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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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UNITED STATES FILTER CORPORATION
(Name of Subject Company)
UNITED STATES FILTER CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(and the associated Preferred Share Purchase Rights)
(Title of Class of Securities)
911843 20 9
(CUSIP Number of Class of Securities)
STEPHEN P. STANCZAK
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
UNITED STATES FILTER CORPORATION
40-004 COOK STREET
PALM DESERT, CA 92211
(760) 340-0098
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
WITH A COPY TO:
ROD A. GUERRA, JR., ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CA 90071
(213) 687-5000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is United States Filter Corporation, a
Delaware corporation (the "Company"), and the address of the principal executive
offices of the Company is 40-004 Cook Street, Palm Desert, California 92211. The
title of the class of equity securities to which this statement relates is the
common stock, par value $.01 per share, of the Company together with the
associated rights to purchase shares of Series A Junior Participating Preferred
Stock issued pursuant to the Rights Agreement dated as of November 27, 1998,
between the Company and the Bank of New York, as Rights Agent (together, the
"Common Stock" or the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER
This statement relates to a tender offer by Eau Acquisition Corp., a
Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Vivendi,
a societe anonyme organized under the laws of France ("Parent"), disclosed in a
Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated March 26,
1999, to purchase all outstanding Shares at $31.50 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated March 26, 1999 (the "Offer to Purchase") and the related Letter
of Transmittal (which together constitute the "Offer"). As set forth in the
Schedule 14D-1, the principal executive offices of each of the Purchaser and
Parent are located at 42, Avenue de Friedland, 75380 Paris Cedex 08, France.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 22, 1999 (the "Merger Agreement"), among the Company, the Purchaser
and the Parent. The Merger Agreement provides, among other things, that as soon
as practicable after the consummation of the Offer and satisfaction or waiver of
all conditions to the Merger, Purchaser will be merged with and into the Company
(the "Merger"), with the Company as the surviving corporation (the "Surviving
Corporation"). A copy of the Merger Agreement is attached hereto as Exhibit 1
and incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) Name and Address of the Company. The name and business address of the
Company, which is the person filing this statement, are set forth in Item 1
above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements or
arrangements or understandings and actual or potential conflicts of interest
between the Company and its affiliates and: (i) the Company, its executive
officers, directors or affiliates or (ii) Parent, its executive officers,
directors and affiliates.
(b)(1) Certain Contracts, Etc. Certain contracts, agreements, arrangements,
or understandings between the Company or its affiliates and certain of its
directors and executive officers are described under the captions "Executive
Compensation," "Option Grants in Last Fiscal Year," "Retirement Program,"
"Executive Severance Pay Plan and Employment Agreements," "Proposal to Approve
the Senior Executive Annual Incentive Plan," "Proposal to Approve the 1998 Stock
Incentive Plan" and "Proposal to Approve an Amendment to the 1991 Directors
Stock Option Plan" on pages 8-12 and 16-22 of the Company's Proxy Statement,
dated July 7, 1998, for the Company's 1998 Annual Meeting of Stockholders (the
"1998 Annual Meeting Proxy Statement"), a copy of which was previously furnished
to stockholders. A copy of such portions of the 1998 Annual Meeting Proxy
Statement is filed as Exhibit (c)(8) hereto and is incorporated herein by
reference. Each other material contract, agreement, arrangement and
understanding between the Company or its affiliates and its executive officers,
directors or affiliates is described in the attached Schedule I or set forth
below.
Stock Option Grants
On October 9, 1998, following review of, among other things, a report from
the Company's compensation consultants, the Compensation Committee of the
Company authorized and approved the award of stock option grants under the
Company's 1998 Stock Incentive Plan (the "1998 Plan") to each of its executive
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officers (such executive officers, collectively, the "Section 16 Officers") who
was subject to Section 16 of the Securities Exchange Act of 1934, as amended,
with respect to the Company at the time of such grant. (Mr. Stanczak was not
employed by the Company at such time.) No further option grants were to be made
to the Section 16 Officers during the next 3-year period. The exercise price per
Share under such options is $12.625, the then-current fair market value of the
Shares. The options have differing vesting schedules but all such options become
fully vested in October 2001, subject to immediate vesting upon the occurrence
of a Change of Control of the Company (as defined in the 1998 Plan), which
generally includes, among other things, the acquisition by any person or entity
of fifty percent (50%) or more of the Company's voting power. Grants in an
aggregate of approximately 3,000,000 Shares were made to the Section 16
Officers.
Executive Employment Agreements
Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into an employment agreement with Richard J. Heckmann (the
"Heckmann Agreement") which has a term of four years from the date on which the
effective time of the Merger occurs (the "Effective Date"). The Heckmann
Agreement will be of no force and effect if the Merger Agreement is terminated.
During the term of the Heckmann Agreement, Mr. Heckmann will be Chairman and
Chief Executive Officer of the Company, a member of the Executive Committee of
Vivendi Water Branch and a director of Generale des Eaux. In addition to
payments of salary (which would be increased to $950,000 per year) and annual
bonus opportunities, the Heckmann Agreement provides for a cash payment not to
exceed $7.5 million to be paid no later than five days following the Effective
Date in respect of the severance provisions of his former employment agreement
with the Company, and provides for the full vesting of Mr. Heckmann's benefit
under the Company's Supplemental Executive Retirement Plan. In addition, the
Company (or Parent, on behalf of the Company) is obligated to deliver to Mr.
Heckmann an aggregate of 289,056 shares of Parent stock, one-quarter of which
will be delivered on each of the first four anniversaries of the Effective Date,
provided that Mr. Heckmann is employed by the Company as of each such date. In
the event that Mr. Heckmann's employment is terminated by the Company for Cause
or by Mr. Heckmann without Good Reason (as each such term is defined in the
Heckmann Agreement), Mr. Heckmann will be entitled to receive only his salary
accrued to such termination and any previously vested benefits under Company
benefit plans; provided, that portion of the Parent stock grant not previously
delivered or past due to be delivered at such time will be forfeited. If Mr.
Heckmann's employment is terminated because of his death or Disability (as
defined in the Heckmann Agreement), Mr. Heckmann (or his beneficiaries, as
applicable) will be entitled to receive, in addition to any accrued but unpaid
salary and other benefits owed or payable to Mr. Heckmann under the Company's
benefit plans, (i) a lump sum in cash equal to two times (x) his then current
base salary plus (y) the minimum annual incentive to which Mr. Heckmann would
have been entitled for the year in which such termination occurs; (ii) a lump
sum in cash in respect of any deferred compensation; (iii) that portion of the
Parent stock grant that was not delivered prior to the effective date of such
termination; and (iv) continuation of welfare-type benefits for two years
following the date of termination. In the event that Mr. Heckmann's employment
is terminated by the Company without Cause or by Mr. Heckmann for Good Reason,
which includes a Change in Control of Parent or the Company (as each term is
defined in the Heckmann Agreement), Mr. Heckmann will be entitled to receive (1)
a lump sum in cash equal to (a) the base salary that would have been paid to Mr.
Heckmann for the remainder of the original term of the Heckman Agreement plus
(b) the target annual bonus that would have been paid to Mr. Heckmann for the
remainder of the original term of the Heckmann Agreement plus (c) the minimum
annual bonus for the year in which such termination occurs, pro-rated to date of
termination; (2) continued welfare-type benefits for the remainder of the
original term of the Heckmann Agreement; and (3) that portion of the Parent
stock grant that was not delivered prior to the effective date of such
termination. The Heckmann Agreement provides that, if any payment or benefit
that Mr. Heckmann receives in connection with the Merger becomes subject to the
excise tax imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company will pay to Mr. Heckmann an amount in cash
sufficient to make him whole with respect to such excise tax. Mr. Heckmann is
subject to non-competition and non-solicitation covenants for the entire term of
the Heckmann Agreement, regardless of the earlier termination of his employment
thereunder. The Company will no longer be obligated to deliver the Parent stock
grant, in the event Mr. Heckmann violated such
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covenants prior to the due date for any payment of the Parent stock grant.
Parent, the Company and Mr. Heckmann have also entered into an agreement whereby
Mr. Heckmann may purchase one of the Company's aircraft at its then depreciated
value upon his retirement or, if earlier, at such time as the Company determines
to sell such aircraft to a third party.
Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into employment agreements with each of Andrew D. Seidel and
Kevin L. Spence (each, an "Executive Agreement") which are substantially similar
in their terms. Each Executive Agreement has a three-year term from the
Effective Date. The Executive Agreements will be of no force and effect if the
Merger Agreement is terminated. During the term of the Executive Agreements, Mr.
Seidel will be President and Chief Operating Officer -- Wastewater Group of the
Company, and Mr. Spence will be Executive Vice President and Chief Financial
Officer of the Company. In addition to payments of salary (which would be
increased for both executives to $350,000 per year) and annual bonus
opportunities, the Executive Agreements provide for a cash payment not to exceed
$2.1 million (in the case of Mr. Seidel) or $1.95 million (in the case of Mr.
Spence) to be paid no later than five days following the Effective Date in
respect of the severance provisions of their former employment agreements with
the Company, and provide for the full vesting of their benefits under the
Company's Supplemental Executive Retirement Plan. In addition, the Company (or
Parent, on behalf of the Company) is obligated to deliver to the executives an
aggregate of 50,370 shares of Parent stock (in the case of Mr. Seidel) or 49,341
shares of Parent stock (in the case of Mr. Spence), one-third of which will be
delivered on each of the first three anniversaries of the Effective Date,
provided that the executive is employed by the Company as of each such date. In
the event that the executive's employment is terminated by the Company for Cause
or by the executive without Good Reason (as each such term is defined in the
Executive Agreements), that portion of the Parent stock grant not previously
delivered or past due to be delivered at such time will be forfeited. If the
executive's employment is terminated because of his death or Disability (as
defined in the Executive Agreements), the executive (or his beneficiaries, as
applicable) will be entitled to receive (i) a lump sum in cash equal to 150
percent (150%) of (x) his then current base salary plus (y) the minimum annual
incentive to which the executive would have been entitled for the year in which
such termination occurs; (ii) a lump sum in cash in respect of any deferred
compensation, (iii) that portion of the Parent stock grant that was not
delivered prior to the effective date of such termination; and (iv) continuation
of welfare-type benefits for two years following the date of termination. In the
event that the executive's employment is terminated by the Company without Cause
or by the executive for Good Reason, which includes a Change in Control of
Parent or the Company (as each such term is defined in the Executive
Agreements), the executive will be entitled to receive (1) a lump sum in cash
equal to (a) the base salary that would have been paid to the executive for the
remainder of the original term of the Executive Agreement plus (b) the target
annual bonus that would have been paid to the executive for the remainder of the
original term of the Executive Agreement plus (c) the minimum annual bonus for
the year in which such termination occurs, pro-rated to the date of termination;
(2) continued welfare-type benefits for the remainder of the original term of
the Executive Agreement; and (3) that portion of the Parent stock grant that was
not delivered prior to the effective date of such termination. The Executive
Agreements provide that, if any payment or benefit that the executive receives
in connection with the Merger becomes subject to the excise tax imposed by
section 4999 of the Code, the Company will pay to the executive an amount in
cash (a "Gross-up Payment") sufficient to make him whole with respect to such
excise tax. Each of the executives is subject to non-competition and
non-solicitation covenants for the entire term of his Executive Agreement,
regardless of the earlier termination of his employment thereunder. The Company
will no longer be obligated to deliver the Parent stock grant to Mr. Seidel or
Mr. Spence, as the case may be, in the event such executive violates such
covenants prior to the due date for any payment of the Parent stock grant.
As of August 26, 1998, the Company entered into Employment Agreements
("Employment Agreements") with its executive officers other than Mr. Heckmann
and Mr. Shimmon (Mr. Stanczak entered into his Employment Agreement on February
15, 1999), whose terms are substantially similar, except that the number of
years in the term of the agreement and the corresponding multiplier used in
calculating severance benefits thereunder may differ. With respect to Messrs.
Seidel and Spence, such agreements are superceded by the Executive Agreements
described above. Each Employment Agreement provides for a term of 24 or 36
months, provided in each case that unless either party has given notice of
termination, on the first day of the
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month following the commencement of the term of the Employment Agreement, the
term is extended by an additional month. The Employment Agreements provide for
certain payments and benefits to be paid in respect of severance upon the
occurrence of a Change of Control (as defined in the Employment Agreements).
Such payments and benefits include: (1) a lump sum in cash equal to (a) the
executive's base salary and target annual incentive bonus that would be payable
for the remainder of the term of the Employment Agreement; (b) the present value
of the welfare-type benefits covering the executive if continued to the end of
the term of the Employment Agreement; and (c) for agreements with a 36-month
term, the immediate vesting of the executive's benefit under the Company's
Supplemental Executive Retirement Plan. Employment Agreements with a 36-month
term provide that, if any payment or benefit that the executive receives in
connection with the Merger becomes subject to excise tax imposed by section 4999
of the Code, the Company will pay to the executive a Gross-up Payment.
Employment Agreements with a two-year term do not provide for a Gross-up
Payment. Each Employment Agreement provides that the executive will be subject
to non-competition covenants during the term of the agreement and, if the
executive's employment is terminated prior to the expiration of the term of the
Employment Agreement, for one year thereafter.
(b)(2) The Merger Agreement. A summary of the Merger Agreement is contained
in the section entitled Section 11 -- "Purpose of the Offer; the Merger
Agreement, the Stock Option Agreement; the Support Agreements; Appraisal Rights;
Plans for the Company; the Rights" -- "(b) The Merger Agreement" in the Offer to
Purchase and is incorporated herein by reference. A copy of the Merger Agreement
is filed as Exhibit (c)(1) hereto and is incorporated herein by reference.
(b)(3) The Support Agreements. A summary of the support agreements between
Parent and, separately, Richard J. Heckmann, Andrew D. Seidel, Kevin L. Spence,
certain stockholders affiliated with the Bass family of Texas (the "Bass
Stockholders") and Apollo Investment Fund, L.P. and Lion Advisors, L.P.
(together with Apollo Investment Fund, L.P., the "Apollo Stockholders") (the
"Support Agreements") is contained in the section entitled Section
11 -- "Purpose of the Offer; the Merger Agreement, the Stock Option Agreement;
the Support Agreements; Appraisal Rights; Plans for the Company; the Rights" --
"(d) The Support Agreements" in the Offer to Purchase and is incorporated herein
by reference. Copies of the form of the Support Agreements are filed as Exhibits
(c)(2) through (c)(4) hereto and are incorporated herein by reference.
(b)(4) The Stock Option Agreement. A summary of the Stock Option Agreement
between Parent and the Company (the "Stock Option Agreement") is contained in
the section entitled Section 11 -- "Purpose of the Offer; the Merger Agreement,
the Stock Option Agreement; the Support Agreements; Appraisal Rights; Plans for
the Company; the Rights" -- "(c) The Stock Option Agreement" in the Offer to
Purchase and is incorporated herein by reference. A copy of the Stock Option
Agreement is filed as Exhibit (c)(b) hereto and is incorporated herein by
reference.
(b)(5) The Confidentiality Agreement. The following is a summary of certain
portion of the Confidentiality Agreement, dated March 15, 1999, among Parent and
the Company (the "Confidentiality Agreement") and is qualified in its entirety
by reference to the Confidentiality Agreement, a copy of which has been filed as
Exhibit (c)(9) hereto and is incorporated by reference herein.
As a condition to being furnished information concerning the Company
("Evaluation Material") by or on behalf of the Company, Parent has agreed, among
other things, that it will keep such Evaluation Material confidential and will
use it solely for evaluating the Offer and the Merger. "Evaluation Material"
does not include information which (i) becomes generally available to the public
other than as a result of a disclosure by Parent or its respective directors,
officers, employees, agents or advisors, or (ii) becomes available to Parent on
a non-confidential basis from a source other than the Company or its advisers,
provided that such source is not known to be bound by a confidentiality
agreement with or other obligation of secrecy to the Company or another party.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
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On March 22, 1999, the Board of Directors of the Company, by a unanimous
vote of all directors in attendance at a meeting of the Board of Directors on
such date, determined that the Merger Agreement and the transactions
contemplated thereby, including without limitation the Offer and the Merger, are
fair to and in the best interests of the stockholders of the Company and
approved the Merger Agreement and the transactions contemplated thereby, and
recommended that the Company stockholders accept the Offer and tender their
Shares pursuant to the Offer and approve and adopt the Merger Agreement, if
required.
(b) BACKGROUND OF THE TRANSACTION
In early July 1996, Richard J. Heckmann, Chairman and Chief Executive
Officer of the Company and certain other members of the Company's senior
management met with Jean-Marie Messier, Chairman and Chief Executive Officer of
Vivendi and other representatives of Parent to discuss the possibility of the
acquisition by the Company of certain assets of Parent. Such exploratory
discussions did not advance beyond the preliminary stage and the potential
transaction was not pursued.
In January 1999, the Company authorized representatives of two investment
banking firms to contact three industrial companies identified by the investment
bankers regarding a possible business combination transaction with the Company.
These inquiries did not result in any subsequent discussions between the Company
and any of such companies.
On January 19, 1999 Messrs. Heckmann and Messier met to discuss a potential
transaction between the Company and Parent involving certain water industry
holdings of Parent. At the meeting, the Company and Parent could not reach
agreement on the terms of a possible transaction. However, in the course of
discussions consideration was given to the possibility of a business combination
transaction between the Company and Parent.
From late January through late February 1999 Mr. Heckmann and Mr. Messier
together with other representatives of the Company and Parent had several
telephone discussions relating to the businesses of the Company and Parent and
exchanged publicly available documents and information about the Company and
Parent, and on February 19, 1999 executives of Parent and the Company met to
exchange detailed presentations concerning their respective businesses.
From late February through early March 1999 the management of the Company
provided Parent certain information with respect to the Company's financial
condition, results of operations and other measurements of operating
performance.
On March 8, 9, and 10, 1999, Mr. Heckmann and certain other executives of
the Company met with Mr. Messier and certain other executives of Parent to
continue discussions with respect to a possible business combination transaction
between the Company and Parent.
On March 11, 1999, representatives from each party's legal and financial
advisors met to discuss the structure and timing of the proposed transaction and
organize a due diligence review of the Company. On March 11, 1999, following
presentations by management, the Board of Directors of Parent authorized its
management to enter into a definitive acquisition agreement if such an agreement
could be concluded on specified terms. From March 12, 1999 through March 22,
1999, Parent's legal and financial advisors together with representatives of
Parent conducted legal and financial due diligence investigations of the
Company.
On March 18-19, 1999, the parties and their legal and financial advisors
met to negotiate the terms of the proposed Merger. Negotiations between the
parties continued at meetings on March 20, 21 and 22, 1999. During that time
Parent and the stockholders of the Company party to Support Agreements
negotiated the terms of such agreements.
From time to time from February 17, 1999 through March 22, 1999, Mr.
Heckmann had numerous conversations with various members of the Company's Board
of Directors to keep them apprised of developments with respect to a possible
business combination transaction with Parent.
At meetings on March 21 and 22, 1999 the Company's Board reviewed the terms
of the proposed Merger Agreement and related documents to be entered into by the
Company and Parent. At the March 21, 1999 Board meeting, the Board discussed the
fairness of the proposed transaction and the Company's financial
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advisors delivered presentations on the fairness of the Merger and the Offer and
rendered their opinions regarding the fairness, from a financial point of view,
to the Company's stockholders of the consideration to be received by the
Company's stockholders pursuant to the Merger and the Offer. At the March 22,
1999 Board meeting, after due deliberation, the Board determined the proposed
Offer and Merger are in the best interests of the Company and the Company's
stockholders and are fair to the Company's stockholders. At the March 22, 1999
Board Meeting, the Board approved the Offer and the Merger and resolved to
recommend acceptance of the Offer by the Company's stockholders.
Following the Company's Board meeting on March 22, 1999, the Merger
Agreement and related documents were finalized and executed by the parties. The
Company and Parent announced the execution of the agreements in a joint press
release issued before the New York Stock Exchange opened on March 22, 1999.
(c) REASONS FOR THE RECOMMENDATION
In reaching its conclusions and recommendations described above, the
Company's Board of Directors considered the following factors:
(i) the terms and conditions of the Offer and the Merger Agreement;
(ii) the financial condition, results of operations, business and
prospects of the Company;
(iii) the separate oral opinions of the Financial Advisors, which were
later confirmed in written opinions, dated March 22, 1999, to the
effect that, as of the date of the opinions, the consideration to be
received by the Company's stockholders pursuant to the Offer and the
Merger is fair from a financial point of view to such stockholders.
The full text of the Advisors' written opinions which set forth the
procedures followed, the factors considered and the assumptions made
by the Advisors are attached hereto and filed as Exhibits (b)(1) and
(b)(2) hereto and incorporated herein by reference. STOCKHOLDERS ARE
URGED TO READ THE OPINIONS OF THE ADVISORS CAREFULLY AND IN THEIR
ENTIRETY;
(iv) the trading history of the Shares during the past several years, a
comparison of that trading history with those of other companies
that were deemed relevant and expected trading prices for the
forseeable future;
(v) a comparison of the historical financial results and present
financial condition of the Company with those of other companies
that were deemed relevant;
(vi) a comparison of the financial terms of the Offer and the Merger with
the financial terms of certain other transactions that were deemed
relevant;
(vii) the fact that the Merger Agreement, while prohibiting the Company
from actively soliciting any competitive proposal, does permit the
Company to furnish information concerning its business, properties
or assets to, and enter into discussions or negotiations with, any
third party that makes a bona fide written proposal for an
Acquisition Transaction (as such term is defined in the Merger
Agreement) for which all necessary financing is then in the judgment
of the Company's Board of Directors readily obtainable; provided
that a majority of the members of the full Company Board of
Directors determines in good faith (after consultation and receipt
of advice from its outside legal counsel) to such effect that the
failure to so act would create a reasonable likelihood of a breach
of the fiduciary duties of the Board and such proposal is, in the
written opinion of the Financial Advisors, more favorable to the
Company's stockholders from a financial point of view than the
transactions contemplated by the Merger Agreement (as the same has
been proposed to be amended by Parent in accordance with the Merger
Agreement);
(viii) the lack of responses from, or expressed interest of, other third
parties who were contacted by or on behalf of the Company regarding
a possible business transaction with the Company and subsequent
public statements of lack of interest in such a transaction with the
Company made by third parties after recent market activity in the
Company's Shares;
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(ix)the fact that two significant stockholders of the Company were willing
to enter into support agreements with Parent pursuant to which such
stockholders agreed, among other things, to tender validly pursuant to
the Offer all shares owned by them;
(x) the representation of Parent and the Purchaser that they will have
sufficient funds available to them to consummate the Offer and the
Merger and the fact that the Offer is not subject to a financing
condition;
(xi)the scope and detail of the negotiating process that led to the
finalization of the Merger Agreement;
(xii)
the fact that, in management's view, an extensive auction of the
Company prior to a decision to sell the Company could cause harm to the
Company and significant disruption in existing operations;
(xiii)
the provisions in the Merger Agreement that require the Company to pay
to Parent a termination fee of $220 million and reimburse Parent for
its documented out-of-pocket expenses not to exceed $25 million if the
Merger Agreement is terminated under certain circumstances, which the
Company's Board of Directors recognized would potentially foreclose
competing offers at approximately the same price level as, or at
slightly higher levels than, the Offer, but, based in part on the
advice of the Company's financial advisors, was well within the range
of termination fees payable in transactions of similar size and should
not be a deterrent to competing offers at price levels somewhat higher
than the Offer;
(xv)the insistence of Parent on the Company executing the Stock Option
Agreement pursuant to which, among other things, the Company agrees to
grant Parent an irrevocable option to purchase up to 36,223,552 shares
at $31.50 per share, exercisable in certain circumstances that give
rise to the termination of the Merger and the Offer; and
(xvi)
the insistence of Parent that the Merger Agreement be executed prior to
the opening of the New York Stock Exchange on March 22, 1999.
The Company's Board of Directors did not assign relative weights to the
foregoing factors or determine that any factor was of particular importance.
Rather, the Company's Board of Directors viewed their position and
recommendations as being based on the totality of the information presented to
and considered by them. In addition, individual members of the Board of
Directors may have given different weight to different factors.
The Company's Board of Directors recognized that, while the consummation of
the Offer gives the stockholders the opportunity to realize a premium over the
prices at which the Shares were traded prior to the public announcement of the
Merger and Offer, tendering in the Offer would eliminate the opportunity for
stockholders to participate in the future growth and profits of the Company.
It is expected that, if the Shares were not to be purchased by the
Purchaser in accordance with the terms of the Offer or if the Merger were not to
be consummated, the Company's current management, under the general direction of
the Company's Board of Directors will continue to manage the Company as an
ongoing business in accordance with the Company's current long-term strategic
plan.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Financial Advisors have been retained by the Company to act as
financial advisors to the Company with respect to the Offer, the Merger and
matters arising in connection therewith. Pursuant to an engagement letter
agreement dated March 1, 1999 (the "Engagement Letter"), the Financial Advisors
agreed to render financial advisory and investment banking services to the
Company in connection with the Offer and the Merger. Each Financial Advisor also
agreed to render, if requested by the Company, an opinion (together, the
"Opinions"), with respect to the fairness, from a financial point of view, to
the Company's stockholders of the consideration to be offered to such
stockholders in connection with the Offer and the Merger. As compensation for
financial advisory and investment banking services rendered by the Financial
Advisors pursuant to the Engagement Letter, the Company agreed to pay each
Financial Advisor a fee of $100,000 plus an additional fee equal to 0.18%, or
0.215% if the Company receives an unsolicited offer, of the aggregate
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consideration in the Offer and the Merger less, in each case, any retainer or
opinion fee. As compensation for services rendered by the Financial Advisors in
connection with the Opinions, the Company agreed to pay each of the Financial
Advisors a fee of approximately $1,500,000 on issuance of the Opinions. The
Company has also agreed to reimburse each of the Financial Advisors for its
reasonable out-of-pocket expenses, and to indemnify the Financial Advisors
against certain liabilities to which the Financial Advisors may become subject
in connection with the rendering of services by the Financial Advisors under the
Engagement Letter.
The Financial Advisors each provided to the Company an Opinion to the
effect that the consideration to be received by the Company's stockholders
pursuant to the Offer and the Merger is fair from a financial point of view to
the Company's stockholders.
Salomon Smith Barney and its predecessors and affiliates have, in the past,
provided investment banking and financial advisory services to the Company and
Parent and have received customary compensation for the rendering of such
services. Salomon Smith Barney and its affiliates have other business and
financial relationships with the Company and Parent. In the ordinary course of
business, Salomon Smith Barney and its affiliates may actively trade the debt
and equity securities of the Company and Parent for their own accounts and/or
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
JP Morgan and its affiliates, from time to time, have provided capital
markets and financial advisory services to Parent, have executed a variety of
risk management transactions with Parent and may continue such business
relationships in the future. In the ordinary course of business, JP Morgan and
its affiliates may actively trade the debt and equity securities of the Company
or Parent for their own accounts or for the accounts of customers and,
accordingly, may at any time hold long or short positions in such securities.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except as set forth below, transactions in the Shares have been
effected during the past 60 days by the Company or, to the best of the Company's
knowledge, by any executive officer, director, affiliate or subsidiary of the
Company.
(b) To the best of the Company's knowledge, except for Shares the sale of
which may trigger liability for the holder(s) under Section 16(b) of the
Exchange Act, each executive officer and director of the Company currently
intends to tender all Shares over which he or she has sole dispositive power to
the Purchaser. Richard J. Heckmann, Andrew D. Seidel, Kevin L. Spence, the Bass
Stockholders and the Apollo stockholders have signed Support Agreements,
obligating themselves to tender their Shares, subject to the terms of such
agreement and applicable law. In addition, the Company has agreed to grant
Parent an irrevocable option to purchase up to 36,223,552 shares pursuant to the
Stock Option Agreement, exerciseable in certain circumstances that give rise to
the termination of the Merger and the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described above or in Item 3(b) or 4(b) above, there are no
transactions, Board of Directors' resolutions, agreements in principle or signed
contracts in response to the Offer that relate to or would result in one or more
of the events referred to in Item 7(a) above.
9
<PAGE> 10
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Directors. The Information Statement attached as Schedule I hereto is being
furnished in connection with the possible designation by Parent, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's stockholders.
Parent Financing. The following information regarding the financing of the
Offer and Merger has been provided by Parent and the Purchaser. The total amount
of funds required by the Purchaser to purchase all outstanding Shares and to pay
related fees and expenses is estimated to be approximately $6.3 billion. The
funds necessary to purchase Shares pursuant to the Offer and to pay related fees
and expenses will be furnished to the Purchaser by Parent and/or one of its
subsidiaries as a capital contribution and/or loans.
Antitrust -- United States. Under the HSR Act, and the rules that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the United States Department of
Justice (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied. The acquisition of Shares by the Purchaser
pursuant to the Offer is subject to such requirements.
Pursuant to the requirements of the HSR Act, Parent and the Company have
filed the required Notification and Report Forms (the "Forms") with the
Antitrust Division and the FTC. The statutory waiting period applicable to the
purchase of Shares pursuant to the Offer is to expire at 11:59 P.M., New York
City time, on the thirtieth day after both parties have filed their Forms.
However, prior to such date, the Antitrust Division or the FTC may extend the
waiting periods by requesting additional information or documentary material
relevant to the acquisition. If such a request is made, the waiting period will
be extended until 11:59 P.M., New York City time, on the twentieth day after
both parties have substantially complied with such request. Thereafter, such
waiting periods can be extended only by court order. A request is being made
pursuant to the HSR Act for early termination of the applicable waiting period.
There can be no assurance, however, that the waiting period will be terminated
early.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could,
notwithstanding termination of the waiting period, take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or
seeking divestiture of the Shares so acquired or divestiture of substantial
assets of the Purchaser or the Company. Private parties may also bring legal
actions under the antitrust laws. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made, or if such a challenge is made,
what the result will be.
Antitrust -- European Union. Parent and the Company each conduct business
in member states of the European Union. European Union Council Regulation
4064/89, as amended, requires notification to and approval by the European
Commission of certain mergers or acquisitions involving parties with aggregate
worldwide sales and individual European Union sales exceeding certain
thresholds, before such mergers or acquisitions are completed. Parent and the
Company have sales that exceed these thresholds. A single notification to the
European Commission eliminates any need to submit notifications of the merger to
national competition authorities in member states within the European Economic
Area. Parent and the Company notified the European Commission of the Merger on
March 23, 1999.
The European Commission must review the Offer and Merger to determine
whether or not it is compatible with the common market and, accordingly, whether
or not to permit it to proceed. A merger or acquisition which does not create or
strengthen a dominant position as a result of which effective competition would
be significantly impeded in the common market or in a substantial part of the
common market is considered to be compatible with the common market, and must be
allowed to proceed. The European Commission has one month following submission
of a complete notification to examine whether the merger raises serious doubts
with regard to its compatibility with the common market. If within this
one-month period the European Commission decides that there are no serious
doubts, or if it fails to reach a decision, the merger is deemed approved. If,
instead, the European Commission decides that there are serious doubts, it must
open
10
<PAGE> 11
a more detailed investigation which can last up to an additional four months.
Parent and the Company believe that the Merger is compatible with the common
market under European Union Council Regulation 4064/89, although there can be no
assurance that the European Commission will agree.
Antitrust -- General. It is possible that any of the governmental entities
with which filings are made may seek, as conditions for granting approval of the
Merger, various regulatory concessions. There can be no assurance that:
-- Parent or the Company will be able to satisfy or comply with such
conditions;
-- compliance or non-compliance will not have adverse consequences for
Parent after completion of the Merger; or
-- the required regulatory approvals will be obtained within the time
frame contemplated by Parent and the Company and referred to herein or
on terms that will be satisfactory to Parent and the Company.
Additional filings may be necessary in countries outside the European
Economic Area and the U.S.
DGCL 203. Section 203 of the DGCL purports to regulate certain business
combinations of a corporation organized under Delaware law, such as the Company,
with a stockholder beneficially owning 15% or more of the outstanding voting
stock of such corporation (an "Interested Stockholder"). Section 203 provides,
in relevant part, that the corporation shall not engage in any business
combination for a period of three years following the date such stockholder
first becomes an Interested Stockholder unless (i) prior to the date the
stockholder first becomes an Interested Stockholder, the board of directors of
the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an Interested Stockholder, (ii) upon
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, or (iii) on or subsequent to the date the stockholder
becomes an Interested Stockholder, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the Interested Stockholder. The Company's
Board of Directors has approved the Merger Agreement and the transactions
contemplated thereby, including the Offer, the Merger, the Support Agreements
and the Stock Option Agreement and, therefore, Section 203 of the DGCL is
inapplicable to the Offer and the Merger.
Change in Control Provisions in Notes. Upon the occurrence of a Change of
Control (as defined in the Notes), holders of the Company's 4 1/2% Convertible
Subordinated Notes Due 2001 (the "Notes") will have the right to require the
Company to repurchase all or any part (equal to $1,000 or an integral multiple
thereof, respectively) of such holder's Notes, at a purchase price equal to 101%
of the principal amount thereof, plus accrued and unpaid interest (the
"Repurchase Rights").
Change in Control Provisions in the Company's Credit Facility. The
occurrence of a Change of Control (as defined in the credit facility)
constitutes an event of default under the Company's credit facility.
Holders of the Notes may also exercise their right to convert their Notes
into Common Stock and participate in the Offer or receive cash upon the Merger
in lieu of pursuing their Repurchase Rights. Holders may also continue to hold
their Notes after the Merger.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
(a)(1) -- Offer to Purchase, dated March 26, 1999.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Text of press release issued by Parent and the Company
dated March 22, 1999.
(a)(4) -- Summary Advertisement dated March 26, 1999.
(a)(5) -- Letter to Stockholders of the Company dated March 26,
1999.
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
(b)(1) -- Opinion of Salomon Smith Barney, Inc. dated March 22,
1999.
(b)(2) -- Opinion of J.P. Morgan Securities, Inc. dated March 22,
1999.
(c)(1) -- Agreement and Plan of Merger, dated as of March 22, 1999
by and among the Company, the Purchaser and Parent.
(c)(2) -- Form of Support Agreement between Parent and the Apollo
Stockholders
(c)(3) -- Support Agreement between Parent and the Bass
Stockholders
(c)(4) -- Form of Support Agreement between Parent and Management
(c)(5) -- Employment Agreement among the Company, Parent and
Richard J. Heckman.
(c)(6) -- Employment Agreement among the Company, Parent and Andrew
D. Seidel.
(c)(7) -- Employment Agreement among the Company, Parent and Kevin
L. Spence.
(c)(8) -- Stock Option Agreement dated March 22, 1999 between the
Company and Parent
(c)(9) -- Confidentiality Agreement, dated March 15, 1999
(c)(10) -- Letter Agreement dated March 22, 1999 between Parent,
Company and Richard J. Heckman.
(c)(11) -- Relevant portions of the Company's Proxy Statement on
Schedule 14A, June 7, 1998.
</TABLE>
12
<PAGE> 13
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
UNITED STATES FILTER CORPORATION
By /s/ STEPHEN P. STANCZAK
-----------------------------------
Stephen P. Stanczak
Executive Vice President,
General Counsel and Secretary
Dated: March 26, 1999
13
<PAGE> 14
SCHEDULE I
UNITED STATES FILTER CORPORATION
40-004 COOK STREET
PALM DESERT, CA
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED
IN CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING
SOLICITED AND YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
------------------------
This Information Statement is being mailed on or about March 26, 1999 as a
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of record of the Shares at the close of
business on or about March 25, 1999. You are receiving this Information
Statement in connection with the possible election of persons designated by the
Purchaser to a majority of the seats on the Board of Directors of the Company.
The Merger Agreement requires the Company, at the request of the Purchaser, to
take all action necessary to cause the Purchaser's designees to be elected to
the Board of Directors under the circumstances described therein. This
Information Statement is required by Section 14(f) of the Exchange Act and Rule
14f-1 thereunder. See "Board of Directors and Executive Officers -- Right to
Designate Directors; The Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
March 26, 1999. The Offer is scheduled to expire at 12:00 midnight, New York
City time, on April 22, 1999 unless the Offer is extended.
The information contained in this Information Statement concerning the
Purchaser has been furnished to the Company by the Purchaser, and the Company
assumes no responsibility for the accuracy or completeness of such information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of March 22, 1999, there were
182,027,902 Shares outstanding. The Board of Directors currently consists of
eleven members and there are currently no vacancies on the Board of Directors.
Each director holds office until such director's successor is duly elected and
qualified or until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of a majority of the outstanding Shares (determined on a fully diluted
basis), the Purchaser will be entitled to designate such number of directors
(the "Purchaser Designees"), rounded up to the next whole number, on the
Company's Board of Directors that equals the product of (i) the total number of
directors on the Company's Board of Directors (after giving effect to the
directors elected pursuant to this sentence) and (ii) the percentage that
I-1
<PAGE> 15
the number of Shares owned by the Purchaser and its affiliates (including Shares
so purchased) bears to the total number of Shares outstanding.
Notwithstanding the Company's obligations outlined above, the Company's
Board of Directors shall have at least two members who are not officers,
directors or designees of the Purchaser or any of its affiliates.
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the directors and executive officers listed in Schedule I to the
Offer to Purchase, a copy of which is being mailed to the Company's stockholders
together with this Schedule 14D-9. The Purchaser has informed the Company that
each of the directors and executive officers listed in Schedule I to the Offer
to Purchase has consented to act as a director, if so designated. The
information on such Schedule I is incorporated herein by reference. It is
expected that no Purchaser Designee will receive any compensation for services
performed in his capacity as a director.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of a specified minimum number of Shares
pursuant to the Offer, which purchase cannot be earlier than April 22, 1999, and
that, upon assuming office, the Purchaser Designees will thereafter constitute
at least a majority of the Board of Directors.
SECTION 16 COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers and any persons beneficially holding more than ten
percent of the Company's Common Stock are required to report their ownership of
the Company's Common Stock and any changes in that ownership to the SEC and the
NYSE. Specific due dates for these reports have been established and the Company
is required to report any failure to file by these dates. During the fiscal year
ended March 31, 1998 ("fiscal 1998"), all of these filing requirements were
satisfied, except that Thierry Reyners, former President/Chief Operating Officer
of the European Water and Wastewater Group, who at the time was an executive
officer of the Company, reported one purchase of the Company's Common Stock on
the next form otherwise required to be filed under Section 16(a), instead of on
a current report on Form 4. In making these statements, the Company has relied
on copies of the reports that its officers and directors have filed with the
SEC.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and the notes thereto set forth information as of March
22, 1999, except as indicated in the accompanying notes, relating to beneficial
ownership (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of the equity securities of the Company by (i) each person known by the
Company to own beneficially more than 5% of the outstanding shares of the voting
stock of the Company, (ii) each director, (iii) each of the executive officers
named in the Summary Executive Compensation Table and (iv) all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK OF THE
COMPANY BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED(1)(2)(3) OWNERSHIP(4)
- ------------------------ -------------------- ------------
<S> <C> <C>
Richard J. Heckmann..................................... 1,428,431(5) *
Harry K. Hornish, Jr.................................... 68,561 *
David Shimmon........................................... 2,077,920 1.14%
Andrew D. Seidel........................................ 137,286 *
Kevin L. Spence......................................... 139,498 *
James E. Clark.......................................... 138,000 *
John L. Diederich....................................... 77,250 *
Robert S. Hillas........................................ 20,000 *
Arthur B. Laffer........................................ 118,875(6) *
Ardon E. Moore.......................................... 160,480(7) *
Alfred E. Osborne, Jr................................... 151,110(8) *
J. Danforth Quayle...................................... 39,000 *
C. Howard Wilkins, Jr................................... 135,920 *
All Directors and Executive Officers as a Group (17
persons).............................................. 4,964,519 2.72%
</TABLE>
I-2
<PAGE> 16
- ---------------
(1) The Common Stock is the only class of equity securities of the Company
outstanding.
