<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) February 9, 1998
----------------
UNITED STATES FILTER CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-10728 33-0266015
(Commission File Number) (IRS Employer Identification No.)
40-004 Cook Street
Palm Desert, CA 92211
(Address of Principal Executive Offices) (Zip Code)
(760) 340-0098
(Registrant's Telephone Number, including Area Code)
<PAGE>
ITEM 5. OTHER EVENTS
On February 9, 1998, United States Filter Corporation, a Delaware
corporation (the "Company"), issued the press release attached hereto as
Exhibit 99.1 announcing that it has entered into the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of February 9, 1998 among the Company,
Palm Water Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of the Company ("Merger Sub"), and Culligan Water Technologies, Inc.,
a Delaware corporation ("Culligan").
Pursuant to the Merger Agreement, Merger Sub will be merged with and into
Culligan (the "Merger"). In connection with the Merger, the Company will issue
in exchange for each issued and outstanding share (other than treasury shares
and shares owned by the Company) of Culligan common stock, par value $.01 per
share ("Culligan Common Stock"), 1.714 shares of common stock, par value $.01
per share of the Company ("Company Common Stock") if the average of the closing
prices of the shares of Company Common Stock as reported on the New York Stock
Exchange Composite Tape on each of the last ten trading days ending on the sixth
trading day prior to the date of the meeting of Culligan stockholders at which
the approval of the Merger by Culligan stockholders is obtained (the "Average
Share Price") is equal to or greater than $35 (the "Exchange Ratio"); provided,
however, that (i) if the Average Share Price is less than $35, but greater than
or equal to $32, then the Exchange Ratio shall be equal to the quotient obtained
(rounded to the nearest ten-thousandth of a share) by dividing $60 by the
Average Share Price; and (ii) if the Average Share Price is less than $32, the
Exchange Ratio shall be equal to 1.875. Among other circumstances, the Merger
Agreement may be terminated by Culligan if the Average Share Price, or if the
average of the closing prices of the shares of Company Common Stock as reported
on the New York Stock Exchange Composite Tape for any period of 10 consecutive
trading days which ends after the last trading day used in calculating the
Average Share Price, is less than $26.25.
The Merger will be accounted for as a pooling of interests and is intended
to qualify as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended. Consummation of the Merger is subject to
customary regulatory approvals and the approval of the stockholders of each of
the Company and Culligan. The Merger is expected to be consummated in the
first half of 1998.
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Apollo Investment Fund, L.P., a Delaware limited partnership and Lion
Advisors, L.P., a Delaware limited partnership, which beneficially own in the
aggregate 7,334,859 shares of Culligan Common Stock (representing approximately
28.5% of the total number of shares of common stock outstanding) have each
entered into a Support/Voting Agreement with the Company pursuant to which they
have agreed, among other things, to cause such shares of Culligan Common Stock
that they beneficially own to be voted in favor of the Merger.
In connection with the Merger Agreement, the Company has also entered into
a Registration Rights Agreement with certain Culligan Stockholders, providing
such Stockholders with registration rights with respect to Company Common Stock
to be issued to such Culligan Stockholders pursuant to the Merger.
The information set forth above is qualified in its entirety by reference
to the Merger Agreement, the Voting/Support Agreements and the Registration
Rights Agreement, copies of which are attached hereto as Exhibits and are
incorporated herein by reference.
ITEM 7(c) EXHIBITS
<TABLE>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<C> <S>
2.1 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.
99.1 Press release, dated as of February 9, 1998, of United
States Filter Corporation.
99.2 Support/Voting Agreement, dated as of February 9, 1998
between United States Filter Corporation and Apollo
Investment Fund, L.P.
99.3 Support/Voting Agreement, dated as of February 9, 1998
between United States Filter Corporation and Lion Advisors,
L.P.
99.4 Registration Rights Agreement, dated as of February 9, 1998,
by and among United States Filter Corporation and the
Persons and Entities Listed on the Signature Pages thereto.
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
Dated: February 10, 1998
UNITED STATES FILTER CORPORATION
By: /s/ Damian C. Georgino
------------------------------------
Name: Damian C. Georgino
Title: Senior Vice President, General
Counsel and Corporate Secretary
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<C> <S>
2.1 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.
99.1 Press release, dated as of February 9, 1998, of United States
Filter Corporation.
99.2 Support/Voting Agreement, dated as of February 9, 1998 between
United States Filter Corporation and Apollo Investment Fund,
L.P.
99.3 Support/Voting Agreement, dated as of February 9, 1998 between
United States Filter Corporation and Lion Advisors, L.P.
99.4 Registration Rights Agreement, dated as of February 9, 1998, by
and among United States Filter Corporation and the Persons and
Entities Listed on the Signature Pages thereto.
</TABLE>
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UNITED STATES FILTER CORPORATION
("USF"),
PALM WATER ACQUISITION CORP.
a wholly owned direct subsidiary of USF
("Subcorp"),
and
CULLIGAN WATER TECHNOLOGIES, INC.
("CULLIGAN")
FEBRUARY 9, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. THE MERGER......................................... 2
1.1 The Merger......................................... 2
1.2 Effective Time..................................... 2
1.3 Effects of the Merger.............................. 2
1.4 Certificate of Incorporation and Bylaws............ 2
1.5 Directors and Officers of the Surviving Corporation 3
1.6 Additional Actions................................. 3
ARTICLE II. CONVERSION OF SECURITIES .......................... 3
2.1 Conversion of Capital Stock........................ 3
2.2 Exchange Ratio; Fractional Shares; Adjustments..... 3
2.3 Exchange of Certificates........................... 4
(a) Exchange Agent................................ 4
(b) Exchange Procedures........................... 4
(c) Distributions with Respect to Unexchanged
Shares...................................... 5
(d) No Further Ownership Rights in Culligan
Common Stock................................ 5
(e) Termination of Exchange Fund.................. 6
(f) No Liability.................................. 6
(g) Investment of Exchange Fund................... 6
2.4 Treatment of Stock Options.......................... 6
ARTICLE III.REPRESENTATIONS AND WARRANTIES OF USF AND SUBCORP... 7
3.1 Organization and Standing........................... 7
3.2 Subsidiaries........................................ 7
3.3 Corporate Power and Authority....................... 7
3.4 Capitalization of USF and Subcorp................... 8
3.5 Conflicts; Consents and Approval.................... 8
3.6 Brokerage and Finder's Fees......................... 8
3.7 Accounting Matters; Reorganization.................. 8
3.8 USF SEC Documents................................... 10
3.9 Registration Statement.............................. 10
3.10 Compliance with Law................................. 10
3.11 Litigation.......................................... 11
3.12 Board Recommendation................................ 11
3.13 No Material Adverse Change.......................... 11
3.14 Title to Properties................................. 11
3.15 Undisclosed Liabilities............................. 11
3.16 Environmental Matters............................... 12
3.17 Opinions of Financial Advisors...................... 12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF CULLIGAN ......... 12
4.1 Organization and Standing........................... 13
4.2 Subsidiaries........................................ 13
4.3 Corporate Power and Authority...................... 13
4.4 Capitalization of Culligan......................... 13
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4.5 Conflicts; Consents and Approvals.................. 14
4.6 No Material Adverse Change......................... 15
4.7 Culligan SEC Documents............................. 15
4.8 Taxes.............................................. 15
4.9 Compliance with Law................................ 17
4.10 Intellectual Property.............................. 17
4.11 Title to Properties................................ 17
4.12 Registration Statement; Joint Proxy Statement...... 17
4.13 Litigation......................................... 18
4.14 Brokerage and Finder's Fees; Expenses.............. 18
4.15 Accounting Matters; Reorganization................. 18
4.16 Employee Benefit Plans............................. 18
4.17 Undisclosed Liabilities............................ 19
4.18 Environmental Matters.............................. 20
4.19 Opinions of Financial Advisors..................... 20
4.20 Board Recommendation............................... 20
4.21 Rights Agreement................................... 20
ARTICLE V. COVENANTS OF THE PARTIES .......................... 21
5.1 Mutual Covenants................................... 21
(a) HSR Act Filings; Reasonable Best Efforts;
Notification................................ 21
(b) Pooling-of-Interests.......................... 23
(c) Tax-Free Treatment............................ 23
(d) Public Announcements.......................... 23
(e) Other Matters................................. 23
5.2 Covenants of USF.................................... 24
(a) USF Stockholders Meeting...................... 24
(b) Preparation of Registration Statement......... 24
(c) Conduct of USF's Operations................... 24
(d) Indemnification; Directors' and Officers'
Insurance................................... 26
(e) Merger Sub.................................... 26
(f) NYSE Listing.................................. 26
(g) Access........................................ 26
(h) Board of Directors of USF..................... 27
(i) Affiliates of USF............................. 27
(j) Notification of Certain Matters............... 27
(k) Employees and Employee Benefits............... 27
(l) Press Release................................. 28
5.3 Covenants of Culligan.............................. 28
(a) Culligan Stockholders Meeting................. 28
(b) Information for the Registration Statement
and Preparation of Joint Proxy Statement.... 28
(c) Conduct of Culligan's Operations.............. 29
(d) No Solicitation............................... 31
(e) Termination Right............................. 32
(f) Affiliates of Culligan........................ 32
-ii-
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(g) Access........................................ 32
(h) Notification of Certain Matters............... 32
ARTICLE VI. CONDITIONS ........................................ 33
6.1 Conditions to the Obligations of Each Party........ 33
6.2 Conditions to Obligations of Culligan.............. 34
6.3 Conditions to Obligations of USF and Subcorp....... 34
ARTICLE VII.TERMINATION AND AMENDMENT.......................... 35
7.1 Termination........................................ 35
7.2 Effect of Termination.............................. 36
7.3 Amendment.......................................... 37
7.4 Special Payment.................................... 37
7.5 Exclusive Remedy................................... 38
7.6 Extension; Waiver.................................. 38
7.7 Cooling Off Period................................. 38
ARTICLE VIII.MISCELLANEOUS..................................... 39
8.1 Survival of Representations and Warranties......... 39
8.2 Notices............................................ 39
8.3 Interpretation..................................... 40
8.4 Counterparts....................................... 40
8.5 Entire Agreement................................... 40
8.6 Third Party Beneficiaries.......................... 41
8.7 Governing Law...................................... 41
8.8 Consent to Jurisdiction; Venue..................... 41
8.9 Specific Performance............................... 41
8.10 Assignment......................................... 41
8.11 Expenses........................................... 41
Exhibit A-1 Form of Culligan Affiliate Letter
Exhibit A-2 Form of USF Affiliate Letter
Exhibit B Provisions for Subcorp Certificate of Incorporation
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<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of the 9th day of February, 1998, by and among United States
Filter Corporation, a Delaware corporation ("USF"), Palm Water Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of USF ("Subcorp"),
and Culligan Water Technologies, Inc., a Delaware corporation ("Culligan").
PRELIMINARY STATEMENTS
A. USF desires to combine its water filtration business and other
businesses with the water filtration business and other businesses operated by
Culligan through the merger of Subcorp with and into Culligan, with Culligan as
the surviving corporation (the "Merger"), pursuant to which each share of
Culligan Common Stock (as defined in Section 4.4) outstanding at the Effective
Time (as defined in Section 1.2) will be converted into the right to receive
shares of USF Common Stock (as defined in Section 3.4) as more fully provided
herein.
B. The Board of Directors of Culligan has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Culligan and Culligan desires to combine its water filtration business and other
businesses with the water filtration and other businesses operated by USF and
for the holders of shares of Culligan Common Stock ("Culligan Stockholders") to
have a continuing equity interest in the combined USF/Culligan businesses
through the ownership of shares of USF Common Stock.
C. The Board of Directors of USF has determined that the Merger is
consistent with the long-term business strategy of USF.
D. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), by reason of Section 368(a)(2)(E)
thereof.
E. The parties intend that the Merger be accounted for as a
pooling-of-interests for financial reporting purposes.
F. The respective Boards of Directors of USF, Subcorp and Culligan
have determined the Merger in the manner contemplated herein to be desirable and
in the best interests of their respective shareholders and, by resolutions duly
adopted, have approved and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the mutual and
dependent promises hereinafter set forth, the parties hereto agree as follows:
<PAGE>
ARTICLE I.
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the provisions of the Delaware General Corporation Act
(the "DGCL"), Subcorp shall be merged with and into Culligan at the Effective
Time. As a result of the Merger, the separate corporate existence of Subcorp
shall cease and Culligan shall continue its existence under the laws of the
State of Delaware. Culligan, in its capacity as the corporation surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.2. Effective Time. As promptly as possible on the Closing Date (as
defined below), the parties shall cause the Merger to be consummated by filing
with the Secretary of State of the State of Delaware (the "Delaware Secretary of
State") a certificate of merger (the "Certificate of Merger") in such form as is
required by and executed in accordance with Section 251 of the DGCL. The Merger
shall become effective (the "Effective Time") when the Certificate of Merger has
been filed with the Delaware Secretary of State or at such later time as shall
be agreed upon by USF and Culligan and specified in the Certificate of Merger.
Prior to the filing referred to in this Section 1.2, a closing (the "Closing")
shall be held at such place as the parties may agree as soon as practicable (but
in any event within two business days) following the date upon which all
conditions set forth in Article VI hereof have been satisfied or waived, or at
such other date as USF and Culligan may agree; provided, that the conditions set
forth in Article VI have been satisfied or waived at or prior to such date. The
date on which the Closing takes place is referred to herein as the "Closing
Date." For all tax purposes, the Closing shall be effective at the end of the
day on the Closing Date.
1.3. Effects of the Merger. From and after the Effective Time, the
Merger shall have the effects set forth in Section 259 of the DGCL.
1.4. Certificate of Incorporation and Bylaws. At the Effective Time
(i) the Certificate of Incorporation of the Surviving Corporation as in effect
immediately prior to the Effective Time shall be amended as of the Effective
Time so as to contain the provisions, and only the provisions, contained
immediately prior thereto in the Amended and Restated Certificate of
Incorporation of Subcorp, except for Article I thereof which shall continue to
read "The name of the corporation is 'CULLIGAN WATER TECHNOLOGIES, INC.'", and
(ii) the Bylaws of Culligan in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation; in each case until amended in
accordance with applicable law. As soon as practicable after the date hereof,
USF shall cause Subcorp to amend the Certificate of Incorporation to add the
provisions set forth in Exhibit B to this Agreement (the "Additional
Provisions"). USF agrees not to amend the Additional Provisions included in the
Amended and Restated Certificate of Incorporation of the Surviving Corporation
or Article VIII of the Bylaws of the Surviving Corporation, in each case for a
period of at least six years from the Effective Time, except to make such
provisions more favorable to current or former directors and officers.
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<PAGE>
1.5. Directors and Officers of the Surviving Corporation. From and
after the Effective Time, the officers of Culligan shall be the officers of the
Surviving Corporation and the directors of Subcorp shall be the directors of the
Surviving Corporation, in each case until their respective successors are duly
elected and qualified.
1.6. Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Culligan, or (b) otherwise carry out the provisions of
this Agreement, Culligan and its officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to execute
and deliver all such deeds, assignments or assurances in law and to take all
acts necessary, proper or desirable to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the provisions of this Agreement, and the officers and
directors of the Surviving Corporation are authorized in the name of Culligan or
otherwise to take any and all such action.
ARTICLE II.
CONVERSION OF SECURITIES
2.1. Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of USF, Subcorp or Culligan or
their respective shareholders:
(a) Each share of common stock, $0.01 par value, of Subcorp issued
and outstanding immediately prior to the Effective Time shall be converted
into one share of common stock, $0.01 par value, of the Surviving
Corporation. Such newly issued shares shall thereafter constitute all of
the issued and outstanding capital stock of the Surviving Corporation.
(b) Subject to the other provisions of this Article II, each share of
Culligan Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into and represent a number of shares of
USF Common Stock equal to the Exchange Ratio (as defined in Section
2.2(a)).
(c) Each share of capital stock of Culligan held in the treasury of
Culligan shall be cancelled and retired and no payment shall be made in
respect thereof.
2.2. Exchange Ratio; Fractional Shares; Adjustments.
(a) The "Exchange Ratio" shall be equal to: 1.714 if the average of
the closing prices of the shares of USF Common Stock as reported on the New York
Stock Exchange ("NYSE") Composite Tape ("NYSE Composite Tape") on each of the
last ten trading days ending on the sixth trading day prior to the date of the
meeting of Culligan Stockholders at which the approval of the Merger by the
Culligan stockholders is obtained (the "Average Share Price") is equal to or
greater than $35; provided, however, that(i) if the Average Share Price is less
than
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$35, but greater than or equal to $32, then the Exchange Ratio shall be equal to
the quotient obtained (rounded to the nearest ten-thousandth of a share) by
dividing $60 by the Average Share Price; and (ii) if the Average Share Price is
less than $32, the Exchange Ratio shall be equal to 1.875. No certificates for
fractional Shares of USF Common Stock shall be issued as a result of the
conversion provided for in Section 2.1(b).
(b) In lieu of any such fractional shares, the holder of a
certificate previously evidencing Culligan Common Stock, upon presentation of
such fractional interest represented by an appropriate certificate for Culligan
Common Stock to the Exchange Agent pursuant to Section 2.3, shall be entitled to
receive a cash payment therefor in an amount equal to the value (determined with
reference to the closing price of shares of USF Common Stock as reported on the
NYSE Composite Tape on the last full trading day immediately prior to the
Closing Date) of such fractional interest. Such payment with respect to
fractional shares is merely intended to provide a mechanical rounding off of,
and is not a separately bargained for, consideration. If more than one
certificate representing shares of Culligan Common Stock shall be surrendered
for the account of the same holder, the number of shares of USF Common Stock for
which certificates have been surrendered shall be computed on the basis of the
aggregate number of shares represented by the certificates so surrendered.
(c) In the event that prior to the Effective Time USF shall declare a
stock dividend or other distribution payable in Shares of USF Common Stock or
securities convertible into shares of USF Common Stock, or effect a stock split,
reclassification, combination or other change with respect to shares of USF
Common Stock, the Exchange Ratio set forth in this Section 2.2 and the price set
forth in Section 7.1(h) shall each be adjusted to reflect such dividend,
distribution, stock split, reclassification, combination or other change.
2.3. Exchange of Certificates.
(a) Exchange Agent. Promptly following the Effective Time, USF shall
deposit with American Stock Transfer & Trust Company or such other exchange
agent as may be designated by USF (the "Exchange Agent"), for the benefit of
Culligan Stockholders, for exchange in accordance with this Section 2.3,
certificates representing shares of USF Common Stock issuable pursuant to
Section 2.1 in exchange for outstanding shares of Culligan Common Stock and
shall from time-to-time deposit cash in an amount reasonably expected to be paid
pursuant to Section 2.2 (such shares of USF Common Stock and cash, together with
any dividends or distributions with respect thereto, being hereinafter referred
to as the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the Effective
Time, USF shall instruct the Exchange Agent to mail to each holder of record of
a certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of Culligan Common Stock whose
shares were converted into the right to receive shares of USF Common Stock
pursuant to Section 2.1(b), (i) a letter of transmittal (the form and substance
of which shall have been reasonably approved by Culligan prior to the Effective
Time and which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of the Certificates
to the Exchange Agent and shall be in such form and have such other customary
provisions as USF may reasonably specify) and (ii) instructions for effecting
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<PAGE>
the surrender of the Certificates in exchange for certificates representing
Shares of USF Common Stock. Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with a duly executed letter of transmittal, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate or certificates representing that whole number of shares of USF
Common Stock which such holder has the right to receive pursuant to Section 2.1
in such denominations and registered in such names as such holder may request
and (y) a check representing the amount of cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, which such holder has the
right to receive pursuant to the provisions of this Article II, after giving
effect to any required withholding tax. The shares represented by the
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, payable to holders of shares of Culligan
Common Stock. In the event of a transfer of ownership of shares of Culligan
Common Stock which is not registered on the transfer records of Culligan, a
certificate representing the proper number of shares of USF Common Stock,
together with a check for the cash to be paid in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, may be issued to such
transferee if the Certificate representing such shares of Culligan Common Stock
held by such transferee is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon surrender a
certificate representing shares of USF Common Stock and cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any, as
provided in this Article II.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding
any other provisions of this Agreement, no dividends or other distributions
declared or made after the Effective Time with respect to shares of USF Common
Stock having a record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate, and no cash payment in lieu of fractional
shares shall be paid to any such holder, until the holder shall surrender such
Certificate as provided in this Section 2.3. Subject to the effect of Applicable
Laws (as defined in Section 3.10), following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole shares
of USF Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of USF Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date subsequent to surrender, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
shares of USF Common Stock, less the amount of any withholding taxes which may
be required thereon.
