<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
{X} Quarterly report pursuant to Section 13 and 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1998
------------------
or
{ } Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-10728
-------
UNITED STATES FILTER CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0266015
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
40-004 COOK STREET, PALM DESERT, CA 92211
------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (760) 340-0098
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares of common stock, $.01 par value, outstanding as of November
13, 1998 was 171,903,477 shares.
Total number of pages 25
--
THERE ARE 12 EXHIBITS FILED WITH THIS REPORT
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1998
--------------- ------------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 66,917 58,028
Short-term investments 241 116
Accounts receivable, net 873,890 1,053,419
Costs and estimated earnings in excess
of billings on uncompleted contracts 217,935 223,103
Inventories 473,698 526,508
Prepaid expenses 16,471 31,988
Deferred taxes 151,107 174,279
Other current assets 51,377 51,429
---------- ---------
Total current assets 1,851,636 2,118,870
---------- ---------
Property, plant and equipment, net 960,019 1,044,339
Investment in leasehold interests, net 21,699 20,286
Costs in excess of net assets of businesses acquired, net 1,312,776 1,366,356
Other assets 319,315 284,732
---------- ---------
$4,465,445 4,834,583
========== =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND SEPTEMBER 30, 1998 (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1998
--------------- ------------------
(in thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 357,260 404,747
Accrued liabilities 535,329 611,600
Current portion of long-term debt 118,849 23,783
Billings in excess of costs and estimated
earnings on uncompleted contracts 90,073 81,245
Other current liabilities 45,702 96,430
---------- ---------
Total current liabilities 1,147,213 1,217,805
---------- ---------
Notes payable 574,806 450,910
Long-term debt, excluding current portion 404,416 65,783
Convertible subordinated debentures 554,000 414,000
Redeemable or remarketable securities - 900,000
Deferred taxes 82,910 64,092
Other liabilities 110,662 152,307
---------- ---------
Total liabilities 2,874,007 3,264,897
---------- ---------
Shareholders' equity:
Preferred stock, authorized 3,000 shares - -
Common stock, par value $.01. Authorized 300,000
shares; 155,825 and 170,275 shares issued and
outstanding at March 31, 1998 and September 30, 1998,
respectively 1,558 1,703
Additional paid-in capital 1,945,223 2,060,898
Currency translation adjustment (57,282) (71,304)
Accumulated deficit (298,061) (421,611)
---------- ---------
Total shareholders' equity 1,591,438 1,569,686
---------- ---------
Commitments and contingencies
$4,465,445 4,834,583
========== =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30, September 30,
---------------------- -----------------------
1997 1998 1997 1998
--------- ---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $938,358 1,225,882 1,731,294 2,345,213
Costs of sales 698,491 861,445 1,296,064 1,649,614
-------- --------- --------- ---------
Gross profit 239,867 364,437 435,230 695,599
Selling, general and administrative expenses 176,416 244,415 330,666 467,579
Purchased in-process research and
development - - - 3,558
Merger, restructuring, acquisition and other
related charges - - - 257,920
-------- --------- --------- ---------
176,416 244,415 330,666 729,057
-------- --------- --------- ---------
Operating income (loss) 63,451 120,022 104,564 (33,458)
Other income (expense):
Interest expense (12,883) (29,533) (23,878) (55,181)
Gain on disposition of affiliate - - 31,098 -
Interest and other income, net 1,287 3,603 2,782 7,730
-------- --------- --------- ---------
(11,596) (25,930) 10,002 (47,451)
-------- --------- --------- ---------
Income (loss) before income taxes 51,855 94,092 114,566 (80,909)
Income tax expense 18,292 33,881 41,708 14,277
-------- --------- --------- ---------
Net income (loss) $ 33,563 60,211 72,858 (95,186)
======== ========= ========= =========
Net income (loss) per common share:
Basic $ 0.26 0.37 0.57 (0.59)
======== ========= ========= =========
Diluted $ 0.25 0.36 0.56 (0.59)
======== ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
---------- ---------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 72,858 (95,186)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Deferred income taxes (6,967) (42,036)
Provision for doubtful accounts 4,581 10,264
Depreciation 40,523 52,120
Amortization 15,565 25,877
Merger, restructuring, acquisition and other related
cash charges - 155,396
Write-off of in-process research and development
and goodwill - 40,818
Gain on disposition of investment in affiliate (31,098) -
(Gain) loss on sale or disposal of property, plant and equipment (217) 29,724
Change in operating assets and liabilities:
Increase in accounts receivable (93,464) (113,688)
Increase in costs and estimated earnings in excess
of billings on uncompleted contracts (11,062) (430)
Increase in inventories (43,079) (28,798)
Increase in other assets (18,552) (34,577)
Increase in accounts payable and accrued expenses 28,301 40,859
Increase (decrease) in billings in excess of costs and
estimated earnings on uncompleted contracts 16,683 (21,231)
Increase (decrease) in other liabilities (1,980) 1,243
--------- --------
Net cash provided by (used in) operating activities (27,908) 20,355
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchase of property, plant and equipment (56,136) (88,413)
Payment for purchase of acquisitions, including certain
merger and restructuring charges, net of cash acquired (111,814) (256,110)
Proceeds from disposal of equipment 6,594 6,297
Proceeds from disposition of investment in affiliate 50,897 -
Sale (purchase) of short-term investments (9,608) 125
--------- --------
Net cash used in investing activities (120,067) (338,101)
--------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
-------- ---------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of remarketable or
redeemable securities - 913,637
Net proceeds from issuance of common stock 2,574 -
Proceeds from exercise of common stock options 538 1,455
Redemption of convertible subordinated debentures - (81,527)
Principal payments on long-term debt (16,711) (465,308)
Net (payments) proceeds from borrowings on notes payable 63,008 (59,400)
Dividends paid (50) -
------- --------
Net cash provided by financing activities 49,359 308,857
------- --------
Net decrease in cash and cash equivalents (98,616) (8,889)
Cash and cash equivalents at March 31, 1997 and 1998 144,128 66,917
------- --------
Cash and cash equivalents at September 30, 1997 and 1998 $45,512 58,028
======= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $21,304 37,175
======= ========
Cash paid during the period for income taxes $31,737 16,823
======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Operations and Significant Accounting Policies
----------------------------------------------
The accompanying condensed consolidated financial statements have been prepared
by the Company pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with U.S. generally
accepted accounting principles have been condensed or omitted pursuant to such
regulations. The condensed consolidated financial statements reflect all
adjustments and disclosures which are, in the opinion of management, necessary
for a fair presentation of the information contained therein. All such
adjustments are of a normal recurring nature. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto that are contained in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998. The
results of operations for the interim periods are not necessarily indicative of
the results of the full fiscal year.
Income (Loss) per Common Share
- ------------------------------
Income (loss) per common share is computed based on the weighted average number
of shares outstanding and in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings Per Share". Dilutive securities consisting
of convertible preferred stock, convertible subordinated debt and common stock
options are included in the computation of income (loss) per dilutive share when
their effect is dilutive. Accordingly, "Basic EPS" and "Diluted EPS" were
calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ------------------
1997 1998 1997 1998
-------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
BASIC
Net income (loss) applicable to common shares $33,563 60,211 72,858 (95,186)
======= ======= ======= =======
Weighted average common shares outstanding 130,461 164,601 128,274 161,271
======= ======= ======= =======
Basic income (loss) per common share $ 0.26 0.37 0.57 (0.59)
======= ======= ======= =======
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
---------------------- -------------------
1997 1998 1997 1998
----- ------- ---- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
DILUTED
Net income (loss) applicable to common shares $ 33,563 60,211 72,858 (95,186)
Add:
Effect on net income of conversion of
convertible subordinated debentures - * 3,312 - * - **
-------- ------- ------- -------
Adjusted net income (loss) applicable to
common shares $ 33,563 63,523 72,858 (95,186)
======== ======= ======= =======
Weighted average shares outstanding 130,461 164,601 128,274 161,271
Add:
Assumed conversion of subordinated
debentures - * 10,481 - * - **
Exercise of options 2,687 2,960 2,495 - **
-------- ------- ------- -------
Adjusted weighted average shares outstanding 133,148 178,042 130,769 161,271
======== ======= ======= =======
Diluted income (loss) per common share $ 0.25 0.36 0.56 (0.59)
======== ======= ======= =======
</TABLE>
_________________
* The calculation of Diluted EPS does not assume conversion of subordinated
debentures for the three and six months ended September 30, 1997 as the
effect would be antidilutive to income per common share.
** The calculation of Diluted EPS does not assume conversion of subordinated
debentures or exercise of stock options for the six months ended
September 30, 1998 as the effect would be antidilutive to loss per share.
Under the treasury stock method, the exercise of all outstanding options
would have increased the weighted average number of shares by 3.0 million
for the six months ended September 30, 1998.
Note 2. Inventories
-----------
Inventories at March 31, 1998 and September 30, 1998 consist of the following:
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1998
-------------- ------------------
<S> <C> <C>
(in thousands)
Raw materials $130,501 150,847
Work-in-progress 102,198 100,301
Finished goods 240,999 275,360
-------- -------
$473,698 526,508
======== =======
</TABLE>
8
<PAGE>
Note 3. Debt
----
Notes Payable. As of September 30, 1998, the Company had a Senior Credit
Facility which provides credit facilities to the Company of up to $750.0
million, of which there were outstanding borrowings of $450.9 million and
outstanding letters of credit of $52.3 million. Borrowings under the Senior
Credit Facility bear interest at variable rates of up to 0.45% above certain
Eurocurrency rates or 0.15% above BankBoston's base rate. The Senior Credit
Facility expires October 2002 and is subject to customary and usual terms.
Remarketable or Redeemable Securities Issuance. On May 15, 1998, the Company
issued $500.0 million 6.375% Remarketable or Redeemable Securities due 2011
(remarketing date May 15, 2001) and $400.0 million 6.50% Remarketable or
Redeemable Securities due 2013 (remarketing date May 15, 2003) (collectively,
the "ROARS"). The net proceeds from the sale of the ROARS, including a premium
payment to the Company by Nationsbanc Montgomery Securities LLC, were $913.6
million. The net proceeds were used to repay indebtedness under the Senior
Credit Facility, indebtedness assumed in the acquisition of Memtec Limited, and
a portion of the indebtedness assumed in the acquisition of Culligan Water
Technologies, Inc. ("Culligan").
Convertible Subordinated Debt. As of September 30, 1998, the Company had
outstanding $414.0 million aggregate principal amount of 4.5% Convertible
Subordinated Debentures due December 15, 2001 (the "Debentures"). The
Debentures are convertible into common stock at any time prior to maturity,
redemption or repurchase at a conversion price of $39.50 per share.
On September 23, 1998, the Company redeemed approximately $81.5 million of the
$140.0 million aggregate principal amount of 6% Convertible Subordinated Notes
due September 15, 2005 (the "Notes"). The redemption was financed with
borrowings under the Senior Credit Facility. The remaining notes were converted
into approximately 3.2 million shares of the Company's common stock.
Note 4. Acquisition
-----------
On June 15, 1998, a wholly owned subsidiary of the Company consummated the
acquisition of Culligan in a tax-free reorganization. The Company issued 48.6
million shares of the Company's common stock for all of the outstanding common
stock of Culligan (1.875 shares of the Company's common stock for each
outstanding share and each outstanding option or other right to acquire a share
of Culligan common stock, par value $.01). In addition, the Company assumed
approximately $491.7 million of third party debt.
Culligan is a leading manufacturer and distributor of water purification and
treatment products and services for household, consumer and commercial
applications. Products and services offered by Culligan range from those
designed to solve residential water problems, such as filters for tap water and
household softeners, to equipment and services, such as ultrafiltration and
microfiltration products. Culligan also offers desalination systems and
portable deionization services ("PDS"), designed for commercial and industrial
applications. In addition, Culligan sells and licenses its dealers to sell
under the Culligan trademark five-gallon bottled water.
The acquisition has been accounted for as a pooling of interests and,
accordingly, the condensed consolidated financial statements and notes thereto
for all periods presented have been restated to include the accounts of
Culligan. Reconciliation of results of operations of the combined entities for
the three and six months ended September 30, 1997 are as follows:
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30, 1997 September 30, 1997
------------------ ------------------
<S> <C> <C>
(in thousands)
Revenues:
Company (as previously reported) $823,593 1,517,126
Culligan 114,765 214,168
-------- ---------
Combined $938,358 1,731,294
======== =========
Net income:
Company (as previously reported) $ 24,091 36,794
Culligan 9,472 36,064
-------- ---------
Combined $ 33,563 72,858
======== =========
Income per common share:
Basic:
As previously reported $ 0.27 0.42
======== =========
As restated $ 0.26 0.57
======== =========
Diluted:
As previously reported $ 0.26 0.41
======== =========
As restated $ 0.25 0.56
======== =========
</TABLE>
Concurrent with the merger with Culligan, the Company designed and implemented a
restructuring plan to streamline its manufacturing and production base, redesign
its distribution network, improve efficiency and enhance its competitiveness.
The restructuring plan resulted in a pre-tax charge of $257.9 million in the six
months ended September 30, 1998. Included in the charge is approximately $49.2
million of merger-related expenses incurred to consummate the Culligan
transaction, including investment banking fees, printing fees, stock transfer
fees, legal fees, accounting fees, governmental filing fees and certain other
transaction costs. Integration and other acquisition costs of approximately
$40.6 million were incurred during the six months ended September 30, 1998 to
combine the operations of Culligan and the Company and consist of travel,
training, payroll and benefit plan conversions, legal and consulting fees and
other one-time charges related to the transaction. The plan identifies certain
manufacturing facilities, distribution sites, sales and administrative offices,
retail outlets and certain related assets that became redundant upon
consummation of the Culligan transaction. As a result, and in accordance with
SFAS 121, an impairment loss was recognized and idle assets were written down to
the lower of their carrying cost or net realizable value. These assets will not
be depreciated while they are held for disposal. Assets with remaining service
lives were written down to the extent that carrying amounts exceeded future
discounted cash flows and estimated proceeds from disposal. Had the Company not
recognized the impairment losses, the resulting depreciation expense for the
period beginning with the plan's implementation and ending September 30, 1998
would not have been material to reported results. These assets have a carrying
value of approximately $58.8 million as of September 30, 1998 and are expected
to be disposed of during the Company's current fiscal year.
The restructuring plan also resulted in the reduction of the combined workforce
by 950 employees consisting of 123 management personnel, 295 administrative
personnel, 444 manufacturing personnel and 88 sales personnel. In addition, the
plan impaired certain carrying amounts of goodwill and other intangible assets
in accordance with SFAS 121, which requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. In determining the amount
of impairment of these assets, the Company valued the assets based on the
present value of estimated expected future cash flows using discount rates
commensurate with the risks involved. The components of the merger,
restructuring, acquisition and other related charges are as follows:
10
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Merger, integration and other acquisitions costs $ 89,773
Write-off of duplicative assets and lease terminations 79,982
Severance, relocation and related costs 50,649
Write-off of goodwill and other intangible assets 37,516
--------
Total merger, restructuring, acquisition and other related charges $257,920
========
Cash charges $155,396
Non-cash charges 102,524
--------
$257,920
========
</TABLE>
Approximately $32.9 million of merger and restructuring related charges are
included in accrued liabilities at September 30, 1998. Additional costs to
complete the restructuring plan are not expected to be material.
Prior to the Company's acquisition of Culligan, Culligan acquired Protean plc,
including Protean's Analytical and Thermal Division ("A&T"). In connection with
Culligan's acquisition of A&T, the Company recorded a charge of $3.6 million in
the six months ended September 30, 1998 for purchased in-process research and
development projects that had not reached technological feasibility and that had
no alternative future use.
After an income tax benefit of $50.5 million, the charges detailed above
totaling $261.5 million reduced earnings by $211.0 million.
Note 5. Comprehensive Income
--------------------
In the current period, the Company adopted SFAS 130 "Reporting Comprehensive
Income", which establishes standards for disclosing comprehensive income in both
annual and interim financial statements. Accordingly, the Company's
comprehensive income was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
-------------------- --------------------
1997 1998 1997 1998
--------- -------- -------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income (loss) $ 33,563 60,211 72,858 (95,186)
Foreign currency translation adjustments (11,410) (7,115) (19,588) (14,022)
-------- ------ ------- --------
Comprehensive income (loss) $ 22,153 53,096 53,270 (109,208)
======== ====== ======= ========
</TABLE>
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
- ---------------------
Revenues. Revenues for the three months ended September 30, 1998 were $1.2
billion, an increase of $287.5 million or 30.6% from the $938.4 million for the
three months ended September 30, 1997. Revenues for the six months ended
September 30, 1998 were $2.3 billion, an increase of $0.6 billion or 35.5% from
the $1.7 billion for the six months ended September 30, 1997. These increases
were due primarily to acquisitions completed by the Company subsequent to
September 30, 1997. For the six months ended September 30, 1998, revenues from
capital equipment sales represented 47.5% of total revenues. Revenues from
services, operations, replacement parts and consumables represented 22.4% of
total revenues, while revenues from distribution represented 22.1% of total
revenues and revenues from consumer products represented 8.0% of total revenues.
Gross Profit. Gross profit as a percentage of revenue ("gross margin") was
29.7% for the three months ended September 30, 1998 compared to 25.6% in the
corresponding period in the prior year. Gross margin was 29.7% for the six
months ended September 30, 1998 compared to 25.1% in the corresponding period in
the prior year. These increases in gross margin for the three and six month
periods ended September 30, 1998 were due primarily to (i) efficiencies realized
as a result of the Company's reorganization plans implemented in the third
quarter of the prior year and the first quarter of the current year; (ii)
certain economies of scale related to the Company's significant growth including
enhanced purchasing power; (iii) favorable product mix in the current period
resulting from the Company's emphasis on selling higher margin value added
products and services in the current period; and (iv) the incurrence of certain
unreimbursed project costs during the six months ended September 30, 1997
recorded by Kinetics, which was acquired by the Company as of December 31, 1997
and accounted for as a pooling of interests.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended September 30, 1998 were
$244.4 million, an increase of $68.0 million or 38.5% from the $176.4 million
for the three months ended September 30, 1997. During this period, selling,
general and administrative expenses were 19.9% of revenues compared to 18.8% for
the comparable period in the prior year. For the six months ended September 30,
1998 selling, general and administrative expenses, before purchased in-process
research and development and merger, restructuring, acquisition and other
related charges described below ("certain charges"), increased $136.9 million to
$467.6 million as compared to $330.7 million in the comparable period in the
prior year. During this period selling, general and administrative expenses
before certain charges were 19.9% of revenues compared to 19.1% for the
comparable period in the prior year. The increase in selling, general and
administrative expenses before certain charges in the three months and six
months ended September 30, 1998 can be attributed primarily to acquisitions
completed subsequent to September 30, 1997.
Merger, Restructuring, Acquisition and Other Related Charges. Concurrent with
the merger with Culligan, the Company designed and implemented a restructuring
plan to streamline its manufacturing and production base, redesign its
distribution network, improve efficiency and enhance its competitiveness. The
restructuring plan resulted in a pre-tax charge of $257.9 million in the six
months ended September 30, 1998. Included in the charge is approximately $49.2
million of merger-related expenses incurred to consummate the Culligan
transaction, including investment banking fees, printing fees, stock transfer
fees, legal fees, accounting fees, governmental filing fees and certain other
transaction costs. Integration and other acquisition costs of approximately
$40.6 million were incurred during the six months ended September 30, 1998 to
combine the operations of Culligan and the Company, and consist of travel,
training, payroll and benefit plan conversions, legal and consulting fees and
other one-time charges related to the transaction. The plan identifies certain
manufacturing facilities, distribution sites, sales and administrative offices,
retail outlets and certain related assets that became redundant upon
consummation of the Culligan transaction. As a result, and in accordance with
SFAS 121, an impairment loss was recognized and idle assets were written down to
the lower of their carrying cost or net realizable value. These assets will not
be depreciated while they are held for disposal. Assets with remaining service
lives were written down to the extent that carrying amounts exceeded future
discounted cash flows and estimated proceeds from disposal. Had the Company not
recognized the
12
<PAGE>
impairment losses, the resulting depreciation expense for the period beginning
with the plan's implementation and ending September 30, 1998 would not have been
material to reported results. These assets have a carrying value of
approximately $58.8 million as of September 30, 1998 and are expected to be
disposed of during the Company's current fiscal year.
The restructuring plan also resulted in the reduction of the combined workforce
by 950 employees consisting of 123 management personnel, 295 administrative
personnel, 444 manufacturing personnel and 88 sales personnel. In addition, the
plan impaired certain carrying amounts of goodwill and other intangible assets
in accordance with SFAS 121, which requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. In determining the amount
of impairment of these assets, the Company valued the assets based on the
present value of estimated expected future cash flows using discount rates
commensurate with the risks involved. The components of the merger,
restructuring, acquisition and other related charges are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Merger, integration and other acquisitions costs $ 89,773
Write-off of duplicative assets and lease terminations 79,982
Severance, relocation and related costs 50,649
Write-off of goodwill and other intangible assets 37,516
--------
Total merger, restructuring, acquisition and other related charges $257,920
========
Cash charges $155,396
Non-cash charges 102,524
--------
$257,920
========
</TABLE>
Approximately $32.9 million of merger and restructuring related charges are
included in accrued liabilities at September 30, 1998. Additional costs to
complete the restructuring plan are not expected to be material.
Prior to the Company's acquisition of Culligan, Culligan acquired Protean plc,
including Protean's Analytical and Thermal Division ("A&T"). In connection with
Culligan's acquisition of A&T, the Company recorded a charge of $3.6 million in
the six months ended September 30, 1998 for purchased in-process research and
development projects that had not reached technological feasibility and that had
no alternative future use.
After an income tax benefit of $50.5 million, the charges detailed above
totaling $261.5 million reduced earnings by $211.0 million for the six months
ended September 30, 1998.
Interest Expense. Interest expense increased to $29.5 million for the three
months ended September 30, 1998 from $12.9 million for the corresponding period
in the prior year. Interest expense increased to $55.2 million for the six
months ended September 30, 1998 from $23.9 million for the corresponding period
in the prior year. Interest expense for the three and six months ended September
30, 1998 consisted primarily of interest on the Company's (i) 6.0% Convertible
Subordinated Notes issued on September 18, 1995 due 2005, (which were redeemed
or converted during the current quarter as discussed below) (ii) 4.5%
Convertible Subordinated Notes issued on December 11, 1996 due 2001, (iii)
6.375% Remarketable or Redeemable Securities issued May 15, 1998 due 2011
(Remarketing Date May 15, 2001), (iv) 6.5% Remarketable or Redeemable Securities
due 2013 (Remarketing date May 15, 2003), (v) other long-term debt bearing
interest at rates ranging from 2.0% to 10.1% and (vi) borrowings under the
Company's Senior Credit Facility. At September 30, 1998, the Company had cash
and short-term investments of $58.1 million.
Income Taxes. Income tax expense for the three months ended September 30, 1998
increased to $33.9 million from $18.3 million in the corresponding period in the
prior year. The Company's effective tax rate for the current period was 36.0%
which was nominally higher than the effective tax rate of 35.3% for the second
quarter in the prior year. The Company recorded income tax expense of $14.3
million for the six months ended September 30, 1998, a decrease of $27.4 million
from income tax expense of $41.7 million in the comparable period in the prior
year. Before certain charges, income tax expense was $64.8 million or an
13
<PAGE>
effective tax rate of 35.9% for the six months ended September 30, 1998 as
compared to 36.4% for the comparable period in the prior year.
Net Income. Net income for the three months ended September 30, 1998 was $60.2
million, an increase of $26.6 million from the $33.6 million for the three
months ended September 30, 1997. Income before certain charges for the six
months ended September 30, 1998 was $115.8 million, an increase of $42.9 million
from the $72.9 million for the six months ended September 30, 1997. Net income
in the six months ended September 30, 1997 included a one-time after tax gain of
$18.8 million or $0.15 per diluted share on Culligan's disposition of an
investment in an affiliate. After non-recurring charges, net loss in the six
months ended September 30, 1998 was $95.2 million. Net income (loss) per common
share for the three and six months ended September 30, 1997 and 1998 were as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------ -----------------
1997 1998 1997 1998
-------- ------- ------ --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Basic $0.26 0.37 0.57 (0.59)
===== ==== ==== =====
Diluted $0.25 0.36 0.56 (0.59)
===== ==== ==== =====
</TABLE>
Liquidity and Capital Resources
- -------------------------------
The Company's principal sources of funds are cash and other working capital,
cash flow generated from operations and borrowings under the Company's Senior
Credit Facility. At September 30, 1998, the Company had working capital of
$901.1 million including cash and short-term investments of $58.1 million. On
May 15, 1998, the Company issued $500.0 million 6.375% Remarketable or
Redeemable Securities due 2011 (remarketing date May 15, 2001) and $400.0
million 6.50% Remarketable or Redeemable Securities due 2013 (remarketing date
May 15, 2003) (collectively, the "ROARS"). The net proceeds from the sale of
the ROARS, including a premium payment to the Company by Nationsbanc Montgomery
Securities LLC, were $913.6 million. The net proceeds were used to repay
indebtedness under the Senior Credit Facility, indebtedness assumed in the
acquisition of Memtec, and a portion of the indebtedness assumed in the
acquisition of Culligan. The Company's long-term debt at September 30, 1998
consisted of (i) $414.0 million of 4.5% Convertible Subordinated Notes due 2001;
(ii) $500.0 million of ROARS due 2011 (remarketing date May 15, 2001); (iii)
$400.0 million of ROARS due 2013 (remarketing date May 15, 2003); and (iv) other
long-term debt of $89.6 million bearing interest at rates ranging from 2.0% to
10.1%.
As of September 30, 1998, the Company had a Senior Credit Facility which
provides credit facilities to the Company of up to $750.0 million, of which
there were outstanding borrowings of $450.9 million and outstanding letters of
credit of $52.3 million. Borrowings under the Senior Credit Facility bear
interest at variable rates of up to 0.45% above certain Eurocurrency rates or
0.15% above BankBoston's base rate. The Senior Credit Facility expires October
2002 and is subject to customary and usual terms.
On September 23, 1998, the Company redeemed approximately $81.5 million of the
$140.0 million aggregate principal amount of 6% Convertible Subordinated Notes
due September 15, 2005 (the "Notes"). The redemption was financed with
borrowings under the Senior Credit Facility. The remaining Notes were converted
into approximately 3.2 million shares of the Company's common stock.
The Company believes its current cash position, cash flow from operations, and
available borrowings under the Company's Senior Credit Facility will be adequate
to meet its anticipated cash needs from working capital, revenue growth,
scheduled debt repayment and capital investment objectives for at least the next
twelve months.
14
<PAGE>
CERTAIN TRENDS AND UNCERTAINTIES
The Company and its representatives may from time to time make written or oral
forward-looking statements, including statements contained in the Company's
filings with the United States Securities and Exchange Commission and in its
reports to stockholders. In connection with the "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company is hereby
identifying important factors that could cause actual results to differ
materially from those contained in any forward-looking statement made by or on
behalf of the Company; any such statement is qualified by reference to the
following cautionary statements.
Earnings Variation Due to Business Cycles and Seasonal Factors. Our operating
results can experience quarterly or annual variations due to business cycles,
seasonality and other factors. The market price for our common stock may
decrease if our operating results do not meet the expectations of stock market
analysts.
About 45% of our sales are of capital equipment. Sales of capital equipment are
affected by general fluctuations in the business cycles in the United States and
worldwide, instability of economic conditions (such as the current conditions in
the Asia Pacific region and Latin America) and interest rates, as well as other
factors.
In addition, operating results of some of our business segments are
significantly influenced, along with other factors such as interest rates, by
particular business cycles and seasonality, including:
<TABLE>
<CAPTION>
BUSINESS CYCLES
AND SEASONS
SEGMENT AFFECTING RESULTS
------- -----------------
<S> <C>
Waterworks . Real estate development
Distribution . Housing starts
. Winter months in temperate regions
. Industrial capital spending
Consumer and Commercial . Consumer spending
. Housing starts
Industrial Products and . Microelectronics
Services . Pharmaceutical
. Biotechnology
. Municipal spending
</TABLE>
Profit Uncertainty in Fixed-Price Contracts. Contracts with fixed prices make
up a significant portion of our revenues. If our original cost estimates are
incorrect, there are delays in scheduled deliveries or we otherwise do not
progress under a fixed-price contract as we expected, the profits under that
contract could decrease, or we could lose money on that contract. When our
estimates of cost change for fixed-price contracts, we record adjustments in our
financial statements, and any future downward adjustments could be material.
15
<PAGE>
Competition. We compete against many companies in fragmented, competitive
markets and we have fewer resources than some of those companies. Our
businesses compete within and outside the United States principally on the basis
of the following factors:
<TABLE>
<CAPTION>
BUSINESS FACTORS
-------- -------
<S> <C>
Water and . Product quality and specifications
Wastewater . Technology
Treatment . Reliability
. Price (can predominate among competitors in
the wastewater treatment business that have
sufficient technical qualifications,
particularly in the municipal contract bid
process)
. Customized design and technical qualifications
. Reputation
. Prompt local service
Filtration and . Price
Separation . Technical expertise
. Product quality
. Responsiveness to customer needs
. Service
. Technical support
Industrial Products . Quality
and Services . Service
. Price
Waterworks . Prompt local service capability
Distribution . Product knowledge by sales force and service
branch management
. Price
Consumer and . Price
Commercial Products . Product quality
. "Taste"
. Service
. Distribution capabilities
. Geographic presence
. Reputation
</TABLE>
The waterworks distribution business competes against independent wholesalers,
distribution chains similar to ours and manufacturers who sell directly to
customers. The consumer products business competes with thousands of companies,
including those with national, regional or local distribution networks, as well
as retail outlets.
Competitive pressures, including those described above, and other factors could
cause us to lose market share or could result in decreases in prices, either of
which could have a material adverse effect on our financial position and results
of operations.
16
<PAGE>
Risks Related to Acquisitions. We have made a large number of acquisitions
since 1991 and we plan to continue to pursue acquisitions. Candidates for
acquisition include businesses that allow us to:
. expand the segments of the water and wastewater treatment and water-
related industries in which we participate;
. complement our technologies, products or services;
. broaden our customer base and geographic areas served;
. expand our global distribution network; or
. use our "one-stop-shop" approach in terms of technology, distribution
or service.
If we are not correct when we assess the value, strengths, weaknesses,
liabilities and potential profitability of acquisition candidates or we are not
successful in integrating the operations of acquired companies, our results of
operation or financial position could be adversely affected and we could lose
money. In addition, if we acquire other businesses by making so-called
"hostile" tender offers, as we did with Memtec Limited, we may encounter added
risks. When we negotiate to acquire a company, that company generally makes
legally binding statements (known as "representations") to us and provides us
with access to internal documents and other data that we rely upon in deciding
whether to acquire the company and if we decide to acquire the company, on what
terms. We would not get such representations or internal information in a
"hostile" tender offer. We will continue to look for acquisition opportunities,
although we may not continue to easily find desirable acquisition candidates or
complete acquisitions.
Risks of Doing Business in Other Countries. We have acquired businesses and we
conduct business in markets outside the United States and we expect to continue
to do so. The risks associated with conducting business outside the United
States include:
. currency fluctuations;
. slower payment of invoices;
. underdeveloped legal systems;
. nationalization; and
. social, political and economic instability.
Current economic conditions in the Asia Pacific region and Latin America have
adversely affected our operations and sales there. We cannot predict the full
impact of this economic instability, but it could have a material adverse effect
on our revenues and profits.
Importance of Certain Employees. Our senior officers, particularly Richard J.
Heckmann, who is our Chief Executive Officer, are very important to the success
of our operations. We have various compensation and benefit arrangements with
our senior officers, including Mr. Heckmann, that are designed to encourage them
to continue their employment with us. However, if any of our senior officers do
not continue in their present roles, our prospects may be adversely affected.
17
<PAGE>
Year 2000 Risks. The Year 2000 issue concerns the potential exposures related
to the automated generation of business and financial misinformation resulting
from the application of computer programs which have been written using six
digits (for example, 12/31/99), rather than eight (for example, 12/31/1999), to
define the applicable date of business transactions. Many products and systems
could experience malfunctions when attempting to process certain dates, such as
January 1, 2000 or September 9, 1999 (a date programmers sometimes used as a
default date). We are currently identifying which of our information technology
("IT") and non-IT systems will be affected by Year 2000 issues.
Most of our IT systems with Year 2000 issues have been modified to address those
issues. We have also commenced identification and assessment of our non-IT
systems, which include, among other things, components found in water and
wastewater treatment plants and process water treatment systems operated and/or
owned under contract by us and in our hazardous waste treatment facilities, as
well as components of equipment in our manufacturing facilities.
Our Year 2000 compliance program consists of three phases: identification and
assessment; remediation; and testing. For any given system, the phases occur in
sequential order, from identification and assessment of Year 2000 problems, to
remediation, and, finally, to testing our solutions.
However, as we acquire additional businesses, each IT and non-IT system of the
acquired business must be independently identified and assessed. As a result,
all three phases of our Year 2000 compliance program may occur simultaneously as
they relate to different systems. Each phase may have a varying timetable to
completion, depending upon the system and the date when a particular business
was acquired by us.
We have completed the identification and assessment of most of our IT systems,
and those systems have been modified to address Year 2000 problems. We will
continue to assess the IT systems of businesses that we have recently acquired
and that we may acquire in the future.
We are in the identification and assessment phase with respect to all non-IT
systems, which is projected to continue until September 1999 for currently-owned
businesses. With the possible exception of the remediation and testing phases
for certain of our non-IT systems, all phases of our Year 2000 compliance
program are expected to be completed by September 1999, although we can not
assure you that all phases for all businesses will be completed by that date.
In particular, we can not assure you that acquired businesses will be Year 2000
compliant, although we currently have a policy that requires an acquisition
candidate to represent that such business is Year 2000 compliant. To the extent
feasible, we also review the Year 2000 status of acquisition candidates before
we complete an acquisition.
In addition to our internal systems, we have begun to assess the level of Year
2000 problems associated with our various suppliers, customers and creditors.
To test the Year 2000 compliance status of our suppliers, we plan to submit
hypothetical orders to our suppliers dated after December 31, 1999 requesting
confirmation that the orders have been correctly processed.
Our costs to date for our Year 2000 compliance program, excluding employee
salaries, have not been material. Although we have not completed our assessment,
we do not currently believe that the future costs associated with our Year 2000
compliance program will be material.
We are currently unable to determine our most reasonably likely worst case Year
2000 scenario, as we have not identified and assessed all our systems,
particularly our non-IT systems. As we complete our identification and
assessment of internal and third-party systems, we expect to develop contingency
plans for various worst case scenarios. We expect to have such contingency
plans in place by September 1999. A failure to address Year 2000 issues
successfully could have a material adverse effect on our business, financial
condition or results of operations.