(2) Except as otherwise noted, all persons listed in the table have sole voting
and investment power with respect to their shares, subject to the rights of
their spouses under applicable community property laws.
(3) Includes stock options exercisable within 60 days of March 22, 1999 as
follows: Mr. Heckmann, 742,899 shares; Mr. Hornish, 38,361 shares; Mr.
Shimmon, 25,000 shares; Mr. Seidel, 136,998 shares; Mr. Spence, 129,498
shares; Mr. Clark, 30,000 shares; Mr. Diederich, 30,000 shares; Mr. Hillas,
12,000 shares; Dr. Laffer, 30,000 shares; Mr. Moore, 12,000 shares; Mr.
Osborne, 30,000 shares; Mr. Quayle, 39,000 shares; Mr. Wilkins, 30,000
shares; and All Directors and Executive Officers as a Group, 1,557,944
shares. All options were granted pursuant to the Company's 1991 Employee
Stock Option Plan or the Directors Plan.
(4) An asterisk (*) indicates ownership of less than 1% of the Common Stock.
(5) Includes 17,024 shares held by Mr. Heckmann's wife and by Mr. Heckmann as
custodian for his children as to which Mr. Heckmann may be deemed to have
indirect beneficial ownership.
(6) Includes 48,000 shares held by Laffer Associates, a company controlled by
Dr. Laffer and 4,875 held in Dr. Laffer's retirement account.
(7) Mr. Moore serves on the Company's Board of Directors as the nominee of the
Bass Stockholders and as such may be deemed to be the beneficial owner of
1,289,950 shares owned by the Bass Stockholders.
(8) Includes 9,650 shares held by Mr. Osborne's wife, 1,000 shares held by Mr.
Osborne's son and 2,935 shares held by AE Osbourne Associates.
Other Principal Beneficial Owners
Apollo Investment Fund, L.P., a Delaware limited partnership with its
principal office address c/o CIBC Bank and Trust Company, Grand Cayman, Cayman
Islands, British West Indies and Lion Advisor, L.P, a Delaware limited
partnership with its principal office address at Two Manhattanville Road,
Purchase, New York 10577, reported to the SEC that they beneficially own an
aggregate of 13,752,860 shares (the "Shares") of the Company's Common Stock, or
approximately 8.7% of the Company's Common Stock outstanding as of July 1, 1998.
I-3
<PAGE> 17
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The name, principal occupation, business experience and age of each
director and named executive officer and his or her term of office and period of
previous service as a director (where applicable) of the Company are set forth
below. Pursuant to an agreement with the Company, the Bass Stockholders are
entitled to select one nominee to the Board of Directors. Other than the above,
there are no family relationships among any of the named individuals, and no
individual was selected as a director pursuant to any arrangement or
understanding with any other person.
<TABLE>
<CAPTION>
YEARS WITH
NAME AGE POSITION(S) HELD THE COMPANY
---- --- ---------------- -----------
<S> <C> <C> <C>
Richard J. Heckmann............... 54 Chairman of the Board of Directors and Chief 9
Executive Officer
David J. Shimmon.................. 40 President, Chief Operating Officer and Director 1
Andrew D. Seidel.................. 37 President and Chief Operating Officer - North 5
American Wastewater Group and Director
J. Danforth Quayle................ 52 Director 2
Arthur B. Laffer.................. 58 Director 7
Alfred E. Osbourne, Jr. .......... 54 Director 7
James E. Clark.................... 70 Director 8
Robert S. Hillas.................. 50 Director 2
John L. Diederich................. 62 Director 5
Ardon E. Moore.................... 41 Director 1
C. Howard Wilkins, Jr............. 61 Director 6
Harry K. Hornish, Jr.............. 54 President and Chief Operating Officer - Waterworks 2
Distribution Group
Calvin R. Hendrix................. 48 President and Chief Operating Officer - North <1
American Consumer and Commercial Group
Kenneth I. Wellings............... 52 President - U.S. Filter International <1
Andrew Denver..................... 50 President and Chief Operating Officer - Filtration 1
and Separation Group
Kevin L. Spence................... 42 Executive Vice President and Chief Financial 7
Officer
Stephen P. Stanczak............... 41 Executive Vice President, General Counsel and <1
Corporate Secretary
</TABLE>
Richard J. Heckmann was elected Chairman of the Board of Directors, Chief
Executive Officer and President of the Company on July 16, 1990 and resigned as
President on February 17, 1999. He is Chairman of the Nominating Committee. Mr.
Heckmann was a Senior Vice President at Prudential-Bache Securities in Rancho
Mirage, California from January 1982 to August 1990. He joined the U.S. Small
Business Administration in 1977 and served as Associate Administrator for
Finance and Investment from 1978 to 1979. Prior thereto he was founder and
Chairman of the Board of Tower Scientific Corporation, a manufacturer of custom
prosthetic devices, which was sold to Hexcel Corporation in 1977. He is also a
director of United Rentals, Inc., USA Waste Services, Inc. and K2, Inc.
David J. Shimmon was made a director in February 1999 and appointed
President on November 12, 1998. He was President and Chief Operating
Officer -- Industrial Products and Services Group from February 1998 to November
1998. Mr. Shimmon has served as President of Kinetics since March 1996, as Chief
Operating Officer and a Director of Kinetics since October 1990, and had served
as Chief Financial Officer of Kinetics since 1991 and as Executive Vice
President of Kinetics from October 1990 to March 1996.
Andrew D. Seidel, a director since August 1998, was appointed President and
Chief Operating Officer -- North American Wastewater Group in February 1998,
having previously served as Executive Vice President -- Wastewater Group since
July 1995, and as Senior Vice President -- Wastewater Group and General Manager
of U.S. Filter, Inc., Warrendale, Pennsylvania, from September 1993 to July
1995. He had previously served as Vice President -- Membralox Group of the
Company since December 8, 1992.
I-4
<PAGE> 18
Mr. Seidel received a B.S. degree in chemical engineering from the University of
Pennsylvania, and completed an M.B.A. program at the Wharton School, the
University of Pennsylvania in 1990. Mr. Seidel is also a member of the
management board of TWO.
J. Danforth Quayle has been a director since 1996. Mr. Quayle was the
forty-fourth Vice President of the United States. In 1976, Mr. Quayle was
elected to Congress and in 1980 to the United States Senate, being re-elected in
1986 and serving until 1989. As Vice President, he headed the Competitiveness
and Space Councils for the President. Since leaving office in January 1993, Mr.
Quayle has served as Chairman of Circle Investors, Inc. (a private financial
services and insurance holding company), and BTC, Inc. (a private company
through which he operates certain of his personal business interests). He is a
director of Central Newspapers, Inc. and American Standard Companies, Inc. and
is a member of the Board of Trustees of the Hudson Institute.
Arthur B. Laffer has been a director since 1991 and is Chairman of the
Audit Committee. Dr. Laffer has been Chairman and Chief Executive Officer of
Laffer Associates, an economic research and financial firm (and its predecessor,
A.B. Laffer, V.A. Canto & Associates), since founding the firm in 1979. He is
also Chairman of Calport Asset Management, Inc., a money management firm. Dr.
Laffer has been Chief Executive Officer of Laffer Advisors, Inc., a registered
broker-dealer and investment advisor, since 1981. He was the Charles B. Thornton
Professor of Business Economics at the University of Southern California from
1976 through 1984, Distinguished University Professor at Pepperdine University
from October 1984 to September 1987, and was a member of President Reagan's
economic policy advisory board. He is a director of Coinmach Laundry
Corporation, MasTec, Inc., Oxigene Inc., Nicholas Applegate Mutual and Growth
Equity Funds and several privately-held companies.
Alfred E. Osbourne, Jr. has been a director since 1991 and is Chairman of
the Compensation Committee and a member of the Audit Committee. Dr. Osbourne is
Director of the Harold Price Center for Entrepreneurial Studies and Associate
Professor of Business Economics at the John E. Anderson Graduate School of
Management at UCLA. He has been on the UCLA faculty since 1972. He is a director
of Greyhound Lines, Inc. Nordstrom, Inc. and The Times Mirror Company.
James E. Clark has been a director since 1990 and is a member of the Audit
and Compensation Committees. Mr. Clark was President of Western Operations for
Prudential Insurance from 1978 to June 1990. Since June 1990, he has been a
consultant and a private investor. Mr. Clark is also Chairman of Asian-American
Communication Company, Inc., and a director of Asian American Association, Inc.,
a joint venture with Sprint, and Durotest Corporation. He is also a trustee of
the Yul Brynner Foundation.
Robert S. Hillas has been a director since 1996. Mr. Hillas was appointed
Chairman, President and Chief Executive Officer of Envirogen, Inc., an
environmental systems and services company, in April 1998. Mr. Hillas has served
as a member of Envirogen's Board of Directors since April 1997. From 1993 to
April 1998, Mr. Hillas served as a Managing Director of E.M. Warburg, Pincus &
Co., LLC, or its predecessor. Mr. Hillas is also a director of Advanced
Technology Materials, Inc., Transition Systems, Inc. and several privately held
companies.
John L. Diederich has been a director since 1993 and is a member of the
Compensation Committee. Mr. Diederich was Executive Vice President -- Chairman's
Counsel for the Aluminum Company of America ("Alcoa") from August 1991 until
January 1997, when he retired. Mr. Diederich is a director of Continental Mills,
Inc. and a trustee of Shadyside Hospital.
Ardon E. Moore has been a director since 1997. Mr. Moore, an investment
advisor to the Bass family of Forth Worth, Texas, has been a Vice President of
Lee M. Bass, Inc., a corporation with operations in ranching, oil and gas
exploration and production and real estate and investments in corporate
securities, for more than ten years. Mr. Moore currently serves as President of
the Fort Worth Zoological Association and is a director of Texas Water
Foundation, Inc.
C. Howard Wilkins, Jr. has been a director since 1992 and is a member of
the Compensation Committee. Mr. Wilkins served as the United States Ambassador
to the Netherlands from June 1989 to July 1992. Prior to being Ambassador and
thereafter, Mr. Wilkins has been Chairman of the Board of Maverick Restaurant
I-5
<PAGE> 19
Corporation, which owns and operates restaurants under franchise agreements, and
Maverick Development Corporation.
Harry K. Hornish, Jr. was appointed President and Chief Operating
Officer -- Waterworks Distribution Group in February 1998, having previously
served as Executive Vice President -- Distribution Group since February 20,
1997. Beginning in November 1991, Mr. Hornish had served as President of the
Utility Supply Group, Inc. ("USG") subsidiary of CertainTeed Corporation
("CertainTeed"), a leading manufacturer of building materials for new
construction and remodeling. Mr. Hornish led a buyout of USG from CertainTeed in
1994. Mr. Hornish continued to serve as President of USG until October 25, 1996,
when the Company acquired USG. Mr. Hornish holds a B.A. in Political Science and
Business Administration from Marshall University. Mr. Hornish is also a director
of Cameron Ashley Building Products Inc.
Calvin R. Hendrix was appointed President and Chief Operating
Officer -- North American Consumer and Commercial Group in June 1998. Mr.
Hendrix had previously served as Group President -- North America of Culligan
since February 1997. From September 1993 to January 1997, he served as Vice
President -- General Manager of the Irrigation Division of The Toro Company, a
leader in turf and landscape products and services. For more than five years
previous to joining Toro, Mr. Hendrix was President of Thermador Corporation, a
major kitchen appliance company; and Group Product Manager with the Frito-Lay
Division of PepsiCo. Mr. Hendrix received BBA and MBA degrees from the
University of North Carolina at Charlotte.
Kenneth T. Wellings was appointed President -- U.S. Filter International in
June 1998. Mr. Wellings had previously served as Group
President -- International of Culligan since January 1997. From August 1995 to
January 1997, Mr. Wellings served as Vice President, International of Culligan
and from August 1994 to August 1995, he served as Vice President, European
Operations. From 1991 to 1994, he was employed with Culligan as General Manager,
Retail Division.
Andrew Denver was appointed President and Chief Operating
Officer -- Filtration and Separation Group in February 1998. In 1987, Mr. Denver
joined Memtec Limited as President and Chief Operating Officer, where he was
responsible for managing all aspects of Memtec's operation including research
and development, manufacturing, marketing and sales. Mr. Denver graduated with
Honors in Chemistry from the University of Manchester and achieved a Distinction
in his MBA at the Harvard Business School. Mr. Denver was a founding member and
Director of the Australian Environment Management Export Corporation (AUSTEMEX)
and was inaugural Chairman of the Board for the first two years. He was a
founding member and Director of the Environment Management Industry Association
of Australia (EMIAA).
Kevin L. Spence was appointed Executive Vice President and chief Financial
Officer of the Company in February 1998, having served as Vice President of the
Company since December 1991 and as Chief Financial Officer of the Company since
January 1992. Prior to that, Mr. Spence served as Treasurer of the Company from
February 17, 1992 until June 9, 1995. Mr. Spence is a certified public
accountant and received a B.S. in Business Administration in 1978 from the
University of Southern California.
Stephen P. Stanczak was appointed Executive Vice President, General Counsel
and Corporate Secretary of the Company in February 1999. From July 1995 to
October 1998, he served as the Vice President Legal Affairs and Company
Secretary of Waste Management International plc, a UK-based majority-owned
subsidiary of Waste Management, Inc. From prior to 1994 to July 1998, Mr.
Stanczak was Vice President, Secretary and Associate General Counsel of two
other publicly-traded subsidiaries of Waste Management, Inc., Wheelabrator
Technologies Inc. and Rust International Inc. Mr. Stanczak received a B.A. in
1979 from West Virginia University and a J.D. from the University of Illinois in
1982.
LEGAL PROCEEDINGS
There are no material proceedings to which any director, officer or
affiliate of the Company, any owner of record or beneficially of more than five
percent of the Shares, or any associate of any such director, officer, affiliate
of the Company, or security holder is a party adverse to the Company or any of
its subsidiaries or has a material interest adverse to the Company or any of its
subsidiaries.
I-6
<PAGE> 20
BOARD MEETINGS AND COMMITTEES
During fiscal 1998, the Board of Directors met on four occasions and also
took action four times by unanimous written consent and three times by
telephonic conference call. The Board has three standing committees, the Audit,
Compensation and Nominating Committees. Each director attended all meetings of
the Board and committees of the Board of which he was a member and took part in
all telephonic conference calls among Board members during fiscal 1998.
The Audit Committee reviews the performance of the Company's independent
public accountants and makes recommendations to the Board concerning the
selection of independent public accountants to audit the Company's financial
statements. The Audit Committee also reviews the audit plans, audit results and
findings of the internal auditors and the independent accountants, and reviews
the Company's systems of internal control. Additionally, the Audit Committee is
responsible for overseeing the Company's corporate compliance program. Members
of the Audit Committee meet with the Company's management and independent public
accountants to discuss the adequacy of internal accounting controls and the
financial accounting process. The Company's independent accountants have free
access to the Audit Committee, without management's presence. The Audit
Committee held one meeting in fiscal 1998.
The Compensation Committee reviews and determines the compensation of the
Company's officers (including salary and bonus), authorizes or approves any
contract for remuneration to be paid after termination of any officer's regular
employment and performs specified functions under the Company's various
compensation plans, including the 1991 Employee Stock Option Plan, the 1991
Directors Stock Option Plan (the "Directors Plan") and the Company's Executive
Severance Pay Plan. The Compensation Committee reviews, but is not required to
approve, the participation of officers in the Company's other benefit programs
for salaried employees. The Compensation Committee held three meetings and took
action by written consent on one occasion in fiscal 1998.
The Nominating Committee reviews the performance of incumbent directors and
the qualifications of nominees proposed for election to the Board and makes
recommendations to the Board with respect to nominations for director. In
recommending candidates for the Board of Directors, the Nominating Committee
will seek individuals having experience in fields applicable to the Company's
goals and functions. Stockholders who wish to suggest qualified candidates
should write to the Corporate Secretary of the Company, stating the
qualifications of such persons for consideration by the Nominating Committee.
The Nominating Committee held one meeting in fiscal 1998.
I-7
<PAGE> 21
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY EXECUTIVE COMPENSATION TABLE
The following table sets forth compensation information for the three
fiscal years ended March 31, 1998 for the Company's Chief Executive Officer and
for the four other most highly compensated executive officers of the Company for
fiscal 1998 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
-------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(1) COMPENSATION(2)
--------------------------- ------ ------- ------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Heckmann............ 1998 450,000 450,000 -- 150,000 5,322
Chairman of the Board, 1997 450,000 300,000 187,499 3,320
Chief Executive Officer 1996 414,731 150,000 -- 150,000 --
And President
Harry K. Hornish, Jr.(3)....... 1998 251,270 100,000 -- 15,000 2,479
President and Chief Operating 1997 115,575 100,000 -- --(4) 3,538
Officer -- Waterworks 1996 -- -- -- -- --
Distribution Group
Nicholas C. Memmo(5)........... 1998 215,923 55,000 -- 25,000 4,718
President and Chief Operating 1997 199,154 37,500 -- 15,000 4,923
Officer -- North American 1996 189,042 37,500 -- 17,500 5,014
Process Water Group
Andrew D. Seidel............... 1998 213,462 55,000 -- 25,000 4,536
President and Chief Operating 1997 181,249 20,000 -- 15,000 5,322
Officer -- North American 1996 153,535 -- -- 15,000 4,980
Wastewater Group
Kevin L. Spence................ 1998 204,654 33,000 -- 20,000 3,647
Executive Vice President 1997 180,001 65,000 -- 15,000 6,209
and Chief Financial Officer 1996 164,774 41,500 -- 15,000 4,865
</TABLE>
- ---------------
(1) Represents options granted pursuant to the Company's 1991 Employee Stock
Option Plan to purchase shares of Common Stock. Option grants during fiscal
1998 are described in greater detail below.
(2) Represents the Company's 50% matching contribution to the Company's 401(k)
Plan.
(3) In connection with the acquisition of The Utility Supply Group, Inc.
("USG"), Mr. Hornish became an employee of the Company on October 25, 1996.
See "-- Executive Severance Plan and Employment Agreements."
(4) Mr. Hornish received options to purchase 67,111 shares of Common Stock in
exchange for outstanding options to purchase shares of Common Stock of USG
in connection with the acquisition of USG by the Company.
(5) Mr. Memmo resigned as a Director and Executive Officer of the Company on
February 16, 1999.
I-8
<PAGE> 22
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Option Grants in Last Fiscal Year
The table below sets forth information with respect to stock options
granted to the Named Executive Officers in fiscal 1998 under the Company's 1991
Employee Stock Option Plan. The options listed below are included in the Summary
Compensation Table above.
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM(2)
OPTIONS IN FISCAL EXERCISE EXPIRATION -------------------------------
NAME GRANTED(1) YEAR PRICE($/SH) DATE 5% 10%
---- ---------- ---------- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Heckmann.... 150,000 6.9% $27.25 6/30/07 $ 2,570,607 $ 6,514,422
Harry K. Hornish, Jr... 15,000 0.9% 27.25 6/30/07 257,061 651,442
Nicholas C. Memmo(4)... 25,000 1.1% 27.25 6/30/07 428,434 1,085,737
Andrew D. Seidel....... 25,000 1.1% 27.25 6/30/07 428,434 1,085,737
Kevin L. Spence........ 20,000 0.9% 27.25 6/30/07 342,748 868,590
Increase in Value to
All
Stockholders(3)...... $1,643,628,842 $4,165,278,193
</TABLE>
- ---------------
(1) Options granted pursuant to the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock. The exercise price may be paid in cash or
in shares of the Company's Common Stock. Of the options granted to Messrs.
Heckmann, Hornish, Memmo, Seidel and Spence, 25% are vested and the
remaining options will vest in equal increments on July 1, 1998, 1999 and
2000.
(2) Calculated over a ten-year period representing the life of the options.
(3) Represents/the increase in value to all stockholders assuming the Company's
Common Stock appreciates 5% or 10% in value per year, compounded over a
ten-year period, equivalent to the life of the options granted to the Named
Executive Officers. Calculated using a Common Stock price of $27.25, the
closing price on June 30, 1997, on the NYSE, which is the exercise price of
substantially all of the options granted in fiscal 1998, and the total
weighted average number of 95,909,000 shares of Common Stock outstanding in
fiscal 1998.
(4) Mr. Memmo resigned as a Director and Executive Officer of the Company on
February 16, 1999.
Option Exercises in Fiscal 1998 and Fiscal Year End Option Value
The table below sets forth information with respect to stock options
exercised by the named Executive Officers in fiscal 1998 and the number of
unexercised options held by such persons on March 31, 1998, on a pre-tax basis:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON EXERCISE OF OPTIONS AT 3/31/98 AT 3/31/98
OPTIONS(1) VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
--------------- -------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Richard J. Heckmann.... -- $ -- 499,149/262,500 $11,204,836/3,808,601
Harry K. Hornish,
Jr. ................. 15,000 437,378 30,861/11,250 892,068/88,594
Nicholas C. Memmo(3)... 6,000 97,694 116,563/32,812 2,726,446/404,560
Andrew D. Seidel....... 5,000 115,556 102,624/31,874 2,390,581/384,588
Kevin L. Spence........ 10,000 224,862 96,374/28,124 2,250,523/355,057
</TABLE>
- ---------------
(1) Represents options under the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock.
(2) The dollar value reported is based on the difference between the exercise
price of the outstanding option and the closing price of the Company's
Common Stock on the NYSE on March 31, 1998, of $35.125 per share.
(3) Mr. Memmo left the Company on February 16, 1999.
I-9
<PAGE> 23
RETIREMENT PROGRAM
Effective April 1, 1995, the Company established a non-qualified defined
benefit pension plan for its senior executives, including Messrs. Heckmann,
Memmo, Seidel and Spence. Under this plan (the "Retirement Program"), the
executive becomes entitled to receive from the Company at age 60 an annual
retirement income, payable for 15 years equal to 50% of the executive's final
five year average compensation. Earnings covered by the Retirement Program
include salaries and incentive compensation. Benefits accrue on a percentage
basis over the number of years of service of the executive from his date of hire
with the Company to the attainment of age 60. The benefit accrued vests
commencing after five years of service, 50% at that time, and 10% each year
thereafter. A reduced benefit is payable at age 55 and if the executive's
employment with the Company terminates before age 55, a deferred benefit, to the
extent vested, is payable at or after age 55 based upon the executive's accrued
benefit prior to termination.
As of August 1997, the following are the benefits payable per year for 15
years under the Retirement Program for Messrs. Heckmann, Memmo, Seidel and
Spence, assuming that their covered compensation increases at a rate of 5%
annually and that their employment with the Company continues until age 60: Mr.
Heckmann $636,545; Mr. Memmo $443,451; Mr. Seidel $443,451; and Mr. Spence
$280,371.
All benefits under the Retirement Program are payable out of the general
assets of the Company. Any funding established by the Company to provide a
source for the payment of Retirement Program benefits would remain subject to
the general creditors of the Company.
EMPLOYMENT AGREEMENTS AND EXECUTIVE SEVERANCE PAY PLAN
Chief Executive Officer
On June 9, 1998 the Company entered into an employment agreement (the "CEO
Agreement") with Richard J. Heckmann, for his employment as Chief Executive
Officer and President. The CEO Agreement is effective as of January 1, 1998 for
a term of 63 months, and shall be automatically extended by one full calendar
month on May 1, 1998, and on the first day of each month thereafter. It provides
for an annual base salary of $750,000, to be reviewed annually for increase by
the Compensation Committee, and for a minimum annual incentive of at least 60%
of base salary, subject to performance goals negotiated in good faith by the
Company and Mr. Heckmann. It also entitles Mr. Heckmann to participate in all
senior executive incentive compensation plans and programs and all employee
benefit, vacation, and fringe benefit plans and programs.
Upon termination of employment for whatever reason, the CEO Agreement
provides for the payment of any unpaid base salary through the date of
termination; a prorated annual incentive based on the minimum annual incentive
determined without regard to any performance goals; any deferred compensation,
accrued vacation or expenses owed; any other compensation or benefits provided
in accordance with any Company plans and programs; and continuation of Company
welfare plans for Mr. Heckmann and/or his family for the balance of the term of
the agreement (24 months when termination is due to death or disability.)
In the event of termination due to death or disability, the CEO Agreement
also provides a lump sum equal to two times the base salary in effect on the
date of termination plus two times the minimum annual incentive determined
without regard to any performance goals; and full and immediate vesting of any
unvested stock options or restricted stock awards.
In the event of termination by the Company without cause or by Mr. Heckmann
for good reason (both as defined in the CEO Agreement), the CEO Agreement
provides for the full and immediate vesting of any unvested stock options or
restricted stock awards and the payment of benefits under the Severance Plan,
described above. If such a termination occurs following a change of control (as
defined in the Severance Plan), Mr. Heckmann is entitled to an additional
payment, if necessary, to make him whole as a result of any excise tax imposed
by the United States Internal Revenue Code of 1986, as amended (the "Code") on
certain change of control payments.
As part of the CEO Agreement and the Severance Plan, Mr. Heckmann is
restricted from engaging in any business then being conducted by the Company
during the term of the CEO Agreement and, except if
I-10
<PAGE> 24
Mr. Heckmann is terminated without cause or terminates for good reason following
a change of control, for a period of one year thereafter.
Retention and Employment Arrangements -- Named Executive Officers Other than
the Chief Executive Officer
The Company is a party to Executive Retention Agreements with each of the
Named Executive Officers, other than Mr. Heckmann and Mr. Hornish (the "Other
Executive Officers"). Each of those agreements (the "Retention Agreements") is
identical. The Retention Agreements provide for the employment of the Other
Executive Officers in their respective positions with the Company or as
otherwise determined, provided the duties to be performed are those of a senior
executive or manager of the Company. The Retention Agreements provide that under
certain conditions, including if the executive's employment is terminated
without cause, the executive has the right to receive from the Company an amount
equal to one times such individual's annual salary. Following a
change-of-control of the Company, the Retention Agreements provide for certain
benefits if, within one year of the change-of-control, the executive's
employment is terminated without cause, or if certain other conditions of the
executive's employment are altered. In any such event, the Other Executive
Officers have the right to receive the same multiple of their annual salary
above described, but including their latest incentive award or target incentive,
if greater, and the Company is also obligated to maintain for one year for the
executive the welfare and retirement plans available to the executive or to
provide an equivalent. Under the Retention Agreements, a change-of-control of
the Company generally is defined to occur if (i) any person or group acquires
50% or more of the Company's voting securities, (ii) during any two year period
there is a change in a majority of the Board of Directors of the Company, (iii)
there is a consolidation or merger of the Company or a transfer of substantially
all of the Company's assets or (iv) a plan of complete liquidation of the
Company is approved by the stockholders.
Mr. Hornish entered into a separate employment agreement with USG (the
"Hornish Agreement") which provides for the payment of $250,000 in base salary
per year for the period beginning October 25, 1996 and ending March 31, 1999.
The Hornish Agreement also provides for cash performance bonuses. For the period
beginning January 1, 1997 and ending March 31, 1998 and the period beginning
April 1, 1998 and ending March 31, 1999, the Hornish Agreement provides for
bonuses of up to $125,000 and $100,000, respectively, as well as additional
annual bonuses of up to 35% of Mr. Hornish's base salary. Pursuant to the
Hornish Agreement, such bonuses will be awarded if specified performance
objectives are met.
Executive Severance Pay Plan
Executive Severance Pay Plan. The United States Filter Corporation
Executive Severance Pay Plan (the "Severance Plan") was adopted by the Board of
Directors on June 9, 1998 effective as of January 1, 1998. It entitles eligible
executives to certain severance benefits only upon termination of employment by
the Company without cause (as defined) or termination by the employee for good
reason (as defined) provided that, except following a change of control (as
defined below), they do not compete with the Company or solicit its employees
during the remainder of the term of the employment agreement and for one year
thereafter. The Severance Plan also requires that confidential information not
be disclosed. A change of control of the Company generally is defined to occur
if (i) any person or group acquires 50% or more of the Company's voting
securities, (ii) during any two year period there is a change in a majority of
the Board of Directors of the Company, (iii) there is a consolidation or merger
of the Company or a transfer of substantially all of the Company's assets or
(iv) a plan of complete liquidation of the Company is approved by the
stockholders.
Initially only the Chief Executive Officer has been designated to
participate in the Severance Plan. It replaces his Executive Retention Agreement
previously in force. Other executive officers may be designated as participants
in the future (which may be in lieu of any Retention Agreement or other
severance arrangement to which any such executive officer is a party). The
benefit provided to the Chief Executive Officer in connection with an eligible
termination is the sum of his base salary plus the minimum annual incentive
(determined without regard to any performance goals) for the balance of the term
of his employment agreement.
I-11
<PAGE> 25
The benefit provided to any other eligible executive under the Severance
Plan, should the Company designate any other executive as eligible, would
consist of base salary for the balance of the term of an employment agreement
that the Company would enter into with the executive plus target annual
incentive for the year in which employment terminated times the number of full
and partial years remaining in such employment term (determined without regard
to any performance goals); and a lump sum equal to the greater of the present
value of the health, life insurance, disability and accident insurance plans or
programs for the remaining term of the agreement, and 1.5 times the present
value of one year of such coverage.
Payment of the severance benefit shall be made within 30 days after
termination of employment.
COMPENSATION OF DIRECTORS
Directors receive no cash compensation for their services as directors,
although they are reimbursed for out-of-pocket expenses incurred in attending
meetings. Each director who is not an employee of the Company participates in
the Directors Plan. The Directors Plan provides that directors of the Company
who are neither officers nor employees of the Company or its subsidiaries are
granted in April of each year options to purchase 12,000 shares of the Company's
Common Stock at fair market value, as determined on the date of grant. During
fiscal 1998, options to purchase 12,000 shares of Common Stock were granted
under the Directors Plan to each of the Company's non-employee directors on
April 1, 1997 at an exercise price of $30.875 per share.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is composed entirely of independent outside
directors and is responsible for determining the compensation of the executive
officers of the Company, presently comprising the Named Executive Officers and
eleven additional individuals. The Compensation Committee also administers the
Company's 1991 Employee Stock Option Plan, the Retirement Program and would
administer the proposed 1998 Stock Incentive Plan, and, with Mr. Heckmann, the
proposed Senior Executive Annual Incentive Plan.
Compensation Policy and Practice. The Company's executive compensation
policy is intended (i) to link compensation and stockholder value; (ii) to
recognize and reward individuals for their contributions and commitment to the
growth and profitability of the Company; and (iii) to secure and retain the
highest caliber of executives through competitive levels of total compensation.
The Compensation Committee believes this policy is generally best accomplished
by providing a competitive total compensation package, a significant portion of
which is variable and related to established performance goals. The Company
retained an independent consulting firm during fiscal 1998 to review the
Company's executive compensation levels and programs and to provide input to the
Compensation Committee. To evaluate competitive compensation practices, the
Company relied not only on the peer group in the performance graph, consisting
of direct industry competitors, but also on a broader group of industrial
companies that are more similar in size to the Company. Based on this input, as
well as other considerations deemed appropriate, the Compensation Committee
believes that the compensation provided to the Company's executives is
competitive with general industry practices.
Section 162(m) of the Code limits deductibility of compensation in excess
of $1.0 million paid to a company's chief executive officer and the four other
highest-paid executive officers unless such compensation qualifies as
"performance-based." The Company was not affected by this limitation for the
1998 tax year. The Compensation Committee has reviewed this issue and, to
preserve deductibility going forward, has recommended that the Company seek
approval from stockholders to adopt the Senior Executive Annual Incentive Plan
that is designed to meet the requirements of Section 162(m).
Compensation of the Company's executive officers consists of the following
elements: base salary, annual cash incentives and long-term stock-based
incentives. Each of these elements is discussed below.
Base Salary. In determining base salary for the Company's executive
officers, the Compensation Committee assesses the relative contribution of each
executive to the Company, the background and skills of each individual and the
particular opportunities and problems which the individual confronts in his or
her
I-12
<PAGE> 26
position with the Company. These factors are then assessed in the context of
competitive market factors, including competitive opportunities with other
industrial companies.
In making changes in base salary for existing executive officers, other
than Mr. Heckmann, the Compensation Committee considers the recommendations of
Mr. Heckmann based on his personal evaluation of individual performance for the
prior year including attainment of personal objectives and goals, attainment of
Company performance goals, the Company's salary structure and competitive salary
data.
Annual Cash Incentives. Pursuant to an Annual Incentive Compensation Plan,
key executives are eligible to earn incentive cash bonuses each year based on
the Company's performance. For eligible operational executives, the maximum
award level is 35% of base salary. For eligible staff executives, the maximum
award level is 25% of base salary. For Mr. Heckmann, the maximum award level has
been at the discretion of the Compensation Committee.
Of the 35% maximum award level for operational executives, up to 8% is
earned if the Company exceeds its profit plan; an additional 8% is earned if the
businesses supervised by the executive achieve their profit plan; an additional
10% is earned if the businesses supervised by the executive exceed their profit
plan; and an additional 9% may be earned based on a subjective assessment of the
executive's performance. Of the 25% maximum award level for staff executives, 8%
is earned if the Company achieves its pre-established profit plan for the fiscal
year; up to an additional 8% may be earned if the Company exceeds its profit
plan; and an additional 9% may be earned based on a subjective assessment of the
executive's performance. With respect to the subjective portion of the award,
Mr. Heckmann assesses the performance of each of the other executives or
employees.
After fiscal 1998, annual cash incentives for the Chief Executive Officer
and any other participating executive officers will be determined under the
Senior Executive Annual Incentive Plan described below provided that such plan
is approved by the stockholders.
Fiscal 1998 Annual Cash Incentives. Mr. Hornish's bonus for fiscal 1998 was
paid pursuant to his Employment Agreement based on performance objectives
established for USG prior to its acquisition by the Company. Bonuses for Messrs.
Seidel, Memmo and Spence were based on an assessment of each executive in
relation to the above criteria. In particular, the cash bonuses paid reflect
that the Company exceeded its profit plan, and that the businesses supervised by
the executives exceeded their profit plan. Information with respect to the cash
bonuses paid to the Named Executive Officers in fiscal 1998 is provided in the
Summary Compensation Table above.
Long-Term Incentives. Long-term incentive compensation is intended to focus
the efforts of executive officers and key employees on performance that will
increase the equity value of the Company for its stockholders. Under the
Company's 1991 Employee Stock Option Plan, officers and key employees of the
Company may be granted stock options. Under the proposed 1998 Stock Incentive
Plan, subject to the approval of stockholders, officers and key employees of the
Company may be granted stock options, and from time to time, stock appreciation
rights, restricted shares, and performance awards. Stock options are granted
with an exercise price equal to the market price of the Company's Common Stock
on the date of grant, generally vest over a period of three years, and expire
after ten years. Options only have value to the recipient if the price of the
Company's stock appreciates after the options are granted. The Company believes
that not less than 10% of the Company's outstanding equity securities should be
available for employee stock incentives, and stock incentive grants by the
Compensation Committee have reflected and can be expected to continue to reflect
this belief.
Fiscal 1998 Long-Term Incentives. Only stock option grants under the
Company's 1991 Employee Stock Option Plan were made in fiscal 1998 to the Named
Executive Officers. Information with respect to these grants is provided in the
Summary Compensation Table above.
Chief Executive Officer Compensation. In determining Mr. Heckmann's
compensation for fiscal 1998, the Compensation Committee focused upon the
policies described above. Mr. Heckmann's annual incentive and the number of
options granted to him reflect the overall performance of the Company for fiscal
1998 under his leadership, including his continued strategic direction, his
significant involvement in and responsibil-
I-13
<PAGE> 27
ity for the overall operations of the Company and his direct involvement in
numerous acquisitions made by the Company during the year. For fiscal 1998, Mr.
Heckmann received an annual incentive under the Annual Incentive Compensation
Plan equal to $450,000, based on the Company's exceeding its profit plan,
successful completion of strategic acquisitions and the Compensation Committee's
assessment of Mr. Heckmann's role in that success.
On June 9, 1998, the Company and Mr. Heckmann entered into a new employment
contract. See "Executive Severance Plan and Employment Agreements -- Employment
Agreement -- Chief Executive Officer." For fiscal 1999, the Compensation
Committee has determined that Mr. Heckmann's salary be increased to $750,000
based on his contributions to the Company, the complexity of leading a company
that now has seven business groups and annual revenue for fiscal 1998 in excess
of $3 billion, his ongoing role in the integration of the Company's numerous
acquisitions, the expectation that the Company will continue to experience rapid
growth, and competitive opportunities with other publicly-traded industrial
companies.
The Compensation Committee believes that Mr. Heckmann's overall
compensation is warranted by his roles in both the strategic and operational
aspects of the Company's business, the value he continues to bring to the
Company in the identification and realization of acquisition opportunities, and
the success of the Company both in its business and in the financial markets.
Alfred E. Osborne, Jr., Chairman
James E. Clark
John L. Diederich
C. Howard Wilkins, Jr.
I-14
<PAGE> 28
COMPARATIVE STOCK PERFORMANCE
The chart below sets forth line graphs comparing the performance of the
Company's Common Stock as compared with the NYSE Composite Stock Index and a
peer group index for the five-year period commencing March 31, 1993 and ending
March 31, 1998. The peer group consists of the Common Stock of Air & Water
Technologies Corporation, Calgon Carbon Corporation, Ionics, Incorporated,
Osmonics, Inc. and Wheelabrator Technologies Inc. ("WTI"). In the future, WTI
will not be included in the peer group because (i) the Company acquired the WTI
businesses that made it a "peer" -- WTI's Water Systems and Manufacturing Group
on December 2, 1996, and its contract operations and privatization business on
April 1, 1997, and (ii) WTI announced on March 30, 1998 that it has agreed to
merge the other businesses with Waste Management, Inc.
The indices assume that the value of the investment in the Company's Common
Stock and each index was $100 on March 31, 1993, and that dividends were
reinvested.
INDEXED TOTAL SHAREHOLDER RETURN
[GRAPH]
<TABLE>
<CAPTION>
NYSE COMPOSITE STOCK
U.S. FILTER COMMON STOCK INDEX PEER GROUP INDEX
------------------------ -------------------- ----------------
<S> <C> <C> <C>
3/31/93 100.00 100.00 100.00
3/31/94 84.50 99.05 89.87
3/31/95 93.00 108.67 70.83
3/31/96 168.00 139.09 86.09
3/31/97 277.88 159.79 74.64
3/31/98 316.13 229.64 83.26
</TABLE>
Source: Standard and Poor's Compustat Total Return Service
PEER GROUP
Air & Water Technologies Corporation Calgon Carbon Corporation
Ionics, Incorporated
Osmonics, Inc.