(d) No Further Ownership Rights in Culligan Common Stock. All shares
of USF Common Stock issued upon surrender of Certificates in accordance with the
terms hereof (including any cash paid pursuant to this Article II) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Culligan Common Stock represented thereby, and there shall be no
further registration of transfers on the stock transfer books of Culligan of
shares of Culligan Common Stock outstanding immediately prior to the Effective
Time. If, after
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<PAGE>
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in this Section
2.3.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to Culligan Stockholders twelve months after the
date of the mailing required by Section 2.3(b) shall be delivered to USF, upon
demand therefor, and holders of Certificates previously representing shares of
Culligan Common Stock who have not theretofore complied with this Section 2.3
shall thereafter look only to USF for payment of any claim to shares of USF
Common Stock, cash in lieu of fractional shares thereof, or dividends or
distributions, if any, in respect thereof.
(f) No Liability. None of USF, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares of
Culligan Common Stock (or dividends or distributions with respect thereto) or
cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by USF, on a daily basis. Any
interest and other income resulting from such investments shall be paid to USF
upon termination of the Exchange Fund pursuant to Section 2.3(e).
2.4. Treatment of Stock Options.
(a) Prior to the Effective Time, USF and Culligan shall take all such
actions as may be necessary to cause each unexpired and unexercised option under
stock option plans of Culligan in effect on the date hereof which has been
granted to current or former directors, officers or employees of Culligan by
Culligan (or which has been granted by Culligan prior to the Effective Time
pursuant to agreements in compliance with the terms of this Agreement) (each, a
"Culligan Option") to be automatically converted at the Effective Time into an
option (a "USF Exchange Option") to purchase that number of Shares of USF Common
Stock equal to the number of shares of Culligan Common Stock issuable
immediately prior to the Effective Time upon exercise of the Culligan Option
(without regard to actual restrictions on exercisability) multiplied by the
Exchange Ratio, with an exercise price equal to the exercise price which existed
under the corresponding Culligan Option divided by the Exchange Ratio, and with
other terms and conditions that are the same as the terms and conditions of such
Culligan Option immediately before the Effective Time; provided that with
respect to any Culligan Option that is an "incentive stock option" within the
meaning of Section 422 of the Code, the foregoing conversion shall be carried
out in a manner satisfying the requirements of Section 424(a) of the Code. In
connection with the issuance of USF Exchange Options, USF shall (i) reserve for
issuance the number of Shares of USF Common Stock that will become subject to
USF Exchange Options pursuant to this Section 2.4 and (ii) from and after the
Effective Time, upon exercise of USF Exchange Options, make available for
issuance all Shares of USF Common Stock covered thereby, subject to the terms
and conditions applicable thereto.
(b) Culligan agrees to issue treasury shares of Culligan, to the
extent available, upon the exercise of Culligan Options prior to the Effective
Time.
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(c) USF agrees to use its reasonable efforts to file with the
Securities and Exchange Commission (the "Commission") within 10 business days
after the Closing Date a registration statement on Form S-8 or other appropriate
form under the Securities Act to register shares of USF Common Stock issuable
upon exercise of the USF Exchange Options and use its reasonable efforts to
cause such registration statement to remain effective until the exercise or
expiration of such options.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF USF AND SUBCORP
In order to induce Culligan to enter into this Agreement, USF and
Subcorp hereby represent and warrant to Culligan as follows:
3.1. Organization and Standing. Each of USF and Subcorp is a
corporation duly organized, validly existing and in good standing under the DGCL
with full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Each of USF and Subcorp is duly qualified to do business
and in good standing in each jurisdiction in which the nature of the business
conducted by it or the property it owns, leases or operates, makes such
qualification necessary, except where the failure to be so qualified or in good
standing in such jurisdiction would not reasonably be expected to have a
Material Adverse Effect (as defined in Section 8.3) on USF. USF is not in
default in the performance, observance or fulfillment of any provision of its
Restated Certificate of Incorporation, as amended (the "USF Certificate"), or
its Restated Bylaws (the "USF Bylaws"), and Subcorp is not in default in the
performance, observance or fulfillment of any provisions of its Amended and
Restated Certificate of Incorporation or Bylaws. USF has heretofore furnished to
Culligan a complete and correct copy of the USF Certificate and USF Bylaws.
3.2. Subsidiaries. Except as set forth in Section 3.2 to the
disclosure schedule delivered by USF to Culligan and dated the date hereof (the
"USF Disclosure Schedule"), USF owns directly or indirectly each of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such subsidiary) of each of USF's
subsidiaries.
3.3. Corporate Power and Authority. Each of USF and Subcorp has all
requisite corporate power and authority to enter into and deliver this
Agreement, subject to approval of the issuance of shares of USF Common Stock
issuable in the Merger and the transactions contemplated hereby by the USF
Stockholders, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of each of USF and
Subcorp, subject to approval by the USF Stockholders of the issuance of shares
of USF Common Stock in the Merger. This Agreement has been duly executed and
delivered by each of USF and Subcorp, and constitutes the legal, valid and
binding obligation of each of Subcorp and USF enforceable against each of them
in accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insol-
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vency, reorganization, moratorium or other similar laws affecting or relating to
creditors' rights generally and (ii) the availability of injunctive relief and
other equitable remedies.
3.4. Capitalization of USF and Subcorp.
(a) As of February 1, 1998, USF's authorized capital stock consisted
solely of (a) 300,000,000 shares of common stock, par value $.01 per share ("USF
Common Stock"), of which (i) 105,979,930 shares were issued and outstanding,
(ii) no shares were issued and held in treasury (except as set forth in Section
3.4 to the USF Disclosure Schedule) and (iii) except as set forth in Section 3.4
to the USF Disclosure Schedule, no shares were reserved for issuance upon the
exercise or conversion of options, warrants or convertible securities granted or
issuable by USF, and (b) 3,000,000 shares of Preferred Stock, par value $.10 per
share, none of which was issued and outstanding or reserved for issuance. Each
outstanding share of USF capital stock is, and all shares of USF Common Stock to
be issued in connection with the Merger will be, duly authorized and validly
issued, fully paid and nonassessable, and, except as set forth in Section 3.4 to
the USF Disclosure Schedule, each outstanding share of USF capital stock has not
been, and all Shares of USF Common Stock to be issued in connection with the
Merger will not be, issued in violation of any preemptive or similar rights and
holders of shares of USF Common Stock, as such, have no conversion, preemptive
or other subscription rights, and there are no redemption or sinking fund
provisions applicable to the USF Common Stock. As of the date hereof, other than
as set forth in the first sentence hereof or in Section 3.4 to the USF
Disclosure Schedule, there are no outstanding subscriptions, options, warrants,
puts, calls, agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale, repurchase, transfer or registration
by USF of any equity securities of USF, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of capital stock of
USF and neither USF nor any USF subsidiary has any obligation of any kind to
issue any additional securities or to pay for or repurchase any securities of
USF, its subsidiaries or its or their predecessors. The shares of USF Common
Stock (including those shares to be issued in the Merger) are registered under
the Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act"). Except as set forth in Section 3.4
to the USF Disclosure Schedule, USF has no agreement, arrangement or
understanding to register any securities of USF or any of its subsidiaries under
the Securities Act or under any state securities law and has not granted
registration rights to any person or entity (other than agreements, arrangements
or understandings with respect to registration rights that are no longer in
effect as of the date of this Agreement); copies of all such agreements have
previously been provided to Culligan.
(b) Subcorp's authorized capital stock consists solely of 1,000
shares of Common Stock, par value $.01 per share ("Subcorp Common Stock"), of
which, as of the date hereof, 1,000 were issued and outstanding and none were
reserved for issuance. As of the date hereof, all of the outstanding shares of
Subcorp Common Stock are owned, beneficially and of record, by USF free and
clear of any liens, claims or encumbrances.
3.5. Conflicts; Consents and Approval. Neither the execution and
delivery of this Agreement by USF or Subcorp nor the consummation of the
transactions contemplated hereby will:
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(a) conflict with, or result in a breach of any provision of the USF
Certificate or USF Bylaws or the Amended and Restated Certificate of
Incorporation or Bylaws of Subcorp, subject to approval by the USF
Stockholders of the issuance of shares of USF Common Stock in the Merger;
(b) except as set forth in Section 3.5 to the USF Disclosure Schedule,
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or en-
title any party (with the giving of notice, the passage of time or other-
wise) to terminate, accelerate, modify or call a default under, or result
in the creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of USF or any of its subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking, agreement, lease
or other instrument or obligation to which USF or any of its subsidiaries
is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to USF or any of its subsidiaries or any of their
respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by USF or any of its affiliates with, any third
party or any local, domestic, foreign or multi-national court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (a "Governmental
Authority"), other than (i) approval by the USF Stockholders of the
issuance of the shares of USF Common Stock to be issued in the Merger,
(ii) authorization for inclusion of the Shares of USF Common Stock to be
issued in the Merger and the transactions contemplated hereby on the NYSE,
subject to official notice of issuance, (iii) actions required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act") or any
applicable foreign Antitrust Law (as defined in Section 5.1(a)), (iv)
registrations or other actions required under federal and state securities
laws as are contemplated by this Agreement, or (v) consents or approvals
of any Governmental Authority set forth in Section 3.5 to the USF
Disclosure Schedule;
except in the case of (b), (c) and (d) for any of the foregoing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on USF or a material adverse effect on the ability of the parties
to consummate the Merger.
3.6. Brokerage and Finder's Fees. Except for USF's obligations to
Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Smith Barney,
neither USF nor any shareholder, director, officer or employee thereof has
incurred or will incur on behalf of USF any brokerage, finder's or similar fee
in connection with the transactions contemplated by this Agreement.
3.7. Accounting Matters; Reorganization. Neither USF nor any of its
affiliates has taken or agreed to take any action that (without giving effect to
any actions taken or agreed to be taken by Culligan or any of its affiliates)
would (a) prevent USF from accounting for the business
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combination to be effected by the Merger as a pooling-of-interests for financial
reporting purposes or (b) prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
3.8. USF SEC Documents. USF has timely filed with the Commission all
forms, reports, schedules, statements and other documents required to be filed
by it since January 1, 1996 under the Exchange Act or the Securities Act of
1933, as amended (the "Securities Act") (such documents, as supplemented and
amended since the time of filing, collectively, the "USF SEC Documents"). The
USF SEC Documents, including, without limitation, any financial statements or
schedules included therein, at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of
mailing, respectively) (a) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (b) complied in all material respects
with the applicable requirements of the Exchange Act and the Securities Act, as
the case may be. The financial statements of USF included in the USF SEC
Documents at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission), and fairly
present (subject in the case of unaudited statements to normal, recurring audit
adjustments) the consolidated financial position of USF and its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
3.9. Registration Statement. None of the information provided by USF
in writing for inclusion in the registration statement on Form S-4 (such
registration statement as amended, supplemented or modified, the "Registration
Statement") to be filed with the Commission by USF under the Securities Act,
including the prospectus relating to Shares of USF Common Stock to be issued in
the Merger (as amended, supplemented or modified, the "Prospectus") and the
joint proxy statement and form of proxies relating to the vote of Culligan
Stockholders with respect to the Merger and the vote of USF Stockholders with
respect to the issuance of shares of USF Common Stock in the Merger (as amended,
supplemented or modified, the "Joint Proxy Statement"), at the time the
Registration Statement becomes effective or, in the case of the Joint Proxy
Statement, at the date of mailing and at the date of the Culligan Stockholders
Meeting or the USF Stockholders Meeting (each, as hereinafter defined) to
consider the Merger and the transactions contemplated thereby, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. Each of
the Registration Statement and Joint Proxy Statement, except for such portions
thereof that relate only to Culligan, will comply as to form in all material
respects with the provisions of the Securities Act and Exchange Act.
3.10. Compliance with Law. USF and its subsidiaries are in compliance
with, and at all times since January 1, 1996 have been in compliance with, all
applicable laws, statutes,
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orders, rules, regulations or policies promulgated, or judgments, decisions or
orders entered by any Governmental Authority (all such laws, statutes, orders,
rules, regulations, policies, judgments, decisions and orders, collectively,
"Applicable Laws"), relating to USF, its subsidiaries or their respective
business or properties, except where the failure to be in compliance therewith
(individually or in the aggregate) would not reasonably be expected to have a
Material Adverse Effect on USF or where such non-compliance has been cured.
Except as set forth in the USF SEC Documents, no investigation or review by any
Governmental Authority with respect to USF or its subsidiaries is pending, or,
to the knowledge of USF, threatened, nor has any Governmental Authority
indicated in writing an intention to conduct the same, other than those the
outcome of which would not reasonably be expected to have a Material Adverse
Effect on USF.
3.11. Litigation. Except as set forth in the USF SEC Documents, there
is no suit, claim, action, proceeding or investigation (an "Action") pending or,
to the knowledge of USF, threatened against USF or any of its subsidiaries
which, individually or in the aggregate, would have a Material Adverse Effect on
USF or a material adverse effect on the ability of USF to consummate the
transactions contemplated hereby. Neither USF nor any of its subsidiaries is
subject to any outstanding order, writ, injunction or decree which, individually
or in the aggregate, insofar as can be reasonably foreseen, could have a
Material Adverse Effect on USF or a material adverse effect on the ability of
USF to consummate the Merger.
3.12. Board Recommendation. The Board of Directors of USF, at a
meeting duly called and held, has by unanimous vote of those directors present
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, taken together, are fair to and in the best interests of
USF and the USF Stockholders, and (ii) resolved to recommend that the USF
Stockholders approve and authorize the issuance of shares of USF Common Stock in
the Merger.
3.13. No Material Adverse Change. Except as disclosed in the USF SEC
Documents filed prior to the date of this Agreement, since March 31, 1997, there
has been no change in the business or financial condition of USF which would
constitute a Material Adverse Effect on USF or any event, occurrence or
development which would have a material adverse effect on the ability of USF to
consummate the Merger.
3.14. Title to Properties. USF and its subsidiaries own or hold under
valid leases all real property, plants, machinery and equipment necessary for
the conduct of the business of USF and its subsidiaries as presently conducted,
except where the failure to own or so hold such property, plants, machinery and
equipment would not reasonably be expected to have a Material Adverse Effect on
USF.
3.15. Undisclosed Liabilities. Except (i) as and to the extent
disclosed or reserved against on the restated consolidated balance sheet of USF
as of March 31, 1997 included in the USF SEC Documents, (ii) as incurred after
the date thereof in the ordinary course of business consistent with prior
practice and not prohibited by this Agreement or (iii) as set forth in Section
3.15 to the USF Disclosure Schedule, USF, together with its subsidiaries, does
not have any liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due,
required by generally accepted
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<PAGE>
accounting principles to be recognized or disclosed on a consolidated balance
sheet of USF and its consolidated subsidiaries or in the notes thereto and
which, individually or in the aggregate, have or would have a Material Adverse
Effect on USF.
3.16. Environmental Matters. Except for matters disclosed in the USF
SEC Documents and except for matters that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on USF, (a)
the properties, operations and activities of USF and its subsidiaries are in
compliance with all applicable Environmental Laws (as defined below) and all
past noncompliance of USF or any USF subsidiary with any Environmental Laws or
Environmental Permits (as defined below) that has been resolved with any
Governmental Authority has been resolved without any pending, ongoing or future
obligation, cost or liability; (b) USF and its subsidiaries and the properties
and operations of USF and its subsidiaries are not subject to any existing,
pending or, to the knowledge of USF, threatened action, suit, investigation,
inquiry or proceeding by or before any court or governmental authority under any
Environmental Law; (c) there has been no release of any hazardous substance,
pollutant or contaminant into the environment by USF or its subsidiaries or in
connection with their properties or operations; and (d) to the best of USF's
knowledge, there has been no exposure of any person or property to any hazardous
substance, pollutant or contaminant in connection with the properties,
operations and activities of USF and its subsidiaries. The term "Environmental
Laws" means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or industrial,
toxic or hazardous substances or wastes (collectively, "Hazardous Materials")
into the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder, as in effect on the date hereof. "Environmental Permit" means any
permit, approval, identification number, license or other authorization required
under or issued pursuant to any applicable Environmental Law.
3.17. Opinions of Financial Advisors. USF has received the written
opinions of Donaldson, Lufkin & Jenrette Securities Corporation and Salomon
Smith Barney, its financial advisors, to the effect that, as of the date of this
Agreement, the Exchange Ratio is fair to the USF Stockholders from a financial
point of view, USF has heretofore provided copies of such opinion to Culligan
and such opinion has not been withdrawn or restated or modified in any material
respect.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF CULLIGAN
In order to induce Subcorp and USF to enter into this Agreement,
Culligan hereby represents and warrants to USF and Subcorp as follows:
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4.1. Organization and Standing. Culligan is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to own, lease, use and operate
its properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Each of Culligan and each subsidiary of Culligan is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns, leases or
operates requires it to so qualify, except where the failure to be so qualified
or in good standing in such jurisdiction would not reasonably be expected to
have a Material Adverse Effect on Culligan. Culligan is not in default in the
performance, observance or fulfillment of any provision of its Amended and
Restated Certificate of Incorporation, as amended and restated (the "Culligan
Certificate"), or its Bylaws, as in effect on the date hereof (the "Culligan
Bylaws"). Culligan has heretofore furnished to USF a complete and correct copy
of the Culligan Certificate and the Culligan Bylaws.
4.2. Subsidiaries. Culligan does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except for the subsidiaries and other
entities set forth in Section 4.2 to the disclosure schedule delivered by
Culligan to USF and dated the date hereof (the "Culligan Disclosure Schedule").
Except as set forth in Section 4.2 to the Culligan Disclosure Schedule, Culligan
owns directly or indirectly each of the outstanding shares of capital stock (or
other ownership interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with respect to
such subsidiary) of each of Culligan's subsidiaries. Each of the outstanding
shares of capital stock of each of Culligan's subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and is owned, directly or
indirectly, by Culligan free and clear of all liens, pledges, security
interests, claims or other encumbrances. Other than as set forth in Section 4.2
to the Culligan Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance, sale or transfer of
any securities of any subsidiary of Culligan, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock of any subsidiary of Culligan, and neither Culligan nor any subsidiary of
Culligan has any obligation of any kind to issue any additional securities of
any subsidiary of Culligan or to pay for or repurchase any securities of any
subsidiary of Culligan or any predecessor thereof.
4.3. Corporate Power and Authority. Culligan has all requisite
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and, subject to approval of the Merger by the
Culligan Stockholders, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Culligan have been
duly authorized by all necessary corporate action on the part of Culligan,
subject to approval of the Merger and the transactions contemplated hereby by
Culligan Stockholders. This Agreement has been duly executed and delivered by
Culligan and constitutes the legal, valid and binding obligation of Culligan
enforceable against it in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors' rights
generally and (ii) the availability of injunctive relief and other equitable
remedies.
4.4. Capitalization of Culligan. As of February 5, 1998, Culligan's
authorized capital stock consisted solely of (a) 60,000,000 shares of common
stock, par value $.01 per share
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("Culligan Common Stock"), of which (i) 25,710,809 shares were issued and
outstanding, (ii) no shares were issued and held in treasury (which does not
include the shares reserved for issuance set forth in clause (iii) below) and no
shares were held by subsidiaries of Culligan, and (iii) 2,815,995 shares were
reserved for issuance upon the exercise of outstanding options, issuance of
shares pursuant to Culligan's Directors' Stock Plan and for a working capital
adjustment in connection with an acquisition, and no shares were reserved for
issuance upon the conversion or exchange of convertible or exchangeable
securities granted or issued by Culligan; and (b) 2,000,000 shares of preferred
stock, par value ("Culligan Preferred Stock"), none of which was issued and
outstanding or reserved for issuance, except for a series of 300,000 shares of
Culligan Preferred Stock designated as Series A Junior Participating Preferred
Stock reserved for issuance pursuant to the Culligan Rights Agreement (as
defined in Section 4.21), none of which was issued and outstanding. Each
outstanding share of Culligan capital stock is duly authorized and validly
issued, fully paid and nonassessable, and has not been issued in violation of
any preemptive or similar rights. Other than as set forth in the first sentence
hereof or in Section 4.4 to the Culligan Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale, repurchase or transfer by Culligan of any securities of
Culligan, nor are there outstanding any securities which are convertible into or
exchangeable for any shares of capital stock of Culligan, and neither Culligan
nor any subsidiary of Culligan has any obligation of any kind to issue any
additional securities or to pay for or repurchase any securities of Culligan or
any predecessor. Except as set forth in Section 4.4 to the Culligan Disclosure
Schedule, Culligan has no agreement, arrangement or understandings to register
any securities of Culligan or any of its subsidiaries under the Securities Act
or under any state securities law and has not granted registration rights to any
person or entity (other than agreements, arrangements or understandings with
respect to registration rights that are no longer in effect as of the date of
this Agreement); copies of all such agreements have previously been provided to
USF.
