession, shall be deemed the Company hereunder.
6.8 CONSTRUCTION.
As used in this Plan, the masculine gender shall include the feminine and the
singular may include the plural, unless the context clearly indicates to the
contrary.
18
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these presents to be executed
by its duly authorized officers and its corporate seal to be hereunto affixed as
of the date first set forth above.
UNITED STATES FILTER CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
19
<PAGE>
EXHIBIT "A"
ELIGIBLE EXECUTIVES
Richard J. Heckmann
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------
1995 1996 1997 1998
------ ------ ------ --------
<S> <C> <C> <C> <C>
Operating income (loss)......................... 40,721 61,385 66,020 (235,209)
Portion of rental expenses deemed to represent
interest....................................... 3,167 3,500 5,433 13,967
------ ------ ------ --------
Earnings (loss) before fixed charges............ 43,888 64,885 71,453 (221,242)
====== ====== ====== ========
Interest expense................................ 8,807 16,280 26,509 53,887
Portion of rental expenses deemed to represent
interest....................................... 3,167 3,500 5,433 13,967
------ ------ ------ --------
Fixed charges................................... 11,974 19,780 31,942 67,854
====== ====== ====== ========
Ratio of earnings to fixed charges.............. 3.7x 3.3x 2.2x na
====== ====== ====== ========
Deficiency of earnings to fixed charges......... na na na $289,096
====== ====== ====== ========
</TABLE>
<PAGE>
EXHIBIT 21.0
LIST OF SUBSIDIARIES OF THE COMPANY
The following lists the subsidiaries of United States Filter Corporation as
of March 31, 1998. The subsidiaries listed are all wholly owned, either
directly or indirectly.
<TABLE>
<CAPTION>
STATE (COUNTRY)
NAME OF INCORPORATION
---- ----------------
<S> <C>
1258010 Ontario Inc. Canada
ARI Chemicals India Private Limited India
Abrasive Products, Inc. Indiana
Adaline Water Systems, Inc. Texas
Advanced Microtherm, Inc. California
Akvapur Sweden
Alfred Gutmann Gesellschaft fur Maschinenbau hbH Germany
American Water Systems, Inc. Nebraska
Arrowhaas Mexico, S.A. de C.V. Mexico
Asdor, Inc. Delaware
Ashland Municipal Supplies Co. Ohio
Astre S.A. France
Autocon Industries, Inc. Minnesota
BCT Spares Ltd. UK
BS Smogless S.A. Italy
Bayard S.C.I. France
Bayard, S.A. France
Bekox S.A. Spain
Best Water Treatment Company, Inc. Illinois
Bio Con. S.p.A. Italy
BioKinetics, Inc. Delaware
Blastrac Europe Ltd. UK
Buckeye Water Conditioning, Inc. Ohio
CIDA HIDROQUIMICA S.A. Spain
CJT Enterprises, Inc. Missouri
CM Services, Inc. Kentucky
California Farms, L.P. Delaware
Chester Engineers of Michigan, Inc., The Pennsylvania
Chester Engineers, Inc. Pennsylvania
Chester Environmental Ohio, Inc. Pennsylvania
Chester Environmental, Ltd. British Columbia
Continental Trade Corporation Texas
Continental Water Conditioning of Jacksonville, Inc. Florida
Cord Chemcial Co Ltd UK
Cove Water, Inc. California
Coyanosa Operations Company, Inc. Texas
D.S.K. Enterprises, Inc. California
Darchet (M) Sdn Bhd Malaysia
Darchet Industrial Water (M) Sdn Bhd Malaysia
Darchet Industrial Water (Penang) Sdn Bhd Malaysia
Darchet Industrial Water Pte. Ltd. Singapore
Diversified Water Systems, Inc. Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE (COUNTRY)
NAME OF INCORPORATION
---- ----------------
<S> <C>