Wheelabrator Technologies Inc.
I-15
<PAGE> 29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Executive Employment Agreements
Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into an employment agreement with Richard J. Heckmann (the
"Heckmann Agreement") which has a term of four years from the date on which the
effective time of the Merger occurs (the "Effective Date"). The Heckmann
Agreement will be of no force and effect if the Merger Agreement is terminated.
During the term of the Heckmann Agreement, Mr. Heckmann will be Chairman and
Chief Executive Officer of the Company, a member of the Executive Committee of
Vivendi Water Branch and a director of Generale des Eaux. In addition to
payments of salary (which would be increased to $950,000 per year) and annual
bonus opportunities, the Heckmann Agreement provides for a cash payment not to
exceed $7.5 million to be paid no later than five days following the Effective
Date in respect of the severance provisions of his former employment agreement
with the Company, and provides for the full vesting of Mr. Heckmann's benefit
under the Company's Supplemental Executive Retirement Plan. In addition, the
Company (or Parent, on behalf of the Company) is obligated to deliver to Mr.
Heckmann an aggregate of 289,056 shares of Parent stock, one-quarter of which
will be delivered on each of the first four anniversaries of the Effective Date,
provided that Mr. Heckmann is employed by the Company as of each such date. In
the event that Mr. Heckmann's employment is terminated by the Company for Cause
or by Mr. Heckmann without Good Reason (as each such term is defined in the
Heckmann Agreement), Mr. Heckmann will be entitled to receive only his salary
accrued to such termination and any previously vested benefits under Company
benefit plans; provided, that portion of the Parent stock grant not previously
delivered or past due to be delivered at such time will be forfeited. If Mr.
Heckmann's employment is terminated because of his death or Disability (as
defined in the Heckmann Agreement), Mr. Heckmann (or his beneficiaries, as
applicable) will be entitled to receive, in addition to any accrued but unpaid
salary and other benefits owed or payable to Mr. Heckmann under the Company's
benefit plans, (i) a lump sum in cash equal to two times (x) his then current
base salary plus (y) the minimum annual incentive to which Mr. Heckmann would
have been entitled for the year in which such termination occurs; (ii) a lump
sum in cash in respect of any deferred compensation; (iii) that portion of the
Parent stock grant that was not delivered prior to the effective date of such
termination; and (iv) continuation of welfare-type benefits for two years
following the date of termination. In the event that Mr. Heckmann's employment
is terminated by the Company without Cause or by Mr. Heckmann for Good Reason,
which includes a Change in Control of Parent or the Company (as each term is
defined in the Heckmann Agreement), Mr. Heckmann will be entitled to receive (1)
a lump sum in cash equal to (a) the base salary that would have been paid to Mr.
Heckmann for the remainder of the original term of the Heckman Agreement plus
(b) the target annual bonus that would have been paid to Mr. Heckmann for the
remainder of the original term of the Heckmann Agreement plus (c) the minimum
annual bonus for the year in which such termination occurs, pro-rated to date of
termination; (2) continued welfare-type benefits for the remainder of the
original term of the Heckmann Agreement; and (3) that portion of the Parent
stock grant that was not delivered prior to the effective date of such
termination. The Heckmann Agreement provides that, if any payment or benefit
that Mr. Heckmann receives in connection with the Merger becomes subject to the
excise tax imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company will pay to Mr. Heckmann an amount in cash
sufficient to make him whole with respect to such excise tax. Mr. Heckmann is
subject to non-competition and non-solicitation covenants for the entire term of
the Heckmann Agreement, regardless of the earlier termination of his employment
thereunder. The Company will no longer be obligated to deliver the Parent stock
grant, in the event Mr. Heckmann violated such covenants prior to the due date
for any payment of the Parent stock grant. Parent, the Company and Mr. Heckmann
have also entered into an agreement whereby Mr. Heckmann may purchase one of the
Company's aircraft at its then depreciated value upon his retirement or, if
earlier, at such time as the Company determines to sell such aircraft to a third
party.
Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into employment agreements with each of Andrew D. Seidel and
Kevin L. Spence (each, an "Executive Agreement") which are substantially similar
in their terms. Each Executive Agreement has a three-year term from the
Effective Date. The Executive Agreements will be of no force and effect if the
Merger Agreement is
I-16
<PAGE> 30
terminated. During the term of the Executive Agreements, Mr. Seidel will be
President and Chief Operating Officer -- Wastewater Group of the Company, and
Mr. Spence will be Executive Vice President and Chief Financial Officer of the
Company. In addition to payments of salary (which would be increased for both
executives to $350,000 per year) and annual bonus opportunities, the Executive
Agreements provide for a cash payment not to exceed $2.1 million (in the case of
Mr. Seidel) or $1.95 million (in the case of Mr. Spence) to be paid no later
than five days following the Effective Date in respect of the severance
provisions of their former employment agreements with the Company, and provide
for the full vesting of their benefits under the Company's Supplemental
Executive Retirement Plan. In addition, the Company (or Parent, on behalf of the
Company) is obligated to deliver to the executives an aggregate of 50,370 shares
of Parent stock (in the case of Mr. Seidel) or 49,341 shares of Parent stock (in
the case of Mr. Spence), one-third of which will be delivered on each of the
first three anniversaries of the Effective Date, provided that the executive is
employed by the Company as of each such date. In the event that the executive's
employment is terminated by the Company for Cause or by the executive without
Good Reason (as each such term is defined in the Executive Agreements), that
portion of the Parent stock grant not previously delivered or past due to be
delivered at such time will be forfeited. If the executive's employment is
terminated because of his death or Disability (as defined in the Executive
Agreements), the executive (or his beneficiaries, as applicable) will be
entitled to receive (i) a lump sum in cash equal to 150 percent (150%) of (x)
his then current base salary plus (y) the minimum annual incentive to which the
executive would have been entitled for the year in which such termination
occurs; (ii) a lump sum in cash in respect of any deferred compensation, (iii)
that portion of the Parent stock grant that was not delivered prior to the
effective date of such termination; and (iv) continuation of welfare-type
benefits for two years following the date of termination. In the event that the
executive's employment is terminated by the Company without Cause or by the
executive for Good Reason, which includes a Change in Control of Parent or the
Company (as each such term is defined in the Executive Agreements), the
executive will be entitled to receive (1) a lump sum in cash equal to (a) the
base salary that would have been paid to the executive for the remainder of the
original term of the Executive Agreement plus (b) the target annual bonus that
would have been paid to the executive for the remainder of the original term of
the Executive Agreement plus (c) the minimum annual bonus for the year in which
such termination occurs, pro-rated to the date of termination; (2) continued
welfare-type benefits for the remainder of the original term of the Executive
Agreement; and (3) that portion of the Parent stock grant that was not delivered
prior to the effective date of such termination. The Executive Agreements
provide that, if any payment or benefit that the executive receives in
connection with the Merger becomes subject to the excise tax imposed by section
4999 of the Code, the Company will pay to the executive an amount in cash (a
"Gross-up Payment") sufficient to make him whole with respect to such excise
tax. Each of the executives is subject to non-competition and non-solicitation
covenants for the entire term of his Executive Agreement, regardless of the
earlier termination of his employment thereunder. The Company will no longer be
obligated to deliver the Parent stock grant to Mr. Seidel or Mr. Spence, as the
case may be, in the event such executive violates such covenants prior to the
due date for any payment of the Parent stock grant.
As of August 26, 1998, the Company entered into Employment Agreements
("Employment Agreements") with its executive officers other than Mr. Heckmann
and Mr. Shimmon (Mr. Stanczak entered into his Employment Agreement on February
15, 1999), whose terms are substantially similar, except that the number of
years in the term of the agreement and the corresponding multiplier used in
calculating severance benefits thereunder may differ. With respect to Messrs.
Seidel and Spence, such agreements are superceded by the Executive Agreements
described above. Each Employment Agreement provides for a term of 24 or 36
months, provided in each case that unless either party has given notice of
termination, on the first day of the month following the commencement of the
term of the Employment Agreement, the term is extended by an additional month.
The Employment Agreements provide for certain payments and benefits to be paid
in respect of severance upon the occurrence of a Change of Control (as defined
in the Employment Agreements). Such payments and benefits include: (1) a lump
sum in cash equal to (a) the executive's base salary and target annual incentive
bonus that would be payable for the remainder of the term of the Employment
Agreement; (b) the present value of the welfare-type benefits covering the
executive if continued to the end of the term of the Employment Agreement; and
(c) for agreements with a 36-month term, the immediate vesting of the
executive's benefit under the Company's Supplemental Executive Retirement Plan.
Employment Agreements with a 36-month term provide that, if any payment or
benefit that the executive receives in connection with the Merger becomes
subject to excise tax imposed by section 4999 of the Code, the Company will pay
to the executive a Gross-up Payment. Employment Agreements with a two- year term
do not provide for a Gross-up Payment. Each Employment Agreement provides that
the executive will be subject to non-competition covenants during the term of
the agreement and, if the
I-17
<PAGE> 31
executive's employment is terminated prior to the expiration of the term of the
Employment Agreement, for one year thereafter.
Stock Option Grants
On October 9, 1998, following review of, among other things, a report from
the Company's compensation consultants, the Compensation Committee of the
Company authorized and approved the award of stock option grants under the
Company's 1998 Stock Incentive Plan (the "1998 Plan") to each of its executive
officers (such executive officers, collectively, the "Section 16 Officers") who
was subject to Section 16 of the Securities Exchange Act of 1934, as amended,
with respect to the Company at the time of such grant. (Mr. Stanczak was not
employed by the Company at such time.) No further option grants were to be made
to the Section 16 Officers during the next 3-year period. The exercise price per
Share under such options is $12.625, the then-current fair market value of the
Shares. The options have differing vesting schedules but all such options become
fully vested in October 2001, subject to immediate vesting upon the occurrence
of a Change of Control of the Company (as defined in the 1998 Plan), which
generally includes, among other things, the acquisition by any person or entity
of fifty percent (50%) or more of the Company's voting power. Grants in an
aggregate of approximately 3,000,000 Shares were made to the Section 16
Officers.
I-18
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
UNITED STATES FILTER CORPORATION
BY
EAU ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF
VIVENDI
AT
$31.50 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, APRIL 22, 1999, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER (AS SUCH TERMS ARE DEFINED HEREIN), ARE FAIR TO AND IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND ADOPTED THE
MERGER AGREEMENT AND DECLARED ITS ADVISABILITY, AND RECOMMENDS ACCEPTANCE OF THE
OFFER BY THE COMPANY'S STOCKHOLDERS.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING AT LEAST
A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES OF COMMON STOCK OF THE
COMPANY ON A FULLY DILUTED BASIS BEING VALIDLY TENDERED PRIOR TO THE EXPIRATION
OF THE OFFER AND NOT PROPERLY WITHDRAWN AND CERTAIN OTHER CONDITIONS. SEE
SECTION 14.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) either should (i) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in the
Letter of Transmittal, and mail or deliver it together with the certificate(s)
representing tendered Shares and any other required documents to the Depositary
(as defined herein) or tender such Shares pursuant to the procedures for
book-entry transfer set forth in Section 3 or (ii) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect such
transaction. A stockholder whose Shares are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates representing
such Shares are not immediately available or who cannot comply with the
procedures for book-entry transfer on a timely basis, may tender such Shares by
following the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information Agent
at its address and telephone number set forth on the back cover of this Offer to
Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other related materials may
be obtained from the Information Agent or from brokers, dealers, commercial
banks, trust companies and other nominees.
------------------------
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717 (call collect)
March 26, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Introduction....................................................... 1
1. Terms of the Offer.......................................... 3
2. Acceptance for Payment and Payment.......................... 6
3. Procedures for Tendering Shares............................. 7
4. Withdrawal Rights........................................... 11
5. Certain Tax Consequences.................................... 12
6. Price Range of the Shares; Dividends........................ 12
7. Possible Effects of the Offer on the Market for the Shares;
NYSE Listing; Exchange Act Registration; Margin
Regulations................................................. 13
8. Certain Information Concerning the Company.................. 15
9. Certain Information Concerning Parent and the Purchaser..... 18
10. Background of the Offer; Contacts with the Company.......... 19
11. Purpose of the Offer; the Merger Agreement; the Stock Option
Agreement; the Support Agreements; Appraisal Rights; Plans
for the Company; the Rights................................. 22
12. Source and Amount of Funds.................................. 39
13. Dividends and Distributions................................. 39
14. Certain Conditions of the Offer............................. 39
15. Certain Legal Matters; Required Regulatory Approvals........ 42
16. Certain Fees and Expenses................................... 45
17. Miscellaneous............................................... 46
SCHEDULE I Directors and Executive Officers of Parent and the I-1
Purchaser........................................................
</TABLE>
i
<PAGE> 3
To: All Holders of Shares of Common Stock of United States Filter Corporation:
INTRODUCTION
Eau Acquisition Corp. (the "Purchaser"), a Delaware corporation and an
indirect wholly-owned subsidiary of Vivendi, a societe anonyme organized under
the laws of France ("Parent"), hereby offers to purchase all outstanding shares
of common stock, par value $.01 per share (the "Shares"), of United States
Filter Corporation, a Delaware corporation (the "Company"), and the associated
Preferred Share Purchase Rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of November 27, 1998, between the Company and The Bank of
New York, as Rights Agent (as the same may be amended, the "Rights Agreement"),
at a purchase price of $31.50 per Share (and associated Right), net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer"). Unless the context
otherwise requires, all references to Shares shall include the associated
Rights.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer. The Purchaser will pay all charges and expenses of
ChaseMellon Shareholder Services, L.L.C., as Depositary (the "Depositary"), and
Innisfree M&A Incorporated, as Information Agent (the "Information Agent"),
incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER (AS SUCH TERMS ARE DEFINED HEREIN) ARE FAIR TO AND IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND ADOPTED THE
MERGER AGREEMENT AND DECLARED ITS ADVISABILITY AND RECOMMENDS THAT STOCKHOLDERS
OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Each of Salomon Smith Barney Inc. ("SSB") and J.P. Morgan Securities Inc.
("J.P. Morgan") has delivered to the Board of Directors of the Company a written
opinion dated March 22, 1999 to the effect that, as of such date and based upon
and subject to certain matters stated in such opinion, the $31.50 per Share cash
consideration to be received by the holders of Shares, pursuant to the Offer and
the Merger is fair, from a financial point of view, to such holders. A copy of
the written opinions from SSB and J.P. Morgan are included with the Company's
Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
that is being mailed to stockholders concurrently herewith, and stockholders are
urged to read such opinion carefully and in its entirety for a description of
the assumptions made, matters considered and limitations of the review
undertaken by SSB and J.P. Morgan.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, AT LEAST A MAJORITY OF
THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS BEING VALIDLY
TENDERED PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN) AND NOT PROPERLY
WITHDRAWN (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
TERMS AND CONDITIONS. THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, APRIL 22, 1999, UNLESS EXTENDED. SEE SECTIONS 1, 14 AND 15.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of March 22, 1999 (the "Merger Agreement"), by and among the Company, the
Purchaser and Parent pursuant to which, following the consummation of the Offer
and the satisfaction or waiver of certain conditions, the Purchaser will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation (the "Surviving Corporation"). On the effective date
of the Merger, each outstanding Share (other than Shares held by Parent, the
Purchaser, any wholly-owned subsidiary of Parent or the Purchaser, or in the
treasury of the Company or by any wholly-owned subsidiary of the Company, which
Shares will be canceled with no payment being made with respect thereto, and
other than Shares, if any, held by stockholders who perfect their appraisal
rights under Delaware law, if available ("Dissenting Shares")), will, by virtue
of
1
<PAGE> 4
the Merger and without any action by the holder thereof, be converted into the
right to receive $31.50 in cash (the "Merger Consideration"), payable to the
holder thereof, without interest thereon, upon the surrender of the certificate
formerly representing such Share. The Merger Agreement is more fully described
in Section 11 below. Certain Federal income tax consequences of the sale of
Shares pursuant to the Offer and the Merger, as the case may be, are described
in Section 5 below.
If the Minimum Condition and the other conditions to the Offer are
satisfied and the Offer is consummated, the Purchaser will own a sufficient
number of Shares to ensure that the Merger will be approved. Under the Delaware
General Corporation Law (the "DGCL"), if, after consummation of the Offer, the
Purchaser owns at least 90% of the Shares then outstanding, the Purchaser will
be able to cause the Merger to occur without a vote of the Company's
stockholders. If, however, after consummation of the Offer, the Purchaser owns
less than 90% of the then outstanding Shares, a vote of the Company's
stockholders will be required under the DGCL to approve the Merger, and a
significantly longer period of time will be required to effect the Merger. See
Section 11.
Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into a Stock Option Agreement (the "Stock Option Agreement")
pursuant to which, the Company granted to Parent an irrevocable option (the
"Option") to purchase 36,223,552 authorized but unissued Shares at an exercise
price of $31.50 per Share. The Shares subject to the Option would represent
approximately 19.9% of the outstanding Shares (before giving effect to the
issuance of the Shares subject to the Option). The Option would become
exercisable by Parent pursuant to the terms and conditions of the Stock Option
Agreement, if the Company would be obligated to pay the Termination Fee (as
described herein) in accordance with the Merger Agreement. See Section 11.
Concurrently with the execution of the Merger Agreement, Parent also
entered into support agreements with certain stockholders of the Company (the
"Stockholder Support Agreements") and three executive officers of the Company
(the "Management Support Agreements", and together with the Stockholder Support
Agreements, the "Support Agreements"). Pursuant to the Support Agreements, such
stockholders of the Company have agreed, among other things, to tender, in
accordance with the terms of the Offer, all of the Shares owned (beneficially or
of record) by them and to vote all of the Shares owned by them in favor of the
Merger and against certain other extraordinary transactions. The Management
Support Agreements also provide for a grant of an option to Parent to purchase
the Shares held by the executive officers that are party thereto at $31.50 per
Share. Parent has also agreed with the stockholders who are parties to the
Stockholder Support Agreements to purchase the Shares owned by such stockholders
as of the date of such agreements in the event the Offer is terminated or
withdrawn or the Shares are not otherwise purchased pursuant to the Offer.
According to information provided by such stockholders, in the aggregate,
approximately 22,410,805 Shares are subject to the Support Agreements,
representing approximately 12.3% of the outstanding Shares. See Section 11.
The Company has informed the Purchaser that, as of March 20, 1999, there
were 182,027,902 Shares issued and outstanding and 14,626,972 Shares reserved
for issuance upon the exercise of outstanding stock options ("Options") granted
under the Company's stock option or similar plans or agreements.
Based on the foregoing, and assuming no additional Shares (or warrants,
options or rights exercisable for, or securities convertible into, Shares) have
been issued (other than Shares issued pursuant to such options and rights
referred to above), if the Purchaser were to acquire approximately 98,327,438
Shares pursuant to the Offer (including the Shares which pursuant to the Support
Agreements are required to be tendered in response to the Offer), the Minimum
Condition would be satisfied.
No appraisal rights are available in connection with the Offer; however,
stockholders may have appraisal rights in connection with the Merger regardless
of whether the Merger is consummated, with or without a vote of the Company's
stockholders. See Section 11.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
2
<PAGE> 5
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and pay for all Shares
validly tendered and not withdrawn on or prior to the Expiration Date in
accordance with the procedures set forth in Section 4, as soon as practicable
after such Expiration Date; provided that, if the Shares validly tendered and
not withdrawn pursuant to the Offer are sufficient to satisfy the Minimum
Condition but equal to less than 90% of the outstanding Shares, the Purchaser
reserves the right, in its sole discretion, to extend the Offer from time to
time for up to 15 business days in the aggregate, notwithstanding the prior
satisfaction of the conditions to the Offer so long as Purchaser irrevocably
waives the satisfaction of any of the conditions to the Offer (other than those
set forth in paragraph (a), (b) or (d) of Section 14 hereof) that subsequently
may not be satisfied during any such extension of the Offer. The Offer will
remain open until 12:00 midnight, New York City time, on Thursday, April 22,
1999 (the "Expiration Date"), unless and until the Purchaser extends the period
of time for which the Offer is open, in which event the term "Expiration Date"
will mean the time and date at which the Offer, as so extended by the Purchaser,
will expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition and the expiration or termination of all waiting periods
imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the Merger Control Regulation 4064-89 of the European
Commission (the "EC Merger Control Regulation"). See Section 14. Parent shall be
entitled to extend the Offer if, at any Expiration Date, any condition to the
Offer is not satisfied or waived, and Parent agrees to cause the Purchaser to
extend the Offer up to 40 days in the aggregate, in one or more periods of not
more than 10 business days, if, at any Expiration Date, any condition to the
Offer set forth in paragraph (a), (b) or (g) of Section 14 hereof is not
satisfied or waived; provided, however, that the Purchaser shall not be required
to extend the Offer as provided in this sentence unless, in Parent's reasonable
judgment, (i) each such condition is reasonably capable of being satisfied and
(ii) the Company is in material compliance with all of its covenants under the
Merger Agreement, subject however to Parent's and the Purchaser's rights of
termination under the Merger Agreement. During any extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer and
subject to the right of a tendering stockholder to withdraw such stockholder's
Shares. See Section 4. Under no circumstances will interest be paid on the
purchase price for tendered Shares, whether or not the Offer is extended.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), the Purchaser expressly reserves the right, in
its sole discretion, at any time or from time to time, to (i) in addition to its
termination rights relating to fulfillment of the Minimum Condition and
expiration or termination of HSR Act or EC Merger Control Regulation waiting
periods, terminate the Offer if at any time prior to the time of payment for
Shares pursuant to the Offer any of the other conditions referred to in Section
14 has not been satisfied; (ii) waive any condition (including the Minimum
Condition); or (iii) except as set forth in the Merger Agreement and discussed
below, otherwise amend the Offer in any respect, in each case, by giving oral or
written notice of such termination, waiver or amendment to the Depositary. In
the Merger Agreement, the Purchaser has agreed that without the prior written
consent of the Company, it will not decrease the Offer Price or change the form
of consideration payable in the Offer, decrease the number of Shares sought to
be purchased in the Offer, impose additional conditions to the Offer or amend
any other term of the Offer in any manner adverse to the holders of Shares, or
reduce the time period during which the Offer shall remain open. Notwithstanding
the foregoing, the Offer Price may be increased and the Offer may be extended to
the extent required by law in connection with any such increase, in each case
without the consent of the Company.
Any such extension, termination or amendment will be followed as promptly
as practicable by public announcement thereof. In the case of an extension, Rule
14e-1(d) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires that the announcement be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rule
14e-1 under the Exchange Act. Subject to applicable law (including Rules
14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material
change in
3
<PAGE> 6
the information published, sent or given to stockholders in connection with the
Offer be promptly disseminated to stockholders in a manner reasonably designed
to inform stockholders of such change), and without limiting the manner in which
the Purchaser may choose to make any public announcement, the Purchaser will not
have any obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service. The rights reserved by the Purchaser in the preceding paragraph are in
addition to the Purchaser's rights pursuant to Section 14.
If the Purchaser makes a material change in the terms of the Offer, or if
it waives a material condition to the Offer, the Purchaser will extend the Offer
and disseminate additional tender offer materials to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
materiality of the changes. In the Commission's view, an offer should remain
open for a minimum of five business days from the date the material change is
first published, sent or given to stockholders, and, if material changes are
made with respect to information that approaches the significance of price and
the percentage of securities sought, a minimum of ten business days may be
required to allow for adequate dissemination and investor response. With respect
to a change in price, a minimum ten business day period from the date of such
change is generally required under applicable Commission rules and regulations
to allow for adequate dissemination to stockholders.
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a Federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
As of the date of this Offer, the Rights are evidenced by the certificates
representing Shares and do not trade separately. Accordingly, by tendering a
certificate representing Shares, a stockholder is automatically tendering a
similar number of associated Rights. If, however, pursuant to the Rights
Agreement or for any other reason, the Rights detach and separate certificates
representing rights ("Rights Certificates") are issued, stockholders will be
required to tender one Right for each Share tendered in order to effect a valid
tender of such Share.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by the Purchaser, to record holders of
Shares and will be furnished by the Purchaser to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the securityholder lists or, if applicable, who are listed
as participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), promptly after the Expiration Date the Purchaser will
purchase, by accepting for payment, and will pay for, all Shares validly
tendered and not properly withdrawn (in accordance with Section 4) prior to the
Expiration Date. In addition, subject to applicable rules of the Commission, the
Purchaser expressly reserves the right, in its sole discretion, to delay
acceptance for payment of, or payment for, Shares in order to comply with
applicable law, including the HSR Act and the EC Merger Control Regulation. See
Sections 1 and 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates
representing such Shares ("Share Certificates") or timely confirmation (a
"Book-Entry Confirmation") of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company ("DTC") pursuant to the
procedures set forth in Section 3; (ii) the appropriate Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees or an Agent's Message (as defined below) in
connection with a book-entry transfer; and (iii) any other documents required by
the Letter of Transmittal.
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<PAGE> 7
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Depositary and forming a part of a Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the Shares which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not withdrawn
as, if and when the Purchaser gives oral or written notice to the Depositary of
the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In
all cases, upon the terms and subject to the conditions of the Offer, payment
for Shares purchased pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to validly tendering stockholders.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE
PAID BY THE PURCHASER.
The reservation by Purchaser of the right to delay the acceptance or
purchase of or payment for Shares is subject to the provisions of Rule 14e-1(c)
under the Exchange Act, which requires Purchaser to pay the consideration
offered or to return Shares deposited by, or on behalf of stockholders, promptly
after the termination or withdrawal of the Offer.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Share Certificates are submitted representing more Shares than are
tendered, Share Certificates representing unpurchased or untendered Shares will
be returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer into the Depositary's account at DTC
pursuant to the procedures set forth in Section 3, such Shares will be credited
to an account maintained within DTC), as promptly as practicable following the
expiration, termination or withdrawal of the Offer.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH INCREASED
CONSIDERATION SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT
TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN
CONSIDERATION.
The Purchaser reserves the right, subject to the provisions of the Merger
Agreement, to assign to any affiliate, to one or more of Parent's direct or
indirect subsidiaries, the right to purchase all or any portion of the Shares
tendered pursuant to the Offer, but no such assignment will relieve Parent or
the Purchaser of any liability under the Merger Agreement for any breach of the
Merger Agreement by any such assignee.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender. Except as set forth below, in order for Shares to be validly
tendered pursuant to the Offer, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), together with any required signature
guarantees or an Agent's Message in connection with a book-entry delivery of
Shares, and any other documents required by the Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase on or prior to the Expiration Date and either (i)
Share Certificates representing tendered Shares must be received by the
Depositary or tendered pursuant to the procedure for book-entry transfer set
forth below, and Book-Entry Confirmation must be received by the Depositary, in
each case on or prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with. No alternate, conditional or
contingent tenders will be accepted.
5
<PAGE> 8
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, RIGHTS CERTIFICATES (IF
APPLICABLE), THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE
CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish accounts with respect
to the Shares at DTC for purposes of the Offer. Any financial institution that
is a participant in DTC's systems may make book-entry delivery of Shares by
causing DTC to transfer such Shares into the Depositary's account at DTC in
accordance with its procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer into the Depositary's account
at DTC, the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other required documents must, in
any case, be transmitted to and received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date, or the guaranteed delivery procedure set forth below must
be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made to, or
Share Certificates for unpurchased Shares are to be issued or returned to, a
person other than the registered holder, then the tendered certificates must be
endorsed or accompanied by appropriate stock powers, signed exactly as the name
or names of the registered holder or holders appear on the certificates, with
the signatures on the certificates or stock powers guaranteed by an Eligible
Institution as provided in the Letter of Transmittal. See Instructions 1 and 5
of the Letter of Transmittal.
If the Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) must accompany each such delivery.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
on or prior to the Expiration Date or the procedures for book-entry transfer
cannot be completed on a timely basis, such Shares or Rights may nevertheless be
tendered if all of the following guaranteed delivery procedures are duly
complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received by the Depositary, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal are received by the
6
<PAGE> 9
Depositary within three New York Stock Exchange, Inc. ("NYSE") trading days
after the date of execution of such Notice of Guaranteed Delivery. A "NYSE
trading day" is any day on which the NYSE is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by facsimile transmission to the Depositary, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery and a representation that the stockholder on whose behalf
the tender is being made is deemed to own the Shares being tendered within the
meaning of Rule 14e-4 under the Exchange Act.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or, of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the Letter of Transmittal.
Accordingly, payment might not be made to all tendering stockholders at the same
time, and will depend upon when Share Certificates are received by the
Depositary or Book-Entry Confirmations of such Shares are received into the
Depositary's account at DTC.
Backup Withholding. Under the backup federal income tax withholding laws
applicable to certain stockholders (other than certain exempt stockholders,
including, among others, all corporations and certain foreign individuals), the
Depositary may be required to withhold 31% of the amount of any payments made to
such stockholders pursuant to the Offer or the Merger. To prevent backup federal
income tax withholding, each such stockholder must provide the Depositary with
such stockholder's correct taxpayer identification number and certify that such
stockholder is not subject to backup federal income tax withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
Instruction 9 of the Letter of Transmittal.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser as such
stockholder's agents, attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares and other securities or rights issued or issuable in
respect of such Shares on or after the date of this Offer to Purchase. All such
powers of attorney and proxies shall be considered irrevocable and coupled with
an interest in the tendered Shares. Such appointment will be effective upon the
acceptance for payment of such Shares by the Purchaser in accordance with the
terms of the Offer. Upon such acceptance for payment, all other powers of
attorney and proxies given by such stockholder with respect to such Shares and
such other securities or rights prior to such payment will be revoked, without
further action, and no subsequent powers of attorney and proxies may be given by
such stockholder (and, if given, will not be deemed effective). The designees of
the Purchaser will, with respect to the Shares and such other securities and
rights for which such appointment is effective, be empowered to exercise all
voting and other rights of such stockholder as they in their sole discretion may
deem proper at any annual or special meeting of the Company's stockholders, or
any adjournment or postponement thereof, or by consent in lieu of any such
meeting or otherwise. In order for Shares to be deemed validly tendered,
immediately upon the acceptance for payment of such Shares, the Purchaser or its
designee must be able to exercise full voting rights with respect to such Shares
and other securities, including voting at any meeting of stockholders.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders determined by
it not to be in proper form or for which the acceptance of or payment may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any of the conditions of the Offer and the Merger
Agreement to the extent permitted by applicable law and the Merger Agreement or
any defect or irregularity in any tender of
7
<PAGE> 10
Shares of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders.
A tender of Shares pursuant to any of the procedures described above will
constitute the tendering stockholder's acceptance of the terms and conditions of
the Offer, as well as the tendering stockholder's representation and warranty to
Purchaser that (i) such stockholder has a net long position in the Shares being
tendered within the meaning of Rule 14e-4 under the Exchange Act and (ii) the
tender of such Shares complies with Rule 14e-4. It is a violation of Rule 14e-4
for a person, directly or indirectly, to tender Shares for such person's own
account unless, at the time of tender, the person so tendering (a) has a net
long position equal to or greater than the amount of (A) Shares tendered or (B)
other securities immediately convertible into or exchangeable or exercisable for
the Shares tendered, and such person will acquire such Shares for tender by
conversion, exchange or exercise and (b) will cause such Shares to be delivered
in accordance with the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person.
The Purchaser's interpretation of the terms and conditions of the Offer
will be final and binding. No tender of Shares will be deemed to have been
validly made until all defects and irregularities with respect to such tender
have been cured or waived by the Purchaser. None of Parent, the Purchaser or any
of their respective affiliates or assigns, the Depositary, the Information Agent
or any other person or entity, will be under any duty to give any notification
of any defects or irregularities in tenders or incur any liability for failure
to give any such notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time, on or prior to the Expiration Date, and, unless
theretofore accepted for payment as provided herein, may also be withdrawn at
any time after May 24, 1999.
If, for any reason whatsoever, acceptance for payment of any Shares
tendered pursuant to the Offer is delayed, or the Purchaser is unable to accept
for payment or pay for Shares tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares and such Shares
may not be withdrawn except to the extent that the tendering stockholder is
entitled to and duly exercises withdrawal rights as described in this Section 4.
In order for a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn, and (if Share
Certificates have been tendered) the name of the registered holder of the Shares
as set forth in the Share Certificate, if different from that of the person who
tendered such Shares. If Share Certificates have been delivered or otherwise
identified to the Depositary, then prior to the physical release of such
certificates, the tendering stockholder must submit the serial numbers shown on
the particular certificates evidencing the Shares to be withdrawn, and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Shares tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth in Section 3, the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawn Shares, in that case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph. Withdrawals of Shares may not be rescinded. Any
Shares properly withdrawn will be deemed not validly tendered for purposes of
the Offer, but may be tendered at any subsequent time prior to the Expiration
Date by following any of the procedures described in Section 3.
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<PAGE> 11
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of Parent, the
Purchaser or any of their respective affiliates or assigns, the Depositary, the
Information Agent or any other person or entity will be under any duty to give
any notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. CERTAIN TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. For
federal income tax purposes, each selling or exchanging stockholder would
generally recognize gain or loss equal to the difference between the amount of
cash received and such stockholder's tax basis for the sold or exchanged Shares.
Such gain or loss will be capital gain or loss (assuming the Shares are held as
a capital asset) and any such capital gain or loss will be long-term capital
gain or loss if the stockholder held the Shares for more than one year.
The foregoing discussion may not be applicable to certain types of
stockholders, including stockholders who acquired Shares pursuant to the
exercise of employee stock options or otherwise as compensation, individuals who
are not citizens or residents of the United States and foreign corporations, or
entities that are otherwise subject to special tax treatment under the Internal
Revenue Code of 1986, as amended (the "Code") (such as dealers in securities,
traders in securities who elect to apply a mark-to-market method of accounting,
financial institutions, persons who hold Shares as part of a hedge, straddle or
conversion transaction, insurance companies, tax-exempt entities and regulated
investment companies). This discussion does not address all aspects of federal
income taxation that may be relevant to a particular stockholder in light of
such stockholder's personal investment circumstances nor does it address any
aspect of foreign, state, local or estate and gift taxation that may be
applicable to a stockholder.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND MERGER,
INCLUDING FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
6. PRICE RANGE OF THE SHARES; DIVIDENDS.
The Shares are traded on the NYSE under the symbol "USF." The following
table sets forth, for the periods indicated, the reported high and low sale
prices for the Shares on the NYSE since the first quarter of 1996.
UNITED STATES FILTER CORPORATION
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
CALENDAR YEAR 1997
First Quarter............................................... $39 $28 7/8
Second Quarter.............................................. $33 3/8 $25 3/4
Third Quarter............................................... $43 3/16 $26 15/16
Fourth Quarter.............................................. $44 7/16 $27 6/8
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
CALENDAR YEAR 1998
First Quarter............................................... $36 7/16 $28 3/4
Second Quarter.............................................. $36 1/4 $26 3/8
Third Quarter............................................... $31 1/4 $14 1/16
Fourth Quarter.............................................. $25 1/2 $11 7/16
CALENDAR YEAR 1999
First Quarter (through March 19, 1999)...................... $31 7/16 $22 1/2
</TABLE>
- ---------------
Prices are adjusted to reflect a three-for-two stock split given to those
holders of record on June 14, 1996.
On March 19, 1999, the last full day of trading prior to the press release
announcing the execution of the Merger Agreement, according to publicly
available sources, the reported closing price on the NYSE for the Shares was
$30 1/2 per Share. The Company has not declared or paid any cash dividends on
the Shares since January 1, 1996.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; NYSE LISTING;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
Possible Effects of the Offer on the Market for the Shares. The purchase
of Shares pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public. The purchase of Shares
pursuant to the Offer can also be expected to reduce the number of holders of
Shares. The Purchaser cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for or marketability of the Shares or whether it
would cause future market prices to be greater or less than the Offer price
therefor.
NYSE Listing. The purchase of Shares pursuant to the Offer will reduce the
number of holders of Shares and the number of Shares that might otherwise trade
publicly and could adversely affect the liquidity and market value of the
remaining Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued listing on the NYSE.
According to published guidelines, the NYSE would give consideration to
delisting the Shares if, among other things, the number of publicly held Shares
falls below 600,000, the number of holders of round lots of Shares falls below
400 (or below 1,200 if the average monthly trading volume is below 100,000 for
the last twelve months) or the aggregate market value of such publicly held
Shares falls below $8,000,000. Shares held by officers or directors of the
Company or their immediate families, or by any beneficial owner of more than 10%
or more of the Shares, ordinarily will not be considered as being publicly held
for this purpose.
In the event the Shares are no longer eligible for listing on the NYSE,
quotations might still be available from other sources. The extent of the public
market for the Shares and the availability of such quotations would, however,
depend upon the number of holders of such shares remaining at such time, the
interest in maintaining a market in such Shares on the part of securities firms,
the possible termination of registration of such Shares under the Exchange Act
as described below and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. The purchase of the Shares pursuant to the Offer may result in the
Shares becoming eligible for deregistration under the Exchange Act. Registration
of the Shares may be terminated upon application by the Company to the
Commission if the Shares are not listed on a "national securities exchange" and
there are fewer than 300 record holders of Shares. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and the Commission
and would make certain provisions of the Exchange Act, such as the short-swing
profit recovery
10
<PAGE> 13
provisions of Section 16(b) and the requirements of furnishing a proxy statement
in connection with stockholders' meetings pursuant to Section 14(a) or 14(c) and
the related requirement of an annual report, no longer applicable to the
Company. If the Shares are no longer registered under the Exchange Act, the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions would no longer be applicable to the Company. Furthermore,
the ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, may be impaired or,
with respect to certain persons, eliminated. If registration of the Shares under
the Exchange Act were terminated, the Shares would no longer be eligible for
stock exchange listing or Nasdaq reporting. The Purchaser believes that the
purchase of the Shares pursuant to the Offer may result in the Shares becoming
eligible for deregistration under the Exchange Act, and it would be the
intention of the Purchaser to cause the Company to make an application for
termination of registration of the Shares as soon as possible after successful
completion of the Offer if the Shares are then eligible for such termination.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will no longer be eligible for listing on the NYSE and the
registration of the Shares under the Exchange Act will be terminated following
the consummation of the Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which have the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares for the purpose of
buying, carrying or trading in securities ("Purpose Loans"). Depending upon
factors such as the number of record holders of the Shares and the number and
market value of publicly held Shares, following the purchase of Shares pursuant
to the Offer, the Shares might no longer constitute "margin securities" for
purposes of the Federal Reserve Board's margin regulations and, therefore, could
no longer be used as collateral for Purpose Loans made by brokers. In addition,
if registration of the Shares under the Exchange Act were terminated, the Shares
would no longer constitute "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive offices
located at 40-004 Cook Street, Palm Desert, California 92211, and its telephone
number is (760) 340-0098. The following description of the Company's business
has been taken from, and is qualified in its entirety by reference to, the Form
10-K filed by the Company for the year ended March 31, 1998 (the "Form 10-K").