4.5. Conflicts; Consents and Approvals. Neither the execution and
delivery of this Agreement by Culligan, nor the consummation of the transactions
contemplated hereby or thereby will:
(a) conflict with, or result in a breach of any provision of, the
Culligan Certificate or the Culligan Bylaws;
(b) except as set forth in Section 4.5 to the Culligan Disclosure
Schedule, violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the giving
of notice, the passage of time or otherwise, would constitute a default)
under, or entitle any party (with the giving of notice, the passage of
time or otherwise) to terminate, accelerate, modify or call a default
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Culligan under, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking, agreement, lease
or other instrument or obligation to which Culligan or any of its
subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Culligan or any of its subsidiaries or any of
their respective properties or assets; or
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(d) require any action or consent or approval of, or review by, or
registration or filing by Culligan or any of its affiliates with, any
third party or any Governmental Authority, other than (i) approval of the
Merger and the transactions contemplated hereby by Culligan Stockholders,
(ii) actions required by the HSR Act or any applicable foreign Antitrust
Laws, (iii) registrations or other actions required under federal and
state securities laws as are contemplated by this Agreement and (iv)
consents or approvals of any Governmental Authority set forth in Section
4.5 to the Culligan Disclosure Schedule;
except in the case of (b), (c) and (d) for any of the foregoing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Culligan or a material adverse effect on the ability of the
parties to consummate the Merger.
4.6. No Material Adverse Change. Except as disclosed in the Culligan
SEC Documents (as defined in Section 4.7 hereof) filed prior to the date of this
Agreement or in Section 4.6 to the Culligan Disclosure Scheudle, since January
31, 1997, there has been no change in the business or financial condition of
Culligan which would constitute a Material Adverse Effect on Culligan or any
event, occurrence or development which would have a material adverse effect on
the ability of Culligan to consummate the Merger.
4.7. Culligan SEC Documents. Culligan has timely filed with the
Commission all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1996 under the Exchange Act or the
Securities Act (such documents, as supplemented and amended since the time of
filing, collectively, the "Culligan SEC Documents"). The Culligan SEC Documents,
including, without limitation, any financial statements or schedules included
therein, at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) except as set forth in Section 4.7 to
the Culligan Disclosure Schedule, complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be. The financial statements of Culligan included in the Culligan SEC
Documents at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission), and fairly
present (subject in the case of unaudited statements to normal, recurring audit
adjustments) the consolidated financial position of Culligan and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
4.8. Taxes. Except as set forth in Section 4.8 to the Culligan
Disclosure Schedule and except for such matters that would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Culligan:
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(a) Culligan and its subsidiaries (i) have duly filed all federal,
state, local and foreign income, franchise, excise, real and personal
property and other Tax Returns and reports (including, but not limited to,
those filed on a consolidated, combined or unitary basis) required to have
been filed by Culligan or its subsidiaries prior to the date hereof; (ii)
have within the time and manner prescribed by Applicable Law paid or,
prior to the Effective Time, will pay all Taxes, interest and penalties
required to be paid pursuant to such returns or reports; and (iii) have
adequate reserves on their financial statements for any Taxes in excess of
the amounts so paid. Neither Culligan nor any of its subsidiaries is the
subject of any currently ongoing Tax audit. As of the date of this
Agreement, there are no pending requests for waivers of the time to assess
any Tax, other than those made in the ordinary course and for which
payment has been made or there are adequate reserves. With respect to any
taxable period ended prior to January 1, 1994, all federal income Tax
Returns including Culligan or any of its subsidiaries have been audited by
the Internal Revenue Service or are closed by the applicable statute of
limitations. Neither Culligan nor any of its subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency. There are no liens
with respect to Taxes upon any of the properties or assets, real or
per sonal, tangible or intangible of Culligan or any of its subsidiaries
(other than liens for Taxes not yet due). Culligan has not filed an
election under Section 341(f) of the Code to be treated as a consenting
corporation.
(b) Neither Culligan nor any of its subsidiaries is obligated by any
contract, agreement or other arrangement to indemnify any other person
with respect to Taxes. Neither Culligan nor any of its subsidiaries are
now or have ever been a party to or bound by any agreement or arrangement
(whether or not written and including, without limitation, any arrangement
required or permitted by law) binding Culligan or any of its subsidiaries
which (i) requires Culligan or any of its subsidiaries to make any Tax
payment to (other than payments made prior to October 31, 1997 or payments
which are adequately reserved on Culligan's balance sheet as of January
31, 1997 included in the Culligan SEC Documents) or for the account of any
other person, or (ii) affords any other person the benefit of any net
operating loss, net capital loss, investment Tax credit, foreign Tax
credit, charitable deduction or any other credit or Tax attribute which
could reduce Taxes (including, without limitation, deductions and credits
related to alternative minimum Taxes) of Culligan or any of its
subsidiaries.
(c) Culligan and its subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or
other third party.
(d) "Tax Returns" means returns, reports and forms required to be
filed with any Governmental Authority of the United States or any other
jurisdiction responsible for the imposition or collection of Taxes.
(e) "Taxes" means (i) all Taxes (whether federal, state, local or
foreign) based upon or measured by income and any other Tax whatsoever,
including, without limitation, gross receipts, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise,
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withholding, payroll, employment, excise, or property Taxes, together with
any interest or penalties imposed with respect thereto and (ii) any
obligations under any agreements or arrangements with respect to any Taxes
described in clause (i) above.
4.9. Compliance with Law. Culligan is in compliance, and at all times
since January 1, 1996 has been in compliance, with all Applicable Laws relating
to Culligan or its business or properties, except where the failure to be in
compliance with such Applicable Laws (individually or in the aggregate) would
not reasonably be expected to have a Material Adverse Effect on Culligan or
where such non-compliance has been cured. Except as disclosed in Section 4.9 to
the Culligan Disclosure Schedule, no investigation or review by any Governmental
Authority with respect to Culligan is pending, or, to the knowledge of Culligan,
threatened, nor has any Governmental Authority indicated in writing an intention
to conduct the same, other than those the outcome of which would not reasonably
be expected to have a Material Adverse Effect on Culligan.
4.10. Intellectual Property. Except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Culligan, Culligan owns or possesses adequate licenses or other valid rights to
use all patents, patent rights, trademarks, trademark rights, trade names, trade
dress, trade name rights, copyrights, service marks, trade secrets, applications
for trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the businesses of Culligan
("Intellectual Property") as currently conducted, and there has not been any
written assertion or claim against Culligan challenging the validity or the use
by Culligan of any of the foregoing. The conduct of the businesses of Culligan
as currently conducted does not conflict with or infringe upon any patent,
patent right, license, trademark, trademark right, trade dress, trade name,
trade name right, service mark or copyright of any third party except for any
conflict or infringement that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Culligan. Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Culligan, there are no infringements of any of the
Intellectual Property owned by or licensed by or to Culligan and the
Intellectual Property is not the subject to any pending Action.
4.11. Title to Properties. Culligan owns or holds under valid leases
all real property, plants, machinery and equipment necessary for the conduct of
the business of Culligan as presently conducted, except where the failure to own
or so hold such property, plants, machinery and equipment would not reasonably
be expected to have a Material Adverse Effect on Culligan.
4.12. Registration Statement; Joint Proxy Statement. None of the
information provided in writing by Culligan for inclusion in the Registration
Statement at the time it becomes effective or, in the case of the Joint Proxy
Statement, at the date of mailing and at the date of the Culligan Stockholders
Meeting or the USF Stockholders Meeting, will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Registration Statement and Joint
Proxy Statement, except for such portions thereof that relate only to USF and
its subsidiaries, will each comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act.
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4.13. Litigation. Except as set forth in Section 4.13 to the Culligan
Disclosure Schedule or in the Culligan SEC Documents, there is no Action pending
or, to the knowledge of Culligan, threatened against Culligan which,
individually or in the aggregate, would have a Material Adverse Effect on
Culligan or a material adverse effect on the ability of Culligan to consummate
the Merger. Culligan is not subject to any outstanding order, writ, injunction
or decree which, individually or in the aggregate, insofar as can be reasonably
foreseen, could have a Material Adverse Effect on Culligan or a material adverse
effect on the ability of Culligan to consummate the Merger.
4.14. Brokerage and Finder's Fees; Expenses. Except for Culligan's
obligations to Bear, Stearns & Co. Inc. and Goldman, Sachs & Co., neither
Culligan nor any stockholder, director, officer or employee thereof, has
incurred or will incur on behalf of Culligan, any brokerage, finder's or
similar fee in connection with the transactions contemplated by this Agreement.
4.15. Accounting Matters; Reorganization. Neither Culligan nor any of
its affiliates has taken or agreed to take any action that (without giving
effect to any actions taken or agreed to be taken by USF or any of its
affiliates) would (a) prevent USF from accounting for the business combination
to be effected by the Merger as a pooling-of-interests for financial reporting
purposes or (b) prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code.
4.16. Employee Benefit Plans.
(a) For purposes of this Section 4.16, the following terms have the
definitions given below:
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or
that is a member of the same "controlled group" as the first entity, trade
or business pursuant to Section 4001(a)(14) of ERISA.
"Plans" means all employee welfare benefit plans within the meaning
of Section 3(1) of ERISA and all employee pension benefit plans within the
meaning of Section 3(2) of ERISA sponsored or maintained by Culligan or
any of its subsidiaries or to which Culligan or any of its subsidiaries
contributes or is obligated to contribute.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan,
as those terms are defined in Part I of Subtitle E of Title IV of ERISA.
(b) Except as set forth in Section 4.16(b) to the Culligan Disclosure
Schedule or as would not have a Material Adverse Effect, the Internal Revenue
Service has issued a favorable determination letter with respect to each Plan
that is intended to be a "qualified plan" within the
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meaning of Section 401(a) of the Code (a "Qualified Plan") and there are no
existing circumstances nor any events that have occurred that would adversely
affect the qualified status of any Qualified Plan or the related trust.
(c) Culligan and its subsidiaries have complied, and are now in
compliance, in all respects, with all provisions of ERISA, the Code and all laws
and regulations applicable to the Plans and each Plan has been operated in
material compliance with its terms except, in each case, to the extent
noncompliance would not have a Material Adverse Effect.
(d) Except as set forth in Section 4.16(d) to the Culligan Disclosure
Schedule, no Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor has
Culligan or any of its subsidiaries or any of their respective ERISA Affiliates,
at any time within six years before the date hereof, contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan.
With respect to each Multiemployer Plan: (i) neither Culligan nor any of its
ERISA Affiliates has incurred any Withdrawal Liability that has not been
satisfied in full; and (ii) neither Culligan nor any ERISA Affiliate has
received any notification, nor has any reason to believe, that any such plan is
in reorganization, is insolvent, has been terminated, or would be in
reorganization, to be insolvent, or to be terminated unless such event would not
have a Material Adverse Effect. Except for Multiemployer Plans and except as set
forth in Schedule 4.16(a) to the Culligan Disclosure Schedule, no Plan is
subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code.
(e) Except as disclosed in Section 4.16(e) to the Culligan Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee, officer, director or consultant of Culligan
or any of its subsidiaries.
(f) Except as disclosed in Section 4.16(f) to the Culligan Disclosure
Schedule, there are no pending or to the knowledge of Culligan threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Plans, any
fiduciaries thereof with respect to their duties to the Plans or the assets of
any of the trusts under any of the Plans which would result in any material
liability of Culligan or any of its subsidiaries to the Pension Benefit Guaranty
Corporation, the Department of Treasury, the Department of Labor or any
Multiemployer Plan.
4.17. Undisclosed Liabilities. Except (i) as and to the extent
disclosed or reserved against on the consolidated balance sheet of Culligan as
of January 31, 1997 included in the Culligan SEC Documents, (ii) as incurred
after the date thereof in the ordinary course of business consistent with prior
practice and not prohibited by this Agreement or (iii) as set forth in Section
4.17 to the Culligan Disclosure Schedule, Culligan, together with its
subsidiaries, does not have any liabilities or obligations of any nature,
whether known or unknown, absolute, accrued, contingent or otherwise and whether
due or to become due, required by generally accepted accounting principles to be
recognized or disclosed on a consolidated balance sheet of Culligan
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and its consolidated subsidiaries or in the notes thereto and which,
individually or in the aggregate, have or would have a Material Adverse Effect
on Culligan.
4.18. Environmental Matters. Except for matters disclosed in
Schedule 4.18 of the Culligan Disclosure Schedule and except for matters that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Culligan, (a) the properties, operations and
activities of Culligan and its subsidiaries are in compliance with all
applicable Environmental Laws (as defined below) and all past noncompliance of
Culligan or any Culligan subsidiary with any Environmental Laws or Environmental
Permits (as defined below) that has been resolved with any Governmental
Authority has been resolved without any pending, ongoing or future obligation,
cost or liability; (b) Culligan and its subsidiaries and the properties and
operations of Culligan and its subsidiaries are not subject to any existing,
pending or, to the knowledge of Culligan, threatened action, suit,
investigation, inquiry or proceeding by or before any court or governmental
authority under any Environmental Law; (c) there has been no release of any
hazardous substance, pollutant or contaminant into the environment by Culligan
or its subsidiaries or in connection with their properties or operations; and
(d) to the best of Culligan's knowledge, there has been no exposure of any
person or property to any hazardous substance, pollutant or contaminant in
connection with the properties, operations and activities of Culligan and its
subsidiaries.
4.19. Opinions of Financial Advisors. Culligan has received the
written opinions of Bear, Stearns & Co. Inc. and Goldman, Sachs & Co., its
financial advisors, to the effect that, as of the date of this Agreement, the
Exchange Ratio is fair to the Culligan Stockholders from a financial point of
view, Culligan has heretofore provided copies of such opinions to USF and such
opinion has not been withdrawn or revoked or modified in any material respect.
4.20. Board Recommendation. The Board of Directors of Culligan, at a
meeting duly called and held, has by unanimous vote of those directors present
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, taken together, are fair to and in the best interests of
the Culligan Stockholders, and (ii) resolved to recommend that the holders of
the shares of Culligan Common Stock approve this Agreement and the transactions
contemplated herein, including the Merger (the "Culligan Board Recommendation").
4.21. Rights Agreement. The Rights Agreement, dated as of September
13, 1996 (the "Culligan Rights Agreement"), between Culligan and the First
National Bank of Boston, has been amended so that USF is exempt from the
definition of "Acquiring Person" contained in the Culligan Rights Agreement, no
"Stock Acquisition Date," "Triggering Event" or "Distribution Date" (as such
terms are defined in the Culligan Rights Agreement) will occur as a result of
the execution of this Agreement or the consummation of the Merger pursuant to
this Agreement and the Culligan Rights Agreement will expire immediately prior
to the Effective Time, and the Culligan Rights Agreement, as so amended, has not
been further amended or modified. Copies of all such amendments to the Culligan
Rights Agreement have been previously provided to USF.
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ARTICLE V.
COVENANTS OF THE PARTIES
The parties hereto agree that:
5.1. Mutual Covenants.
(a) HSR Act Filings; Reasonable Best Efforts; Notification.
(i) Each of USF and Culligan shall (A) make or cause to be made
the filings required of such party or any of its subsidiaries or
affiliates under the HSR Act with respect to the transactions contemplated
hereby as promptly as practicable and in any event within ten business
days after the date of this Agreement, (B) comply at the earliest
practicable date with any request under the HSR Act for additional
information, documents, or other materials received by such party or any
of its subsidiaries from the Federal Trade Commission or the Department of
Justice (each an "HSR Authority") or any other Governmental Authority in
respect of such filings or such transactions, and (C) cooperate with the
other party in connection with any such filing (including, with respect to
the party making a filing, providing copies of all such documents to the
non-filing party and its advisors prior to filing and, if requested, to
accept all reasonable additions, deletions or changes suggested in
connection therewith) and in connection with resolving any investigation
or other inquiry of any such agency or other Governmental Authority under
any Antitrust Laws (as hereinafter defined) with respect to any such
filing or any such transaction. Each party shall furnish to each other all
information required for any application or other filing to be made
pursuant to any Applicable Law in connection with the Merger and the other
transactions contemplated by this Agreement. Each party shall promptly
inform the other party of any communication with, and any proposed
understanding, undertaking, or agreement with, any Governmental Authority
regarding any such filings or any such transaction. Neither party shall
independently participate in any meeting or discussion with any
Governmental Authority in respect of any such filings, investigation, or
other inquiry without giving the other party prior notice of the meeting
or discussion and, to the extent permitted by such Governmental Authority,
the opportunity to attend and/or participate. The parties hereto will
consult and cooperate with one another, in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to the HSR Act or other
Antitrust Laws.
(ii) Subject to the limitation set forth in Section 5.1(a)(iv),
each of USF and Culligan shall use reasonable best efforts to resolve such
objections, if any, as may be asserted by any Governmental Authority with
respect to the transactions contemplated by this Agreement under the HSR
Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal
Trade Commission Act, as amended, and any other federal, state or foreign
statutes, rules, regulations, orders, decrees, administrative or judicial
doctrines or other laws that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or
restraint of trade (collectively, "Antitrust Laws"). In connec-
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tion therewith, if any administrative or judicial action or proceeding
is instituted (or threatened to be instituted) challenging
any transaction contemplated by this Agreement as violative of any
Antitrust Law, each of USF and Culligan shall cooperate and use reasonable
best efforts vigorously to contest and resist any such action or
proceeding, including any legislative, administrative or judicial action,
and to have vacated, lifted, reversed, or overturned any decree, judgment,
injunction or other order whether temporary, preliminary or permanent
(each an "Order"), that is in effect and that prohibits, prevents, or re-
stricts consummation of the Merger or any other transactions contemplated
by this Agreement, including, without limitation, by vigorously pursuing
all available avenues of administrative and judicial appeal and all avail-
able legislative action, unless by mutual agreement USF and Culligan de-
cide that litigation is not in their respective best interests. Notwith-
standing the foregoing or any other provision of this Agreement, nothing
in this Section 5.1(a) shall limit a party's right to terminate this
Agreement pursuant to Section 7.1, so long as such party has up to then
complied with its obligations under this Section 5.1(a). Each of USF and
Culligan shall use reasonable best efforts to take such action as may be
required to cause the expiration of the notice periods under the HSR Act
or other Antitrust Laws with respect to such transactions as promptly as
possible after the execution of this Agreement and shall refrain from
taking any action that would have the effect of making the expiration of
such notice periods less likely or delay in the Merger in any material
respect.
(iii) Subject to the limitation set forth in Section 5.1(a)(iv),
each of the parties agrees to use reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (A) the obtaining of all other
necessary actions or nonactions, waivers, consents, licenses, permits,
authorizations, orders and approvals from Governmental Authorities and the
making of all other necessary registrations and filings, (B) the obtaining
of all consents, approvals or waivers from third parties related to or
required in connection with the Merger that are necessary to consummate
the Merger and the transactions contemplated by this Agreement or required
to prevent a Material Adverse Effect on USF or Culligan from occurring
prior to or after the Effective Time, (C) the preparation of the Joint
Proxy Statement, the Prospectus and the Registration Statement, (D) the
taking of all action necessary to ensure that it is a "poolable entity"
eligible to participate in a transaction to be accounted for as a pooling
of interests for financial reporting purposes and to ensure that the
Merger constitutes a tax-free reorganization within the meaning of Section
368(a)(1)(A), and (E) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and
to fully carry out the purposes of, this Agreement.
(iv) Unless USF and Culligan otherwise agree in writing, if
required to avoid an HSR Authority instituting an Action challenging the
transactions under this Agreement under the Antitrust Laws and seeking to
enjoin or prohibit the consummation of any of the transactions
contemplated by this Agreement, USF shall and, at the direction of USF,
Culligan shall, hold separate (including by trust or otherwise) or divest
any of
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their respective businesses or assets, or take or agree to take any action
or agree to any limitation required to avoid an HSR Authority instituting
an Action challenging the transactions under this Agreement under the
Antitrust Laws and seeking to enjoin or prohibit the consummation of any of
the transactions contemplated hereby unless such action would require USF
or the Surviving Corporation to agree to the sale or divestiture of
businesses, properties, product lines or assets having aggregate gross
annual sales in excess of $150 million.
(b) Pooling-of-Interests. Each of the parties agrees that it shall
not, and shall not permit any of its subsidiaries to, take any actions which
would, or would be reasonably likely to, prevent USF from accounting, and shall
use its best efforts (including, without limitation, providing appropriate
representation letters to USF's accountants) to allow USF to account, for the
Merger in accordance with the pooling-of-interests method of accounting under
the requirements of Opinion No. 16 "Business Combinations" of the Accounting
Principles Board of the American Institute of Certified Public Accountants, as
amended by applicable pronouncements by the Financial Accounting Standards
Board, and all related published rules, regulations and policies of the
Commission ("APB No. 16"), and to obtain a letter, in form and substance
reasonably satisfactory to USF and Culligan, from KPMG Peat Marwick LLP dated
the date of the Effective Time stating that they concur with management's
conclusion that the Merger will qualify as a transaction to be accounted for by
USF in accordance with the pooling of interests method of accounting under the
requirements of APB No. 16.