Douglas L. Windover, Inc. New York
EBE Netherland B.V. Netherlands
ETI S.r.l. Italy
Ecogest S.r.l. Italy
Edwards & Jones GmbH Germany
Edwards & Jones Inc. Delaware
Edwards & Jones, Ltd. UK
Edwards and Jones Pension Trustees Limited UK
Envirex Inc. Delaware
Envirex and General Filter (Europe) Limited UK
Eurofiltec Deutschland GmbH Germany
Europeenne de Grenaillage S.A. France
FPD S.r.l. Italy
FW Ranchlands, L.P. Texas
Fife Industrial Pipe Company Florida
Filtration Seco Inc. Canada
Fletcher Filtration Limited UK
Florida Springs Distributors, Inc. Florida
Gawa Gesellschaft fur Automatische Wasseraufbereitung
MbH Germany
Gene McVety, Inc. Arizona
General Filter Company Delaware
Geopure Systems & Services, Inc. Florida
Giesseci S.r.l. Italy
Grupo de Tratamiento de Aguas Davis, S.A. de C.V. Mexico
HPD/Evatherm A.G. Switzerland
HTI Vehicle Acquisition Corp. Texas
Heinrick Schlick GmbH Germany
Hi-Tech Tool Rental, Inc. California
Hunter Screen Management Pty Limited Australia
Hunter Screen Products Pty Limited Australia
IP Holding Company Delaware
Idrofoglia International S.p.A. Italy
Illinois Water Treatment, Inc. Delaware
Interpure L.L.C. Delaware
Ionpure Aktiebolag Sweden
Ionpure Foreign Sales Corporation Virgin Islands
Ionpure L.L.C. Delaware
Ionpure Technologies (Ireland) Limited Ireland
Ionpure Technologies A.B. Sweden
Ionpure Technologies Limited UK
Ionpure Technologies Oy Finland
Ionpure Technologies S.A. Spain
Johnson Filtration Systems (Australia) Pty Australia
Ltd Johnson Filtration Systems (France) S.A. France
Johnson Filtration Systems (India) Limited India
Johnson Filtration Systems (Japan) Ltd. Japan
Johnson Filtration Systems Limited Ireland
K.M.I. Micro Electronics, Ltd Israel
KSI Mechanical SDN BHD Malaysia
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE (COUNTRY)
NAME OF INCORPORATION
---- ----------------
<S> <C>
KSI Mexico, S.A. de C.V. Mexico
KSI West Coast Mfg., Inc. California
Kinetic Systems Caribe, Inc. Delaware
Kinetic Systems France SARL France
Kinetic Systems International, Inc. California
Kinetic Systems Italy S.r.l. Italy
Kinetic Systems Netherlands B.V. Netherlands
Kinetic Systems Singapore Pte. Ltd Singapore
Kinetic Systems de Mexico, S.A. de C.V. Mexico
Kinetic Systems, Inc. California
Kinetics Brazil Ltd Brazil
Kinetics Ireland Limited Ireland
Kinetics Management Group, Inc. California
Kinetics Mechanical Service, Inc. California
Kinetics Mechanical, Inc. California
Kinetics Nexus LLC, A California Limited Liability
Company California
Kinetics Process Piping S.A. Switzerland
Kinetics Products, Inc. California
Lazers H2O, Inc. Minnesota
Lindsay Soft Water of Northern Iowa, Inc. Iowa
London, London & Klugherz, Inc. California
Lone Star Water, Inc. Texas
Mass Ionpure de Mexico S.A. de C.V. Mexico
Memcor Ltd UK
Memtec (UK) Limited UK
Memtec BV Netherlands
Memtec China Pty Ltd Australia
Memtec Europe Limited UK
Memtec Filtertechnik GmbH Germany
Memtec Finance Inc Delaware
Memtec France SA France
Memtec GmbH Germany
Memtec Japan Limited Japan
Memtec Limited Australia
Memtec Research Pty Limited Australia
Meter Box Equipment Corporation Washington
MicroKinetics, Inc. California
Miller Rossmark Ltd. UK
Nelco Porta-Blast Corp. Oklahoma
Neptune Nichols Limited UK
Niagara Screen Products Limited Canada
North West Water Holding GmbH Germany
Northedge Limited UK
Northwest Continental Systems, Inc. Washington
OT GmbH Germany