Potential Environmental Risks. Environmental laws and regulations require us to
meet certain standards and impose liability if we do not meet them.
Environmental laws and regulations and their interpretations change.
18
<PAGE>
We must comply with any new standards and requirements, even when they require
us to clean up environmental conditions that were not illegal when the
conditions were created. We can be held responsible for failures to meet
environmental standards by businesses we acquired that happened before we
acquired them. All of these requirements can cost us money.
Environmental costs can result from cleanup obligations, civil or criminal
enforcement actions or private actions. Costs of environmental compliance and
fines or penalties for environmental violations could have a material adverse
effect on us in the future. Environmental risks that we have in our businesses
and some of the specific environmental liabilities that we know about and that
could result in significant future costs to us are discussed below.
. Cleanup Liabilities. The United States Environmental Protection Agency
has notified us that we are a potentially responsible party under the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (CERCLA) at certain sites to which we (or companies we have
acquired) have allegedly sent waste in the past. We may receive
additional notices under CERCLA or state law.
You should be aware that in 1995, Culligan, one of our subsidiaries,
bought part of Anvil Holdings, Inc. and assumed certain environmental
liabilities associated with soil and contamination at Anvil Knitwear's
Asheville Dyeing and Finishing Plant in Swannanoa, North Carolina. Since
1990, Culligan has monitored the contamination pursuant to an
Administrative Consent Order entered into with the North Carolina
Department of Environment, Health and Natural Resources related to the
closure of an underground storage tank at the site. Groundwater testing
at this plant and at two adjoining properties showed levels of a
cleaning solvent that Culligan believed to be from the plant that exceed
applicable state standards.
We have begun cleanup of the contamination and estimate that the costs
of future site cleanup will range from $1.0 million to $1.8 million. We
have sufficient financial reserves for site cleanup. We anticipate that
the potential costs of further monitoring and corrective measures to
address the groundwater problem will not have a material adverse effect
on our financial position or results of operations. However, because the
full extent of the required cleanup has not been determined, we cannot
assure you of this result.
Also, based on all of the sites we know to require cleanup, including
the Anvil site, we do not believe that our liability relating to such
sites will be material to us. However, we cannot assure you that such
sites will not have a material adverse effect on our financial position
or results of operations.
. Hazardous Waste Treatment and Recovery Facilities. We own and operate
several hazardous waste treatment and recovery facilities, which are
subject to very strict environmental laws and regulations and compliance
reviews. If we do not comply with these regulations, we could be fined
significant amounts of money or the facilities' hazardous waste permits
could be suspended or revoked.
. Liability for Wastewater Treatment Facilities and Wastewater Discharges.
By contract, we operate various wastewater collection and treatment
facilities that were developed and are owned by governmental or
industrial entities. We also operate facilities owned by us, including
service deionization centers and manufacturing facilities, that
discharge wastewater in connection with routine operations. Under
certain service contracts and applicable environmental laws we may be
held responsible as an operator of such facilities. Potential
responsibilities include paying the fines or penalties if the facilities
malfunction or discharge wastewater which fall below certain regulatory
thresholds. In some cases, such possible malfunctions or discharges
depend upon design or operational conditions over which we have limited,
if any, control.
. Underground Storage Tanks and Potential for Soil and Groundwater
Contamination. Some of our facilities contain (or in the past
contained) underground storage tanks which may have caused soil or
19
<PAGE>
groundwater contamination. At one site formerly owned by Culligan, we
are investigating, and have taken certain actions to correct,
contamination that may have resulted from a former underground storage
tank. Based on the amount of contamination believed to have been present
when the tank was removed, and the probability that some of the
contamination may have originated from nearby properties, we believe,
although there can be no assurance, that this matter will not have a
material adverse effect on our financial position or results of
operations.
. Impact of Environmental Laws on Our Product Sales. The liabilities and
risks imposed on our customers by environmental laws may adversely
impact demand for some of our products or services or impose greater
liabilities and risks on us, which could also have an adverse effect on
our competitive and financial position.
Risks Related to Municipal Water and Wastewater Business. Sales to municipal
customers make up a significant percentage of our revenues. We encounter some
different risks with municipalities than we do with industrial customers.
Competition for selection of a municipal contractor usually requires a formal
bidding process. By requiring formal bids, municipal projects entail longer lead
times than industrial projects and force us to commit more resources. In
addition, the municipal business depends upon the availability of funding at the
local level, which may be subject to increasing pressure as local governments
are expected to bear a greater share of the cost of public services.
Technological and Regulatory Risks. Changes in technology, competitively
imposed process standards and regulatory requirements influence the demand for
many of our products and services. To grow and remain competitive, we need to
anticipate changes in technological and regulatory standards. We need to
introduce new and enhanced products on a timely basis. We may not achieve these
goals and some of our products may become obsolete.
New products often face lack of market acceptance, development delays or
operational failure. Stricter governmental regulations also may affect
acceptance of new products. The market growth potential of acquired in-process
research and development is subject to significant risks, including high
development, production and sales costs, introduction of competing technologies
and the possible lack of market acceptance of the developed products and
technologies.
Our trademarks or patents may not provide substantial protection from
competition or be of commercial benefit to us. We may not be able to enforce our
rights under trademarks or patents against third parties. Some international
jurisdictions may not protect these kinds of rights to the same extent that they
are protected under U.S. law. If a third party successfully challenges our
trademarks or patents, it may affect our competitive and financial position.
Risks Related to Water Rights and Transfers of Water. We own more than 47,000
acres of agricultural land in the southwestern United States, most of which is
located within the Imperial Irrigation District (IID) in Imperial County,
California. We lease substantially all of the 47,000 acres to agricultural
tenants.
We acquired the land with water rights, and we are seeking to acquire additional
properties with water rights, primarily in the southwestern and western United
States. In the future, we may transfer water attributable to such water rights,
particularly from the land located in the IID.
Our ability to transfer water and the profitability of any such transfers are
subject to various uncertainties, including:
. Hydrologic risks of variable water supplies;
. Conveyance risks from unavailable or inadequate transportation
facilities;
20
<PAGE>
. Risks presented by allocations of water under existing and prospective
priorities; and
. Risks of adverse changes to or interpretations of U.S. federal, state
and local laws, regulations and policies.
The IID holds title to all of the water rights within the IID in trust for the
landowners and would control the amounts and terms of any transfers by us of
IID water. Transfer of IID water are subject to additional uncertainties,
including:
. Limitations of Colorado River water allocations (the source of all water
deliveries to IID properties) under
. international treaties;
. interstate compacts;
. U.S. federal and state laws and regulations; and
. contractual arrangements;
. Curtailment of water deliveries by the U.S. government in times of
drought;
. The approval of the U.S. Secretary of the Interior;
. The use of the Colorado River Aqueduct owned by the Metropolitan Water
District of southern California, a quasi-governmental agency; and
. Compliance with all U.S. federal and state environmental laws and
regulations.
Even if a transfer of IID water were approved, other California water districts
and users could assert claims adverse to the IID water rights, including but not
limited to claims that the IID has failed to satisfy U.S. federal law and
California constitutional requirements that IID water must be put to reasonable
and beneficial use. A finding that the IID's water use is unreasonable or
nonbeneficial could adversely impact title to the IID water rights and the
ability to transfer IID water.
The uncertainties associated with water rights could have a material adverse
effect on our future profitability.
Impact of Recently Issued Accounting Standards. In June 1997, FASB issued a new
statement titled "Disclosures about Segments of an Enterprise and Related
Information". The new statement is effective for fiscal years beginning after
December 15, 1997. The Company is currently determining required disclosure
under this new standard and will include the disclosures in its next annual
report.
In June 1998, FASB issued a new statement titled "Accounting for Derivative
Instruments and Hedging Activities. The new statement is effective for fiscal
years beginning after June 15, 1999. The Company does not believe that the
adoption of this standard will have a material impact on its consolidated
financial position or results of operations.
21
<PAGE>
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
N/A
Item 2. CHANGES IN SECURITIES
On September 22, 1998, the Company issued to Hadwaco US, Inc.
69,333 shares (the "Shares") of its common stock, par value $.01
per share. The Shares were issued in a transaction exempt from
registration pursuant to Section 4(2) of the United States
Securities Act of 1933 as amended.
Item 3. DEFAULTS UPON SENIOR SECURITIES
N/A
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
(i) The following directors were elected to terms expiring in 2001:
<TABLE>
<CAPTION>
Class I Directors: For Withheld
----------------- --- --------
<S> <C> <C>
J. Danforth Quayle 120,217,396 946,633
Arthur B. Laffer 120,309,466 844,802
Alfred E. Osborne, Jr. 120,310,343 841,859
Andrew D. Seidel 120,311,524 841,278
</TABLE>
(ii) To approve the Company's Senior Executive Annual Incentive Plan:
<TABLE>
<CAPTION>
For Against Abstain
----------- --------- ---------
<S> <C> <C>
116,240,360 3,530,872 1,260,061
</TABLE>
(iii) To approve the Company's 1998 Stock Incentive Plan:
<TABLE>
<CAPTION>
For Against Abstain
----------- --------- ---------
<S> <C> <C>
115,104,902 4,829,148 1,097,244
</TABLE>
(iv) To approve an amendment to the Company's 1991 Director's Stock
Option Plan:
<TABLE>
<CAPTION>
For Against Abstain
----------- --------- ---------
<S> <C> <C>
116,243,891 3,505,536 1,281,867
</TABLE>
(v) Ratification of the appointment of KPMG Peat Marwick LLP as
independent accountants for the Company:
<TABLE>
<CAPTION>
For Against Abstain
----------- --------- ---------
<S> <C> <C>
120,193,998 361,306 587,098
</TABLE>
Item 5. OTHER INFORMATION
N/A
22
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The following exhibits are filed herewith or incorporated herein by reference:
3.02 Amended and Restated Bylaws of United States Filter Corporation (filed
herewith)
4.01 Third Amendment to Amended and Restated Multicurrency Credit Agreement
and First Omnibus Agreement dated as of November 10, 1998 by and among
the Company and various lenders with BankBoston, N.A. as Managing Agent
(filed herewith)
10.01 First Amended and Restated Employment Agreement between Richard J.
Heckmann and the Company (filed herewith)
10.02 Employment Agreement between Nicholas C. Memmo and the Company (filed
herewith)
10.03 Employment Agreement between Andrew D. Seidel and the Company (filed
herewith)
10.04 Employment Agreement between Harry K. Hornish, Jr. and the Company
(filed herewith)
10.05 Employment Agreement between Calvin R. Hendrix and the Company (filed
herewith)
10.06 Employment Agreement between Kenneth I. Wellings and the Company (filed
herewith)
10.07 Employment Agreement between Kevin L. Spence and the Company (filed
herewith)
10.08 Employment Agreement between Damian C. Georgino and the Company (filed
herewith)
10.09 Employment Agreement between Michael J. Reardon and the Company (filed
herewith)
27.0 Financial Data Schedule
The Company filed three Current Reports on Forms 8-K and 8-K/A during the
quarter ended September 30, 1998, as follows:
(1) August 17, 1998, reporting certain financial information to reflect 30 days
of combined operations of the Company and Culligan Water Technologies, Inc.
(2) August 17, 1998, amendment to 8-K dated August 17, 1998, reporting certain
financial information to reflect 30 days of combined operations of the
Company and Culligan Water Technologies, Inc.
(3) September 18, 1998, amendment to 8-K dated June 15, 1998, restating certain
of the Company's financial information as a result of the Company's
acquisition of Culligan Water Technologies, Inc.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED STATES FILTER CORPORATION
By: /s/ Kevin L. Spence
-------------------
Dated: November 13, 1998 Kevin L. Spence
Executive Vice President, Chief
Financial Officer (Principal
Financial Officer and Duly Authorized
Officer)
24
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
3.02 Amended and Restated Bylaws of United States Filter Corporation
(filed herewith)
10.01 First Amended and Restated Employment Agreement between Richard J.
Heckmann and the Company (filed herewith)
10.02 Employment Agreement between Nicholas C. Memmo and the Company (filed
herewith)
10.03 Employment Agreement between Andrew D. Seidel and the Company (filed
herewith)
10.04 Employment Agreement between Harry K. Hornish, Jr. and the Company
(filed herewith)
10.05 Employment Agreement between Calvin R. Hendrix and the Company (filed
herewith)
10.06 Employment Agreement between Kenneth I. Wellings and the Company
(filed herewith)
10.07 Employment Agreement between Kevin L. Spence and the Company (filed
herewith)
10.08 Employment Agreement between Damian C. Georgino and the Company
(filed herewith)
10.09 Employment Agreement between Michael J. Reardon and the Company
(filed herewith)
10.10 Third Amendment to Amended and Restated Multicurrency Credit
Agreement and First Omnibus Agreement dated as of November 10,
1998 by and among the Company and various lenders with BankBoston,
N.A. as Managing Agent (filed herewith)
27.0 Financial Data Schedule
</TABLE>
25
<PAGE>
EXHIBIT 3.02
AMENDED AND RESTATED BYLAWS
United Stated Filter Corporation
(a Delaware corporation)
ARTICLE I
Offices
SECTION 1.01 Registered Office. The registered office of United States
-----------------
Filter Corporation (hereinafter called the Corporation) in the State of Delaware
shall be at 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of the registered agent in charge thereof shall be The Corporation
Trust Company.
SECTION 1.02 Other Offices. The Corporation may also have an office or
-------------
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of the
---------------
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meeting. A special meeting of the stockholders for the
---------------
transaction of any proper business may only be called in accordance with the
provisions of the Certificate of Incorporation.
SECTION 2.03 Place of Meetings. All meetings of the stockholders shall be
-----------------
held at such places, within or without the State of Delaware, as may from time
to time be designated by the person or persons calling the respective meeting
and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meeting. Except as otherwise required by law, notice
-----------------
of each meeting of the stockholders, whether annual or special, shall be given
not less than ten (10)
<PAGE>
nor more than sixty (60) days before the date of the meeting to each stockholder
of record entitled to vote at such meeting by delivering a typewritten or
printed notice thereof to him personally, or by depositing such notice in the
United States mail, in a postage prepaid envelope, directed to him at his post
office address furnished by him to the Secretary of the Corporation for such
purpose or, if he shall not have furnished to the Secretary his address for such
purpose, then at his post office address last known to the Secretary, or by
transmitting a notice thereof to him at such address by telegraph, cable, or
wireless. Except as otherwise expressly required by law, no publication of any
notice of a meeting of the stockholders shall be required. Every notice of a
meeting of the stockholders shall state the place, date and hour of the meeting
and, in the case of a special meeting, shall also state the purpose or purposes
for which the meeting is called. Notice of any meeting of stockholders shall not
be required to be given to any stockholder who shall have waived such notice and
such notice shall be deemed waived by any stockholder who shall attend such
meeting in person or by proxy, except as a stockholder who shall attend such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Except as otherwise expressly required by law, notice of any adjourned
meeting of the stockholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
SECTION 2.05 Quorum. Except as provided by law, the holders of record of a
------
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting from time
to time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called.
SECTION 2.06 Voting.
------
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each
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share or fractional share of the stock of the Corporation having voting rights
on the matter in question and which shall have been held by him and registered
in his name on the books of the Corporation:
(i) on the date fixed pursuant to Section 2.10 of these Bylaws as the
record date for the determination of stockholders entitled to notice of and
to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at the
close of business on the day next preceding the day on which notice of the
meeting shall be given or (b) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on which the
meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
3
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matters, except as otherwise provided in the Certificate of Incorporation, in
these bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07 List of Stockholders. The Secretary of the Corporation shall
--------------------
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (1O) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 2.08 Judges. If at any meeting of the stockholders a vote by
------
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be stockholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a proposal in
which he shall have a material interest.
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SECTION 2.09 No Action By Consent of Stockholders. No action may be taken
------------------------------------
by written consent of the stockholders.
SECTION 2.10 Fixing Date for Determination of Stockholders. In order that
---------------------------------------------
the Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action.
the Board may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If in any case involving the
determination of stockholders for any purpose other than notice of or voting at
a meeting of stockholders of the Board shall not fix such a record date, the
record date for determining stockholders for such purpose shall be the close of
business on the day on which the Board shall adopt the resolution relating
thereto. A determination of stockholders entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
SECTION 2.11 Stockholder Proposals at Annual Meetings.
----------------------------------------
(a) Business may be properly brought before an annual meeting by a
stockholder only upon the stockholder's timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than thirty (30) days nor more than sixty (60) days prior
to the meeting as originally scheduled; provided, however, that in the event
that less than forty (40) days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
made timely must be so received not later than the close of business on the 10th
day following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. For purposes of this Section 2.11,
any adjournment(s) or postponement(s) of the original meeting shall be deemed
for purposes of notice to be a continuation of the original meeting and no
business may be brought before any reconvened meeting unless such timely notice
of such business was given to the Secretary of the Corporation for the meeting
as originally scheduled. A stockholder's notice to the Secretary
5
<PAGE>
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder, and (iv) any material interest
of the stockholder in such business. Notwithstanding the foregoing, nothing in
this Section 2.11 shall be interpreted or construed to require the inclusion of
information about any such proposal in any proxy statement distributed by, at
the direction of, or on behalf of the Board.
(b) The chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 2.11, and
if the chairman should so determine, the chairman shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
SECTION 2.12 Notice of Shareholder Nominees.
------------------------------
(a) Nomination of persons for election to the Board of the Corporation
shall be made only at a meeting of stockholders and only (1) by or at the
direction of the Board or (2) by any stockholder of the Corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 2.12. Such nominations, other than those
made by or at the direction of the Board, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than thirty (30) days
nor more than sixty (60) days prior to the meeting; provided, however, that in
the event that less than forty (40) days' written notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. For purposes of this
Section 2.12, any adjournment(s) or postponement(s) of the original meeting
shall be deemed for purposes of notice to be a continuation of the original
meeting and no nominations by a stockholder of persons to be elected directors
of the Corporation may be made at any such reconvened meeting unless pursuant to
a notice which as timely for the meeting on the date originally scheduled. Such
6
<PAGE>
stockholder's notice shall set forth: (i) as to each person whom the stockholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to the Securities Exchange Act of 1934, as amended, (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); and (ii) as to the stockholder giving the
notice (A) the name and address, as they appear on the Corporation's books, of
such stockholder, and (B) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. Notwithstanding the foregoing,
nothing in this Section 2.12 shall be interpreted or construed to require the
inclusion of information about any such nominee in any proxy statement
distributed by, at the direction of, or on behalf of the Board.
(b) The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by this Section 2.12, and if the chairman should so
determine, the chairman shall so declare to the meeting and the defective
nomination shall be disregarded.
ARTICLE III
Board of Directors
SECTION 3.01 General Powers. The property, business and affairs of the
--------------
Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The number of directors shall be
-------------------------
such number as may be fixed from time to time by resolution of the Board,
subject to the provisions of the Certificate of Incorporation. Directors need
not be stockholders. Each of the directors of the Corporation shall hold office
until his successor shall have been duly elected and qualified or until he shall
resign or shall have been removed in the manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be elected annually
---------------------
by the stockholders of the Corporation and the persons receiving the greatest
number of votes, up to the number of directors to be elected, shall be the
directors.
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SECTION 3.04 Resignations. Any director of the Corporation may resign at
------------
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the Certificate of
---------
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office until
his successor shall have been elected and shall qualify or until he shall resign
or shall have been removed in the manner hereinafter provided.
SECTION 3.06 Place of Meetings, Etc. The Board may hold any of its meetings
----------------------
at such place or places within or without the State of Delaware as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice or a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting of
the Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as practicable
-------------
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be held at
----------------
such times as the Board shall from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.
SECTION 3.09 Special Meeting. Special meetings of the Board shall be held
---------------
whenever called by the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each
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<PAGE>
such special meeting shall be mailed to each director, addressed to him at his
residence or usual place of business, at least five (5) days before the day on
which the meeting is to be held, or shall be sent to him at such place by
telegraph or cable or be delivered personally not less than forty-eight (48)
hours before the time at which the meeting is to be held. Except where otherwise
required by law or by these Bylaws, notice of the purpose of a special meeting
need not be given. Notice of any meeting of the Board shall not be required to
be given to any director who is present at such meeting, except a director who
shall attend such meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise provided in
---------------------------
these Bylaws, the Certificate of Incorporation or by law, the presence of a
majority of the authorized number of directors shall be required to constitute a
quorum for the transaction of business at any meeting of the Board, and all
matters shall be decided at any such meeting, a quorum being present, by the
affirmative votes of a majority of the directors present. In the absence of a
quorum, a majority of directors present at any meeting may adjourn the same from
time to time until a quorum shall be present. Notice of any adjourned meeting
need not be given. The directors shall act only as a Board, and the individual
directors shall have no power as such.
SECTION 3.11 Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.12 Removal of Directors. Subject to the provisions of the
--------------------
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
stockholders called for the purpose.
SECTION 3.13 Compensation. The directors shall receive only such
------------
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the
9
<PAGE>
payment of such compensation nor the reimbursement of such expenses shall be
construed to preclude any director from serving the Corporation or its
subsidiaries in any other capacity and receiving compensation therefor.
SECTION 3.14 Committees. The Board may, by resolution passed by a majority
----------
of the whole Board, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. Any such committee, to the
extent provided in the resolution of the Board and except as otherwise limited
by law, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
Any such committee shall keep written minutes of its meetings and report the
same to the Board at the next regular meeting of the Board. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE IV
Officers
SECTION 4.01 Number. The officers of the Corporation shall be a President,
------
one or more Vice Presidents (the number thereof and their respective titles to
be determined by the Board), a Secretary, a Chief Financial Officer and a
Treasurer.
SECTION 4.02 Election Term of Office and Qualifications. The officers of
------------------------------------------
the Corporation, except such officers as may be appointed in accordance with
Section 4.03, shall be elected annually by the Board at the first meeting
thereof held after the election thereof. Each officer shall hold office until
his successor shall have been duly chosen and shall qualify or until his
resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees, Etc. In addition to the
-------------------------------------
officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and
10
<PAGE>
perform such duties as the Board may from time to time determine. The Board may
delegate to any officer of the Corporation or any committee of the Board the
power to appoint, remove and prescribe the duties of any such assistants, agents
or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of the
-------
Corporation may be removed, with or without cause, at any time: (i) in the case
of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of an officer, assistant, agent or
employee. by any officer of the Corporation or committee of the Board upon whom
or which such power of removal may be conferred by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at any time
------------
by giving written notice of his resignation to the Board or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, upon receipt thereof by the Board or
the Secretary, as the case may be; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07. Chairman of the Board. The Chairman of the Board shall
---------------------
preside at all meetings of the shareholders and of the Board of Directors. If
the Chairman of the Board shall be the Chief Executive Officer, the Chairman of
the Board also shall have the powers and perform the duties of the Chief
Executive Officer. If the Chairman of the Board shall be the President, the
Chairman of the Board also shall have the powers and perform the duties of the
Chief Operating Officer, unless the Board of Directors shall at any time specify
by resolution that another officer shall be the Chief Operating Officer. If the
Chairman of the Board shall not be the Chief Executive Officer or the President,
the Chairman of the Board shall have such other powers and perform such other
duties as shall from time to time be specified by the Board of Directors.
SECTION 4.08. Chief Executive Officer. The Chairman of the Board of the
-----------------------
Corporation shall be the Chief Executive
11
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Officer of the Corporation unless the Board of Directors shall at any time
specify by resolution that the President, rather than the Chairman of the Board,
shall be the Chief Executive Officer of the Corporation. The officer so
designated shall be the Chief Executive Officer until otherwise specified by the
Board. The Chief Executive Officer shall be the chief executive officer and
general manager of the Corporation and shall have general and active charge and
control over the business and affairs of the Corporation, subject to the Board
of Directors. In the absence of the Chairman of the Board, or if the Chief
Executive Officer is also the Chairman of the Board, the Chief Executive Officer
shall preside at meetings of the shareholders and of the Board of Directors.
SECTION 4.09. President. If the President shall be the Chief Executive
---------
Officer, the President shall have the powers and perform the duties of the Chief
Executive Officer. If the President shall be the Chief Operating Officer, the
President shall have the powers and perform the duties of the Chief Operating
Officer. If the President shall not be either the Chief Executive Officer or
the Chief Operating Officer, the President shall have such other powers and
perform such other duties as shall from time to time be specified by the Board
of Directors.
SECTION 4.10. Chief Operating Officer. The President of the Corporation
-----------------------
shall be the Chief Operating Officer of the Corporation unless the Board of
Directors shall at any time specify by resolution that another officer, rather
than the President, shall be the Chief Operating Officer of the Corporation.
The officer so designated shall be the Chief Operating Officer until otherwise
specified by the Board. The Chief Operating Officer shall have general and
active management and supervision of the operations and properties of the
Corporation and shall have such other powers and perform such other duties as
shall from time to time be specified by the Board of Directors or delegated to
the Chief Operating Officer by the Chief Executive Officer.
SECTION 4.11 The Vice President. Each Vice President shall have such powers
------------------
and perform such duties as the Board may from time to time prescribe. At the
request of the President, or in case of the President's absence or inability to
act upon the request of the Board, a Vice President shall perform the duties of
the President and when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the President.
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SECTION 4.12 Chief Financial Officer. The Chief Financial Officer shall
-----------------------
supervise, have custody of, and be responsible for all funds and securities of
the Corporation. The Chief Financial Officer shall deposit all such funds in the
name of the Corporation in such banks' trust companies or other depositories as
shall be selected by the Board or in accordance with authority delegated by the
Board. The Chief Financial Officer shall receive, and give receipts for, moneys
due and payable to the Corporation from any source whatsoever. The Chief
Financial Officer shall exercise general supervision over expenditures and
disbursements made by officers, agents and employees of the Corporation and the
preparation of such records and reports in connection therewith as may be
necessary or desirable. The Chief Financial Officer shall, in general, perform
all other duties and such other duties as from time to time may be assigned to
the Chief Financial Officer by the Board.
SECTION 4.13 The Secretary. The Secretary shall, if present, record the
-------------
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.14 The Treasurer. The Treasurer shall have such powers and
-------------
perform such duties as the Board may from time to time prescribe. Unless
otherwise provided by the Board, the Chief Financial Officer shall be the
Treasurer of the Corporation.
SECTION 4.15 Compensation. The compensation of the officers of the
------------
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
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corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01 Execution of Contracts. The Board, except as in these Bylaws
----------------------
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or in any amount.
SECTION 5.02 Checks, Drafts. Etc. All checks, drafts or other orders for
-------------------
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
SECTION 5.03 Deposits. All funds of the Corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President (or any other
officer or officers, assistant or assistants, agent or agents, or attorney or
attorneys of the Corporation who shall from time to time be determined by the
Board or designated by the President) may endorse, assign and deliver checks,
drafts and other orders for the payment of money which are payable to the order
of the Corporation.
SECTION 5.04 General and Special Bank Accounts. The Board may from time to
---------------------------------
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
14
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may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01 Certificate for Stock. Every owner of stock of the Corporation
---------------------
shall be entitled to have a certificate or certificates, to be in such form as
the Board shall prescribe, certifying the number and class of shares of the
stock of the Corporation owned by him. The certificates representing shares of
such stock shall be numbered in the order in which they shall be issued and
shall be signed in the name of the Corporation by the President or a Vice
President, and by the Secretary or an Assistant Secretary or by the Treasurer or
an Assistant Treasurer. Any of or all of the signatures on the certificates may
be a facsimile. In case any officer, transfer agent or registrar who has signed,
or whose facsimile signature has been placed upon, any such certificate, shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, such certificate may nevertheless be issued by the
Corporation with the same effect as though the person who signed such
certificate, or whose facsimile signature shall have been placed thereupon, were
such officer, transfer agent or registrar at the date of issue. A record shall
be kept of the respective names of the persons, firms or corporations owning the
stock represented by such certificates, the number and class of shares
represented by such certificates, respectively, and the respective dates
thereof, and in case of cancellation, the respective dates of cancellation.
Every certificate surrendered to the Corporation for exchange, or transfer shall
be cancelled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing shall have been so cancelled,
except in cases provided for in Section 6.04.
Section 6.02 Transfers of Stock. Transfers of shares of stock of the
------------------
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender
15
<PAGE>
of the certificate or certificates for such shares properly endorsed and the
payment of all taxes thereon. The person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof for all purposes
as regards the Corporation. Whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact shall be so expressed in the
entry of transfer if, when the certificate or certificates shall be presented to
the Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
Section 6.03 Regulations. The Board may make such rules and regulations
-----------
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue, transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
Section 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In any
---------------------------------------------------
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
ARTICLE VII
INDEMNITY OF DIRECTORS, OFFICERS AND OTHER PERSONS
SECTION 7.01 Right to Indemnification. Each person who was or is made a
------------------------
party or is threatened to be made a party to or is involved (including, without
limitation, as a witness) in any threatened, pending, or completed action, suit,
or proceeding, whether civil, derivative, criminal, administrative, or
investigative (a "proceeding"), by reason of the fact that he or she is or was a
director or officer of the Corporation or, being or having been such a director
or officer, he or she or a person of whom he or she is a legal representative,
is or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee, or agent of another corporation or of a partnership,
joint venture, trust, or other enterprise, including service with respect to
employee benefit plans,
16
<PAGE>
whether the basis of such proceeding is alleged action or inaction in an
official capacity as a director, officer, partner, trustee, employee, or agent
or in any other capacity while serving as a director, officer, partner, trustee,
employee, or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent not prohibited by the Delaware General Corporation Law,
public policy, or other applicable law (including binding regulations and orders
of, and undertakings or other commitments with, any governmental entity or
agency) as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all expense, liability,
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) actually and reasonably
incurred or suffered by such person in connection therewith. The right to
indemnification granted in this Section 7.01 shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any proceeding in advance of its final disposition; provided, however,
that the payment of such expenses in advance of the final disposition of a
proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined (including the final resolution
of any suit brought pursuant to Section 7.02) that such director or officer is
not entitled to be indemnified under this Section 7.01 or otherwise. The
indemnification granted in this Section 7.01 shall continue as to a person who
has ceased to be a director, officer, partner, trustee, employee, or agent and
shall inure to the benefit of his or her heirs, executors, and administrators;
provided, however, that expect as provided in Section 7.02 of this Article with
respect to proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
SECTION 7.02 Right of Claimant to Bring Suit. If a claim under Section 7.01
-------------------------------
of this Article is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for expenses incurred in defending a proceeding in advance of its final
disposition, in which case the applicable period shall be
17
<PAGE>
twenty days, the claimant may at any time thereafter bring an action against the
Corporation to recover the unpaid amount of the claim and, to the extent
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. The claimant shall be presumed to be
entitled to indemnification under this Article upon submission of a written
claim (and, in an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition, upon tender of any
required undertaking) and thereafter the Corporation shall have the burden of
proof to overcome the presumption that the claimant is so entitled. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
claimant is not entitled to indemnification shall be a defense to the action or
create a presumption that the claimant is not so entitled. If an action is
brought pursuant to this Section a final nonappealable order in such action
shall constitute the ultimate determination of the claimant's right to
indemnification.
SECTION 7.03 Nonexclusively of Rights. The right to indemnification and the
------------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition granted in this Article shall not be exclusive of any other right
which any person may or hereafter acquire under any statute, provision of the
Certificate of Incorporation or these Bylaws, agreement, vote of stockholders or
disinterested directors, or otherwise. The Corporation shall have the express
right to grant additional indemnity without seeking further approval by the
stockholders. All applicable indemnity provisions and any applicable law shall
be interpreted and applied so as to provide a claimant with the broadest but
nonduplicative indemnity to which he or she is entitled.
SECTION 7.04 Insurance, Contracts, and Funding. The Corporation may
---------------------------------
maintain insurance, at its expense, to protect itself and any director, officer,
partner, trustee, employee, or agent of the Corporation or another corporation,
partnership, joint venture, trust, or other enterprise against any expense,
liability, or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability, or loss under the
Delaware General Corporation Law. The Corporation may enter into contracts
granting indemnity to
18
<PAGE>
any director or officer of the Corporation and may create a trust fund, grant a
security interest, or use other means (including, without limitation, a letter
of credit) to secure or ensure the payment of such amounts as may be necessary
to effect indemnification.
SECTION 7.05 Indemnification of Employees and Agents of the Corporation.
----------------------------------------------------------
The Corporation may, by action of its Board of Directors from time to time,
provide indemnification and pay expenses in advance of the final disposition of
a proceeding to employees and agents of the Corporation with respect to the
indemnification and advancement of expenses or directors and officers of the
Corporation or pursuant to rights granted pursuant to, or provided by, the
Delaware General Corporation Law or otherwise.
SECTION 7.06 Partial Indemnification. It a claimant is entitled to
-----------------------
indemnification by the Corporation for some or a portion of expenses,
liabilities, or losses actually and reasonably incurred by claimant in an
investigation, defense, appeal, or settlement but not, however, for the total
amount thereof, the Corporation shall nevertheless indemnify claimant for the
portion of such expenses, liabilities, or losses to which claimant is entitled.
SECTION 7.07 Successors and Assigns. All obligations of the Corporation to
----------------------
indemnify any director or officer shall be (i) binding upon all successors and
assigns of the Corporation (including any transferee of all or substantially all
of its assets and any successor by merger or otherwise by operation of law) and
(ii) shall be binding on and inure to the benefit of the spouse, heirs, personal
representatives, and estate of the director or officer.
SECTION 7.08 Severability. In the event that any provision of this Article
------------
is determined by a court to require the Corporation to do or to fail to do an
act which is in violation of applicable law, such provision shall be limited or
modified in its application to the minimum extent necessary to avoid a violation
of law, and, as so limited or modified, such provision and the balance of this
Article shall remain in full force and effect.
ARTICLE VIII
Miscellaneous
19
<PAGE>
SECTION 8.01 Seal. The Board shall provide a corporate seal, which shall be
----
in the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Delaware
and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to be given by
-----------------
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 Amendments. Except as otherwise provided herein or in the
----------
Certificate of Incorporation, these Bylaws, or any of them. may be altered,
amended or repealed, and new Bylaws may be adopted, (i) by the stockholders, at
any annual meeting of stockholders. or at any special meeting of stockholders,
provided that notice of such proposed amendment, modification, repeal or
adoption is given in the notice of meeting, or (ii) by the Board. Any Bylaws
made or altered by the stockholders may be altered or repealed by either the
Board or the stockholders.