The Company is a leading global provider of industrial, municipal,
commercial and consumer water and wastewater treatment systems, products and
services, with an installed base of systems that the Company believes is one of
the largest worldwide. The Company offers a single-source solution to its
customers through what the Company believes is the industry's broadest range of
cost-effective systems, products, services and proven technologies. In addition,
the Company markets a broad line of waterworks distribution products and
services. The Company has one of the industry's largest networks of sales and
service and distribution facilities through more than 2,000 locations, including
over 1,100 franchised dealerships, 833 Company-owned or leased facilities and
manufacturing plants in 94 countries. The Company capitalizes on its large
installed base, extensive distribution network and manufacturing capabilities to
provide customers with ongoing local service and maintenance. The Company is a
leading provider of outsourced water services, including the operation of water
and wastewater treatment systems at customer sites. In addition, the Company is
actively involved in the development of privatization initiatives for municipal
water treatment facilities throughout the world and, specifically, in the United
States, Mexico and Canada. The Company also owns a significant amount of
properties with appurtenant water rights in the Western and Southwestern United
States, substantially all of which are leased to agricultural tenants.
The selected financial information of the Company and its consolidated
subsidiaries set forth below has been excerpted and derived from the Form 10-K
and from the Form 10-Q filed by the Company for the nine months ended December
31, 1998. More comprehensive financial and other information is included in such
report (including management's discussion and analysis of financial condition
and results of operations) and in
11
<PAGE> 14
other reports and documents filed by the Company with the Commission. The
financial information set forth below is qualified in its entirety by reference
to such reports and documents filed with the Commission and the financial
statements and related notes contained therein. These reports and other
documents may be examined and copies thereof may be obtained in the manner set
forth below.
12
<PAGE> 15
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED YEARS ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, --------------------------------------
1998 1998 1996 1997 1998
------------ ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues.................... $1,225,109 $3,570,322 $1,090,745 $1,764,406 $3,234,580
Costs of sales.............. 861,690 2,511,304 836,973 1,376,615 2,456,173
---------- ---------- ---------- ---------- ----------
Gross profit.............. 363,419 1,059,018 253,772 387,791 778,407
Selling, general and
administrative expenses... 241,652 709,231 192,387 316,190 573,002
Purchased in-process
research and
development............... -- 3,558 -- -- 299,505
Merger, restructuring,
acquisition and other
related charges........... -- 257,920 -- 5,581 141,109
---------- ---------- ---------- ---------- ----------
241,652 970,709 192,387 321,771 1,013,616
---------- ---------- ---------- ---------- ----------
Operating income (loss)... 121,767 88,309 61,385 66,020 (235,209)
Other income (expense):
Interest expense.......... (29,999) (85,180) (16,280) (26,509) (53,887)
Gain on disposition of
affiliate.............. -- -- -- -- --
Interest and other income,
net.................... 7,497 15,227 5,923 3,678 4,900
---------- ---------- ---------- ---------- ----------
(22,503) (69,953) (10,357) (22,831) (48,987)
---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 99,265 18,356 51,028 43,189 (284,196)
Income tax expense
(benefit)................. 35,774 50,051 20,329 10,681 15,583
---------- ---------- ---------- ---------- ----------
Net income (loss)......... 63,491 (31,695) 30,699 32,508 (299,779)
========== ========== ========== ========== ==========
Net income (loss) per common
share:
Basic..................... 0.37 (0.19) 0.62 0.51 (3.13)
========== ========== ========== ========== ==========
Diluted................... 0.36 (0.19) 0.61 0.49 (3.13)
========== ========== ========== ========== ==========
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
--------- ---------
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Current assets.............................................. 1,164,922 1,575,950
Property and equipment, net................................. 319,687 806,475
Investment in leasehold interests, net...................... 23,230 21,699
Costs in excess of net assets of businesses acquired, net... 788,096 1,027,481
Other assets................................................ 101,628 166,239
Total assets................................................ 2,397,563 3,597,844
Current liabilities......................................... 649,770 948,174
Notes payable............................................... 42,646 574,806
Convertible subordinated debt............................... 554,000 554,000
Long-term debt (excluding current portion).................. 31,464 56,305
Deferred taxes.............................................. 12,198 51,849
Other liabilities........................................... 61,655 83,300
Total liabilities........................................... 1,351,733 2,304,434
Stockholders' equity........................................ 1,045,830 1,293,410
</TABLE>
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Certain information, as of
particular dates, concerning the Company's business, principal physical
properties, capital structure, material pending legal proceedings, operating
results, financial condition, directors and officers (including their
remuneration and the stock options granted to them), the principal holders of
the Company's securities, any material interests of such persons in transactions
with the Company and certain other matters is required to be disclosed in proxy
statements and annual reports distributed to the Company's stockholders and
filed with the Commission. Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 500 West Madison Street, Chicago,
Illinois 60606, and 7 World Trade Center, New York, New York 10048. Copies of
such material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Such material may be obtained
electronically by visiting the Commission's website on the Internet, at
http://www.sec.gov. The Shares are traded on the New York Stock Exchange, Inc.,
and reports, proxy statements and other information concerning the Company
should also be available for inspection at 20 Broad Street, New York, New York
10005.
Although neither Parent nor the Purchaser has any knowledge that any such
information is untrue, neither Parent nor the Purchaser takes any responsibility
for the accuracy or completeness of information contained in this Offer to
Purchase with respect to the Company or any of its subsidiaries or affiliates or
for any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER.
Parent is a societe anonyme organized under the laws of France whose
principal executive offices are located at 42, Avenue de Friedland, 75380 Paris
Cedex 08 France.
The Purchaser's principal executive offices are located care of
Vivendi-North America Management Services, Inc. 800 Third Avenue, 38th Floor,
New York, New York 10022. The Purchaser is a newly formed Delaware corporation
and an indirect wholly owned subsidiary of Parent. The Purchaser has not
conducted any business other than in connection with the Offer and the Merger.
14
<PAGE> 17
The name, business address, citizenship, present principal occupation and
employment history for the past five years of each of the directors and
executive officers of Parent and the Purchaser are set forth in Schedule I.
Except as set forth elsewhere in this Offer to Purchase or Schedule I
hereto: (i) neither Parent nor the Purchaser nor, to the knowledge of Parent or
the Purchaser, any of the persons listed in Schedule I hereto or any associate
or majority-owned subsidiary of Parent or the Purchaser or any of the persons so
listed, beneficially owns or has a right to acquire any Shares or any other
equity securities of the Company; (ii) neither Parent nor the Purchaser nor, to
the knowledge of Parent or the Purchaser, any of the persons or entities
referred to in clause (i) above or any of their executive officers, directors or
subsidiaries has effected any transaction in the Shares or any other equity
securities of the Company during the past 60 days; (iii) neither Parent nor the
Purchaser nor, to the knowledge of Parent or the Purchaser, any of the persons
listed in Schedule I hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies, consents or
authorizations); (iv) since January 1, 1996, there have been no transactions
which would require reporting under the rules and regulations of the Commission
between Parent or the Purchaser or any of their respective subsidiaries or, to
the knowledge of Parent or the Purchaser, any of the persons listed in Schedule
I hereto, on the one hand, and the Company or any of its executive officers,
directors or affiliates, on the other hand; and (v) since January 1, 1996, there
have been no contacts, negotiations or transactions between Parent or the
Purchaser or any of their respective subsidiaries or, to the knowledge of Parent
or the Purchaser, any of the persons listed in Schedule I hereto, on the one
hand, and the Company or any of its subsidiaries or affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
In early July 1996, Richard J. Heckmann, Chairman and Chief Executive
Officer of the Company and certain other members of the Company's senior
management met with Jean-Marie Messier, Chairman and Chief Executive Officer of
Vivendi and other representatives of Parent to discuss the possibility of the
acquisition by the Company of certain assets of Parent. Such exploratory
discussions did not advance beyond the preliminary stage and the potential
transaction was not pursued.
In January 1999, the Company authorized representatives of two investment
banking firms to contact three industrial companies identified by the investment
bankers regarding a possible business combination transaction with the Company.
These inquiries did not result in any subsequent discussions between the Company
and any of such companies.
On January 19, 1999 Messrs. Heckmann and Messier met to discuss a potential
transaction between the Company and Parent involving certain water industry
holdings of Parent. At the meeting, the Company and Parent could not reach
agreement on the terms of a possible transaction. However, in the course of
discussions consideration was given to the possibility of a business combination
transaction between the Company and Parent.
From late January through late February 1999 Mr. Heckmann and Mr. Messier
together with other representatives of the Company and Parent had several
telephone discussions relating to the businesses of the Company and Parent and
exchanged publicly available documents and information about the Company and
Parent, and on February 19, 1999 executives of Parent and the Company met to
exchange detailed presentations concerning their respective businesses.
From late February through early March 1999 the management of the Company
provided Parent certain information with respect to the Company's financial
condition, results of operations and other measurements of operating
performance.
15
<PAGE> 18
On March 8, 9, and 10, 1999, Mr. Heckmann and certain other executives of
the Company met with Mr. Messier and certain other executives of Parent to
continue discussions with respect to a possible business combination transaction
between the Company and Parent.
On March 11, 1999, representatives from each party's legal and financial
advisors met to discuss the structure and timing of the proposed transaction and
organize a due diligence review of the Company. On March 11, 1999, following
presentations by management the Board of Directors of Parent authorized its
management to enter into a definitive acquisition agreement if such an agreement
could be concluded on specified terms. From March 12, 1999 through March 22,
1999, Parent's legal and financial advisors together with representatives of
Parent conducted legal and financial due diligence investigations of the
Company.
On March 18-19, 1999, the parties and their legal and financial advisors
met to negotiate the terms of the proposed Merger. Negotiations between the
parties continued at meetings on March 20, 21 and 22, 1999. During that time
Parent and the stockholders of the Company party to Support Agreements
negotiated the terms of such agreements.
From time to time from February 17, 1999 through March 22, 1999, Mr.
Heckmann had numerous conversations with various members of the Company's Board
of Directors to keep them apprised of developments with respect to a possible
business combination transaction with Parent.
At meetings on March 21 and 22, 1999 the Company's Board reviewed the terms
of the proposed Merger Agreement and related documents to be entered into by the
Company and Parent. At the March 21, 1999 Board meeting, the Board discussed the
fairness of the proposed transaction and the Company's financial advisors
delivered presentations on the fairness of the merger and the Offer and rendered
their opinions regarding the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be received by the Company's
stockholders pursuant to the Merger and the Offer. At the March 22, 1999 Board
meeting, after due deliberation, the Board determined the proposed Offer and
Merger are in the best interests of the Company and the Company's stockholders
and are fair to the Company's stockholders. At the March 22, 1999 Board Meeting,
the Board approved the Offer and the Merger and resolved to recommend acceptance
of the Offer by the Company's stockholders.
Following the Company's Board meeting on March 22, 1999, the Merger
Agreement and related documents were finalized and executed by the parties. The
Company and Parent announced the execution of the agreements in a joint press
release issued before the New York Stock Exchange opened on March 22, 1999.
11. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; THE STOCK OPTION AGREEMENT; THE
SUPPORT AGREEMENTS; APPRAISAL RIGHTS; PLANS FOR THE COMPANY; THE RIGHTS.
(a) Purpose
The purpose of the Offer and the Merger is to acquire control of, and the
entire equity interest in, the Company. The Offer, as the first step in the
acquisition of the Company, is intended to facilitate the acquisition of all the
Shares. The purpose of the Merger is to acquire all of the capital stock of the
Company not purchased pursuant to the Offer or otherwise.
The following is a summary of certain provisions of the Merger Agreement,
the Stock Option Agreement and the Support Agreements. This summary is qualified
in its entirety by reference to the Merger Agreement, the Stock Option Agreement
and the Support Agreements which are incorporated by reference and copies or
forms of which have been filed with the Commission as exhibits to the Schedule
14D-1 to which this Offer to Purchase is an exhibit (the "Schedule 14D-1"). The
Merger Agreement, the Stock Option Agreement and the Support Agreements may be
examined and copies may be obtained at the places set forth in Section 8.
Defined terms used herein and not defined herein shall have the respective
meanings assigned to those terms in the Merger Agreement.
(b) The Merger Agreement
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to prior satisfaction or waiver
of the conditions of the Offer, as set forth in Section 14, the Purchaser will
purchase all Shares validly tendered pursuant to the Offer. The Merger Agreement
provides
16
<PAGE> 19
that, without the prior written consent of the Company, the Purchaser shall not
decrease the Offer Price or change the form of consideration payable in the
Offer, decrease the number of Shares sought to be purchased in the Offer, impose
additional conditions to the Offer or amend any other term of the Offer in any
manner adverse to the holders of Shares or reduce the time period during which
the Offer shall remain open. Notwithstanding the foregoing, the Purchaser shall
be entitled to extend the Offer, if at the initial expiration of the Offer, or
any extension thereof, any condition to the Offer is not satisfied or waived,
and Parent agrees to cause the Purchaser to extend the Offer up to 40 days in
the aggregate, in one or more periods of not more than 10 business days, if, at
the initial expiration date of the Offer, or any extension thereof, any
condition to the Offer set forth in paragraphs (a), (b) or (g) of Section 14
hereof is not satisfied or waived; provided, however, that the Purchaser shall
not be required to extend the Offer unless, in Parent's reasonable judgment, (i)
each such condition is reasonably capable of being satisfied and (ii) the
Company is in material compliance with all of its covenants under the Merger
Agreement. In addition, without limiting the foregoing, the Purchaser may,
without the consent of the Company, if on any Expiration Date the Shares validly
tendered and not withdrawn pursuant to the Offer are sufficient to satisfy the
Minimum Condition but equal to less than 90% of the outstanding Shares, extend
the Offer for up to 15 business days in the aggregate notwithstanding that all
the conditions to the Offer have been satisfied so long as Purchaser irrevocably
waives the satisfaction of any of the conditions to the Offer (other than those
set forth in paragraphs (a), (b) or (d) of Section 14 hereof) that subsequently
may not be satisfied during any such extension of the Offer. In addition, the
Offer Price may be increased and the Offer may be extended to the extent
required by law in connection with such increase, in each case, without the
consent of the Company.
Directors. The Merger Agreement provides that promptly upon the payment by
the Purchaser for the Shares pursuant to the Offer and from time to time
thereafter at which it owns a majority of the Shares, Parent will be entitled to
designate such number of directors, rounded up to the next whole number on the
Company Board of Directors as is equal to the product of the total number of
directors on the Company Board of Directors (determined after giving effect to
the directors elected pursuant such provision) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Parent or its affiliates
bears to the total number of Shares then outstanding. The Merger Agreement
provides that the Company will, upon request of Parent, promptly take all
actions necessary to cause Parent's designees to be so elected, including, if
necessary, seeking the resignations of one or more existing directors; provided,
however, that prior to the time the Merger becomes effective (the "Effective
Time") the Company Board of Directors will always have at least two members who
are neither officers, directors or designees of the Purchaser or any of its
affiliates ("Purchaser Insiders") (including at least two members who are
"independent directors" for purposes of the rules of the New York Stock
Exchange). If the number of directors who are not Purchaser Insiders is reduced
below two prior to the Effective Time, the remaining director who is not a
Purchaser Insider will be entitled to designate a person to fill such vacancy
who is not a Purchaser Insider and who will be a director not deemed to be a
Purchaser Insider for all purposes of the Merger Agreement. Following the
election or appointment of Parent's designees and prior to the Effective Time,
if any of the directors of the Company then in office are not Purchaser
Insiders, any amendment or termination of the Merger Agreement by the Company,
any extension of time for performance of any of the obligations of Parent or the
Purchaser under the Merger Agreement, any waiver of any condition or any of the
Company's rights under the Merger Agreement or other action by the Company
thereunder adversely affecting the rights of the minority stockholders of the
Company, will require the concurrence of a majority of such directors.
The Merger. The Merger Agreement provides that, at the Effective Time, the
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the Surviving Corporation.
The Company has agreed pursuant to the Merger Agreement that, if required
by applicable law in order to consummate the Merger, it will (i) convene and
hold a special meeting of its stockholders as soon as practicable following the
acceptance for payment of and payment for Shares by the Purchaser pursuant to
the Offer for the purpose of considering and taking action upon the Merger
Agreement; (ii) prepare and file with the Commission a preliminary proxy
statement relating to the Merger Agreement, and use its reasonable best efforts
(x) to obtain and furnish the information required to be included by the
Commission in the Proxy
17
<PAGE> 20
Statement (as defined herein) and, after consultation with Parent, to respond as
soon as practicable to any comments made by the Commission with respect to the
preliminary proxy statement and to cause a definitive proxy statement (the
"Proxy Statement") to be mailed to its stockholders and (y) to obtain the
necessary approvals of the Merger and adoption of the Merger Agreement by its
stockholders; and (iii) include in the Proxy Statement the recommendation of the
Company Board of Directors that stockholders of the Company vote in favor of the
approval of the Merger and adoption of the Merger Agreement. Parent has agreed
in the Merger Agreement that it will vote, or cause to be voted, all of the
Shares then owned by it, the Purchaser or any of its other subsidiaries in favor
of the approval of the Merger and the Merger Agreement. Parent also agrees that
it will not transfer, sell or assign any of the Shares of the Purchaser prior to
the Effective Time.
The Merger Agreement further provides that, notwithstanding the foregoing,
if the Purchaser acquires at least 90% of the outstanding Shares pursuant to the
Offer, the parties to the Merger Agreement will take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of and payment for the Shares by
the Purchaser pursuant to the Offer without a meeting of the stockholders of the
Company, in accordance with Section 253 of the DGCL.
Charter, Bylaws, Directors and Officers. The Certificate of Incorporation
of the Purchaser, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation, until thereafter
amended in accordance with the provisions thereof and of the Merger Agreement
and applicable law. The By-Laws of the Purchaser in effect at the time of the
Effective Time shall be the By-Laws of the Surviving Corporation until amended,
subject to the provisions of the Merger Agreement which provide that all rights
to indemnification now existing in favor of directors and officers of the
Company and its subsidiaries as provided in their respective charters or by-laws
shall survive the Merger and continue in effect for not less than six years
thereafter. Subject to applicable law, the directors of the Purchaser
immediately prior to the Effective Time as well as Mr. Richard J. Heckmann,
Chairman of the Board of Directors, Chief Executive Officer and President of the
Company, will be the initial directors of the Surviving Corporation, and the
officers of the Purchaser immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation. Such officers and directors will
hold office until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal.
Conversion of Securities. By virtue of the Merger and without any action
on the part of the holders thereof, at the Effective Time, each Share issued and
outstanding immediately prior to the Effective Time (other than (i) any Shares
held by Parent, the Purchaser, any wholly owned subsidiary of Parent or the
Purchaser, in the treasury of the Company or by any wholly owned subsidiary of
the Company, which Shares, by virtue of the Merger and without any action on the
part of the holder thereof, will be canceled and retired and will cease to exist
with no payment being made with respect thereto and (ii) Dissenting Shares) will
be canceled and retired and will be converted into the right to receive $31.50
net per Share in cash (the "Merger Price"), payable to the holder thereof,
without interest thereon, upon surrender of the certificate formerly
representing such Share. At the Effective Time, each share of common stock of
the Purchaser, par value $.01 per share, issued and outstanding immediately
prior to the Effective Time will, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into and become one validly
issued, fully paid and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
The Merger Agreement provides that, prior to the consummation of the Offer,
the Company Board of Directors (or, if appropriate, any committee thereof) shall
adopt appropriate resolutions and take all other actions necessary or desirable
(including obtaining all applicable consents from optionees) to provide for the
cancellation, effective at the Effective Time, of all the outstanding stock
options (the "Options") granted under any stock option or similar plan of the
Company (the "Stock Plans") or under any agreement, without any payment therefor
except as otherwise discussed in this Section 11. Immediately prior to the
Effective Time, all Options (whether vested or unvested) will be canceled (and
to the extent exercisable shall no longer be exercisable) and will entitle each
holder thereof, in cancellation and settlement therefor, to a payment, if any,
in cash by the Company (less any applicable withholding taxes), as soon as
practicable following the Effective Time, equal to the product of (i) the total
number of Shares subject to such Option (without regard to whether such Option
was vested or unvested) and (ii) the excess, if any, of the Merger Price over
the exercise price per Share subject to such Option (the "Cash Payments");
provided that no such payment shall
18
<PAGE> 21
be due until the Company has delivered to Parent a true and complete list of the
Options which remained outstanding as of immediately prior to the Effective
Time. The Merger Agreement provides that the Cash Payments are the sole payments
that will be made with respect to or in relation to the Options.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and the
Purchaser with respect to, among other matters, its organization and
qualification, subsidiaries, capitalization, authority, required filings,
consents and approvals, financial statements, public filings, litigation,
compliance with law, employee benefit plans, intellectual property,
environmental matters, material contracts, opinion of financial advisor,
information to be included in the Proxy Statement, tax matters, labor matters,
state law approvals, brokers and the absence of any material adverse effects on
the Company. Parent and the Purchaser have made customary representations and
warranties to the Company with respect to, among other matters, its
organization, qualifications, authority, required filings, information to be
included in the Proxy Statement, consents and approvals, ownership of Shares and
financing.
Covenants. The Merger Agreement obligates the Company and its
subsidiaries, from the date of the Merger Agreement until the Effective Time, to
conduct their operations only in the ordinary and usual course of business
consistent with past practice and obligates the Company and its subsidiaries to
use all reasonable best efforts to preserve intact their business organizations,
to keep available the services of their present officers and employees and to
preserve the good will of those having business relationships with them,
including, without limitation, maintaining satisfactory relationships with
licensors, suppliers, customers and others having business relationships with
the Company and its subsidiaries. The Merger Agreement also contains specific
restrictive covenants as to certain activities of the Company prior to the
Effective Time, which provide that the Company will not (and will not permit any
of its subsidiaries to) take certain actions without the prior written consent
of Parent including, among other things and subject to certain exceptions,
amendments to its certificate of incorporation or by-laws, issuances or sales of
its securities, changes in capital structure, dividends and other distributions,
repurchases or redemptions of securities, material acquisitions or dispositions,
incurrence of indebtedness, incurrences of capital expenditures increases in
compensation or adoption of new benefit plans and certain other material events
or transactions.
Access to Information. The Merger Agreement provides that, until the
Effective Time, the Company will, and will cause its subsidiaries to, give
Parent and the Purchaser and their representatives full access, during normal
business hours, to the offices and other facilities and to the books and records
of the Company and its subsidiaries, subject to applicable confidentiality
requirements.
Efforts. Subject to the terms and conditions provided in the Merger
Agreement, each of the Company, Parent and the Purchaser shall, and the Company
shall cause each of its subsidiaries to, cooperate and use their respective
reasonable best efforts to take, or cause to be made, all filings reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement.
Each of the parties also has agreed to use its reasonable best efforts to
obtain as promptly as practicable all Consents of any Governmental Entity or any
other person required in connection with, and waivers of any Violations that may
be caused by, the consummation of the transactions contemplated by the Offer and
the Merger Agreement.
The Merger Agreement provides that neither the Company nor the Company
Board of Directors nor any committee thereof will withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent or Purchaser, the
recommendation of the Company Board of Directors of the Merger Agreement, the
Offer or the Merger, or approve or recommend, or propose publicly to approve or
recommend, an Acquisition Transaction (as defined herein), unless the Company
Board of Directors determines in good faith by a vote of a majority of the
members of the full Company Board of Directors that failing to take such action
would create a reasonable likelihood of a breach of the fiduciary duties of the
Company Board of Directors, after consultation with and receipt of advice from
its outside counsel to such effect. Any such withdrawal, modification or change
of the recommendation of the Company Board of Directors of the Merger Agreement,
the Merger or the Offer shall not change the approval of the Company Board of
Directors for purpose of
19
<PAGE> 22
causing any state takeover statute or other law or the Rights Agreement or the
Rights to be inapplicable to the Merger Agreement, the Merger, the Stock Option
Agreement and the Support Agreements, and the transactions contemplated thereby.
Public Announcements. The Merger Agreement provides that the Company, on
the one hand, and Parent and the Purchaser, on the other hand, agree to consult
promptly with each other prior to issuing any press release or otherwise making
any public statement with respect to the Offer, the Merger and the other
transactions contemplated by the Merger Agreement, agree to provide to the other
party for review a copy of any such press release or statement, and will not
issue any such press release or make any such public statement prior to such
consultation and review, unless required by applicable law or any listing
agreement with a securities exchange.
Employee Benefit Arrangements With respect to employee benefit matters,
the Merger Agreement provides that, Parent will maintain, or cause the Surviving
Corporation to maintain compensation and employee benefits substantially
equivalent in the aggregate to those provided by the Company immediately prior
to the Effective Time (not taking into account equity-based incentive
compensation provided by the Company) for employees other than those subject to
collective bargaining agreements, until December 31, 2000. The Merger Agreement
provides that, from and after the Effective Time, Parent will honor or will
cause the Surviving Corporation to honor, all obligations under certain listed
plans. Notwithstanding the foregoing, the Merger Agreement provides that from
and after the Effective Time, the Surviving Corporation will have the right to
amend, modify, alter or terminate any Plan to the extent the terms of such Plans
permit such action. The Merger Agreement further provides, however, that for a
period of 12 months following the Effective Time, the Surviving Corporation
shall neither terminate nor adversely amend or modify the Company's severance
pay policy in effect as of April 1, 1999, other than with respect to requiring a
binding waiver and release from the terminated employee prior to the payment of
severance benefits. The Merger Agreement does not confer rights or remedies upon
any person other than the parties thereto (except as provided under
"Indemnification; Investors' and Officers' Insurance" below).
Except for employees subject to collective bargaining agreements, for
purposes of determining eligibility to participate, vesting and accrual or
entitlement to benefits where length of service is relevant under any employee
benefit plan of the Parent or the Surviving Corporation, the Company's employees
will receive service credit for service with the Company and any of its
subsidiaries to the same extent such service credit was granted under the Plans,
subject to offsets for previously accrued benefits and to no duplication of
benefits (except that no such credit shall be applied for benefit accrual or
entitlement purposes under defined benefit pension plans). Such employees will
also be given credit for any deductible or co-payment amounts paid in respect of
the plan year in which the Effective Time occurs, to the extent that, following
the Effective Time, they participate in any Parent Plan for which deductibles or
co-payments are required. Parent agrees that it shall also cause each Parent
Plan to waive (i) any pre-existing condition restriction which was waived under
the terms of any analogous Plan immediately prior to the Effective Time or (ii)
waiting period limitation which would otherwise be applicable to an employee on
or after the Effective Time to the extent such employee had satisfied any
similar waiting period limitation under an analogous Plan prior to the Effective
Time.
The transactions contemplated by the Merger Agreement constitute a "Change
of Control" of the Company for purposes of the Company's Plans.
Indemnification; Directors' and Officers' Insurance. Pursuant to the
Merger Agreement, Parent has agreed that from and after the Effective Time all
rights to indemnification existing at the date of the Merger Agreement in favor
of directors, officers or employees of the Company or any of its subsidiaries as
set forth in their respective charters and bylaws shall survive the Merger and
shall continue in full force and effect for a period of six years following the
Effective Time and Parent shall cause the Surviving Corporation to honor all of
these obligations. The Merger Agreement further provides that the Company will,
and from and after the Effective Time, the Surviving Corporation will, cause to
be maintained in effect for not less than six years (except as provided below)
from the Effective Time the current policies of the directors' and officers'
liability insurance maintained by the Company; provided that the Surviving
Corporation may substitute therefor other
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policies not less advantageous (other than to a de minimis extent) to the
beneficiaries for the current policies and provided that such substitution shall
not result in any gaps or lapses in coverage with respect to matters occurring
prior to the Effective Time; and provided, however, that the Surviving
Corporation shall not be required to pay an annual premium in excess of 200% of
the last annual premium paid by the Company prior to the date of the Merger
Agreement (which the Company represents to be not more than $400,000 for the
12-month period ending December 31, 1998) and if the Surviving Corporation is
unable to obtain such insurance it shall obtain as much comparable insurance as
possible for an annual premium equal to such maximum amount. The Merger
Agreement provides that these requirements are deemed to be satisfied if prepaid
policies have been obtained by the Company prior to the Effective Time, which
policies provide such directors and officers with coverage for an aggregate
period of six years with respect to claims arising from facts and events that
occurred on or before the Effective Time, including in respect of the
transactions contemplated by the Merger Agreement and for a premium not in
excess of the aggregate premiums set forth above. Notwithstanding the foregoing,
at any time on or after the second anniversary of the Effective Time, Parent
may, at its election, undertake to provide funds to the Surviving Corporation to
the extent necessary so that the Surviving Corporation may self-insure with
respect to the level of insurance coverage required in lieu of causing to remain
in effect any directors' and officers' liability insurance policy.
Notification of Certain Matters. Parent and the Company have agreed to
promptly notify each other of (i) the occurrence or non-occurrence of any fact
or event which would be reasonably likely (A) to cause any representation or
warranty contained in the Merger Agreement to be untrue or inaccurate in any
material respect at any time prior to the Effective Time or (B) to cause any
covenant, condition or agreement under the Merger Agreement not to be complied
with or satisfied in any material respect and (ii) any failure of the Company or
Parent, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under the Merger Agreement in
any material respect; provided, however, that no such notification will affect
the representations or warranties of any party or the conditions to the
obligations of any party. Each of the Company, Parent and the Purchaser is also
required to give prompt notice to the other parties of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by the
Merger Agreement.
Rights Agreement. The Company agreed in the Merger Agreement that it will
not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii) take any
action which would allow any Person (as defined in the Rights Agreement) other
than Parent or the Purchaser to acquire beneficial ownership of 15% or more of
the Shares without causing a Distribution Date or a Triggering Event (as such
terms are defined in the Rights Agreement) to occur.
State Takeover Laws. The Merger Agreement provides that the Company will,
upon the request of the Purchaser, take all reasonable steps to assist in any
challenge by the Purchaser to the validity or applicability to the transactions
contemplated by the Merger Agreement, including the Offer and the Merger, of any
state takeover law.
No Solicitation. The Merger Agreement requires the Company, its controlled
affiliates and their respective officers, directors, employees, representatives
and agents to immediately cease any existing discussions or negotiations, with
any parties with respect to any acquisition or exchange of all or any material
portion of the assets of, or any equity interest in, the Company or any of its
subsidiaries or any business combination with the Company or any of its
subsidiaries. The Merger Agreement further provides that, prior to the Effective
Time, the Company will not, and will not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
merger, liquidation, recapitalization, consolidation or other business
combination involving the Company or its subsidiaries or acquisition of any
capital stock or any material portion of the assets of the Company or of its
subsidiaries, or any combination of the foregoing (an "Acquisition Transaction")
or negotiate, explore or otherwise engage in discussions with any person (other
than the Purchaser, Parent or their respective directors, officers, employees,
agents and representatives) with respect to any Acquisition Transaction or enter
into any agreement, arrangement or understanding requiring it
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<PAGE> 24
to abandon, terminate or fail to consummate the Merger or any other transactions
contemplated by the Merger Agreement; provided that prior to the purchase of a
majority of the Shares pursuant to the Offer, the Company may furnish
information, pursuant to a customary confidentiality agreement with terms not
more favorable to the receiving party than the confidentiality agreement with
Parent, to, and negotiate or otherwise engage in discussions with, any party who
delivers a bona fide written proposal for an Acquisition Transaction for which
all necessary financing is then in the judgment of the Company Board of
Directors readily obtainable, if the Company Board of Directors determines in
good faith and by a majority vote of the members of the full Company Board of
Directors that failing to take such action would create a reasonable likelihood
of a breach of the fiduciary duties of the Company Board of Directors (after
consultation and receipt of advice from its outside legal counsel to such
effect) and such a proposal is, in the written opinion of each of SSB and J.P.
Morgan, more favorable to the Company's stockholders from a financial point of
view than the transactions contemplated by the Merger Agreement, as it has been
proposed to be amended by Parent pursuant to Parent's right to propose
amendments in response to such a proposal, as described below. The Merger
Agreement further provides that from and after the date of execution of the
Merger Agreement, the Company will promptly advise Purchaser in writing of the
receipt, directly or indirectly, of any inquiries, discussions, negotiations or
proposals relating to an Acquisition Transaction, identify the offeror and
furnish to the Purchaser a copy of any such proposal or inquiry, if it is in
writing, and that the Company will promptly advise Parent of any material
development relating to such proposal, including the results of any discussions
or negotiations with respect thereto. Notwithstanding anything in the Merger
Agreement to the contrary, the Merger Agreement provides that prior to the
approval of an Acquisition Transaction by the Company Board of Directors, the
Company shall give Parent sufficient notice of the material terms and conditions
of any such Acquisition Transaction, and negotiate in good faith with Parent for
a period of not less than three business days after Parent's receipt of a
written proposal or a written summary of any oral proposal to make such
adjustments in the terms and conditions of the Merger Agreement as would enable
the Company to proceed with the transactions contemplated by the Merger
Agreement.
Conditions to Consummation of the Merger. Pursuant to the Merger
Agreement, the respective obligations of Parent, the Purchaser and the Company
to consummate the Merger are subject to the satisfaction, at or before the
Effective Time, of each of the following conditions: (i) the stockholders of the
Company shall have duly approved the transactions contemplated by the Merger
Agreement, if required by applicable law; (ii) Parent, the Purchaser or any of
their affiliates shall have accepted for payment and paid for Shares pursuant to
the Offer in accordance with the terms of the Merger Agreement; (iii) the
consummation of the Merger is not restrained, enjoined or prohibited by any
order, judgment, decree, injunction or ruling of a court of competent
jurisdiction or any Governmental Entity (provided that each of the parties to
the Merger Agreement shall have used reasonable best efforts to prevent the
entry of any such injunction or other order that may be entered) and there is
not any statute, rule or regulation enacted, promulgated or deemed applicable to
the Merger by any Governmental Entity which prevents the consummation of the
Merger or has the effect of making the purchase of Shares illegal; and (iv) any
waiting period (and any extension thereof) under the HSR Act applicable to the
Merger shall have expired or terminated and all applicable foreign approvals and
consents shall have been received or obtained.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding approval
thereof by the stockholders of the Company (with any termination by Parent also
being an effective termination by the Purchaser):
(a) by the mutual written consent of the Company, by action of its
Board of Directors and Parent; provided that any such change is done in
with the approval of the directors who are not Purchaser Insiders, if
applicable;
(b) by the Company if (i) the Purchaser fails to commence the Offer
by March 26, 1999, (ii) the Purchaser has not accepted for payment and paid
for the Shares pursuant to the Offer in accordance with the terms of the
Offer on or before October 31, 1999, or (iii) the Purchaser fails to
purchase validly tendered Shares in violation of the terms of the Merger
Agreement;
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(c) by Parent or the Company if the Offer is terminated or withdrawn
pursuant to its terms without any Shares being purchased thereunder;
provided, however, that neither Parent nor the Company may terminate the
Merger Agreement pursuant to this clause (c) if such party shall have
materially breached the Merger Agreement;
(d) by Parent or the Company if any court or other Governmental
Entity shall have issued an order, decree, judgment or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting
the acceptance for payment of, or payment for, Shares pursuant to the Offer
or the Merger and such order, decree or ruling or other action shall have
become final and nonappealable;
(e) by the Company if, prior to the purchase of a majority of the
Shares pursuant to the Offer in accordance with the terms of the Merger
Agreement, (i) the Company Board of Directors approves an Acquisition
Transaction, for which all necessary financing is then in the judgment of
the Company Board of Directors readily obtainable, on terms which a
majority of the members of the full Company Board of Directors has
determined in good faith and on a reasonable basis after consultation with
and receipt of advice from its outside legal counsel to the effect that
failing to take such action would create a reasonable likelihood of a
breach of their fiduciary duties, and (ii) such Acquisition Transaction is,
in the written opinion of each of SSB and J.P. Morgan, more favorable from
a financial point of view to the Company's stockholders than the
transactions contemplated by the Merger Agreement (as the same has been
proposed to be amended by Parent in response to the proposal in question);
provided that the termination described in this clause (e) shall not be
effective unless and until the Company shall have paid to Parent all of the
fees and expenses described herein including, without limitation, the
Termination Fee (as hereinafter defined);
(f) by Parent, if the Company breaches any of its covenants in
Section 6.3(c) (relating to an approval, recommendation, or public proposal
to approve or recommend an Acquisition Transaction); 6.8 (relating to the
Rights Agreement) or 6.10 of the Merger Agreement (relating to the
Company's obligation not to solicit competing transactions), if the Company
Board of Directors withdraws or modifies (including by amendment of the
Schedule 14D-9) in a manner adverse to the Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger, approves
or recommends another Acquisition Transaction, or resolves to effect any of
the foregoing (and such resolution shall have been made public); or
(g) by Parent, if the Minimum Condition shall not have been satisfied
by the expiration date of the Offer and on or prior to such date (A) a
third party shall have made a proposal or public announcement or
communication to the Company with respect to (i) the acquisition of the
Company by merger, tender offer or otherwise, (ii) a merger, consolidation
or similar business combination with the Company or any of its
subsidiaries, (iii) the acquisition of 50% or more of the assets of the
Company and its subsidiaries, taken as a whole or any material asset of the
Company or its subsidiaries, (iv) the acquisition of 50% or more of the
outstanding Shares, (v) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend, or
(vi) the repurchase by the Company or any of its subsidiaries of 50% or
more of the outstanding Shares at a price in excess of the Offer Price or
(B) any person (including the Company or any of its affiliates or
subsidiaries), other than Parent or any of its affiliates, shall have
become the beneficial owner of more than 50% of the Shares.
Effect of Termination. In the event of the termination of the Merger
Agreement in accordance with its terms, the Merger Agreement will become void
and have no effect, without any liability on the part of any party or its
directors, officers, employees or stockholders, other than this provision and
provisions relating to the payment of certain fees and expenses including the
Termination Fee, which shall survive any such termination; provided that no
party would be relieved from liability for any breach of the Merger Agreement.
Fees and Expenses. Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Offer, the
Merger Agreement and the transactions contemplated by the Merger Agreement will
be paid by the party incurring such expenses. In the event that the Merger
Agreement is terminated pursuant to subparagraph (e), (f) or (g)(B) under
"Termination" above, or is terminated pursuant to paragraph (c) under
"Termination" above following the termination of the Offer by
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<PAGE> 26
Parent as a result of the failure to satisfy the conditions set forth in
paragraph (c)(1) of Section 14, then the Company will simultaneously with such
termination (or, in the case of a termination by Parent, within one business day
thereafter) reimburse Parent for out-of-pocket fees and expenses of Parent and
the Purchaser (including printing fees, filing fees and fees and expenses of its
legal and financial advisors) related to the Offer, the Merger Agreement, the
transactions contemplated thereby and any related financing up to a maximum of
$25 million (collectively, "Expenses"), and at the same time pay Parent a
termination fee of $220 million (the "Termination Fee") in immediately available
funds by wire transfer to an account designated by Parent. In the event that (i)
the Merger Agreement is terminated pursuant to subparagraph (g)(A) under
"Termination" above or pursuant to subparagraph (c) under "Termination" above by
the Purchaser following the termination of the Offer by Parent as a result of
the failure to satisfy any of the conditions set forth in subparagraph (c)(2),
(3) or (4) of Section 14 hereof) and (ii) within twelve months of the date of
such termination, the Company will enter into an agreement for an Acquisition
Transaction with any person other than Parent and its affiliates, then, prior to
or simultaneously with entering into such agreement, the Company will pay Parent
the Termination Fee and reimburse Parent and the Purchaser for their Expenses,
in each case in immediately available funds by wire transfer to an amount
specified by Parent. Without limiting the foregoing, in the event the Merger
Agreement is terminated pursuant to subparagraph (c) under "Termination" above
as a result of the failure to satisfy the conditions set forth in paragraph (e)
of Section 14 hereof, then the Company will promptly (and in any event within
one business day of such termination) reimburse Parent for Expenses in
immediately available funds by wire transfer to an account designated by Parent.