(c) Tax-Free Treatment. Each of the parties shall use its best
efforts to cause the Merger to constitute a tax-free "reorganization" under
Section 368(a) of the Code and to cooperate with one another in obtaining an
opinion from Wachtell, Lipton, Rosen & Katz ("Wachtell, Lipton"), counsel to
Culligan, as provided for in Section 6.2(d). In connection therewith, each of
USF and Culligan shall deliver to Wachtell, Lipton representation letters and
Culligan shall use all reasonable efforts to obtain representation letters from
appropriate shareholders of Culligan and shall deliver any such letters obtained
to Wachtell, Lipton, in each case in form and substance reasonably satisfactory
to Wachtell, Lipton.
(d) Public Announcements. The initial press release concerning the
Merger and the transactions contemplated hereby shall be a joint press release.
Unless otherwise required by Applicable Laws or requirements of the NYSE (and in
that event only if time does not permit), at all times prior to the earlier of
the Effective Time or termination of this Agreement pursuant to Section 7.1, USF
and Culligan shall consult with each other before issuing any press release with
respect to the Merger and shall not issue any such press release prior to such
consultation.
(e) Other Matters. Each of USF and Culligan agree that from the date
of this Agreement until the earlier of the Effective Time or the termination of
this Agreement, it will not, and it will cause its subsidiaries and affiliates
not to, (i) actively pursue any pending or threatened Action against the other
party relating to events that occurred prior to the date of this Agreement, or
(ii) take any other action with respect to any such matter except as may be
necessary to maintain the status quo. In connection with the maintenance of the
status quo, each of USF and Culligan will seek to postpone the filing of any
responsive pleadings in any Action, and will not
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file any new Action unless such filing is necessary to preserve rights that may
otherwise be forfeited as a result of such delay.
5.2. Covenants of USF.
(a) USF Stockholders Meeting. USF shall take all action in accordance
with the federal securities laws, the DGCL and the USF Certificate and USF
Bylaws, as amended and restated, necessary to convene a special meeting of USF
Stockholders (the "USF Stockholders Meeting") to be held on the date determined
by USF, and to obtain the approval of USF Stockholders with respect to the
issuance of shares of USF Common Stock in the Merger, including recommending
approval of the issuance of shares of USF Common Stock in the Merger to the USF
Stockholders as set forth in Section 3.12 of this Agreement; provided, however,
that if the Board of Directors of USF determines in good faith by majority vote,
after consultation with and receipt of advice from outside legal counsel, that
failure to do so would create a reasonable possibility of a breach of the
fiduciary duties of the USF Board of Directors under Applicable Law, the Board
of Directors of USF may withdraw, change or modify such recommendation in a
manner adverse to Culligan.
(b) Preparation of Registration Statement. USF shall, as soon as is
reasonably practicable, prepare the Joint Proxy Statement for filing with the
Commission on a confidential basis. Consistent with the timing for the USF
Stockholders Meeting and the Culligan Stockholders Meeting, USF shall prepare
and file the Registration Statement with the Commission as soon as is reasonably
practicable following clearance of the Joint Proxy Statement by the Commission
and reasonable approval of the Joint Proxy Statement by Culligan and shall use
all reasonable efforts to have the Registration Statement declared effective by
the Commission as promptly as practicable and to maintain the effectiveness of
the Registration Statement through the Effective Time. If, at any time prior to
the Effective Time, USF shall obtain knowledge of any information pertaining to
USF contained in or omitted from the Registration Statement that would require
an amendment or supplement to the Registration Statement or the Joint Proxy
Statement, USF will so advise Culligan in writing and will promptly take such
action as shall be required to amend or supplement the Registration Statement
and/or the Joint Proxy Statement. USF shall promptly furnish to Culligan all
information concerning it as may be required for the Joint Proxy Statement and
any supplements or amendments thereto. USF shall cooperate with Culligan in the
preparation of the Joint Proxy Statement in a timely fashion and shall use all
reasonable efforts to assist Culligan in clearing the Joint Proxy Statement with
the Staff of the Commission, such Joint Proxy Statement to include the
recommendation of the USF Board of Directors referred to in Section 3.12 above
(to the extent not previously withdrawn in compliance with Section 5.2(a)) and
the written opinions of Donaldson, Lufkin & Jenrette Securities Corporation and
Salomon Smith Barney. USF also shall take such other reasonable actions (other
than qualifying to do business in any jurisdiction in which it is not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Shares of USF Common Stock in the Merger.
(c) Conduct of USF's Operations. During the period from the date of
this Agreement to the Effective Time, USF shall use its reasonable efforts to
maintain and preserve its business organization and to retain the services of
its officers and key employees and maintain relationships with customers,
suppliers and other third parties to the end that their goodwill and
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ongoing business shall not be impaired in any material respect. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement to the Effective Time, USF shall not, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby or as
set forth in Section 5.2(c) to the USF Disclosure Schedule, without the prior
written consent of Culligan:
(i) change any method or principle of accounting in a manner
that is inconsistent with past practice except to the extent required by
generally accepted accounting principles as advised by USF's regular
independent accountants;
(ii) (A) grant any person any right or option to acquire any
shares of its capital stock, provided, however, that USF may grant options
with a fair market value exercise price to purchase up to 750,000 shares
of USF Common Stock (which number shall be 1,500,000 shares of USF Common
Stock if the Effective Time is after July 1, 1998) to employees of USF in
the ordinary course consistent with past practice or in connection with
acquisitions, mergers, consolidations or similar transactions permitted
pursuant to clause (iii) below; (B) issue, deliver or sell or agree to
issue, deliver or sell any additional shares of its capital stock or any
securities or obligations convertible into or exchangeable or exercisable
for any shares of its capital stock or securities (except (I) pursuant to
the exercise of options for USF Common Stock which are outstanding as of
the date hereof or which are granted by USF prior to the Effective Time in
compliance with the terms of this Agreement, or (II) in connection with
acquisitions, mergers, consolidations and similar transactions permitted
pursuant to clause (iii) below provided that the fair market value of any
capital stock or securities issued (based on the closing price on the NYSE
Composite Tape on the date the agreement for any such transaction is
entered into) does not exceed $350 million in the aggregate) or (C) enter
into any agreement, understanding or arrangement with respect to the sale,
voting, registration or repurchase of its capital stock;
(iii) merge or consolidate with any other person or acquire any
assets or businesses other than expenditures for current assets in the
ordinary course of business and expenditures for fixed or capital assets
in the ordinary course of business; provided, however, USF shall not be
prohibited from acquiring any assets or businesses or effecting any
merger, consolidation or similar transaction or incurring or assuming
indebtedness in connection with acquisitions of assets or businesses or
mergers, consolidations or similar transactions so long as such trans-
actions are (A) disclosed in Section 5.2(c) to the USF Disclosure
Schedule, or (B) Distribution Acquisitions (except to the extent
prohibited by Section 7.7(c) hereof) or other acquisitions provided that
the aggregate value of consideration paid in connection with all of such
acquisitions (including Distribution Acquisitions) does not exceed $500
million;
(iv) take any action that could likely result in the
representations and warranties set forth in Article III becoming false or
inaccurate in any material respect;
(v) make any changes in the USF Certificate that would adversely
affect the rights and preferences of the holders of Shares of USF Common
Stock or make any changes in the Amended and Restated Certificate of
Incorporation of Subcorp;
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(vi) permit or cause any subsidiary to do any of the foregoing
or agree or commit to do any of the foregoing; or
(vii) agree in writing or otherwise to take any of the foregoing
actions.
The term "Distribution Acquisition" means the acquisition (by purchase, merger,
consolidation or otherwise) of assets or stock of an entity whose primary
business is the sale and/or service to residential, commercial and consumer end
users of water treatment, water purification, bottled water or related water
products.
(d) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Effective Time, USF shall indemnify,
defend and hold harmless the present and former officers and directors of
Culligan in respect of acts or omissions occurring prior to the Effective
Time to the fullest extent permitted by Applicable Law, including with
respect to taking all actions necessary to advance expenses to the extent
permitted by Applicable Law.
(ii) USF shall use all reasonable efforts to cause the Surviving
Corporation or USF to obtain and maintain in effect for a period of six
years after the Effective Time policies of directors' and officers'
liability insurance at no cost to the beneficiaries thereof with respect
to acts or omissions occurring prior to the Effective Time with
substantially the same coverage and containing substantially similar terms
and conditions as existing policies; provided, however, that neither the
Surviving Corporation nor USF shall be required to pay an annual premium
for such insurance coverage in excess of 250% of Culligan's current annual
premium, but in such case shall purchase as much coverage as possible for
such amount.
(iii) USF covenants and agrees from and after the Effective Time
to (A) provide to the directors of Culligan who become directors of USF
directors' and officers' liability insurance on the same basis and to the
same extent as that, if any, provided to other directors of USF, and (B)
enter into indemnification agreements with any directors of Culligan who
become directors of USF on terms entered into with other directors of USF
generally.
(e) Merger Sub. Prior to the Effective Time, Subcorp shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement and will not have any assets (other than a de
minimis amount of cash paid to Subcorp for the issuance of its stock to USF) or
any material liabilities.
(f) NYSE Listing. USF shall use its reasonable best efforts to cause
the Shares of USF Common Stock issuable pursuant to the Merger (including,
without limitation, the Shares of USF Common Stock issuable upon the exercise of
the USF Exchange Options) to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Effective Time.
(g) Access. From the date hereof until the earlier to occur of the
Effective Time or the termination of this Agreement, USF shall permit
representatives of Culligan to have appro-
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priate access at all reasonable times to USF's premises, properties, books,
records, contracts and documents. Information obtained by Culligan pursuant to
this Section 5.2(g) shall be subject to the provisions of the confidentiality
agreement between USF and Culligan dated February 4, 1998 (the "Confidentiality
Agreement"), which agreement remains in full force and effect. No investigation
conducted pursuant to this Section 5.2(g) shall affect or be deemed to modify
any representation or warranty made in this Agreement.
(h) Board of Directors of USF. The Board of Directors of USF shall
take all action necessary immediately following the Effective Time to elect one
person selected by the Culligan Board of Directors prior to the Effective Time
(subject to the consent of the USF Board of Directors which shall not be
unreasonably withheld) as a director of USF effective as of the Effective Time,
for a term expiring at USF's third annual meeting of stockholders following the
Effective Time.
(i) Affiliates of USF. USF shall use all reasonable efforts to cause
each such person who may be at the Effective Time or was on the date hereof an
"affiliate" of USF for purposes of applicable accounting releases of the
Commission with respect to pooling of interests accounting treatment, to execute
and deliver to Culligan no less than 30 days prior to the date of the USF
Stockholders Meeting, the written undertakings in the form attached hereto as
Exhibit A-2 (the "USF Affiliate Letter").
(j) Notification of Certain Matters. USF shall give prompt notice to
Culligan of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any USF representation or warranty contained
in this Agreement to be untrue or inaccurate at or prior to the Effective Time
in any material respect and (ii) any material failure of USF to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.2(j) shall not limit or otherwise affect the remedies available
hereunder to Culligan.
(k) Employees and Employee Benefits. (i) For at least one year from
and after the Effective Time, USF and its affiliates shall provide Culligan
Employees (as defined below) with (i) pension and savings benefits, (ii) health
and medical benefits, (iii) severance benefits, and (iv) other employee benefits
that are, in the case of each such category of benefits, no less favorable in
the aggregate than the comparable benefits provided to comparable
employees of USF and its affiliates immediately before the Effective Time. From
and after the Effective Time, USF and its affiliates shall honor, in accordance
with their terms and except to the extent amended in accordance with such terms,
all Plans and all contracts, plans, and programs providing for compensation or
benefits for Culligan Employees.
(ii) From and after the Effective Time, USF shall treat all service
by Culligan Employees (as defined below) with Culligan and its affiliates and
their respective predecessors prior to the Effective Time for all purposes as
service with USF (except to the extent such treatment would result in
duplicative accrual on or after the Closing Date of benefits for the same period
of service), and, with respect to any medical or dental benefit plan in which
Culligan Employees participate after the Effective Time, USF shall waive or
cause to be waived any pre-existing condition exclusions and actively-at-work
requirements (provided, however, that no such waiver
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shall apply to a pre-existing condition of any Culligan Employee who was, as of
the Effective Time, excluded from participation in a Culligan Benefit Plan by
virtue of such pre-existing condition), and shall provide that any covered
expenses incurred on or before the Effective Time by a Culligan Employee or a
Culligan Employee's covered dependent shall be taken into account for purposes
of satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Effective Time to the same extent as such expenses are
taken into account for the benefit of similarly situated employees of USF and
subsidiaries of USF.
(iii) Nothing in this Section 5.2(k) shall be construed to impose
upon USF and its affiliates any obligation to continue the employment of any
Culligan Employee following the effective time. For purposes of this Section
5.2(k), "Culligan Employees" shall mean persons who are, as of the Effective
Time, employees of Culligan or any of its subsidiaries.
(l) Press Release. USF shall use its best efforts to publish, as soon
as possible after the Effective Time, financial results which are sufficient in
accordance with Accounting Series Release No. 135 to permit the disposition by
all Culligan Stockholders of the shares of USF Common Stock received in the
Merger consistent with the requirements for treating the Merger as a pooling of
interests for financial reporting purposes; provided, however, that such
financial results shall be published no later than the fifteenth day after the
end of the first calendar month that is at least 30 days after the Effective
Time.
5.3. Covenants of Culligan.
(a) Culligan Stockholders Meeting. Culligan shall take all action in
accordance with the federal securities laws, the DGCL and the Culligan
Certificate and the Culligan Bylaws necessary to convene a special meeting of
Culligan Stockholders (the "Culligan Stockholders Meeting") to be held on the
date determined by Culligan, to consider and vote upon approval of the Merger,
this Agreement and the transactions contemplated hereby, including the Culligan
Board Recommendation to the extent not previously withdrawn in compliance with
Section 5.3(d).
(b) Information for the Registration Statement and Preparation of
Joint Proxy Statement. Culligan shall promptly furnish USF with all information
concerning it as may be required for inclusion in the Registration Statement.
Culligan shall cooperate with USF in the preparation of the Registration
Statement in a timely fashion and shall use all reasonable efforts to assist USF
in having the Registration Statement declared effective by the Commission as
promptly as practicable consistent with the timing for the Culligan Stockholders
Meeting as determined by Culligan and the USF Stockholders Meeting. If, at any
time prior to the Effective Time, Culligan obtains knowledge of any information
pertaining to Culligan that would require any amendment or supplement to the
Registration Statement or the Joint Proxy Statement, Culligan shall so advise
USF and shall promptly furnish USF with all information as shall be required for
such amendment or supplement and shall promptly amend or supplement the
Registration Statement and/or Joint Proxy Statement. Culligan shall use all
reasonable efforts to cooperate with USF in the preparation and filing of the
Joint Proxy Statement with the Commission on a confidential basis. Consistent
with the timing for the USF Stockholders Meeting and the Culligan Stockholders
Meeting as determined by Culligan, Culligan shall use all reasonable efforts to
mail at the earliest practicable
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date to Culligan Stockholders the Joint Proxy Statement, which shall include all
information required under Applicable Law to be furnished to Culligan
Stockholders in connection with the Merger and the transactions contemplated
thereby and shall include the Culligan Board Recommendation to the extent not
previously withdrawn in compliance with Section 5.3(d) and the written opinions
of Goldman, Sachs & Co. and Bear, Stearns & Co. Inc. described in Section 4.20.
(c) Conduct of Culligan's Operations. Culligan shall conduct its
operations in the ordinary course except as expressly contemplated by this
Agreement and the transactions contemplated hereby and shall use all reasonable
efforts to maintain and preserve its business organization and its material
rights and franchises and to retain the services of its officers and key
employees and maintain relationships with customers, suppliers, lessees,
licensees and other third parties, and to maintain all of its operating assets
in their current condition (normal wear and tear excepted), to the end that its
goodwill and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, during the period from the
date of this Agreement to the Effective Time, Culligan shall not, except as
otherwise expressly contemplated by this Agreement and the transactions
contemplated hereby or as set forth in Section 5.3(c) to the Culligan Disclosure
Schedule, without the prior written consent of USF:
(i) do or effect any of the following actions with respect to
its securities: (A) adjust, split, combine or reclassify its capital
stock, (B) make, declare or pay any dividend or distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares
of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, (C) grant any person any
right or option to acquire any shares of its capital stock, provided,
however, that Culligan may grant options with a fair market value exercise
price to purchase up to 250,000 shares of Culligan Common Stock (which
number shall be 500,000 shares of Culligan Common Stock if the Effective
Time is after July 1, 1998) to employees of Culligan in the ordinary
course consistent with prior practice or in connection with acquisitions,
mergers, consolidations and similar transactions permitted pursuant to
clause (v) below, (D) issue, deliver or sell or agree to issue, deliver or
sell any additional shares of its capital stock or any securities or
obligations convertible into or exchangeable or exercisable for any shares
of its capital stock or such securities (except (I) pursuant to the
exercise of Culligan Options which are outstanding as of the date hereof
or which are granted by Culligan prior to the Effective Time in compliance
with the terms of this Agreement, or (II) in connection with acquisitions,
mergers, consolidations and similar transactions permitted pursuant to
clause (v) below provided that the fair market value of any capital stock
or securities issued (based on the closing price on the NYSE Composite
Tape on the date the agreement for any such transaction is entered into)
does not exceed $119 million in the aggregate), or (E) enter into any
agreement, understanding or arrangement with respect to the sale, voting,
registration or repurchase of its capital stock;
(ii) other than in connection with financing or refinancing of
indebtedness permitted pursuant to clause (vi) below, directly or
indirectly sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any of its property or assets other than in the
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ordinary course of business and other than the sale of some or all of the
Protean plc businesses and up to an additional $25 million of other
assets;
(iii) make or propose any changes in the Culligan Certificate or
the Culligan Bylaws;
(iv) merge or consolidate with any other person (other than as
permitted, in each case, by Section 5.3(d) or in connection with a
transaction permitted pursuant to clause (v) below);
(v) make any acquisition of any assets or businesses other than
expenditures for current assets in the ordinary course of business and
expenditures for fixed or capital assets in the ordinary course of
business; provided, however, Culligan shall not be prohibited from
acquiring any assets or businesses or effecting any merger, consolidation
or similar transaction or incurring or assuming indebtedness in connection
with acquisitions of assets or businesses or mergers, consolidations or
similar transactions so long as such transactions are (A) disclosed in
Section 5.3(c) to the Culligan Disclosure Schedule, or (B) Distribution
Acquisitions (it being understood that such Distribution Acquisitions
shall not be deemed to violate Culligan's obligations pursuant to Section
5.1(a)), or other acquisitions provided that the aggregate value of
consideration paid in connection with all of such acquisitions (including
Distribution Acquisitions) does not exceed $170 million;
(vi) except pursuant to existing credit arrangements or as
permitted pursuant to clause (v), incur, create, assume or otherwise
become liable for any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible or
liable for the obligations of any other individual, corporation or other
entity, other than in the ordinary course of business, consistent with
past practice or in connection with a refinancing of existing indebtedness
(which refinancing shall not increase the aggregate amount of indebtedness
permitted to be outstanding thereunder by more than $200 million);
(vii) enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or grant any
bonuses, salary increases, severance or termination pay to, any officer,
director, consultant or employee other than in the ordinary course of
business consistent with past practice, or otherwise increase the
compensation or benefits provided to any officer, director, consultant or
employee except as may be required by Applicable Law or in the ordinary
course of business consistent with past practice; provided, however, that
Culligan may implement a stay-bonus or similar program providing for
payments in an aggregate amount, not to exceed $5 million for employees of
Culligan and will consult with, but need not have the approval of, USF
prior to implementing any such plans;
(viii) enter into, adopt or amend any employee benefit or
similar plan except as may be required by Applicable Law;
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(ix) change any method or principle of accounting in a manner
that is inconsistent with past practice except to the extent required by
generally accepted accounting principles as advised by Culligan's regular
independent accountants;
(x) take any action that will likely result in the
representations and warranties set forth in Article IV becoming false or
inaccurate in any material respect;
(xi) enter into or carry out any other transaction other than in
the ordinary and usual course of business or other than as permitted
pursuant to the other clauses in this Section 5.3(c);
(xii) permit or cause any subsidiary to do any of the foregoing
or agree or commit to do any of the foregoing; or
(xiii) agree in writing or otherwise to take any of the
foregoing actions.