SECTION 8.04 Representation of Other Corporations. The President, any Vice
------------------------------------
President or the Secretary of this Corporation is authorized to vote, represent
and exercise on behalf of this Corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of this
Corporation. The authority herein granted to said officers to vote or represent
on behalf of this Corporation any and all shares held by this Corporation in any
other corporation or corporations may be exercised either by such officers in
person or by any person authorized so to do by proxy or power of attorney duly
executed by said officers.
20
<PAGE>
EXHIBIT 4.01
THIRD AMENDMENT TO
AMENDED AND RESTATED
MULTICURRENCY CREDIT AGREEMENT
AND FIRST OMNIBUS AMENDMENT
---------------------------
This THIRD AMENDMENT TO AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT
AND FIRST OMNIBUS AMENDMENT (this "Third Amendment") is made and entered into as
of November 10, 1998, by and among UNITED STATES FILTER CORPORATION, a Delaware
corporation with its chief executive office at 40-004 Cook Street, Palm Desert,
California 92211 (the "Borrower"), BANKBOSTON, N.A., a national banking
association having its principal place of business at 100 Federal Street,
Boston, Massachusetts 02110 ("BKB"), DLJ CAPITAL FUNDING, INC. ("DLJ"), ABN AMRO
BANK N.V. ("ABN"), THE BANK OF NEW YORK ("BNY"), BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION ("BOA"), FLEET BANK, N.A. ("Fleet"), NATIONSBANK, N.A.
("NationsBank"), DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES
("Deutsche Bank"), THE LONG-TERM CREDIT BANK OF JAPAN LTD. (LOS ANGELES AGENCY),
UNION BANK OF CALIFORNIA, N.A., ("Union"), THE SANWA BANK LIMITED, LOS ANGELES
BRANCH ("Sanwa"), THE FIRST NATIONAL BANK OF CHICAGO ("First Chicago") and the
other financial institutions which are party to the Credit Agreement (defined
below) (each a "Lender" and, collectively, the "Lenders"), BKB as Administrative
Agent, FIRST CHICAGO as Documentation Agent, BOA as Syndication Agent, DEUTSCHE
BANK and FLEET as Co-Agents, AND UNION, ABN, BNY and SANWA as Lead Managers.
Capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Credit Agreement.
WHEREAS, the Borrower, the Lenders, and the Agents entered into an Amended
and Restated Multicurrency Credit Agreement dated as of October 20, 1997 (as
amended and in effect from time to time, the "Credit Agreement"), pursuant to
which the lenders extended credit to the Borrower on the terms set forth
therein;
WHEREAS, the Borrower, the Lenders, and the Agents have agreed to amend the
Credit Agreement and other loan documents as set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement and other loan
documents as follows:
1. AMENDMENT TO THE LOAN DOCUMENTS. For the Agreement Regarding Existing
-------------------------------
Letters of Credit between the Borrower and BKB (the "L/C Agreement") and each of
the Loan Documents, any and all references to "Managing Agent" shall be deemed
to be references to "Administrative Agent". The L/C Agreement and each of the
Loan Documents are hereby
<PAGE>
-2-
further amended mutatis mutandis as appropriate to reflect the fact that BKB's
------- --------
title has been changed from Managing Agent to Administrative Agent.
2. AMENDMENT TO PREAMBLE. The Preamble to the Credit Agreement is hereby
---------------------
amended by deleting the Preamble in its entirety and restating it as follows:
"This AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT is made as
of October 20, 1997 among UNITED STATES FILTER CORPORATION, a Delaware
corporation with its chief executive office at 40-004 Cook Street, Palm
Desert, California 92211 (the "Borrower"), BANKBOSTON, N.A., a national
banking association having its principal place of business at 100 Federal
Street, Boston, Massachusetts 02110 ("BKB"), DLJ CAPITAL FUNDING, INC.
("DLJ"), ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL BRANCH ("ABN"), THE
BANK OF NEW YORK ("BNY"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION ("BOA"), FLEET BANK, N.A. ("Fleet"), NATIONSBANK, N.A.
("NationsBank") THE INDUSTRIAL BANK OF JAPAN, LIMITED (LOS ANGELES AGENCY)
("IBJ"), DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES
("Deutsche Bank"), THE LONG-TERM CREDIT BANK OF JAPAN LTD. (LOS ANGELES
AGENCY) ("LTCB"), UNION BANK OF CALIFORNIA, N.A. ("Union"), THE SANWA BANK
LIMITED, LOS ANGELES BRANCH ("Sanwa"), UNICREDITO ITALIANO ("Unicredito"),
BANCA NAZIONALE DEL LAVORO S.P.A., and THE FIRST NATIONAL BANK OF CHICAGO
("First Chicago") (such financial institutions and any financial
institutions which become parties hereto in accordance with (S)22 hereof
are collectively referred to herein as the "Lenders" and individually as a
"Lender"), BKB as administrative and managing agent for the Lenders (in
such capacity, the "Administrative Agent"), FIRST CHICAGO as documentation
agent (the "Documentation Agent"), BOA as syndication agent (the
"Syndication Agent"), DEUTSCHE BANK and FLEET As co-agents (the "Co-Agents"
and, collectively with the Managing Agent, the Documentation Agent, and the
Syndication Agent, the "Agents"), and ABN, UNION, BNY and SANWA as lead
managers (the "Lead Managers")."
3. AMENDMENT TO DEFINITIONS. Section 1.1 is hereby amended by
------------------------
(a) inserting the following definitions in their proper alphabetical place:
"Financial L/C(s). Letter(s) of credit where the event which
----------------
triggers payment is financial, such as the failure to pay money, and
not performance related, such as failure to ship a product or provide
a service, as set forth in greater detail in the letter dated March
30, 1995 from the Board of Governors of the Federal Reserve System or
in any applicable directive or letter
<PAGE>
-3-
ruling of the Board of Governors of the Federal Reserve System issued
subsequent thereto.
Third Amendment Effective Date. November 10, 1998."
----- --------- --------- ----
and (b) deleting the following definitions in their entirety and restating
them as follows:
"Arranger. BancBoston Robertson Stephens Inc. (f/k/a BancBoston
--------
Securities Inc.).
Funded Debt. Consolidated Indebtedness of the Borrower and its
-----------
Subsidiaries (other than Unrestricted Subsidiaries) for borrowed
money, including (without duplication) guarantees of such debt,
recorded on the Consolidated balance sheet of the Borrower and its
Subsidiaries, and including (without duplication) the amount of any
such indebtedness for Capitalized Leases which corresponds to
principal and all contingent Reimbursement Obligations with respect to
outstanding Financial L/Cs (including the Letters of Credit), but
excluding contingent obligations with respect to letters of credit
which are not Financial L/Cs.
Issuing Lender. The Lender(s) issuing Letters of Credit, which
--------------
shall initially be BKB or any of its Affiliates, and such other
Lenders as are agreed to be issuing Lenders by the Borrower and the
Managing Agent.
<TABLE>
<CAPTION>
Pricing Table:
-------------
- ---------------------------------------------------------------------------------------------------------------------
APPLICABLE APPLICABLE
MARGIN FOR MARGIN FOR
APPLICABLE APPLICABLE BASE RATE EUROCURRENCY
SENIOR PUBLIC FACILITY RATE L/C RATE LOANS LOANS
LEVEL DEBT RATING (PER ANNUM) (PER ANNUM) (PER ANNUM) (PER ANNUM)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level I At least BBB+ by Standard 0.1250% (M) 0.3750% 0.0000% 0.3750% (M)
& Poor's 0.1000% (R) 0.4000% (R)
- ---------------------------------------------------------------------------------------------------------------------
Level At least BBB by Standard 0.1500% (M) 0.5000% 0.0000% 0.5000% (M)
II & Poor's 0.1250% (R) 0.5250% (R)
- ---------------------------------------------------------------------------------------------------------------------
Level At least BBB- by Standard 0.2000% (M) 0.5500% 0.0000% 0.5500% (M)
III & Poor's 0.1500% (R) 0.6000% (R)
- ---------------------------------------------------------------------------------------------------------------------
Level At least BB+ by Standard 0.2500% (M) 0.7000% 0.0000% 0.7000% (M)
IV & Poor's 0.2000% (R) 0.7500% (R)
- ---------------------------------------------------------------------------------------------------------------------
Level If no other level applies 0.2500% (M) 0.7500% 0.0000% 0.9500% (M)
V 0.2000% (R) 1.0000% (R)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-4-
M = Multicurrency Loans
R = Revolving Credit Loans
The applicable rate or margin for any day shall be determined by the
Senior Public Debt Rating in effect as of that day, provided that
Level II pricing shall be effective from the Third Amendment Effective
Date through the Managing Agent's receipt of the Compliance
Certificate for the quarter ended March 31, 1999, unless a change in
the Senior Public Debt Rating would result in a higher pricing level.
Term Out Date.__October 19, 1999."
-------------
4. AMENDMENTS TO (S)3 (LETTERS OF CREDIT). Section 3 is hereby amended by
--------------------------------------
deleting (S)3.6 in its entirety and restating it as follows:
"LETTER OF CREDIT FEE. The Borrower shall pay a fee (the "Letter of
Credit Fee") equal to the Applicable L/C Rate on the Maximum Drawing Amount
to the Managing Agent for the account of the Lenders, to be shared pro rata
--- ----
by the Lenders in accordance with their respective Commitment Percentages.
The Borrower shall also pay (a) a fee (the "Issuance Fee") to the Issuing
Lender, for its own account, equal to 0.07% multiplied by the result of (i)
----------
one (1) minus (ii) such Issuing Lender's Commitment Percentage (expressed
-----
as a decimal), per annum on the Maximum Drawing Amount of all Letters of
Credit issued by such Issuing Lender, plus (b) its customary administrative
charges and such other fees as agreed between the Borrower and such Issuing
Lender. The Letter of Credit Fee and the Issuance Fee shall be payable for
the number of days each Letter of Credit is outstanding, and shall be
payable quarterly in arrears on the last day of each calendar quarter for
the quarter then ended, and on the Maturity Date."
5. AMENDMENTS TO (S)5 (REVOLVING CREDIT LOANS). Section 5 is hereby
-------------------------------------------
amended by
(a) deleting (S)5.1 in its entirety and restating it as follows:
"(S)5.1. COMMITMENT TO LEND.
------------------
(a) Subject to the terms and conditions set forth in this
Agreement, each of the Lenders severally agrees to lend to the
Borrower, and the Borrower may borrow and reborrow from time to
time from the Third Amendment Effective Date until the Term Out
Date, upon notice to the Managing Agent given in accordance with
(S)5.3 hereof, such sums in Dollars as are requested by the
Borrower up to a maximum aggregate principal amount outstanding
(after giving effect to all amounts requested) at any one time
equal to such
<PAGE>
-5-
Lender's Commitment Percentage of the Revolving Credit
Commitment. In no event shall (a) the aggregate principal
outstanding balance of the Revolving Credit Loans (after giving
effect to all amounts requested) exceed at any one time the
Revolving Credit Commitment, or (b) any Lender be obligated to
fund or maintain Revolving Credit Loans in excess of such
Lender's Commitment Percentage of the Revolving Credit
Commitment. The Revolving Credit Loans shall be made pro rata in
accordance with each Lender's Commitment Percentage.
(b) As of the Term Out Date, the Revolving Credit Commitment
shall terminate, and the outstanding Revolving Credit Loans shall
convert into the Term Loan in accordance with (S)6.1."
and (b) deleting (S)5.4 in its entirety.
6. AMENDMENTS TO (S)6 (THE TERM LOAN). Section 6 is hereby amended by
-------------- -----------------
deleting (S)6.3 in its entirety and restating it as follows:
"(S)6.3 SCHEDULED REPAYMENTS. The Borrower promises to pay to the
--------------------
Managing Agent for the account of the Lenders the principal amount of the
Term Loan in twelve (12) equal quarterly installments, commencing on
December 31, 1999, each equal to 1/12th of the principal balance of the
Revolving Credit Loans outstanding on the Term Out Date, with a final
payment on the Maturity Date in an amount equal to the unpaid balance of
the Term Loan, if any, plus interest thereon."
7. AMENDMENT TO (S)7 (PROVISIONS RELATING TO THE MULTICURRENCY LOANS AND
---------------------------------------------------------------------
REVOLVING CREDIT LOANS). Section 7 is hereby amended by (a) deleting (S)7.1 in
- -----------------------
its entirety and restating it as follows:
"(S)7.1 THE NOTES. The Multicurrency Loans shall be evidenced by
---------
separate promissory notes of the Borrower in substantially the form of
Exhibit A hereto (each a "Multicurrency Note") each dated as of the
Third Amendment Effective Date and completed with appropriate
insertions, and the Revolving Credit Loans shall be evidenced by
separate promissory notes of the Borrower in substantially the form of
Exhibit D hereto (each a "Revolving Credit Note") each dated as of the
Third Amendment Effective Date and completed with appropriate
insertions. One Multicurrency Note shall be payable to the order of
each Lender in a principal amount equal to such Lender's Commitment
Percentage of the Multicurrency Commitment, and shall represent the
obligation of the Borrower to pay to such Lender such principal amount
(or the outstanding principal amount, if less) plus interest accrued
thereon as set forth below. One Revolving Credit Note
<PAGE>
-6-
shall be payable to the order of each Lender in a principal amount
equal to such Lender's Commitment Percentage of the Revolving Credit
Commitment, and shall represent the obligation of the Borrower to pay
to such Lender such principal amount (or the outstanding principal
amount, if less) plus interest accrued thereon as set forth below. The
Borrower irrevocably authorizes each Lender to make or cause to be
made, at or about the time of the Drawdown Date of any Multicurrency
Loan or Revolving Credit Loan or at the time of receipt of any payment
of principal on such Lender's Multicurrency Note or Revolving Credit
Note, an appropriate notation on such Lender's Multicurrency Note
record or Revolving Credit Note record, as the case may be, reflecting
the making of such Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Multicurrency Loans or
Revolving Credit Loans set forth on such Lender's Multicurrency Note
record or Revolving Credit Note record, as the case may be, shall be
prima facie evidence of the principal amount thereof owing and unpaid
to such Lender, but the failure to record, or any error in so
recording, any such amount on such Lender's Multicurrency Note record
or Revolving Credit Note record shall not limit, increase, or
otherwise affect the obligations of the Borrower hereunder or under
any Multicurrency Note or Revolving Credit Note to make payments of
principal or interest on any Multicurrency Loans or Revolving Credit
Loans advanced to the Borrower and evidenced by such Multicurrency
Note or Revolving Credit Note when due. As of the Third Amendment
Effective Date, all Multicurrency Notes and Revolving Credit Notes
dated as of October 20, 1997 and previously held by the Lenders
pursuant to this Agreement shall be returned to the Borrower."
and (b) adding the following (S)(S)7.5 and 7.6 to the end thereof:
"(S)7.5 LEVERAGE PREMIUM. The Borrower agrees to pay to the
----------------
Managing Agent for the account of the Lenders a premium (the "Leverage
Premium") equal to the outstanding portion of the Total Commitment
multiplied by 0.20%. The Leverage Premium shall be payable initially
for the period from (and including) the Third Amendment Effective Date
through the date of the Managing Agent's receipt of the Compliance
Certificate for the quarter ended March 31, 1999, and thereafter for
each fiscal quarter during which the Leverage Ratio in (S)12.1 exceeds
3.25:1. The Leverage Premium shall be payable quarterly in arrears on
the date of the Managing Agent's receipt of the Compliance Certificate
for the applicable fiscal quarter. The Leverage Premium shall be
distributed pro rata among the Lenders in accordance with each
Lender's Commitment Percentage.
<PAGE>
-7-
(S)7.6 EUROPEAN MONETARY UNION.
-----------------------
(a) The provisions of this section apply from and after, and in
anticipation of, the Euro Availability Date (as defined below).
(b) For purposes of this section, the following terms shall have
the following meanings:
ECU: The unit of account known as the ECU that is from time to
---
time used in the European Monetary System.
EMU: The third stage of the economic and monetary union formed
---
pursuant to the EU Treaties.
Euro Availability Date: The later of January 1, 1999, and the
----------------------
date on which the ECU is replaced by the Euro in accordance with the
EU Treaties.
Euro Interbank Rate: With respect to any Loan denominated or to
-------------------
be denominated in Euros, the rate of interest at which the Reference
Banks are able to obtain deposits for comparable amounts in Euros for
the relevant Interest Period in the London interbank market for a
period comparable to the duration of such Interest Period, as
determined by the Managing Agent.
EU Treaties: The Treaty Establishing the European Economic
-----------
Community, as amended by the Treaty on the European Union (the
Maastrict Treaty).
Euro or e: The currency introduced during the third stage of the
---- -
EMU.
participating member state: Each state described as a
--------------------------
"participating member state" in the EU Treaties.
(c) If, as a result of the implementation of the EMU,
(i) any Optional Currency ceases to be lawful currency of
the nation issuing such Optional Currency and is replaced by the
Euro as the lawful currency of such nation, or
(ii) any Optional Currency and the Euro are at the same time
recognized by the central bank or comparable authority of the
nation issuing such Optional Currency as lawful currency of such
nation and the Managing Agent or the Majority Lenders shall so
request or, upon the request of
<PAGE>
-8-
the Borrower, the Managing Agent or the Majority Lenders shall so
consent, in a notice delivered to the Borrower,
then:
(A) any amount payable hereunder by the Lenders to the
Borrower, or by the Borrower to the Lenders, in such Optional
Currency shall instead be payable in the Euro and the amount so
payable shall be determined by translating the amount payable in
such Optional Currency to the Euro at the exchange rate
recognized by the European Central Bank for the purpose of
implementing the EMU,
(B) the Euro itself shall be an Optional Currency for
purposes of this Agreement, and
(C) if so specified in the notice delivered under the
foregoing clause (ii) or in any subsequent notice referring to
such clause, the Optional Currency recognized at the same time as
the Euro shall no longer be available as an Optional Currency for
purposes of this Agreement, effective at the expiration of the
period of five Business Days following the Borrower's receipt of
such notice. Such notice shall apply to (1) any Loan to be made
or Letter of Credit to be issued, extended or renewed on or after
the expiration of such five Business Day period or (2) any Loan
outstanding at the end of such five Business Day period and
denominated in such Optional Currency, following the expiration
of the Interest Period applicable to such outstanding Loan at the
time of the expiration of such five Business Day period.
(d) The Managing Agent may in its discretion by notice to the
Lenders and the Borrower:
(i) modify the definition of "Business Day" to include a
principal financial center of any participating member state
where Loans to bear interest by reference to the Euro Interbank
Rate are funded, or any amounts are or are to be paid in Euros;
(ii) designate an account or accounts at a bank in a
principal financial center of any participating member state for
receiving payments to the Managing Agent, whether for the account
of the Managing Agent or for the account of the Lenders, in
immediately available funds, in Euros or for disbursing Loans to
bear interest by reference to the Euro Interbank Rate;
<PAGE>
-9-
(iii) designate the date or time for fixing the Euro
Interbank Rate for any Interest Period to be consistent with any
practice or convention in the London interbank market;
(iv) designate the fraction for rounding upwards
quotations by Reference Banks used to determine the Euro
Interbank Rate, to be, in the reasonable judgment of the Managing
Agent, as nearly as may be, consistent with the rounding of
quotations by Reference Banks for other Optional Currencies and
also consistent with any practice or convention in the London
interbank market;
(v) designate other mechanics for fixing the Euro
Interbank Rate to be, in the reasonable judgment of the Managing
Agent, as nearly as may be, consistent with the mechanics for
determining rates for other Optional Currencies and also
consistent with any practice or convention in the London
interbank market;
(vi) designate the period of notice from the Borrower to
the Managing Agent required for the Borrower to borrow any Loan
to be denominated in Euros or to convert any Loan denominated in
another Optional Currency to a Loan denominated in Euros;
(vii) designate the basis of accrual of interest, fees or
other amounts to be consistent with any practice or convention in
the London interbank market with respect to amounts calculated or
payable in Euros;
(viii) where this Agreement specifies a minimum amount or
integral multiple thereof, designate what the Managing Agent
considers a reasonably comparable and convenient minimum amount
and integral multiple for the Euro; and
(ix) where this Agreement specifies an amount to be paid
in an Optional Currency that is, under the terms of this Section,
to be paid in Euros, designate a convenient amount in Euros to
account for de minimis rounding.
-- -------
(e) Section 8.13(a) shall not apply in the event that an Optional
Currency is not available or an interbank offered rate may not be
quoted for such Optional Currency, solely because such Optional
Currency ceases to be lawful currency of the nation issuing such
Optional Currency and is replaced by the Euro as the lawful currency
of such nation, so long as the Euro is available as an Optional
Currency and the Euro Interbank Rate may be quoted for the Euro.
<PAGE>
-10-
(f) The Borrower agrees, at the request of the Majority Lenders,
at the time of or at any time following the implementation of the EMU
and within 30 days following such request, to further amend this
Agreement in such manner as may be mutually agreed upon by the
Borrower and the Majority Lenders in order further to reflect the
implementation of the EMU and to place the parties hereto in the
position they would have been in had the EMU not been implemented.
(g) The Borrower agrees, at the request of any Lender, to
compensate such Lender for any reasonable loss, cost, expense or
reduction in return that shall be incurred or sustained by such Lender
as a result of the implementation of the EMU and that would not have
been incurred or sustained but for the transactions provided for
herein. A certificate of a Lender setting forth (i) the amount or
amounts necessary to compensate such Lender, (ii) a description of the
nature of the loss or expense sustained or incurred by such Lender as
a consequence thereof and (iii) a reasonably detailed explanation of
the calculation thereof shall be delivered to the Borrower and shall
be conclusive absent manifest error. The Borrower shall pay such
Lender the amount shown as due on any such certificate within 10 days
after receipt thereof."
8. AMENDMENT TO (S)11.1 (RESTRICTIONS ON INDEBTEDNESS). Section 11.1(g)
------------- -----------------------------------
is hereby amended by deleting the words " the greater of $150,000,000 or"
therein.
9. AMENDMENT TO (S)11.2 (RESTRICTIONS ON LIENS). Section 11.2 is hereby
------------- ----------------------------
amended by adding the following paragraph immediately following (S)11.2(h)
therein:
"The Borrower covenants and agrees that if it or any of its
Subsidiaries shall create or assume any lien upon any of their respective
properties or assets, whether now owned or hereafter acquired, other than
Permitted Liens (unless prior written consent shall have been obtained from
the Lenders), the Borrower will make or cause to be made effective
provisions whereby the Obligations will be secured by such lien equally and
ratably with any and all other Indebtedness thereby secured so long as such
other Indebtedness shall be so secured; provided, that the covenants of the
--------
Borrower contained in this sentence shall only be in effect for so long as
the Borrower shall be similarly obligated under any other Indebtedness;
provided, further, that an Event of Default shall occur for so long as such
-------- -------
other Indebtedness becomes secured notwithstanding any actions taken by the
Borrower to ratably secure the Obligations hereunder."
<PAGE>
-11-
10. AMENDMENTS TO (S)12 (FINANCIAL COVENANTS). Section 12 is hereby
-------------- ------------------------
amended by deleting (S)(S)12.1 12.3 in their entirety and restating them as
follows:
"(S)12.1 LEVERAGE RATIO. As of the end of any fiscal quarter
-------- -----
commencing with the fiscal quarter ending September 30, 1998, the ratio of
(a) Funded Debt less cash and cash equivalents in excess of $10,000,000 to
(b) EBITDA for the four quarters ending on such date (the "Leverage Ratio")
shall not exceed the ratio set forth below for the applicable period:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PERIOD RATIO
- ------------------------------------------------------------------
<S> <C>
Ending 9/30/98 4.75:1
- ------------------------------------------------------------------
10/1/98 through 4.25:1
3/31/99
- ------------------------------------------------------------------
4/1/99 through 4.00:1
6/30/99
- ------------------------------------------------------------------
Thereafter 3.25:1
- ------------------------------------------------------------------
</TABLE>
(S)12.2 INTEREST COVERAGE RATIO. As of the end of any fiscal quarter
-------- -------- -----
commencing with the fiscal quarter ending September 30, 1998 the ratio of
(a) EBIT for the four quarters ending on such date to (b) Consolidated
Total Interest Expense for such period shall not be less than the ratio set
forth below for the applicable period:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PERIOD RATIO
- ------------------------------------------------------------------
<S> <C>
Ending 9/30/98 2.50:1
- ------------------------------------------------------------------
Thereafter 3.50:1
- ------------------------------------------------------------------
</TABLE>
(S)12.3 DEBT TO CAPITAL RATIO. As at the end of any fiscal quarter
---------------------
commencing with the fiscal quarter ending September 30, 1998 the ratio of
(a) Funded Debt to (b) Funded Debt plus total shareholders' equity
(excluding any capital contributions from Unrestricted Subsidiaries,
including net income earned by Unrestricted Subsidiaries, which is
reflected in consolidated retained earnings) shall not exceed the
percentage set forth below for the applicable period:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PERIOD RATIO
- ------------------------------------------------------------------
<S> <C>
Ending 6/30/99 60%
- ------------------------------------------------------------------
Thereafter 55%
- ------------------------------------------------------------------
</TABLE>
<PAGE>
-12-
11. AMENDMENTS TO (S)30 (CONSENTS, AMENDMENTS, WAIVERS, ETC.). Section 30
---------------------------------------------------------
is hereby amended by deleting clauses (a) and (d) thereof in their entirety and
restating them as follows:
"(a) without the written consent of the Borrower and the written
consent of all of the Lenders (i) the rate of interest on the Notes and the
amount of Facility Fees, Letter of Credit Fees or Leverage Premium
hereunder may not be decreased, and (ii) the amount of any Reimbursement
Obligations, the amount of the Commitments of the Lenders, the Revolving
Credit Commitment, the Multicurrency Commitment, the Total Commitment, and
the amount or date of any scheduled payment or mandatory prepayment
hereunder may not be changed;
(d) the amount of any Letter of Credit Fees payable for any Issuing
Lender's account may not be decreased without the written consent of the
Issuing Lender, and."
12. AMENDMENT TO SCHEDULE 2 (BANKS; COMMITMENT PERCENTAGES; ADDRESSES).
------------------------------------------------------------------
Schedule 2 is hereby amended by deleting such schedule in its entirety and
- ----------
substituting the Schedule 2 attached hereto in place thereof. The parties
----------
hereto hereby acknowledge and agree that each reference to Schedule 2 in the
----------
Credit Agreement or any other Loan Document shall henceforth be a reference to
Schedule 2 attached hereto or as subsequently amended.
- ----------
13. CONDITIONS TO EFFECTIVENESS. This Third Amendment shall become
---------- -- -------------
effective upon the satisfaction of the following conditions:
(a) The execution and delivery of this Third Amendment by the parties
hereto;
(b) Each of the Lenders shall have received an executed original of such
Lender's Revolving Credit Note in form and substance satisfactory to such Lender
signed by the Borrower;
(c) Each of the Lenders shall have received an executed original of such
Lender's Multicurrency Note in form and substance satisfactory to such Lender
signed by the Borrower;
(d) The Lenders shall have received opinions of counsel to the Borrower as
to the due authorization and enforceability of the Third Amendment, the
Multicurrency Notes and the Revolving Credit Notes issued to the Lenders
pursuant to the Third Amendment, the due organization, legal existence, and good
standing of the Borrower, and all other matters as the Lenders may reasonably
request;
(d) The Borrower shall have delivered to the Managing Agent financial
projections, including a balance sheet, income statement and cash flow
<PAGE>
-13-
statement beginning with the period ending September 30, 1998 and for the
following five (5) fiscal years thereafter, in form and substance reasonably
satisfactory to the Managing Agent; and
(e) The Borrower shall have paid to the Managing Agent, for the pro rata
--------
benefit of the Lenders, an amendment fee in an amount equal to one tenth of one
percent (0.10%) of the Total Commitment.
14. NO EVENT OF DEFAULT. The Borrower represents and warrants to the
-------------------
Agents and the Lenders that after giving effect to this Third Amendment, no
Default or Event of Default has occurred and is continuing.
15. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
------------ ---
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Third Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement, any other Loan Document or any
agreement or instrument related to the Credit Agreement shall hereafter refer to
the Credit Agreement as amended by this Third Amendment.
16. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
17. COUNTERPARTS. This Third Amendment may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed this Third
Amendment under seal as of the date first set forth above.
THE BORROWER:
- -------------
UNITED STATES FILTER
CORPORATION
By: /s/ Kevin L. Spence
_______________________________
Name: Kevin L. Spence
Title: Executive Vice President, Chief Financial Officer
THE LENDERS:
- ------------
BANKBOSTON, N.A., individually and DLJ CAPITAL FUNDING, INC.
as Administrative Agent
/s/ Lindsay W. McSweeney /s/ Dana F. Klein
By:_______________________________ By:____________________________
Name: Lindsay W. McSweeney Name: Dana F. Klein
Title: Director Title: Vice President
ABN AMRO BANK N.V. DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
/s/ Ellen M. Coleman /s/ Jean M. Hannigan
By:______________________________ By:____________________________
NAME: Ellen M. Coleman NAME: Jean M. Hannigan
TITLE: Vice President TITLE: Vice President
/s/ Catheryn N. Fuller /s/ Susan L. Pearson
By:_______________________________ By:____________________________
NAME: Catheryn N. Fuller NAME: Susan L. Pearson
TITLE: Senior Vice President TITLE: Director
Branch Manager
THE BANK OF NEW YORK BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
/s/ Jonathan Rollins /s/ Chas A. McDonell
By:_______________________________ By:____________________________
NAME: Jonathan Rollins NAME: Chas A. McDonell
TITLE: Assistant Vice President TITLE: Vice President
<PAGE>
UNICREDITO ITALIANO FLEET BANK, N.A.
/s/ Gianfranco Bisagni /s/ Christopher Mayrose
BY:_______________________________ By:____________________________
NAME: Gianfranco Bisagni NAME: Christopher Mayrose
TITLE: First Vice President TITLE: Vice President
/s/ Saiyed A. Abbos
BY:_______________________________
NAME: Saiyed A. Abbos
TITLE: Assistant Vice President
NATIONSBANK, N.A. THE LONG-TERM CREDIT
BANK OF JAPAN LTD.
(LOS ANGELES AGENCY)
/s/ Chas A. McDonell /s/ Noboru Akahane
By:_______________________________ By:____________________________
NAME: Chas A. McDonell NAME: Noboru Akahane
TITLE: Vice President TITLE: Deputy General
Manager
UNION BANK OF THE SANWA BANK LIMITED,
CALIFORNIA, N.A. LOS ANGELES BRANCH
/s/ Karyssa M. Britton /s/ Toshiko Boyd
By:_______________________________ By:____________________________
NAME: Karyssa M. Britton NAME: Toshiko Boyd
TITLE: Vice President TITLE: Vice President
BANCA NAZIONALE DEL LAVORO S.P.A. THE INDUSTRIAL BANK OF JAPAN,
LIMITED (LOS ANGELES AGENCY)
/s/ R. Mancone /s/ Vincente L. Timiraos
By:_______________________________ By:____________________________
NAME: R. Mancone NAME: Vincente L. Timiraos
TITLE: Assistant Vice President TITLE: SVP & SDGM
/s/ L. Valentini
By:_______________________________
NAME: L. Valentini
TITLE: First Vice President
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
/s/ Mark A. Isley
By:___________________________
NAME: Mark A. Isley
TITLE: First Vice President
<PAGE>
SCHEDULE 2
----------
BANKS; COMMITMENT PERCENTAGES; ADDRESSES
----- ----------------------------------
- -----------------------------------------------------------------------------
COMMITMENT
LENDER PERCENTAGE
- -----------------------------------------------------------------------------
BANKBOSTON, N.A. 20.0000%
100 FEDERAL STREET, M/S 01-08-02
BOSTON, MA 02110
ATTN: LINDSAY W. MCSWEENEY
TEL: 617.434.7211
FAX: 617.434.2160
- -----------------------------------------------------------------------------
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN
ISLANDS BRANCHES 10.0000%
31 WEST 52ND STREET, 24TH FLOOR
NEW YORK, NY 10019
ATTN: JEAN HANNIGAN
TEL: 212.469.8648
FAX: 212.469.3632
- ------------------------------------------------------------------------------
FIRST CHICAGO 10.0000%
777 S. FIGUEROA STREET, 4TH FLOOR
LOS ANGELES, CA 90017-5800
ATTN: TONY MATTHEWS
TEL: 213.683.4957
FAX: 213.683.4999
- ------------------------------------------------------------------------------
FLEET BANK, N.A. 10.0000%
1185 AVENUE OF THE AMERICAS, 3RD FLOOR
NEW YORK, NY 10036
ATTN: CHRISTOPHER MAYROSE
TEL: 212.819.5727
FAX: 212.819.4113
- ------------------------------------------------------------------------------
NATIONSBANK, N.A. 10.0000%
444 SOUTH FLOWER STREET, SUITE 4100
LOS ANGELES, CA 90071
ATTN: CHAS MCDONELL
TEL: 213.236.4914
FAX: 213.624.5812
- ------------------------------------------------------------------------------
<PAGE>
-2-
- ------------------------------------------------------------------------------
COMMITMENT
LENDER PERCENTAGE
- ------------------------------------------------------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION 7.3333%
444 SOUTH FLOWER STREET, SUITE 4100
LOS ANGELES, CA 90071
ATTN: CHAS MCDONELL
TEL: 213.236.4914
FAX: 213.624.5812
- ------------------------------------------------------------------------------
UNION BANK OF CALIFORNIA, N.A. 7.3333%
445 SOUTH FIGUEROA, 15TH FLOOR
LOS ANGELES, CA 90071
ATTN: JULIE BECKLEY
TEL: 213.236.5779
FAX: 213.236.4096
- ------------------------------------------------------------------------------
ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL
BRANCH 6.6667%
300 SOUTH GRAND AVENUE, SUITE 2650
LOS ANGELES, CA 90071-7519
ATTN: ELLEN COLEMAN
TEL: 213.687.2306
FAX: 213.687.2390
- ------------------------------------------------------------------------------
THE BANK OF NEW YORK 4.6667%
10990 WILSHIRE BOULEVARD, SUITE 1125
LOS ANGELES, CA 90024
ATTN: JONATHAN ROLLINS
TEL: 310.996.8658
FAX: 310.996.8667
- ------------------------------------------------------------------------------
THE SANWA BANK, LIMITED, LOS ANGELES BRANCH 4.6667%
SANWA BANK PLAZA, W5-4
601 SOUTH FIGUEROA STREET
LOS ANGELES, CA 90017
ATTN: TOSHIKO BOYD
TEL: 213.896.7176
FAX: 213.623.4912
- ------------------------------------------------------------------------------
<PAGE>
-3-
- ------------------------------------------------------------------------------
COMMITMENT
LENDER PERCENTAGE
- ------------------------------------------------------------------------------
UNICREDITO ITALIANO 3.3333%
375 PARK AVENUE
NEW YORK, NY 10152
ATTN: GIANFRANCO BISAGNI
TEL: 212.546.9623
FAX: 212.546.9675
- ------------------------------------------------------------------------------
BANCA NAZIONALE DEL LAVORO 2.0000%
25 W. 51ST STREET
NEW YORK, NY 10019
ATTN: ROBERTO MANCONE
TEL: 212.314.0734
FAX: 212.765.2978
- ------------------------------------------------------------------------------
DLJ CAPITAL FUNDING, INC. 1.3333%
277 PARK AVENUE, 9TH FLOOR
NEW YORK, NY 10172
ATTN: DANA KLEIN
TEL: 212.892.7911
FAX: 212.892.7542
- ------------------------------------------------------------------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED (LOS
ANGELES AGENCY) 1.3333%
350 SOUTH GRAND AVENUE, SUITE 1500
LOS ANGELES, CA 90071
ATTN: J. BLAKE SEATON
TEL: 213.893.6448
FAX: 213.488.9840
- ------------------------------------------------------------------------------
THE LONG-TERM CREDIT BANK OF JAPAN, LTD. (LOS
ANGELES AGENCY) 1.3333%
350 SOUTH GRAND AVENUE, SUITE 3000
LOS ANGELES, CA 90071
ATTN: BRYAN READ
TEL: 213.689.6314
FAX: 213.622.6908
- ------------------------------------------------------------------------------
TOTAL 100.0000%
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.01
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"),
dated as of January 1, 1998, between United States Filter Corporation (the
"Company") and Richard J. Heckmann (the "Employee").