The prevailing party in any legal action undertaken to enforce the provisions of
the Merger Agreement relating to the Termination Fee shall be entitled to
recover his costs and expenses.
Amendment. The Merger Agreement may be amended in writing by the Company,
Parent and the Purchaser at any time before or after any approval of the Merger
Agreement by the stockholders of the Company but, after any such approval, no
amendment may be made which decreases the Merger Price or which adversely
affects the rights of the Company's stockholders hereunder without the approval
of such stockholders. The Merger Agreement also provides that any amendment or
termination of the Merger Agreement by the Company, any extension of time for
performance of any of the obligations of Parent or the Purchaser under the
Merger Agreement or any waiver of any condition or any of the Company's rights
under the Merger Agreement or any other action by the Company under the Merger
Agreement adversely affecting the rights of minority stockholders of the
Company, following the election of Parent's designees to the Company Board of
Directors requires the concurrence of a majority of the Company directors who
are not Purchaser Insiders.
Extension; Waiver. At any time prior to the Effective Time, the parties
hereto may in writing (i) extend the time for the performance of any of the
obligations or other acts of any other party thereto, (ii) waive any
inaccuracies in the representations and warranties contained therein of any
other party thereto or in any document, certificate or writing delivered
pursuant to the Merger Agreement by any other party thereto, or (iii) waive
compliance with any of the agreements of any other party or with any conditions
to its own obligations
(c) The Stock Option Agreement
As an inducement to, and a condition of, Parent entering into the Merger
Agreement concurrently with the execution of the Merger Agreement, the Company
and Parent entered into a Stock Option Agreement (the "Stock Option Agreement")
pursuant to which the Company granted to Parent an irrevocable option (the
"Stock Option") to purchase 36,223,552 authorized but unissued Shares at an
exercise price (the "Exercise Price") of $31.50 per Share. The Shares subject to
the Stock Option represent approximately 19.9% of the outstanding Shares (before
giving effect to the issuance of the Shares subject to the Option). The Option
becomes exercisable by Parent pursuant to the terms and conditions of the Stock
Option Agreement if an event (an "Exercise Event") giving rise to the obligation
to pay the Termination Fee in accordance with the Merger Agreement has occurred,
as described in (b) of this Section 11.
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The Stock Option will expire upon the earliest of (i) the Effective Time,
(ii) one year after receipt by Parent of notice from the Company that an
Exercise Event has occurred and (iii) termination of the Merger Agreement other
than a termination as a result of an Exercise Event.
The number and type of securities subject to the Stock Option and the
Exercise Price will be adjusted to preserve the economic benefit of the Stock
Option if there is any change in the Shares by reason of a stock dividend,
split-up, combination, recapitalization, exchange of shares or similar
transaction.
The Stock Option Agreement provides that at any time after an Exercise
Event and prior to 120 days after the expiration of the term of the Stock
Option, Parent may put (the "Put Right") to the Company the Stock Option and any
Shares purchased pursuant to the Stock Option ("Option Shares") for aggregate
consideration equal to (i) the aggregate exercise price paid by Parent for any
Shares owned by Parent and purchased pursuant to the Stock Option in respect of
which Parent is exercising the Put Right and (ii) the number of Shares in
respect of which the Put Right is being exercised (whether or not such Shares
are owned by Parent and purchased pursuant to the Stock Option or remain subject
to the Stock Option) multiplied by the difference between the Exercise Price and
the highest of (A) the highest purchase price per Share paid pursuant to a third
party's tender or exchange offer prior to the date the Put Right is exercised;
(B) the price per share to be paid by any third person for Shares pursuant to a
business combination transaction involving the Company; and (C) the average
closing price of the Shares as reported on the NYSE during the ten consecutive
trading days prior to exercise of the Put Right.
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<PAGE> 28
The Stock Option Agreement further provides that to the extent the Put
Right has not been exercised, following the tenth day after the purchase by
Parent of any Option Shares and for a period of 120 days after expiration of the
Option, the Company may repurchase from Parent (the "Call Right") all (but not
less than all) of the Option Shares owned by Parent at such time for a price per
Share equal to the greater of (i) the average closing price of the Shares as
reported on the NYSE during the ten consecutive trading days prior to the
exercise of such right and (ii) the Exercise Price.
The Stock Option Agreement provides that Parent's total profit from the
Stock Option Agreement (including amounts payable pursuant to the Put Right and
the Call Right), the Termination Fee and Parent's expenses cannot exceed a
"Profit Cap" of $237 million.
The Stock Option Agreement further provides that for a period of two years
following the first exercise of the Stock Option by Parent, Parent will have
certain registration rights in respect of the Option Shares.
The foregoing is a summary of the material provisions of the Stock Option
Agreement, a copy of which is included as an exhibit to the Schedule 14D-1 of
which this Offer to Purchase forms a part. This summary is qualified in its
entirety by reference to the Stock Option Agreement which is incorporated herein
by reference.
(d) The Support Agreements
Concurrently with the execution of the Merger Agreement, Parent entered
into Support Agreements with three executive officers (the "Management
Stockholders") of the Company, Apollo Investment Fund, L.P., Lion Advisors, L.P.
(together with Apollo Investment Fund, L.P., the "Apollo Stockholders") and
certain shareholders related to the Bass family of Texas (the "Bass
Stockholders"). According to the information provided by them, the Management
Stockholders, the Apollo Stockholders and the Bass Stockholders owned 657,946,
13,752,859 and 8,000,000 Shares, respectively, as of March 22, 1999,
representing in the aggregate approximately 12.3% of the Shares outstanding as
of such date.
Pursuant to the Support Agreements each of the above stockholders has
agreed to tender (or cause the record owner to tender) and not withdraw all of
their Shares owned on the date of the Support Agreements and all Shares acquired
prior to termination of the Tender Offer ("Tender Shares") and not withdraw
their Shares pursuant to the Offer. Each also agreed that, for so long as the
Support Agreement was in effect, at any meeting of the stockholders of the
Company, however called, he would vote his Tender Shares in favor of the Merger,
vote against any action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement, and against any action or agreement that
would impede, interfere with, delay, postpone or attempt to discourage the
Merger or the Offer including (i) any extraordinary transaction involving the
Company or any of its subsidiaries, (ii) a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries or a reorganization,
recapitalization or liquidation of the Company or any of its subsidiaries, (iii)
any change in the management or Company Board of Directors, except as agreed to
by Parent, (iv) any material change in the capitalization or dividend policy of
the Company, or (v) any other material change in the Company's corporate
structure or business.
Each of these stockholders also granted representatives of Parent an
irrevocable proxy to vote its Tender Shares in favor of the Merger and other
transactions contemplated by the Merger Agreement, against any Acquisition
Transaction and otherwise as contemplated by the preceding paragraph.
In addition each of the stockholders who is a party to a Support Agreement
agreed not to (i) except to Parent or the Purchaser, transfer any or all of his
Tender Shares, (ii) except with Parent, enter into any contract, option or other
agreement or understanding with respect to any transfer of any or all of his
Tender Shares, (iii) grant any proxy, power-of-attorney or other authorization
in or with respect to his Tender Shares, (iv) deposit his Tender Shares into a
voting trust or enter into a voting agreement or arrangement with respect to his
Shares, or (v) take any other action that would in any way restrict, limit or
interfere with the performance of his obligations under the Support Agreements
or by the Merger Agreement or which would make any representation or warranty of
such stockholder under the Support Agreement untrue or incorrect.
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Each stockholder further agreed that he would not, and would not permit or
authorize any of his affiliates, representatives or agents to, directly or
indirectly, encourage, solicit, explore, participate in or initiate discussions
or negotiations with, or provide or disclose any information to, any
corporation, partnership, person or other entity or group (other than Parent,
the Purchaser, any of their affiliates or representatives) concerning any
Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring the Company to abandon, terminate or fail to consummate
the Merger or any other transactions contemplated by the Merger Agreement. Each
such stockholder also agreed to immediately cease any existing activities,
discussions or negotiations with any parties with respect to any Acquisition
Transaction and to immediately advise Parent in writing of the receipt, directly
or indirectly, of any inquiries, discussions, negotiations or proposals relating
to an Acquisition Transaction, identify the offeror and furnish to parent a copy
of any such proposal or inquiry, if it is in writing, or a written summary of
any oral proposal or inquiry relating to an Acquisition Transaction and to
promptly advise Parent in writing of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto.
Where applicable, the Support Agreements provide, however, that any action taken
by the Company or any member of the Board of Directors of the Company
(including, if applicable, such stockholder or his representative acting in such
capacity) in accordance with the proviso set forth in the second sentence of "No
Solicitation" will be deemed not to violate the provisions described in this
paragraph.
Each such stockholder also agreed to waive any appraisal rights available
under applicable law, as described below.
Each Management Stockholder also granted Parent an irrevocable option (the
"Management Stock Option") to purchase his Tender Shares at $31.50. The
Management Stock Option becomes exercisable in whole or in part upon the first
to occur of (i) the Tender Shares being purchased pursuant to the Offer or (ii)
the Merger Agreement being terminated pursuant to subparagraph (e), (f) or (g)
under "Termination," or the Offer being terminated following the failure of any
of the conditions set forth in paragraph (c) or (e) of Section 14 hereof to be
satisfied. Once exercisable, the Management Stock Option will remain
exercisable, in whole or in part for 120 days. However, the Management Stock
Option may only be exercised if (i) all waiting periods under the HSR Act and
any equivalent foreign laws, required for the purchase of the Tender Shares upon
such exercise shall have expired or been waived (and the 120-day exercise period
shall be tolled if it would otherwise expire pending such expiration or waiver)
and (ii) there is not in effect any preliminary or final injunction or other
order issued by any court or governmental, administrative or regulatory agency
or authority prohibiting the exercise of the Management Stock Option.
The Management Support Agreements also provide that any incremental value
in excess of $31.50 per Tender Share received by any executive officers party to
any such agreement attributable to an Acquisition Transaction (other than with
Parent or the Purchaser) that is entered into or consummated within 12 months of
the termination of the Merger Agreement belongs to Parent who is entitled to
receive such amount within two business days of receipt by any such executive
officer.
Parent has agreed in the Stockholder Support Agreements that it will,
unless prevented by law, purchase or cause the Purchaser to purchase the shares
owned as of the date of such agreements by each of the Bass Stockholders and the
Apollo Stockholders if (i) the Offer is terminated or withdrawn by the Purchaser
or (ii) the Offer is consummated and such shares are not purchased by Purchaser
pursuant to the Offer, at $31.50 per Share (or at such higher price as may be
paid to tendering stockholders pursuant to the Offer). In addition, the Support
Agreement with the Apollo Stockholders provides that Parent and the Purchaser
will use their best efforts to obtain all necessary approvals so that the
Purchaser can pay (or have a third party pay) the Apollo Stockholders for their
Shares by June 15, 1999, and that the Apollo Stockholders will have the right to
transfer their Shares owned as of the date of such Support Agreement if the
Offer is not consummated or such Shares are not otherwise purchased by Parent or
the Purchaser prior to June 15, 1999 (with Parent and the Purchaser being
responsible for the difference between $31.50 and the price per Share received
by the Apollo Stockholders).
The agreements and proxy contained in each Support Agreement will terminate
on the earlier of payment for the Shares pursuant to the Offer (or otherwise in
the case of the Stockholder Support Agreements) and, in
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the case of the Management Support Agreements and the Support Agreement with the
Bass Stockholders, the 181st day after termination of the Merger Agreement in
accordance with its terms.
The foregoing is a summary of the material provisions of the Support
Agreements, copies of which are included as exhibits to the Schedule 14D-1 of
which this Offer to Purchase forms a part. This summary is qualified in its
entirety by reference to the Support Agreements which are incorporated herein by
reference.
(e) Executive Employment Agreements
Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into an employment agreement with Richard J. Heckmann (the
"Heckmann Agreement") which has a term of four years from the date on which the
effective time of the Merger occurs (the "Effective Date"). The Heckmann
Agreement will be of no force and effect if the Merger Agreement is terminated.
During the term of the Heckmann Agreement, Mr. Heckmann will be Chairman and
Chief Executive Officer of the Company, a member of the Executive Committee of
Vivendi Water Branch and a director of Generale des Eaux. In addition to
payments of salary (which would be increased to $950,000 per year) and annual
bonus opportunities, the Heckmann Agreement provides for a cash payment not to
exceed $7.5 million to be paid no later than five days following the Effective
Date in respect of the severance provisions of his former employment agreement
with the Company, and provides for the full vesting of Mr. Heckmann's benefit
under the Company's Supplemental Executive Retirement Plan. In addition, the
Company (or Parent, on behalf of the Company) is obligated to deliver to Mr.
Heckmann an aggregate of 289,056 shares of Parent stock, one-quarter of which
will be delivered on each of the first four anniversaries of the Effective Date,
provided that Mr. Heckmann is employed by the Company as of each such date. In
the event that Mr. Heckmann's employment is terminated by the Company for Cause
or by Mr. Heckmann without Good Reason (as each such term is defined in the
Heckmann Agreement), Mr. Heckmann will be entitled to receive only his salary
accrued to such termination and any previously vested benefits under Company
benefit plans; provided, that portion of the Parent stock grant not previously
delivered or past due to be delivered at such time will be forfeited. If Mr.
Heckmann's employment is terminated because of his death or Disability (as
defined in the Heckmann Agreement), Mr. Heckmann (or his beneficiaries, as
applicable) will be entitled to receive, in addition to any accrued but unpaid
salary and other benefits owed or payable to Mr. Heckmann under the Company's
benefit plans, (i) a lump sum in cash equal to two times (x) his then current
base salary plus (y) the minimum annual incentive to which Mr. Heckmann would
have been entitled for the year in which such termination occurs; (ii) a lump
sum in cash in respect of any deferred compensation; (iii) that portion of the
Parent stock grant that was not delivered prior to the effective date of such
termination; and (iv) continuation of welfare-type benefits for two years
following the date of termination. In the event that Mr. Heckmann's employment
is terminated by the Company without Cause or by Mr. Heckmann for Good Reason,
which includes a Change in Control of Parent or the Company (as each term is
defined in the Heckmann Agreement), Mr. Heckmann will be entitled to receive (1)
a lump sum in cash equal to (a) the base salary that would have been paid to Mr.
Heckmann for the remainder of the original term of the Heckman Agreement plus
(b) the target annual bonus that would have been paid to Mr. Heckmann for the
remainder of the original term of the Heckmann Agreement plus (c) the minimum
annual bonus for the year in which such termination occurs, pro-rated to date of
termination; (2) continued welfare-type benefits for the remainder of the
original term of the Heckmann Agreement; and (3) that portion of the Parent
stock grant that was not delivered prior to the effective date of such
termination. The Heckmann Agreement provides that, if any payment or benefit
that Mr. Heckmann receives in connection with the Merger becomes subject to the
excise tax imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company will pay to Mr. Heckmann an amount in cash
sufficient to make him whole with respect to such excise tax. Mr. Heckmann is
subject to non-competition and non-solicitation covenants for the entire term of
the Heckmann Agreement, regardless of the earlier termination of his employment
thereunder. The Company will no longer be obligated to deliver the Parent stock
grant, in the event Mr. Heckmann violated such covenants prior to the due date
for any payment of the Parent stock grant. Parent, the Company and Mr. Heckmann
have also entered into an agreement whereby Mr. Heckmann may purchase one of the
Company's aircraft at its then depreciated value upon his retirement or, if
earlier, at such time as the Company determines to sell such aircraft to a third
party.
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Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into employment agreements with each of Andrew D. Seidel and
Kevin L. Spence (each, an "Executive Agreement") which are substantially similar
in their terms. Each Executive Agreement has a three-year term from the
Effective Date. The Executive Agreements will be of no force and effect if the
Merger Agreement is terminated. During the term of the Executive Agreements, Mr.
Seidel will be President and Chief Operating Officer -- Wastewater Group of the
Company, and Mr. Spence will be Executive Vice President and Chief Financial
Officer of the Company. In addition to payments of salary (which would be
increased for both executives to $350,000 per year) and annual bonus
opportunities, the Executive Agreements provide for a cash payment not to exceed
$2.1 million (in the case of Mr. Seidel) or $1.95 million (in the case of Mr.
Spence) to be paid no later than five days following the Effective Date in
respect of the severance provisions of their former employment agreements with
the Company, and provide for the full vesting of their benefits under the
Company's Supplemental Executive Retirement Plan. In addition, the Company (or
Parent, on behalf of the Company) is obligated to deliver to the executives an
aggregate of 50,370 shares of Parent stock (in the case of Mr. Seidel) or 49,341
shares of Parent stock (in the case of Mr. Spence), one-third of which will be
delivered on each of the first three anniversaries of the Effective Date,
provided that the executive is employed by the Company as of each such date. In
the event that the executive's employment is terminated by the Company for Cause
or by the executive without Good Reason (as each such term is defined in the
Executive Agreements), that portion of the Parent stock grant not previously
delivered or past due to be delivered at such time will be forfeited. If the
executive's employment is terminated because of his death or Disability (as
defined in the Executive Agreements), the executive (or his beneficiaries, as
applicable) will be entitled to receive (i) a lump sum in cash equal to 150
percent (150%) of (x) his then current base salary plus (y) the minimum annual
incentive to which the executive would have been entitled for the year in which
such termination occurs; (ii) a lump sum in cash in respect of any deferred
compensation, (iii) that portion of the Parent stock grant that was not
delivered prior to the effective date of such termination; and (iv) continuation
of welfare-type benefits for two years following the date of termination. In the
event that the executive's employment is terminated by the Company without Cause
or by the executive for Good Reason, which includes a Change in Control of
Parent or the Company (as each such term is defined in the Executive
Agreements), the executive will be entitled to receive (1) a lump sum in cash
equal to (a) the base salary that would have been paid to the executive for the
remainder of the original term of the Executive Agreement plus (b) the target
annual bonus that would have been paid to the executive for the remainder of the
original term of the Executive Agreement plus (c) the minimum annual bonus for
the year in which such termination occurs, pro-rated to the date of termination;
(2) continued welfare-type benefits for the remainder of the original term of
the Executive Agreement; and (3) that portion of the Parent stock grant that was
not delivered prior to the effective date of such termination. The Executive
Agreements provide that, if any payment or benefit that the executive receives
in connection with the Merger becomes subject to the excise tax imposed by
section 4999 of the Code, the Company will pay to the executive an amount in
cash (a "Gross-up Payment") sufficient to make him whole with respect to such
excise tax. Each of the executives is subject to non-competition and
non-solicitation covenants for the entire term of his Executive Agreement,
regardless of the earlier termination of his employment thereunder. The Company
will no longer be obligated to deliver the Parent stock grant to Mr. Seidel or
Mr. Spence, as the case may be, in the event such executive violates such
covenants prior to the due date for any payment of the Parent stock grant.
As of August 26, 1998, the Company entered into Employment Agreements
("Employment Agreements") with its executive officers other than Mr. Heckmann
and Mr. Shimmon (Mr. Stanczak entered into his Employment Agreement on February
15, 1999), whose terms are substantially similar, except that the number of
years in the term of the agreement and the corresponding multiplier used in
calculating severance benefits thereunder may differ. With respect to Messrs.
Seidel and Spence, such agreements are superceded by the Executive Agreements
described above. Each Employment Agreement provides for a term of 24 or 36
months, provided in each case that unless either party has given notice of
termination, on the first day of the month following the commencement of the
term of the Employment Agreement, the term is extended by an additional month.
The Employment Agreements provide for certain payments and benefits to be paid
in respect of severance upon the occurrence of a Change of Control (as defined
in the Employment Agreements). Such payments and benefits include: (1) a lump
sum in cash equal to (a) the executive's base
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salary and target annual incentive bonus that would be payable for the remainder
of the term of the Employment Agreement; (b) the present value of the
welfare-type benefits covering the executive if continued to the end of the term
of the Employment Agreement; and (c) for agreements with a 36-month term, the
immediate vesting of the executive's benefit under the Company's Supplemental
Executive Retirement Plan. Employment Agreements with a 36-month term provide
that, if any payment or benefit that the executive receives in connection with
the Merger becomes subject to excise tax imposed by section 4999 of the Code,
the Company will pay to the executive a Gross-up Payment. Employment Agreements
with a two-year term do not provide for a Gross-up Payment. Each Employment
Agreement provides that the executive will be subject to non-competition
covenants during the term of the agreement and, if the executive's employment is
terminated prior to the expiration of the term of the Employment Agreement, for
one year thereafter.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. If the Merger is consummated, however, stockholders of the Company who
have not tendered their Shares will have certain rights under the DGCL to
dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. Stockholders who perfect such rights by complying with
the procedures set forth in Section 262 of the GCL ("Section 262") will have the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) determined by the Delaware Court of
Chancery and will be entitled to receive a cash payment equal to such fair value
from the Surviving Corporation. In addition, such dissenting stockholders would
be entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is required
to take into account all relevant factors. Accordingly, such determination could
be based upon considerations other than, or in addition to, the market value of
the Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme court stated that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding. The Weinberger court also noted that under Section 262,
fair value is to be determined "exclusive of any element of value arising from
the accomplishment of exception of the merger." In Cede & Co. v. Technicolor,
Inc., however, the Delaware Supreme Court stated that, in the context of a
two-step cash merger, "to the extent that value has been added following a
change in majority control before cash-out, it is still value attributable to
the going concern," to be included in the appraisal process. As a consequence,
the fair value determined in any appraisal proceeding could be more or less than
the consideration to be paid in the Offer and the Merger.
Parent does not intend to object, assuming the proper procedures are
followed, to the exercise of appraisal rights by any stockholder and the demand
for appraisal of, and payment in cash for the fair value of, the Shares. Parent
intends, however, to cause the Surviving Corporation to argue in an appraisal
proceeding that, for purposes of such proceeding, the fair value of each Share
is less than the price paid in the Merger. In this regard, stockholders should
be aware that opinions of investment banking firms as to the fairness from a
financial point of view (including the opinions of SSB and J.P. Morgan described
herein) are not necessarily opinions as to "fair value" under Section 262.
THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
Plans for the Company. In connection with the Offer, Parent and the
Purchaser have reviewed, and will continue to review various possible business
strategies that they might consider in the event that the Purchaser acquires
control of the Company, whether pursuant to this Offer, the Merger or otherwise.
Such strategies could include, among other things, changes in the Company's
business, corporate structure, capitalization or management.
"Going Private" Transactions. The Commission has adopted Rule 13e-3 under
the Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger. However, Rule
13e-3 would be inapplicable if (i) the Shares are deregistered under the
Exchange Act prior to the Merger or other business combination or (ii) the
Merger or other business
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combination is consummated within one year after the purchase of the Shares
pursuant to the Offer and the amount paid per Share in the Merger or other
business combination is at least equal to the amount paid per Share in the
Offer. If applicable, Rule 13e-3 requires, among other things, that certain
financial information concerning the fairness of the proposed transaction and
the consideration offered to minority stockholders in such transaction be filed
with the Commission and disclosed to stockholders prior to the consummation of
the transaction.
The Rights. According to the Company's Current Report on Form 8-K dated
November 27, 1998 (together with subsequent filings relating to the Rights
Agreement, the "Company 8-K"), on November 12, 1998, the Company declared a
dividend distribution of one Right for each outstanding Share, which entitles
the registered holder to purchase from the Company one one-thousandth of a share
of Series A Junior Participating Preferred Stock, par value $0.10 per share, of
the Company (the "Preferred Stock") at an exercise price of $80.00 (the
"Exercise Price"), subject to adjustment.
The Rights Agreement provides that in the event that a person becomes the
beneficial owner of 15% or more of the outstanding Shares, each holder of a
Right can receive upon exercise that number of Shares (or other securities) of
the Company having at the time of such transaction a market value equal to two
times the Exercise Price. In the event that the Company is acquired in a merger
or other business combination transaction in which the Company is not the
surviving corporation or where 50% or more of the assets or earning power is
sold or transferred, each holder of a Right can receive common stock of the
acquiring company having a value equal to two times the Exercise Price. As a
condition of the Offer and pursuant to the Merger Agreement, the Company has
taken all actions necessary to make the Rights inapplicable to the Offer, the
Merger, the Stock Option Agreement and the Support Agreements.
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the Company 8-K and
the text of the Rights Agreement as set forth as an exhibit thereto filed with
the Commission, copies of which may be obtained in the manner set forth in
Section 8.
STOCKHOLDERS ARE REQUIRED TO TENDER ONE ASSOCIATED RIGHT FOR EACH SHARE
TENDERED IN ORDER TO EFFECT A VALID TENDER OF SUCH SHARE. IF THE DISTRIBUTION
DATE (AS DEFINED IN THE RIGHTS AGREEMENT) DOES NOT OCCUR PRIOR TO THE EXPIRATION
DATE, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF THE ASSOCIATED RIGHTS.
SEE SECTIONS 1 AND 3.
12. SOURCE AND AMOUNT OF FUNDS.
Approximately $6.2 billion is required to purchase the Shares pursuant to
the Offer and upon conversion of the Shares in the proposed Merger, and to pay
fees and expenses related to the Offer and the proposed Merger.
Parent plans to obtain sufficient funds from available cash on hand,
available lines of credit and from bridge loans to be separately provided by
Bayerische Landesbank and Societe Generale. Parent expects to conclude an
arrangement with Bayerische Landesbank under which it will provide to Parent a
FF 13.2 billion loan repayable no later than October 29, 1999. Such borrowing
will bear interest at one of the following rates: (i) 1-, 2- or 3-month Euribor
rate plus 8 basis points if the loan is drawn in Euros or; (ii) 1-, 2- or
3-month Libor U.S. dollar rate plus 8 basis points if the loan is drawn in U.S.
dollars. Additionally, Parent expects to conclude an arrangement with Societe
Generale under which it will provide a FF 2.286 billion 7-month loan. Such
borrowing will bear an interest rate equal to 1-month Euribor plus 8 basis
points, subject to certain adjustment at Parent's option. Parent expects to
obtain the remaining funds to consummate the Offer and the proposed Merger from
available cash and existing lines of credit.
Both bridge loans will be repaid with the issuance through a rights
offering on the Paris Stock Exchange of Parent common stock for aggregate
proceeds of E3 billion and convertible bonds for aggregate proceeds of not less
than E2 billion.
The funds necessary to purchase the Shares pursuant to the Offer and upon
conversion of the Shares in the proposed Merger, and to pay fees and expenses
related to the Offer and the proposed Merger, will be furnished to Purchaser by
Parent and/or one or more of its subsidiaries as a capital contribution and/or
loans.
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13. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that without the prior written consent of
Parent, the Company will not, and will not permit any of its subsidiaries to,
prior to the Effective Time, (i) issue, reissue or sell, or authorize the
issuance, reissuance or sale of (A) additional shares of capital stock of any
class, or securities convertible into capital stock of any class, or any rights,
warrants or options to acquire any convertible securities or capital stock,
other than the issuance of Shares, in accordance with the terms of the
instruments governing such issuance on the date hereof, pursuant to the exercise
of Options outstanding on the date of the Merger Agreement, or (B) any other
securities in respect of, in lieu of, or in substitution for, the Shares or any
other capital stock of any class outstanding on the date of the Merger Agreement
or (ii) make any other changes in its capital structure (other than the
incurrence of indebtedness in the amount of up to $100 million in the aggregate
under existing revolving credit facilities).
14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Purchaser shall not
be required to accept for payment or pay for any tendered Shares and may
terminate or, subject to the terms of the Merger Agreement, amend the Offer, if
(i) the Minimum Condition is not satisfied, (ii) any applicable waiting period
under the HSR Act shall not have expired or been terminated, and any applicable
approvals or consents have not been obtained under any Foreign Approval Laws (or
any applicable waiting periods thereunder have not expired or been terminated),
(iii) the Company shall not have delivered to the Purchaser and Parent a duly
executed FIRPTA certificate in the form of Attachment 1 to the Merger Agreement,
or (iv) at any time on or after the date of the Merger Agreement and prior to
the time of payment for any Shares, any of the following events (each, an
"Event") shall occur:
(a) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, ruling, condition, judgment, order or
injunction enacted, enforced, promulgated, proposed, amended, issued or
deemed applicable to the Offer, by any governmental entity that could
reasonably be expected to, directly or indirectly: (1) make illegal or
otherwise prohibit consummation of the Offer or the Merger, (2) prohibit or
materially limit the ownership or operation by Parent or the Purchaser of
all or a portion of the business or assets of the Company and its
subsidiaries or compel Parent or the Purchaser to dispose of or hold
separately all or a portion of the business or assets of Parent or the
Purchaser or the Company and its subsidiaries, or seek to impose a
limitation on the ability of Parent or the Purchaser to conduct its
business or own such assets, (3) impose a limitations on the ability of
Parent or the Purchaser effectively to acquire, hold or exercise full
rights of ownership of the Shares, including, without limitation, the right
to vote any Shares acquired or owned by the Purchaser or Parent on all
matters properly presented to the Company's stockholders, (4) require
divestiture by Parent or the Purchaser of Shares, in the case of any of the
foregoing in clauses (2), (3) or (4), which would reasonably be expected,
individually or in the aggregate, to have a material adverse effect on the
respective businesses of the Company or Compagnie Generale des Eaux, or (5)
result in any change in or effect on the business, financial condition,
results of operations or prospects of the Company or any of its
subsidiaries that could reasonably be expected to have a material adverse
effect (a "Material Adverse Effect") on the Company and its subsidiaries
taken as a whole or could reasonably be expected to prevent or delay
consummation of the Offer or Merger on the Company or Parent;
(b) there shall be instituted or pending any action or proceeding by
any Governmental Entity seeking any of the consequences referred to in
clauses (1) through (4) of paragraph (a) above; or
(c) it shall have been publicly disclosed or the Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph (c) as set forth in Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of the outstanding Shares has been acquired by
any person (including the Company or any of its subsidiaries or affiliates)
or group (as defined in Section 13(d)(3) under the Exchange Act), (2) the
Company Board of Directors or any committee thereof shall have withdrawn,
or shall have modified or amended in a manner adverse to Parent or the
Purchaser, the approval, adoption or recommendation, as the case may be, of
the Offer, the Merger or the
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Merger Agreement, or approved or recommended any, merger, consolidation,
other business combination, sale of material assets, takeover proposal or
other acquisition of Shares other than the Offer and the Merger, (3) a
third party shall have entered into a definitive agreement or a written
agreement in principle with the Company with respect to a tender offer or
exchange offer for any Shares or a merger, consolidation, other business
combination with the Company or sale of material assets with or involving
the Company or any of its subsidiaries (except as specifically permitted by
Section 6.1 of the Merger Agreement), or (4) the Company Board of Directors
or any committee thereof shall have resolved to do any of the foregoing
(and such resolution shall be made public); or
(d) the Company and the Purchaser and Parent shall have reached an
agreement that the Offer or the Merger Agreement be terminated, or the
Merger Agreement shall have been terminated in accordance with its terms;
or
(e) (i) any of the representations and warranties of the Company set
forth in the Merger Agreement, when read without any exception or
qualification as to materiality or to Material Adverse Effect on the
Company, shall not be true and correct as of the date of the Merger
Agreement except where the failure or failures to be so true and correct
would not, individually or in the aggregate, reasonably be expected to
adversely affect the value of the Company and its subsidiaries taken as a
whole, in an amount equal to or in excess of $500 million, (ii) any of the
representations and warranties of the Company with respect to the
capitalization of the Company (Section 4.3 of the Merger Agreement) not be
true and correct (except for immaterial inaccuracies), as if such
representations and warranties were made at the time of such determination;
or (iii) the Company shall have breached or failed to observe or perform in
any material respect any of its covenants or agreements under the Merger
Agreement, provided, however, that any breach or failure to observe or
perform by the Company which is capable of being cured without a material
adverse effect upon the Company and its subsidiaries or Parent and its
subsidiaries, shall not be deemed a breach or failure to observe or perform
by the Company if, without a material adverse effect upon the Company and
its subsidiaries or Parent and its subsidiaries, such breach or failure to
perform or observe is cured by the Company within five business days after
written notice thereof by Parent is provided; or
(f) any consent (other than the filing of a certificate of merger or
approval by the stockholders of the Company of the Merger if required by
the DGCL) required to be filed, occurred or been obtained by the Company or
any of its subsidiaries in connection with the execution and delivery of
the Merger Agreement, the Offer and the consummation of the transactions
contemplated by the Merger Agreement shall not have been filed or obtained
or shall not have occurred except where the failure to obtain such consent
could not reasonably be expected to have individually or in the aggregate a
Material Adverse Effect on the Company; or
(g) there shall have occurred, and continued to exist, (1) any general
suspension of, or limitation on prices for, trading in securities on the
New York Stock Exchange or the Paris Bourse, (2) (excluding any coordinated
trading halt-triggered solely as a result of a specified decrease in a
market index and suspensions on limitations resulting solely from physical
damage or interference with such exchanges not related to market
conditions), (3) any decline of at least 35% in the CAC-40 Index from the
close of business on the last trading day immediately preceding the date of
the Merger Agreement, (4) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, France or
the European Union, or a material limitation (whether or not mandatory) by
any Governmental Entity on the extension of credit by banks or other
lending institutions, or (5) in the case of any of the foregoing clauses
(1) and (2) existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof.
The foregoing conditions (including those set forth in clauses (i), (ii)
and (iii) of the initial paragraph) are for the benefit of Parent and the
Purchaser and may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to any such conditions and may be waived by Parent or
the Purchaser, in whole or in part, at any time and from time to time in their
reasonable discretion, in each case, subject to the terms of the Merger
Agreement. The failure by Parent or the Purchaser at any time to exercise any of
the foregoing
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rights will not be deemed a waiver of any such right and each such right will be
deemed an ongoing right which may be asserted at any time and from time to time.
Any reasonable determination by the Purchaser concerning the events described in
this Section 14 will be final and binding on all parties.
15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS.
General. Except as set forth in this Offer to Purchase, based on its
review of publicly available filings by the Company with the Commission, neither
Parent nor the Purchaser is aware of any licenses or regulatory permits that
appear to be material to the business of the Company and its subsidiaries, taken
as a whole, and that might be adversely affected by the Purchaser's acquisition
of Shares (and the indirect acquisition of the stock of the Company's
subsidiaries) as contemplated herein, or any filings, approvals or other actions
by or with any domestic, foreign or supranational governmental authority or
administrative or regulatory agency that would be required for the acquisition
or ownership of the Shares (or the indirect acquisition of the stock of the
Company's subsidiaries) by the Purchaser pursuant to the Offer as contemplated
herein. Should any such approval or other action be required, it is presently
contemplated that such approval or action would be sought except as described
below under "State Takeover Laws." Should any such approval or other action be
required, there can be no assurance that any such approval or action would be
obtained without substantial conditions or that adverse consequences might not
result to the Company's or its subsidiaries' businesses, or that certain parts
of the Company's, Parent's, the Purchaser's or any of their respective
subsidiaries' businesses might not have to be disposed of or held separate or
other substantial conditions complied with in order to obtain such approval or
action or in the event that such approvals were not obtained or such actions
were not taken. The Purchaser's obligation to purchase and pay for Shares is
subject to certain conditions, including conditions with respect to litigation
and governmental actions. See Introduction and Section 14.
State Takeover Laws. A number of states (including Delaware where the
Company is incorporated) have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, stockholders, principal executive offices or principal places of
business therein. To the extent that certain provisions of certain of these
state takeover statutes purport to apply to the Offer or the Merger, the
Purchaser believes that such laws conflict with federal law and constitute an
unconstitutional burden on interstate commerce. In 1982, the Supreme Court of
the United States, in Edgar v. Mite Corp., invalidated on constitutional grounds
the Illinois Business Takeovers Statute, which as a matter of state securities
law made takeovers of corporations meeting certain requirements more difficult.
The reasoning in such decision is likely to apply to certain other state
takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America,
the Supreme Court of the United States held that the State of Indiana could as a
matter of corporate law and, in particular, those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without the prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex
Corp., a Federal district court in Oklahoma ruled that the Oklahoma statutes
were unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a Federal district court in Florida held, in Grand
Metropolitan PLC v. Butterworth, that the provisions of the Florida Affiliated
Transactions Act and Florida Control Share Acquisition Act were unconstitutional
as applied to corporations incorporated outside of Florida.
Section 203 of the DGCL prevents certain "business combinations" with an
"interested stockholder" (generally, any person who owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock) for a period of
three years following the time such person became an interested stockholder,
unless, among other things, prior to the time the interested stockholder became
such, the board of directors of the corporation approved either the business
combination or the transaction in which the interested stockholder
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<PAGE> 37
became such. The Board of Directors of the Company has unanimously approved the
Offer, the Merger and the Merger Agreement and the transactions contemplated
thereby for the purposes of Section 203 of DGCL.
The Purchaser has not attempted to comply with any state takeover statutes
in connection with the Offer or the Merger although, pursuant to the Merger
Agreement, the Company has represented that the Company Board of Directors has
taken appropriate action to render Section 203 of the DGCL inapplicable to the
Offer, the Merger and the transactions contemplated by the Merger Agreement. The
Purchaser reserves the right to challenge the validity or applicability of any
state law allegedly applicable to the Offer or the Merger, and nothing in this
Offer to Purchase nor any action taken in connection herewith is intended as a
waiver of that right. In the event that it is asserted that one or more takeover
statutes apply to the Offer or the Merger, and it is not determined by an
appropriate court that such statute or statutes do not apply or are invalid as
applied to the Offer or the Merger, as applicable, the Purchaser may be required
to file certain documents with, or receive approvals from, the relevant state
authorities, and the Purchaser might be unable to accept for payment or purchase
Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for purchase, or pay for, any Shares tendered. See Section 14.
United States Antitrust Approvals. Under the HSR Act, and the rules and
regulations that have been promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain acquisition transactions may not be consummated
until certain information and documentary material has been furnished for review
by the FTC and the Antitrust Division of the Department of Justice (the
"Antitrust Division") and certain waiting period requirements have been
satisfied. The acquisition of Shares pursuant to the Offer and the Merger is
subject to such requirements.