Oberflachen-Luft-und Tfocknungstechmik GmbH Germany
P.V. Pacific (Malaysia) Sdn. Bhd. Malaysia
P.V. Pacific Private Ltd. Singapore
Pacific Water Works Supply Co., Inc. Washington
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE (COUNTRY)
NAME OF INCORPORATION
---- ----------------
<S> <C>
Paice Nanco, Inc. Nevada
Palm Water Acquisition Corp. Delaware
Panborn Europe SpA Italy
Permtek Ltd. Hong Kong
Permutit (Egypt) Limited Egypt
Permutit Company Pty Limited, The Australia
Permutit New Zealand Limited New Zealand
Perrier Equipment S.A. France
Polymetrics Inc. of Delaware Delaware
Polymetrics, Inc. California
Polyteknika Engineering S.r.l. Italy
Posey Pure Corporation Texas
Presian Pty Limited Australia
ProComp, Inc. Delaware
Processos y Systemas de Separacion S.A. Spain
Puro Water Group, Inc. Delaware
Quality Assurance Management Ireland Ltd Ireland
Quality Assurance Management, Inc. California
R.B.S. Pension Trustees Limited UK
R.F. Schneider Pipe and Supply Company Pennsylvania
RJ Environmental, Inc. California
RWB Beheer B.V. Netherlands
RWB Belgium N.V./S.A. Belgium
Recon Verfahrenstechnik GmbH Germany
Ropes Corporation Indiana
Rossmark-van Wijk & Boerma Water Behandeling B.V. Netherlands
S.B. Technologies SARL F.G.P. Chaudronnerie France
SARL FGP France
SARL Traitement des eaux standard France
SMAR S.p.A. Italy
Sabino Water Treatment, Inc. Illinois
San Marco Bioenergie S.r.l. Italy
Sanilo, S.A. France
Sanitech Ireland
Sation S.L. Spain
Schlick Engineering Conin Sp.Z.oo Poland
Schlick France Sarl France
Schlick Polonia Sp.Z.oo Poland
Schlick-OLT, Prahs Spol.Sr.O. Czech Republic
Schlick-Roto-Jet Maschinenbau GmbH Germany
Schmidt Manufacturing, Inc. Texas
Sda Scarl Italy
Seitz Filtration (GB) Limited UK
Seitz Iberica SA (Spain) Spain
Seitz-Filter-Werke GmbH Germany
Seral Erich Alhuaser GmbH & Co. KG Germany
Servicios Filtermex, S.A. de C.V. Mexico
Sidener Supply Company Missouri
Silver Springs Water Co., Inc. Nevada
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE (COUNTRY)
NAME OF INCORPORATION
---- ----------------
<S> <C>
Societe HPD S.A. France
Societe des Ceramiques Techniques France
Spencer & Halstead Ltd. UK
St. George's Engineers Limited UK
Stammhaus Beteiligungs GmbH & Co KG Germany
Stranco Australia Pty Limited Australia
Stranco Credit Corp. Illinois
Stranco Foreign Sales Corporation Virgin Islands
Stranco Ltd UK
Stranco, Inc. Delaware
Submicron Products, Inc. California
Surface Finishing Company Kansas
Technipure, Inc. New Mexico
The International Water and Wastewater Treatment Co.
Limited Egypt
The Kinetics Group, Inc. Delaware
Thomas Willett & Co Limited UK
Tilghman (1988) Ltd UK
Tilghman (Broadheath) Ltd UK
Tilghman (Engineers) Limited UK
Tilghman Wheelabrator Limited UK
Tilghman Wheelabrator Ltd and Michael Charles Edward
Stuart UK
Tilghman Wheelabrator Special Products Ltd. UK
Transwater NWWPEL Sdn Bhd Malaysia
Tratax S.L. Spain
Trident Separation Technologies, Inc. Texas
Trinity Coast Sales Incorporated Texas
Trupar, Incorporated Ohio
Tyzack Maschinenmesser GmbH Germany
U.S. Filter (Australia)Pty Ltd Australia
U.S. Filter (Hong Kong) Limited Hong Kong
U.S. Filter (Malaysia) Sdn Bhd Singapore
U.S. Filter (Philippines), Inc. Philippines
U.S. Filter (Taiwan) Corporation Taiwan
U.S. Filter Argentina S.A. Argentina
U.S. Filter Asia Pacific Pte. Ltd. Singapore
U.S. Filter Asia Pte. Ltd. Singapore
U.S. Filter Capital Corporation Delaware