(d) No Solicitation. Culligan agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination involving
Culligan, or acquisition of any capital stock from Culligan (other than upon
exercise of Culligan Options which are outstanding as of the date hereof and
other than to the extent specifically permitted by Section 5.3(c)) or 15% or
more of the assets of Culligan and its subsidiaries, taken as a whole, in a
single transaction or a series of related transactions, or any acquisition by
Culligan of any material assets or capital stock of any other person (other than
to the extent specifically permitted by Section 5.3(c)), or any combination of
the foregoing (a "Competing Transaction"), or negotiate, explore or otherwise
engage in discussions with any person (other than USF, Subcorp or their
respective directors, officers, employees, agents and representatives) with
respect to any Competing Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement; provided that,
at any time prior to the approval of the Merger by the Culligan Stockholders,
Culligan may furnish information to, and negotiate or otherwise engage in
discussions with, any party who delivers a proposal for a Competing Transaction
if and so long as the Board of Directors of Culligan determines in good faith by
a majority vote, after consultation with its outside legal counsel, that failing
to take such action would create a reasonable possibility of a breach of the
fiduciary duties of the Board of Directors of Culligan under Applicable Law.
Culligan will immediately cease all existing activities, discussions and
negotiations with any parties conducted heretofore with respect to any proposal
for a Competing Transaction. Notwithstanding any other provision of this Section
5.3(d), in the event that prior to the approval of the Merger by the Culligan
Stockholders the Board of Directors of Culligan determines in good faith by a
majority vote, after consultation with and receipt of advice from outside legal
counsel, that failure to do so would create a reasonable possibility of a breach
of the fiduciary duties of the Culligan Board of Directors under Applicable Law,
the Board of Directors of Culligan may withdraw, modify or change, in a manner
adverse to USF, the Culligan Board Recommendation and, to the extent applicable,
comply with Rule 14e-2
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promulgated under the Exchange Act with respect to a Competing Transaction by
disclosing such withdrawn, modified or changed Culligan Board Recommendation in
connection with a tender or exchange offer for Culligan securities. Culligan
shall immediately advise USF, in writing, if the Board of Directors of Culligan
shall make any determination as to any Competing Transaction as contemplated by
the proviso to the first sentence of this Section 5.3(d).
(e) Termination Right. If prior to the approval of the Merger by the
Culligan Stockholders the Board of Directors of Culligan shall determine in good
faith, after consultation with its financial and legal advisors, with respect to
any written proposal from a third party for a Competing Transaction received
after the date hereof that failure to enter into such Competing Transaction
would create a reasonable possibility of a breach of the fiduciary duties of the
Board of Directors of Culligan under Applicable Law and that such Competing
Transaction is more favorable to the Culligan Stockholders than the transactions
contemplated by this Agreement (including any adjustment to the terms and
conditions of such transaction proposed in writing by USF in response to such
Competing Transaction), Culligan may terminate this Agreement and enter into an
acquisition agreement or other similar definitive agreement (each, an
"Acquisition Agreement") with respect to such Competing Transaction. Prior to
terminating this Agreement pursuant to this Section 5.3(e), Culligan shall
endeavor to provide USF with a reasonable opportunity to respond to any
Competing Transaction which Culligan may wish to accept, including in any case
advising USF of the material terms of any Competing Transaction.
(f) Affiliates of Culligan. Culligan shall use all reasonable efforts
to cause each such person who may be at the Effective Time or was on the date
hereof an "affiliate" of Culligan for purposes of Rule 145 under the Securities
Act or applicable accounting releases of the Commission with respect to pooling
of interests accounting treatment, to execute and deliver to USF no less than 30
days prior to the date of the Culligan Stockholders Meeting, the written
undertakings in the form attached hereto as Exhibit A-1 (the "Culligan Affiliate
Letter"). No later than 45 days prior to the date of the Culligan Stockholders
Meeting, Culligan, after consultation with its outside counsel, shall provide
USF with a letter (reasonably satisfactory to outside counsel to USF) specifying
all of the persons or entities who, in Culligan's opinion, may be deemed to be
"affiliates" of Culligan under the preceding sentence.
(g) Access. From the date hereof until the earlier to occur of the
Effective Time or the termination of this Agreement, Culligan shall permit
representatives of USF to have appropriate access at all reasonable times to
Culligan's premises, properties, books, records, contracts and documents.
Information obtained by USF pursuant to this Section 5.3(g) shall be subject to
the provisions of the Confidentiality Agreement, which agreement remains in full
force and effect. No investigation conducted pursuant to this Section 5.3(g)
shall affect or be deemed to modify any representation or warranty made in this
Agreement.
(h) Notification of Certain Matters. Culligan shall give prompt
notice to USF of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any Culligan representation or
warranty contained in this Agreement to be untrue or inaccurate at or prior to
the Effective Time in any material respect and (ii) any material failure of
Culligan to comply with or satisfy any covenant, condition or agreement to be
complied with or
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satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.3(h) shall not limit or otherwise affect the remedies
available hereunder to USF.
ARTICLE VI.
CONDITIONS
6.1. Conditions to the Obligations of Each Party. The obligations of
Culligan, USF and Subcorp to consummate the Merger shall be subject to the
satisfaction of the following conditions:
(a) (i) This Agreement and the Merger shall have been approved and
adopted by the Culligan Stockholders in the manner required by any
Applicable Law, and (ii) the issuance of the Shares of USF Common Stock to
be issued in the Merger shall have been approved by the USF Stockholders
in the manner required by any Applicable Law and the applicable rules of
the NYSE.
(b) Any applicable waiting periods under the HSR Act relating to the
Merger and the transactions contemplated by this Agreement shall have
expired or been terminated, and any requirements of foreign jurisdictions
applicable to the consummation of the Merger shall have been satisfied
unless the failure of such requirements of foreign jurisdictions to be
satisfied does not constitute a Material Adverse Effect in respect of
either Culligan or USF.
(c) No judgment, injunction, order or decree shall prohibit or enjoin
the consummation of the Merger.
(d) There shall not be pending any Action by any federal Governmental
Authority challenging or seeking to restrain or prohibit the consummation
of the Merger.
(e) The Commission shall have declared the USF Registration Statement
effective under the Securities Act, and no stop order or similar
restraining order suspending the effectiveness of the USF Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the Commission.
(f) The Shares of USF Common Stock to be issued in the Merger
(including, without limitation, the shares of USF Common Stock issuable
upon the exercise of the USF Exchange Options) shall have been approved
for listing on the NYSE, subject to official notice of issuance.
(g) USF shall have received a letter, in form and substance
reasonably satisfactory to USF and Culligan, from KPMG Peat Marwick LLP
dated the date of the Effective Time stating that they concur with the
conclusion of USF's management that the Merger will qualify as a
transaction to be accounted for by USF in accordance with the pooling of
interests method of accounting under the requirements of APB No. 16.
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6.2. Conditions to Obligations of Culligan. The obligations of
Culligan to consummate the Merger and the transactions contemplated hereby shall
be subject to the fulfillment of the following conditions unless waived by
Culligan:
(a) The representations and warranties of USF and Subcorp set forth
in Article III shall be true and correct in all material respects on the
date hereof and on and as of the Closing Date as though made on and as of
the Closing Date (except for such representations and warranties made as
of a specified date, the accuracy of which will be determined as of the
specified date).
(b) Each of USF and Subcorp shall have performed in all material
respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with by
it hereunder at or prior to the Effective Time.
(c) Each of USF and Subcorp shall have furnished Culligan with a
certificate dated the Closing Date signed on behalf of it by the Chairman,
President or any Vice President to the effect that the conditions set
forth in Sections 6.2(a) and (b) have been satisfied.
(d) Culligan shall have received the opinion of Wachtell, Lipton,
dated on or prior to the effective date of the Registration Statement, to
the effect that (i) the Merger will constitute a reorganization under
section 368(a) of the Code, (ii) Culligan, USF and Subcorp will each be a
party to that reorganization, and (iii) no gain or loss will be recognized
by the shareholders of Culligan upon the receipt of Shares of USF Common
Stock in exchange for shares of Culligan Common Stock pursuant to the
Merger except with respect to cash received in lieu of fractional share
interests in Shares of USF Common Stock.
6.3. Conditions to Obligations of USF and Subcorp. The obligations of
USF and Subcorp to consummate the Merger and the other transactions contemplated
hereby shall be subject to the fulfillment of the following conditions unless
waived by USF:
(a) The representations and warranties of Culligan set forth in
Article IV shall be true and correct in all material respects on the date
hereof and on and as of the Closing Date as though made on and as of the
Closing Date (except for such representations and warranties made as of a
specified date, the accuracy of which will be determined as of the
specified date).
(b) Culligan shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects
with each covenant to be performed and complied with by it hereunder at or
prior to the Effective Time.
(c) Culligan shall have furnished USF with a certificate dated the
Closing Date signed on its behalf by its Chairman, President or any Vice
President to the effect that the conditions set forth in Sections 6.3(a)
and (b) have been satisfied.
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ARTICLE VII.
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by Culligan Stockholders and USF Stockholders):
(a) by mutual written consent of USF and Culligan;
(b) by either USF or Culligan if any judgment, injunction, order or
decree of a court or other Governmental Authority of competent
jurisdiction enjoining USF or Culligan from consummating the Merger shall
have been entered and such judgment, injunction, order or decree shall
have become final and nonappealable;
(c) by either USF or Culligan if the Merger shall not have been
consummated before November 15, 1998 (which date shall be December 31,
1998 if the HSR Authorities have issued a "second request" under the HSR
Act), provided, however, that the right to terminate this Agreement under
this Section 7.1(c) shall not be available to any party whose failure or
whose affiliate's failure to perform any material covenant or obligation
under this Agreement has been the cause of or resulted in the failure of
the Merger to occur on or before such date;
(d) by USF if the Board of Directors of Culligan shall withdraw, or
shall modify or change the Culligan Board Recommendation in a manner
adverse to USF;
(e) by USF or Culligan if at the Culligan Stockholders Meeting
(including any adjournment or postponement thereof) the requisite vote of
the Culligan Stockholders to approve the Merger and the transactions
contemplated hereby shall not have been obtained;
(f) by USF or Culligan if at the USF Stockholders Meeting (including
any adjournment or postponement thereof) the requisite vote of the USF
Stockholders to approve the issuance of shares of USF Common Stock in the
Merger shall not have been obtained;
(g) by Culligan, pursuant to Section 5.3(e);
(h) by Culligan if the Average Share Price, or if the average of the
closing prices of the shares of USF Common Stock as reported on the NYSE
Composite Tape for any period of 10 consecutive trading days which ends
after the last trading day used in calculating the Average Share Price, is
less than $26.25;
(i) by USF or Culligan if there shall have been a material breach by
the other of any of its representations, warranties, covenants or
agreements contained in this Agreement, which breach would result in the
failure to satisfy one or more of the conditions set forth in Section
6.2(a) or 6.2(b) (in the case of a breach by USF) or Section 6.3(a) or
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<PAGE>
6.3(b) (in the case of a breach by Culligan) or would result in a material
adverse effect on the ability of USF and/or Culligan to consummate the
Merger, and such breach shall not have been cured within 30 days after
notice thereof shall have been received by the party alleged to be in
breach.
7.2. Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement, except for the provisions of the second sentence of
each of Section 5.2(g) and Section 5.3(g) and the provisions of Sections 7.2,
7.7 and 8.11, shall become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders. Notwithstanding
the foregoing, nothing in this Section 7.2 shall relieve any party to this
Agreement of liability for a material breach of any provision of this Agreement
and provided, further, however, that if it shall be judicially determined that
termination of this Agreement was caused by an intentional breach of this
Agreement, then, in addition to other remedies at law or equity for breach of
this Agreement, the party so found to have intentionally breached this Agreement
shall indemnify and hold harmless the other parties for their respective
out-of-pocket costs, fees and expenses of their counsel, accountants, financial
advisors and other experts and advisors as well as fees and expenses incident to
negotiation, preparation and execution of this Agreement and related
documentation, preparation of filings, and shareholders' meetings and consents,
and any litigation by third parties resulting from the execution of this
Agreement ("Costs").
(b) Culligan agrees that, if:
(i) Culligan terminates this Agreement pursuant
to Section 7.1(g); or
(ii) (A) USF or Culligan terminates this Agreement pursuant to
Section 7.1(e) or USF terminates this Agreement pursuant to Section
7.1(d), (B) at the time of such termination there is a publicly
announced or disclosed Competing Transaction with respect to Culligan
involving a third party or, in the case of a termination pursuant to
Section 7.1(d), at the time of such termination there is a Competing
Transaction with respect to Culligan involving a third party and USF
is aware of such Competing Transaction even if not publicly announced
or disclosed, and (C) within six months after such termination,
Culligan shall enter into an Acquisition Agreement for a Business
Combination (as defined below) or consummates a Business Combination;
then, (X) in the case of a termination by Culligan as described in clause (i)
above, concurrently with such termination, or (Y) in the case of a termination
by Culligan or USF as described in clause (ii) above upon the earlier of the
consummation of a Business Combination or execution of a definitive agreement
with respect thereto, Culligan will pay to USF in cash by wire transfer in
immediately available funds to an account designated by USF (i) in reimbursement
for USF's expenses an amount in cash equal to the aggregate amount of USF's
Costs incurred in connection with pursuing the transactions contemplated by this
Agreement, including, without limitation, legal, accounting and investment
banking fees, up to but not in excess of an amount equal to $5 million in the
aggregate and (ii) a termination fee in an amount equal to $42 million (such
amounts
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<PAGE>
collectively, the "Termination Fee"). In the event that USF or Culligan
terminates this Agreement pursuant to Section 7.1(e) or USF terminates this
Agreement pursuant to Section 7.1(d) but in each case clauses (B) and (C) of
Section 7.2(b)(ii) are not satisfied, Culligan will pay to USF in cash by wire
transfer in immediately available funds to an account designated by USF (i) in
reimbursement for USF's expenses an amount in cash equal to the aggregate amount
of USF's Costs incurred in connection with the Agreement, up to but not in
excess of an amount equal to $5 million in the aggregate, and (ii) an additional
amount equal to $5 million; provided, however, to the extent the Termination Fee
becomes payable at a subsequent date, the amount of any payments made pursuant
to this sentence shall be credited against the Termination Fee. For the purposes
of this Section 7.2, "Business Combination" means (i) a merger, consolidation,
share exchange, business combination or similar transaction involving Culligan
as a result of which the Culligan Stockholders prior to such transaction in the
aggregate cease to own at least 50% of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate parent entity
thereof), (ii) a sale, lease, exchange, transfer or other disposition of more
than 35% of the assets of Culligan and its subsidiaries, taken as a whole, in a
single transaction or a series of related transactions, or (iii) the
acquisition, by a person (other than USF or any affiliate thereof) or group (as
such term is defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of beneficial ownership (as defined in Rule 13d-3 under
the Exchange Act) of more than 15% of the Culligan Common Stock whether by
tender or exchange offer or otherwise.
7.3. Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after adoption of this Agreement by Culligan Stockholders, but
after any such approval, no amendment shall be made which by law requires
further approval or authorization by the Culligan Stockholders without such
further approval or authorization. Notwithstanding the foregoing, this Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
7.4. Special Payment.
(a) In the event that (x) the Board of Directors of USF shall
withdraw or shall modify or change in a manner adverse to Culligan its
recommendation as set forth in Section 3.12 of this Agreement, and this
Agreement shall have terminated in accordance with the terms hereof as a result
thereof, or (y) this Agreement is terminated pursuant to Section 7.1(f), then
concurrently with any such termination by USF or within 3 days after
delivery by Culligan of notice of such termination, USF shall pay to Culligan in
cash by wire transfer of immediately available funds to an account designated by
Culligan, as liquidated damages (i) in reimbursement for Culligan's expenses, an
amount of cash equal to the aggregate amount of Culligan's Costs up to but not
in excess of an amount equal to $5 million in the aggregate and (ii) the amount
of $42 million.
(b) In the event that this Agreement is terminated by Culligan
pursuant to Section 7.1(b), 7.1(c) or Section 7.1(i) hereof, in each case as a
result of the failure of USF or its affiliates to perform its covenants and
obligations under Section 5.1(a) hereof, then within 3 days after such
termination, USF shall pay to Culligan in cash by wire transfer of immediately
available funds to an account designated by Culligan, as liquidated damages, an
amount of cash equal to $47 million.
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<PAGE>
7.5. Exclusive Remedy. In the event that any Termination Fee is paid
pursuant to Section 7.2 or any liquidated damages are paid pursuant to Section
7.4, notwithstanding any other provision of this Agreement, it is understood and
agreed that such Termination Fee or liquidated damages, as the case may be,
shall be the exclusive remedy for any act or omission resulting in the
termination of this Agreement or other claim arising out of this Agreement or
the transactions contemplated hereby.
7.6. Extension; Waiver. At any time prior to the Effective Time, USF
(with respect to Culligan) and Culligan (with respect to USF and Subcorp) by
action taken or authorized by their respective Boards of Directors, may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of such party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
7.7. Cooling Off Period.
(a) In the event of a termination of this Agreement due to a breach
by USF, then USF shall be prohibited from entering into, commencing negotiations
or soliciting negotiations, or having or continuing discussions that constitute,
or could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of shares
of capital stock or similar transaction involving current or former franchisees
of Culligan (a "Franchisee Acquisition Proposal") or engage in negotiations or
discussions concerning any Franchisee Acquisition Proposal for a period of 180
days from the date of termination. In the event of a termination of this
Agreement other than due to a breach by Culligan or a breach by USF, then USF
shall be prohibited from entering into, commencing negotiations, or soliciting
negotiations, or having or continuing discussions that constitute, or could
reasonably be expected to lead to, a Franchisee Acquisition Proposal, or engage
in negotiations or discussions concerning any Franchisee Acquisition Proposal
for a period of 90 days from the date of termination.
(b) In the event of a termination of this Agreement due to a breach
by Culligan, there shall be no prohibition on USF concerning Franchisee
Acquisition Proposals from the date of termination.
(c) Notwithstanding any other provision of this Agreement, except
with respect to the transactions contemplated by the definitive agreements
previously disclosed to counsel for Culligan by counsel for USF, USF hereby
agrees that from the date of this Agreement until the earlier to occur of the
Effective Time or the termination of this Agreement, that it shall not make,
solicit or pursue in any manner any pending or future Franchisee Acquisition
Proposal.
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<PAGE>
ARTICLE VIII.
MISCELLANEOUS
8.1. Survival of Representations and Warranties. The representations
and warranties made herein by the parties hereto shall not survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
hereto, which by its terms contemplates performance after the Effective Time or
after the termination of this Agreement.
8.2. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed) or dispatched by a nationally recognized overnight courier service
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to USF or Subcorp:
United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Attention: Damian C. Georgino
Telecopy No.: (760) 346-4024
with a copy to
Brian J. McCarthy
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, CA 90071-3144
Telecopy No.: (213) 687-5600
(b) if to Culligan:
Culligan Water Technologies, Inc.
One Culligan Parkway
Northbrook, Illinois 60062
Attention: General Counsel
Telecopy No.: (847) 205-6050
with a copy to
Daniel A. Neff
David A. Katz
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
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<PAGE>
8.3. Interpretation.
(a) When a reference is made in this Agreement to an Article or
Section, such reference shall be to an Article or Section of this Agreement
unless otherwise indicated. The headings and the table of contents contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. When a reference is made in
this Agreement to Culligan, such reference shall be deemed to include any and
all subsidiaries of Culligan, individually and in the aggregate, except for
Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.7, 4.8, 4.12, 4.16, 4.17, 4.19, 4.20, 4.21,
5.2(k) and 8.3.
(b) For the purposes of any provision of this Agreement, a "Material
Adverse Effect" with respect to any party shall be deemed to occur if any event,
change or effect, individually or in the aggregate with such other events,
changes or effects, has occurred which has a material adverse effect on the
business or financial condition of such party and its subsidiaries taken as a
whole; provided, however, that a Material Adverse Effect with respect to any
party shall not include any change in or effect upon the business or financial
condition of such party or any of its subsidiaries directly or indirectly
arising out of or attributable to or a consequence of (i) conditions, events, or
circumstances generally affecting the industries in which USF (and its
subsidiaries) and Culligan (and its subsidiaries) operate or the economy in
general, (ii) the loss by such party (and its subsidiaries) of any of its
customers, suppliers or employees as a result of the transactions contemplated
hereby or the public announcement of this Agreement, or (iii) any action or
change specifically contemplated by the provisions of this Agreement or, with
respect to Culligan, any other transactions or actions by or involving USF or
its affiliates.
(c) For purposes of this Agreement, a "subsidiary" of any person
means another person, an amount of the voting securities or other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting securities or interests, 50% or more of the equity interests
of which) is owned directly or indirectly by such first person.
(d) For purposes of this Agreement, "knowledge" of a party shall mean
the actual knowledge of all officers of such party with a title of vice
president or higher.
8.4. Counterparts. This Agreement may be executed in counterparts,
which together shall constitute one and the same Agreement. The parties may
execute more than one copy of the Agreement, each of which shall constitute an
original.