Under the provisions of the HSR Act applicable to the Offer and the Merger,
the purchase of Shares pursuant to the Offer and the Merger may not be
consummated until the expiration of a 30-calendar-day waiting period following
the filing of certain required information and documentary material with respect
to the Offer with the FTC and the Antitrust Division, unless such waiting period
is earlier terminated by the FTC and the Antitrust Division. Parent has filed a
Premerger Notification and Report Form with the FTC and the Antitrust Division
in connection with the purchase of Shares pursuant to the Offer and the Merger
under the HSR Act on March 23, 1999, and the required waiting period with
respect to the Offer and the Merger would expire at 12:00 a.m., New York City
time, on April 22, 1999, unless earlier terminated by the FTC or the Antitrust
Division or Parent receives a request for additional information or documentary
material prior thereto. If within such 30-calendar-day waiting period either the
FTC or the Antitrust Division were to request additional information or
documentary material from Parent, the waiting period with respect to the Offer
and the Merger would be extended for an additional period of 10 calendar days
following the date of substantial compliance with such request by Parent. Only
one extension of the waiting period pursuant to a request for additional
information is authorized by the rules promulgated under the HSR Act.
Thereafter, the waiting period could be extended only by court order or with the
consent of Parent. The additional 10-calendar-day waiting period may be
terminated sooner by the FTC or the Antitrust Division. Although the Company is
required to file certain information and documentary material with the FTC and
the Antitrust Division in connection with the Offer, neither the Company's
failure to make such filings nor a request made to the Company from the FTC or
the Antitrust Division for additional information or documentary material will
extend the waiting period with respect to the purchase of Shares pursuant to the
Offer and the Merger.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer and the Merger. At any time before or after the
Purchaser's purchase of Shares, the FTC or the Antitrust Division could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer and the Merger, the divestiture of Shares purchased pursuant to the
Offer or the divestiture of substantial assets of Parent, the Purchaser, the
Company or any of their respective subsidiaries or affiliates. Private parties
as well as state attorneys general may also bring legal actions under the
antitrust laws under certain circumstances. See Section 14.
35
<PAGE> 38
Based upon an examination of publicly available information relating to the
businesses in which the Company is engaged, the Purchaser believes that the
acquisition of Shares pursuant to the Offer and the Merger should not violate
the applicable antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer and the Merger on antitrust grounds will not be made, or,
if such challenge is made, what the result will be. See Section 14.
Foreign Approvals. Parent and the Company each conduct business in member
states of the European Union. The EC Merger Control Regulation, requires
notification to and approval by the European Commission of certain mergers or
acquisitions involving parties with aggregate worldwide sales and individual
European Union sales exceeding certain thresholds, before such mergers or
acquisitions are completed. Parent and the Company have sales that exceed these
thresholds. A single notification to the European Commission eliminates any need
to submit notifications of the merger to national competition authorities in
member states within the European Economic Area. Parent and the Company notified
the European Commission of the Merger on March 23, 1999.
The European Commission must review the Offer and Merger to determine
whether or not it is compatible with the common market and, accordingly, whether
or not to permit it to proceed. A merger or acquisition which does not create or
strengthen a dominant position as a result of which effective competition would
be significantly impeded in the common market or in a substantial part of the
common market is considered to be compatible with the common market, and must be
allowed to proceed. The European Commission has one month following submission
of a complete notification to examine whether the merger raises serious doubts
with regard to its compatibility with the common market. If within this
one-month period the European Commission decides that there are no serious
doubts, or if it fails to reach a decision, the merger is deemed approved. If,
instead, the European Commission decides that there are serious doubts, it must
open a more detailed investigation which can last up to an additional four
months. Parent and the Company believe that the Merger is compatible with the
common market under the EC Merger Control Regulation, although there can be no
assurance that the European Commission will agree.
Parent also anticipates filing a premerger notification with the Mexican
Competition Council. It is not anticipated at this time that there will be any
waiting period associated with the filing in Mexico. Parent also intends to make
voluntary filings with the Australian Foreign Investment Review Board and
Competition & Consumer Commission, and there is no waiting period associated
with this filing.
In connection with the acquisition of the Shares pursuant to the Offer or
the Merger, the laws of certain of other foreign countries and jurisdictions may
require the filing of information with, or the obtaining of the approval or
consent of, governmental authorities in such countries and jurisdictions. The
governments in such countries and jurisdictions might attempt to impose
additional conditions on the Company's operations conducted in such countries
and jurisdictions as a result of the acquisition of the Shares pursuant to the
Offer or the Merger. If such approvals or consents are found to be required the
parties intend to make the appropriate filings and applications. In the event
such a filing or application is made for the requisite foreign approvals or
consents, there can be no assurance that such approvals or consents will be
granted and, if such approvals or consents are received, there can be no
assurance as to the date of such approvals or consents. In addition, there can
be no assurance that the Purchaser will be able to cause the Company or its
subsidiaries to satisfy or comply with such laws or that compliance or
noncompliance will not have adverse consequences for the Company or any
subsidiary after purchase of the Shares pursuant to the Offer or the Merger.
Litigation. On March 22, 1999, Michael Wigton ("'Plaintiff"), filed a
purported class action complaint (the "Complaint") in the Court of Chancery of
the State of Delaware in and for New Castle County captioned Michael Wigton v.
United States Filter Corporation et. al., (Case No. 17033 NC), challenging the
proposed transaction between the Company and Parent. Plaintiff alleges that he
is the owner of Common Stock and seeks to represent all persons, other than
defendants, and any person, firm, trust, corporation or other entity related to
or affiliated with the defendants or their successors in interest, who have been
or will be adversely affected by the conduct of defendants in connection with
the proposed transaction with Parent. Plaintiff names as defendants the Company
and several of its officers and/or directors including Richard J.
36
<PAGE> 39
Heckmann, James E. Clark, John L. Diederich, Robert A. Hillas, Nicholas C.
Memmo, Alfred E. Osborne, J. Danforth Quayle, C. Howard Wilkins, Jr., Arthur B.
Laffer, Ardon E. Moore and Andrew D. Seidel.
Plaintiff alleges that defendants breached their fiduciary duties to the
Company's stockholders by failing to take all necessary steps to obtain the best
price available in the proposed transactions with Parent, and further, have
agreed to a lock-up option that will impede the conduct of any such process.
Plaintiff seeks an order declaring his action to be a proper class action
and certifying Plaintiff as a class representative, and ordering defendants to
fulfill their fiduciary duties to the class by (i) taking all appropriate steps
to enhance the Company's value as a merger candidate and to obtain the best
possible price for the Company; (ii) acting independently so that the interests
of the Company's public stockholders are protected; and (iii) adequately
insuring that no conflicts of interest exist between defendants and their
fiduciary obligation to maximize stockholder value in the sale of the Company.
Plaintiff also seeks an accounting to the class for damages suffered as a result
of the sale of the Company, costs and reasonable expert and attorney's fees.
Also on March 22, 1999, two other complaints were filed in the Court of
Chancery of the State of Delaware in and for New Castle County captioned Earnest
Hack v. United States Filter Corporation, et. al., (Case No. 17036 NC) (the
"Schipper Complaint"). The Hack and Schipper Complaints contain allegations
identical to those in the Wigton Complaint.
16. CERTAIN FEES AND EXPENSES.
Innisfree M&A Incorporated has been retained by the Purchaser as
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telex, telegraph and personal
interview and may request brokers, dealers and other nominee stockholders to
forward material relating to the Offer to beneficial owners of Shares. The
Purchaser will pay the Information Agent reasonable and customary compensation
for all such services in addition to reimbursing the Information Agent for
reasonable out-of-pocket expenses in connection therewith.
In addition, ChaseMellon Shareholder Services L.L.C. has been retained as
the Depositary. The Purchaser will pay the Depositary reasonable and customary
compensation for its services in connection with the Offer, will reimburse the
Depositary for its reasonable out-of-pocket expenses in connection therewith and
will indemnify the Depositary against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
Except as set forth above, neither Parent nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by Parent or the
Purchaser for customary clerical and mailing expenses incurred by them in
forwarding offering materials to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
Parent and the Purchaser have filed with the Commission a Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. Such Schedule 14D-1
and
37
<PAGE> 40
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The name, business address, present principal occupation or employment and
five-year history of each of the directors and executive officers of the
Purchaser are set forth below. Unless otherwise indicated, the business address
of each such director and each such executive officer is care of Vivendi-USA,
800 Third Avenue, 38th Floor, New York, NY 10022. Unless otherwise indicated,
all directors and executive officers listed below are citizens of France.
DIRECTORS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
- ---------------- -------------------------------------------------------------
<S> <C>
Bernard Arnault................... Chairman and CEO of LVMH
LVMH
30, avenue Hoche
75008 Paris
France
Eric Licoys....................... Chairman and CEO of Havas and General Manager of Vivendi;
HAVAS formerly Chairman of Fonds Partenaires Gestion and General
31, rue du Colisee Manager of HAVAS
75008 Paris
France
Philippe L. Germond............... CEO of Cegetel and Senior Executive Vice President of
Cegetel Vivendi; formerly General Manager of Hewlett-Packard Europe
1, Place Carpeaux and CEO of SFR
92 Paris La Defense
France
Simon Murray...................... Executive at Simon Murray and Associates (UK) Ltd., Chairman
Simon Murray and Associates (U.K.) of Gens (HK) Ltd., Director of Tommy Hilfiger, Director of
Ltd. Usinor Sacilor and Director of Hutchison Waampta Hong Kong;
Princes House formerly Chairman of Deutsche Bank Asia
38 Jermyn Street
England
Esther Koplowitz.................. Vice President of F.C.C.
F.C.C. -- Madrid -- Spain
Plaza Pablo Ruiz Picasso
28020 Madrid
Spain
Serge Tchuruk..................... Chairman and CEO of Alcatel; formerly Chairman and CEO of
Alcatel Total S.A.
64, rue de la Boetie
75008 Paris
France
Ambroise Roux..................... Executive of Pinault-Printemps-Redoute and Vice President of
Pinault-Printemps-Redoute Vivendi; formerly Director of Compagnie Generale des Eaux,
8 bis, rue Margueritte
75017 Paris
France
Philippe Foriel-Destezet.......... Co-Chairman of Addeco, Chairman of Ecco SA, and Chairman of
Nescofin Nescofin
43 Rutlandgate
S.W. 71 ED London
England
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
- ---------------- -------------------------------------------------------------
<S> <C>
Jacques Friedmann................. Chairman of the Supervisory Board of AXA; formerly Chairman
AXA of UAP
9, Place Vendome
75001 Paris
France
Henri Lachmann.................... Chairman and CEO of Schneider S.A. and Schneider Electric
Schneider S.A. S.A.;
64/70 Avenue Jean-Baptiste Clement formerly Chairman and CEO of the Strafor Facom Group
92646 Boulogne Billancourt
France
Jacques Calvet.................... Retired; formerly Chairman and CEO of PSA-Peugeot-Citroen
7, rue de Tilsitt
75017 Paris
France
Marc Vienot....................... Chairman of Paris-Europlace, Honorary Chairman and Director
Paris Europlace of Societe Generale and Director of Rhone Poulenc; formerly
39, rue Cambon Chairman and CEO of Societe Generale, Director of
75039 Paris Cedex 1er Alcatel-Alsthom, Director of Havas
France
Rene Thomas....................... Honorary Chairman of Banque Nationale de Paris
Banque Nationale de Paris
16, boulevard des Italiens
75009, Paris
France
Jean-Louis Beffa.................. Chairman and CEO of Compagnie Saint-Gobain; formerly Vice-
Compagnie de Saint-Gobain Chairman of Compagnie Generale des Eaux
"Les Miroirs"
92096 La Defense Cedex
France
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
- ---------------- -------------------------------------------------------------
<S> <C>
Jean-Marie Messier................ Chairman and CEO of Vivendi; formerly General Manager of
Vivendi Vivendi
42, Avenue de Friedland
75009 Paris
France
Henri Proglio..................... Senior Executive Vice President of Vivendi
Vivendi
42, Avenue de Friedland
75008 Paris
France
Stephanie Richard................. Chairman and CEO of CGIS, Managing Director of Compagnie
CGIS (Vivendi Group) Immobiliere Phenix and Chairman of CGIS
8, rue du general Foy
75008, Paris
France
</TABLE>
40
<PAGE> 42
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
- ---------------- -------------------------------------------------------------
<S> <C>
Antoine Zacharias................. Chairman and CEO of Societe Generale d'Entreprises; formerly
Societe Generale d'Entreprises Chairman of Ecco SA
1, cours Ferdinand de Lesseps
95851, Rueil Malmaison
France
Guy Dejouany...................... President of Honor of Vivendi; formerly President of
Vivendi-Compagnie Generale des Compagnie Generale des Eaux
Eaux
52, Rue d'Anjou
75008, Paris
France
</TABLE>
I-4
<PAGE> 43
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
The name, business address, present principal occupation or employment and
five-year history of each of the directors and executive officers of the
Purchaser are set forth below. Unless otherwise indicated, the business address
of each such director and each such executive officer is care of Vivendi North
America Management Services, Inc. ("Vivendi North America"), 800 Third Avenue,
38th Floor, New York, NY 10022. Unless otherwise indicated, all directors and
executive officers listed below are citizens of the United States.
DIRECTOR
<TABLE>
<CAPTION>
POSITION WITH THE PURCHASER; PRINCIPAL
NAME OCCUPATION OR EMPLOYMENT AND 5-YEAR EMPLOYMENT HISTORY
- ---- ------------------------------------------------------
<S> <C>
Jean-Marie Messier................... Chairman, President and CEO of Purchaser
Vivendi Chairman and CEO of Vivendi; formerly General Manager of
Vivendi
42, Avenue de Friedland
75009 Paris
France
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<S> <C>
Michael Avenas....................... Vice-President of Purchaser
President of Vivendi North America;formerly Assistant to
the Chairman of Compagnie Generale des Eaux
Christian Furman..................... Vice-President, Assistant Secretary and Treasurer of
Purchaser
Vice President and Chief Financial Officer of Vivendi North
America
Neil Laurence Lane................... Vice President and Secretary of Purchaser
General Counsel, Vivendi North and General Counsel Vivendi,
Aqua Alliance Inc.; formerly Associate General Counsel,
Citicorp Investment Services, and associate Dewey
Ballantine.
</TABLE>
I-5
<PAGE> 44
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 120 Broadway 85 Challenger Road,
South Hackensack, NJ 07606 13th Floor Mail Drop-Reorg
New York, NY 10271 Ridgefield Park, NJ 07660
By Facsimile Transmission:
(for eligible institutions
only)
(201) 296-4293
Confirm Facsimile Transmission:
By Telephone Only
(201) 296-1860
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone number set forth below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below and will
be furnished promptly at the Purchaser's expense. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
INNSFREE M&A INCORPORATED
501 MADISON AVENUE, 20TH FLOOR
NEW YORK, NEW YORK 10022
BANKS AND BROKERS CALL COLLECT: (212) 750-5833
ALL OTHERS CALL TOLL FREE (888) 750-5834
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717 (call collect)
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
UNITED STATES FILTER CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED MARCH 26, 1999
BY
EAU ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
VIVENDI
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, APRIL 22, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT COURIER:
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
Post Office Box 3301 120 Broadway, 13th Floor 85 Challenger Road-Mail Drop-Reorg
South Hackensack, NJ 07606 New York, NY 10271 Ridgefield Park, NJ 07660
Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
</TABLE>
BY FACSIMILE TRANSMISSION
(for eligible institutions only)
(201) 296-4293
To Confirm Facsimile Transmission Only
(201) 296-4860
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates for Shares (as defined in the Offer to Purchase dated March 26,
1999 (the "Offer to Purchase")) are to be forwarded herewith or, unless an
Agent's Message (as defined in the Offer to Purchase) is utilized, if tenders of
Shares are to be made by book-entry transfer to an account maintained by
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") at The Depository
Trust Company ("DTC"), pursuant to the procedures set forth in Section 3 of the
Offer to Purchase. Stockholders who tender Shares by book-entry transfer are
referred to herein as "Book-Entry Stockholders."
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary on or prior to
the Expiration Date (as defined in the Offer to Purchase) or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase. See Instruction 2.
<PAGE> 2
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
NOTE: SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER. PLEASE
READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------------------------------------------
Account Number:
---------------------------------------- Transaction Code Number:
----------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
----------------------------------------------------------------------------
Window Ticket Number (if any):
----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------------------------------------------------
Name of Institution which Guaranteed Delivery:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
ON SHARE CERTIFICATE(S) TENDERED) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------------------------
SHARE TOTAL NUMBER OF NUMBER
CERTIFICATE SHARES REPRESENTED BY OF SHARES
NUMBER(S)* SHARE CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated it will be assumed that all Shares represented
by Share Certificates delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
<PAGE> 3
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Eau Acquisition Corp. (the "Purchaser"),
a Delaware corporation and an indirect wholly-owned subsidiary of Vivendi, a
societe anonyme organized under the laws of France("Parent"), the above
described shares of Common Stock, par value $.01 per share (the "Shares"), of
United States Filter Corporation, a Delaware corporation (the "Company"), and
the associated preferred share purchase rights (the "Rights") issued pursuant to
the Rights Agreement, dated as of November 27, 1998, between the Company and The
Bank of New York, as Rights Agent (as the same may be amended, the "Rights
Agreement"), pursuant to the Purchaser's offer to purchase all outstanding
Shares at a price of $31.50 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase, receipt of which is hereby acknowledged, and in this Letter
of Transmittal (which together with the Offer to Purchase constitute the
"Offer"). Unless the context otherwise requires, all references to Shares shall
include the associated Rights. The undersigned understands that the Purchaser
reserves the right to transfer or assign, in whole or from time to time in part,
to one or more of its direct or indirect subsidiaries or affiliates the right to
purchase all or any portion of the Shares tendered pursuant to the Offer, as
used herein, the term "Purchaser" shall, if applicable, include any such
subsidiary and affiliate.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered hereby in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns, and transfers
to, or upon the order of, the Purchaser all right, title and interest in and to
all of the Shares that are being tendered hereby and any and all dividends on
the Shares (including, without limitation, the issuance of additional Shares
pursuant to a stock dividend or stock split, the issuance of other securities,
the issuance of rights for the purchase of any securities, or any cash dividends
that are declared or paid by the Company on or after the date of the Offer to
Purchase and are payable or distributable to stockholders of record on a date
prior to the transfer into the name of the Purchaser or its nominees or
transferees on the Company's stock transfer records of the Shares purchased
pursuant to the Offer (collectively, "Distributions"), and constitutes and
irrevocably appoints the Depositary the true and lawful agent, attorney-in-fact
and proxy of the undersigned to the full extent of the undersigned's rights with
respect to such Shares (and Distributions) with full power of substitution (such
power of attorney and proxy being deemed to be irrevocable and coupled with an
interest), to (a) deliver Share Certificates (and Distributions), or transfer
ownership of such Shares on the account books maintained by DTC, together in
either such case with all accompanying evidences of transfer and authenticity,
to or upon the order of the Purchaser upon receipt by the Depositary, as the
undersigned's agent, of the purchase price, (b) present such Shares (and
Distributions) for transfer on the books of the Company and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and Distributions), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints designees of the Purchaser, and
each of them, the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to vote in such manner as each such attorney and
proxy or his or her substitute shall, in his or her sole discretion, deem
proper, and otherwise act (including pursuant to written consent) with respect
to all of the Shares tendered hereby which have been accepted for payment by the
Purchaser prior to the time of such vote or action (and Distributions) which the
undersigned is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned meeting), or by
written consent in lieu of such meeting, or otherwise. This power of attorney
and proxy is coupled with an interest in the Company and in the Shares and is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Purchaser in accordance with the
terms of the Offer. Such acceptance for payment shall revoke, without further
action, any other power of attorney or proxy granted by the undersigned at any
time with respect to such Shares (and Distributions) and no subsequent powers of
attorney or proxies will be given (and if given will be deemed not to be
effective) with respect thereto by the undersigned. The undersigned understands
that the Purchaser reserves the right to require that, in order for Shares to be
deemed validly tendered, immediately upon the Purchaser's acceptance for payment
of such Shares, the Purchaser is able to exercise full voting rights with
respect to such Shares and Distributions, including voting at any meeting of
stockholders.
<PAGE> 4
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and Distributions), that the undersigned own(s) the Shares
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that such
tender of Shares complies with Rule 14e-4 under the Exchange Act and that when
the same are accepted for payment by the Purchaser, the Purchaser will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents reasonably deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and Distributions). In addition, the undersigned shall
promptly remit and transfer to the Depositary for the account of the Purchaser
any and all other Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer and, pending such
remittance or appropriate assurance thereof, the Purchaser shall be entitled to
all rights and privileges as owner of such Distributions and may withhold the
entire purchase price or deduct from the purchase price of Shares tendered
hereby the amount or value thereof, as determined by the Purchaser in its sole
discretion.
All authority herein conferred or herein agreed to be conferred shall not
be affected by, and shall survive, the death or incapacity of the undersigned
and any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Tenders of Shares pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment
pursuant to the Offer, may also be withdrawn at any time after May 24, 1999. See
Section 4 of the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates not tendered or accepted for payment (and accompanying
documents as appropriate) to the undersigned at the address shown below the
undersigned's signature. In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please issue
the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or return certificates to, the person or persons so indicated. Stockholders
tendering Shares by book-entry transfer may request that any Shares not accepted
for payment be returned by crediting such account maintained at DTC as such
stockholder may designate by making an appropriate entry under "Special Payment
Instructions." The undersigned recognizes that the Purchaser has no obligation
pursuant to the "Special Payment Instructions" to transfer any Shares from the
name of the registered holder thereof if the Purchaser does not accept for
payment any of such Shares.
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be issued in the name of someone other than the undersigned, or if
Shares tendered by book-entry transfer which are not purchased are to be
returned by credit to an account maintained at DTC other than that
designated on the front cover.
Issue check and/or certificates to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
[ ] Credit unpurchased Shares tendered by book-entry transfer to account
at DTC set forth below:
------------------------------------------------------------
(ACCOUNT NUMBER)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be sent to someone other than the undersigned, or to the undersigned at
an address other than that shown on the front cover.
Mail check and/or certificate to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
---------------------------------------------------------------
<PAGE> 6
IMPORTANT -- SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated:
- ------------------------
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the necessary information.
See Instruction 5.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Tax Identification or Social Security No.:
- ---------------------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
- --------------------------------------------------------------------------------
Name (Please print):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Dated:
- ------------------------, 1999
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in DTC whose name appears on a security position listing as the
owner of Shares) of the Shares tendered herewith, unless such holder(s) has
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the inside front cover hereof or
(ii) if such Shares are tendered for the account of a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program (an
"Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message is utilized, if tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth in
Section 3 of the Offer to Purchase. Share Certificates, or timely confirmation
of a book-entry transfer (a "Book-Entry Confirmation") of such Shares into the
Depositary's account at DTC, as well as this Letter of Transmittal (or a
facsimile hereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in the case of a book-entry
delivery, and any other documents required by this Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth herein prior to
the Expiration Date. Stockholders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date or who cannot complete
the procedures for delivery by book-entry transfer on a timely basis may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth in Section 3
of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be
made by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Purchaser, must be received by the Depositary on or prior to the
Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer together with a
properly completed and duly executed Letter of Transmittal (or a facsimile
hereof), with any required signature guarantees (or, in the case of a book-entry
delivery, an Agent's Message) and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three NYSE trading days
after the date of execution of such Notice of Guaranteed Delivery. A "NYSE
trading day" is any day on which New York Stock Exchange, Inc. is open for
business. If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or facsimile hereof)
must accompany each such delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal or facsimile hereof, waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate schedule attached hereto and
separately signed on each page thereof in the same manner as this Letter of
Transmittal is signed.
1
<PAGE> 8
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares which are to be
tendered in the box entitled "Number of Shares Tendered." In such case, new
certificate(s) for the remainder of the Shares that were evidenced by your old
certificate(s) will be sent to you, unless otherwise provided in the appropriate
box marked "Special Payment Instructions" and/or "Special Delivery Instructions"
on this Letter of Transmittal, as soon as practicable after the Expiration Date.
All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or any
other change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or purchased are to be issued in the name
of a person other than the registered owner(s). Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner(s) appear(s) on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or purchased are to be registered in the
name of, any person other than the registered holder(s), or if tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder(s) or such person) payable on account
of the transfer to such person will be deducted from the purchase price received
by such person(s) pursuant to this Offer (i.e., such purchase price will be
reduced) unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
2
<PAGE> 9
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for unpurchased Shares are to be returned
to, a person other than the person(s) signing this Letter of Transmittal or if a
check is to be sent and/or such certificates are to be returned to someone other
than the person(s) signing this Letter of Transmittal or to an address other
than that shown on the front cover hereof, the appropriate boxes on this Letter
of Transmittal should be completed. Book-Entry Stockholders may request that
Shares not purchased be credited to such account maintained at DTC as such
Book-Entry Stockholder may designate hereon. If no such instructions are given,
such Shares not purchased will be returned by crediting the account at DTC
designated above. See Instruction 1.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent at its addresses set forth below.
Requests for additional copies of the Offer to Purchase and this Letter of
Transmittal may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service may subject the
stockholder or other payee to a $50 penalty, and payments that are made to such
stockholder or other payee with respect to Shares purchased pursuant to the
Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, it must submit a Form W-8, signed under penalties of perjury,
attesting to that individual's exempt status. A Form W-8 can be obtained from
the Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing a Substitute Form W-9 certifying (i) that the TIN provided on
Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN), and
(ii) that (a) such stockholder is exempt from backup withholding, (b) such
stockholder has not been notified by the Internal Revenue Service that such
stockholder is subject to backup withholding as a result of a failure to report
all interest or dividends or (c) the Internal Revenue Service has notified such
stockholder that such stockholder is no longer subject to backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN but has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN of the record
holder of the Shares or of the last transferee appearing on the transfers
attached to, or endorsed on, the Shares. If the Shares are in more than one name
or are not in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
3
<PAGE> 10
10. LOST, DESTROYED, MUTILATED, OR STOLEN CERTIFICATES. If any
certificate(s) representing Shares has been lost, destroyed, mutilated, or
stolen, the stockholder should promptly notify The American Stock Transfer &
Trust Company at (800) 937-5449. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost, mutilated, or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF) OR AN
AGENT'S MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR
TO THE EXPIRATION DATE.
4
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<S> <C> <C>
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- -----------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- Please provide your name, address PART 3 -- Social Security Number
FORM W-9 and TIN and certify by signing and dating or Employer ID Number
DEPARTMENT OF THE TREASURY below ----------------------------------
INTERNAL REVENUE SERVICE Awaiting TIN [ ]
Name:
--------------------------------------------
Address:
--------------------------------------------
--------------------------------------------
------------------------------------------------------------------------------------
PART 2 -- CERTIFICATIONS -- Under penalties of perjury, I certify that:
PAYOR'S REQUEST FOR (1) The number shown on this form is my correct Taxpayer Identification Number (or
TAXPAYER IDENTIFICATION I am waiting for a number to be issued to me and have checked the box in Part 3)
NUMBER ("TIN") and
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, (b) I have not been notified by the
Internal Revenue Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
- -----------------------------------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item(2) of Part II above if you have been notified by the IRS that
you are currently subject to backup withholding because of underreporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding, do not cross out such item(2).
- -----------------------------------------------------------------------------------------------------------------------
Signature Date ----------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS. YOU MUST COMPLETE
THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE
FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Center or Social Security Administration Office, or (2) I
intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld.
Signature:
- --------------------------------------------------- Date:------------ , 1999
<PAGE> 12
FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY
EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER OF
THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER
NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW:
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT COURIER:
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
Post Office Box 3301 120 Broadway, 13th Floor 85 Challenger Road-Mail Drop-Reorg
South Hackensack, NJ 07606 New York, NY 10271 Ridgefield Park, NJ 07660
Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
</TABLE>
BY FACSIMILE TRANSMISSION
(for eligible institutions only)
(201) 296-4293
To Confirm Facsimile Transmission Only
(201) 296-4860
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone number listed below. Additional copies of the
Offer to Purchase, the Letter of Transmittal and other tender offer materials
may be obtained from the Information Agent as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
INNSFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
Banks and Brokers Call Collect: (212) 750-5833
All Others Call Toll-Free: (888) 750-5834
<PAGE> 1
EXHIBIT (a)(3)
Vivendi to Acquire USFilter Through a $6.2 Billion Tender Offer
Two Water Industry Leaders Join Forces to Create the World's
Largest Water Treatment Firm
NEW YORK, March 22 - Vivendi, the world's largest environmental services
provider and one of Europe's fastest-growing companies, today announced an
agreement to acquire United States Filter Corporation (NYSE: USF - news) in a
two-step cash transaction worth approximately US$6.2 billion (Euro 5.7 billion).
The tender offer, approved by the boards of directors of both companies at
$31.50 (Euro 29.0) per share of USFilter common stock, is the largest French
acquisition ever made in the United States. The transaction is subject to
regulatory approvals under the Hart-Scott-Rodino Act in the United States and by
the European Union Commission.
In the first step of the transaction, a Vivendi subsidiary will commence
an all cash tender offer for all outstanding shares of USFilter common stock
within five business days. In the second step, subject to the terms and
conditions of the agreement, a Vivendi subsidiary will merge into USFilter,
making USFilter a wholly owned subsidiary of Vivendi. In the merger, USFilter
stockholders will receive $31.50 (Euro 29.0) per share in cash.
USFilter has granted to Vivendi a 19.9 percent Treasury stock option. In
addition, members of USFilter's senior management and a major USFilter
stockholder, Apollo, L.P. agreed to tender their USFilter shares into the offer.
<PAGE> 2
Once approved, the transaction would nearly double the revenues of
Vivendi's water treatment business through its Generale des Eaux subsidiary.
Combined, Palm Desert, California-based USFilter and Paris-based Generale des
Eaux would have annual sales of approximately $12 billion (Euro 11.0 billion).
The transaction will create an undisputed water technology leader, with
worldwide manufacturing, distribution and service capabilities for the
commercial, industrial, municipal, residential and agricultural market segments.
"What we recognized is that we share a vision of a full-service, global
water enterprise," said Jean-Marie Messier, chairman of Vivendi. "The world's
population is continuing to grow. Industry is demanding ever-higher standards of
processed water for manufacturing and the demand for quality wastewater
treatment to protect the environment has never been greater."
After the transaction, USFilter Chairman and Chief Executive Officer
Richard J. Heckmann will broaden his responsibilities, serving on the Generale
des Eaux Board of Directors and joining Messier and Generale des Eaux Chairman
Daniel Caille on the Vivendi Water Group Executive Committee.
-2-
<PAGE> 3
"This transaction makes perfect sense for USFilter," Heckmann said. "Our
customers, shareholders and employees all benefit from this agreement."
Generale des Eaux was founded in Paris in 1853 to supply water to cities
throughout France. Since then, the company has expanded beyond its borders to
become a world leader in water treatment and distribution services. Generale des
Eaux is a major player in the growing municipal privatization movement, in which
cities contract out to private firms to design, build, own and operate their
water and wastewater treatment services. Privatization is widespread in the
United Kingdom and France and the concept is spreading to other parts of the
world, including the United States, Canada, Latin America, China and the Pacific
Rim.
Generale des Eaux has over 4,000 municipal contracts in France through
which it provides drinking water treatment services to more than 25 million
people and wastewater treatment services for some 16 million residents. Outside
France, Generale des Eaux provides water and wastewater treatment services for
65 million people on every continent.
USFilter was founded in 1990 with the goal of becoming the world's largest
water treatment equipment manufacturer. Sales have increased from $16 million
(Euro 15 million) to about $5 billion (Euro 4.6 billion) this year as a result
of both organic growth and strategic acquisitions companies such as Memtec,
Culligan and Kinetics.
USFilter's Memtec subsidiary is the world leader in advanced
microfiltration technology, which can be used to treat drinking water and
recycle wastewater without the use of chemicals. Microfiltration technology is
-3-
<PAGE> 4
becoming increasingly sought after worldwide as means of removing giardia and
cryptosporidium and other water-borne parasites and pathogens.
USFilter's Culligan subsidiary bottles water and provides industrial water
treatment services in numerous locations throughout Europe, Asia and Latin
America.
USFilter has also made numerous acquisitions in the industrial water
treatment sector which, when combined with its Kinetics subsidiary, give it the
ability to not only provide high purity water treatment services, but the high
purity piping infrastructure needed by companies in the biotechnology,
pharmaceutical and microelectronics industries.
"Vivendi and USFilter have both been targeting the growing worldwide water
market, but from different starting points and with an emphasis on different
types of clients," said Messier of
-4-
<PAGE> 5
Vivendi. "Our businesses are very complementary and this agreement gives us
access to the North American water treatment business and a very strong
management team to run it."
"This transaction makes strategic sense for us," said USFilter Chairman
and Chief Executive Officer Richard J. Heckmann. "Generale des Eaux offers
USFilter an enormous worldwide market for everything we manufacture. Together we
will have a capability for tapping the municipal privatization market in the
United States and elsewhere that we haven't had before."
Heckmann and Messier added that joining forces at this time is a strategic
move by both companies to provide unprecedented single source service for their
customers, who include commercial, industrial, municipal and residential
customers worldwide. Fittingly, today's announcement in New York coincides with
the United Nations observance of "World Day for Water."
USFilter has 28,000 employees in some 2,000 manufacturing, distribution
and sales offices in 94 countries. Generale des Eaux has 40,000 employees in 90
countries.
Vivendi, Generale des Eaux's parent company, is a major player in Europe's
communications and utilities industries. Vivendi has 235,000 employees, annual
sales of about $35 billion (Euro 32 billion) and market capitalization of over
$41 billion (Euro 38.0 billion). In 1998, Generale des Eaux had net sales of
$7.3 billion (Euro 6.7 billion), of which $1.6 billion (Euro 1.5 billion)
stemmed from sales outside France. Vivendi also recently acquired most of Waste
Management's Houston, Texas-based industrial services business, which has net
sales of $360 million (Euro 331.0).
-5-
<PAGE> 6
Vivendi and USFilter invite you to visit their respective websites, at
www.vivendi.com and www.usfilter.com. Please contact Sandra Sokoloff or Melissa
Kinch at the numbers listed below to schedule interviews with Jean-Marie Messier
or Richard Heckmann today or Tuesday, March 23.
Forward-looking statements in this release, including, without limitation,
statements relating to USFilter's plans, strategies, objectives, expectations,
intentions and adequacy of resources, are made pursuant to the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
factors include, among others, the following: general economic and business
conditions; competition; success of operating initiatives; advertising and
promotional efforts; existence of adverse publicity or litigation; changes in
business strategy or plans; quality of management; availability, terms and
development of capital; business abilities and judgment of personnel; changes
in, or the failure to comply with governmental regulations; and other factors
described in filings of the company with the U.S. Securities and Exchange
Commission. USFilter undertakes no obligation to publicly update or revise any
forward looking statements, whether as a result of new information, future
events or otherwise.
CONTACT: Alain Delrieu, 011-331-171711711, Fax: 011-331-171713711, or
Sandra Sokoloff, 212-367-6892, both of Vivendi; or Jeff Crider, 760-341-8173,
Fax: 760-341-9368, or Melissa Kinch, 310-444-1306, both of United States Filter
Corporation.
-6-
<PAGE> 1
Exhibit (a)(4)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated March
26, 1999, and the related Letter of Transmittal, and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Eau Acquisition Corp. by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
UNITED STATES FILTER CORPORATION
BY
EAU ACQUISITION CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY
OF
VIVENDI
AT
$31.50 NET PER SHARE
Eau Acquisition Corp. (the "Purchaser"), a Delaware corporation and an
indirect wholly-owned subsidiary of Vivendi, a societe anonyme organized under
the laws of France ("Parent"), is offering to purchase all outstanding shares of
Common Stock, par value $.01 per share (the "Shares"), of United States Filter
Corporation, a Delaware corporation (the "Company"), and the associated
preferred share purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of November 27, 1998, between the Company and The Bank of
New York; as Rights Agent (as the same may be amended, the "Rights Agreement"),
at a purchase price of $31.50 per Share (and associated Right), net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated March 26,1999 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer"). Unless the context otherwise requires, all references
to Shares herein and in the Offer to Purchase shall include the associated
Rights.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON APRIL 22, 1999, UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of March 22, 1999 (the "Merger Agreement"), by and among the Company,
the Purchaser and Parent pursuant to which, following the consummation of the
Offer and the satisfaction of certain conditions, the Purchaser will be merged
with and into the Company (the "Merger"), with the Company continuing as the
surviving corporation. On the effective date of the Merger, each outstanding
Share (other than any Shares held by Parent, the Purchaser, any wholly-owned
subsidiary of Parent or the Purchaser, in the treasury of the Company or by any
wholly-owned subsidiary of the Company, and other than Shares, if any, held by
stockholders who perfect their appraisal rights under Delaware law, if
available) will be converted into the right to receive an amount equal to $31.50
in cash (without interest).
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND
THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE OFFER AND ADOPTED THE MERGER AGREEMENT AND
DECLARED ITS ADVISABILITY, AND RECOMMENDS ACCEPTANCE OF THE OFFER BY THE
COMPANY'S STOCKHOLDERS.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, AT LEAST A MAJORITY
OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE
OF PURCHASE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE
EXPIRATION OF THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1, 14 AND 15 OF THE OFFER TO
PURCHASE.
<PAGE> 2
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered and not
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary (as defined in the Offer to Purchase) of the Purchaser's acceptance
of such Shares for payment pursuant to the Offer. In all cases, upon the terms
and subject to the conditions of the Offer, payment for Shares purchased
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from the Purchaser and transmitting payment to
validly tendering stockholders. Under no circumstances will interest on the
purchase price for Shares be paid by the Purchaser. In all cases, payment for
Shares purchased pursuant to the Offer will be made only after timely receipt by
the Depositary of (i) certificates representing Shares (the "Share
Certificates") for such Shares or timely confirmation of the book-entry transfer
of such Shares into the Depositary's account at The Depository Trust Company
("DTC") pursuant to the procedures set forth in Section 3 of the Offer to
Purchase, (ii) the Letter of Transmittal delivered with the Offer to Purchase
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry transfer of Shares and (iii) any other
documents required by the Letter of Transmittal.
The Purchaser expressly reserves the right, in its sole discretion
(subject to the terms and conditions of the Merger Agreement), at any time and
from time to time, to extend the period during which the Offer is open for any
reason, including the failure of any of the conditions specified in Section 14
of the Offer to Purchase to be satisfied, by giving oral or written notice of
such extension to the Depositary. Any such extension will be followed as
promptly as practicable by public announcement thereof, and such announcement
will be made no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date (as defined below).
Tenders of Shares made pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment as
provided in the Offer to Purchase, may also be withdrawn at any time after May
24, 1999. The term "Expiration Date" means 12:00 midnight, New York City time,
on Thursday, April 22, 1999, unless and until the Purchaser, subject to the
terms of the Merger Agreement, shall have further extended the period of time
for which the Offer is open, in which event the term "Expiration Date" shall
mean the time and date at which the Offer, as so extended by the Purchaser,
shall expire. In order for a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn, and (if Share
Certificates have been tendered) the name of the registered holder of the Shares
as set forth in the Share Certificate, if different from that of the person who
tendered such Shares. If Share Certificates have been delivered or otherwise
identified to the Depositary, then prior to the physical release of such
certificates, the tendering stockholder must submit the serial numbers shown on
the particular certificates evidencing the Shares to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by a firm that is a
bank, broker, dealer, credit union, savings association or other entity which is
a member in good standing of the Securities Transfer Agents Medallion Program
(an "Eligible Institution"), except in the case of Shares tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to the
procedures for book-entry transfer set forth in Section 3 of the Offer to
Purchase, the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Shares, in which case a notice
of withdrawal will be effective if delivered to the Depositary by any method of
delivery described in this paragraph. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by the
Purchaser, in its sole discretion, whose determination shall be final and
binding. Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be tendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3 of the
Offer to Purchase.