WITNESSETH
WHEREAS, Employee is currently Chairman of the Board of Directors, Chief
Executive Officer and President of the Company; and
WHEREAS, the Company desires to insure the continued availability to the
Company of the Employee's services, managerial skills and business experience,
and the Employee is willing to render such services, all upon and subject to the
terms and conditions contained in this Agreement; and
WHEREAS, the parties previously entered into a certain written
Employment Agreement on June 9, 1998, effective as of January 1, 1998 (the
"Prior Agreement"), and now desire to amend and restate the Prior Agreement in
its entirety.
NOW THEREFORE, in consideration of the premises and the mutual covenants
set forth in this Agreement, the Company and the Employee agree as follows:
1
<PAGE>
1. EMPLOYMENT AND EMPLOYMENT TERM.
------------------------------
(a) EMPLOYMENT.
Subject to the terms and provisions set forth in this Agreement, the
Company hereby employs the Employee during the Employment Term (as
hereinafter defined) as the Chief Executive Officer and President of
the Company, and agrees to use its best efforts to cause the Employee
to be a director and Chairman of the Board of Directors of the Company
(the "Board") during the Employment Term, and the Employee hereby
accepts such employment.
(b) EMPLOYMENT TERM.
The period of employment under this Agreement (the "Employment Term")
shall be deemed to have commenced as of January 1, 1998 (the "Effective
Date") and shall continue for a period of sixty-three (63) full
calendar months thereafter, as herein provided. On May 1, 1998, and on
the first day of each month thereafter, the Employment Term shall be
automatically extended by one full calendar month. The Employment Term
shall continue until the expiration of all automatic extensions
affected as aforesaid unless and until it ceases or is terminated
sooner as provided in this Agreement.
2. POSITIONS, RESPONSIBILITIES AND DUTIES.
--------------------------------------
(a) IN GENERAL.
During the Employment Term, the Employee shall be employed as, and the
Company shall at all times cause the Employee to be, the Chief
2
<PAGE>
Executive Officer and President of the Company. In addition to such
positions, the Company shall use its best efforts to ensure that the
Employee is at all times during the Employment Term a director and the
Chairman of the Board. In such positions, the Employee shall have the
duties, responsibilities and authority normally associated with the
office and position of chairman, director, chief executive officer and
president of a publicly traded corporation. No other employee of the
Company shall have authority and responsibilities that are equal to or
greater than those of the Employee. The Employee shall report solely
and directly to the Board and all other officers and other employees
shall report directly to the Employee or the Employee's designees.
(b) TIME.
During the Employment Term, the Employee shall devote such time as is
reasonably necessary to perform the duties associated with his offices
and positions as set forth herein and shall use his best efforts to
perform faithfully and efficiency the duties and responsibilities
contemplated by this Agreement; provided, however, that the Employee
shall not be required to perform any duties and responsibilities which
would be likely to result in non-compliance with or violation or breach
of any applicable law or regulation. Notwithstanding the foregoing, the
Employee may devote reasonable time to activities other than those
required under this Agreement, including the supervision of his
personal investments, and activities involving professional,
charitable, educational, religious and similar types of organizations,
speaking engagements, membership on the
3
<PAGE>
boards of directors of other orations, and similar type activities, to
the extent that such over activities do not materially inhibit or
prohibit the performance of the Employee's duties under this Agreement
or conflict in any material way with the business of the Company;
provided however, that the Executive shall not serve on the board of
any business or hold any over position unto any business without the
consent of the Board.
3. COMPENSATION AND BENEFITS.
-------------------------
(a) BASE SALARY.
During the Employment Term, the Employee shall receive a base salary
("Base Salary"), payable in accordance with the Company's payroll
practices generally applicable to the Company's senior executives, of
$500,000 per annum. Such Base Salary shall be reviewed for increase
(but not decrease) in the sole discretion of the Compensation Committee
of tile Board not less frequently the annually during the Employment
Term. In conducting any such annual review, the Compensation Committee
of the Board shall take into account any change in the Employee's
responsibilities, increases in the compensation of other senior
executives of the Company or of its competitors or over comparable
executes and companies, the performance of the Employee and other
pertinent factors. If so increased, such increased Base Salary shall
then constitute "Base Salary" for purposes of this Agreement.
(b) INCENTIVE COMPENSATION.
4
<PAGE>
(i) During the Employment Term, the Employee shall be entitled to
participate in all incentive compensation plans and programs maintained
by the Company for the benefit of senior executives. Such plans and
programs, in the aggregate, shall provide the Employee win compensation
opportunities at least as favorable as the most favorable of such
opportunities provided by the Company to the Employee under such plans
and programs as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter to the Employee or other
senior executives of the Company.
(ii) Without limiting the foregoing, for each fiscal year of the
Company ending with or within the Employment Term, the Employee shall
be paid an annual incentive of not less than sixty percent (60%) of his
base salary (subject to such performance goals as the Company and the
Employee may from time to time negotiate in good faith). Each such
annual incentive shall be paid at the same time that annual incentives
are generally paid to the Company's other senior executives, but no
later than the end of the third month of the fiscal year next following
the fiscal year for which such annual incentive is paid, unless the
Employee shall elect to defer the receipt or alter the payment thereof.
(c) EMPLOYEE BENEFITS.
During the Employment Term, the Employee and/or the Employee's family,
as the case may be, shall be entitled to participate in all employee
benefit plans and programs provided or maintained by the Company
5
<PAGE>
(including, without limitation, pension, profit sharing, savings,
medical, disability, life and accident plans and programs and the
United States Filter Corporation Executive Severance Pay Plan). Such
plans and programs, in the aggregate, shall provide the Employee and/or
the Employee's family, as the case may be, with benefits at least as
favorable as the most favorable of such benefits provided by the
Company to or in respect of the Employee under such plans and programs
as in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Employee, as provided
at any time thereafter to or in respect of the Employee or over senior
executives of the Company.
(d) VACATION AND FRINGE BENEFITS.
(i) During the Employment Term, the Employee shall be entitled to paid
vacation and fringe benefits at least as favorable as the most
favorable plans and programs of the Company for the Employee under such
plans and programs as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Employee, as in effect at any time thereafter for the Employee or other
senior executives of the Company.
(ii) Without limiting the foregoing, during the Employment Tenn, the
Company will lease the Employee an automobile for the Employee's
business and private use, the make and model of which shall be at least
comparable to the make and model provided to the Employee immediately
preceding the Effective Date, and the Company will pay all deposit
6
<PAGE>
requirements, servicing and maintenance costs, insurance premiums and
the cost of the gasoline for authorized business use. (The term of any
one such automobile lease shall not exceed thirty-six months other than
at the discretion of the Employee.)
(e) OFFICE AND SUPPORT STAFF.
During the Employment Term, the Employee shall be entitled to an office
or offices of a size and with furnishings and other appointments, and
to personal secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the Employee by the Company
at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Employee, as provided at
any time thereafter to the Employee or other senior executives of the
Company.
(f) EXPENSE REIMBURSEMENT.
During the Employment Term, the Employee shall be entitled to receive
prompt reimbursement for all usual, customary and reasonable, business-
related expenses incurred by the Employee in performing his duties and
responsibilities hereunder in accordance with the practices and
procedures of the Company as in effect and applied immediately prior to
the Effective Date, or, if more favorable to the Employee, as in effect
at any time thereafter with respect to the Employee or other senior
Executives of the Company.
(g) INDEMNIFICATION.
The Company shall maintain directors and officers liability insurance
in commercially reasonable amounts (as reasonably determined by the
7
<PAGE>
Board), and the Employee shall be covered under such insurance to the
same extent as other directors and senior executives of the Company.
The Employee shall be eligible for indemnification by the Company under
the Company by-laws as currently in effect, and the Company agrees that
it shall not take any action that would impair the Employee's rights to
indemnification under the Company by-laws, as currently in effect.
4. TERMINATION OF EMPLOYMENT.
-------------------------
(a) TERMINATION DUE TO DEATH OR DISABILITY.
The Company may terminate the Employee's employment hereunder due to
Disability (as hereinafter defined). In the event of the Employee's
death or a termination of the Employee's employment by the Company due
to Disability, the Employee or his estate or his legal representative,
as the case may bet shall be entitled to receive:
(i) any unpaid Base Salary through the Date of Termination;
(ii) an immediate prorated annual incentive for the fiscal year in
which the Date of Termination occurs equal to the minimum annual
incentive (determined without regard to any performance goals)
provided by Section 3(b)(ii) multiplied by a fraction, the
numerator of which is the number of days such fiscal year through
the Date of Termination and the denominator of which is 365;
(iii) an immediate lump sum amount equal to the sum of (A) two times
the minimum annual incentive (determined without regard to any
performance goals) provided by Section 3(b)(ii) plus (B) twenty-
8
<PAGE>
four (24) times the monthly rate of Base Salary at the rate in
effect on the Date of Termination;
(iv) any deferred compensation (including, without limitation,
interest or other credits on such deferred amounts), any accrued
vacation pay and any reimbursement for expenses incurred but not
yet paid prior to such Date of Termination; and
(v) any other compensation or benefits which may be owed or provided
to or in respect of the Employee in accordance with the terms and
provisions of this Agreement or any plans and programs of the
Company.
For purposes of this Agreement, "Disability" means the Employee's
inability to render, for a period of six consecutive months, services
hereunder by reason of permanent disability, as determined by the
written medical opinion of an independent medical physician mutually
acceptable to the Employee and the Company. If the Employee and the
Company cannot agree as to such an independent medical physician each
shall appoint one medical physician and those two physicians shall
appoint a third physician who shall make such determination.
(b) DISCHARGE OR RESIGNATION.
(i) In the event that the Employee's employment with the Company
is terminated for any reason other than due to death or Disability,
then the Company shall pay the Employee (A) any unpaid Base Salary
through the Date of Termination, (B) plus an amount equal to the pro
rated annual incentive for the fiscal year in
9
<PAGE>
which the Date of Termination occurs equal to the minimum annual
incentive (determined without regard to any performance goals) provided
in Section 3(b)(ii) multiplied by a fraction, the numerator of which is
the number of days from the beginning of fiscal year until the Date of
Termination, and the denominator of which is 365, plus (C) any
previously vested benefits, such as previously vested retirement
benefits, plus (D) any deferred compensation (including, without
limitation, interest or other credits on such deferred amounts), any
accrued vacation pay and any reimbursement for expenses incurred but
not yet paid prior to such Date of Termination. Furthermore, the
Company shall honor any rights previously vested in the Employee under
a stock option or other similar plan or program.
(ii) Furthermore, and in addition to the foregoing, in the
event that the Employee's employment with the Company is terminated for
any reason other than due to death or Disability, then the Company
shall also pay the Employee an amount equal to the sum of his Base
Salary for the balance of the Employment Term, plus the target annual
incentive bonus scheduled for each year following the Date of
Termination for the balance of the Employment Term (determined without
regard to any performance goals).
(iii) For purposes of this Agreement, "Date of Termination" means (A)
in the case of Disability, the last day of the six month
10
<PAGE>
period referred to in Section 4(a), and (B) in all other cases, the
actual date on which the Executive's employment terminates during the
Term of Employment.
(c) [INTENTIONALLY LEFT BLANK]
(d) [INTENTIONALLY LEFT BLANK]
(e) CHANGE OF CONTROL.
(i) In the event the Employee's employment with the Company is
terminated following a Change of Control, Employee shall receive on the
Date of Termination an amount equal to the sum of his Base Salary for
the balance of the Employment Term, plus the target annual incentive
bonus scheduled for each year following the Date of Termination for the
balance of the Employment Term (determined without regard to any
performance goals). In addition, in the event a Change of Change (as
defined herein) occurs during the Employment Term, the Employee's
benefit in the U.S. Filter Supplemental Executive Retirement Plan shall
immediately become fully vested
(ii) "Change of Control" shall mean the occurrence of any of the
following:
(A) the acquisition by any person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or any successor provision to either of the foregoing, of
"beneficial ownership"
11
<PAGE>
directly or indirectly, of shares of capital stock of the Company
entitling such person to exercise 50% or more of the total voting
power of all "Voting Shares" of the Company;
(B) during any year or any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a
person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii) or (iv) of
this definition) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved
(hereinafter referred to as "Continuing Directors"), cease for any
reason to constitute at least a majority thereof;
(C) any consolidation of the Company with, or merger of the Company
into, any other person, any merger of another person into the
Company, or any sale or transfer of all or substantially all of
the assets of the Company to another person (other than (x) a
consolidation or merger which does
12
<PAGE>
not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock other than shares
of capital stock owned by any of the parties to the consolidation or
merger or (y) a merger which is effected solely to change the
jurisdiction of incorporation of the Company or (z) any consolidation
with or merger of the Company into a wholly owned subsidiary, or any
sale or transfer by the Company of all of substantially all of its
assets to one or more of its wholly owned subsidiaries in any one
transaction or a series of transactions; or
(D) the stockholders of the Company approve a plan of complete liquidation
of the Company.
Notwithstanding the foregoing, unless otherwise determined by the Board of
Directors, no change in control of the Company shall be deemed to have
occurred if (x) the Employee is a member of a group which first announces a
proposal which, if successful, would result in a Change of Control, which
proposal (including any modifications thereof) is ultimately successful, or
(y) the Executive acquires a two percent or more equity interest in the
entity which ultimately acquires the Company pursuant to the transaction
described in (x) of this paragraph.
"Beneficial Ownership" shall be determined in accordance with Rule 13d-3
promulgated under the Exchange Act, except that a person shall be deemed to
be the "beneficial owner" of all
13
<PAGE>
securities that such person has the right to acquire, whether such right is
exercisably immediately or only after the passage of time.
"Voting Share" means all outstanding shares of any class or classes (however
designated) of capital stock of the Company entitled to vote generally in
the election of the Board of Directors of the Company.
(iii) If any payment or benefit to which the Employee becomes entitled
pursuant to this Agreement will be subject to the tax imposed by
section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") (or any similar tax that may hereafter be imposed) (the
"Excise Tax"), the Company shall pay to the Employee at the time
specified below, an additional amount (the "Gross-up Payment") such
that the net amount retained by the Employee, after deduction of any
Excise Tax on the Total Payments (as hereinafter defined) and any
federal, state and local income tax and Excise Tax upon the payment
provided for by this subsection, shall be equal to the Total Payments.
For purposes of determining whether any of such payments or benefits
will be subject to the Excise Tax, and the amount of such Excise Tax,
(if) any over payments or benefits received or to be received by the
Employee in connection with a Change of Control or his termination of
employment, whether pursuant to the terms of this Agreement or
otherwise (which together with the payments and benefits pursuant to
this Agreement, constitute the "Total Payments") shall be treated
14
<PAGE>
as "parachute payments" within the meaning of section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning of
section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to the Employee such other
payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4) of the Code in excess of the
base amount within the meaning of section 280G(b)(3) of the Code, or
are otherwise not subject to the Excise Tax, (B) the amount of the
Total Payments which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (1) the total amount of the Total
Payments or (2) the amount of excess parachute payments within the
meaning of section 280G(b)(l) (after applying paragraph (A), above),
and (C) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Compass independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment,
the Employee shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year
in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal
15
<PAGE>
rate of taxation in the sate and locality of his residence on the Date
of Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes.
In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of
termination of his employment, the Employee shall repay to the Company
at the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to
the Excise Tax and federal and state and local income tax imposed on
the Gross-Up Payment being repaid by him if such repayment results in
reduction in Excise Tax and/or a federal and state and local income
tax deduction) plus interest on the amount of such repayment at the
rate provided in section 1274(b)(2)(B) of the Code. In the event that
the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the Employee's termination of employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess
(plus any interest payable with respect to such excess) at the time
that the amount of such excess is finally determined. If the mounts of
any payments under this Agreement cannot be finally determined on or
before the payment
16
<PAGE>
date otherwise scheduled for payment, the Company shall pay to the
Employee on such date an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay the
reminder of such payments (together with interest at the rate provided
in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined, but in no event later than the thirtieth day after
the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Employee
payable on the fifth day after demand by the Company (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code).
(f) CONTINUATION OF EMPLOYEE BENEFITS.
Upon the termination of the Employee's employment hereunder for
whatever reason, the Company shall continue, for such period after the
Date of Termination as it is required in accordance with this Section
4, to continue to pay Base Salary to or in respect of the Employee, to
cover the Employee and/or the Employee's family under those life,
disability, accident and health insurance benefits that were
applicable to the Employee on the Date of Termination at the same
benefit levels and on the same terms and conditions then in effect;
provided, however, that such coverage shall be no less favorable than
that to which the Employee and/or his family was entitled immediately
prior to his Date of Termination; and further provided that in the
event Employee's employment hereunder is
17
<PAGE>
terminated for Disability, such coverage shall continue for twenty-
four (24) months following the Date of Termination. In the event that
the Employee and/or the Employee's family's participation in any such
program is barred, the Company shall arrange to provide the Employee
and/or the Employee's family with benefits substantially similar to
those which the Employee and/or the Employee's family would otherwise
have been entitled to receive under such plans and programs from which
continued participation is barred. Following the continuation period
described in this subsection, the Employee and the Employee's family
shall be entitled to elect continuation coverage under Section 601 et.
--
seq. of the Employee Retirement Income Security Act.
---
(g) EQUITY BASED AWARDS.
In the event of the termination of the Employee's employment
hereunder, any vesting or service requirements under any outstanding
stock option or restricted stock awards then held by the Employee
shall be deemed fully satisfied as of the Date of Termination.
Anything herein or in any other agreement, plan or program to the
contrary notwithstanding, in the event of the termination of the
Employee's employment hereunder for whatever reason, all outstanding
vested stock options held by the Employee as of the Date of
Termination, including any for which vesting has been accelerated
pursuant to this Section, shall remain exercisable for the balance of
the respective terms thereof.
(h) NO MITIGATION OR OFFSET.
18
<PAGE>
The Company agrees that, if the Employee's employment with the Company
terminates, the Employee is not required to seek other employment or
to attempt in any way to reduce any amounts payable to or in respect
of the Employee by the Company pursuant to this Agreement. Further,
the amount of any payment or benefit provided for in this Agreement
shall not be reduced by an compensation earned by the Employee as the
result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Employee to the
Company, or otherwise.
(i) [INTENTIONALLY LEFT BLANK]
5. ENFORCEMENT OF AGREEMENT; DEFENSE OF ACTIONS.
--------------------------------------------
If the Employee determines that it is necessary or desirable for him
to retain legal counsel or incur other costs and expenses in connection with
either enforcing party and all of his rights under this Agreement or defending
against any allegations by the Company of breach of this Agreement by him, the
Employee shall be entitled to recover from the Company reasonable attorneys'
fees, costs and expenses incurred by him in connection with such enforcement or
defense. Such payments shall be made by the Company to the Employee (or
directly to the Employee's attorney) promptly following submission to the
Company of appropriate documentation evidencing the incurrence of such
attorneys' fees, costs, and expenses. The Employee's rights to payments under
this Section shall not be affected by the final outcome of any dispute with the
Company; provided however, that to the extent that the court shall determine
that under the circumstances recovery by the Employee of all or a part of any
such fees and costs and expenses would be unjust or inappropriate, the Employee
shall not be entitled to such recovery.
19
<PAGE>
6. PROTECTIVE COVENANTS.
--------------------
(a) COMPENSATION BENEFITS IF SECTION 6 (b) OR (c) ARE BREACHED.
The Employee agrees that if, during the Employment Term and for a
period of one year thereafter, he (i) competes in any manner (except
as provided below), directly or indirectly, though any person, firm or
corporation, alone or as a member of a partnership or as an officer,
director, stockholder, investor or employee of or consultant to any
other corporation or enterprise or otherwise engages or assists any
other person, firm, corporation or enterprise in engaging in any
business then being conducted by the Company (but not later than as of
the Date of Termination) in any geographic area in which the Company
is then conducting such business or (ii) breaches his obligations
under Section 6(b) or (c), any compensation benefits to which the
Employee would otherwise have been entitled shall be suspended for one
year, or, if less, the remaining balance of the period unto respect to
which the Employee, would be so entitled to such payment and benefits,
which payments and benefits shall be deemed immediately forfeited.
Nothing herein shall prohibit the Employee from being a stockholder in
a mutual fund or a diversified investment company or a passive owner
of not more than two percent of the outstanding stock of any class of
a corporation any equity securities of which are publicly traded, so
long as the Employee has no active participation in the business of
such corporation. Clause (i) of this subsection shall not apply
following the Employment Term if the
20
<PAGE>
Employee's employment is terminated following a Change of Control.
(b) NO SOLICITATION OF EMPLOYEES.
The Employee further agrees that during the Employment Term and for
one year thereafter, he shall not, in any manner, directly or
indirectly induce or attempt to induce any employee of the Company to
terminate or abandon his or her employment for any purpose whatsoever.
This subsection (b) shall not apply following the Employment Term if
the Employee's employment is terminated following a Change of Control.
(c) NON-DISCLOSURE.
The Employee shall not, at any time during the Employment Term or
thereafter, make use of or disclose, directly or indirectly, any trade
secret, customer lists or other confidential or secret information of
the Company not available to the public generally or to the
competitors of the Company ("Confidential information), except to the
extent that such Confidential Information becomes a matter of public
record or is otherwise available to the general public, other than as
a result of any act or omission of the Employee, or is required to be
disclosed by any law, regulation or order of any court or regulatory
commission, department or agency. Promptly following the Date of
Termination, the Employee shall surrender to the Company all records,
memoranda, notes, plans, reports, computer tapes and software and
other documents and data relating to any Confidential Information or
the business of the Company that he may then possess or have under his
control (together with all copies thereon; provided,
21
<PAGE>
however, that the Employee may retain copies of such documents as are
necessary for the preparation of his federal or state income tax
returns.
(d) FALSE, DEFAMATORY, OR DISPARAGING STATEMENTS.
The Employee agrees that, while he is employed by the Company, and
after his Date of Termination, he shall not make any false, defamatory
or disparaging statements about the Company, or the officers or
directors of the Company that are reasonably likely to cause material
damage to the Company, or the officers or directors of the Company.
While the Employee is employed by the Company, and after his Date of
Termination, the Company agrees that neither the officers nor the
directors of the Company shall make any false, defamatory or
disparaging statements about the Employee that are reasonably likely
to cause material damage to the Executive.
(e) INJUNCTIONS TO PREVENT BREACHES OF PROTECTIVE COVENANTS.
The parties hereto agree that the Company would be damaged irreparably
in the event of any provision of paragraphs (b), (c) or (d), next
above, were not performed by the Employee in accordance with their
respective terms or were otherwise breached and that money damages
would be an inadequate remedy for any such nonperformance or breach.
Therefore, the Company or its successors or assigns shall be entitled,
in addition to any other rights and remedies existing in their favor,
to an injunction or injunctions to prevent any breach or threatened
breach of any such provisions and to enforce such provisions
specifically (without posting a bond or other security). The parties
hereto agree that the Employee
22
<PAGE>
would be damaged irreparably in the event of any provision of paragraph
(d), next above, were not performed by the Company in accordance with
its or were otherwise breached and that money damages would be an
inadequate remedy for any such nonperformance or breach. Therefore, the
Employee shall be entitled, in addition to any other rights and
remedies existing in his favor, to an injunction or injections to
prevent any breach or threatened breach of any such provisions and to
enforce such provision specifically (without posting a bond or other
security).
7. SUCCESSORS.
----------
(a) THE EMPLOYEE.
This Agreement is personal to the Employee and, without the prior
express written consent of the Company, shall not be assignable by the
Employee, except that the Employee's rights to receive any compensation
or benefits under this Agreement may be transferred or disposed of
pursuant to testamentary disposition, intestate succession or pursuant
to a domestic relations order of a court of competent jurisdiction.
This Agreement shall inure to the benefit of and be enforceable by the
Employee's heirs, beneficiaries and/or legal representatives.
(b) THE COMPANY.
This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns. The Company shall require any
successor to all or substantially all of the business and/or assets of
the Company, whether direct or indirect, by purchase, merger,
consolidation, acquisition of stock, or otherwise, by an agreement in
form ant substance
23
<PAGE>
satisfactory to the Employee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as the Company
would be required to perform if no such succession had taken place.
8. MISCELLANEOUS.
-------------
(a) APPLICABLE LAW.
This Agreement shell be governed by and construed in accordance with
the laws of the State of California, applied without reference to
principles of conflict of laws.
(b) AMENDMENTS.
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective
successors and legal representatives.
(c) NOTICES.
All notices and other communications hereunder shall be in writing and
shall be given by hand-delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Company: UNITED STATES FILTER CORPORATION
40-004 Cook Street
Palm Desert, CA 9221
If to the Employee: RICHARD J. HECKMANN
72551 Clancy Lane
24
<PAGE>
Rancho Mirage, CA 92270
With a copy to: LAZOF & COSS
Attn: Ronald C. Lazof, Esq.
4590 MacArthur Boulevard,
Suite 390
Newport Beach, CA 92660
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notices and communications
shall be effective when actually received by the addressee.
(d) WITHHOLDING.
The Company may withhold from any amounts payable under this Agreement
such federal, state or local income taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other
provision of this Agreement.
(f) CAPTIONS.
The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(g) BENEFICIARIES/REFERENCES.
The Employee shall be enabled to select (and change) a beneficiary or
beneficiaries to receive any compensation or benefit payable
hereunder following the Employee's death, and may change such
election, in either
25
<PAGE>
case by giving the Company written notice thereof. In the event of
the Employee's death or a judicial determination of his incompetence,
reference in this Agreement to the Employee shall be deemed, where
appropriate, to refer to other beneficiary(ies), estate or his legal
representative(s).
(h) ENTIRE AGREEMENT.
This Agreement will contain the entire agreement between the parties
concerning the subject matter hereof and will supersede all prior
agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the parties with
respect to the subject matter hereof. However, nothing in this
Agreement shall adversely affect the Employee's rights to benefits
accrued prior to the Effective Date, and, except as contemplated
hereby, the Employee's rights with respect to stock options and
restricted stock granted prior to the Effective Date shall be
governed by the respective stock options and restricted stock
agreements relating thereto.
(i) ARBITRATION.
Company and Employee agree that any controversy or dispute arising
out of or in connection with this Agreement, its interpretation,
performance of termination, shall, upon demand of a party, be
submitted to and decided by binding arbitration. The arbitration
shall be conducted pursuant to Part 3, Title 9 of the
California Code of Civil Procedure Sections 1280-1288.8.
-------------------------------------------------------
Discovery, including depositions for the purpose of discovery,
shall be broadly permitted, and the provisions of the California
----------
Code of Civil
-------------
26
<PAGE>
Procedure Section 1283.05 shall apply. Any demand to arbitrate
---------
shall be deemed to have been made on the date actually received by
the party upon whom it is served, and, for the purposes of the
statute of limitations, shall have the same effect as it suit had
been filed on the date the demand is made. The arbitration shall
occur in Orange County, California, before a single retired or former
judge of the Superior Court of the State of California, or the Court
of Appeals of the State of California. The parties shall agree upon
an arbitrator within ten (10) days after the demand is made, and if
the parties fail to so agree, then any of them may apply to the Court
for an order appointing an arbitrator meeting the requirements of
this section. The arbitrator's decision shall be rendered in ninety
(90) days after the hearing and the decision of the arbitrator shall
be final and binding and shall be subject to confirmation, correction
or vacation in accordance with the provisions of California Code of
------------------
Civil Procedure Sections 1285-1287.4. Any application, petition,
---------------
or other proceeding (A) to enforce the award or the provisions of
this Agreement, (B) to the extent that the arbitrator does not have
the power or authority to resolve or grant the relief sought, and/or
(C) for provisions or equitable relief pending appointment of the
arbitrator, shall be commenced in the appropriate State or Federal
Court having jurisdiction in Orange County, California, and the
parties hereby consent to jurisdiction and venue in such Courts.
(j) REPRESENTATION.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and Mat the performance of its
27
<PAGE>
obligations under this Agreement will not violate any agreement
between the Company and any other person, firm or organization or any
applicable laws or regulations.
(k) SURVIVORSHIP.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement or the Employee's
employment hereunder to the extent necessary to the intended
preservation of such rights and obligations.
28
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth opposite their signatures herein below.
EMPLOYER:
---------
UNITED STATES FILTER CORPORATION,
a California corporation
DATED: September 30, 1998 By: /s/ Alfred E. Osborne, Jr.
_______________________________
Its: Dr. Alfred E. Osborne, Jr.
______________________________
(title)
Chairman of the Compensation Committee
EMPLOYEE:
--------
DATED: September 30, 1998 By: /s/ Richard J. Heckmann
_______________________________
RICHARD J. HECKMANN
29
<PAGE>
EXHIBIT 10.02
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
August 26, 1998, by and between UNITED STATES FILTER CORPORATION, a Delaware
corporation (the "Company"), and NICHOLAS C. MEMMO ("Executive").
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into this Agreement to
assure the Company of the continuing and exclusive service of Executive and to
set forth the terms and conditions of Executive's employment with the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
1. Employment.
----------
1.1 Title and Duties. The Company hereby employs Executive as President
----------------
and Chief Operating Officer Process Water of the Company. Executive's duties,
responsibilities and authority shall be consistent with Executive's position and
shall include such other duties, responsibilities and authority as may be
assigned to Executive by the Board of Directors of the Company (the "Board") or
the Chief Executive Officer of the Company (the "CEO").
1.2 Services and Exclusivity of Services. The Company and Executive
------------------------------------
recognize that the services to be rendered by Executive are of such a nature as
to be peculiarly rendered by Executive, encompass the individual ability,
managerial skills and business experience of Executive and cannot be measured
exclusively in terms of hours or services rendered in any particular period.
Executive agrees to devote Executive's full business time and to use Executive's
best efforts, energy and ability exclusively toward advancing the business,
affairs and interests of the Company, and matters related thereto.
1
<PAGE>
1.3 Noncompetition and Nonsolicitation. Executive agrees that during the
----------------------------------
Term (as defined in Section 2 below) of this Agreement (and in the case of
termination pursuant to Section 5 below for a period of one year thereafter),
Executive will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries
or affiliates, nor without the prior written consent of the Board directly or
indirectly have any interest in, own, manage, operate, control, be connected
with as a stockholder, joint venturer, officer, employee, partner or consultant,
or otherwise engage, invest or participate in any business that is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 1.3 shall prevent Executive from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
Executive's own account and benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and are consistent with the conflict of interest
policies maintained by the Company from time to time. Executive further agrees
that during the Term of this Agreement (and in the case of termination pursuant
to Section 5 below for a period of one year thereafter) Executive will not, in
any manner, directly or indirectly induce or attempt to induce any employee of
the Company to terminate or abandon his or her employment for any purpose
whatsoever (other than for poor performance of an employee employed by the
Company at such time).
2. Term. The period of employment under this Agreement (the "Term")
----
shall commence as of the date first set forth above, (the "Effective Date")
and shall continue for a period of thirty-six (36) full calendar months
thereafter, as herein provided. Unless the Company or the Executive gives
written notice to the other party to the contrary at least 60 days prior to the
end of the Term (including any extension), on the first day of the month
following the Effective Date, and on the first day of each month thereafter,
the Term shall be automatically extended by one full calendar month. The Term
shall continue until the expiration of all automatic extensions affected as
aforesaid unless and until it ceases or is terminated sooner as provided in this
Agreement.
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3. Compensation.
------------
3.1 Base Salary. During the Term, the Company will pay to Executive a
-----------
base salary at the rate of US$325,000 per year, payable in accordance with the
Company practices in effect from time to time ("Base Salary"). Amounts payable
shall be reduced by standard withholding and other authorized deductions. Such
Base Salary shall be reviewed for increase (but not decrease) in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company not less frequently than annually during the Term. In conducting any
such review, the Compensation Committee shall consider and take into account,
among other things, any change in Executive's responsibilities, performance of
Executive, and compensation of other similarly situated executives of the
Company and other comparable companies and other pertinent factors. Executive's
Base Salary shall not be decreased except upon mutual agreement between the
parties.
3.2 Bonuses, Incentive, Savings and Retirement Plans, Welfare Benefit
-----------------------------------------------------------------
Plans. Executive shall be entitled to participate in all annual and long-term
- -----
bonuses and incentive, savings and retirement plans generally available to other
similarly situated executive employees of the Company. Executive, and
Executive's family as the case may be, shall be eligible to participate in and
receive all benefits under welfare benefit plans, practices, programs and
policies provided to other similarly situated executive employees of the
Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other similarly situated peer executives and
does not single out Executive.
3.3 Fringe Benefits. Executive shall be entitled to receive fringe
---------------
benefits consistent with Executive's duties and position, and in accordance with
the benefits provided to other similarly situated executive employees of the
Company. Such benefits shall include the full time use of an automobile,
including reimbursement for all operating and maintenance costs, consistent with
the Company's corporate policy on automobiles as in effect from time to time.
The Company reserves the right to modify, suspend or discontinue any and all of
its fringe benefits referred to in this Section 3.3 at any time without recourse
by Executive so long as such
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action is taken generally with respect to other similarly situated peer
executives and does not single out Executive.
3.4 Expenses. Executive shall be entitled to reimbursement for expenses
--------
incurred in the furtherance of the business of the Company in accordance with
the Company's practices and procedures, as they may exist from time to time.