8.5. Entire Agreement. This Agreement (including the documents and
the instruments referred to herein), the Support/Voting Agreement, dated as of
February 9, 1998 between USF and Apollo Investment Fund, L.P., the Support
Voting Agreement, dated as of February 9, 1998, between USF and Lion Advisors,
L.P., the Registration Rights Agreement, dated as of February 9, 1998, between
USF and the parties listed therein, and the Confidentiality Agreement constitute
the entire agreement among the parties and supersede all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof.
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<PAGE>
8.6. Third Party Beneficiaries. Except for the agreement set forth in
Section 5.2(d), 5.2(k) and 5.2(l), nothing in this Agreement, express or
implied, is intended or shall be construed to create any third party
beneficiaries.
8.7. Governing Law. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the laws of
the State of Delaware. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in any state or federal court
sitting in Delaware.
8.8. Consent to Jurisdiction; Venue.
(a) Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the state courts of Delaware and to the jurisdiction of the
United States District Court for Delaware, for the purpose of any action or
proceeding arising out of or relating to this Agreement and each of the parties
hereto irrevocably agrees that all claims in respect to such action or
proceeding may be heard and determined exclusively in any Delaware state or
federal court sitting in Delaware. Each of the parties hereto agrees that a
final judgment in any action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(b) Each of the parties hereto irrevocably consents to the service of
any summons and complaint and any other process in any other action or
proceeding relating to the Merger, on behalf of itself or its property, by the
personal delivery of copies of such process to such party. Nothing in this
Section 8.8 shall affect the right of any party hereto to serve legal process in
any other manner permitted by law.
8.9. Specific Performance. The transactions contemplated by this
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled, each of the
parties hereto is entitled to a decree of specific performance, provided such
party is not in material default hereunder.
8.10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
8.11. Expenses. Subject to the provisions of Section 7.2, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses.
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<PAGE>
IN WITNESS WHEREOF, USF, Subcorp and Culligan have signed this
Agreement as of the date first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Richard J. Heckmann
Name: Richard J. Heckmann
Title: Chief Executive Officer
PALM WATER ACQUISITION CORP.
By: /s/ Richard J. Heckmann
Name: Richard J. Heckmann
Title: Chief Executive Officer
CULLIGAN WATER TECHNOLOGIES, INC.
By: /s/ Douglas A. Pertz
Name: Douglas A. Pertz
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT 99.1
UNITED STATES FILTER CORPORATION
TO ACQUIRE CULLIGAN WATER TECHNOLOGIES, INC.
FOR $1.5 BILLION IN STOCK, STRENGTHENING U.S. FILTER'S
POSITION AS LARGEST GLOBAL WATER TREATMENT COMPANY
PALM DESERT, CALIFORNIA AND NORTHBROOK, ILLINOIS, February 9, 1998 --
United States Filter Corporation (NYSE:USF) announced today that it has signed a
definitive agreement to acquire Culligan Water Technologies, Inc. (NYSE:CUL) for
approximately $1.5 billion in U.S. Filter common stock. Under the terms of the
transaction, which further consolidates U.S. Filter's position as the world's
largest global water treatment company, Culligan shareholders will get 1.714
shares of U.S. Filter common stock for each Culligan share they own. Subject to
certain adjustments, this equates to $60.00 per share in U.S. Filter stock.
Combined, the two companies will have more than $4.5 billion in revenues,
2,000 locations and more than 20,000 employees in 90 countries throughout the
world. Culligan has annualized revenues of approximately $760 million, with
about 4,000 employees worldwide and a three year compounded growth rate of 22%.
The transaction, which is subject to approval by both companies'
shareholders, Hart, Scott Rodino Antitrust Clearance and other governmental and
customary conditions, is expected to close in late May 1998. The Company said
the integration of Culligan and U.S. Filter is expected to be slightly accretive
within the first twelve months.
Richard J. Heckmann, Chairman, President and CEO of U.S. Filter said, "This
transaction will create a significant critical mass for U.S. Filter and a
leadership position in the consumer/residential and commercial segment of the
water treatment business, including bottled water. Culligan clearly is the most
recognized brand name in the water business and with its spectacular growth rate
of the last several years, fits culturally and strategically into what we do.
The combination of our two organizations considerably strengthens our
position as the preeminent company in the water treatment business globally."
He continued, "With Culligan's global reach and outstanding franchise
dealer network, the cross-selling opportunities between our broad and diverse
product lines and their worldwide network of over 1,400 sales and service
centers, offers truly amazing opportunities and operating synergies. We are
adding a powerful water company to our already strong and growing network of
companies. Customers will benefit from our continued one-stop shop philosophy
of being a low cost, high quality and local service supplier of all water
products. Shareholders will benefit from the enhanced value this brings to both
companies."
Doug Pertz, CEO of Culligan, commenting on the transaction said, "As we
move into the 21st Century, merging with U.S. Filter is a terrific opportunity
to capitalize on the tremendous secular trends in our industry. The benefits
to our customers, dealers and employees are enormous. This industry-leading
strategic combination will allow greater support of Culligan's strong franchise
dealer network and further expand the Culligan brand name, supporting continued
strong growth."
Culligan was founded in 1936. The Culligan(R), Everpure(R), Elga(R),
<PAGE>
Ametek(R) and Bruner(R) brands are among the most recognized in the industry.
Culligan's products are sold and serviced in over 90 countries with
manufacturing facilities in the United States, Italy, Spain, United Kingdom,
Germany and Canada. Culligan's residential water treatment systems have been
installed in over 3 million households in the United States, representing the
largest installed base in the country. Culligan is one of the largest five
gallon bottled water companies in the United States with the only nationwide
dealer network and brand.
With annualized revenues of over $3.5 billion, U.S. Filter is the leading
global provider of industrial, municipal and residential water and wastewater
treatment systems, products and services, with an installed base U.S. Filter
believes is the largest worldwide. In addition, U.S. Filter has the industry's
largest network of sales and service facilities through over 612 locations
including 90 manufacturing plants in 33 countries. U.S. Filter is also a leading
provider of outsourced water services, including the operation of water and
wastewater treatment systems at customer sites. It is also actively involved in
the development of privatization initiatives for municipal water treatment
facilities in the U.S., Mexico and Canada. U.S. Filter invites you to visit its
web site at http://www.usfilter.com.
###
<PAGE>
Exhibit 99.2
Conformed Copy
Support/Voting Agreement
February 9, 1998
United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Re: Support/Voting Agreement
Dear Sirs:
The undersigned understands that United States Filter Corporation
("USF"), Palm Water Acquisition Corp., a wholly owned subsidiary of USF
("Subcorp"), and Culligan Water Technologies, Inc. ("Culligan") are entering
into an Agreement and Plan of Merger, dated the date hereof (the "Agreement"),
providing for, among other things, a merger between Subcorp and Culligan (the
"Merger"), in which all of the outstanding shares of capital stock of Culligan
will be exchanged for shares of common stock, par value $.01 per share, of USF.
The undersigned is a stockholder of Culligan (the "Stockholder") and
is entering into this letter agreement to induce you to enter into the Agreement
and to consummate the transactions contemplated thereby.
The Stockholder confirms its agreement with you as follows:
1. The Stockholder represents, warrants and agrees that Schedule I
annexed hereto sets forth the shares of the capital stock of Culligan of which
the Stockholder is the record or beneficial owner (the "Shares") and that the
Stockholder is on the date hereof the lawful owner of the number of Shares set
forth in Schedule I, free and clear of all liens, charges, encumbrances, voting
agreements and commitments of every kind, except as disclosed previously in
writing to USF. Except for the Shares set forth in Schedule I, the Stockholder
does not own or hold any rights to acquire any additional shares of the capital
stock of Culligan (other than pursuant to stock options) or any interest therein
or any voting rights with respect to any additional shares.
2. The Stockholder agrees that it will not, will not permit any
company, trust or other entity controlled by the Stockholder (other than
Culligan) to, contract to sell, sell or otherwise transfer or dispose of any of
the Shares or any interest therein or securities convertible thereinto or any
voting rights with respect thereto, other than (i) pursuant to the Merger, (ii)
with
<PAGE>
your prior written consent or (iii) to the extent contractually required
(as disclosed previously in writing to USF).
3. The Stockholder agrees to, will cause any company, trust or other
entity controlled by the Stockholder to, and will use its reasonable best
efforts to cause its affiliates (as defined under the Securities Exchange Act of
1934, as amended) to, cooperate fully with you in connection with the Agreement
and the transactions contemplated thereby. The Stockholder agrees that, during
the term of this letter agreement, it will not, and will not permit any such
company, trust or other entity to, and will use its reasonable best efforts to
not permit any of its affiliates to, directly or indirectly (including through
its directors, officers, employees or other representatives) solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
Competing Transaction, or negotiate, explore or otherwise engage in discussions
with any person (other than USF, Subcorp or their respective directors,
officers, employees, agents and representatives) with respect to any Competing
Transaction or enter into any agreement, arrangement or understanding with
respect to any Competing Transaction or agree to or otherwise assist in the
effectuation of any Competing Transaction; provided, however, that nothing
herein shall prevent the Stockholder (or any representative of the Stockholder)
from taking any action or omitting to take any action solely as a member of the
Board of Directors of Culligan if failure to do so would create a reasonable
possibility of a breach of such Stockholder's (or such Stockholder's
representatives) fiduciary duties as a member (or members) of the Culligan Board
of Directors after consultation with outside counsel.
4. The Stockholder agrees that all of the Shares beneficially owned
by the Stockholder (except shares subject to unexercised stock options), or over
which the Stockholder has voting power or control, directly or indirectly
(including any common shares of Culligan acquired after the date hereof), at the
record date for any meeting of stockholders of Culligan called to consider and
vote to approve the Merger and the Agreement and/or the transactions
contemplated thereby and/or any Competing Transaction will be voted in favor the
Merger and the Agreement and the transactions contemplated thereby and that the
Stockholder will not vote such Shares in favor of any Competing Transaction
during the term of this letter agreement.
5. The Stockholder has all necessary power and authority to enter
into this letter agreement. This letter agreement is the legal, valid and
binding agreement of the Stockholder, and is enforceable against the Stockholder
in accordance with its terms.
6. The Stockholder agrees that damages are an inadequate remedy for
the breach by Stockholder of any term or condition of this letter agreement and
that you shall be entitled to a temporary restraining order and preliminary and
permanent injunctive relief in order to enforce our agreements herein.
7. Except to the extent that the laws of the jurisdiction of
organization of any party hereto, or any other jurisdiction, are mandatorily
applicable to matters arising under or in connection with this letter agreement,
this letter agreement shall be governed by the laws of the
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<PAGE>
State of Delaware. All actions and proceedings arising out of or relating to
this letter agreement shall be heard and determined in any Delaware state or
federal court sitting in Delaware.
8. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the state courts of Delaware and to the jurisdiction of the
United States District Court for the District of Delaware, for the purpose of
any action or proceeding arising out of or relating to this letter agreement and
each of the parties hereto irrevocably agrees that all claims in respect to such
action or proceeding may be heard and determined exclusively in any Delaware
state or federal court sitting in Delaware. Each of the parties hereto agrees
that a final judgment in any action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Each of the parties hereto irrevocably consents to the service
of any summons and complaint and any other process in any other action or
proceeding relating hereto, on behalf of itself or its property, by the personal
delivery of copies of such process to such party. Nothing in this Section 8
shall affect the right of any party hereto to serve legal process in any other
manner permitted by law.
9. This letter agreement constitutes the entire agreement among the
parties hereto with respect to the matters covered hereby and supersedes all
prior agreements, understandings or representations among the parties written or
oral, with respect to the subject matter hereof.
10. Capitalized terms not defined in this letter agreement shall
have the meaning assigned to them in the Agreement.
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<PAGE>
11. This letter agreement may be terminated at the option of any
party at any time upon the earlier of (i) the date on which the Agreement is
terminated and (ii) the Effective Time (as defined in the Agreement); provided,
however, if the Agreement is terminated pursuant to Sections 7.1 (d), 7.1(e) or
7.1(g) thereof, then the limitations set forth in paragraphs 2 and 4 hereof
shall survive for 150 days from the date of termination.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to me a counterpart hereof.
Very truly yours,
APOLLO INVESTMENT FUND, L.P.
by Apollo Advisors, L.P.
its general partner
by Apollo Capital Management, Inc.
its general partner
By: /s/ Marc J. Rowan
Marc J. Rowan, Vice President
Confirmed on the date first above written.
United States Filter Corporation
By: /s/ Richard J. Heckmann
Name: Richard J. Heckmann
Title: Chief Executive Officer
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<PAGE>
Schedule I
Stock Ownership
of Apollo Investment Fund, L.P.
Owned Beneficially or of Record
3,668,163
-5-
<PAGE>
Exhibit 99.3
Conformed Copy
Support/Voting Agreement
February 9, 1998
United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Re: Support/Voting Agreement
Dear Sirs:
The undersigned understands that United States Filter Corporation
("USF"), Palm Water Acquisition Corp., a wholly owned subsidiary of USF
("Subcorp"), and Culligan Water Technologies, Inc. ("Culligan") are entering
into an Agreement and Plan of Merger, dated the date hereof (the "Agreement"),
providing for, among other things, a merger between Subcorp and Culligan (the
"Merger"), in which all of the outstanding shares of capital stock of Culligan
will be exchanged for shares of common stock, par value $.01 per share, of USF.
The undersigned is a stockholder of Culligan (the "Stockholder") and
is entering into this letter agreement to induce you to enter into the Agreement
and to consummate the transactions contemplated thereby.
The Stockholder confirms its agreement with you as follows:
1. The Stockholder represents, warrants and agrees that Schedule I
annexed hereto sets forth the shares of the capital stock of Culligan of which
the Stockholder is the record or beneficial owner (the "Shares") and that the
Stockholder is on the date hereof the lawful owner of the number of Shares set
forth in Schedule I, free and clear of all liens, charges, encumbrances, voting
agreements and commitments of every kind, except as disclosed previously in
writing to USF. Except for the Shares set forth in Schedule I, the Stockholder
does not own or hold any rights to acquire any additional shares of the capital
stock of Culligan (other than pursuant to stock options) or any interest therein
or any voting rights with respect to any additional shares.
2. The Stockholder agrees that it will not, will not permit any
company, trust or other entity controlled by the Stockholder (other than
Culligan) to, contract to sell, sell or otherwise transfer or dispose of any of
the Shares or any interest therein or securities convertible thereinto or any
voting rights with respect thereto, other than (i) pursuant to the Merger, (ii)
with
<PAGE>
your prior written consent or (iii) to the extent contractually required
(as disclosed previously in writing to USF).
3. The Stockholder agrees to, will cause any company, trust or other
entity controlled by the Stockholder to, and will use its reasonable best
efforts to cause its affiliates (as defined under the Securities Exchange Act of
1934, as amended) to, cooperate fully with you in connection with the Agreement
and the transactions contemplated thereby. The Stockholder agrees that, during
the term of this letter agreement, it will not, and will not permit any such
company, trust or other entity to, and will use its reasonable best efforts to
not permit any of its affiliates to, directly or indirectly (including through
its directors, officers, employees or other representatives) solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
Competing Transaction, or negotiate, explore or otherwise engage in discussions
with any person (other than USF, Subcorp or their respective directors,
officers, employees, agents and representatives) with respect to any Competing
Transaction or enter into any agreement, arrangement or understanding with
respect to any Competing Transaction or agree to or otherwise assist in the
effectuation of any Competing Transaction; provided, however, that nothing
herein shall prevent the Stockholder (or any representative of the Stockholder)
from taking any action or omitting to take any action solely as a member of the
Board of Directors of Culligan if failure to do so would create a reasonable
possibility of a breach of such Stockholder's (or such Stockholder's
representatives) fiduciary duties as a member (or members) of the Culligan Board
of Directors after consultation with outside counsel.
4. The Stockholder agrees that all of the Shares beneficially owned
by the Stockholder (except shares subject to unexercised stock options), or over
which the Stockholder has voting power or control, directly or indirectly
(including any common shares of Culligan acquired after the date hereof), at the
record date for any meeting of stockholders of Culligan called to consider and
vote to approve the Merger and the Agreement and/or the transactions
contemplated thereby and/or any Competing Transaction will be voted in favor the
Merger and the Agreement and the transactions contemplated thereby and that the
Stockholder will not vote such Shares in favor of any Competing Transaction
during the term of this letter agreement.
5. The Stockholder has all necessary power and authority to enter
into this letter agreement. This letter agreement is the legal, valid and
binding agreement of the Stockholder, and is enforceable against the Stockholder
in accordance with its terms.
6. The Stockholder agrees that damages are an inadequate remedy for
the breach by Stockholder of any term or condition of this letter agreement and
that you shall be entitled to a temporary restraining order and preliminary and
permanent injunctive relief in order to enforce our agreements herein.
7. Except to the extent that the laws of the jurisdiction of
organization of any party hereto, or any other jurisdiction, are mandatorily
applicable to matters arising under or in connection with this letter agreement,
this letter agreement shall be governed by the laws of the
-2-
<PAGE>
State of Delaware. All actions and proceedings arising out of or relating to
this letter agreement shall be heard and determined in any Delaware state or
federal court sitting in Delaware.
8. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the state courts of Delaware and to the jurisdiction of the
United States District Court for the District of Delaware, for the purpose of
any action or proceeding arising out of or relating to this letter agreement and
each of the parties hereto irrevocably agrees that all claims in respect to such
action or proceeding may be heard and determined exclusively in any Delaware
state or federal court sitting in Delaware. Each of the parties hereto agrees
that a final judgment in any action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Each of the parties hereto irrevocably consents to the service
of any summons and complaint and any other process in any other action or
proceeding relating hereto, on behalf of itself or its property, by the personal
delivery of copies of such process to such party. Nothing in this Section 8
shall affect the right of any party hereto to serve legal process in any other
manner permitted by law.
9. This letter agreement constitutes the entire agreement among the
parties hereto with respect to the matters covered hereby and supersedes all
prior agreements, understandings or representations among the parties written or
oral, with respect to the subject matter hereof.
10. Capitalized terms not defined in this letter agreement shall
have the meaning assigned to them in the Agreement.
-3-
<PAGE>
11. This letter agreement may be terminated at the option of any
party at any time upon the earlier of (i) the date on which the Agreement is
terminated and (ii) the Effective Time (as defined in the Agreement); provided,
however, if the Agreement is terminated pursuant to Sections 7.1 (d), 7.1(e) or
7.1(g) thereof, then the limitations set forth in paragraphs 2 and 4 hereof
shall survive for 150 days from the date of termination.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to me a counterpart hereof.
Very truly yours,
LION ADVISORS, L.P.
by Lion Capital Management, Inc.
its general partner
By: /s/ Marc J. Rowan
Marc J. Rowan, Vice President
Confirmed on the date first above written.
United States Filter Corporation
By: /s/ Richard J. Heckmann
Name: Richard J. Heckmann
Title: Chief Executive Officer
-4-
<PAGE>
Schedule I
Stock Ownership
of Lion Advisors, L.P.
Owned Beneficially or of Record
3,666,696
-5-
<PAGE>
CONFORMED COPY
------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
UNITED STATES FILTER CORPORATION
AND
THE PERSONS AND ENTITIES LISTED ON
THE SIGNATURE PAGES HEREOF
------------
DATED AS OF FEBRUARY 9, 1998
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
<S> <C>
1. DEFINITIONS................................................................................. 1
2. REGISTRATION UNDER THE SECURITIES ACT....................................................... 4
(a) Required Registration................................................................ 4
(b) Incidental Registration.............................................................. 6
(c) Expenses............................................................................. 8
(d) Effective Registration Statement; Suspension......................................... 8
(e) Selection of Underwriters............................................................ 8
3. HOLDBACK ARRANGEMENTS........................................................................ 9
4. REGISTRATION PROCEDURES...................................................................... 9
5. INDEMNIFICATION; CONTRIBUTION................................................................14
(a) Indemnification by the Company........................................................14
(b) Indemnification by Holders............................................................15
(c) Conduct of Indemnification Proceedings................................................15
(d) Contribution..........................................................................16
6. MISCELLANEOUS................................................................................17
(a) No Inconsistent Agreements............................................................17
(b) Amendments and Waivers................................................................17
(c) Notices...............................................................................18
(d) Successors and Assigns................................................................18
(e) Recapitalizations, Exchanges, etc., Affecting Registrable Securities..................19
(f) Counterparts..........................................................................19
(g) Descriptive Headings, Etc.............................................................19
(h) Severability..........................................................................19
(i) Governing Law.........................................................................19
(j) Specific Performance..................................................................19
(k) Entire Agreement......................................................................20
</TABLE>
(i)
<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of February
---------
9, 1998, by and between UNITED STATES FILTER CORPORATION, a Delaware corporation
(the "Company"), the Persons listed on the signature pages hereof (herein
-------
successors referred to collectively, along with their respective Affiliates and
who from and after the date hereof acquire or are otherwise the transferee of
any Registrable Securities (as hereinafter defined), as the "Initial Holders"
---------------
and individually as an "Initial Holder") and any other Person that shall from
---------------
and after the date hereof acquire or otherwise be the transferee of any
Registrable Securities and who shall be a Permitted Transferee (as hereinafter
defined) of any Initial Holder (herein referred to collectively as the "Holders"
-------
and individually as a "Holder").