The information required to be disclosed pursuant to Rule
14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, is contained in the Offer to Purchase, and is
incorporated herein by reference.
The Company is providing the Purchaser with the Company's stockholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal and, if required, other relevant materials will be mailed to record
holders of Shares and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the
Information Agent at the address and telephone number listed below. Additional
copies of the Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other related materials may be obtained at the
Purchaser's expense from the Information Agent or from brokers, dealers,
commercial banks and trust companies. Neither Parent nor the Purchaser will pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer (other than the Information Agent and
the Dealer Manager).
The Information Agent for the Offer is:
[INNISFREE LOGO]
M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
BANKS AND BROKERS CALL COLLECT: (212) 750-5833
ALL OTHERS CALL TOLL FREE: (888) 750-5834
The Dealer Manager for the Offer is:
[LAZARD FRERES & CO. LLC LOGO]
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717 (call collect)
March 26, 1999
<PAGE> 1
(U.S. Filter Logo)
40-004 COOK STREET
PALM DESERT, CALIFORNIA 92211
March 26, 1999
Dear Stockholder:
I am pleased to inform you that on March 22, 1999, United States Filter
Corporation (the "Company") entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Vivendi, a societe anonyme organized under the laws of
France ("Vivendi") and Eau Acquisition Corp., a Delaware corporation and an
indirect subsidiary of Vivendi which was formed in connection with the Merger
Agreement (the "Purchaser"). Pursuant to the Merger Agreement, the Purchaser
today commenced a tender offer (the "Offer") to purchase all outstanding shares
of the Company's common stock (the "Common Stock"), including the associated
preferred share purchase rights issued pursuant to a rights agreement dated
November 27, 1998 (the "Rights" and, together with the Common Stock, the
"Shares"), for $31.50 per Share in cash, without interest, subject to the terms
and conditions in the Offer to Purchase and the related Letter of Transmittal
that are included in the Purchaser's offering materials. Under the Merger
Agreement, the Offer will be followed by a merger (the "Merger") of the
Purchaser with and into the Company, and all Shares not purchased in the Offer
(other than Shares held by the Purchaser and its affiliates, by dissenting
stockholders or by the Company) will be converted into the right to receive
$31.50 per Share in cash in the Merger.
YOUR BOARD OF DIRECTORS HAS APPROVED THE OFFER, THE MERGER AND THE MERGER
AGREEMENT AND HAS DETERMINED THAT THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS. ACCORDINGLY, THE BOARD RECOMMENDS THAT STOCKHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES IN THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors, including, among other things, the
opinions of Salomon Smith Barney Inc. and J.P. Morgan Securities Inc., the
Company's financial advisors, that, as of the date of such opinions, the
consideration to be paid to the Company's stockholders in the Offer and the
Merger is fair, from a financial point of view, to such stockholders.
Attached is a copy of the Schedule 14D-9 filed by the Company with the
Securities and Exchange Commission. The Schedule 14D-9 describes the reasons for
your Board of Directors' recommendation and contains other important information
relating to the Offer. Also enclosed is the Offer to Purchase, dated March 26,
1999, of the Purchaser, together with related materials, including a Letter of
Transmittal to be used for tendering your Shares. These documents set forth the
terms and conditions of the Offer and the Merger and provide instructions on how
to tender your Shares. We urge you to read Schedule 14D-9 and the enclosed
materials carefully.
Sincerely,
/s/ Richard J. Heckmann
Richard J. Heckmann
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT (b)(1)
March 22, 1999
Board of Directors
United States Filter Corporation
40-004 Cook Street
Palm Desert, California 92211
Ladies and Gentlemen:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders of shares of common stock, par
value $0.01 per share (the "Company Common Stock"), of United States Filter
Corporation (the "Company") of the consideration to be received by such holders
in connection with the proposed acquisition of the Company by Vivendi SA (the
"Acquiror"), pursuant to the Agreement and Plan of Merger (the "Agreement"),
dated as of March 22, 1999, by and among the Company, the Acquiror and Eau
Acquisition Corp., a wholly owned subsidiary of the Acquiror ("Acquisition
Sub").
As more specifically set forth in the Agreement, Acquisition Sub will
commence a tender offer (the "Proposed Tender Offer") to purchase all
outstanding shares of Company Common Stock, including the associated preferred
share purchase rights, at an offer price of $31.50 per share in cash. The
Proposed Tender Offer will be subject to certain conditions, including, a
majority of the outstanding shares be validly tendered in the Proposed Tender
Offer and not withdrawn. Following consummation of the Proposed Tender Offer,
Acquisition Sub will be merged with and into the Company (the "Proposed Merger,"
and together with the Proposed Tender Offer, the "Proposed Acquisition").
Pursuant to the Proposed Merger, each then-outstanding share of Company Common
Stock (other than (i) shares held by the Company, the Acquiror, Acquisition Sub,
or any wholly owned subsidiary of the Company and (ii) Dissenting Shares (as
defined in the Agreement)) will be converted into the right to receive the
consideration paid per share of Company Common Stock in the Proposed Tender
Offer.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) a draft dated March 22, 1999 of the
Agreement; (ii) certain publicly available information concerning the Company,
including the Annual Reports on Form 10-K of the Company for each of the years
in the three-year period ended March 31, 1998 and the Quarterly Reports on 10-Q
for the Company for the quarters ended June 30, 1998, September 30, 1998, and
December 31, 1998 (as restated or amended); (iii) certain internal information,
primarily financial in nature, including projections, concerning the business
and operations of the Company, furnished to us by the Company for purposes of
our analysis; (iv) certain publicly available information concerning the trading
of, and the trading market for, the Company Common Stock; (v) certain publicly
available information with respect to certain other companies that we believe to
be comparable to the Company and the trading markets for certain of such other
companies' securities; and (vi) certain publicly available information
concerning the nature and terms of certain other transactions that we consider
relevant to our inquiry. We also have considered such other information,
financial studies, analyses, investigations and financial, economic and market
criteria that we deemed relevant. We also have met with certain officers and
employees of the Company to discuss the foregoing as well as other matters we
believe relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have neither attempted
independently to verify, nor assumed any responsibility for verifying, any of
such information. We have not conducted a physical inspection of any of the
properties or facilities of the Company, nor have we made or obtained or assumed
any responsibility for making or obtaining any independent evaluations or
appraisals of any of such properties or facilities. With respect to financial
projections, we have assumed that they were reasonably prepared and reflect the
best currently available estimates and judgment of the management of the Company
as to the future financial performance of the Company, and we express no view
with respect to such projections or the assumptions on which they are
<PAGE> 2
United States Filter Corporation
March 22, 1999
Page 2
based. We also have assumed the definitive Agreement, when executed, will not
contain any terms or conditions that differ materially from the draft we have
reviewed and that the Proposed Acquisition will be consummated in a timely
manner and in accordance with the terms of the Agreement, without waiver of any
of the conditions precedent to the Proposed Acquisition contained in the
Agreement.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial position and results of operations of the
Company; (ii) the business prospects of the Company; (iii) the historical and
current market for the Company Common Stock and for the equity securities of
certain other companies that we believe to be comparable to the Company; and
(iv) the nature and terms of certain other acquisition transactions that we
believe to be relevant. We have also taken into account our assessment of
general economic, market and financial conditions as well as our experience in
connection with similar transactions and securities valuation generally. We have
not been asked to consider, and our opinion does not address, the relative
merits of the Proposed Acquisition as compared to any alternative business
strategy that might exist for the Company. Our opinion necessarily is based upon
conditions as they exist and can be evaluated on the date hereof and we assume
no responsibility to update or revise our opinion based upon circumstances or
events occurring after the date hereof. Our opinion is, in any event, limited to
the fairness, from a financial point of view, of the consideration to be paid in
the Proposed Acquisition to the holders of Company Common Stock and is not a
recommendation that holders of the Company Common Stock tender shares in the
Proposed Tender Offer.
As you are aware, Salomon Smith Barney Inc. ("Salomon Smith Barney") is
acting as financial advisor to the Company in connection with the Proposed
Acquisition and will receive certain fees for our services, a substantial
portion of which fees is contingent on consummation of the Proposed Acquisition.
In addition, in the ordinary course of business, Salomon Smith Barney and its
affiliates may actively trade the debt and equity securities of the Company and
the Acquiror for their own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
We or our predecessors or affiliates previously have rendered certain investment
banking and financial advisory services to the Company and the Acquiror, for
which we or such predecessors or affiliates received customary compensation.
Salomon Smith Barney and its affiliates (including Citigroup Inc. and its
affiliates) may have other business and financial relationships with the Company
and the Acquiror.
This opinion is intended solely for the benefit and use of the Company
(including the management and directors of the Company) in considering the
transaction to which it relates and may not be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose, other than as expressly provided for in the engagement letter,
dated March 1, 1999, among the Company, J.P. Morgan Securities and Salomon Smith
Barney.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the consideration to be received by the
holders of the Company Common Stock in the Proposed Acquisition is fair, from a
financial point of view, to such holders.
Very truly yours,
SALOMON SMITH BARNEY INC.
<PAGE> 1
EXHIBIT (b)(2)
March 22, 1999
The Board of Directors
United States Filter Corporation
40-004 Cook Street
Palm Desert, CA 92211
Attention: Mr. Richard J. Heckmann
Chairman of the Board and
Chief Executive Officer
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the stockholders of United States Filter Corporation (the "Company")
of the consideration proposed to be paid to them in connection with the proposed
acquisition of the Company by Eau Acquisition Corp. (the "Sub"), a subsidiary of
Vivendi S.A. (the "Buyer"). Pursuant to the Agreement and Plan of Merger, dated
as of March 22, 1999 (the "Agreement"), by and among the Company, the Buyer and
the Sub, the Sub will make a tender offer (the "Offer ") to purchase all of the
outstanding shares of common stock, par value $0.01 per share, of the Company
(the "Common Stock"), including the associated preferred share purchase rights
(the "Rights" and, together with the Common Stock, the "Shares"), at a price per
Share of $31.50 net to the seller in cash. Pursuant to the Agreement, following
consummation of the Offer, the Sub will be merged with and into the Company (the
"Merger" and, together with the Offer, the "Transaction"), the Company shall
continue as the surviving corporation, and each Share issued and outstanding
immediately prior to the effective time of the Merger (other than such Shares to
be cancelled pursuant to the Agreement and Dissenting Shares (as defined in the
Agreement)) will be converted into the right to receive $31.50 in cash, without
interest thereon.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii)
certain publicly available information concerning the Company and of certain
other companies engaged in businesses comparable to those of the Company, and
the reported market prices for certain other companies' securities deemed
comparable; (iii) publicly available terms of certain transactions involving
companies comparable to the Company and the consideration received for such
companies; (iv) current and historical market prices of the Common Stock of the
Company; (v) the audited financial statements of the Company for the fiscal year
ended March 31, 1998, and the unaudited financial statements of the Company for
the period ended December 31, 1998; (vi) certain agreements with respect to
outstanding indebtedness or obligations of the Company; (vii) certain internal
financial analyses and forecasts prepared by the Company and its management; and
(viii) the terms of other business combinations that we deemed relevant.
In addition, we have held discussions with certain members of the
management of the Company with respect to certain aspects of the Transaction,
the past and current business operations of the Company, the financial condition
and future prospects and operations of the Company, and certain other matters we
believed necessary or appropriate to our inquiry. We have reviewed such other
financial studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company or otherwise reviewed by us, and
we have not assumed any responsibility or liability therefor. We have not
conducted any valuation or appraisal of any assets or liabilities, nor have any
such valuations or appraisals been provided to us. In relying on financial
analyses and forecasts provided to us, we have assumed that they have been
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management as to the expected future results of
operations and financial condition of the Company to which such analyses or
forecasts relate. We have also assumed that the Transaction will have the tax
consequences described in discussions with, and materials furnished to us by,
representatives of the
<PAGE> 2
Company, and that the other transactions contemplated by the Agreement will be
consummated as described in the Agreement. We have relied as to all legal
matters relevant to rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion.
We have acted as financial advisor to the Company with respect to the
proposed Transaction and will receive a fee from the Company for our services.
We will also receive an additional fee if the proposed Merger is consummated.
Please be advised that we have no other financial advisory or other
relationships with the Company. As you are aware, we and our affiliates have
provided capital markets and financial advisory services to the Buyer from time
to time, have executed a variety of risk management transactions with the Buyer,
and may continue its business relationships with the Buyer in the future. In the
ordinary course of their businesses, we and our affiliates may actively trade
the debt and equity securities of the Company or the Buyer for their own account
or for the accounts of customers and, accordingly, they may at any time hold
long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be paid to the Company's stockholders in
the proposed Transaction is fair, from a financial point of view, to such
stockholders.
This letter is provided solely for the benefit of the Board of Directors of
the Company in connection with and for the purposes of its evaluation of the
Transaction. This opinion does not constitute a recommendation to any
stockholder of the Company as to whether such stockholder should tender Shares
in the Offer or how such stockholder should vote with respect to the Merger.
This opinion may be reproduced in full in the Solicitation/ Recommendation
Statement on Schedule 14D-9 to be filed by the Company with the Securities and
Exchange Commission ("SEC") and may be referred to in the Tender Offer Statement
on Schedule 14D-1 to be filed by the Buyer and the Sub with the SEC in
connection with the initial Offer.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ JOHN SHELDON
------------------------------------
Name: John Sheldon
Title: Managing Director
2
<PAGE> 1
EXHIBIT (c)(1)
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
VIVENDI
EAU ACQUISITION CORP.
and
UNITED STATES FILTER CORPORATION
dated as of
March 22, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
THE OFFER
SECTION 1.1 The Offer............................................. 2
SECTION 1.2 Company Actions....................................... 4
SECTION 1.3 Directors............................................. 5
ARTICLE II
THE MERGER
SECTION 2.1 The Merger............................................ 6
SECTION 2.2 Effective Time........................................ 6
SECTION 2.3 Effects of the Merger................................. 6
SECTION 2.4 Certificate of Incorporation and By-Laws
of the Surviving Corporation.......................... 6
SECTION 2.5 Directors............................................. 6
SECTION 2.6 Officers.............................................. 6
SECTION 2.7 Conversion of Common Shares........................... 7
SECTION 2.8 Conversion of Purchaser Common Stock.................. 7
SECTION 2.9 Options; Stock Plans.................................. 7
SECTION 2.10 Stockholders' Meeting................................. 8
SECTION 2.11 Merger Without Meeting of Stockholders................ 8
SECTION 2.12 Closing............................................... 8
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.1 Dissenting Shares..................................... 9
SECTION 3.2 Payment for Common Shares............................. 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1 Organization and Qualification; Subsidiaries.......... 10
SECTION 4.2 Charter; By-Laws and Rights Agreement................. 11
SECTION 4.3 Capitalization; Subsidiaries.......................... 11
SECTION 4.4 Authority............................................. 12
SECTION 4.5 No Conflict; Required Filings and Consents............ 12
SECTION 4.6 SEC Reports and Financial Statements.................. 14
SECTION 4.7 Environmental Matters................................. 15
SECTION 4.8 Compliance with Applicable Laws....................... 15
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SECTION 4.9 Litigation............................................ 15
SECTION 4.10 Information........................................... 16
SECTION 4.11 Certain Approvals..................................... 16
SECTION 4.12 Employee Benefit Plans................................ 16
SECTION 4.13 Intellectual Property................................. 19
SECTION 4.14 Taxes................................................. 19
SECTION 4.15 Absence of Certain Changes............................ 20
SECTION 4.16 Labor Matters......................................... 20
SECTION 4.17 Rights Agreement...................................... 21
SECTION 4.18 Brokers............................................... 21
SECTION 4.19 Opinion of Financial Advisor.......................... 21
SECTION 4.20 Material Contracts.................................... 21
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
SECTION 5.1 Organization and Qualification........................ 22
SECTION 5.2 Authority............................................. 22
SECTION 5.3 No Conflict; Required Filings and Consents............ 23
SECTION 5.4 Information........................................... 23
SECTION 5.5 Financing............................................. 24
SECTION 5.6 Stock Ownership....................................... 24
SECTION 5.7 Purchaser's Operations................................ 24
ARTICLE VI
COVENANTS
SECTION 6.1 Conduct of Business of the Company.................... 24
SECTION 6.2 Access to Information................................. 27
SECTION 6.3 Efforts............................................... 28
SECTION 6.4 Public Announcements.................................. 29
SECTION 6.5 Employee Benefit Arrangements......................... 29
SECTION 6.6 Indemnification....................................... 30
SECTION 6.7 Notification of Certain Matters....................... 31
SECTION 6.8 Rights Agreement...................................... 31
SECTION 6.9 State Takeover Laws................................... 32
SECTION 6.10 No Solicitation....................................... 32
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions............................................ 33
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ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1 Termination........................................... 34
SECTION 8.2 Effect of Termination................................. 35
SECTION 8.3 Fees and Expenses..................................... 35
SECTION 8.4 Amendment............................................. 36
SECTION 8.5 Extension; Waiver..................................... 36
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Non-Survival of Representations and Warranties........ 36
SECTION 9.2 Entire Agreement; Assignment.......................... 36
SECTION 9.3 Validity.............................................. 37
SECTION 9.4 Notices............................................... 37
SECTION 9.5 Governing Law......................................... 38
SECTION 9.6 Descriptive Headings.................................. 38
SECTION 9.7 Counterparts.......................................... 38
SECTION 9.8 Parties in Interest................................... 38
SECTION 9.9 Certain Definitions................................... 38
SECTION 9.10 Specific Performance.................................. 39
SECTION 9.11 Jurisdiction.......................................... 39
Signatures............................................................. 41
ANNEX I Conditions to the Offer
ANNEX II-A List of Parties to Support Agreements
ANNEX II-B Forms of Support Agreements
ANNEX III Forms of Employment Agreements
ANNEX IV Form of Company Stock Option Agreement
Attachment 1 Form of FIRPTA Certificate
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March
22, 1999, by and among VIVENDI, a societe anonyme organized under the laws of
France ("Parent"), EAU ACQUISITION CORP., a Delaware corporation and a
subsidiary of Parent (the "Purchaser"), and UNITED STATES FILTER CORPORATION, a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, the Purchaser
and the Company have approved the acquisition of the Company on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, pursuant to this Agreement the Purchaser has agreed to
commence a tender offer (the "Offer") to purchase all of the outstanding shares
of the Company's common stock, par value $.01 per share (the "Common Shares"),
including the associated preferred share purchase rights (the "Rights") issued
pursuant to the Rights Agreement, dated as of November 27, 1998, between the
Company and The Bank of New York, as Rights Agent (the "Rights Agreement") (the
Common Shares, together with the Rights, are hereinafter referred to as the
"Shares"), at a price per Share of $31.50 net to the seller in cash (the "Offer
Price");
WHEREAS, the Board of Directors of the Company (the "Company Board")
has (i) approved the Offer and (ii) approved and adopted this Agreement,
declared its advisability and is recommending that the Company's stockholders
accept the Offer, tender their Shares to the Purchaser and approve and adopt
this Agreement;
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company have approved and adopted the merger of the Purchaser with and into the
Company, as set forth below (the "Merger"), in accordance with the General
Corporation Law of Delaware (the "GCL") and upon the terms and subject to the
conditions set forth in this Agreement, whereby each of the issued and
outstanding Shares not owned directly or indirectly by Parent, the Purchaser or
the Company will be converted into the right to receive the Offer Price in cash;
WHEREAS, as a condition and inducement to Parent's and the
Purchaser's willingness to enter into this Agreement, upon the execution and
delivery of this Agreement, the individuals and entities set forth in Annex II-A
are simultaneously entering into and delivering support agreements (the "Support
Agreements") in the forms attached hereto as Annex II-B;
WHEREAS, as a condition and inducement to Parent's and the
Purchaser's willingness to enter into this Agreement, the individuals set forth
on Annex II-A are simultaneously entering into and delivering the Employment
Agreements in the form of Annex III attached hereto;
WHEREAS, as a condition and inducement to Parent's and the
Purchaser's willingness to enter into this Agreement, the Purchaser and the
Company are simultaneously entering into and delivering the Company Stock Option
Agreement in the form of Annex IV attached hereto;
<PAGE> 6
WHEREAS, the Boards of Directors of Parent, the Purchaser and the
Company have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the acquisition of the Company by Parent
and the Purchaser upon the terms and subject to the conditions set forth herein;
and
WHEREAS, Parent, the Purchaser and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
the Purchaser and the Company agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII hereof and none of the events set forth in Annex I
hereto (the "Tender Offer Conditions") shall have occurred, as promptly as
practicable but in no event later than the fifth business day from the date of
this Agreement, Parent shall cause the Purchaser to, and the Purchaser shall
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (including the rules and regulations promulgated thereunder,
the "Exchange Act")) the Offer to purchase all outstanding Shares at the Offer
Price and shall file all necessary documents with the Securities and Exchange
Commission (the "SEC") in connection with the Offer (together with any
amendments or supplements to the "Offer Documents"). The Offer shall remain open
until at least the twentieth business day after the commencement of the Offer.
Purchaser shall disseminate to holders of Common Shares the Offer Documents to
the extent required by law. The obligation of the Purchaser to accept for
payment or pay for any Shares tendered pursuant thereto will be subject only to
the satisfaction of the conditions set forth in Annex I hereto.
(b) Without the prior written consent of the Company, the Purchaser
shall not decrease the Offer Price or change the form of consideration payable
in the Offer, decrease the number of Shares sought to be purchased in the Offer,
impose additional conditions to the Offer or amend any other term of the Offer
in any manner adverse to the holders of Shares or reduce the time period during
which the Offer shall remain open. Subject to the terms of the Offer and this
Agreement and the satisfaction or waiver of all the Tender Offer Conditions as
of any expiration date, the Purchaser will accept for payment and pay for all
Shares validly tendered and not withdrawn pursuant to the Offer as soon as
practicable after such expiration date of the Offer. Notwithstanding the
foregoing, the Purchaser shall be entitled to extend the Offer, if at the
initial expiration of the Offer, or any extension thereof, any condition to the
Offer is not satisfied or waived, and Parent agrees to cause the Purchaser to
extend the Offer up to 40 days in the aggre-
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<PAGE> 7
gate, in one or more periods of not more than 10 business days, if, at the
initial expiration date of the Offer, or any extension thereof, any condition to
the Offer set forth in paragraphs (a), (b) or (g) of Annex I is not satisfied or
waived; provided, however, that the Purchaser shall not be required to extend
the Offer as provided in this sentence unless, in Parent's reasonable judgment,
(i) each such condition is reasonably capable of being satisfied and (ii) the
Company is in material compliance with all of its covenants under this
Agreement. In addition, without limiting the foregoing, the Purchaser may,
without the consent of the Company, if, on the expiration date of the Offer, the
Shares validly tendered and not withdrawn pursuant to the Offer are sufficient
to satisfy the Minimum Condition (as defined in Annex I hereto) but equal to
less than 90% of the outstanding Shares, extend the Offer for up to 15 business
days in the aggregate notwithstanding that all the conditions to the Offer have
been satisfied so long as Purchaser irrevocably waives the satisfaction of any
of the conditions to the Offer (other than those set forth in paragraphs (a),
(b) or (d) of Annex I) that subsequently may not be satisfied during any such
extension of the Offer. In addition, the Offer Price may be increased and the
Offer may be extended to the extent required by law in connection with such
increase in each case without the consent of the Company.
(c) Parent and the Purchaser represent that the Offer Documents will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading, except
that no representation is made by Parent or the Purchaser with respect to
information supplied by the Company for inclusion in the Offer Documents. The
Company and its counsel shall be given an opportunity to review and comment on
the Offer Documents and any material amendments thereto prior to the filing
thereof with the SEC. Each of Parent and the Purchaser, on the one hand, and the
Company, on the other hand, agrees promptly to correct any information provided
by it for use in the Offer Documents if and to the extent that it shall have
become false or misleading in any material respect and the Purchaser further
agrees to take all steps necessary to cause the Offer Documents as so corrected
to be filed with the SEC and to be disseminated to stockholders of the Company,
in each case, as and to the extent required by applicable federal securities
laws. Parent and Purchaser will provide the Company and its counsel with a copy
of any written comments or telephonic notification of any oral comments Parent
or Purchaser may received from the SEC or its staff with respect to the Offer
Documents promptly after receipt thereof and will provide the Company and its
counsel with a copy of any written responses and telephonic notification of any
oral responses of Parent, Purchaser or their counsel.
SECTION 1.2 Company Actions.
(a) The Company shall file with the SEC and mail to the holders of
Common Shares, on the date of the filing by Parent and the Purchaser of the
Offer Documents, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements thereto, the "Schedule 14D-9")
reflecting the recommendation of the Company Board that holders of Shares tender
their Shares pursuant to the Offer, and shall disseminate the Schedule
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<PAGE> 8
14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. The Schedule
14D-9 will set forth, and the Company hereby represents, that the Company Board,
at a meeting duly called and held, has (i) determined by unanimous vote of its
directors present at the meeting at which this Agreement was approved that the
transactions contemplated hereby, including each of the Offer and the Merger,
are fair to and in the best interests of the Company and its stockholders, (ii)
approved the Offer and adopted this Agreement and declared its advisability in
accordance with the GCL, (iii) recommended acceptance of the Offer and approval
of this Agreement by the Company's stockholders (if such approval is required by
applicable law), and (iv) taken all other action necessary to render Section 203
of the GCL and the Rights inapplicable to the Offer, the Merger, the Company
Stock Option Agreement and the Support Agreements. The Company further
represents that, prior to the execution hereof, each of Salomon Smith Barney
Inc. ("SSB") and J.P. Morgan & Co. Incorporated ("J.P. Morgan") has delivered to
the Company Board its written opinion that the consideration to be received for
the Shares pursuant to the Offer and the Merger is fair to the Company's
stockholders from a financial point of view. The Company further represents and
warrants that it has been authorized by each of SSB and J.P. Morgan to permit,
subject to prior review and consent by each of SSB and J.P. Morgan, respectively
(such consent not to be unreasonably withheld), the inclusion of the respective
fairness opinion (or a reference thereto) in the Offer Documents and in the
Schedule 14D-9. The Company hereby consents to the inclusion in the Offer
Documents of the recommendations of the Company Board described in this Section
1.2(a).
(b) The Company represents that the Schedule 14D-9 will comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser for inclusion in the Schedule 14D-9. Parent and its
counsel shall be given an opportunity to review and comment on the Schedule
14D-9 and any material amendments thereto prior to the filing thereof with the
SEC. Each of the Company, on the one hand, and Parent and the Purchaser, on the
other hand, agree promptly to correct any information provided by either of them
for use in the Schedule 14D-9 if and to the extent that it shall have become
false or misleading, and the Company further agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to the holders of Shares, in each case, as and to the extent
required by applicable federal securities law. The Company will provide Parent,
Purchaser and their counsel with a copy of any written comments or telephonic
notification of any oral comments the Company may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt thereof and
will provide Parent, Purchaser and their counsel with a copy of any written
responses and telephonic notification of any oral responses of the Company or
its counsel.
(c) In connection with the Offer, the Company will promptly furnish
the Purchaser with mailing labels, security position listings, any non-objecting
beneficial owner lists and any available listing or computer list containing the
names and addresses of the record hold-
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<PAGE> 9
ers of the Shares as of the most recent practicable date and shall furnish the
Purchaser with such additional information (including, but not limited to,
updated lists of holders of Shares and their addresses, mailing labels and lists
of security positions and non-objecting beneficial owner lists) and such other
assistance as the Purchaser or its agents may reasonably request in
communicating the Offer to the Company's record and beneficial stockholders.
SECTION 1.3 Directors.
(a) Subject to compliance with applicable law, promptly upon the
payment by the Purchaser for the Shares pursuant to the Offer and from time to
time thereafter, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number provided, however, that the Purchaser shall
not be entitled to designate any members to the Company Board without owning a
majority of the Shares, on the Company Board as is equal to the product of the
total number of directors on the Company Board (determined after giving effect
to the directors elected pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by Parent or its
affiliates bears to the total number of Shares then outstanding, and the Company
shall, upon request of Parent, promptly take all actions necessary to cause
Parent's designees to be so elected, including, if necessary, seeking the
resignations of one or more existing directors; provided, however, that prior to
the Effective Time (as defined herein), the Company Board shall always have at
least two members who are neither officers, directors or designees of the
Purchaser or any of its affiliates ("Purchaser Insiders") (including at least
two members who are "independent directors" for purposes of the rules of the New
York Stock Exchange). If the number of directors who are not Purchaser Insiders
is reduced below two prior to the Effective Time, the remaining director who is
not a Purchaser Insider shall be entitled to designate a person to fill such
vacancy who is not a Purchaser Insider and who shall be a director not deemed to
be a Purchaser Insider for all purposes of this Agreement.
(b) The Company's obligations to appoint Parent's designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 thereunder. The Company shall promptly take all actions required pursuant
to such Section and Rule in order to fulfill its obligations under this Section
1.3 and shall include in the Schedule 14D-9 such information with respect to the
Company and its officers and directors as is required under such Section and
Rule in order to fulfill its obligations under this Section 1.3. Parent will
supply any information with respect to itself and its officers, directors and
affiliates required by such Section and Rule to the Company.
(c) Following the election or appointment of Parent's designees
pursuant to this Section 1.3 and prior to the Effective Time (as defined
herein), if any of the directors of the Company then in office are not Purchaser
Insiders, any amendment or termination of this Agreement by the Company, any
extension of time for performance of any of the obligations of Parent or the
Purchaser hereunder, any waiver of any condition or any of the Company's rights
hereunder or other action by the Company hereunder adversely affecting the
rights of the minority stockholders of the Company, will require the concurrence
of a majority of such directors.
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<PAGE> 10
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the GCL, at the Effective Time the
Purchaser shall be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation").
SECTION 2.2 Effective Time. As soon as practicable after the
satisfaction of the conditions set forth in Sections 7.1(a) and 7.1(b), but
subject to Sections 7.1(c) and 7.1(d), the Company shall execute, in the manner
required by the GCL, and deliver to the Secretary of State of the State of
Delaware a duly executed certificate of merger, and the parties shall take such
other and further actions as may be required by law to make the Merger
effective. The time the Merger becomes effective in accordance with applicable
law is referred to as the "Effective Time."
SECTION 2.3 Effects of the Merger. The Merger shall have the effects
set forth in the GCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and the Purchaser shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
the Purchaser shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.4 Certificate of Incorporation and By-Laws of the
Surviving Corporation.
(a) The Certificate of Incorporation of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and hereof and applicable law.
(b) Subject to the provisions of Section 6.6 of this Agreement, the
By-Laws of the Purchaser in effect at the Effective Time shall be the By-Laws of
the Surviving Corporation until amended in accordance with the provisions
thereof and applicable law.
SECTION 2.5 Directors. Subject to applicable law, the directors of
the Purchaser immediately prior to the Effective Time, as well as Mr. Richard J.
Heckmann shall be the initial directors of the Surviving Corporation and shall
hold office until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal.
SECTION 2.6 Officers. The officers of the Company immediately prior
to the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
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<PAGE> 11
SECTION 2.7 Conversion of Common Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
each Common Share issued and outstanding immediately prior to the Effective Time
(other than (i) any Common Shares held by Parent, the Purchaser, any wholly
owned subsidiary of Parent or the Purchaser, in the treasury of the Company or
by any wholly owned subsidiary of the Company, which Common Shares, by virtue of
the Merger and without any action on the part of the holder thereof, shall be
cancelled and retired and shall cease to exist with no payment being made with
respect thereto and (ii) Dissenting Shares (as defined herein)), shall be
cancelled and retired and shall be converted into the right to receive $31.50 in
cash (the "Merger Price"), payable to the holder thereof, without interest
thereon, upon surrender of the certificate formerly representing such Common
Share.
SECTION 2.8 Conversion of Purchaser Common Stock. The Purchaser has
outstanding 100 shares of common stock, par value $.01 per share, all of which
are entitled to vote with respect to approval of this Agreement. At the
Effective Time, each share of common stock, par value $.01 per share, of the
Purchaser issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become one validly issued, fully paid and
non-assessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
SECTION 2.9 Options; Stock Plans. Prior to the consummation of the
Offer, the Company Board (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions necessary or desirable
(including obtaining all applicable consents from optionees) to provide for the
cancellation, effective at the Effective Time, of all of the outstanding stock
options (the "Options") heretofore granted under any stock option or similar
plan of the Company (the "Stock Plans") or under any agreement, without any
payment therefor except as otherwise provided in this Section 2.9. Immediately
prior to the Effective Time, all Options (whether vested or unvested) which are
listed in Section 2.9 of the disclosure schedule delivered to Parent by the
Company prior to the date hereof (the "Company Disclosure Schedule"), which list
includes all outstanding Options, shall be canceled, to the extent such Options
remain outstanding as of immediately prior to the Effective Time (and to the
extent exercisable shall no longer be exercisable) and shall entitle each holder
thereof, in cancellation and settlement therefor, to a payment, if any, in cash
by the Company (less any applicable withholding taxes), as soon as practicable
following the Effective Time, equal to the product of (i) the total number of
Common Shares subject to such Option (without regard to whether such Option was
vested or unvested) and (ii) the excess, if any, of the Merger Price over the
exercise price per Share subject to such Option (the "Cash Payments"); provided
that no such payment shall be due until following such time that the Company has
delivered to Parent a true and complete list of the Options which remained
outstanding as of immediately prior to the Effective Time. The Company
represents and warrants that the Company Board has taken all necessary action to
terminate the 1991 Employee Stock Option Plan, the 1991 Director Stock Option
Plan, as amended, and the 1998 Stock Incentive Plan, and all other Stock Plans
and any other plan, program or arrangement providing for the issuance or grant
of any other interest in respect of the capital stock of the Company or any
subsidiary in each case effective prior to the Effective Time; provided,
however, that with respect to any employment agreements that provide for
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<PAGE> 12
grants of Options, the Company will take such necessary action prior to the
Effective Time. The Company and the Parent agree that the Cash Payments are the
sole payments that will be made with respect to or in relation to the Options.
The Company may take all such steps as may be required to cause the transactions
contemplated by this Section 2.9 and any other dispositions of Company equity
securities (including derivative securities) in connection with this Agreement
by each individual who is a director or officer of the Company to be exempt
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, such steps to be taken in accordance with the No-Action Letter dated
January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
SECTION 2.10 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through the Company Board, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as soon as practicable
following the acceptance for payment of and payment for Shares by the
Purchaser pursuant to the Offer for the purpose of considering and taking
action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy
statement relating to this Agreement, and use its reasonable efforts (A)
to obtain and furnish the information required to be included by the SEC
in the Proxy Statement (as hereinafter defined) and, after consultation
with Parent, to respond promptly to any comments made by the SEC with
respect to the preliminary proxy statement and cause a definitive proxy
statement (the "Proxy Statement") to be mailed to its stockholders and (B)
to obtain the necessary approvals of the Merger and adoption of this
Agreement by its stockholders; and
(iii) include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the
approval of the Merger and adoption of this Agreement.
(b) Parent agrees that it will vote, or cause to be voted, all of
the Shares then owned by it, the Purchaser or any of its other subsidiaries in
favor of the approval of the Merger and of this Agreement. Parent agrees that it
will not transfer, sell or assign any of the shares of the Purchaser prior to
the Effective Date.
SECTION 2.11 Merger Without Meeting of Stockholders. Notwithstanding
Section 2.10, in the event that the Purchaser shall acquire at least 90% of the
outstanding Shares pursuant to the Offer, the parties hereto agree to take all
necessary and appropriate action to cause the Merger to become effective as soon
as reasonably practicable after the acceptance for payment of and payment for
Shares by the Purchaser pursuant to the Offer without a meeting of stockholders
of the Company, in accordance with Section 253 of the GCL.
SECTION 2.12 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m., on a date to be specified by the parties, which
shall be as soon as practica-
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<PAGE> 13
ble, but in no event later than the third business day, after satisfaction or
waiver of all of the conditions set forth in Article VII hereof (the "Closing
Date"), at the offices of Wachtell, Lipton, Rosen & Katz, unless another date or
place is agreed to in writing by the parties hereto.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.1 Dissenting Shares. Notwithstanding Section 2.7, Common
Shares outstanding immediately prior to the Effective Time and held by a holder
who has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Common Shares in accordance with the GCL
("Dissenting Shares") shall not be converted into a right to receive the Merger
Price, unless such holder fails to perfect or withdraws or otherwise loses such
holder's right to appraisal. If after the Effective Time such holder fails to
perfect or withdraws or loses such holder's right to appraisal, such Common
Shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Price. The Company shall give Parent prompt
notice of any demands received by the Company for appraisal of Common Shares,
and Parent shall have the right to conduct all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, or otherwise negotiate, any such demands.
SECTION 3.2 Payment for Common Shares.
(a) From and after the Effective Time, such bank or trust company as
shall be mutually acceptable to Parent and the Company shall act as paying agent
(the "Paying Agent") in effecting the payment of the Merger Price in respect of
certificates (the "Certificates") that, prior to the Effective Time, represented
Shares entitled to payment of the Merger Price pursuant to Section 2.7. At the
Effective Time, Parent or the Purchaser shall deposit, or cause to be deposited,
in trust with the Paying Agent the aggregate Merger Price to which holders of
Shares shall be entitled at the Effective Time pursuant to Section 2.7.
(b) Promptly after the Effective Time, the Paying Agent shall mail
to each record holder of Certificates a form of letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent and instructions for use in surrendering such Certificates and
receiving the Merger Price in respect thereof. Upon the surrender of each such
Certificate, the Paying Agent shall pay the holder of such Certificate the
Merger Price multiplied by the number of Shares formerly represented by such
Certificate, in consideration therefor, and such Certificate shall forthwith be
cancelled. Until so surrendered, each such Certificate (other than Certificates
representing Shares held by Parent or the Purchaser, any wholly owned subsidiary
of Parent or the Purchaser, in the treasury of the Company or by any wholly
owned subsidiary of the Company or Dissenting Shares) shall represent solely the
right to receive the aggregate Merger Price relating thereto. No interest or
dividends shall be paid or accrued on the Merger Price. If the Merger Price (or
any portion thereof) is to be delivered to any person other than the person
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in whose name the Certificate surrendered is registered, it shall be a condition
to such right to receive such Merger Price that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person surrendering such Shares shall pay to the Paying Agent any transfer
or other taxes required by reason of the payment of the Merger Price to a person
other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Paying Agent that such taxes have been paid
or are not applicable.