Executive shall keep complete and accurate records of all expenditures such that
Executive may fully account according to the Company's practices and procedures.
3.5 Vacation. Executive shall be entitled to paid vacations and other
--------
absences from work that are reasonably consistent with the performance of
Executive's duties as provided in this Agreement. Such vacations and absences
shall be in accordance with those generally provided to other similarly situated
executive employees.
3.6 Additional Benefits Upon a Change of Control.
--------------------------------------------
(a) In the event a Change of Control occurs during the Term, the
Executive's benefit in the U. S. Filter Supplemental Executive Retirement Plan
shall immediately become fully vested.
(b) In the event a Change of Control occurs during the Term, the
Executive shall be entitled to receive, within thirty (30) days after the Change
of Control, a cash lump sum amount equal to:
(i) Executive's Base Salary for the balance of the Term, plus
the target annual incentive bonus scheduled for the year in which there is
a Change of Control and each year thereafter for the balance of the Term
(determined without regard to any performance goals); plus
(ii) the present value (as determined by a nationally
recognized employee benefits consulting firm agreed to by Executive and the
Company) of the health, life insurance, disability and accident insurance
plans or programs covering Executive for the balance of the Term.
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(c) "Change of Control" shall mean the occurrence of any of the
following:
(i) the acquisition by any person (including any syndicate or
group deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision to either of the foregoing, of "beneficial ownership"
directly or indirectly, of shares of capital stock of the Company entitling
such person to exercise 50% or more of the total voting power of all
"Voting Shares" of the Company;
(ii) during any year or any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in clause
(i), (iii) or (iv) of this definition) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved (hereinafter referred to
as "Continuing Directors"), cease for any reason to constitute at least a
majority thereof;
(iii) any consolidation of the Company with, or merger of the
Company into, any other person, any merger of another person into the
Company, or any sale or transfer of all or substantially all of the assets
of the Company to another person (other than (x) a consolidation or merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock other than shares of
capital stock owned by any of the parties to the consolidation or merger or
(y) a merger which is effected solely to change the jurisdiction of
incorporation of the Company or (z) any consolidation with or merger of the
Company into a wholly owned subsidiary, or any sale or transfer by the
Company of all of substantially all of its assets to one or more of its
wholly owned subsidiaries in any one transaction or a series of
transactions; or
5
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(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company.
Notwithstanding the foregoing, unless otherwise determined by the Board of
Directors, no change in control of the Company shall be deemed to have
occurred if (x) the Executive is a member of a group which first announces
a proposal which, if successful, would result in a Change of Control, which
proposal (including any modifications thereof) is ultimately successful, or
(y) the Executive acquires a two percent or more equity interest in the
entity which ultimately acquires the Company pursuant to the transaction
described in (x) of this paragraph.
"Beneficial Ownership" shall be determined in accordance with Rule 13d-3
promulgated under the Exchange Act, except that a person shall be deemed to
be the "beneficial owner" of all securities that such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time.
"Voting Share" means all outstanding shares of any class or classes (however
designated) of capital stock of the Company entitled to vote generally in the
election of the Board of Directors of the Company.
4. Confidential Information.
4.1 General. Executive acknowledges that during employment by and as
-------
a result of a relationship with the Company, Executive will obtain knowledge of
and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively
6
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referred to herein as "Confidential Information"). Executive agrees that during
the Term of this Agreement and, to the fullest extent permitted by law,
thereafter, Executive will, in a fiduciary capacity for the benefit of the
Company, hold all Confidential Information strictly in confidence and will not
directly or indirectly reveal, report, disclose, publish or transfer any of such
Confidential Information to any person, firm or other entity, or utilize any of
the Confidential Information for any purpose, except in furtherance of
Executive's employment under this Agreement.
4.2 Proprietary Interest. All inventions, designs, improvements,
--------------------
patents, copyrights and discoveries conceived by Executive during the Term of
this Agreement that are useful in or directly or indirectly related to the
business of the Company or to any experimental work carried on by the Company,
shall be the property of the Company. Executive will promptly and fully disclose
to the Company all such inventions, designs, improvements, patents, copyrights
and discoveries (whether developed individually or with other persons) and shall
take all steps necessary and reasonably required to assure the Company's
ownership thereof and to assist the Company in protecting or defending the
Company's proprietary rights therein.
4.3 Return of Materials. Executive expressly acknowledges that all
-------------------
lists, books, records and other Confidential Information of the Company obtained
in connection with the Company's business is the exclusive property of the
Company and that upon the expiration or earlier termination of this Agreement,
Executive will immediately surrender and return to the Company all such items
and all other property belonging to the Company then in the possession of
Executive, and Executive shall not make or retain any copies thereof.
5. Termination Prior to Expiration of Term. Executive's employment, and
---------------------------------------
his rights under this Agreement, may be terminated prior to the expiration of
the Term of this Agreement only as provided in this section 5.
5.1 Death or Disability.
-------------------
(a) The Company may terminate the Executive's employment
hereunder due to death or Disability (as defined below). If Executive's
employment is terminated as a
7
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result of death or Disability, Executive (or Executive's estate or personal
representative in the event of death) shall be entitled to receive Executive's
full Base Salary until the expiration of six months from the date on which
Executive was first unable to substantially perform his duties hereunder and, as
of the last day of such six month period, shall be entitled to receive a lump
sum payment equal to an additional six months of Base Salary. Executive and/or
Executive's dependents shall be entitled to continue to participate in the
Company's welfare benefit plans and programs on the same terms as similarly
situated active employees for a period of twelve months from the date Executive
was first unable to substantially perform Executive's duties hereunder.
Executive and/or Executive's dependents shall thereafter be entitled to any
continuation of such benefits provided under such benefit plans or by applicable
law.
(b) "Disability" shall mean a total and permanent physical or
mental impairment that substantially limits a major life activity of Executive
and that renders Executive unable to perform the essential functions of
Executive's position, even with reasonable accommodation that does not impose an
undue hardship on the Company. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and/or
Executive's medical personnel or others selected by the Company or its insurers.
5.2 Termination by the Company for Cause.
------------------------------------
(a) The Company may terminate the Executive's employment
hereunder for Cause (as hereinafter defined). If the Company terminates the
Executive's employment hereunder for Cause, the Executive shall be entitled to
receive (1) all Base Salary due employee as of the date of termination, (2) any
previously authorized bonus (if any) for the period of Executive's employment
prior to the discharge or resignation, and (3) any previously vested benefits,
such as previously vested retirement benefits. Furthermore, the Company shall
honor any rights previously vested in Executive under a stock option or similar
plan or program.
(b) "Cause" shall mean (1) the Executive's conviction of a
felony; (2) a material breach of this Agreement by the Executive and/or the
Executive's gross neglect of his duties hereunder; or (3) the Executive's
addiction to alcohol or to a drug not prescribed by a physician.
8
<PAGE>
5.3 Termination Without Cause or Termination for Good Reason.
--------------------------------------------------------
(a) The Company may terminate the Executive's employment
hereunder without Cause, and the Executive shall be permitted to terminate his
employment hereunder for Good Reason (as hereinafter defined). If the Company
terminates the Executive's employment hereunder without Cause, other than due to
death or Disability, or if the Employee effects a termination for Good Reason,
the Executive shall be entitled to receive all the benefits provided for under
Section 3.6 of this Agreement.
(b) "Good Reason" means and shall be deemed to exist if, without
the prior written consent of the Executive, (1) the Executive suffers a
reduction in duties, responsibilities or effective authority associated with his
titles and positions as set forth and described in this Agreement or is assigned
any duties or responsibilities inconsistent in any material respect therewith;
(2) the Company fails to substantially perform any material term or provision of
this Agreement; or (3) the Executive's compensation or benefits provided for
hereunder is decreased.
5.4 Voluntary Termination.
---------------------
(a) The Executive may effect a Voluntary Termination (as
hereinafter defined) of his employment hereunder by giving not less than nine
(9) months prior written notice to the Company. If the Executive effects a
Voluntary Termination after such notice (or upon replacement of the Executive if
Executive is replaced during the notice period) without accepting other
employment with a title and/or duties similar to those provided hereunder (a
"Successor Position"), the Executive shall be entitled to receive all the
benefits provided for under Section 3.6 of this Agreement, less the nine (9)
months (or such lesser period upon replacement) of compensation paid during the
notice period. If the Employee effects a Voluntary Termination without providing
the notice required by this section, or for the purpose of accepting a Successor
Position, the Executive shall be entitled to receive (1) all Base Salary due
Executive as of the date of termination, (2) any previously authorized bonus (if
any) for the period of Executive's employment prior to the discharge or
resignation, and (3) any previously vested benefits, such as previously vested
retirement benefits. Furthermore, the Company shall honor any rights previously
vested in Executive under a stock option or similar plan or program.
9
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(b) "Voluntary Termination" shall mean a termination of
employment by the Executive on his own initiative other than (1) a termination
due to Disability or (2) a termination for Good Reason.
5.5 Gross-up of Parachute Payments. If any payment or benefit to which
------------------------------
the Executive becomes entitled from the Company will be subject to the tax
imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"),
the Company shall pay to the Executive at the time specified below, an
additional amount (the "Gross-up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income tax and Excise Tax
upon the payment provided for by this subsection, shall be equal to the Total
Payments. For purposes of determining whether any of such payments or benefits
will be subject to the Excise Tax, and the amount of such Excise Tax, (i) any
over payments or benefits received or to be received by the Executive in
connection with a Change of Control or his termination of employment, whether
pursuant to the terms of this Agreement or otherwise (which together with the
payments and benefits pursuant to this Agreement, constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive such other payments or benefits (in
whole or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the Code in excess
of the base amount within the meaning of section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments
which shall be treated as subject to the Excise Tax shall be equal to the lesser
of (A) the total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of section 280G(b)(l) (after applying
paragraph (i), above), and (iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the
10
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calendar year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the sate and locality
of his residence, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. In the event
that the Excise Tax is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of his employment, the
Executive shall repay to the Company at the time that the amount of such
reduction in Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the Gross-Up Payment being repaid by him if such repayment results in
reduction in Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of
payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any interest
payable with respect to such excess) at the time that the amount of such excess
is finally determined. If the amounts of any payments under this Agreement
cannot be finally determined on or before the payment date otherwise scheduled
for payment, the Company shall pay to the Executive on such date an estimate, as
determined in good faith by the Company, of the minimum amount of such payment
and shall pay the reminder of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can
be determined. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive payable on the fifth day after
demand by the Company (together with interest at the rate provided in section
1274(b)(2)(B) of the Code).
6. Arbitration.
-----------
6.1 General. Any dispute, controversy or claim arising out of or
-------
relating to this Agreement, the breach hereof or the coverage or enforceability
of this arbitration provision shall be settled by arbitration in Riverside
County, California (or such other location as the Company and Executive may
mutually agree), conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as such rules are in effect in
Riverside on the
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date of delivery of demand for arbitration. The arbitration of any such issue,
including the determination of the amount of any damages suffered by either
party hereto by reason of the acts or omissions of the other, shall be to the
exclusion of any court of law. Notwithstanding the foregoing, either party
hereto may seek any provisional remedy in a court, including but not limited to
an action for injunctive relief or attachment, without waiving the right to
arbitration.
6.2 Procedure. There shall be three arbitrators, one to be chosen by
---------
each party at will within 10 days from the date of delivery of demand for
arbitration and the third arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a third arbitrator within 10
days after the last of the two arbitrators is chosen by the parties, the third
arbitrator will be designated, on application by either party, by the American
Arbitration Association. The decision of a majority of the arbitrators shall be
final and binding on both parties and their respective heirs, executors,
administrators, personal representatives, successors and assigns. Judgment upon
any award of the arbitrators may be entered in any court having jurisdiction, or
application may be made to any such court for the judicial acceptance of the
award and for an order of enforcement.
6.3 Costs and Expenses. The Company shall pay the fees of all
------------------
arbitrators, witnesses and such other expenses as may be generated by the
arbitration, except Executive's attorneys fees, unless a majority of the
arbitrators concludes that such arbitration procedure was not instituted in good
faith by Executive. In such event the arbitrators shall be empowered to allocate
fees and assess costs and other expenses of the arbitration, except attorneys
fees, as they may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.
7. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Executive. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
8. Remedies. Executive acknowledges that the services Executive is to
--------
render under this Agreement are of a unique and special nature, the loss of
which cannot reasonably or
12
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adequately be compensated for in monetary damages, and that irreparable injury
and damage will result to the Company in the event of any default or breach of
this Agreement by Executive. Because of the unique nature of the Confidential
Information, Executive further acknowledges and agrees that the Company will
suffer irreparable harm if Executive fails to comply with the obligations in
section 4 hereof and that monetary damages would be inadequate to compensate the
Company for such breach. Accordingly, Executive agrees that the Company will, in
addition to any other remedies available to it at law, in equity or, without
limitation, otherwise, be entitled to injunctive relief and/or specific
performance to enforce the terms, or prevent or remedy the violation, of any
provisions of this Agreement. This provision shall not constitute a waiver by
the Company of any rights to damages or other remedies which it may have
pursuant to this Agreement or otherwise.
9. Survival. The provisions of sections 4, 5, 6 and 8 shall survive the
--------
expiration or earlier termination of this Agreement.
10. Notices. Any notices or other communications relating to this
-------
Agreement shall be in writing and delivered personally or mailed by certified
mail, return receipt requested, to the party concerned at the address set forth
below:
If to Company: United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Attn: General Counsel
If to Executive: At Executive's residence address as maintained by
the Company in the regular course of its business
for payroll purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 10.
13
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11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. Without limiting the generality of the foregoing
sentence, this Agreement supersedes the Executive Retention Agreement and the
First Amended and Restated United States Filter Corporation Executive Severance
Pay Plan. This Agreement may not be changed orally, but only by an agreement in
writing signed by both parties.
12. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
agreement.
13. Construction. This Agreement shall be governed under and construed in
------------
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or interpretation of this Agreement. It
is intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.
14. Severability. If any portion or provision of this Agreement is
------------
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected The covenants in this Agreement are severable and separate, and the
unenforceability of any specific covenant shall not affect the enforceability of
any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.
15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
14
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and in the year first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Dr. Alfred E. Osborne, Jr.
-----------------------------------
Name: Dr. Alfred E. Osborne, Jr.
---------------------------------
Title: Chairman, Compensation Committee
--------------------------------
of the Board of Directors
--------------------------------
EXECUTIVE
NICHOLAS C. MEMMO
/s/ Nicholas C. Memmo
----------------------------------
Signature
15
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EXHIBIT 10.03
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
August 26, 1998, by and between UNITED STATES FILTER CORPORATION, a Delaware
corporation (the "Company"), and ANDREW D. SEIDEL ("Executive").
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into this Agreement to
assure the Company of the continuing and exclusive service of Executive and to
set forth the terms and conditions of Executive's employment with the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
1. Employment.
----------
1.1 Title and Duties. The Company hereby employs Executive as President
----------------
and Chief Operating Officer Wastewater Group of the Company. Executive's
duties, responsibilities and authority shall be consistent with Executive's
position and shall include such other duties, responsibilities and authority as
may be assigned to Executive by the Board of Directors of the Company (the
"Board") or the Chief Executive Officer of the Company (the "CEO").
1.2 Services and Exclusivity of Services. The Company and Executive
------------------------------------
recognize that the services to be rendered by Executive are of such a nature as
to be peculiarly rendered by Executive, encompass the individual ability,
managerial skills and business experience of Executive and cannot be measured
exclusively in terms of hours or services rendered in any particular period.
Executive agrees to devote Executive's full business time and to use
1
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Executive's best efforts, energy and ability exclusively toward advancing the
business, affairs and interests of the Company, and matters related thereto.
1.3 Noncompetition and Nonsolicitation. Executive agrees that during the
----------------------------------
Term (as defined in Section 2 below) of this Agreement (and in the case of
termination pursuant to Section 5 below for a period of one year thereafter),
Executive will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries
or affiliates, nor without the prior written consent of the Board directly or
indirectly have any interest in, own, manage, operate, control, be connected
with as a stockholder, joint venturer, officer, employee, partner or consultant,
or otherwise engage, invest or participate in any business that is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 1.3 shall prevent Executive from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
Executive's own account and benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and are consistent with the conflict of interest
policies maintained by the Company from time to time. Executive further agrees
that during the Term of this Agreement (and in the case of termination pursuant
to Section 5 below for a period of one year thereafter) Executive will not, in
any manner, directly or indirectly induce or attempt to induce any employee of
the Company to terminate or abandon his or her employment for any purpose
whatsoever (other than for poor performance of an employee employed by the
Company at such time).
2. Term. The period of employment under this Agreement (the "Term") shall
----
commence as of the date first set forth above, (the "Effective Date") and shall
continue for a period of thirty-six (36) full calendar months thereafter, as
herein provided. Unless the Company or the Executive gives written notice to the
other party to the contrary at least 60 days prior to the end of the Term
(including any extension), on the first day of the month following the Effective
Date, and on the first day of each month thereafter, the Term shall be
automatically extended by one full calendar month. The Term shall continue until
the expiration of all automatic extensions
2
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affected as aforesaid unless and until it ceases or is terminated sooner as
provided in this Agreement.
3. Compensation.
-----------
3.1 Base Salary. During the Term, the Company will pay to Executive a base
-----------
salary at the rate of US$325,000 per year, payable in accordance with the
Company practices in effect from time to time ("Base Salary"). Amounts payable
shall be reduced by standard withholding and other authorized deductions. Such
Base Salary shall be reviewed for increase (but not decrease) in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company not less frequently than annually during the Term. In conducting any
such review, the Compensation Committee shall consider and take into account,
among other things, any change in Executive's responsibilities, performance of
Executive, and compensation of other similarly situated executives of the
Company and other comparable companies and other pertinent factors. Executive's
Base Salary shall not be decreased except upon mutual agreement between the
parties.
3.2 Bonuses, Incentive, Savings and Retirement Plans, Welfare Benefit Plans.
-----------------------------------------------------------------------
Executive shall be entitled to participate in all annual and long-term bonuses
and incentive, savings and retirement plans generally available to other
similarly situated executive employees of the Company. Executive, and
Executive's family as the case may be, shall be eligible to participate in and
receive all benefits under welfare benefit plans, practices, programs and
policies provided to other similarly situated executive employees of the
Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other similarly situated peer executives and
does not single out Executive.
3.3 Fringe Benefits. Executive shall be entitled to receive fringe benefits
---------------
consistent with Executive's duties and position, and in accordance with the
benefits provided to other similarly situated executive employees of the
Company. Such benefits shall include the full time use of an automobile,
including reimbursement for all operating and maintenance costs,
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consistent with the Company's corporate policy on automobiles as in effect from
time to time. The Company reserves the right to modify, suspend or discontinue
any and all of its fringe benefits referred to in this Section 3.3 at any time
without recourse by Executive so long as such action is taken generally with
respect to other similarly situated peer executives and does not single out
Executive.
3.4 Expenses. Executive shall be entitled to reimbursement for expenses
--------
incurred in the furtherance of the business of the Company in accordance with
the Company's practices and procedures, as they may exist from time to time.
Executive shall keep complete and accurate records of all expenditures such that
Executive may fully account according to the Company's practices and procedures.
3.5 Vacation. Executive shall be entitled to paid vacations and other
--------
absences from work that are reasonably consistent with the performance of
Executive's duties as provided in this Agreement. Such vacations and absences
shall be in accordance with those generally provided to other similarly situated
executive employees.
3.6 Additional Benefits Upon a Change of Control.
--------------------------------------------
(a) In the event a Change of Control occurs during the Term, the
Executive's benefit in the U. S. Filter Supplemental Executive Retirement Plan
shall immediately become fully vested.
(b) In the event a Change of Control occurs during the Term, the
Executive shall be entitled to receive, within thirty (30) days after the Change
of Control, a cash lump sum amount equal to :
(i) Executive's Base Salary for the balance of the Term, plus the
target annual incentive bonus scheduled for the year in which there is a
Change of Control and each year thereafter for the balance of the Term
(determined without regard to any performance goals); plus
(ii) the present value (as determined by a nationally recognized
employee benefits consulting firm agreed to by Executive and the
Company)
4
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of the health, life insurance, disability and accident insurance plans
or programs covering Executive for the balance of the Term.
(c) "Change of Control" shall mean the occurrence of any of the
following:
(i) the acquisition by any person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision to either of the foregoing, of "beneficial
ownership" directly or indirectly, of shares of capital stock of the
Company entitling such person to exercise 50% or more of the total
voting power of all "Voting Shares" of the Company;
(ii) during any year or any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (i), (iii) or (iv) of this definition) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved (hereinafter referred to as "Continuing
Directors"), cease for any reason to constitute at least a majority
thereof;
(iii) any consolidation of the Company with, or merger of the
Company into, any other person, any merger of another person into the
Company, or any sale or transfer of all or substantially all of the
assets of the Company to another person (other than (x) a consolidation
or merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of capital stock other
than shares of capital stock owned by any of the parties to the
consolidation or merger or (y) a merger which is effected solely to
change the jurisdiction of incorporation of the Company or (z) any
consolidation with or merger of the Company into a wholly owned
subsidiary, or any sale or transfer by the Company of all of
substantially all of its assets
5
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to one or more of its wholly owned subsidiaries in any one transaction
or a series of transactions; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company.
Notwithstanding the foregoing, unless otherwise determined by the Board
of Directors, no change in control of the Company shall be deemed to
have occurred if (x) the Executive is a member of a group which first
announces a proposal which, if successful, would result in a Change of
Control, which proposal (including any modifications thereof) is
ultimately successful, or (y) the Executive acquires a two percent or
more equity interest in the entity which ultimately acquires the Company
pursuant to the transaction described in (x) of this paragraph.
"Beneficial Ownership" shall be determined in accordance with Rule 13d-3
promulgated under the Exchange Act, except that a person shall be deemed
to be the "beneficial owner" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time.
"Voting Share" means all outstanding shares of any class or classes
(however designated) of capital stock of the Company entitled to vote
generally in the election of the Board of Directors of the Company.
4. Confidential Information.
4.1 General. Executive acknowledges that during employment by and
-------
as a result of a relationship with the Company, Executive will obtain knowledge
of and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
6
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information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively referred to herein as
"Confidential Information"). Executive agrees that during the Term of this
Agreement and, to the fullest extent permitted by law, thereafter, Executive
will, in a fiduciary capacity for the benefit of the Company, hold all
Confidential Information strictly in confidence and will not directly or
indirectly reveal, report, disclose, publish or transfer any of such
Confidential Information to any person, firm or other entity, or utilize any of
the Confidential Information for any purpose, except in furtherance of
Executive's employment under this Agreement.
4.2 Proprietary Interest. All inventions, designs, improvements, patents,
--------------------
copyrights and discoveries conceived by Executive during the Term of this
Agreement that are useful in or directly or indirectly related to the business
of the Company or to any experimental work carried on by the Company, shall be
the property of the Company. Executive will promptly and fully disclose to the
Company all such inventions, designs, improvements, patents, copyrights and
discoveries (whether developed individually or with other persons) and shall
take all steps necessary and reasonably required to assure the Company's
ownership thereof and to assist the Company in protecting or defending the
Company's proprietary rights therein.
4.3 Return of Materials. Executive expressly acknowledges that all lists,
-------------------
books, records and other Confidential Information of the Company obtained in
connection with the Company's business is the exclusive property of the Company
and that upon the expiration or earlier termination of this Agreement, Executive
will immediately surrender and return to the Company all such items and all
other property belonging to the Company then in the possession of Executive, and
Executive shall not make or retain any copies thereof.
5. Termination Prior to Expiration of Term. Executive's employment, and his
---------------------------------------
rights under this Agreement, may be terminated prior to the expiration of the
Term of this Agreement only as provided in this section 5.
7
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5.1 Death or Disability.
-------------------
(a) The Company may terminate the Executive's employment hereunder due
to death or Disability (as defined below). If Executive's employment is
terminated as a result of death or Disability, Executive (or Executive's estate
or personal representative in the event of death) shall be entitled to receive
Executive's full Base Salary until the expiration of six months from the date on
which Executive was first unable to substantially perform his duties hereunder
and, as of the last day of such six month period, shall be entitled to receive a
lump sum payment equal to an additional six months of Base Salary. Executive
and/or Executive's dependents shall be entitled to continue to participate in
the Company's welfare benefit plans and programs on the same terms as similarly
situated active employees for a period of twelve months from the date Executive
was first unable to substantially perform Executive's duties hereunder.
Executive and/or Executive's dependents shall thereafter be entitled to any
continuation of such benefits provided under such benefit plans or by applicable
law.
(b) "Disability" shall mean a total and permanent physical or mental
impairment that substantially limits a major life activity of Executive and that
renders Executive unable to perform the essential functions of Executive's
position, even with reasonable accommodation that does not impose an undue
hardship on the Company. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and/or
Executive's medical personnel or others selected by the Company or its insurers.
5.2 Termination by the Company for Cause.
------------------------------------
(a) The Company may terminate the Executive's employment hereunder for
Cause (as hereinafter defined). If the Company terminates the Executive's
employment hereunder for Cause, the Executive shall be entitled to receive (1)
all Base Salary due employee as of the date of termination, (2) any previously
authorized bonus (if any) for the period of Executive's employment prior to the
discharge or resignation, and (3) any previously vested
8
<PAGE>
benefits, such as previously vested retirement benefits. Furthermore, the
Company shall honor any rights previously vested in Executive under a stock
option or similar plan or program.
(b) "Cause" shall mean (1) the Executive's conviction of a felony; (2) a
material breach of this Agreement by the Executive and/or the Executive's gross
neglect of his duties hereunder; or (3) the Executive's addiction to alcohol or
to a drug not prescribed by a physician.
5.3 Termination Without Cause or Termination for Good Reason.
--------------------------------------------------------
(a) The Company may terminate the Executive's employment hereunder
without Cause, and the Executive shall be permitted to terminate his employment
hereunder for Good Reason (as hereinafter defined). If the Company terminates
the Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination for Good Reason, the
Executive shall be entitled to receive all the benefits provided for under
Section 3.6 of this Agreement.
(b) "Good Reason" means and shall be deemed to exist if, without the
prior written consent of the Executive, (1) the Executive suffers a reduction in
duties, responsibilities or effective authority associated with his titles and
positions as set forth and described in this Agreement or is assigned any duties
or responsibilities inconsistent in any material respect therewith; (2) the
Company fails to substantially perform any material term or provision of this
Agreement; or (3) the Executive's compensation or benefits provided for
hereunder is decreased.
5.4 Voluntary Termination.
---------------------
(a) The Executive may effect a Voluntary Termination (as hereinafter
defined) of his employment hereunder by giving not less than nine (9) months
prior written notice to the Company. If the Executive effects a Voluntary
Termination after such notice (or upon replacement of the Executive if Executive
is replaced during the notice period) without accepting other employment with a
title and/or duties similar to those provided hereunder (a "Successor
Position"), the Executive shall be entitled to receive all the benefits provided
for under Section 3.6 of this Agreement, less the nine (9) months (or such
lesser period upon
9
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replacement) of compensation paid during the notice period. If the Employee
effects a Voluntary Termination without providing the notice required by this
section, or for the purpose of accepting a Successor Position, the Executive
shall be entitled to receive (1) all Base Salary due Executive as of the date of
termination, (2) any previously authorized bonus (if any) for the period of
Executive's employment prior to the discharge or resignation, and (3) any
previously vested benefits, such as previously vested retirement benefits.
Furthermore, the Company shall honor any rights previously vested in Executive
under a stock option or similar plan or program.
(b) "Voluntary Termination" shall mean a termination of employment by
the Executive on his own initiative other than (1) a termination due to
Disability or (2) a termination for Good Reason.
5.5 Gross-up of Parachute Payments. If any payment or benefit to which the
------------------------------
Executive becomes entitled from the Company will be subject to the tax imposed
by section 4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(or any similar tax that may hereafter be imposed) (the "Excise Tax"), the
Company shall pay to the Executive at the time specified below, an additional
amount (the "Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income tax and Excise Tax
upon the payment provided for by this subsection, shall be equal to the Total
Payments. For purposes of determining whether any of such payments or benefits
will be subject to the Excise Tax, and the amount of such Excise Tax, (i) any
over payments or benefits received or to be received by the Executive in
connection with a Change of Control or his termination of employment, whether
pursuant to the terms of this Agreement or otherwise (which together with the
payments and benefits pursuant to this Agreement, constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive such other payments or benefits (in
whole or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the Code in excess
of the base amount within the meaning of section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments
10
<PAGE>
which shall be treated as subject to the Excise Tax shall be equal to the lesser
of (A) the total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of section 280G(b)(l) (after applying
paragraph (i), above), and (iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the sate and locality of his residence, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of his employment, the Executive shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the Gross-Up Payment being repaid by him
if such repayment results in reduction in Excise Tax and/or a federal and state
and local income tax deduction) plus interest on the amount of such repayment at
the rate provided in section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of payment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest payable with respect to such excess) at the time that the amount of
such excess is finally determined. If the amounts of any payments under this
Agreement cannot be finally determined on or before the payment date otherwise
scheduled for payment, the Company shall pay to the Executive on such date an
estimate, as determined in good faith by the Company, of the minimum amount of
such payment and shall pay the reminder of such payments (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive payable on the
fifth day after demand by the Company (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
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6. Arbitration.
-----------
6.1 General. Any dispute, controversy or claim arising out of or relating to
-------
this Agreement, the breach hereof or the coverage or enforceability of this
arbitration provision shall be settled by arbitration in Riverside County,
California (or such other location as the Company and Executive may mutually
agree), conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as such rules are in effect in Riverside on
the date of delivery of demand for arbitration. The arbitration of any such
issue, including the determination of the amount of any damages suffered by
either party hereto by reason of the acts or omissions of the other, shall be to
the exclusion of any court of law. Notwithstanding the foregoing, either party
hereto may seek any provisional remedy in a court, including but not limited to
an action for injunctive relief or attachment, without waiving the right to
arbitration.
6.2 Procedure. There shall be three arbitrators, one to be chosen by each
---------
party at will within 10 days from the date of delivery of demand for arbitration
and the third arbitrator to be selected by the two arbitrators so chosen. If the
two arbitrators are unable to select a third arbitrator within 10 days after the
last of the two arbitrators is chosen by the parties, the third arbitrator will
be designated, on application by either party, by the American Arbitration
Association. The decision of a majority of the arbitrators shall be final and
binding on both parties and their respective heirs, executors, administrators,
personal representatives, successors and assigns. Judgment upon any award of the
arbitrators may be entered in any court having jurisdiction, or application may
be made to any such court for the judicial acceptance of the award and for an
order of enforcement.
6.3 Costs and Expenses. The Company shall pay the fees of all arbitrators,
------------------
witnesses and such other expenses as may be generated by the arbitration, except
Executive's attorneys fees, unless a majority of the arbitrators concludes that
such arbitration procedure was not instituted in good faith by Executive. In
such event the arbitrators shall be empowered to allocate fees and assess costs
and other expenses of the arbitration, except attorneys fees, as they may deem
appropriate, bearing in mind the relative financial abilities of the parties and
the respective merits of their positions.
12
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7. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Executive. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
8. Remedies. Executive acknowledges that the services Executive is to render
--------
under this Agreement are of a unique and special nature, the loss of which
cannot reasonably or adequately be compensated for in monetary damages, and that
irreparable injury and damage will result to the Company in the event of any
default or breach of this Agreement by Executive. Because of the unique nature
of the Confidential Information, Executive further acknowledges and agrees that
the Company will suffer irreparable harm if Executive fails to comply with the
obligations in section 4 hereof and that monetary damages would be inadequate to
compensate the Company for such breach. Accordingly, Executive agrees that the
Company will, in addition to any other remedies available to it at law, in
equity or, without limitation, otherwise, be entitled to injunctive relief
and/or specific performance to enforce the terms, or prevent or remedy the
violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
9. Survival. The provisions of sections 4, 5, 6 and 8 shall survive the
--------
expiration or earlier termination of this Agreement.
10. Notices. Any notices or other communications relating to this Agreement
-------
shall be in writing and delivered personally or mailed by certified mail, return
receipt requested, to the party concerned at the address set forth below:
If to Company: United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Attn: General Counsel
13
<PAGE>
If to Executive: At Executive's residence address as
maintained by the Company in the regular
course of its business for payroll
purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 10.
11. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties and supersedes all prior written and oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject
matter hereof. Without limiting the generality of the foregoing sentence, this
Agreement supersedes the Executive Retention Agreement and the First Amended and
Restated United States Filter Corporation Executive Severance Pay Plan. This
Agreement may not be changed orally, but only by an agreement in writing signed
by both parties.
12. Counterparts. This Agreement may be executed in counterparts, each of which
------------
shall be an original, but all of which together shall constitute one agreement.
13. Construction. This Agreement shall be governed under and construed in
------------
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or interpretation of this Agreement. It
is intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.
14. Severability. If any portion or provision of this Agreement is determined by
------------
arbitration or by a court of competent jurisdiction to be invalid, illegal or
unenforceable, the remaining portions or provisions hereof shall not be affected
The covenants in this Agreement are severable and separate, and the
unenforceability of any specific covenant shall not affect the enforceability of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and this
Agreement shall thereby be reformed.
14
<PAGE>
15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
in the year first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Dr. Alfred E. Osborne, Jr.
-------------------------------
Name: Dr. Alfred E. Osborne, Jr.
-------------------------------
Title: Chairman, Compensation Committee
--------------------------------
of the Board of Directors
--------------------------------
EXECUTIVE
ANDREW D. SEIDEL
/s/ Andrew D. Seidel
--------------------
Signature
15
<PAGE>
EXHIBIT 10.04
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
August 26, 1998, by and between UNITED STATES FILTER CORPORATION, a Delaware
corporation (the "Company"), and HARRY K. HORNISH, JR. ("Executive").
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into this Agreement to
assure the Company of the continuing and exclusive service of Executive and to
set forth the terms and conditions of Executive's employment with the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
1. Employment.
----------
1.1 Title and Duties. The Company hereby employs Executive as President
----------------
and Chief Operating Officer - Distribution Group of the Company. Executive's
duties, responsibilities and authority shall be consistent with Executive's
position and shall include such other duties, responsibilities and authority as
may be assigned to Executive by the Board of Directors of the Company (the
"Board") or the Chief Executive Officer of the Company (the "CEO").
1.2 Services and Exclusivity of Services. The Company and Executive
------------------------------------
recognize that the services to be rendered by Executive are of such a nature as
to be peculiarly rendered by Executive, encompass the individual ability,
managerial skills and business experience of Executive and cannot be measured
exclusively in terms of hours or services rendered in any particular period.