------
WHEREAS, the Company has entered into an Agreement and Plan of Merger,
dated as of February 9, 1998 (the "Merger Agreement"), with Palm Water
----------------
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the
Company and Culligan Water Technologies, Inc., a Delaware corporation
("Culligan"), which provides, upon the terms and subject to the conditions
--------
thereof, for the merger of the Palm Water Acquisition Corp. with and into
Culligan (the "Merger"), with Culligan as the surviving corporation;
------
WHEREAS, in consideration of the Merger, among other things, all of
the issued and outstanding shares of common stock of Culligan owned by the
Initial Holders shall be converted into the right to receive validly issued,
fully paid and nonassessable shares of Company Common Stock, par value $.01 per
share ("Common Shares"), as provided in the Merger Agreement; and
-------------
WHEREAS, in order to induce the Initial Holders to complete the
transactions contemplated by the Merger Agreement, the Company has agreed to
provide registration rights on the terms and subject to the conditions provided
herein;
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION 1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
---------
under the Exchange Act.
"Common Shares" shall have the meaning set forth in the preamble.
-------------
"Company" shall have the meaning set forth in the preamble and shall
-------
also include the Company's successors.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
<PAGE>
"Holder" shall have the meaning set forth in the preamble.
------
"Incidental Registration" shall mean a registration required to be
-----------------------
effected by the Company pursuant to Section 2(b).
"Incidental Registration Statement" shall mean a registration
---------------------------------
statement of the Company, as provided in Section 2(b), which covers any of the
Registrable Securities on an appropriate form in accordance with the Securities
Act and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Initial Holder(s)" shall have the meaning set forth in the preamble.
-----------------
"Majority Holders" shall mean Holders of Common Shares representing in
----------------
the aggregate a majority of the aggregate number of outstanding Common Shares
beneficially owned by Holders.
"Merger" shall have the meaning set forth in the preamble.
------
"Merger Agreement" shall have the meaning set forth in the preamble.
----------------
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"Permitted Transferee" shall mean any Person which would be a
--------------------
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act.
"Person" shall mean any individual, limited or general partnership,
------
corporation, trust, joint venture, association, joint stock company or
unincorporated organization.
"Pooling Holding Period" shall mean the period from the effective date
----------------------
of the Merger until the publication of the Company's financial results for 30
days of post-Merger combined operations which is sufficient in accordance with
Accounting Series Release No. 135 to permit the disposition of shares of Company
Stock by all former Culligan shareholders, consistent with the requirements for
pooling of interests accounting treatment of the Merger.
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary Prospectus, and any such Prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities and by all other
amendments and supplements to such Prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Registrable Securities" shall mean Common Shares beneficially owned
----------------------
by any Holder, but shall not include any Common Share (i) which has been
effectively registered under the Securities Act and disposed of in accordance
with a Registration Statement covering such security (excluding the Company's
Registration Statement on Form S-4 covering the shares of Company Stock which
are to be issued in the Merger or which are issuable in connection
-2-
<PAGE>
therewith) or (ii) which has been distributed to the public pursuant to Rule 144
under the Securities Act.
"Registration Expenses" shall mean (i) all registration, listing,
---------------------
qualification and filing fees (including NASD filing fees), (ii) fees and
disbursements of counsel for the Company, (iii) accounting fees incident to any
such registration, (iv) blue sky fees and expenses (including counsel fees in
connection with the preparation of a Blue Sky Memorandum and legal investment
survey), (v) all expenses of any Persons in preparing or assisting in preparing,
printing, distributing, mailing and delivering any Registration Statement, any
Prospectus, any underwriting agreements, transmittal letters, securities sales
agreements, securities certificates and other documents relating to the
performance of and compliance with this Agreement, (vi) the expenses incurred in
connection with making road show presentations and holding meetings with
potential investors to facilitate the distribution and sale of Registrable
Securities which are customarily borne by the issuer, and (v) all internal
expenses of the Company (including all salaries and expenses of officers and
employees performing legal or accounting duties); provided, however,
Registration Expenses shall not include any Selling Expenses.
"Registration Statement" shall mean any registration statement of the
----------------------
Company which covers any Registrable Securities and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Required Registration" shall mean a registration required to be
---------------------
effected pursuant to Section 2(a).
"Required Registration Statement" shall mean a Registration Statement
-------------------------------
which covers the Registrable Securities requested to be included therein
pursuant to the provisions of Section 2(a) on an appropriate form (in accordance
with Section 4(a) hereof) pursuant to the Securities Act, and which form shall
be available for the sale of the Registrable Securities in accordance with the
intended method or methods of distribution thereof, and all amendments and
supplements to such Registration Statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
---
"Selling Expenses" shall mean underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the shares registered by the
Holders, fees and disbursements of counsel for the Holders retained by them
(other than with respect to the fees and disbursements made in connection with
the preparation of a Blue Sky Memorandum and legal investment survey).
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time.
-3-
<PAGE>
"Underwriter" shall have the meaning set forth in Section 5(a).
-----------
"Underwritten Offering" shall mean a sale of securities of the Company
---------------------
to an Underwriter or Underwriters for reoffering to the public.
(b) Capitalized terms used herein and not otherwise defined shall
have the meanings assigned such terms in the Merger Agreement.
SECTION 2. REGISTRATION UNDER THE SECURITIES ACT.
(a) Required Registration.
--- ---------------------
(i) Right to Require Registration. At any time prior to the third
--- -----------------------------
anniversary of the expiration of the Pooling Holding Period (subject to
extension in accordance with the penultimate paragraph of this Section 2(a)(i)),
one or more Holders of Registrable Securities shall have the right to request in
writing (a "Request") (which Request shall specify the Registrable Securities
-------
intended to be disposed of by such Holders and the intended method of
distribution thereof) that the Company register such Holders' Registrable
Securities by filing with the SEC a Required Registration Statement. Upon the
receipt of such a Request, the Company will, by the fifth business day
thereafter, give written notice of such requested registration to all Initial
Holders of Registrable Securities, and, not later than the 30th calendar day
after the receipt of such a Request by the Company, the Company will cause to be
filed with the SEC a Required Registration Statement covering the Registrable
Securities which the Company has been so requested to register in such Request
and all other Registrable Securities which the Company has been requested to
register by Holders thereof other than the Initial Holder(s) initiating the
Request by written request given to the Company within 9 business days after the
giving of such written notice by the Company, providing for the registration
under the Securities Act of the Registrable Securities which the Company has
been so requested to register by all such Holders, to the extent necessary to
permit the disposition of such Registrable Securities so to be registered in
accordance with the intended methods of distribution thereof specified in such
Request or further requests, and shall use all reasonable efforts to have such
Required Registration Statement declared effective by the SEC as soon as
practicable thereafter (but in no event later than the 75th calendar day after
the receipt of such a Request) and to keep such Required Registration Statement
continuously effective for a period of at least 60 calendar days (or, in the
case of an Underwritten Offering, such period as the Underwriters shall
reasonably require) following the date on which such Required Registration
Statement is declared effective (or such shorter period which will terminate
when all of the Registrable Securities covered by such Required Registration
Statement have been sold pursuant thereto), including, if necessary, by filing
with the SEC a post-effective amendment or a supplement to the Required
Registration Statement or the related Prospectus or any document incorporated
therein by reference or by filing any other required document or otherwise
supplementing or amending the Required Registration Statement, if required by
the rules, regulations or instructions applicable to the registration form used
by the Company for such Required Registration Statement or by the Securities
Act, the Exchange Act, any state securities or blue sky laws, or any rules and
regulations thereunder.
-4-
<PAGE>
The Company shall not be required to effect, pursuant to this Section
2(a), (x) the initial Required Registration hereunder unless Initial Holders
beneficially owning at least 2,500,000 Common Shares have initiated or joined
in such Request, (y) any subsequent Required Registration hereunder unless
initiated or joined in by Holders beneficially owning the lesser of (i)
2,500,000 Common Shares and (z) more than three registrations in the aggregate
requested by the Initial Holders. For purposes of clauses (x) and (y) of the
preceding sentence, shares of Company Stock purchased after the effective date
of the Merger shall be deemed not to be beneficially owned by the Initial
Holders.
A Request may be withdrawn prior to the filing of the Required
Registration Statement by the Initial Holder(s) which made such Request (a
"Withdrawn Request") and a Required Registration Statement may be withdrawn
- ------------------
prior to the effectiveness thereof by the Holders of a majority of the
Registrable Securities included therein (a "Withdrawn Required Registration"),
-------------------------------
and, in either such event, such withdrawal shall be treated as a Required
Registration which shall have been effected pursuant to clause (z) of the
immediately preceding paragraph, except that the Holders may require the
Company to disregard one Withdrawn Request for purposes of such clause (z).
The Initial Holders shall not, without the Company's consent, be
entitled to deliver a Request for a Required Registration after the completion
of the initial Required Registration if less than 90 calendar days have elapsed
since (A) the effective date of a prior Required Registration Statement or (B)
in the case of a Required Registration which is effected other than by means of
an Underwritten Offering, since the sale by the Holders of their Registrable
Securities pursuant thereto or (C) the date of withdrawal of a Withdrawn
Required Registration.
Notwithstanding the foregoing, from and after 91 days following the
termination of the Pooling Holding Period, the Company may delay the filing of a
registration statement required pursuant to this Section 2(a) if the Board of
Directors of the Company determines that such action is in the best interests of
the Company's stockholders and only for a period not to exceed 60 days (a
"Blackout Period"); provided that after any initial Blackout Period the Company
- ----------------
may not invoke a subsequent Blackout Period until 12 months elapse from the end
of any previous Blackout Period and the number of days in each Blackout Period
shall be deemed to effect a day-for-day extension of the three-year period
referred to in the first sentence of this Section 2(a) and the first sentence of
Section 2(b), and the three-year period referred to in the proviso to the second
sentence of Section 6(a).
The registration rights granted pursuant to the provisions of this
Section 2(a) shall be in addition to the registration rights granted pursuant to
the other provisions of this Section 2.
(ii) Priority in Required Registrations. If a Required Registration
----------------------------------
pursuant to this Section 2(a) involves an Underwritten Offering, and the sole
Underwriter or the lead managing Underwriter, as the case may be, of such
Underwritten Offering shall advise the Company in writing (with a copy to each
Holder requesting registration) on or before the date 5 days prior to the date
then scheduled for such offering that, in its opinion, the amount of Registrable
Securities requested to be included in such Required Registration exceeds the
amount which can be sold in such offering without adversely affecting the
distribution of the Registrable
-5-
<PAGE>
Securities being offered, the Company will include in such Required Registration
only the amount of Registrable Securities that the Company is so advised can be
sold in such offering; provided, however, that the Company shall be required to
include in such Required Registration first, all Registrable Securities
requested to be included in the Required Registration by the Holders and, to the
extent not all such Registrable Securities can be included in such Required
Registration, the number of Registrable Securities to be included shall be
allocated pro rata on the basis of the number of Common Shares beneficially
owned at that time by all the Holders requesting to participate in the Required
Registration or on such other basis as shall be agreed among the Holders, by
agreement of the Majority Holders; and second, if all Registrable Securities
requested to be included in the Required Registration by the Holders can be so
included, all other securities requesting, in accordance with any registration
rights which are granted in compliance with Section 6(a), to be included in such
Required Registration which are of the same class as the Registrable Securities
and, to the extent not all such securities can be included in such Required
Registration, the number of securities to be included shall be allocated pro
rata among the holders thereof requesting inclusion in such Required
Registration on the basis of the number of securities requested to be included
by all such holders.
(b) Incidental Registration.
-----------------------
(i) Right to Include Registrable Securities. If at any time prior to
---------------------------------------
the third anniversary of the expiration of the Pooling Holding Period (subject
to extension in accordance with the penultimate paragraph of Section 2(a)(i))
the Company proposes to register any of its Common Shares under the Securities
Act (other than (A) any registration of public sales or distributions solely by
and for the account of the Company of securities issued (x) pursuant to any
employee benefit or similar plan or any dividend reinvestment plan or (y) in any
acquisition by the Company, or (B) pursuant to Section 2(a) hereof), either in
connection with a primary offering for cash for the account of the Company or a
secondary offering, the Company will, each time it intends to effect such a
registration, give written notice to all Initial Holders of Registrable
Securities at least 10 business days prior to the initial filing of a
Registration Statement with the SEC pertaining thereto, informing such Initial
Holders of its intent to file such Registration Statement and of the Holders'
rights to request the registration of the Registrable Securities held by the
Holders under this Section 2(b) (the "Company Notice"). Upon the written
--------------
request of any Initial Holder made within 7 business days after any such Company
Notice is given (which request shall specify the Registrable Securities intended
to be disposed of by such Initial Holder and such Initial Holder's Permitted
Transferees and, unless the applicable registration is intended to effect a
primary offering of Common Shares for cash for the account of the Company, the
intended method of distribution thereof), the Company will use all reasonable
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by such Initial
Holders to the extent required to permit the disposition (in accordance with the
intended methods of distribution thereof or, in the case of a registration which
is intended to effect a primary offering for cash for the account of the
Company, in accordance with the Company's intended method of distribution) of
the Registrable Securities so requested to be registered, including, if
necessary, by filing with the SEC a post-effective amendment or a supplement to
the Incidental Registration Statement or the related Prospectus or any document
incorporated therein by reference or by filing any other required document or
otherwise supplementing or amending the Incidental Registration Statement, if
required by the
-6-
<PAGE>
rules, regulations or instructions applicable to the registration form used by
the Company for such Incidental Registration Statement or by the Securities Act,
any state securities or blue sky laws, or any rules and regulations thereunder;
provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
Incidental Registration Statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each Initial Holder of Registrable Securities
and, thereupon, (A) in the case of a determination not to register, the Company
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses incurred in connection therewith), and (B) in the case of
a determination to delay such registration, the Company shall be permitted to
delay registration of any Registrable Securities requested to be included in
such Incidental Registration Statement for the same period as the delay in
registering such other securities.
The registration rights granted pursuant to the provisions of this
Section 2(b) shall be in addition to the registration rights granted pursuant to
the other provisions of this Section.
(ii) Priority in Incidental Registrations. If a registration pursuant
------------------------------------
to this Section 2(b) involves an Underwritten Offering of the securities so
being registered, whether or not for sale for the account of the Company, and
the sole Underwriter or the lead managing Underwriter, as the case may be, of
such Underwritten Offering shall advise the Company in writing (with a copy to
each Initial Holder of Registrable Securities requesting registration) on or
before the date 5 days prior to the date then scheduled for such offering that,
in its opinion, the amount of securities (including Registrable Securities)
requested to be included in such registration exceeds the amount which can be
sold in (or during the time of) such offering without adversely affecting the
distribution of the securities being offered, then the Company will include in
such registration first, all the securities entitled to be sold pursuant to such
Registration Statement without reference to the incidental registration rights
of any holder (including Holders), and second, the amount of other securities
(including Registrable Securities) requested to be included in such registration
that the Company is so advised can be sold in (or during the time of) such
offering, allocated, if necessary, pro rata among the holders (including the
Holders) thereof requesting such registration on the basis of the number of the
securities (including Registrable Securities) beneficially owned at the time by
the holders (including Holders) requesting inclusion of their securities;
provided, however, that in the event the Company will not, by virtue of this
paragraph, include in any such registration all of the Registrable Securities of
any Holder requested to be included in such registration, such Holder may, upon
written notice to the Company given within 3 days of the time such Holder first
is notified of such matter, reduce the amount of Registrable Securities it
desires to have included in such registration, whereupon only the Registrable
Securities, if any, it desires to have included will be so included and the
Holders not so reducing shall be entitled to a corresponding increase in the
amount of Registrable Securities to be included in such registration.
(c) Expenses. The Company agrees to pay all Registration Expenses in
--------
connection with (i) each of three registrations requested pursuant to Section
2(a) (subject to Section 2(a)(i)) and (ii) each registration as to which Holders
request inclusion of Registrable Securities pursuant to Section 2(b). All
Selling Expenses relating to securities registered on behalf of
-7-
<PAGE>
Holders shall be borne by the Holders of shares included in such registration,
other selling stockholders and the Company pro rata on the basis of the number
of shares of Common Stock so registered.
(d) Effective Registration Statement; Suspension. Subject to the
--------------------------------------------
third paragraph of Section 2(a)(i), a Registration Statement pursuant to Section
2(a) will not be deemed to have become effective (and the related registration
will not be deemed to have been effected) unless it has been declared effective
by the SEC prior to a request by the Holders of a majority of the Registrable
Securities included in such registration that such Registration Statement be
withdrawn; provided, however, that if, after it has been declared effective, the
offering of any Registrable Securities pursuant to such Registration Statement
is interfered with by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court, such Registration
Statement will be deemed not to have become effective and the related
registration will not be deemed to have been effected.
Any period during which the Company fails to keep any Required
Registration Statement effective and usable for resale of Registrable Securities
shall be referred to as a "Suspension Period." A Suspension Period shall
-----------------
commence on and include the date that the Company gives notice that any Required
Registration Statement is no longer effective or usable for resale of
Registrable Securities to and including the date when each Holder of Registrable
Securities covered by such Required Registration Statement either receives the
copies of the supplemented or amended Prospectus contemplated by Section 4(j) or
is advised in writing by the Company that the use of the Prospectus may be
resumed. In the event of one or more Suspension Periods, the applicable time
period referenced in the first paragraph of Section 2(a)(i)) shall be extended
by the number of days included in each such Suspension Period, and, in the event
any Suspension Period occurs sooner than 30 days after the end of the previous
Suspension Period or 30 days after the initial effectiveness of any Required
Registration Statement, none of the days between such Suspension Periods or
prior to such Suspension Period shall be included in computing such applicable
time period.
(e) Selection of Underwriters. At any time or from time to time, the
-------------------------
Holders of a majority of the Registrable Securities covered by a Required
Registration Statement may elect to have such Registrable Securities sold in an
Underwritten Offering and may select the investment banker or investment bankers
and manager or managers that will serve as lead and co-managing Underwriters
with respect to the offering of such Registrable Securities, subject to the
consent of the Company which shall not be unreasonably withheld. No Holder may
participate in any Underwritten Offering hereunder unless such Holder (a) agrees
to sell such Holder's securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, custody agreements, indemnities, underwriting agreements and other
documents required under the terms of such Underwritten Offering.
SECTION 3. RESTRICTIONS ON PUBLIC SALE BY THE COMPANY.
If requested by the sole Underwriter or lead managing Underwriter(s)
in such Underwritten Offering, the Company agrees not to effect any public sale
or distribution (other than,
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<PAGE>
in the case of the Company, public sales or distributions solely by and for the
account of the Company of securities issued pursuant to any employee benefit or
similar plan or any dividend reinvestment plan) of any securities during the
period commencing on the date the Company receives a Request from any Initial
Holder and continuing until 90 days after the commencement of an Underwritten
Offering (or for such shorter period as the sole or lead managing Underwriter
shall request) unless earlier terminated by the sole Underwriter or lead
managing Underwriter(s) in such Underwritten Offering.
SECTION 4. REGISTRATION PROCEDURES.