U.S. Filter Chile Limitada (Limited Liability Company
U.S. Filter Consumer Products, Inc. Delaware
U.S. Filter Control Systems, Inc. Delaware
U.S. Filter Cuernavaca S.A. de C.V. Mexico
U.S. Filter Distribution Acquisition Corporation Delaware
U.S. Filter Distribution Group, Inc. Georgia
U.S. Filter Do Brasil Ltda Brazil
U.S. Filter Farms GP, Inc. Delaware
U.S. Filter Farms LP, Inc. Delaware
U.S. Filter Finance, BV Netherlands
U.S. Filter Gestion Integral del Agua, S.A. de C.V. Mexico
U.S. Filter Latin America, Inc. Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE (COUNTRY)
NAME OF INCORPORATION
---- ----------------
<S> <C>
U.S. Filter Operating Services of Wilmington, Inc. Delaware
U.S. Filter Operating Services, Inc. Delaware
U.S. Filter Recovery Services (California), Inc. Delaware
U.S. Filter Recovery Services (Mid-Atlantic), Inc. Delaware
U.S. Filter Recovery Services (Southwest), Inc. Delaware
U.S. Filter Recovery Services, Inc. Delaware
U.S. Filter Servicios S.A. Argentina
U.S. Filter Servicos Ltda Brazil
U.S. Filter Sistemas de Colombia Colombia
U.S. Filter Sistemas de Venezuela, S.A. Venezuela
U.S. Filter Surface Preparation Group, Inc. Delaware
U.S. Filter Transportation Company Delaware
U.S. Filter Tratamento e Recuperacao de Residous Ltda Brazil
U.S. Filter Wastewater Group, Inc. Delaware
U.S. Filter Water Technologies (Shanghai) Co., Ltd China
U.S. Filter de Mexico, S.A. de C.V. Mexico
U.S. Filter/Acumem, Inc. Delaware
U.S. Filter/Asdor Limited Canada
U.S. Filter/BCP Acquisition Corporation Delaware
U.S. Filter/BZ Acquisition Corporation Delaware
U.S. Filter/Canada, Inc. Canada
U.S. Filter/Castalloy, Inc. Delaware
U.S. Filter/EOS of Ohio, Inc. Delaware
U.S. Filter/EOS of Wilmington L.L.C Delaware
U.S. Filter/Ionpure Inc. Massachusetts
U.S. Filter/JWI, Inc. Michigan
U.S. Filter/MPF Engineered Filter Products (Canada)
Inc. Canada
U.S. Filter/Marlboro, Inc. New Jersey
U.S. Filter/PETWA Ltd. Canada
U.S. Filter/PolyOzone, Inc. Colorado
U.S. Filter/Puerto Rico, Inc. Delaware
U.S. Filter/TWC Acquisition Corporation Delaware
U.S. Filter/USW, Inc. Delaware
U.S. Filter/VL Rampe, Inc. Michigan
U.S. Filter/Wallace & Tiernan, Inc. Delaware
U.S. Filter/Wheelabrator (Canada) Inc. Canada
U.S. Filter/Whittier, Inc. Delaware
U.S. Filter/Zimpro, Inc. Delaware
USF (Switzerland) Ltd. Switzerland
USF Acquisition Limited UK
USF Aquaflow OY Finland
USF Benelux BV Netherlands
USF Canada Inc. Canada
USF Deutschland GmbH Prozeb-und
Abwasseraufbereitungssysteme Germany
USF Euroholding S.A. Spain
USF Euroholding S.A. (Sociedad Unipersonal) Spain
USF Europe, A.E.I.E. Spain
USF Filtration and Separations Group, Inc. Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE (COUNTRY)
NAME OF INCORPORATION
---- ----------------
<S> <C>
USF Finance B.V. Netherlands
USF France S.A. France
USF Gutling GmbH Germany
USF Home Waterbehandeling BV Netherlands
USF Houseman B.V. Netherlands
USF Johnson and Mohammed Ali Barwani LLC Oman
USF Limited UK
USF Oberflachentechnik Beteiligungs GmbH Germany
USF Ponzini Acque S.r.l. Italy
USF Real Estate B.V. Netherlands
USF Smogless S.p.a. Italy
USF Spain S.A. Spain
USF Sverige Sweden
USF Two, Inc. Delaware
USF WaterGroup, Inc. Canada
USF/DLW Acquisition Corporation Delaware
USFC Acquisition Inc. Delaware
Vacu-Blast International Limited UK
Vessel Aircomp Srl Italy
Vessel Srl Italy
WMW Industries, Inc. Texas
Wallace & Tiernan Canada, Inc. Canada
Wallace & Tiernan GmbH Germany