Executive agrees to devote Executive's full business time and to use
1
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Executive's best efforts, energy and ability exclusively toward advancing the
business, affairs and interests of the Company, and matters related thereto.
1.3 Noncompetition and Nonsolicitation. Executive agrees that during the
----------------------------------
Term (as defined in Section 2 below) of this Agreement (and in the case of
termination pursuant to Section 5 below for a period of one year thereafter),
Executive will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries
or affiliates, nor without the prior written consent of the Board directly or
indirectly have any interest in, own, manage, operate, control, be connected
with as a stockholder, joint venturer, officer, employee, partner or consultant,
or otherwise engage, invest or participate in any business that is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 1.3 shall prevent Executive from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
Executive's own account and benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and are consistent with the conflict of interest
policies maintained by the Company from time to time. Executive further agrees
that during the Term of this Agreement (and in the case of termination pursuant
to Section 5 below for a period of one year thereafter) Executive will not, in
any manner, directly or indirectly induce or attempt to induce any employee of
the Company to terminate or abandon his or her employment for any purpose
whatsoever (other than for poor performance of an employee employed by the
Company at such time).
2. Term. The period of employment under this Agreement (the "Term")
----
shall commence as of the date first set forth above, (the "Effective Date")
and shall continue for a period of twenty-four (24) full calendar months
thereafter, as herein provided. Unless the Company or the Executive gives
written notice to the other party to the contrary at least 60 days prior to the
end of the Term (including any extension), on the first day of the month
following the Effective Date, and on the first day of each month thereafter,
the Term shall be automatically extended by one full calendar month. The Term
shall continue until the expiration of all
2
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automatic extensions affected as aforesaid unless and until it ceases or is
terminated sooner as provided in this Agreement.
3. Compensation.
------------
3.1 Base Salary. During the Term, the Company will pay to Executive a
-----------
base salary at the rate of US$325,000 per year, payable in accordance with the
Company practices in effect from time to time ("Base Salary"). Amounts payable
shall be reduced by standard withholding and other authorized deductions. Such
Base Salary shall be reviewed for increase (but not decrease) in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company not less frequently than annually during the Term. In conducting any
such review, the Compensation Committee shall consider and take into account,
among other things, any change in Executive's responsibilities, performance of
Executive, and compensation of other similarly situated executives of the
Company and other comparable companies and other pertinent factors. Executive's
Base Salary shall not be decreased except upon mutual agreement between the
parties.
3.2 Bonuses, Incentive, Savings and Retirement Plans, Welfare Benefit
-----------------------------------------------------------------
Plans. Executive shall be entitled to participate in all annual and long-term
- -----
bonuses and incentive, savings and retirement plans generally available to other
similarly situated executive employees of the Company. Executive, and
Executive's family as the case may be, shall be eligible to participate in and
receive all benefits under welfare benefit plans, practices, programs and
policies provided to other similarly situated executive employees of the
Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other similarly situated peer executives and
does not single out Executive.
3.3 Fringe Benefits. Executive shall be entitled to receive fringe
---------------
benefits consistent with Executive's duties and position, and in accordance with
the benefits provided to other similarly situated executive employees of the
Company. The Company reserves the right
3
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to modify, suspend or discontinue any and all of its fringe benefits referred to
in this Section 3.3 at any time without recourse by Executive so long as such
action is taken generally with respect to other similarly situated peer
executives and does not single out Executive.
3.4 Expenses. Executive shall be entitled to reimbursement for expenses
--------
incurred in the furtherance of the business of the Company in accordance with
the Company's practices and procedures, as they may exist from time to time.
Executive shall keep complete and accurate records of all expenditures such that
Executive may fully account according to the Company's practices and procedures.
3.5 Vacation. Executive shall be entitled to paid vacations and other
--------
absences from work that are reasonably consistent with the performance of
Executive's duties as provided in this Agreement. Such vacations and absences
shall be in accordance with those generally provided to other similarly situated
executive employees.
3.6 Additional Benefits Upon a Change of Control.
--------------------------------------------
(a) In the event a Change of Control occurs during the Term, the
Executive shall be entitled to receive, within thirty (30) days after the Change
of Control, a cash lump sum amount equal to:
(i) Executive's Base Salary for the balance of the Term, plus the
target annual incentive bonus scheduled for the year in which there is a
Change of Control and each year thereafter for the balance of the Term
(determined without regard to any performance goals); plus
(ii) the present value (as determined by a nationally
recognized employee benefits consulting firm agreed to by Executive and
the Company) of the health, life insurance, disability and accident
insurance plans or programs covering Executive for the balance of the
Term.
(b) "Change of Control" shall mean the occurrence of any of the
following:
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(i) the acquisition by any person (including any syndicate or
group deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision to either of the foregoing, of "beneficial ownership"
directly or indirectly, of shares of capital stock of the Company
entitling such person to exercise 50% or more of the total voting power of
all "Voting Shares" of the Company;
(ii) during any year or any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction
described in clause (i), (iii) or (iv) of this definition) whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved
(hereinafter referred to as "Continuing Directors"), cease for any reason
to constitute at least a majority thereof;
(iii) any consolidation of the Company with, or merger of the
Company into, any other person, any merger of another person into the
Company, or any sale or transfer of all or substantially all of the assets
of the Company to another person (other than (x) a consolidation or merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock other than shares of
capital stock owned by any of the parties to the consolidation or merger
or (y) a merger which is effected solely to change the jurisdiction of
incorporation of the Company or (z) any consolidation with or merger of
the Company into a wholly owned subsidiary, or any sale or transfer by the
Company of all of substantially all of its assets to one or more of its
wholly owned subsidiaries in any one transaction or a series of
transactions; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company.
5
<PAGE>
Notwithstanding the foregoing, unless otherwise determined by the Board of
Directors, no change in control of the Company shall be deemed to have
occurred if (x) the Executive is a member of a group which first announces a
proposal which, if successful, would result in a Change of Control, which
proposal (including any modifications thereof) is ultimately successful, or
(y) the Executive acquires a two percent or more equity interest in the entity
which ultimately acquires the Company pursuant to the transaction described in
(x) of this paragraph.
"Beneficial Ownership" shall be determined in accordance with Rule 13d-3
promulgated under the Exchange Act, except that a person shall be deemed to be
the "beneficial owner" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time.
"Voting Share" means all outstanding shares of any class or classes (however
designated) of capital stock of the Company entitled to vote generally in the
election of the Board of Directors of the Company.
4. Confidential Information.
4.1 General. Executive acknowledges that during employment by and as a
-------
result of a relationship with the Company, Executive will obtain knowledge of
and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively referred to herein as
"Confidential Information"). Executive agrees that during the Term of this
Agreement and, to the fullest extent permitted by law, thereafter, Executive
will, in a fiduciary
6
<PAGE>
capacity for the benefit of the Company, hold all Confidential Information
strictly in confidence and will not directly or indirectly reveal, report,
disclose, publish or transfer any of such Confidential Information to any
person, firm or other entity, or utilize any of the Confidential Information for
any purpose, except in furtherance of Executive's employment under this
Agreement.
4.2 Proprietary Interest. All inventions, designs, improvements, patents,
--------------------
copyrights and discoveries conceived by Executive during the Term of this
Agreement that are useful in or directly or indirectly related to the business
of the Company or to any experimental work carried on by the Company, shall be
the property of the Company. Executive will promptly and fully disclose to the
Company all such inventions, designs, improvements, patents, copyrights and
discoveries (whether developed individually or with other persons) and shall
take all steps necessary and reasonably required to assure the Company's
ownership thereof and to assist the Company in protecting or defending the
Company's proprietary rights therein.
4.3 Return of Materials. Executive expressly acknowledges that all
-------------------
lists, books, records and other Confidential Information of the Company obtained
in connection with the Company's business is the exclusive property of the
Company and that upon the expiration or earlier termination of this Agreement,
Executive will immediately surrender and return to the Company all such items
and all other property belonging to the Company then in the possession of
Executive, and Executive shall not make or retain any copies thereof.
5. Termination Prior to Expiration of Term. Executive's employment, and his
---------------------------------------
rights under this Agreement, may be terminated prior to the expiration of the
Term of this Agreement only as provided in this section 5.
5.1 Death or Disability.
-------------------
(a) The Company may terminate the Executive's employment hereunder
due to death or Disability (as defined below). If Executive's employment is
terminated as a result of death or Disability, Executive (or Executive's estate
or personal representative in the event of death) shall be entitled to receive
Executive's full Base Salary until the expiration of six
7
<PAGE>
months from the date on which Executive was first unable to substantially
perform his duties hereunder. Executive and/or Executive's dependents shall be
entitled to continue to participate in the Company's welfare benefit plans and
programs on the same terms as similarly situated active employees for a period
of six months from the date Executive was first unable to substantially perform
Executive's duties hereunder. Executive and/or Executive's dependents shall
thereafter be entitled to any continuation of such benefits provided under such
benefit plans or by applicable law.
(b) "Disability" shall mean a total and permanent physical or mental
impairment that substantially limits a major life activity of Executive and that
renders Executive unable to perform the essential functions of Executive's
position, even with reasonable accommodation that does not impose an undue
hardship on the Company. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and/or
Executive's medical personnel or others selected by the Company or its insurers.
5.2 Termination by the Company for Cause.
------------------------------------
(a) The Company may terminate the Executive's employment hereunder
for Cause (as hereinafter defined). If the Company terminates the Executive's
employment hereunder for Cause, the Executive shall be entitled to receive (1)
all Base Salary due employee as of the date of termination, (2) any previously
authorized bonus (if any) for the period of Executive's employment prior to the
discharge or resignation, and (3) any previously vested benefits, such as
previously vested retirement benefits. Furthermore, the Company shall honor any
rights previously vested in Executive under a stock option or similar plan or
program.
(b) "Cause" shall mean (1) the Executive's conviction of a felony;
(2) a material breach of this Agreement by the Executive and/or the Executive's
gross neglect of his duties hereunder; or (3) the Executive's addiction to
alcohol or to a drug not prescribed by a physician.
5.3 Termination Without Cause or Termination for Good Reason.
--------------------------------------------------------
8
<PAGE>
(a) The Company may terminate the Executive's employment hereunder
without Cause, and the Executive shall be permitted to terminate his employment
hereunder for Good Reason (as hereinafter defined). If the Company terminates
the Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination for Good Reason, the
Executive shall be entitled to receive all the benefits provided for under
Section 3.6 of this Agreement.
(b) "Good Reason" means and shall be deemed to exist if, without the
prior written consent of the Executive, (1) the Executive suffers a reduction in
duties, responsibilities or effective authority associated with his titles and
positions as set forth and described in this Agreement or is assigned any duties
or responsibilities inconsistent in any material respect therewith; (2) the
Company fails to substantially perform any material term or provision of this
Agreement; or (3) the Executive's compensation or benefits provided for
hereunder is decreased.
6. Arbitration.
-----------
6.1 General. Any dispute, controversy or claim arising out of or
-------
relating to this Agreement, the breach hereof or the coverage or enforceability
of this arbitration provision shall be settled by arbitration in Riverside
County, California (or such other location as the Company and Executive may
mutually agree), conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as such rules are in effect in
Riverside on the date of delivery of demand for arbitration. The arbitration of
any such issue, including the determination of the amount of any damages
suffered by either party hereto by reason of the acts or omissions of the other,
shall be to the exclusion of any court of law. Notwithstanding the foregoing,
either party hereto may seek any provisional remedy in a court, including but
not limited to an action for injunctive relief or attachment, without waiving
the right to arbitration.
6.2 Procedure. There shall be three arbitrators, one to be chosen by
---------
each party at will within 10 days from the date of delivery of demand for
arbitration and the third arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a third arbitrator within 10
days after the last of the two arbitrators is chosen by the parties, the third
arbitrator will be designated, on application by either party, by the American
Arbitration
9
<PAGE>
Association. The decision of a majority of the arbitrators shall be final and
binding on both parties and their respective heirs, executors, administrators,
personal representatives, successors and assigns. Judgment upon any award of
the arbitrators may be entered in any court having jurisdiction, or application
may be made to any such court for the judicial acceptance of the award and for
an order of enforcement.
6.3 Costs and Expenses. The Company shall pay the fees of all
------------------
arbitrators, witnesses and such other expenses as may be generated by the
arbitration, except Executive's attorneys fees, unless a majority of the
arbitrators concludes that such arbitration procedure was not instituted in good
faith by Executive. In such event the arbitrators shall be empowered to allocate
fees and assess costs and other expenses of the arbitration, except attorneys
fees, as they may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.
7. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Executive. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
8. Remedies. Executive acknowledges that the services Executive is to
--------
render under this Agreement are of a unique and special nature, the loss of
which cannot reasonably or adequately be compensated for in monetary damages,
and that irreparable injury and damage will result to the Company in the event
of any default or breach of this Agreement by Executive. Because of the unique
nature of the Confidential Information, Executive further acknowledges and
agrees that the Company will suffer irreparable harm if Executive fails to
comply with the obligations in section 4 hereof and that monetary damages would
be inadequate to compensate the Company for such breach. Accordingly, Executive
agrees that the Company will, in addition to any other remedies available to it
at law, in equity or, without limitation, otherwise, be entitled to injunctive
relief and/or specific performance to enforce the terms, or prevent or remedy
the violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
10
<PAGE>
9. Survival. The provisions of sections 4, 5, 6 and 8 shall survive the
--------
expiration or earlier termination of this Agreement.
10. Notices. Any notices or other communications relating to this Agreement
-------
shall be in writing and delivered personally or mailed by certified mail, return
receipt requested, to the party concerned at the address set forth below:
If to Company: United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Attn: General Counsel
If to Executive: At Executive's residence address as maintained by
the Company in the regular course of its business for
payroll purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 10.
11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may not be changed orally, but only
by an agreement in writing signed by both parties.
12. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
agreement.
13. Construction. This Agreement shall be governed under and construed in
------------
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or interpretation of this Agreement. It
is intended by the parties that this Agreement be interpreted
11
<PAGE>
in accordance with its fair and simple meaning, not for or against either party,
and neither party shall be deemed to be the drafter of this Agreement.
14. Severability. If any portion or provision of this Agreement is
------------
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected The covenants in this Agreement are severable and separate, and the
unenforceability of any specific covenant shall not affect the enforceability of
any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.
15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and in the year first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Dr. Alfred E. Osborne, Jr.
------------------------------
Name: Dr. Alfred E. Osborne, Jr.
Title: Chairman, Compensation Committee of the
Board of Directors
EXECUTIVE
HARRY K. HORNISH, JR.
/s/ Harry K. Hornish, Jr.
-------------------------
Signature
13
<PAGE>
EXHIBIT 10.05
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of August 26, 1998, by and between UNITED STATES FILTER CORPORATION, a Delaware
corporation (the "Company"), and CALVIN R. HENDRIX ("Executive").
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into this Agreement
to assure the Company of the continuing and exclusive service of Executive and
to set forth the terms and conditions of Executive's employment with the
Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties agree as follows:
1. Employment.
----------
1.1 Title and Duties. The Company hereby employs Executive as President
----------------
and Chief Operating Officer Consumer and Commercial Group of the Company.
Executive's duties, responsibilities and authority shall be consistent with
Executive's position and shall include such other duties, responsibilities and
authority as may be assigned to Executive by the Board of Directors of the
Company (the "Board") or the Chief Executive Officer of the Company (the "CEO").
1.2 Services and Exclusivity of Services. The Company and Executive
------------------------------------
recognize that the services to be rendered by Executive are of such a nature as
to be peculiarly rendered by Executive, encompass the individual ability,
managerial skills and business experience of Executive and cannot be measured
exclusively in terms of hours or services rendered in any particular period.
Executive agrees to devote Executive's full business time and to use
1
<PAGE>
Executive's best efforts, energy and ability exclusively toward advancing the
business, affairs and interests of the Company, and matters related thereto.
1.3 Noncompetition and Nonsolicitation. Executive agrees that during the
----------------------------------
Term (as defined in Section 2 below) of this Agreement (and in the case of
termination pursuant to Section 5 below for a period of one year thereafter),
Executive will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries
or affiliates, nor without the prior written consent of the Board directly or
indirectly have any interest in, own, manage, operate, control, be connected
with as a stockholder, joint venturer, officer, employee, partner or consultant,
or otherwise engage, invest or participate in any business that is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 1.3 shall prevent Executive from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
Executive's own account and benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and are consistent with the conflict of interest
policies maintained by the Company from time to time. Executive further agrees
that during the Term of this Agreement (and in the case of termination pursuant
to Section 5 below for a period of one year thereafter) Executive will not, in
any manner, directly or indirectly induce or attempt to induce any employee of
the Company to terminate or abandon his or her employment for any purpose
whatsoever (other than for poor performance of an employee employed by the
Company at such time).
2. Term. The period of employment under this Agreement (the "Term")
----
shall commence as of the date first set forth above, (the "Effective Date")
and shall continue for a period of twenty-four (24) full calendar months
thereafter, as herein provided. Unless the Company or the Executive gives
written notice to the other party to the contrary at least 60 days prior to the
end of the Term (including any extension), on the first day of the month
following the Effective Date, and on the first day of each month thereafter,
the Term shall be automatically extended by one full calendar month. The Term
shall continue until the expiration of all
2
<PAGE>
automatic extensions affected as aforesaid unless and until it ceases or is
terminated sooner as provided in this Agreement.
3. Compensation.
------------
3.1 Base Salary. During the Term, the Company will pay to Executive a
-----------
base salary at the rate of US$233,000 per year, payable in accordance with the
Company practices in effect from time to time ("Base Salary"). Amounts payable
shall be reduced by standard withholding and other authorized deductions. Such
Base Salary shall be reviewed for increase (but not decrease) in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company not less frequently than annually during the Term. In conducting any
such review, the Compensation Committee shall consider and take into account,
among other things, any change in Executive's responsibilities, performance of
Executive, and compensation of other similarly situated executives of the
Company and other comparable companies and other pertinent factors. Executive's
Base Salary shall not be decreased except upon mutual agreement between the
parties.
3.2 Bonuses, Incentive, Savings and Retirement Plans, Welfare Benefit
-----------------------------------------------------------------
Plans. Executive shall be entitled to participate in all annual and long-term
- -----
bonuses and incentive, savings and retirement plans generally available to other
similarly situated executive employees of the Company. Executive, and
Executive's family as the case may be, shall be eligible to participate in and
receive all benefits under welfare benefit plans, practices, programs and
policies provided to other similarly situated executive employees of the
Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other similarly situated peer executives and
does not single out Executive.
3.3 Fringe Benefits. Executive shall be entitled to receive fringe
---------------
benefits consistent with Executive's duties and position, and in accordance with
the benefits provided to other similarly situated executive employees of the
Company. The Company reserves the right
3
<PAGE>
to modify, suspend or discontinue any and all of its fringe benefits referred to
in this Section 3.3 at any time without recourse by Executive so long as such
action is taken generally with respect to other similarly situated peer
executives and does not single out Executive.
3.4 Expenses. Executive shall be entitled to reimbursement for expenses
--------
incurred in the furtherance of the business of the Company in accordance with
the Company's practices and procedures, as they may exist from time to time.
Executive shall keep complete and accurate records of all expenditures such that
Executive may fully account according to the Company's practices and procedures.
3.5 Vacation. Executive shall be entitled to paid vacations and other
--------
absences from work that are reasonably consistent with the performance of
Executive's duties as provided in this Agreement. Such vacations and absences
shall be in accordance with those generally provided to other similarly situated
executive employees.
3.6 Additional Benefits Upon a Change of Control.
--------------------------------------------
(a) In the event a Change of Control occurs during the Term, the
Executive shall be entitled to receive, within thirty (30) days after the Change
of Control, a cash lump sum amount equal to :
(i) Executive's Base Salary for the balance of the Term, plus
the target annual incentive bonus scheduled for the year in which
there is a Change of Control and each year thereafter for the balance
of the Term (determined without regard to any performance goals); plus
(ii) the present value (as determined by a nationally
recognized employee benefits consulting firm agreed to by Executive and
the Company) of the health, life insurance, disability and accident
insurance plans or programs covering Executive for the balance of the
Term.
(b) "Change of Control" shall mean the occurrence of any of the
following:
4
<PAGE>
(i) the acquisition by any person (including any syndicate or
group deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision to either of the foregoing, of "beneficial
ownership" directly or indirectly, of shares of capital stock of the
Company entitling such person to exercise 50% or more of the total
voting power of all "Voting Shares" of the Company;
(ii) during any year or any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (i), (iii) or (iv) of this definition) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved (hereinafter referred to as "Continuing
Directors"), cease for any reason to constitute at least a majority
thereof;
(iii) any consolidation of the Company with, or merger of the
Company into, any other person, any merger of another person into the
Company, or any sale or transfer of all or substantially all of the
assets of the Company to another person (other than (x) a consolidation
or merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of capital stock other
than shares of capital stock owned by any of the parties to the
consolidation or merger or (y) a merger which is effected solely to
change the jurisdiction of incorporation of the Company or (z) any
consolidation with or merger of the Company into a wholly owned
subsidiary, or any sale or transfer by the Company of all of
substantially all of its assets to one or more of its wholly owned
subsidiaries in any one transaction or a series of transactions; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company.
5
<PAGE>
Notwithstanding the foregoing, unless otherwise determined by the Board
of Directors, no change in control of the Company shall be deemed to
have occurred if (x) the Executive is a member of a group which first
announces a proposal which, if successful, would result in a Change of
Control, which proposal (including any modifications thereof) is
ultimately successful, or (y) the Executive acquires a two percent or
more equity interest in the entity which ultimately acquires the
Company pursuant to the transaction described in (x) of this paragraph.
"Beneficial Ownership" shall be determined in accordance with Rule 13d-
3 promulgated under the Exchange Act, except that a person shall be
deemed to be the "beneficial owner" of all securities that such person
has the right to acquire, whether such right is exercisable immediately
or only after the passage of time.
"Voting Share" means all outstanding shares of any class or classes
(however designated) of capital stock of the Company entitled to vote
generally in the election of the Board of Directors of the Company.
4. Confidential Information.
4.1 General. Executive acknowledges that during employment by and as a
-------
result of a relationship with the Company, Executive will obtain knowledge of
and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively referred to herein as
"Confidential Information"). Executive agrees that during the Term of this
Agreement and, to the fullest extent permitted by law, thereafter, Executive
will, in a fiduciary
6
<PAGE>
capacity for the benefit of the Company, hold all Confidential Information
strictly in confidence and will not directly or indirectly reveal, report,
disclose, publish or transfer any of such Confidential Information to any
person, firm or other entity, or utilize any of the Confidential Information for
any purpose, except in furtherance of Executive's employment under this
Agreement.
4.2 Proprietary Interest. All inventions, designs, improvements,
--------------------
patents, copyrights and discoveries conceived by Executive during the Term of
this Agreement that are useful in or directly or indirectly related to the
business of the Company or to any experimental work carried on by the Company,
shall be the property of the Company. Executive will promptly and fully disclose
to the Company all such inventions, designs, improvements, patents, copyrights
and discoveries (whether developed individually or with other persons) and shall
take all steps necessary and reasonably required to assure the Company's
ownership thereof and to assist the Company in protecting or defending the
Company's proprietary rights therein.
4.3 Return of Materials. Executive expressly acknowledges that all
-------------------
lists, books, records and other Confidential Information of the Company obtained
in connection with the Company's business is the exclusive property of the
Company and that upon the expiration or earlier termination of this Agreement,
Executive will immediately surrender and return to the Company all such items
and all other property belonging to the Company then in the possession of
Executive, and Executive shall not make or retain any copies thereof.
5. Termination Prior to Expiration of Term. Executive's employment, and his
---------------------------------------
rights under this Agreement, may be terminated prior to the expiration of the
Term of this Agreement only as provided in this section 5.
5.1 Death or Disability.
-------------------
(a) The Company may terminate the Executive's employment hereunder
due to death or Disability (as defined below). If Executive's employment is
terminated as a result of death or Disability, Executive (or Executive's estate
or personal representative in the event of death) shall be entitled to receive
Executive's full Base Salary until the expiration of six
7
<PAGE>
months from the date on which Executive was first unable to substantially
perform his duties hereunder. Executive and/or Executive's dependents shall be
entitled to continue to participate in the Company's welfare benefit plans and
programs on the same terms as similarly situated active employees for a period
of six months from the date Executive was first unable to substantially perform
Executive's duties hereunder. Executive and/or Executive's dependents shall
thereafter be entitled to any continuation of such benefits provided under such
benefit plans or by applicable law.
(b) "Disability" shall mean a total and permanent physical or mental
impairment that substantially limits a major life activity of Executive and that
renders Executive unable to perform the essential functions of Executive's
position, even with reasonable accommodation that does not impose an undue
hardship on the Company. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and/or
Executive's medical personnel or others selected by the Company or its insurers.
5.2 Termination by the Company for Cause.
------------------------------------
(a) The Company may terminate the Executive's employment hereunder for
Cause (as hereinafter defined). If the Company terminates the Executive's
employment hereunder for Cause, the Executive shall be entitled to receive (1)
all Base Salary due employee as of the date of termination, (2) any previously
authorized bonus (if any) for the period of Executive's employment prior to the
discharge or resignation, and (3) any previously vested benefits, such as
previously vested retirement benefits. Furthermore, the Company shall honor any
rights previously vested in Executive under a stock option or similar plan or
program.
(b) "Cause" shall mean (1) the Executive's conviction of a felony; (2)
a material breach of this Agreement by the Executive and/or the Executive's
gross neglect of his duties hereunder; or (3) the Executive's addiction to
alcohol or to a drug not prescribed by a physician.
5.3 Termination Without Cause or Termination for Good Reason.
--------------------------------------------------------
8
<PAGE>
(a) The Company may terminate the Executive's employment hereunder
without Cause, and the Executive shall be permitted to terminate his employment
hereunder for Good Reason (as hereinafter defined). If the Company terminates
the Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination for Good Reason, the
Executive shall be entitled to receive all the benefits provided for under
Section 3.6 of this Agreement.
(b) "Good Reason" means and shall be deemed to exist if, without the
prior written consent of the Executive, (1) the Executive suffers a reduction in
duties, responsibilities or effective authority associated with his titles and
positions as set forth and described in this Agreement or is assigned any duties
or responsibilities inconsistent in any material respect therewith;; (2) the
Company fails to substantially perform any material term or provision of this
Agreement; or (3) the Executive's compensation or benefits provided for
hereunder is decreased.
6. Arbitration.
-----------
6.1 General. Any dispute, controversy or claim arising out of or
-------
relating to this Agreement, the breach hereof or the coverage or enforceability
of this arbitration provision shall be settled by arbitration in Riverside
County, California (or such other location as the Company and Executive may
mutually agree), conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as such rules are in effect in
Riverside on the date of delivery of demand for arbitration. The arbitration of
any such issue, including the determination of the amount of any damages
suffered by either party hereto by reason of the acts or omissions of the other,
shall be to the exclusion of any court of law. Notwithstanding the foregoing,
either party hereto may seek any provisional remedy in a court, including but
not limited to an action for injunctive relief or attachment, without waiving
the right to arbitration.
6.2 Procedure. There shall be three arbitrators, one to be chosen by
---------
each party at will within 10 days from the date of delivery of demand for
arbitration and the third arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a third arbitrator within 10
days after the last of the two arbitrators is chosen by the parties, the third
arbitrator will be designated, on application by either party, by the American
Arbitration
9
<PAGE>
Association. The decision of a majority of the arbitrators shall be final and
binding on both parties and their respective heirs, executors, administrators,
personal representatives, successors and assigns. Judgment upon any award of
the arbitrators may be entered in any court having jurisdiction, or application
may be made to any such court for the judicial acceptance of the award and for
an order of enforcement.
6.3 Costs and Expenses. The Company shall pay the fees of all
------------------
arbitrators, witnesses and such other expenses as may be generated by the
arbitration, except Executive's attorneys fees, unless a majority of the
arbitrators concludes that such arbitration procedure was not instituted in good
faith by Executive. In such event the arbitrators shall be empowered to allocate
fees and assess costs and other expenses of the arbitration, except attorneys
fees, as they may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.
7. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Executive. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
8. Remedies. Executive acknowledges that the services Executive is to
--------
render under this Agreement are of a unique and special nature, the loss of
which cannot reasonably or adequately be compensated for in monetary damages,
and that irreparable injury and damage will result to the Company in the event
of any default or breach of this Agreement by Executive. Because of the unique
nature of the Confidential Information, Executive further acknowledges and
agrees that the Company will suffer irreparable harm if Executive fails to
comply with the obligations in section 4 hereof and that monetary damages would
be inadequate to compensate the Company for such breach. Accordingly, Executive
agrees that the Company will, in addition to any other remedies available to it
at law, in equity or, without limitation, otherwise, be entitled to injunctive
relief and/or specific performance to enforce the terms, or prevent or remedy
the violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
10
<PAGE>
9. Survival. The provisions of sections 4, 5, 6 and 8 shall survive the
--------
expiration or earlier termination of this Agreement.
10. Notices. Any notices or other communications relating to this Agreement
-------
shall be in writing and delivered personally or mailed by certified mail, return
receipt requested, to the party concerned at the address set forth below:
If to Company: United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Attn: General Counsel
If to Executive: At Executive's residence address as maintained by
the Company in the regular course of its business for
payroll purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 10.
11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof, other than that certain written letter agreement
dated as of _______, 1998 by and among Executive, the Company and Culligan
International, Inc. This Agreement may not be changed orally, but only by an
agreement in writing signed by both parties.
12. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
agreement.
13. Construction. This Agreement shall be governed under and construed in
------------
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or
11
<PAGE>
interpretation of this Agreement. It is intended by the parties that this
Agreement be interpreted in accordance with its fair and simple meaning, not for
or against either party, and neither party shall be deemed to be the drafter of
this Agreement.
14. Severability. If any portion or provision of this Agreement is
------------
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected The covenants in this Agreement are severable and separate, and the
unenforceability of any specific covenant shall not affect the enforceability of
any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.
15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and in the year first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Dr. Alfred E. Osborne, Jr.
------------------------------
Name: Dr. Alfred E. Osborne, Jr.
Title: Chairman, Compensation Committee of the
Board of Directors
EXECUTIVE
CALVIN R. HENDRIX
/s/ Calvin R. Hendrix
---------------------
Signature
13
<PAGE>
EXHIBIT 10.06
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of August 26, 1998, by and between UNITED STATES FILTER CORPORATION, a Delaware
corporation (the "Company"), and KENNETH I. WELLINGS ("Executive").
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into this Agreement
to assure the Company of the continuing and exclusive service of Executive and
to set forth the terms and conditions of Executive's employment with the
Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties agree as follows:
1. Employment.
----------
1.1 Title and Duties. The Company hereby employs Executive as President
----------------
and Chief Operating Officer-International of the Company. Executive's duties,
responsibilities and authority shall be consistent with Executive's position and
shall include such other duties, responsibilities and authority as may be
assigned to Executive by the Board of Directors of the Company (the "Board") or
the Chief Executive Officer of the Company (the "CEO").
1.2 Services and Exclusivity of Services. The Company and Executive
------------------------------------
recognize that the services to be rendered by Executive are of such a nature as
to be peculiarly rendered by Executive, encompass the individual ability,
managerial skills and business experience of Executive and cannot be measured
exclusively in terms of hours or services rendered in any particular period.
Executive agrees to devote Executive's full business time and to use Executive's
best efforts, energy and ability exclusively toward advancing the business,
affairs and interests of the Company, and matters related thereto.
1
<PAGE>
1.3 Noncompetition and Nonsolicitation. Executive agrees that during the
----------------------------------
Term (as defined in Section 2 below) of this Agreement (and in the case of
termination pursuant to Section 5 below for a period of one year thereafter),
Executive will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries
or affiliates, nor without the prior written consent of the Board directly or
indirectly have any interest in, own, manage, operate, control, be connected
with as a stockholder, joint venturer, officer, employee, partner or consultant,
or otherwise engage, invest or participate in any business that is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 1.3 shall prevent Executive from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
Executive's own account and benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and are consistent with the conflict of interest
policies maintained by the Company from time to time. Executive further agrees
that during the Term of this Agreement (and in the case of termination pursuant
to Section 5 below for a period of one year thereafter) Executive will not, in
any manner, directly or indirectly induce or attempt to induce any employee of
the Company to terminate or abandon his or her employment for any purpose
whatsoever (other than for poor performance of an employee employed by the
Company at such time).
2. Term. The period of employment under this Agreement (the "Term")
----
shall commence as of the date first set forth above, (the "Effective Date")
and shall continue for a period of twenty-four (24) full calendar months
thereafter, as herein provided. Unless the Company or the Executive gives
written notice to the other party to the contrary at least 60 days prior to the
end of the Term (including any extension), on the first day of the month
following the Effective Date, and on the first day of each month thereafter,
the Term shall be automatically extended by one full calendar month. The Term
shall continue until the expiration of all automatic extensions affected as
aforesaid unless and until it ceases or is terminated sooner as provided in this
Agreement.
2
<PAGE>
3. Compensation.
------------
3.1 Base Salary. During the Term, the Company will pay to Executive a base
-----------
salary at the rate of US$235,969 per year, payable in accordance with the
Company practices in effect from time to time ("Base Salary"). Amounts payable
shall be reduced by standard withholding and other authorized deductions. Such
Base Salary shall be reviewed for increase (but not decrease) in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company not less frequently than annually during the Term. In conducting any
such review, the Compensation Committee shall consider and take into account,
among other things, any change in Executive's responsibilities, performance of
Executive, and compensation of other similarly situated executives of the
Company and other comparable companies and other pertinent factors. Executive's
Base Salary shall not be decreased except upon mutual agreement between the
parties.
3.2 Bonuses, Incentive, Savings and Retirement Plans, Welfare Benefit
-----------------------------------------------------------------
Plans. Executive shall be entitled to participate in all annual and long-term
- -----
bonuses and incentive, savings and retirement plans generally available to other
similarly situated executive employees of the Company. Executive, and
Executive's family as the case may be, shall be eligible to participate in and
receive all benefits under welfare benefit plans, practices, programs and
policies provided to other similarly situated executive employees of the
Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other similarly situated peer executives and
does not single out Executive.
3.3 Fringe Benefits. Executive shall be entitled to receive fringe
---------------
benefits consistent with Executive's duties and position, and in accordance with
the benefits provided to other similarly situated executive employees of the
Company. The Company reserves the right to modify, suspend or discontinue any
and all of its fringe benefits referred to in this Section 3.3 at any time
without recourse by Executive so long as such action is taken generally with
respect to other similarly situated peer executives and does not single out
Executive.