In connection with the obligations of the Company pursuant to Section
2, the Company shall use all reasonable efforts to effect or cause to be
effected the registration of the Registrable Securities under the Securities Act
to permit the sale of such Registrable Securities by the Holders in accordance
with their intended method or methods of distribution, and the Company shall:
(a) (i) prepare and file a Registration Statement with the SEC which
(x) shall be on Form S-3 (or any successor to such form), if available, (y)
shall be available for the sale or exchange of the Registrable Securities in
accordance with the intended method or methods of distribution by the selling
Holders thereof, and (z) shall comply as to form with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith and all other information reasonably requested by the lead
managing Underwriter or sole Underwriter, if applicable, to be included therein,
(ii) use all reasonable efforts to cause such Registration Statement to become
effective and remain effective in accordance with Section 2, (iii) use all
reasonable efforts to not take any action that would cause a Registration
Statement to contain a material misstatement or omission or to be not effective
and usable for resale of Registrable Securities during the period that such
Registration Statement is required to be effective and usable, and (iv) cause
each Registration Statement and the related Prospectus and any amendment or
supplement thereto, as of the effective date of such Registration Statement,
amendment or supplement (x) to comply in all material respects with any
requirements of the Securities Act and the rules and regulations of the SEC and
(y) not to contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading;
(b) subject to paragraph (j) of this Section 4, prepare and file with
the SEC such amendments and post-effective amendments to each such Registration
Statement, as may be necessary to keep such Registration Statement effective for
the applicable period; cause each such Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holders thereof, as
set forth in such registration statement;
(c) furnish to each Holder of Registrable Securities and to each
Underwriter of an Underwritten Offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and
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<PAGE>
such other documents as such Holder or Underwriter may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Securities; the Company hereby consents to the use of the Prospectus, including
each preliminary Prospectus, by each Holder of Registrable Securities and each
Underwriter of an Underwritten Offering of Registrable Securities, if any, in
connection with the offering and sale of the Registrable Securities covered by
the Prospectus or the preliminary Prospectus (the Holders hereby agreeing not to
make a broad public dissemination of a form of preliminary Prospectus which is
designed to be a "quiet filing" without the Company's consent, such consent to
not be withheld unreasonably);
(d) (i) use all reasonable efforts to register or qualify the
Registrable Securities, no later than the time the applicable Registration
Statement is declared effective by the SEC, under all applicable state
securities or "blue sky" laws of such jurisdictions as each Underwriter, if any,
or any Holder of Registrable Securities covered by a Registration Statement,
shall reasonably request; (ii) use all reasonable efforts to keep each such
registration or qualification effective during the period such Registration
Statement is required to be kept effective; and (iii) do any and all other acts
and things which may be reasonably necessary or advisable to enable each such
Underwriter, if any, and Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is not
so qualified or to consent to be subject to general service of process (other
than service of process in connection with such registration or qualification or
any sale of Registrable Securities in connection therewith) in any such
jurisdiction;
(e) notify each Holder of Registrable Securities promptly, and, if
requested by such Holder, confirm such advice in writing, (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of the issuance by the
SEC or any state securities authority of any stop order, injunction or other
order or requirement suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose, (iii) if, between the
effective date of a Registration Statement and the closing of any sale of
securities covered thereby pursuant to any agreement to which the Company is a
party, the representations and warranties of the Company contained in such
agreement cease to be true and correct in all material respects or if the
Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, (iv) of the happening of any
event during the period a Registration Statement is effective as a result of
which such Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(v) of the termination of the Pooling Holding Period;
(f) furnish counsel for each such Underwriter, if any, and for the
Holders of Registrable Securities copies of any request by the SEC or any state
securities authority for amendments or supplements to a Registration Statement
and Prospectus or for additional information;
(g) use all reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible time;
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<PAGE>
(h) upon request, furnish to the sole Underwriter or lead managing
Underwriter of an Underwritten Offering of Registrable Securities, if any,
without charge, at least one signed copy of each Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits; and furnish to
each Holder of Registrable Securities, without charge, at least one conformed
copy of each Registration Statement and any post-effective amendment thereto
(without documents incorporated therein by reference or exhibits thereto, unless
requested);
(i) cooperate with the selling Holders of Registrable Securities and
the sole Underwriter or lead managing Underwriter of an Underwritten Offering of
Registrable Securities, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such denominations (consistent with the provisions of the governing documents
thereof) and registered in such names as the selling Holders or the sole
Underwriter or lead managing Underwriter of an Underwritten Offering of
Registrable Securities, if any, may reasonably request at least three business
days prior to any sale of Registrable Securities;
(j) upon the occurrence of any event contemplated by paragraph (e)(iv)
of this Section, use all reasonable efforts to prepare a supplement or post-
effective amendment to a Registration Statement or the related Prospectus, or
any document incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(k) enter into customary agreements (including, in the case of an
Underwritten Offering, underwriting agreements in customary form, and including
provisions with respect to indemnification and contribution in customary form
and consistent with the provisions relating to indemnification and contribution
contained herein) and take all other customary and appropriate actions in order
to expedite or facilitate the disposition of such Registrable Securities and in
connection therewith:
(1) make such representations and warranties to the Holders of such
Registrable Securities and the Underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in similar
underwritten offerings;
(2) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the lead managing Underwriter, if any, and the
Majority Holders of the Registrable Securities being sold) addressed to
each selling Holder and the Underwriters, if any, covering the matters
customarily covered in opinions requested in sales of securities or
underwritten offerings and such other matters as may be reasonably
requested by such Holders and Underwriters;
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the selling
Holders of Registrable Se-
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<PAGE>
curities, if permissible, and the Underwriters, if any, which letters shall
be customary in form and shall cover matters of the type customarily
covered in "cold comfort" letters to underwriters in connection with
primary underwritten offerings;
(4) to the extent requested and customary for the relevant
transaction, enter into a securities sales agreement with the Holders and
such representative of the selling Holders as the Majority Holders of the
Registrable Securities covered by any Registration Statement relating to
the Registration and providing for, among other things, the appointment of
such representative as agent for the selling Holders for the purpose of
soliciting purchases of Registrable Securities, which agreement shall be
customary in form, substance and scope and shall contain customary
representations, warranties and covenants; and
(5) deliver such customary documents and certificates as may be
reasonably requested by the Majority Holders of the Registrable Securities
being sold or by the managing Underwriters, if any.
The above shall be done (i) at the effectiveness of such Registration Statement
(and each post-effective amendment thereto) in connection with any registration,
and (ii) at each closing under any underwriting or similar agreement as and to
the extent required thereunder;
(l) make available for inspection by representatives of the Initial
Holders of the Registrable Securities and any Underwriters participating in any
disposition pursuant to a Registration Statement and any counsel or accountant
retained by such Holders or Underwriters, all relevant financial and other
records, pertinent corporate documents and properties of the Company and cause
the respective officers, directors and employees of the Company to supply all
information reasonably requested by any such representative, Underwriter,
counsel or accountant in connection with a Registration Statement;
(m) (i) within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of such
document to the Initial Holders of Registrable Securities and to counsel to such
Initial Holders and to the Underwriter or Underwriters of an Underwritten
Offering of Registrable Securities, if any; fairly consider such reasonable
changes in any such document prior to or after the filing thereof as the counsel
to the Holders or the Underwriter or the Underwriters may request and not file
any such document in a form to which the Majority Holders of Registrable
Securities being registered or any Underwriter shall reasonably object; and make
such of the representatives of the Company as shall be reasonably requested by
the Holders of Registrable Securities being registered or any Underwriter
available for discussion of such document;
(ii) within a reasonable time prior to the filing of any document
which is to be incorporated by reference into a Registration Statement or a
Prospectus, provide copies of such document to counsel for the Holders; fairly
consider such reasonable changes in such document prior to or after the filing
thereof as counsel for such Holders or such Underwriter shall
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<PAGE>
request; and make such of the representatives of the Company as shall be
reasonably requested by such counsel available for discussion of such document;
(n) cause all Registrable Securities to be qualified for inclusion in
or listed on The New York Stock Exchange or any securities exchange on which
securities of the same class issued by the Company are then so qualified or
listed if so requested by the Majority Holders of Registrable Securities covered
by a Registration Statement, or if so requested by the Underwriter or
Underwriters of an Underwritten Offering of Registrable Securities, if any;
(o) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the SEC, including making available to its security
holders an earnings statement covering at least 12 months which shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(p) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
Underwriter in an Underwritten Offering; and
(q) use all reasonable efforts to facilitate the distribution and sale
of any Registrable Securities to be offered pursuant to this Agreement,
including without limitation by making road show presentations, holding meetings
with potential investors and taking such other actions as shall be requested by
the Majority Holders of Registrable Securities covered by a Registration
Statement or the lead managing Underwriter of an Underwritten Offering.
Each selling Holder of Registrable Securities as to which any
registration is being effected pursuant to this Agreement agrees, as a condition
to the registration obligations with respect to such Holder provided herein, to
furnish to the Company such information regarding such Holder required to be
included in the Registration Statement, the ownership of Registrable Securities
by such Holder and the proposed distribution by such Holder of such Registrable
Securities as the Company may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in paragraph (e)(iv) of this
Section, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the affected Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus, contemplated by
paragraph (j) of this Section, and, if so directed by the Company, such Holder
will deliver to the Company (at the expense of the Company), all copies in its
possession, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Registrable Securities which was current at the
time of receipt of such notice.
SECTION 5. INDEMNIFICATION; CONTRIBUTION.
(a) Indemnification by the Company. The Company agrees to indemnify
--- ------------------------------
and hold harmless each Person who participates as an underwriter (any such
Person being an "Underwriter"), each Holder and their respective partners,
-----------
directors, officers and employees and
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<PAGE>
each Person, if any, who controls any Holder or Underwriter within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act as
follows:
(i) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement pursuant to which Registrable
Securities were registered under the Securities Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus, including all documents incorporated therein
by reference, or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, investigation or
proceeding by any governmental agency or body, commenced or threatened, or
of any other claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; and
(iii) against any and all reasonable expense whatsoever, as incurred
(including fees and disbursements of counsel), incurred in investigating,
preparing or defending against any litigation, investigation or proceeding
by any governmental agency or body, commenced or threatened, in each case
whether or not such Person is a party, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue statement
or omission, to the extent that any such expense is not paid under sub-
paragraph (i) or (ii) above;
provided, however, that this indemnity agreement does not apply to any Holder or
Underwriter with respect to any loss, liability, claim, damage, judgment or
expense to the extent arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus, or the omission or
alleged omission therefrom of a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in any such case made in reliance upon and in conformity with
written information furnished to the Company by such Holder or Underwriter
expressly for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto).
(b) Indemnification by Holders. (i) Each selling Holder severally
--- ---------------------------
agrees to indemnify and hold harmless the Company, each Underwriter and the
other selling Holders, and each of their respective partners, directors,
officers and employees (including each officer of the Company who signed the
Registration Statement), and each Person, if any, who controls the Company, any
Underwriter or any other selling Holder within the meaning of Section 15 of the
Securities Act, against any and all losses, liabilities, claims, damages,
judgments and expenses described in the indemnity contained in paragraph (a) of
this Section (provided that any settlement
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<PAGE>
of the type described therein is effected with the written consent of such
selling Holder), as incurred, but only with respect to untrue statements or
alleged untrue statements of a material fact contained in any Prospectus or the
omissions, or alleged omissions therefrom of a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, in any such case made in reliance upon and in conformity
with written information furnished to the Company by such selling Holder
expressly for use in such Registration Statement (or any amendment thereto) or
such Prospectus (or any amendment or supplement thereto).
(c) Conduct of Indemnification Proceedings. Each indemnified party or
--------------------------------------
parties shall give reasonably prompt notice to each indemnifying party or
parties of any action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but failure so to notify an indemnifying
party or parties shall not relieve it or them from any liability which it or
they may have under this indemnity agreement, except to the extent that the
indemnifying party is materially prejudiced by such failure to give notice. If
the indemnifying party or parties so elects within a reasonable time after
receipt of such notice, the indemnifying party or parties may assume the defense
of such action or proceeding at such indemnifying party's or parties' expense
with counsel chosen by the indemnifying party or parties and approved by the
indemnified party defendant in such action or proceeding, which approval shall
not be unreasonably withheld; provided, however, that, if such indemnified party
or parties determine in good faith that a conflict of interest exists and that
therefore it is advisable for such indemnified party or parties to be
represented by separate counsel or that, upon advice of counsel, there may be
legal defenses available to it or them which are different from or in addition
to those available to the indemnifying party, then the indemnifying party or
parties shall not be entitled to assume such defense and the indemnified party
or parties shall be entitled to separate counsel (limited in each jurisdiction
to one counsel for all Underwriters and another counsel for all other
indemnified parties under this Agreement) at the indemnifying party's or
parties' expense. If an indemnifying party or parties is not so entitled to
assume the defense of such action or does not assume such defense, after having
received the notice referred to in the first sentence of this paragraph, the
indemnifying party or parties will pay the reasonable fees and expenses of
counsel for the indemnified party or parties (limited in each jurisdiction to
one counsel for all Underwriters and another counsel for all other indemnified
parties under this Agreement). No indemnifying party or parties will be liable
for any settlement effected without the written consent of such indemnifying
party or parties, which consent shall not be unreasonably withheld. If an
indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, such indemnifying party
or parties shall not, except as otherwise provided in this subsection (c), be
liable for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
(d) Contribution. (i) In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
this Section is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms in respect of any
losses, liabilities, claims, damages, judgments and expenses suffered by an
indemnified party referred to therein, each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, liabilities,
claims, damages, judgments and expenses in such proportion
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<PAGE>
as is appropriate to reflect the relative fault of the Company on the one hand
and of the liable selling Holders (including, in each case, that of their
respective officers, directors, employees and agents) on the other in connection
with the statements or omissions which resulted in such losses, liabilities,
claims, damages, judgments or expenses, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
liable selling Holders (including, in each case, that of their respective
officers, directors, employees and agents) on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, on the one hand, or by or on
behalf of the selling Holders, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, liabilities, claims, damages, judgments and expenses referred to above
shall be deemed to include, subject to the limitations set forth in paragraph
(c) of this Section, any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim.
(ii) The Company and each Holder of Registrable Securities agree that
it would not be just and equitable if contribution pursuant to this paragraph
(d) were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in sub-
paragraph (i) above. Notwithstanding the provisions of this paragraph (d), in
the case of distributions to the public, an indemnifying Holder shall not be
required to contribute any amount in excess of the amount by which (A) the total
price at which the Registrable Securities sold by such indemnifying Holder and
its affiliated indemnifying Holders and distributed to the public were offered
to the public exceeds (B) the amount of any damages which such indemnifying
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(iii) For purposes of this Section, each Person, if any, who controls
a Holder or an Underwriter within the meaning of Section 15 of the Securities
Act (and their respective partners, directors, officers and employees) shall
have the same rights to contribution as such Holder or Underwriter; and each
director of the Company, each officer of the Company who signed the Registration
Statement, and each Person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act, shall have the same rights to contribution
as the Company.
SECTION 6. MISCELLANEOUS.
(a) No Inconsistent Agreements. The Company will not on or after the
--------------------------
date of this Agreement enter into any agreement which conflicts with the
provisions of this Agreement or which grants registration or similar rights nor
has the Company entered into any such agreement, except for the registration
rights which have been granted heretofore pursuant to (i) the 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, as
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<PAGE>
amended by the letter dated May 29, 1996 from Laidlaw Inc. to the Company, and
(ii) the Transfer, Registration Rights and Governance Agreement by and among the
Company, Western Farm & Cattle Company, N. N. Investors, L.P., California Land &
Cattle Company, SF Ranch GenPar, Inc., and FW Ranch Partners, L.P., dated as of
September 17, 1997, and the Company will not on or after the date of this
Agreement modify in any manner adverse to the Holders such existing agreements;
provided, however, that nothing in this sentence shall prohibit the Company from
granting registration rights, which become exerciseable from and after the
91/st/ day following termination of the Pooling Holding Period, to any Person (a
"Third Party") who becomes an owner of shares of Company Stock after the date
- -------------
hereof (including granting incidental registration rights with respect to any
Registration Statement required to be filed or maintained hereunder) if, and
only if, (i) the Third-Party's registration rights (including, without
limitation, demand registration rights) provide to the Holders of Registrable
Securities who seek to participate in such registration (whether or not such
registration is initiated hereunder) rights no less favorable to such Holders
than those rights provided to the Holders hereunder as if such registration were
a Required Registration (including, without limitation, the priority provisions
contained in Section 2(a)(ii)), provided further however, that if such
registration is not initiated by the Initial Holders such registration shall not
be deemed one of the three Required Registrations for purposes of the
limitations contained in the second paragraph of Section 2(a)(i), and (ii)
require the Third Party to enter into the agreements provided for in Section 3
hereof (as if it were the Company) on the terms and for the period applicable to
the Company (including preventing sales pursuant to Rule 144 under the
Securities Act) if requested by the sole Underwriter or lead managing
Underwriter in an Underwritten Offering initiated by Holders of Registrable
Securities pursuant to Section 2(a). The rights granted to the Holders hereunder
do not in any way conflict with and are not inconsistent with the rights granted
to the holders of the Company's other issued and outstanding securities under
any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of a
majority of the Holders and, if any such amendment, modification, supplement,
waiver or consent would adversely affect the rights of any Holder hereunder, the
written consent of each Holder which is affected shall be obtained; provided,
however, that nothing herein shall prohibit any amendment, modification,
supplement, waiver or consent the effect of which is limited only to those
Holders who have agreed to such amendment, modification, supplement, waiver or
consent.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, telex,
telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to the Company by means of a
notice given in accordance with the provisions of this paragraph (c), which
address initially is, with respect to each Holder as of the date hereof, the
address set forth next to such Holder's name on the signature pages hereof with
a copy to Daniel A. Neff, Esq. and David A. Katz, Esq., telecopier number (212)
403-2000, and with respect to each Holder who becomes such after the date
hereof, the address of such Holder in the stock or warrant records of the
Company, or (ii) if to the Company at 40-004 Cook Street, Palm Desert,
California, telecopier number (760) 341-4024, Attention: General Counsel, and
thereafter at such other address, notice
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<PAGE>
of which is given in accordance with the provisions of this paragraph (c), with
a copy to Brian J. McCarthy, telecopier number (213) 687-5600. Notwithstanding
the foregoing, the Company shall not be obligated to provide any notice to any
Holder which is not an Initial Holder except with respect to a Required or
Incidental Registration Statement which has been filed and pursuant to which
such Holder is identified as a selling stockholder.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and on the next
business day if timely delivered to a courier guaranteeing overnight delivery.
Notwithstanding the foregoing, nothing in this Section 6(d) is intended to
enlarge the class of Persons which are Holders, as defined in the preamble of
this Agreement, and thus entitled to the rights granted hereunder.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without the need for an express assignment, subsequent
Holders. If any successor, assignee or transferee of any Holder shall acquire
Registrable Securities in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such Person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and to receive the benefits hereof.
Notwithstanding the foregoing, nothing in this Section 6(d) is intended to
enlarge the class of Persons which are Holders, as defined in the preamble of
this Agreement, and thus entitled to the rights granted hereunder. For purposes
of this Agreement, "successor" for any entity other than a natural person shall
mean a successor to such entity as a result of such entity's merger,
consolidation, liquidation, dissolution, sale of substantially all of its
assets, or similar transaction.
(e) Recapitalizations, Exchanges, etc., Affecting Registrable
---------------------------------------------------------
Securities. The provisions of this Agreement shall apply, to the full extent
- ----------
set forth herein with respect to the Registrable Securities, to any and all
securities or capital stock of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in exchange for, or in substitution of such
Registrable Securities, by reason of any dividend, split, issuance, reverse
split, combination, recapitalization, reclassification, merger, consolidation or
otherwise. Upon the occurrence of any of such events, Common Share amounts
hereunder shall be appropriately adjusted if necessary.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all of which counterparts, taken together, shall constitute
one and the same instrument.
(g) Descriptive Headings, Etc. The headings in this Agreement are for
-------------------------
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires: (1) words of any gender shall be deemed to include each
other gender; (2) words using the singular or plural number shall also include
the plural or singular number, respectively; (3) the words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agree-
-18-
<PAGE>
ment as a whole and not to any particular provision of this Agreement, and
Article, Section and paragraph references are to the Articles, Sections and
paragraphs to this Agreement unless otherwise specified; (4) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless otherwise specified; (5) "or" is
--
not exclusive; and (6) provisions apply to successive events and transactions.
(h) Severability. In the event that any one or more of the
------------
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
-------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAW PRINCIPLES THEREOF).
(j) Specific Performance. The parties hereto acknowledge that there
--------------------
would be no adequate remedy at law if any party fails to perform in any material
respect any of its obligations hereunder, and accordingly agree that each party,
in addition to any other remedy to which it may be entitled at law or in equity,
shall be entitled to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
(k) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the Company, on the one hand, and the
other parties to this Agreement, on the other, with respect to such subject
matter.
* * *
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Richard J. Heckmann
-------------------------------------------
Name: Richard J. Heckmann
Title: Chief Executive Officer
APOLLO INVESTMENT FUND, L.P.
By: Apollo Advisors, L.P., its General
Partner,
Address:
- ------------------------------ By: Apollo Capital Management, Inc., its
Two Manhattanville Road General Partner
Purchase, New York 10577
Attention: Marc J. Rowan
Telecopier Number:
- ------------------------------ By: /s/ Marc J. Rowan
(212) 261-4071 ----------------------------
Name: Marc J. Rowan
Title: Vice President, Apollo
Capital Management, Inc.
LION ADVISORS, L.P.
Address: By: Lion Capital Management, Inc.,
- ------------------------------ its General Partner
1301 Avenue of the Americas
New York, New York 10019
Attention: Marc J. Rowan By: /s/ Marc J. Rowan
Telecopier Number: -----------------------------
- ------------------------------ Name: Marc J. Rowan
(212) 261-4071 Title: Vice President, Lion Capital
Management, Inc.
-20-