Wallace & Tiernan Ltd. UK
Wallace & Tiernan Pacific Pty Ltd. Australia
Wallace & Tiernan SARL France
Water Systems, Inc. Nebraska
WaterGroup Inc. Nebraska
West Coast Holdings, Inc. California
Westates Carbon-Arizona, Inc. Arizona
Western Farms. L.P. California
Weylin Pty Limited Australia
Wheelabrator Asia-Pacific (Pte) Ltd. Singapore
Wheelabrator Clean Air Systems, Inc. Delaware
Wheelabrator Engineered Systems (Poland) Spoka z
organiczona odpowiedzialnoscia Poland
Wheelabrator Mexicana, S.A. de C.V. Mexico
Wheelabrator Servicios Ambientales, S.A. de C.V. Mexico
Wheelabrator Sisson Lehman S.A. France
Wheelabrator Technologies (UK) Limited UK
Wheelabrator Water Technologies (M) Sdn Bhd Malaysia
Wheelabrator Water Technologies (T) Co. Ltd. Taiwan
Wheelabrator Water Technologies International
Holdings, Inc. Delaware
Wheelabrator-Berger (Maschinenfabriken) GmbH Germany
Wheelabrator-Berger Stiftung GmbH Germany
</TABLE>
<PAGE>
EXHIBIT 23.0
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders
United States Filter Corporation:
We consent to incorporation by reference in the Registration Statements (No.
333-30783 and No. 333-45955) on Form S-8, the Registration Statements (No.
333-24465, No. 333-07759 and No. 333-45981) on Form S-3 and the Registration
Statements (No. 333-35189, No. 333-39711, No. 333-42463, No. 333-52487 and No.
333-52717) on Form S-4 of United States Filter Corporation of our report dated
June 1, 1998, relating to the consolidated balance sheets of United States
Filter Corporation as of March 31, 1997 and 1998, and the related consolidated
statements of operations, shareholders' equity, and cash flows and related
schedule for each of the years in the three-year period ended March 31, 1998,
which report appears in the March 31, 1998 Annual Report on Form 10-K of
United States Filter Corporation.
KPMG Peat Marwick LLP
Orange County, California
June 26, 1998
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statements (No.
333-30783, No. 333-45955) on Form S-8, the Registration Statement (No. 333-
24465, No. 333-07759, No. 333-45981) on Form S-3 and the Registration
Statements (No. 333-35189, No. 333-39711, No. 333-42463, No. 333-52487, No.
333-52717) on Form S-4 of United States Filter Corporation of our report dated
January 16, 1998, relating to the consolidated balance sheets of The Kinetics
Group, Inc. as of September 30, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 1997, included in the Annual
Report (Form 10-K) of United States Filter Corporation for the year ended
March 31, 1998.
Ernst & Young LLP
Walnut Creek, California
June 26, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS OF UNITED STATES FILTER
CORPORATION AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 48,673
<SECURITIES> 241
<RECEIVABLES> 761,856
<ALLOWANCES> (33,370)
<INVENTORY> 386,100
<CURRENT-ASSETS> 1,575,950
<PP&E> 1,005,649
<DEPRECIATION> (199,174)
<TOTAL-ASSETS> 3,597,844
<CURRENT-LIABILITIES> 984,174
<BONDS> 689,476
0
0
<COMMON> 1,074
<OTHER-SE> 1,292,336
<TOTAL-LIABILITY-AND-EQUITY> 3,597,844
<SALES> 3,234,580
<TOTAL-REVENUES> 3,234,580
<CGS> 2,456,173
<TOTAL-COSTS> 2,456,173
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,620
<INTEREST-EXPENSE> 53,887
<INCOME-PRETAX> (284,196)
<INCOME-TAX> 15,583
<INCOME-CONTINUING> (299,779)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (299,779)
<EPS-PRIMARY> (3.13)
<EPS-DILUTED> (3.13)
</TABLE>