3
<PAGE>
3.4 Expenses. Executive shall be entitled to reimbursement for expenses
--------
incurred in the furtherance of the business of the Company in accordance with
the Company's practices and procedures, as they may exist from time to time.
Executive shall keep complete and accurate records of all expenditures such that
Executive may fully account according to the Company's practices and procedures.
3.5 Vacation. Executive shall be entitled to paid vacations and other
--------
absences from work that are reasonably consistent with the performance of
Executive's duties as provided in this Agreement. Such vacations and absences
shall be in accordance with those generally provided to other similarly situated
executive employees.
3.6 Additional Benefits Upon a Change of Control.
--------------------------------------------
(a) In the event a Change of Control occurs during the Term, the
Executive shall be entitled to receive, within thirty (30) days after the Change
of Control, a cash lump sum amount equal to :
(i) Executive's Base Salary for the balance of the Term, plus the
target annual incentive bonus scheduled for the year in which there is
a Change of Control and each year thereafter for the balance of the
Term (determined without regard to any performance goals); plus
(ii) the present value (as determined by a nationally
recognized employee benefits consulting firm agreed to by Executive and
the Company) of the health, life insurance, disability and accident
insurance plans or programs covering Executive for the balance of the
Term.
(b) "Change of Control" shall mean the occurrence of any of the
following:
(i) the acquisition by any person (including any syndicate or
group deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision to either of the foregoing, of "beneficial
ownership" directly or indirectly, of shares of capital stock
4
<PAGE>
of the Company entitling such person to exercise 50% or more of the
total voting power of all "Voting Shares" of the Company;
(ii) during any year or any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (i), (iii) or (iv) of this definition) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved (hereinafter referred to as "Continuing
Directors"), cease for any reason to constitute at least a majority
thereof;
(iii) any consolidation of the Company with, or merger of the
Company into, any other person, any merger of another person into the
Company, or any sale or transfer of all or substantially all of the
assets of the Company to another person (other than (x) a consolidation
or merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of capital stock other
than shares of capital stock owned by any of the parties to the
consolidation or merger or (y) a merger which is effected solely to
change the jurisdiction of incorporation of the Company or (z) any
consolidation with or merger of the Company into a wholly owned
subsidiary, or any sale or transfer by the Company of all of
substantially all of its assets to one or more of its wholly owned
subsidiaries in any one transaction or a series of transactions; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company.
Notwithstanding the foregoing, unless otherwise determined by the Board of
Directors, no change in control of the Company shall be deemed to have
occurred if (x) the Executive is a member of a group which first announces
a proposal which, if successful,
5
<PAGE>
would result in a Change of Control, which proposal (including any
modifications thereof) is ultimately successful, or (y) the Executive
acquires a two percent or more equity interest in the entity which
ultimately acquires the Company pursuant to the transaction described in
(x) of this paragraph.
"Beneficial Ownership" shall be determined in accordance with Rule 13d-3
promulgated under the Exchange Act, except that a person shall be deemed to
be the "beneficial owner" of all securities that such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time.
"Voting Share" means all outstanding shares of any class or classes
(however designated) of capital stock of the Company entitled to vote
generally in the election of the Board of Directors of the Company.
4. Confidential Information.
4.1 General. Executive acknowledges that during employment by and as a
-------
result of a relationship with the Company, Executive will obtain knowledge of
and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively referred to herein as
"Confidential Information"). Executive agrees that during the Term of this
Agreement and, to the fullest extent permitted by law, thereafter, Executive
will, in a fiduciary capacity for the benefit of the Company, hold all
Confidential Information strictly in confidence and will not directly or
indirectly reveal, report, disclose, publish or transfer any of such
Confidential Information to any person, firm or other entity, or utilize any of
the Confidential
6
<PAGE>
Information for any purpose, except in furtherance of Executive's employment
under this Agreement.
4.2 Proprietary Interest. All inventions, designs, improvements, patents,
--------------------
copyrights and discoveries conceived by Executive during the Term of this
Agreement that are useful in or directly or indirectly related to the business
of the Company or to any experimental work carried on by the Company, shall be
the property of the Company. Executive will promptly and fully disclose to the
Company all such inventions, designs, improvements, patents, copyrights and
discoveries (whether developed individually or with other persons) and shall
take all steps necessary and reasonably required to assure the Company's
ownership thereof and to assist the Company in protecting or defending the
Company's proprietary rights therein.
4.3 Return of Materials. Executive expressly acknowledges that all lists,
-------------------
books, records and other Confidential Information of the Company obtained in
connection with the Company's business is the exclusive property of the Company
and that upon the expiration or earlier termination of this Agreement, Executive
will immediately surrender and return to the Company all such items and all
other property belonging to the Company then in the possession of Executive, and
Executive shall not make or retain any copies thereof.
5. Termination Prior to Expiration of Term. Executive's employment, and his
---------------------------------------
rights under this Agreement, may be terminated prior to the expiration of the
Term of this Agreement only as provided in this section 5.
5.1 Death or Disability.
-------------------
(a) The Company may terminate the Executive's employment hereunder due
to death or Disability (as defined below). If Executive's employment is
terminated as a result of death or Disability, Executive (or Executive's estate
or personal representative in the event of death) shall be entitled to receive
Executive's full Base Salary until the expiration of six months from the date on
which Executive was first unable to substantially perform his duties hereunder.
Executive and/or Executive's dependents shall be entitled to continue to
participate in the Company's welfare benefit plans and programs on the same
terms as similarly situated active
7
<PAGE>
employees for a period of six months from the date Executive was first unable to
substantially perform Executive's duties hereunder. Executive and/or Executive's
dependents shall thereafter be entitled to any continuation of such benefits
provided under such benefit plans or by applicable law.
(b) "Disability" shall mean a total and permanent physical or mental
impairment that substantially limits a major life activity of Executive and that
renders Executive unable to perform the essential functions of Executive's
position, even with reasonable accommodation that does not impose an undue
hardship on the Company. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and/or
Executive's medical personnel or others selected by the Company or its insurers.
5.2 Termination by the Company for Cause.
------------------------------------
(a) The Company may terminate the Executive's employment hereunder
for Cause (as hereinafter defined). If the Company terminates the Executive's
employment hereunder for Cause, the Executive shall be entitled to receive (1)
all Base Salary due employee as of the date of termination, (2) any previously
authorized bonus (if any) for the period of Executive's employment prior to the
discharge or resignation, and (3) any previously vested benefits, such as
previously vested retirement benefits. Furthermore, the Company shall honor any
rights previously vested in Executive under a stock option or similar plan or
program.
(b) "Cause" shall mean (1) the Executive's conviction of a felony; (2)
a material breach of this Agreement by the Executive and/or the Executive's
gross neglect of his duties hereunder; or (3) the Executive's addiction to
alcohol or to a drug not prescribed by a physician.
5.3 Termination Without Cause or Termination for Good Reason.
--------------------------------------------------------
(a) The Company may terminate the Executive's employment hereunder
without Cause, and the Executive shall be permitted to terminate his employment
hereunder for Good Reason (as hereinafter defined). If the Company terminates
the Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Employee effects a
8
<PAGE>
termination for Good Reason, the Executive shall be entitled to receive all the
benefits provided for under Section 3.6 of this Agreement.
(b) "Good Reason" means and shall be deemed to exist if, without the
prior written consent of the Executive, (1) the Executive suffers a reduction in
duties, responsibilities or effective authority associated with his titles and
positions as set forth and described in this Agreement or is assigned any duties
or responsibilities inconsistent in any material respect therewith; (2) the
Company fails to substantially perform any material term or provision of this
Agreement; or (3) the Executive's compensation or benefits provided for
hereunder is decreased.
6. Arbitration.
-----------
6.1 General. Any dispute, controversy or claim arising out of or relating
-------
to this Agreement, the breach hereof or the coverage or enforceability of this
arbitration provision shall be settled by arbitration in Riverside County,
California (or such other location as the Company and Executive may mutually
agree), conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as such rules are in effect in Riverside on
the date of delivery of demand for arbitration. The arbitration of any such
issue, including the determination of the amount of any damages suffered by
either party hereto by reason of the acts or omissions of the other, shall be to
the exclusion of any court of law. Notwithstanding the foregoing, either party
hereto may seek any provisional remedy in a court, including but not limited to
an action for injunctive relief or attachment, without waiving the right to
arbitration.
6.2 Procedure. There shall be three arbitrators, one to be chosen by each
---------
party at will within 10 days from the date of delivery of demand for arbitration
and the third arbitrator to be selected by the two arbitrators so chosen. If
the two arbitrators are unable to select a third arbitrator within 10 days after
the last of the two arbitrators is chosen by the parties, the third arbitrator
will be designated, on application by either party, by the American Arbitration
Association. The decision of a majority of the arbitrators shall be final and
binding on both parties and their respective heirs, executors, administrators,
personal representatives, successors and assigns. Judgment upon any award of
the arbitrators may be entered in any court having
9
<PAGE>
jurisdiction, or application may be made to any such court for the judicial
acceptance of the award and for an order of enforcement.
6.3 Costs and Expenses. The Company shall pay the fees of all arbitrators,
------------------
witnesses and such other expenses as may be generated by the arbitration, except
Executive's attorneys fees, unless a majority of the arbitrators concludes that
such arbitration procedure was not instituted in good faith by Executive. In
such event the arbitrators shall be empowered to allocate fees and assess costs
and other expenses of the arbitration, except attorneys fees, as they may deem
appropriate, bearing in mind the relative financial abilities of the parties and
the respective merits of their positions.
7. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Executive. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
8. Remedies. Executive acknowledges that the services Executive is to
--------
render under this Agreement are of a unique and special nature, the loss of
which cannot reasonably or adequately be compensated for in monetary damages,
and that irreparable injury and damage will result to the Company in the event
of any default or breach of this Agreement by Executive. Because of the unique
nature of the Confidential Information, Executive further acknowledges and
agrees that the Company will suffer irreparable harm if Executive fails to
comply with the obligations in section 4 hereof and that monetary damages would
be inadequate to compensate the Company for such breach. Accordingly, Executive
agrees that the Company will, in addition to any other remedies available to it
at law, in equity or, without limitation, otherwise, be entitled to injunctive
relief and/or specific performance to enforce the terms, or prevent or remedy
the violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
9. Survival. The provisions of sections 4, 5, 6 and 8 shall survive the
--------
expiration or earlier termination of this Agreement.
10
<PAGE>
10. Notices. Any notices or other communications relating to this Agreement
-------
shall be in writing and delivered personally or mailed by certified mail, return
receipt requested, to the party concerned at the address set forth below:
If to Company: United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Attn: General Counsel
If to Executive: At Executive's residence address as maintained by
the Company in the regular course of its business for
payroll purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 10.
11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof, other than the terms of that certain written letter
agreement dated _____, 1998 by and among Executive, the Company and Culligan
International, Inc. This Agreement may not be changed orally, but only by an
agreement in writing signed by both parties.
12. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
agreement.
13. Construction. This Agreement shall be governed under and construed in
------------
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or interpretation of this Agreement. It
is intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.
11
<PAGE>
14. Severability. If any portion or provision of this Agreement is
------------
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected The covenants in this Agreement are severable and separate, and the
unenforceability of any specific covenant shall not affect the enforceability of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and this
Agreement shall thereby be reformed.
15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and in the year first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Dr. Alfred E. Osborne, Jr.
------------------------------
Name: Dr. Alfred E. Osborne, Jr.
Title: Chairman, Compensation Committee of the
Board of Directors
EXECUTIVE
KENNETH I. WELLINGS
/s/ Kenneth I. Wellings
-----------------------
Signature
12
<PAGE>
EXHIBIT 10.07
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of August 26, 1998, by and between UNITED STATES FILTER CORPORATION, a
Delaware corporation (the "Company"), and KEVIN L. SPENCE ("Executive").
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into this Agreement
to assure the Company of the continuing and exclusive service of Executive and
to set forth the terms and conditions of Executive's employment with the
Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties agree as follows:
1. Employment.
----------
1.1 Title and Duties. The Company hereby employs Executive as
----------------
Executive Vice President and Chief Financial Officer of the Company. Executive's
duties, responsibilities and authority shall be consistent with Executive's
position and shall include such other duties, responsibilities and authority as
may be assigned to Executive by the Board of Directors of the Company (the
"Board") or the Chief Executive Officer of the Company (the "CEO").
1.2 Services and Exclusivity of Services. The Company and Executive
------------------------------------
recognize that the services to be rendered by Executive are of such a nature as
to be peculiarly rendered by Executive, encompass the individual ability,
managerial skills and business experience of Executive and cannot be measured
exclusively in terms of hours or services rendered in any particular period.
Executive agrees to devote Executive's full business time and to use Executive's
best efforts, energy and ability exclusively toward advancing the business,
affairs and interests of the Company, and matters related thereto.
1
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1.3 Noncompetition and Nonsolicitation. Executive agrees that during
----------------------------------
the Term (as defined in Section 2 below) of this Agreement (and in the case of
termination pursuant to Section 5 below for a period of one year thereafter),
Executive will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries
or affiliates, nor without the prior written consent of the Board directly or
indirectly have any interest in, own, manage, operate, control, be connected
with as a stockholder, joint venturer, officer, employee, partner or consultant,
or otherwise engage, invest or participate in any business that is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 1.3 shall prevent Executive from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
Executive's own account and benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and are consistent with the conflict of interest
policies maintained by the Company from time to time. Executive further agrees
that during the Term of this Agreement (and in the case of termination pursuant
to Section 5 below for a period of one year thereafter) Executive will not, in
any manner, directly or indirectly induce or attempt to induce any employee of
the Company to terminate or abandon his or her employment for any purpose
whatsoever (other than for poor performance of an employee employed by the
Company at such time).
2. Term. The period of employment under this Agreement (the "Term")
----
shall commence as of the date first set forth above, (the "Effective Date") and
shall continue for a period of thirty-six (36) full calendar months thereafter,
as herein provided. Unless the Company or the Executive gives written notice to
the other party to the contrary at least 60 days prior to the end of the Term
(including any extension), on the first day of the month following the Effective
Date, and on the first day of each month thereafter, the Term shall be
automatically extended by one full calendar month. The Term shall continue until
the expiration of all automatic extensions affected as aforesaid unless and
until it ceases or is terminated sooner as provided in this Agreement.
2
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3. Compensation.
------------
3.1 Base Salary. During the Term, the Company will pay to Executive a
-----------
base salary at the rate of US$325,000 per year, payable in accordance with the
Company practices in effect from time to time ("Base Salary"). Amounts payable
shall be reduced by standard withholding and other authorized deductions. Such
Base Salary shall be reviewed for increase (but not decrease) in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company not less frequently than annually during the Term. In conducting any
such review, the Compensation Committee shall consider and take into account,
among other things, any change in Executive's responsibilities, performance of
Executive, and compensation of other similarly situated executives of the
Company and other comparable companies and other pertinent factors. Executive's
Base Salary shall not be decreased except upon mutual agreement between the
parties.
3.2 Bonuses, Incentive, Savings and Retirement Plans, Welfare Benefit
-----------------------------------------------------------------
Plans. Executive shall be entitled to participate in all annual and long-term
- -----
bonuses and incentive, savings and retirement plans generally available to other
similarly situated executive employees of the Company. Executive, and
Executive's family as the case may be, shall be eligible to participate in and
receive all benefits under welfare benefit plans, practices, programs and
policies provided to other similarly situated executive employees of the
Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other similarly situated peer executives and
does not single out Executive.
3.3 Fringe Benefits. Executive shall be entitled to receive fringe
---------------
benefits consistent with Executive's duties and position, and in accordance with
the benefits provided to other similarly situated executive employees of the
Company. Such benefits shall include the full time use of an automobile,
including reimbursement for all operating and maintenance costs, consistent with
the Company's corporate policy on automobiles as in effect from time to time.
The Company reserves the right to modify, suspend or discontinue any and all of
its fringe benefits referred to in this Section 3.3 at any time without recourse
by Executive so long as such
3
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action is taken generally with respect to other similarly situated peer
executives and does not single out Executive.
3.4 Expenses. Executive shall be entitled to reimbursement for
--------
expenses incurred in the furtherance of the business of the Company in
accordance with the Company's practices and procedures, as they may exist from
time to time. Executive shall keep complete and accurate records of all
expenditures such that Executive may fully account according to the Company's
practices and procedures.
3.5 Vacation. Executive shall be entitled to paid vacations and other
--------
absences from work that are reasonably consistent with the performance of
Executive's duties as provided in this Agreement. Such vacations and absences
shall be in accordance with those generally provided to other similarly situated
executive employees.
3.6 Additional Benefits Upon a Change of Control.
--------------------------------------------
(a) In the event a Change of Control occurs during the Term, the
Executive's benefit in the U. S. Filter Supplemental Executive Retirement Plan
shall immediately become fully vested.
(b) In the event a Change of Control occurs during the Term, the
Executive shall be entitled to receive, within thirty (30) days after the Change
of Control, a cash lump sum amount equal to :
(i) Executive's Base Salary for the balance of the
Term, plus the target annual incentive bonus scheduled for the year in
which there is a Change of Control and each year thereafter for the
balance of the Term (determined without regard to any performance
goals); plus
(ii) the present value (as determined by a nationally
recognized employee benefits consulting firm agreed to by Executive and
the Company) of the health, life insurance, disability and accident
insurance plans or programs covering Executive for the balance of the
Term.
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(c) "Change of Control" shall mean the occurrence of any of the
following:
(i) the acquisition by any person (including any
syndicate or group deemed to be a "person" under Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor provision to either of the foregoing,
of "beneficial ownership" directly or indirectly, of shares of capital
stock of the Company entitling such person to exercise 50% or more of
the total voting power of all "Voting Shares" of the Company;
(ii) during any year or any period of two consecutive
years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute
the Board, and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition)
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved (hereinafter referred to as "Continuing
Directors"), cease for any reason to constitute at least a majority
thereof;
(iii) any consolidation of the Company with, or merger
of the Company into, any other person, any merger of another person into
the Company, or any sale or transfer of all or substantially all of the
assets of the Company to another person (other than (x) a consolidation
or merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of capital stock other
than shares of capital stock owned by any of the parties to the
consolidation or merger or (y) a merger which is effected solely to
change the jurisdiction of incorporation of the Company or (z) any
consolidation with or merger of the Company into a wholly owned
subsidiary, or any sale or transfer by the Company of all of
substantially all of its assets to one or more of its wholly owned
subsidiaries in any one transaction or a series of transactions; or
5
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(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company.
Notwithstanding the foregoing, unless otherwise determined by the Board
of Directors, no change in control of the Company shall be deemed to
have occurred if (x) the Executive is a member of a group which first
announces a proposal which, if successful, would result in a Change of
Control, which proposal (including any modifications thereof) is
ultimately successful, or (y) the Executive acquires a two percent or
more equity interest in the entity which ultimately acquires the Company
pursuant to the transaction described in (x) of this paragraph.
"Beneficial Ownership" shall be determined in accordance with Rule 13d-3
promulgated under the Exchange Act, except that a person shall be deemed
to be the "beneficial owner" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time.
"Voting Share" means all outstanding shares of any class or classes
(however designated) of capital stock of the Company entitled to vote
generally in the election of the Board of Directors of the Company.
4. Confidential Information.
4.1 General. Executive acknowledges that during employment by and as a
-------
result of a relationship with the Company, Executive will obtain knowledge of
and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively
6
<PAGE>
referred to herein as "Confidential Information"). Executive agrees that during
the Term of this Agreement and, to the fullest extent permitted by law,
thereafter, Executive will, in a fiduciary capacity for the benefit of the
Company, hold all Confidential Information strictly in confidence and will not
directly or indirectly reveal, report, disclose, publish or transfer any of such
Confidential Information to any person, firm or other entity, or utilize any of
the Confidential Information for any purpose, except in furtherance of
Executive's employment under this Agreement.
4.2 Proprietary Interest. All inventions, designs, improvements,
--------------------
patents, copyrights and discoveries conceived by Executive during the Term of
this Agreement that are useful in or directly or indirectly related to the
business of the Company or to any experimental work carried on by the Company,
shall be the property of the Company. Executive will promptly and fully disclose
to the Company all such inventions, designs, improvements, patents, copyrights
and discoveries (whether developed individually or with other persons) and shall
take all steps necessary and reasonably required to assure the Company's
ownership thereof and to assist the Company in protecting or defending the
Company's proprietary rights therein.
4.3 Return of Materials. Executive expressly acknowledges that all
-------------------
lists, books, records and other Confidential Information of the Company obtained
in connection with the Company's business is the exclusive property of the
Company and that upon the expiration or earlier termination of this Agreement,
Executive will immediately surrender and return to the Company all such items
and all other property belonging to the Company then in the possession of
Executive, and Executive shall not make or retain any copies thereof.
5. Termination Prior to Expiration of Term. Executive's employment, and
---------------------------------------
his rights under this Agreement, may be terminated prior to the expiration of
the Term of this Agreement only as provided in this section 5.
7
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5.1 Death or Disability.
-------------------
(a) The Company may terminate the Executive's employment hereunder
due to death or Disability (as defined below). If Executive's employment is
terminated as a result of death or Disability, Executive (or Executive's estate
or personal representative in the event of death) shall be entitled to receive
Executive's full Base Salary until the expiration of six months from the date on
which Executive was first unable to substantially perform his duties hereunder
and, as of the last day of such six month period, shall be entitled to receive a
lump sum payment equal to an additional six months of Base Salary. Executive
and/or Executive's dependents shall be entitled to continue to participate in
the Company's welfare benefit plans and programs on the same terms as similarly
situated active employees for a period of twelve months from the date Executive
was first unable to substantially perform Executive's duties hereunder.
Executive and/or Executive's dependents shall thereafter be entitled to any
continuation of such benefits provided under such benefit plans or by applicable
law.
(b) "Disability" shall mean a total and permanent physical or
mental impairment that substantially limits a major life activity of Executive
and that renders Executive unable to perform the essential functions of
Executive's position, even with reasonable accommodation that does not impose an
undue hardship on the Company. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and/or
Executive's medical personnel or others selected by the Company or its insurers.
5.2 Termination by the Company for Cause.
------------------------------------
(a) The Company may terminate the Executive's employment hereunder
for Cause (as hereinafter defined). If the Company terminates the Executive's
employment hereunder for Cause, the Executive shall be entitled to receive (1)
all Base Salary due employee as of the date of termination, (2) any previously
authorized bonus (if any) for the period of Executive's employment prior to the
discharge or resignation, and (3) any previously vested
8
<PAGE>
benefits, such as previously vested retirement benefits. Furthermore, the
Company shall honor any rights previously vested in Executive under a stock
option or similar plan or program.
(b) "Cause" shall mean (1) the Executive's conviction of a felony;
(2) a material breach of this Agreement by the Executive and/or the Executive's
gross neglect of his duties hereunder; or (3) the Executive's addiction to
alcohol or to a drug not prescribed by a physician.
5.3 Termination Without Cause or Termination for Good Reason.
--------------------------------------------------------
(a) The Company may terminate the Executive's employment hereunder
without Cause, and the Executive shall be permitted to terminate his employment
hereunder for Good Reason (as hereinafter defined). If the Company terminates
the Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination for Good Reason, the
Executive shall be entitled to receive all the benefits provided for under
Section 3.6 of this Agreement.
(b) "Good Reason" means and shall be deemed to exist if, without
the prior written consent of the Executive, (1) the Executive suffers a
reduction in duties, responsibilities or effective authority associated with his
titles and positions as set forth and described in this Agreement or is assigned
any duties or responsibilities inconsistent in any material respect therewith;
(2) the Company fails to substantially perform any material term or provision of
this Agreement; or (3) the Executive's compensation or benefits provided for
hereunder is decreased.
5.4 Voluntary Termination.
---------------------
(a) The Executive may effect a Voluntary Termination (as
hereinafter defined) of his employment hereunder by giving not less than nine
(9) months prior written notice to the Company. If the Executive effects a
Voluntary Termination after such notice (or upon replacement of the Executive if
Executive is replaced during the notice period) without accepting other
employment with a title and/or duties similar to those provided hereunder (a
"Successor Position"), the Executive shall be entitled to receive all the
benefits provided for under Section 3.6 of this Agreement, less the nine (9)
months (or such lesser period upon
9
<PAGE>
replacement) of compensation paid during the notice period. If the Employee
effects a Voluntary Termination without providing the notice required by this
section, or for the purpose of accepting a Successor Position, the Executive
shall be entitled to receive (1) all Base Salary due Executive as of the date of
termination, (2) any previously authorized bonus (if any) for the period of
Executive's employment prior to the discharge or resignation, and (3) any
previously vested benefits, such as previously vested retirement benefits.
Furthermore, the Company shall honor any rights previously vested in Executive
under a stock option or similar plan or program.
(b) "Voluntary Termination" shall mean a termination of employment
by the Executive on his own initiative other than (1) a termination due to
Disability or (2) a termination for Good Reason.
5.5 Gross-up of Parachute Payments. If any payment or benefit to which
-------------------------------
the Executive becomes entitled from the Company will be subject to the tax
imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"),
the Company shall pay to the Executive at the time specified below, an
additional amount (the "Gross-up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income tax and Excise Tax
upon the payment provided for by this subsection, shall be equal to the Total
Payments. For purposes of determining whether any of such payments or benefits
will be subject to the Excise Tax, and the amount of such Excise Tax, (i) any
over payments or benefits received or to be received by the Executive in
connection with a Change of Control or his termination of employment, whether
pursuant to the terms of this Agreement or otherwise (which together with the
payments and benefits pursuant to this Agreement, constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive such other payments or benefits (in
whole or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the Code in excess
of the base amount within the meaning of section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments
10
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which shall be treated as subject to the Excise Tax shall be equal to the lesser
of (A) the total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of section 280G(b)(l) (after applying
paragraph (i), above), and (iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the sate and locality of his residence, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of his employment, the Executive shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the Gross-Up Payment being repaid by him
if such repayment results in reduction in Excise Tax and/or a federal and state
and local income tax deduction) plus interest on the amount of such repayment at
the rate provided in section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of payment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest payable with respect to such excess) at the time that the amount of
such excess is finally determined. If the amounts of any payments under this
Agreement cannot be finally determined on or before the payment date otherwise
scheduled for payment, the Company shall pay to the Executive on such date an
estimate, as determined in good faith by the Company, of the minimum amount of
such payment and shall pay the reminder of such payments (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive payable on the
fifth day after demand by the Company (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
11
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6. Arbitration.
-----------
6.1 General. Any dispute, controversy or claim arising out of or
-------
relating to this Agreement, the breach hereof or the coverage or enforceability
of this arbitration provision shall be settled by arbitration in Riverside
County, California (or such other location as the Company and Executive may
mutually agree), conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as such rules are in effect in
Riverside on the date of delivery of demand for arbitration. The arbitration of
any such issue, including the determination of the amount of any damages
suffered by either party hereto by reason of the acts or omissions of the other,
shall be to the exclusion of any court of law. Notwithstanding the foregoing,
either party hereto may seek any provisional remedy in a court, including but
not limited to an action for injunctive relief or attachment, without waiving
the right to arbitration.
6.2 Procedure. There shall be three arbitrators, one to be chosen by
---------
each party at will within 10 days from the date of delivery of demand for
arbitration and the third arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a third arbitrator within 10
days after the last of the two arbitrators is chosen by the parties, the third
arbitrator will be designated, on application by either party, by the American
Arbitration Association. The decision of a majority of the arbitrators shall be
final and binding on both parties and their respective heirs, executors,
administrators, personal representatives, successors and assigns. Judgment upon
any award of the arbitrators may be entered in any court having jurisdiction, or
application may be made to any such court for the judicial acceptance of the
award and for an order of enforcement.
6.3 Costs and Expenses. The Company shall pay the fees of all
------------------
arbitrators, witnesses and such other expenses as may be generated by the
arbitration, except Executive's attorneys fees, unless a majority of the
arbitrators concludes that such arbitration procedure was not instituted in good
faith by Executive. In such event the arbitrators shall be empowered to allocate
fees and assess costs and other expenses of the arbitration, except attorneys
fees, as they may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.
12
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7. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Executive. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
8. Remedies. Executive acknowledges that the services Executive is to
--------
render under this Agreement are of a unique and special nature, the loss of
which cannot reasonably or adequately be compensated for in monetary damages,
and that irreparable injury and damage will result to the Company in the event
of any default or breach of this Agreement by Executive. Because of the unique
nature of the Confidential Information, Executive further acknowledges and
agrees that the Company will suffer irreparable harm if Executive fails to
comply with the obligations in section 4 hereof and that monetary damages would
be inadequate to compensate the Company for such breach. Accordingly, Executive
agrees that the Company will, in addition to any other remedies available to it
at law, in equity or, without limitation, otherwise, be entitled to injunctive
relief and/or specific performance to enforce the terms, or prevent or remedy
the violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
9. Survival. The provisions of sections 4, 5, 6 and 8 shall survive the
--------
expiration or earlier termination of this Agreement.
10. Notices. Any notices or other communications relating to this Agreement
-------
shall be in writing and delivered personally or mailed by certified mail, return
receipt requested, to the party concerned at the address set forth below:
If to Company: United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Attn: General Counsel
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If to Executive: At Executive's residence address as maintained
by the Company in the regular course of its
business for payroll purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 10.
11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. Without limiting the generality of the foregoing
sentence, this Agreement supersedes the Executive Retention Agreement and the
First Amended and Restated United States Filter Corporation Executive Severance
Pay Plan. This Agreement may not be changed orally, but only by an agreement in
writing signed by both parties.
12. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
agreement.
13. Construction. This Agreement shall be governed under and construed in
------------
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or interpretation of this Agreement. It
is intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.
14. Severability. If any portion or provision of this Agreement is
------------
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected The covenants in this Agreement are severable and separate, and the
unenforceability of any specific covenant shall not affect the enforceability of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and this
Agreement shall thereby be reformed.
14
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15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and in the year first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Dr. Alfred E. Osborne, Jr.
---------------------------------------
Name: Dr. Alfred E. Osborne, Jr.
---------------------------------------
Title: Chairman, Compensation Committee of the
---------------------------------------
Board of Directors
---------------------------------------
EXECUTIVE
KEVIN L. SPENCE
/s/ Kevin L. Spence
-------------------
Signature
15
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EXHIBIT 10.08
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
August 26, 1998, by and between UNITED STATES FILTER CORPORATION, a Delaware
corporation (the "Company"), and DAMIAN C. GEORGINO ("Executive").
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into this Agreement to
assure the Company of the continuing and exclusive service of Executive and to
set forth the terms and conditions of Executive's employment with the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
1. Employment.
----------
1.1 Title and Duties. The Company hereby employs Executive as Executive
----------------
Vice President, General Counsel and Corporate Secretary of the Company.
Executive's duties, responsibilities and authority shall be consistent with
Executive's position and shall include such other duties, responsibilities and
authority as may be assigned to Executive by the Board of Directors of the
Company (the "Board") or the Chief Executive Officer of the Company (the "CEO").
1.2 Services and Exclusivity of Services. The Company and Executive
------------------------------------
recognize that the services to be rendered by Executive are of such a nature as
to be peculiarly rendered by Executive, encompass the individual ability,
managerial skills and business experience of Executive and cannot be measured
exclusively in terms of hours or services rendered in any particular period.
Executive agrees to devote Executive's full business time and to use
1
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Executive's best efforts, energy and ability exclusively toward advancing the
business, affairs and interests of the Company, and matters related thereto.
1.3 Noncompetition and Nonsolicitation. Executive agrees that during the
----------------------------------
Term (as defined in Section 2 below) of this Agreement (and in the case of
termination pursuant to Section 5 below for a period of one year thereafter),
Executive will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries
or affiliates, nor without the prior written consent of the Board directly or
indirectly have any interest in, own, manage, operate, control, be connected
with as a stockholder, joint venturer, officer, employee, partner or consultant,
or otherwise engage, invest or participate in any business that is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 1.3 shall prevent Executive from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
Executive's own account and benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and are consistent with the conflict of interest
policies maintained by the Company from time to time. Executive further agrees
that during the Term of this Agreement (and in the case of termination pursuant
to Section 5 below for a period of one year thereafter) Executive will not, in
any manner, directly or indirectly induce or attempt to induce any employee of
the Company to terminate or abandon his or her employment for any purpose
whatsoever (other than for poor performance of an employee employed by the
Company at such time).
2. Term. The period of employment under this Agreement (the "Term")
----
shall commence as of the date first set forth above, (the "Effective Date")
and shall continue for a period of thirty-six (36) full calendar months
thereafter, as herein provided. Unless the Company or the Executive gives
written notice to the other party to the contrary at least 60 days prior to the
end of the Term (including any extension), on the first day of the month
following the Effective Date, and on the first day of each month thereafter,
the Term shall be automatically extended by one full calendar month. The Term
shall continue until the expiration of all automatic extensions
2
<PAGE>
affected as aforesaid unless and until it ceases or is terminated sooner as
provided in this Agreement.
3. Compensation.
------------
3.1 Base Salary. During the Term, the Company will pay to Executive a
-----------
base salary at the rate of US$300,000 per year, payable in accordance with the
Company practices in effect from time to time ("Base Salary"). Amounts payable
shall be reduced by standard withholding and other authorized deductions. Such
Base Salary shall be reviewed for increase (but not decrease) in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company not less frequently than annually during the Term. In conducting any
such review, the Compensation Committee shall consider and take into account,
among other things, any change in Executive's responsibilities, performance of
Executive, and compensation of other similarly situated executives of the
Company and other comparable companies and other pertinent factors. Executive's
Base Salary shall not be decreased except upon mutual agreement between the
parties.
3.2 Bonuses, Incentive, Savings and Retirement Plans, Welfare Benefit
-----------------------------------------------------------------
Plans. Executive shall be entitled to participate in all annual and long-term
- -----
bonuses and incentive, savings and retirement plans generally available to other
similarly situated executive employees of the Company. Executive, and
Executive's family as the case may be, shall be eligible to participate in and
receive all benefits under welfare benefit plans, practices, programs and
policies provided to other similarly situated executive employees of the
Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other similarly situated peer executives and
does not single out Executive.
3.3 Fringe Benefits. Executive shall be entitled to receive fringe
---------------
benefits consistent with Executive's duties and position, and in accordance with
the benefits provided to other similarly situated executive employees of the
Company. Such benefits shall include the full time use of an automobile,
including reimbursement for all operating and maintenance costs,
3
<PAGE>
consistent with the Company's corporate policy on automobiles as in effect from
time to time. The Company reserves the right to modify, suspend or discontinue
any and all of its fringe benefits referred to in this Section 3.3 at any time
without recourse by Executive so long as such action is taken generally with
respect to other similarly situated peer executives and does not single out
Executive.
3.4 Expenses. Executive shall be entitled to reimbursement for expenses
--------
incurred in the furtherance of the business of the Company in accordance with
the Company's practices and procedures, as they may exist from time to time.
Executive shall keep complete and accurate records of all expenditures such that
Executive may fully account according to the Company's practices and procedures.
3.5 Vacation. Executive shall be entitled to paid vacations and other
--------
absences from work that are reasonably consistent with the performance of
Executive's duties as provided in this Agreement. Such vacations and absences
shall be in accordance with those generally provided to other similarly situated
executive employees.
3.6 Additional Benefits Upon a Change of Control.
--------------------------------------------
(a) In the event a Change of Control occurs during the Term, the
Executive's benefit in the U. S. Filter Supplemental Executive Retirement Plan
shall immediately become fully vested.
(b) In the event a Change of Control occurs during the Term, the
Executive shall be entitled to receive, within thirty (30) days after the Change
of Control, a cash lump sum amount equal to:
(i) Executive's Base Salary for the balance of the Term, plus
the target annual incentive bonus scheduled for the year in which there is
a Change of Control and each year thereafter for the balance of the Term
(determined without regard to any performance goals); plus
(ii) the present value (as determined by a nationally
recognized employee benefits consulting firm agreed to by Executive and the
Company)
4
<PAGE>
of the health, life insurance, disability and accident insurance
plans or programs covering Executive for the balance of the Term.
(c) "Change of Control" shall mean the occurrence of any of the
following:
(i) the acquisition by any person (including any syndicate or
group deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision to either of the foregoing, of "beneficial ownership"
directly or indirectly, of shares of capital stock of the Company entitling
such person to exercise 50% or more of the total voting power of all
"Voting Shares" of the Company;
(ii) during any year or any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in clause
(i), (iii) or (iv) of this definition) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved (hereinafter referred to
as "Continuing Directors"), cease for any reason to constitute at least a
majority thereof;
(iii) any consolidation of the Company with, or merger of the
Company into, any other person, any merger of another person into the
Company, or any sale or transfer of all or substantially all of the assets
of the Company to another person (other than (x) a consolidation or merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock other than shares of
capital stock owned by any of the parties to the consolidation or merger or
(y) a merger which is effected solely to change the jurisdiction of
incorporation of the Company or (z) any consolidation with or merger of the
Company into a wholly owned subsidiary, or any sale or transfer by the
Company of all of substantially all of its assets
5
<PAGE>
to one or more of its wholly owned subsidiaries in any one transaction or a
series of transactions; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company.
Notwithstanding the foregoing, unless otherwise determined by the Board of
Directors, no change in control of the Company shall be deemed to have
occurred if (x) the Executive is a member of a group which first announces
a proposal which, if successful, would result in a Change of Control, which
proposal (including any modifications thereof) is ultimately successful, or
(y) the Executive acquires a two percent or more equity interest in the
entity which ultimately acquires the Company pursuant to the transaction
described in (x) of this paragraph.
"Beneficial Ownership" shall be determined in accordance with Rule 13d-3
promulgated under the Exchange Act, except that a person shall be deemed to
be the "beneficial owner" of all securities that such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time.
"Voting Share" means all outstanding shares of any class or classes
(however designated) of capital stock of the Company entitled to vote
generally in the election of the Board of Directors of the Company.
4. Confidential Information.
4.1 General. Executive acknowledges that during employment by and as a
-------
result of a relationship with the Company, Executive will obtain knowledge of
and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
6
<PAGE>
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively referred to herein as
"Confidential Information"). Executive agrees that during the Term of this
Agreement and, to the fullest extent permitted by law, thereafter, Executive
will, in a fiduciary capacity for the benefit of the Company, hold all
Confidential Information strictly in confidence and will not directly or
indirectly reveal, report, disclose, publish or transfer any of such
Confidential Information to any person, firm or other entity, or utilize any of
the Confidential Information for any purpose, except in furtherance of
Executive's employment under this Agreement.
4.2 Proprietary Interest. All inventions, designs, improvements,
--------------------
patents, copyrights and discoveries conceived by Executive during the Term of
this Agreement that are useful in or directly or indirectly related to the
business of the Company or to any experimental work carried on by the Company,
shall be the property of the Company. Executive will promptly and fully disclose
to the Company all such inventions, designs, improvements, patents, copyrights
and discoveries (whether developed individually or with other persons) and shall
take all steps necessary and reasonably required to assure the Company's
ownership thereof and to assist the Company in protecting or defending the
Company's proprietary rights therein.
4.3 Return of Materials. Executive expressly acknowledges that all
-------------------
lists, books, records and other Confidential Information of the Company obtained
in connection with the Company's business is the exclusive property of the
Company and that upon the expiration or earlier termination of this Agreement,
Executive will immediately surrender and return to the Company all such items
and all other property belonging to the Company then in the possession of
Executive, and Executive shall not make or retain any copies thereof.
5. Termination Prior to Expiration of Term. Executive's employment, and his
---------------------------------------
rights under this Agreement, may be terminated prior to the expiration of the
Term of this Agreement only as provided in this section 5.
7
<PAGE>
5.1 Death or Disability.
-------------------
(a) The Company may terminate the Executive's employment hereunder
due to death or Disability (as defined below). If Executive's employment is
terminated as a result of death or Disability, Executive (or Executive's estate
or personal representative in the event of death) shall be entitled to receive
Executive's full Base Salary until the expiration of six months from the date on
which Executive was first unable to substantially perform his duties hereunder
and, as of the last day of such six month period, shall be entitled to receive a
lump sum payment equal to an additional six months of Base Salary. Executive
and/or Executive's dependents shall be entitled to continue to participate in
the Company's welfare benefit plans and programs on the same terms as similarly
situated active employees for a period of twelve months from the date Executive
was first unable to substantially perform Executive's duties hereunder.
Executive and/or Executive's dependents shall thereafter be entitled to any
continuation of such benefits provided under such benefit plans or by applicable
law.
(b) "Disability" shall mean a total and permanent physical or mental
impairment that substantially limits a major life activity of Executive and that
renders Executive unable to perform the essential functions of Executive's
position, even with reasonable accommodation that does not impose an undue
hardship on the Company. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and/or
Executive's medical personnel or others selected by the Company or its insurers.
5.2 Termination by the Company for Cause.
------------------------------------
(a) The Company may terminate the Executive's employment hereunder
for Cause (as hereinafter defined). If the Company terminates the Executive's
employment hereunder for Cause, the Executive shall be entitled to receive (1)
all Base Salary due employee as of the date of termination, (2) any previously
authorized bonus (if any) for the period of Executive's employment prior to the
discharge or resignation, and (3) any previously vested
8
<PAGE>
benefits, such as previously vested retirement benefits. Furthermore, the
Company shall honor any rights previously vested in Executive under a stock
option or similar plan or program.
(b) "Cause" shall mean (1) the Executive's conviction of a felony;
(2) a material breach of this Agreement by the Executive and/or the Executive's
gross neglect of his duties hereunder; or (3) the Executive's addiction to
alcohol or to a drug not prescribed by a physician.
5.3 Termination Without Cause or Termination for Good Reason.
--------------------------------------------------------
(a) The Company may terminate the Executive's employment hereunder
without Cause, and the Executive shall be permitted to terminate his employment
hereunder for Good Reason (as hereinafter defined). If the Company terminates
the Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination for Good Reason, the
Executive shall be entitled to receive all the benefits provided for under
Section 3.6 of this Agreement.
(b) "Good Reason" means and shall be deemed to exist if, without the
prior written consent of the Executive, (1) the Executive suffers a reduction in
duties, responsibilities or effective authority associated with his titles and
positions as set forth and described in this Agreement or is assigned any duties
or responsibilities inconsistent in any material respect therewith; (2) the
Company fails to substantially perform any material term or provision of this
Agreement; or (3) the Executive's compensation or benefits provided for
hereunder is decreased.
5.4 Voluntary Termination.
---------------------
(a) The Executive may effect a Voluntary Termination (as hereinafter
defined) of his employment hereunder by giving not less than nine (9) months
prior written notice to the Company. If the Executive effects a Voluntary
Termination after such notice (or upon replacement of the Executive if Executive
is replaced during the notice period) without accepting other employment with a
title and/or duties similar to those provided hereunder (a "Successor
Position"), the Executive shall be entitled to receive all the benefits provided
for under Section 3.6 of this Agreement, less the nine (9) months (or such
lesser period upon
9
<PAGE>
replacement) of compensation paid during the notice period. If the Employee
effects a Voluntary Termination without providing the notice required by this
section, or for the purpose of accepting a Successor Position, the Executive
shall be entitled to receive (1) all Base Salary due Executive as of the date of
termination, (2) any previously authorized bonus (if any) for the period of
Executive's employment prior to the discharge or resignation, and (3) any
previously vested benefits, such as previously vested retirement benefits.
Furthermore, the Company shall honor any rights previously vested in Executive
under a stock option or similar plan or program.
(b) "Voluntary Termination" shall mean a termination of employment
by the Executive on his own initiative other than (1) a termination due to
Disability or (2) a termination for Good Reason.
5.5 Gross-up of Parachute Payments. If any payment or benefit to which
------------------------------
the Executive becomes entitled from the Company will be subject to the tax
imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"),
the Company shall pay to the Executive at the time specified below, an
additional amount (the "Gross-up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income tax and Excise Tax
upon the payment provided for by this subsection, shall be equal to the Total
Payments. For purposes of determining whether any of such payments or benefits
will be subject to the Excise Tax, and the amount of such Excise Tax, (i) any
over payments or benefits received or to be received by the Executive in
connection with a Change of Control or his termination of employment, whether
pursuant to the terms of this Agreement or otherwise (which together with the
payments and benefits pursuant to this Agreement, constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive such other payments or benefits (in
whole or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the Code in excess
of the base amount within the meaning of section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments
10
<PAGE>
which shall be treated as subject to the Excise Tax shall be equal to the lesser
of (A) the total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of section 280G(b)(l) (after applying
paragraph (i), above), and (iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the sate and locality of his residence, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of his employment, the Executive shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the Gross-Up Payment being repaid by him
if such repayment results in reduction in Excise Tax and/or a federal and state
and local income tax deduction) plus interest on the amount of such repayment at
the rate provided in section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of payment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest payable with respect to such excess) at the time that the amount of
such excess is finally determined. If the amounts of any payments under this
Agreement cannot be finally determined on or before the payment date otherwise
scheduled for payment, the Company shall pay to the Executive on such date an
estimate, as determined in good faith by the Company, of the minimum amount of
such payment and shall pay the reminder of such payments (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive payable on the
fifth day after demand by the Company (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
11
<PAGE>
6. Arbitration.
-----------
6.1 General. Any dispute, controversy or claim arising out of or
-------
relating to this Agreement, the breach hereof or the coverage or enforceability
of this arbitration provision shall be settled by arbitration in Riverside
County, California (or such other location as the Company and Executive may
mutually agree), conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as such rules are in effect in
Riverside on the date of delivery of demand for arbitration. The arbitration of
any such issue, including the determination of the amount of any damages
suffered by either party hereto by reason of the acts or omissions of the other,
shall be to the exclusion of any court of law. Notwithstanding the foregoing,
either party hereto may seek any provisional remedy in a court, including but
not limited to an action for injunctive relief or attachment, without waiving
the right to arbitration.
6.2 Procedure. There shall be three arbitrators, one to be chosen by
---------
each party at will within 10 days from the date of delivery of demand for
arbitration and the third arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a third arbitrator within 10
days after the last of the two arbitrators is chosen by the parties, the third
arbitrator will be designated, on application by either party, by the American
Arbitration Association. The decision of a majority of the arbitrators shall be
final and binding on both parties and their respective heirs, executors,
administrators, personal representatives, successors and assigns. Judgment upon
any award of the arbitrators may be entered in any court having jurisdiction, or
application may be made to any such court for the judicial acceptance of the
award and for an order of enforcement.
6.3 Costs and Expenses. The Company shall pay the fees of all
------------------
arbitrators, witnesses and such other expenses as may be generated by the
arbitration, except Executive's attorneys fees, unless a majority of the
arbitrators concludes that such arbitration procedure was not instituted in good
faith by Executive. In such event the arbitrators shall be empowered to allocate
fees and assess costs and other expenses of the arbitration, except attorneys
fees, as they may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.
12
<PAGE>
7. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Executive. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
8. Remedies. Executive acknowledges that the services Executive is to
--------
render under this Agreement are of a unique and special nature, the loss of
which cannot reasonably or adequately be compensated for in monetary damages,
and that irreparable injury and damage will result to the Company in the event
of any default or breach of this Agreement by Executive. Because of the unique
nature of the Confidential Information, Executive further acknowledges and
agrees that the Company will suffer irreparable harm if Executive fails to
comply with the obligations in section 4 hereof and that monetary damages would
be inadequate to compensate the Company for such breach. Accordingly, Executive
agrees that the Company will, in addition to any other remedies available to it
at law, in equity or, without limitation, otherwise, be entitled to injunctive
relief and/or specific performance to enforce the terms, or prevent or remedy
the violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
9. Survival. The provisions of sections 4, 5, 6 and 8 shall survive the
--------
expiration or earlier termination of this Agreement.
10. Notices. Any notices or other communications relating to this Agreement
-------
shall be in writing and delivered personally or mailed by certified mail, return
receipt requested, to the party concerned at the address set forth below:
If to Company: United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Attn: General Counsel
13
<PAGE>
If to Executive: At Executive's residence address as maintained by
the Company in the regular course of its business
for payroll purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 10.
11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. Without limiting the generality of the foregoing
sentence, this Agreement supersedes the Executive Retention Agreement and the
First Amended and Restated United States Filter Corporation Executive Severance
Pay Plan. This Agreement may not be changed orally, but only by an agreement in
writing signed by both parties.
12. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
agreement.
13. Construction. This Agreement shall be governed under and construed in
------------
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or interpretation of this Agreement. It
is intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.
14. Severability. If any portion or provision of this Agreement is
------------
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected The covenants in this Agreement are severable and separate, and the
unenforceability of any specific covenant shall not affect the enforceability of
any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.
14
<PAGE>
15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and in the year first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Dr. Alfred E. Osborne, Jr.
---------------------------------------
Name: Dr. Alfred E. Osborne, Jr.
---------------------------------------
Title: Chairman, Compensation Committee of the
---------------------------------------
Board of Directors
---------------------------------------
EXECUTIVE
DAMIAN C. GEORGINO
/s/ Damian C. Georgino
----------------------
Signature
15
<PAGE>
EXHIBIT 10.09
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
August 26, 1998, by and between UNITED STATES FILTER CORPORATION, a Delaware
corporation (the "Company"), and MICHAEL J. REARDON ("Executive").
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into this Agreement to
assure the Company of the continuing and exclusive service of Executive and to
set forth the terms and conditions of Executive's employment with the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties agree as follows:
1. Employment.
----------
1.1 Title and Duties. The Company hereby employs Executive as
----------------
Executive Vice President and Chief Administrative Officer of the Company.
Executive's duties, responsibilities and authority shall be consistent with
Executive's position and shall include such other duties, responsibilities and
authority as may be assigned to Executive by the Board of Directors of the
Company (the "Board") or the Chief Executive Officer of the Company (the "CEO").
1.2 Services and Exclusivity of Services. The Company and Executive
------------------------------------
recognize that the services to be rendered by Executive are of such a nature as
to be peculiarly rendered by Executive, encompass the individual ability,
managerial skills and business experience of Executive and cannot be measured
exclusively in terms of hours or services rendered in any particular period.
Executive agrees to devote Executive's full business time and to use Executive's
best efforts, energy and ability exclusively toward advancing the business,
affairs and interests of the Company, and matters related thereto.
1
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1.3 Noncompetition and Nonsolicitation. Executive agrees that during
----------------------------------
the Term (as defined in Section 2 below) of this Agreement (and in the case of
termination pursuant to Section 5 below for a period of one year thereafter),
Executive will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries
or affiliates, nor without the prior written consent of the Board directly or
indirectly have any interest in, own, manage, operate, control, be connected
with as a stockholder, joint venturer, officer, employee, partner or consultant,
or otherwise engage, invest or participate in any business that is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 1.3 shall prevent Executive from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
Executive's own account and benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and are consistent with the conflict of interest
policies maintained by the Company from time to time. Executive further agrees
that during the Term of this Agreement (and in the case of termination pursuant
to Section 5 below for a period of one year thereafter) Executive will not, in
any manner, directly or indirectly induce or attempt to induce any employee of
the Company to terminate or abandon his or her employment for any purpose
whatsoever (other than for poor performance of an employee employed by the
Company at such time).
2. Term. The period of employment under this Agreement (the "Term")
----
shall commence as of the date first set forth above, (the "Effective Date")
and shall continue for a period of thirty-six (36) full calendar months
thereafter, as herein provided. Unless the Company or the Executive gives
written notice to the other party to the contrary at least 60 days prior to the
end of the Term (including any extension), on the first day of the month
following the Effective Date, and on the first day of each month thereafter,
the Term shall be automatically extended by one full calendar month. The Term
shall continue until the expiration of all automatic extensions affected as
aforesaid unless and until it ceases or is terminated sooner as provided in this
Agreement.
2
<PAGE>
3. Compensation.
------------
3.1 Base Salary. During the Term, the Company will pay to
-----------
Executive a base salary at the rate of US$275,000 per year, payable in
accordance with the Company practices in effect from time to time ("Base
Salary"). Amounts payable shall be reduced by standard withholding and other
authorized deductions. Such Base Salary shall be reviewed for increase (but not
decrease) in the sole discretion of the Compensation Committee of the Board of
Directors of the Company not less frequently than annually during the Term. In
conducting any such review, the Compensation Committee shall consider and take
into account, among other things, any change in Executive's responsibilities,
performance of Executive, and compensation of other similarly situated
executives of the Company and other comparable companies and other pertinent
factors. Executive's Base Salary shall not be decreased except upon mutual
agreement between the parties.
3.2 Bonuses, Incentive, Savings and Retirement Plans, Welfare
---------------------------------------------------------
Benefit Plans. Executive shall be entitled to participate in all annual and
- -------------
long-term bonuses and incentive, savings and retirement plans generally
available to other similarly situated executive employees of the Company.
Executive, and Executive's family as the case may be, shall be eligible to
participate in and receive all benefits under welfare benefit plans, practices,
programs and policies provided to other similarly situated executive employees
of the Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other similarly situated peer executives and
does not single out Executive.
3.3 Fringe Benefits. Executive shall be entitled to receive
---------------
fringe benefits consistent with Executive's duties and position, and in
accordance with the benefits provided to other similarly situated executive
employees of the Company. Such benefits shall include the full time use of an
automobile, including reimbursement for all operating and maintenance costs,
consistent with the Company's corporate policy on automobiles as in effect from
time to time. The Company reserves the right to modify, suspend or discontinue
any and all of its fringe benefits referred to in this Section 3.3 at any time
without recourse by Executive so long as such
3
<PAGE>
action is taken generally with respect to other similarly situated peer
executives and does not single out Executive.
3.4 Expenses. Executive shall be entitled to reimbursement for
--------
expenses incurred in the furtherance of the business of the Company in
accordance with the Company's practices and procedures, as they may exist from
time to time. Executive shall keep complete and accurate records of all
expenditures such that Executive may fully account according to the Company's
practices and procedures.
3.5 Vacation. Executive shall be entitled to paid vacations and
--------
other absences from work that are reasonably consistent with the performance of
Executive's duties as provided in this Agreement. Such vacations and absences
shall be in accordance with those generally provided to other similarly situated
executive employees.
3.6 Additional Benefits Upon a Change of Control.
--------------------------------------------
(a) In the event a Change of Control occurs during the Term,
the Executive's benefit in the U. S. Filter Supplemental Executive Retirement
Plan shall immediately become fully vested.
(b) In the event a Change of Control occurs during the Term,
the Executive shall be entitled to receive, within thirty (30) days after the
Change of Control, a cash lump sum amount equal to:
(i) Executive's Base Salary for the balance of the
Term, plus the target annual incentive bonus scheduled for the year in
which there is a Change of Control and each year thereafter for the
balance of the Term (determined without regard to any performance
goals); plus
(ii) the present value (as determined by a
nationally recognized employee benefits consulting firm agreed to by
Executive and the Company) of the health, life insurance, disability and
accident insurance plans or programs covering Executive for the balance
of the Term.
4
<PAGE>
(c) "Change of Control" shall mean the occurrence of any of
the following:
(i) the acquisition by any person (including any
syndicate or group deemed to be a "person" under Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor provision to either of the foregoing,
of "beneficial ownership" directly or indirectly, of shares of capital
stock of the Company entitling such person to exercise 50% or more of
the total voting power of all "Voting Shares" of the Company;
(ii) during any year or any period of two consecutive
years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute
the Board, and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition)
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved (hereinafter referred to as "Continuing
Directors"), cease for any reason to constitute at least a majority
thereof;
(iii) any consolidation of the Company with, or merger
of the Company into, any other person, any merger of another person into
the Company, or any sale or transfer of all or substantially all of the
assets of the Company to another person (other than (x) a consolidation
or merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of capital stock other
than shares of capital stock owned by any of the parties to the
consolidation or merger or (y) a merger which is effected solely to
change the jurisdiction of incorporation of the Company or (z) any
consolidation with or merger of the Company into a wholly owned
subsidiary, or any sale or transfer by the Company of all of
substantially all of its assets to one or more of its wholly owned
subsidiaries in any one transaction or a series of transactions; or
5
<PAGE>
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company.
Notwithstanding the foregoing, unless otherwise determined by the Board
of Directors, no change in control of the Company shall be deemed to
have occurred if (x) the Executive is a member of a group which first
announces a proposal which, if successful, would result in a Change of
Control, which proposal (including any modifications thereof) is
ultimately successful, or (y) the Executive acquires a two percent or
more equity interest in the entity which ultimately acquires the Company
pursuant to the transaction described in (x) of this paragraph.
"Beneficial Ownership" shall be determined in accordance with Rule 13d-3
promulgated under the Exchange Act, except that a person shall be deemed
to be the "beneficial owner" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time.
"Voting Share" means all outstanding shares of any class or classes
(however designated) of capital stock of the Company entitled to vote
generally in the election of the Board of Directors of the Company.
4. Confidential Information.
4.1 General. Executive acknowledges that during employment by and
as a result of a relationship with the Company, Executive will obtain knowledge
of and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively
6
<PAGE>
referred to herein as "Confidential Information"). Executive agrees that during
the Term of this Agreement and, to the fullest extent permitted by law,
thereafter, Executive will, in a fiduciary capacity for the benefit of the
Company, hold all Confidential Information strictly in confidence and will not
directly or indirectly reveal, report, disclose, publish or transfer any of such
Confidential Information to any person, firm or other entity, or utilize any of
the Confidential Information for any purpose, except in furtherance of
Executive's employment under this Agreement.
4.2 Proprietary Interest. All inventions, designs, improvements,
--------------------
patents, copyrights and discoveries conceived by Executive during the Term of
this Agreement that are useful in or directly or indirectly related to the
business of the Company or to any experimental work carried on by the Company,
shall be the property of the Company. Executive will promptly and fully disclose
to the Company all such inventions, designs, improvements, patents, copyrights
and discoveries (whether developed individually or with other persons) and shall
take all steps necessary and reasonably required to assure the Company's
ownership thereof and to assist the Company in protecting or defending the
Company's proprietary rights therein.
4.3 Return of Materials. Executive expressly acknowledges that
-------------------
all lists, books, records and other Confidential Information of the Company
obtained in connection with the Company's business is the exclusive property of
the Company and that upon the expiration or earlier termination of this
Agreement, Executive will immediately surrender and return to the Company all
such items and all other property belonging to the Company then in the
possession of Executive, and Executive shall not make or retain any copies
thereof.
5. Termination Prior to Expiration of Term. Executive's employment,
---------------------------------------
and his rights under this Agreement, may be terminated prior to the expiration
of the Term of this Agreement only as provided in this section 5.
7
<PAGE>
5.1 Death or Disability.
-------------------
(a) The Company may terminate the Executive's employment hereunder
due to death or Disability (as defined below). If Executive's employment is
terminated as a result of death or Disability, Executive (or Executive's estate
or personal representative in the event of death) shall be entitled to receive
Executive's full Base Salary until the expiration of six months from the date on
which Executive was first unable to substantially perform his duties hereunder
and, as of the last day of such six month period, shall be entitled to receive a
lump sum payment equal to an additional six months of Base Salary. Executive
and/or Executive's dependents shall be entitled to continue to participate in
the Company's welfare benefit plans and programs on the same terms as similarly
situated active employees for a period of twelve months from the date Executive
was first unable to substantially perform Executive's duties hereunder.
Executive and/or Executive's dependents shall thereafter be entitled to any
continuation of such benefits provided under such benefit plans or by applicable
law.
(b) "Disability" shall mean a total and permanent physical or mental
impairment that substantially limits a major life activity of Executive and that
renders Executive unable to perform the essential functions of Executive's
position, even with reasonable accommodation that does not impose an undue
hardship on the Company. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and/or
Executive's medical personnel or others selected by the Company or its insurers.
5.2 Termination by the Company for Cause.
------------------------------------
(a) The Company may terminate the Executive's employment hereunder
for Cause (as hereinafter defined). If the Company terminates the Executive's
employment hereunder for Cause, the Executive shall be entitled to receive (1)
all Base Salary due employee as of the date of termination, (2) any previously
authorized bonus (if any) for the period of Executive's employment prior to the
discharge or resignation, and (3) any previously vested
8
<PAGE>
benefits, such as previously vested retirement benefits. Furthermore, the
Company shall honor any rights previously vested in Executive under a stock
option or similar plan or program.
(b) "Cause" shall mean (1) the Executive's conviction of a felony;
(2) a material breach of this Agreement by the Executive and/or the Executive's
gross neglect of his duties hereunder; or (3) the Executive's addiction to
alcohol or to a drug not prescribed by a physician.
5.3 Termination Without Cause or Termination for Good Reason.
--------------------------------------------------------
(a) The Company may terminate the Executive's employment hereunder
without Cause, and the Executive shall be permitted to terminate his employment
hereunder for Good Reason (as hereinafter defined). If the Company terminates
the Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination for Good Reason, the
Executive shall be entitled to receive all the benefits provided for under
Section 3.6 of this Agreement.
(b) "Good Reason" means and shall be deemed to exist if, without
the prior written consent of the Executive, (1) the Executive suffers a
reduction in duties, responsibilities or effective authority associated with his
titles and positions as set forth and described in this Agreement or is assigned
any duties or responsibilities inconsistent in any material respect therewith;
(2) the Company fails to substantially perform any material term or provision of
this Agreement; or (3) the Executive's compensation or benefits provided for
hereunder is decreased.
5.4 Voluntary Termination.
---------------------
(a) The Executive may effect a Voluntary Termination (as
hereinafter defined) of his employment hereunder by giving not less than nine
(9) months prior written notice to the Company. If the Executive effects a
Voluntary Termination after such notice (or upon replacement of the Executive if
Executive is replaced during the notice period) without accepting other
employment with a title and/or duties similar to those provided hereunder (a
"Successor Position"), the Executive shall be entitled to receive all the
benefits provided for under Section 3.6 of this Agreement, less the nine (9)
months (or such lesser period upon
9
<PAGE>
replacement) of compensation paid during the notice period. If the Employee
effects a Voluntary Termination without providing the notice required by this
section, or for the purpose of accepting a Successor Position, the Executive
shall be entitled to receive (1) all Base Salary due Executive as of the date of
termination, (2) any previously authorized bonus (if any) for the period of
Executive's employment prior to the discharge or resignation, and (3) any
previously vested benefits, such as previously vested retirement benefits.
Furthermore, the Company shall honor any rights previously vested in Executive
under a stock option or similar plan or program.
(b) "Voluntary Termination" shall mean a termination of employment by
the Executive on his own initiative other than (1) a termination due to
Disability or (2) a termination for Good Reason.
5.5 Gross-up of Parachute Payments. If any payment or benefit to which the
-------------------------------
Executive becomes entitled from the Company will be subject to the tax imposed
by section 4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(or any similar tax that may hereafter be imposed) (the "Excise Tax"), the
Company shall pay to the Executive at the time specified below, an additional
amount (the "Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income tax and Excise Tax
upon the payment provided for by this subsection, shall be equal to the Total
Payments. For purposes of determining whether any of such payments or benefits
will be subject to the Excise Tax, and the amount of such Excise Tax, (i) any
over payments or benefits received or to be received by the Executive in
connection with a Change of Control or his termination of employment, whether
pursuant to the terms of this Agreement or otherwise (which together with the
payments and benefits pursuant to this Agreement, constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive such other payments or benefits (in
whole or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the Code in excess
of the base amount within the meaning of section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments
10
<PAGE>
which shall be treated as subject to the Excise Tax shall be equal to the lesser
of (A) the total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of section 280G(b)(l) (after applying
paragraph (i), above), and (iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the sate and locality of his residence, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of his employment, the Executive shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the Gross-Up Payment being repaid by him
if such repayment results in reduction in Excise Tax and/or a federal and state
and local income tax deduction) plus interest on the amount of such repayment at
the rate provided in section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of payment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest payable with respect to such excess) at the time that the amount of
such excess is finally determined. If the amounts of any payments under this
Agreement cannot be finally determined on or before the payment date otherwise
scheduled for payment, the Company shall pay to the Executive on such date an
estimate, as determined in good faith by the Company, of the minimum amount of
such payment and shall pay the reminder of such payments (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive payable on the
fifth day after demand by the Company (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
11
<PAGE>
6. Arbitration.
-----------
6.1 General. Any dispute, controversy or claim arising out of or
-------
relating to this Agreement, the breach hereof or the coverage or enforceability
of this arbitration provision shall be settled by arbitration in Riverside
County, California (or such other location as the Company and Executive may
mutually agree), conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as such rules are in effect in
Riverside on the date of delivery of demand for arbitration. The arbitration of
any such issue, including the determination of the amount of any damages
suffered by either party hereto by reason of the acts or omissions of the other,
shall be to the exclusion of any court of law. Notwithstanding the foregoing,
either party hereto may seek any provisional remedy in a court, including but
not limited to an action for injunctive relief or attachment, without waiving
the right to arbitration.
6.2 Procedure. There shall be three arbitrators, one to be chosen by
---------
each party at will within 10 days from the date of delivery of demand for
arbitration and the third arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a third arbitrator within 10
days after the last of the two arbitrators is chosen by the parties, the third
arbitrator will be designated, on application by either party, by the American
Arbitration Association. The decision of a majority of the arbitrators shall be
final and binding on both parties and their respective heirs, executors,
administrators, personal representatives, successors and assigns. Judgment upon
any award of the arbitrators may be entered in any court having jurisdiction, or
application may be made to any such court for the judicial acceptance of the
award and for an order of enforcement.
6.3 Costs and Expenses. The Company shall pay the fees of all
------------------
arbitrators, witnesses and such other expenses as may be generated by the
arbitration, except Executive's attorneys fees, unless a majority of the
arbitrators concludes that such arbitration procedure was not instituted in good
faith by Executive. In such event the arbitrators shall be empowered to allocate
fees and assess costs and other expenses of the arbitration, except attorneys
fees, as they may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.
12
<PAGE>
7. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Executive. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
8. Remedies. Executive acknowledges that the services Executive is to
--------
render under this Agreement are of a unique and special nature, the loss of
which cannot reasonably or adequately be compensated for in monetary damages,
and that irreparable injury and damage will result to the Company in the event
of any default or breach of this Agreement by Executive. Because of the unique
nature of the Confidential Information, Executive further acknowledges and
agrees that the Company will suffer irreparable harm if Executive fails to
comply with the obligations in section 4 hereof and that monetary damages would
be inadequate to compensate the Company for such breach. Accordingly, Executive
agrees that the Company will, in addition to any other remedies available to it
at law, in equity or, without limitation, otherwise, be entitled to injunctive
relief and/or specific performance to enforce the terms, or prevent or remedy
the violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
9. Survival. The provisions of sections 4, 5, 6 and 8 shall survive the
--------
expiration or earlier termination of this Agreement.
10. Notices. Any notices or other communications relating to this Agreement
-------
shall be in writing and delivered personally or mailed by certified mail, return
receipt requested, to the party concerned at the address set forth below:
If to Company: United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Attn: General Counsel
13
<PAGE>
If to Executive: At Executive's residence address as maintained by
the Company in the regular course of its business
for payroll purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 10.
11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. Without limiting the generality of the foregoing
sentence, this Agreement supersedes the Executive Retention Agreement and the
First Amended and Restated United States Filter Corporation Executive Severance
Pay Plan. This Agreement may not be changed orally, but only by an agreement in
writing signed by both parties.
12. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
agreement.
13. Construction. This Agreement shall be governed under and construed in
------------
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or interpretation of this Agreement. It
is intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.
14. Severability. If any portion or provision of this Agreement is
------------
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected The covenants in this Agreement are severable and separate, and the
unenforceability of any specific covenant shall not affect the enforceability of
any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.
14
<PAGE>
15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and in
the year first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Dr. Alfred E. Osborne, Jr.
---------------------------------------------------
Name: Dr. Alfred E. Osborne, Jr.
-------------------------------------------------
Title: Chairman, Compensation Committee of the Board of
------------------------------------------------
Directors
------------------------------------------------
EXECUTIVE
MICHAEL J. REARDON
/s/ Michael J. Reardon
-------------------------------------------------------
Signature
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS OF UNITED STATES FILTER
CORPORATION AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1999
<PERIOD-START> APR-01-1998 APR-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 58,028 0
<SECURITIES> 116 0
<RECEIVABLES> 1,099,638 0
<ALLOWANCES> (46,219) 0
<INVENTORY> 526,508 0
<CURRENT-ASSETS> 2,118,870 0
<PP&E> 1,363,692 0
<DEPRECIATION> (319,353) 0
<TOTAL-ASSETS> 4,834,583 0
<CURRENT-LIABILITIES> 1,217,805 0
<BONDS> 1,403,566 0
0 0
0 0
<COMMON> 1,703 0
<OTHER-SE> 1,567,983 0
<TOTAL-LIABILITY-AND-EQUITY> 4,834,583 0
<SALES> 1,225,882 2,345,213
<TOTAL-REVENUES> 1,225,882 2,345,213
<CGS> 861,445 1,649,614
<TOTAL-COSTS> 861,445 1,649,614
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 4,144 10,264
<INTEREST-EXPENSE> 29,533 55,181
<INCOME-PRETAX> 94,092 (80,909)
<INCOME-TAX> 33,881 14,277
<INCOME-CONTINUING> 60,211 (95,186)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 60,211 (95,186)
<EPS-PRIMARY> 0.37 (0.59)
<EPS-DILUTED> 0.36 (0.59)
</TABLE>