(c) Promptly following the date which is 180 days after the
Effective Time, the Paying Agent shall deliver to the Surviving Corporation all
cash, Certificates and other documents in its possession relating to the
transactions described in this Agreement, and the Paying Agent's duties shall
terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in consideration therefor the
aggregate Merger Price relating thereto, without any interest or dividends
thereon. Notwithstanding the foregoing, none of Parent, the Purchaser, the
Company or the Paying Agent shall be liable to any person in respect of any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have been surrendered
immediately prior to such date on which any payment pursuant to this Article III
would otherwise escheat to or become the property of any Governmental Entity (as
hereinafter defined), the cash payment in respect of such Certificate shall, to
the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any person previously
entitled thereto.
(d) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of any Common Shares which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Paying Agent, they shall be surrendered and cancelled in return for the payment
of the aggregate Merger Price relating thereto, as provided in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser,
except as set forth by specific reference to the applicable Section of this
Article IV in the Company Disclosure Schedule (as hereinafter defined), as
follows:
SECTION 4.1 Organization and Qualification; Subsidiaries. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Company's significant
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. The Company
and each of its significant subsidiaries has the requisite corporate power and
authority to own, operate or lease its properties and to carry on its business
as it is now being conducted, and is duly qualified or licensed to do business,
and is in good standing, in each jurisdiction in which the nature of its
business or the properties owned, operated or leased by it makes such
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<PAGE> 15
qualification, licensing or good standing necessary, except where the failure to
have such power or authority, or the failure to be so qualified, licensed or in
good standing, would not have a Material Adverse Effect on the Company. The term
"Material Adverse Effect on the Company," as used in this Agreement, means any
change in or effect on the business, financial condition, results of operation
or prospects of the Company or any of its subsidiaries that could reasonably be
expected to have a material adverse effect on the Company and its subsidiaries
taken as a whole or could reasonably be expected to prevent or delay
consummation of the Offer or the Merger.
SECTION 4.2 Charter; By-Laws and Rights Agreement. The Company has
heretofore made available to Parent and the Purchaser a complete and correct
copy of the certificate of incorporation and the by-laws or comparable
organizational documents, each as amended to the date hereof, of the Company and
each of its domestic subsidiaries and has made available a complete and correct
copy of the Rights Agreement as amended through the date hereof.
SECTION 4.3 Capitalization; Subsidiaries. The authorized capital
stock of the Company consists of 300,000,000 Common Shares and 3,000,000 shares
of Preferred Stock, par value $.10 per share (the "Preferred Stock") of which
300,000 shares are designated Series A Junior Participating Preferred Stock, par
value $.10 per share (the "Junior Preferred Stock"). As of the close of business
on March 20, 1999, 182,027,902 Common Shares were issued and outstanding, all of
which are entitled to vote on this Agreement, and 119,129 Common Shares were
held in treasury. As of the close of business on March 20, 1999 there were no
shares of Preferred Stock issued and outstanding. The Company has no shares
reserved for issuance, except that, as of March 20, 1999, there were 14,626,972
Common Shares reserved for issuance pursuant to outstanding Options granted
under the Stock Plans there were 1,231,050 Common Shares reserved for issuance
pursuant to outstanding warrants and 300,000 shares of Junior Preferred Stock
reserved for issuance upon exercise of the Rights. Section 4.3 of the Company
Disclosure Schedule sets forth the holders of all outstanding Options and the
number, exercise prices and expiration dates of each grant to such holders.
Except as set forth in Section 4.3 of the Company Disclosure Schedule, since
December 31, 1998, the Company has not granted any Options or issued any shares
of capital stock except pursuant to the exercise of Options outstanding as of
such date. All the outstanding Common Shares are, and all Common Shares which
may be issued pursuant to the exercise of outstanding Options will be, when
issued and paid for in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and nonassessable and are not subject to,
nor were they issued in violation of, any preemptive rights. Except as set forth
in Section 4.3 of the Company Disclosure Schedule, there are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its subsidiaries issued and outstanding. Except as set forth above or
in Section 4.3 of the Company Disclosure Schedule or for the Rights and except
for the transactions contemplated by this Agreement, there are no existing
options, warrants, calls, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the issued or unissued
capital stock of the Company or any of its subsidiaries, obligating the Company
or any of its subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or any of its subsidiaries or securities
convertible into or exchangeable
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<PAGE> 16
for such shares or equity interests and neither the Company nor any of its
subsidiaries is obligated to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or
commitment. Except as contemplated by this Agreement or the Rights Agreement,
there are no outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Common Shares or the
capital stock of the Company or any of its subsidiaries. Each of the outstanding
shares of capital stock of each of the Company's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable (except, in the case of
foreign subsidiaries, for immaterial failures to be such), and such shares of
the Company's subsidiaries are owned by the Company or by a subsidiary of the
Company in each case free and clear of any lien, claim, option, charge, security
interest, limitation, encumbrance and restriction of any kind (any of the
foregoing being a "Lien"). Set forth in Section 4.3 of the Company Disclosure
Schedule is a complete and correct list of each domestic subsidiary (direct or
indirect) of the Company, each material foreign subsidiary (direct or indirect)
of the Company and any joint ventures or partnerships in which the Company or
any of its subsidiaries has an interest (and the amount and percentage of any
such interest). No entity in which the Company or any of its subsidiaries owns,
directly or indirectly, less than a 50% equity interest is, individually or when
taken together with all such other entities, material to the business of the
Company and its subsidiaries taken as a whole.
SECTION 4.4 Authority. The Company has all necessary corporate power
and authority to execute and deliver this Agreement and the Company Stock Option
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Company Stock Option
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly and validly authorized and
approved by the Company Board and no other corporate proceedings on the part of
the Company are necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby and thereby (other than, with
respect to the Merger, the approval of this Agreement by the affirmative vote of
the holders of a majority of the then outstanding Shares entitled to vote
thereon, to the extent required by applicable law). Each of this Agreement and
the Company Stock Option Agreement has been duly and validly executed and
delivered by the Company and, assuming the due and valid authorization,
execution and delivery of this Agreement and the Company Stock Option Agreement
by Parent and the Purchaser (to the extent Parent or Purchaser is a party
thereto), constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
SECTION 4.5 No Conflict; Required Filings and Consents.
(a) Assuming (i) the filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and the rules and regulations
thereunder (the "HSR Act") are made and the waiting periods thereunder have been
terminated or have expired, (ii) the requirements of the Exchange Act and any
applicable state securities, "blue sky" or takeover law are met, (iii) the
filing of the certificate of merger and other appropriate merger documents, if
any, as required by the GCL, is made, (iv) approval of this Agreement by the
holders of a majority of the Common Shares, if required by the GCL, is received,
and (v) the filings required under the competition and foreign investment and
other applicable laws, each as set forth on
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<PAGE> 17
Section 4.5(b) of the Company Disclosure Schedule, and the approvals and
consents thereunder have been obtained (or waiting periods thereunder have been
terminated or have expired), none of the execution and delivery of this
Agreement by the Company, the consummation by the Company of the transactions
contemplated hereby or compliance by the Company with any of the provisions
hereof will (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or the comparable organizational documents of any of its
material subsidiaries, (ii) except as disclosed on Section 4.5(a) of the Company
Disclosure Schedule, result in a breach or violation of, a default under or the
triggering of any payment or the increase in any other obligations pursuant to,
any of the Company's existing Employee Benefit Arrangements (as hereinafter
defined) or any grant or award made under any of the foregoing, (iii) conflict
with or violate any statute, ordinance, rule, regulation, order, judgment,
decree, permit or license applicable to the Company or any of its subsidiaries,
or by which any of them or any of their respective properties or assets may be
bound or affected, or (iv) except as set forth in Section 4.5 of the Company
Disclosure Schedule, require the consent from or the giving of notice to a third
party pursuant to, result in a violation or breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any benefit, the triggering of any
payment by, or the increase in any other obligation of, the Company or any of
its subsidiaries or the creation of any material Lien on any of the property or
assets of the Company or any of its subsidiaries (any of the foregoing referred
to in clause (ii), (iii) or this clause (iv) being a "Violation") pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise Plan (as defined in Section 4.13), or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties may be bound or affected, except in the case of (ii), (iii) and (iv)
for any of the foregoing that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or a
material adverse effect on the ability of the parties to consummate the Offer or
the Merger.
(b) None of the execution and delivery of this Agreement or the
Company Stock Option Agreement by the Company, the consummation by the Company
of the transactions contemplated hereby or thereby or compliance by the Company
with any of the provisions hereof or thereof will require any consent, waiver,
approval, authorization or permit of, or registration or filing with or
notification to (any of the foregoing with respect to any Governmental Entity
(as hereinafter defined) or any other third party being a "Consent"), any
government or subdivision thereof, domestic or foreign (including supranational)
or any administrative, governmental, legislative or regulatory authority,
agency, commission, tribunal, court or body, domestic or foreign (including
supranational) (a "Governmental Entity"), except for (i) compliance with any
applicable requirements of the Exchange Act, (ii) the filing of a certificate of
merger pursuant to the GCL, (iii) compliance with the HSR Act, (iv) such
filings, authorizations, orders and approvals, if any, as set forth on Section
4.5(b) of the Company Disclosure Schedule, as are required under foreign laws or
(v) where the failure to obtain such consent, approval, authorization or permit,
or to make such filing or notification, would not, individually or in the
aggregate, reasonably be expected to (i) have a Material Adverse Effect on the
Company, (ii) impair in any material respect the ability of the Company to
perform its obligations hereunder or (iii) prevent or materially delay
consummation of the transactions contemplated hereby.
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SECTION 4.6 SEC Reports and Financial Statements.
(a) The Company and its subsidiaries have filed with the SEC all
forms, reports, schedules, registration statements and definitive proxy
statements required to be filed by them with the SEC since March 31, 1996 (as
amended since the time of their filing and prior to the date hereof,
collectively, the "SEC Reports"). As of their respective dates, the SEC Reports
(including, but not limited to, any financial statements or schedules included
or incorporated by reference therein) complied in all material respects with the
requirements of the Exchange Act or the Securities Act of 1933, as amended,
including the rules and regulations of the SEC promulgated thereunder (the
"Securities Act") applicable, as the case may be, to such SEC Reports, and none
of the SEC Reports contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(b) The (i) consolidated balance sheets as of March 31, 1998 (the
"3/31/98 Balance Sheet") and March 31, 1997 and the consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended March 31, 1998 (including the related notes and schedules
thereto) of the Company contained in the Company's Form 10-K for the fiscal year
ended March 31, 1998 as amended or restated prior to the date hereof and (ii)
the unaudited consolidated balance sheet as of December 31, 1998 and the
unaudited consolidated statements of operations, stockholders' equity and cash
flows for the three- and nine-month periods ended December 31, 1998 of the
Company contained in the Company's Form 10-Q for the three-month period ended
December 31, 1998 present fairly in all material respects the consolidated
financial position and the consolidated results of operations and cash flows of
the Company and its subsidiaries as of the dates or for the periods presented
therein and were prepared in accordance with United States generally accepted
accounting principles ("GAAP") consistently applied during the periods involved
(except as set forth in the notes contained therein and subject, in the case of
unaudited statements, to recurring audit adjustments normal in nature and
amount).
(c) Except as reflected in the SEC Reports or reserved against in
the 12/31/98 Balance Sheet or as set forth in Section 4.6(c) of the Company
Disclosure Schedule, as of the date hereof, neither the Company nor any of its
subsidiaries have any material liabilities or obligations (absolute, accrued,
fixed, contingent or otherwise), other than liabilities incurred in the ordinary
course of business consistent with past practice since the date of the 12/31/98
Balance Sheet.
(d) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications which have not yet been filed
with the SEC (but which it would or will be required to file with the SEC) to
agreements, documents or other instruments which previously had been filed by
the Company with the SEC pursuant to the Securities Act or the Exchange Act.
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<PAGE> 19
SECTION 4.7 Environmental Matters. Except as set forth in the
Company Disclosure Schedule or except as disclosed in the SEC Reports or
otherwise would not have a Material Adverse Effect:
(a) the Company and its subsidiaries are and have been in compliance
in all respects with federal, state, local and foreign laws and regulations
relating to pollution, protection or preservation of human health or the
environment ("Environmental Laws") relating to the generation, storage,
containment, disposal, transport or handling of regulated levels of hazardous or
toxic materials, substances or wastes ("Hazardous Materials"), including
compliance with any environmental permits or similar governmental authorizations
or the terms and conditions thereof;
(b) there is no pending claim, investigation, order, or judicial or
administrative proceeding against the Company or any of its subsidiaries for any
violation of Environmental Laws or for investigation, remediation or clean up of
Hazardous Materials, or payment therefor, by any third party included in any
governmental authority, pursuant to any Environmental Law at any location owned
or operated by the Company or its subsidiaries, or at any location to which the
Company or any of its subsidiaries have sent Hazardous Materials; and
(c) there currently exist no facts or circumstances that could
reasonably be expected to (i) give rise to proceedings described in subsection
(b) above and (ii) prevent the renewal or reissuance, on terms reasonably
comparable to those in existence, or any permits or authorizations required for
the Company's operations under any Environmental Law as such laws currently
exist.
SECTION 4.8 Compliance with Applicable Laws. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities (the "Company Permits") required in order
to own their assets and to conduct their respective businesses as currently
conducted, except where the failure to hold such Company Permits, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. The Company and its subsidiaries are in
compliance with the terms of the Company Permits except where the failure to
comply would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company. The operations of the Company and
its subsidiaries have been conducted in compliance with all applicable laws,
ordinances and regulations of any Governmental Entity, except violations which
will not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 4.9 Litigation. Except as reflected in the SEC Reports or as
set forth in Section 4.9 of the Company Disclosure Schedule, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of the
Company, threatened, against the Company or any of its subsidiaries, which, if
adversely determined, could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. Except as set forth
in Section 4.9 of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries is subject to any outstanding order, writ, injunction or
decree which, individually
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<PAGE> 20
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect on the Company or could reasonably be expected to prevent or materially
delay the consummation of the transactions contemplated hereby.
SECTION 4.10 Information. None of the information supplied by the
Company for inclusion or incorporation by reference in (i) the Offer Documents,
(ii) the Proxy Statement or (iii) any other document to be filed with the SEC or
any other Governmental Entity in connection with the transactions contemplated
by this Agreement (the "Other Filings") will, at the respective times filed with
the SEC or other Governmental Entity and, in addition, in the case of the Proxy
Statement, at the date it or any amendment or supplement is mailed to
stockholders, at the time of the Special Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
statements made therein based on information supplied by Parent or the Purchaser
in writing specifically for inclusion in the Proxy Statement. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act.
SECTION 4.11 Certain Approvals. The Company Board has taken any and
all necessary and appropriate action to render inapplicable to the Offer, the
Merger and the transactions contemplated by this Agreement, the Company Stock
Option Agreement and the Support Agreements the provisions of Section 203 of the
GCL. No other state takeover statute or similar domestic or foreign statute or
regulation applies or purports to apply to the Offer, the Merger or the
transactions contemplated by this Agreement, the Company Stock Option Agreement,
or the Support Agreements.
SECTION 4.12 Employee Benefit Plans.
(a) Section 4.12(a) of the Company Disclosure Schedule includes a
complete list of all material employee benefit plans, programs, agreements and
other arrangements providing benefits to any former, current or future employee,
officer or director of the Company or any of its subsidiaries or any beneficiary
or dependent thereof, whether or not written, and whether covering one person or
more than one person, sponsored or maintained by the Company or any of its
subsidiaries or to which the Company or any of its subsidiaries contributes or
is obligated to contribute for the benefit of U.S. employees of the Company and
its subsidiaries ("Listed Plans"). Without limiting the generality of the
foregoing, the term "Listed Plans" includes all employee welfare benefit plans
within the meaning of Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended, and the regulations promulgated thereunder ("ERISA")
and all employee pension benefit plans within the meaning of Section 3(2) of
ERISA and all other material employee benefit, employment, bonus, incentive,
profit sharing, thrift, compensation, restricted stock, retirement, savings,
deferred compensation, stock purchase, stock option, termination, severance,
change in control, fringe benefit and other similar plans, programs, agreements
or arrangements. For purposes of this Agreement, the term "Plans" shall mean all
Listed Plans and all plans, programs, agreements and other arrangements which
would have been Listed Plans, if there were no materiality qualifier for the
definition of Listed
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<PAGE> 21
Plans or if plans, programs, agreements and other arrangements for non-U.S.
employees of the Company and its subsidiaries (other than employment agreements
for non-U.S. employees that are not material) were on the Company Disclosure
Schedule.
(b) With respect to each Listed Plan, the Company has made available
to Parent a true, correct and complete copy of: (i) each writing constituting a
part of such Listed Plan, including, without limitation, all plan documents,
benefit schedules, trust agreements, and insurance contracts and other funding
vehicles; (ii) the most recent Annual Report (Form 5500 Series) and accompanying
schedule, if any; (iii) the current summary plan description (and any material
modification to such description), if any; (iv) the most recent annual financial
report, if any; (v) the most recent actuarial report, if any; and (vi) the most
recent determination letter from the Internal Revenue Service (the "IRS"), if
any. As soon as practicable following the date of this Agreement, the Company
will provide to Parent the foregoing information, if applicable, with respect to
the Plans that are not Listed Plans and a list of such Plans. Except as both
previously made available to Parent and set forth on the Company Disclosure
Plan, there are no material amendments to any Plan (or the establishment of any
new Plan) that have been adopted or approved nor has the Company or any of its
subsidiaries undertaken or committed to make any such amendments or to adopt or
approve any new Plans.
(c) Section 4.12(c) of the Company Disclosure Schedule identifies
each Listed Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations thereunder (the "Code") ("Qualified Plans"). The IRS has
issued a favorable determination letter (or, with respect to standardized
prototype plans, an opinion letter) with respect to each Qualified Plan that has
not been revoked, and, to the Company's knowledge, there are no existing
circumstances nor any events that have occurred that could reasonably be
expected to adversely affect the qualified status of any Qualified Plan or the
related trust. No Plan is intended to meet the requirements of Section 501(c)(9)
of the Code. Except as disclosed on actuarial reports previously provided to
Parent, with respect to each Plan that is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code, the fair market value of the assets of
such Plan equals or exceeds the actuarial present value of all accrued benefits
under such Plan (whether or not vested), based upon the actuarial assumptions
used to prepare the most recent actuarial report for such Plan and, to the
knowledge of the Company, no event has occurred which would be reasonably
expected to change any such funded status.
(d) Each Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including but not
limited to ERISA and the Code. With respect to each Plan, no event has occurred
and there exists no condition or set of circumstances in connection with which
the Company could be subject to any liability that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(e) With respect to each such multiemployer plan within the meaning
of Section 4001(a)(3) of ERISA (a "Multiemployer Plan") in which the Company,
any subsidiary or any ERISA Affiliate participates or has participated, (i) none
of the Company, any of its subsidiaries or any ERISA Affiliate has withdrawn,
partially withdrawn, or received any notice of any
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<PAGE> 22
claim or demand for withdrawal liability or partial withdrawal liability; (ii)
none of the Company nor any of its subsidiaries or any ERISA Affiliate has
received any notice that any such plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, or that any such plan is or may become insolvent;
(iii) none of the Company, any of its subsidiaries or any ERISA Affiliate has
failed to make any required contributions; (iv) to the Company's knowledge, no
such plan is a party to any pending merger or asset or liability transfer; (v)
to the Company's knowledge, there are no PBGC proceedings against or affecting
any such plan; and (vi) none of the Company, any of its subsidiaries or any
ERISA Affiliate has any withdrawal liability by reason of a sale of assets
pursuant to Section 4204 of ERISA. With respect to each Multiemployer Plan, as
of its last valuation date, the amount of potential withdrawal liability of the
Company, any of its subsidiaries and any ERISA Affiliates would not reasonably
be expected to have a Material Adverse Effect. To the best knowledge of the
Company, nothing has occurred or is expected to occur that would materially
increase the amount of the total potential withdrawal liability for any such
plan over the amount shown in the Company Disclosure Schedule.
(f) Except as set forth in the Company's Disclosure Schedule,
neither the Company nor any of its subsidiaries has any liability for life,
health, medical or other welfare benefits to former employees or beneficiaries
or dependents thereof, except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA at no expense to the
Company and its subsidiaries.
(g) There are no pending or, to the knowledge of the Company,
threatened claims (other than claims for benefits in the ordinary course),
lawsuits, arbitrations or other alternate dispute resolution proceedings which
have been asserted or instituted against the Plans, any fiduciaries thereof with
respect to their duties to the Plans or the assets of any of the trusts under
any of the Plans which could reasonably be expected to result in any liability
of the Company or any of its subsidiaries to any Plan participant or
beneficiary, the PBGC, the Department of Treasury, the Department of Labor or
any Multiemployer Plan.
(h) All Plans covering foreign employees of the Company or any of
its subsidiaries comply in all material respects with applicable local law
(including any qualification or registration requirements) and, to the extent
applicable, are fully funded and/or fully book reserved in accordance with
applicable law and GAAP.
(i) Other than as disclosed in the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby or by the Company Stock Option Agreement or the
Support Agreements will (either alone or in conjunction with any other act)
result in, cause the accelerated vesting or delivery of, or increase the amount
or value of, any payment or benefit to any employee of the Company or any of its
subsidiaries, or to fund any "rabbi" trust or similar trust.
(j) Except as set forth in the Company Disclosure Schedule, no Plans
provide for the reimbursement of any excise taxes under Section 4999 of the
Code.
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<PAGE> 23
(k) Except as set forth on Section 4.12(k) of the Company Disclosure
Schedule, no employment agreement or stock option agreement between the Company
and any of its executive officers has been amended subsequent to December
31,1998.
SECTION 4.13 Intellectual Property.
(a) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, the
Company owns or possesses adequate licenses or other valid rights to use all
Intellectual Property used in connection with the business of the Company as
currently conducted. As used herein "Intellectual Property" shall mean all
patents, patent applications, patent disclosures, assumed names, trade names,
trademarks, trademark registrations and trademark applications, service marks,
service mark registrations and service mark applications, certification marks,
certification mark registrations and certification mark applications,
copyrights, copyright registrations and copyright registration applications,
chip registrations and chip registration applications, both domestic and
foreign, which are owned by the Company or any of its subsidiaries and all
computer software (and related documentation), trade secrets, know-how,
industrial property, technology or other proprietary rights used or held for use
in connection with the business of the Company and its subsidiaries as currently
conducted.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, none of
the licenses which are part of the Intellectual Property is subject to
termination or cancellation or change in its terms or provisions as a result of
this Agreement or the transactions provided for in this Agreement.
(c) To the knowledge of the Company, no Person or entity is
infringing, or has misappropriated, any Intellectual Property.
(d) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, no
claims with respect to the Intellectual Property have been asserted or, to the
best knowledge of the Company, are threatened by any Person nor does the Company
know of any valid grounds for any claims (i) to the effect that the manufacture,
sale or use of any product or process or the furnishing of any service as
previously used, now used or offered or proposed for use or sale by the Company
infringes on any copyright, trade secret, patent, tradename or other
intellectual property right of any Person, (ii) against the use by the Company
or any of its subsidiaries of any Intellectual Property, or (iii) challenging
the ownership, validity or effectiveness of any Intellectual Property. Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company, all granted and issued patents and all
registered trademarks and service marks and all copyrights held by the Company
or any of its subsidiaries are valid, enforceable and subsisting.
SECTION 4.14 Taxes.
(a) The Company and each of its subsidiaries has duly filed (or has
had duly filed on their behalf) or will duly file or cause to be duly filed all
material federal, state, local
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and foreign income and other Tax Returns (as hereinafter defined) required to be
filed by it, and has duly paid or caused to be paid all Taxes (as hereinafter
defined) shown to be due on such Tax Returns in respect of the periods covered
by such Tax Returns and has made adequate provision according to GAAP in the
Company's financial statements for payment of all Taxes in respect of all
taxable periods or portions thereof ending on or before the date hereof. Section
4.14 of the Company Disclosure Schedule lists the periods through which the Tax
Returns required to be filed by the Company or its subsidiaries have been
examined by the IRS or, to the Company's knowledge, other appropriate taxing
authority, or the periods during which the opportunity for any assessments to be
made by the IRS or, to the Company's knowledge, other appropriate taxing
authority has expired. All material deficiencies and assessments asserted in
writing as a result of such examinations or other audits by federal, state,
local or foreign taxing authorities have been paid, fully settled or adequately
provided for according to GAAP in the Company's financial statements, and no
issue or claim has been asserted or threatened in writing for Taxes by any
taxing authority for any prior period, other than those heretofore paid or
adequately provided for according to GAAP in the Company's financial statements.
Except as set forth in Section 4.14 of the Company Disclosure Schedule, there
are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any material Tax Return of the Company or any of its
subsidiaries. Except as set forth in Section 4.14 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code or that would not be deductible pursuant to the
terms of Section 162(a)(l), 162(m) or 162(n) of the Code. Except as set forth in
Section 4.14 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries is a party to a material Tax sharing or Tax indemnity agreement
or any other agreement of a similar nature that remains in effect.
(b) For purposes of this Agreement, the term "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, use, transfer,
license, payroll, withholding, export, import, and customs duties, capital stock
and franchise taxes, imposed by the United States or any state, local or foreign
government or subdivision or agency thereof, including any interest, penalties
or additions thereto. For purposes of this Agreement, the term "Tax Return"
means any report, return or other information or document required to be
supplied to a taxing authority in connection with Taxes.
SECTION 4.15 Absence of Certain Changes. Except as disclosed in
Section 4.15 of the Company Disclosure Schedule or the SEC Reports, since
December 31, 1998 through the date hereof (i) there has not been any Material
Adverse Effect on the Company or any event, development or circumstance which
could reasonably be expected to have a Material Adverse Effect on the Company;
and (ii) the businesses of the Company and its subsidiaries have been conducted
only in the ordinary course and in a manner consistent with past practice.
SECTION 4.16 Labor Matters. No work stoppage involving the Company
or any of its subsidiaries is pending or, to the knowledge of the Company,
threatened and neither the Company nor any of its subsidiaries is involved in,
threatened with or affected by any labor
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dispute, arbitration, lawsuit or administrative proceeding which would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company. Except as disclosed in Section 4.16 of the
Company Disclosure Schedule, none of the employees of the Company or of any of
its subsidiaries are represented by any labor union or any collective bargaining
organization and, to the best knowledge of the Company, no labor union is
attempting to organize employees of the Company or any of its subsidiaries.
There is no pending charge or complaint against the Company or any of its
subsidiaries by the National Labor Relations Board or any comparable state
agency.
SECTION 4.17 Rights Agreement. The Company and the Company Board
have taken all necessary action to amend the Rights Agreement (without redeeming
the Rights) so that (a) none of the execution or delivery of this Agreement, the
Company Stock Option Agreement and the Support Agreements, the making of the
Offer, the acquisition of Common Shares pursuant to the Offer under this
Agreement, the Company Stock Option Agreement and the Support Agreements, or the
consummation of the Merger will (i) cause any Rights issued pursuant to the
Rights Agreement to become exercisable or to separate from the stock
certificates to which they are attached, (ii) cause Parent, the Purchaser or any
of their Affiliates or Associates to be an Acquiring Person (as each such term
is defined in the Rights Agreement) or (iii) trigger other provisions of the
Rights Agreement, including giving rise to a Distribution Date or a Triggering
Event (as each such term is defined in the Rights Agreement), and (b) the Rights
Agreement will expire immediately prior to the Effective Time; and the Rights
Agreement, as so amended, has not been further amended or modified. Copies of
all such amendments to the Rights Agreement have been previously provided to
Parent.
SECTION 4.18 Brokers. Except for the engagement of SSB and J.P.
Morgan, none of the Company, any of its subsidiaries, or any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement. The Company has previously
delivered to Parent a copy of the Company's engagement letter with each of SSB
and J.P. Morgan.
SECTION 4.19 Opinion of Financial Advisor. The Company has received
the written opinion of each of SSB and J.P. Morgan, its financial advisors, to
the effect that, as of the date hereof, the consideration to be received in the
Offer and the Merger by the Company's stockholders is fair to the Company's
stockholders from a financial point of view. The Company will promptly deliver
to Parent a copy of such opinions.
SECTION 4.20 Material Contracts. Except as identified in the SEC
Reports, neither the Company nor any of its subsidiaries is party to, nor is the
Company or any of its subsidiaries (or their respective assets) bound by, any
contract, indenture, lease or other agreement which, individually or in the
aggregate, is material to the Company and the subsidiaries taken as a whole.
Except as identified in the SEC Reports or in Section 4.20 of the Company
Disclosure Schedule, there are no (i) contracts, indentures, leases or other
agreements between the Company or any subsidiary, on the one hand, and any
current or former director, officer, employee or 5% or greater shareholder of
the Company or any of their affiliates or family members, on the other,
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or (ii) any material non-competition agreement or any other agreement or
obligation which purports to limit in any respect the manner in which, or the
localities in which, the business of the Company and its subsidiaries, is or
would be conducted. All contracts, indentures, leases and agreement to which the
Company or any of the subsidiaries is a party or by which any of their
respective assets is bound are valid and binding, in full force and effect in
accordance with its terms would and enforceable against the parties thereto in
accordance with their respective terms, other than such failures to be so valid
and binding, in full force and effect or enforceable which would not, either
individually or in the aggregate, have a Material Adverse Effect on the Company.
There is not under any such contract, indenture or agreement any existing
default, or event, which after notice or lapse of time, or both, would
constitute a default, by the Company or any of its subsidiaries, or to the
Company's knowledge, any other party, except to the extent any such defaults or
events would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company,
except as set forth by specific reference to the applicable Section of this
Article V in the Parent Disclosure Schedule (as hereinafter defined), as
follows:
SECTION 5.1 Organization and Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. Parent is a societe anonyme organized under the laws
of France. Each of Parent and the Purchaser has the requisite corporate power
and authority to own, operate or lease its properties and to carry on its
business as it is now being conducted, and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction in which the nature of
its business or the properties owned, operated or leased by it makes such
qualification, licensing or good standing necessary, except where the failure to
have such power or authority, or the failure to be so qualified, licensed or in
good standing, would not have a Material Adverse Effect on Parent. The term
"Material Adverse Effect on Parent", as used in this Agreement, means any change
in or effect on the business, financial condition, results of operation or
prospects of Parent or any of its subsidiaries that would reasonably be expected
to have a material adverse effect on Parent and its subsidiaries taken as a
whole or could reasonably be expected to prevent or delay consummation of the
Offer or the Merger.
SECTION 5.2 Authority. Each of Parent and the Purchaser has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the Company Stock Option Agreement by Parent and
the Purchaser (to the extent Parent or Purchaser is a party thereto) and the
consummation by Parent and the Purchaser to the extent Parent or Purchaser is a
party thereto of the transactions contemplated hereby and thereby have been duly
and
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validly authorized and approved by the respective Boards of Directors of Parent
and the Purchaser and by Parent as sole stockholder of the Purchaser and no
other corporate proceedings on the part of Parent or the Purchaser are necessary
to authorize or approve this Agreement or to consummate the transactions
contemplated hereby or thereby (to the extent Parent or Purchaser is a party
thereto). Each of this Agreement and the Company Stock Option Agreement has been
duly executed and delivered by each of Parent and the Purchaser (to the extent
Parent or Purchaser is a party thereto) and, assuming the due and valid
authorization, execution and delivery by the Company, constitutes a valid and
binding obligation of each of Parent and the Purchaser (to the extent Parent or
Purchaser is a party thereto) enforceable against each of them in accordance
with its terms.
SECTION 5.3 No Conflict; Required Filings and Consents.
(a) Assuming (i) the filings required under the HSR Act are made and
the waiting periods thereunder have terminated or have expired, (ii) the
requirements of the Exchange Act and any applicable state securities, "blue sky"
or takeover law are met, (iii) the filings required under the competition and
foreign investment and other applicable laws, each as set forth on Section 5.3
of the disclosure schedule delivered to the Company by the Parent prior to the
date hereof (the "Parent Disclosure Schedule"), and the approvals and consents
thereunder have been obtained (or waiting periods thereunder have been
terminated or have expired), and (iv) the filing of the certificate of merger
and other appropriate merger documents, if any, as required by the GCL, is made,
none of the execution and delivery of this Agreement by Parent or the Purchaser,
the consummation by Parent or the Purchaser of the transactions contemplated
hereby or compliance by Parent or the Purchaser with any of the provisions
hereof will (i) conflict with or violate the organizational documents of Parent
or the Purchaser, (ii) conflict with or violate any statute, ordinance, rule,
regulation, order, judgment, decree, permit or license applicable to Parent or
the Purchaser or any of their subsidiaries, or by which any of them or any of
their respective properties or assets may be bound or affected, or (iii) result
in a violation pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or the Purchaser or any of their subsidiaries is a party or by
which Parent or the Purchaser or any of their subsidiaries or any of their
respective properties or assets may be bound or affected.
(b) None of the execution and delivery of this Agreement by Parent
and the Purchaser, the consummation by Parent and the Purchaser of the
transactions contemplated hereby or compliance by Parent and the Purchaser with
any of the provisions hereof will require any Consent of any Governmental
Entity, except for (i) compliance with any applicable requirements of the
Exchange Act and any state securities, "blue sky" or takeover law, (ii) the
filing of a certificate of merger pursuant to the GCL, (iii) compliance with the
HSR Act, and (iv) such filings, authorizations, orders and approvals, if any, as
set forth on Section 5.3 of the Parent Disclosure Schedule, as are required
under foreign laws.
SECTION 5.4 Information. None of the information supplied or to be
supplied by Parent and the Purchaser for inclusion in (i) the Schedule 14D-9,
(ii) the Proxy Statement or (iii) the Other Filings will, at the respective
times filed with the SEC or such other Gov-
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ernmental Entity and, in addition, in the case of the Proxy Statement, at the
date it or any amendment or supplement is mailed to stockholders, at the time of
the Special Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Offer Documents
and any supplement thereto will comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations thereunder,
and the Offer Documents and any supplement thereto will not contain, as of the
date thereof, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statement herein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by Parent or
Purchaser with respect to the statements made or incorporated by reference
therein based on information supplied by the Company specifically for inclusion
or incorporation therein.
SECTION 5.5 Financing. Parent and Purchaser collectively will have
at the closing of the Offer and the Effective Time and Parent will make
available to Purchaser sufficient funds to enable Purchaser to purchase all
Shares, on a fully diluted basis, and to pay all fees and expenses related to
the transactions contemplated by this Agreement payable by them.
SECTION 5.6 Stock Ownership. As of the date hereof, except as set
forth on Section 5.6 of Parent's Disclosure Schedule, none of the Parent,
Purchaser or any of their respective "affiliates" or "associates" (as those
terms are defined under Rule 12b-2 under the Exchange Act) beneficially own any
Shares.
SECTION 5.7 Purchaser's Operations. Purchaser was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement and
has not engaged in any business activities or conducted any operations other
than in connection with such transactions.
ARTICLE VI
COVENANTS
SECTION 6.1 Conduct of Business of the Company. Except as required
by this Agreement or otherwise with the prior written consent of Parent, during
the period from the date of this Agreement to the Effective Time, the Company
will, and will cause each of its subsidiaries to, conduct its operations only in
the ordinary and usual course of business consistent with past practice and will
use all reasonable efforts, and will cause each of its subsidiaries to use its
all reasonable efforts, to preserve intact the business organization of the
Company and each of its subsidiaries, to keep available the services of its and
their present officers and employees, and to preserve the good will of those
having business relationships with it, including, without limitation,
maintaining satisfactory relationships with licensors, suppliers, customers and
others having business relationships with the Company and its subsidiaries.
Without limiting the generality of the foregoing, and except as otherwise
required by this Agreement or as set forth in
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Section 6.1 of the Company Disclosure Schedule, the Company will not, and will
not permit any of its subsidiaries to, prior to the Effective Time, without the
prior written consent of Parent:
(a) adopt any amendment to its certificate of incorporation or
by-laws or comparable organizational documents or the Rights Agreement or adopt
a plan of merger, consolidation, reorganization, dissolution or liquidation;
(b) sell, pledge or encumber any stock owned by it in any of its
subsidiaries;
(c) (i) issue, reissue or sell, or authorize the issuance,
reissuance or sale of (A) additional shares of capital stock of any class, or
securities convertible into capital stock of any class, or any rights, warrants
or options to acquire any convertible securities or capital stock, other than
the issuance of Shares, in accordance with the terms of the instruments
governing such issuance on the date hereof, pursuant to the exercise of Options
outstanding on the date hereof, or (B) any other securities in respect of, in
lieu of, or in substitution for, Common Shares or any other capital stock of any
class outstanding on the date hereof or (ii) make any other changes in its
capital structure (other than incurrence of indebtedness in the amount of up to
$100 million in the aggregate under existing revolving credit facilities);
(d) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock other than between any of the
Company and any of its wholly owned subsidiaries;
(e) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities;
(f) increase, or accelerate payment of, the compensation or benefits
payable or to become payable to its directors, officers or, except in the
ordinary course of business consistent with past practice in accordance with
regular review and promotion cycles, employees (whether from the Company or any
of its subsidiaries), or pay or award any benefit not required by any existing
plan or arrangement to any officer, director or, except in the ordinary course
of business consistent with past practice in accordance with regular review and
promotion cycles, employee (including, without limitation, the granting of stock
options, stock appreciation rights, shares of restricted stock or performance
units pursuant to the Stock Plans or otherwise), or grant any severance or
termination pay to any officer, director or other employee of the Company or any
of its subsidiaries (other than as required by existing agreements or policies
described in Section 6.1 of the Company Disclosure Schedule), or enter into any
employment or severance agreement with, any director, officer or other employee
of the Company or any of its subsidiaries or establish, adopt, enter into,
amend, or waive any performance or vesting criteria or amend the exercise or
grant price for any equity-based awards under any Plan for the benefit or
welfare of any current or former directors, officers or employees of the Company
or its subsidiaries or their beneficiaries or dependents (any of the foregoing
being an "Employee Benefit Arrangement"), except, in each case, to the extent
required by applicable law or regulation;
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<PAGE> 30
(g) acquire, mortgage, encumber, sell, pledge, lease, license or
dispose of any assets (including Intellectual Property or resource rights),
except in the ordinary course of business consistent with past practice or any
securities;
(h) (i) incur, assume or prepay any long-term debt or incur or
assume any short-term debt, except that the Company and its subsidiaries may
incur or prepay debt in the ordinary course of business in amounts and for
purposes consistent with past practice under existing lines of credit, but in
any event such incurrences, assumptions or prepayments not to exceed $100
million in the aggregate, (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any third party except in the ordinary course of business
consistent with past practice, (iii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, contingent or otherwise), except
in the ordinary course of business consistent with past practice and (except as
would not be material) in accordance with their terms, (iv) make any loans,
advances or capital contributions to, or investments in, any other person or
entity, except for loans, advances, capital contributions or investments in the
ordinary course, consistent with past practice (in an amount not to exceed $10
million in the aggregate), or between any wholly owned subsidiary of the Company
and the Company or another wholly owned subsidiary of the Company, (v) authorize
or make capital expenditures (other than those previously committed as disclosed
in the Capital Plan of the Company, a copy of which has been provided to the
Purchaser) in excess of $10 million, (vi) accelerate or delay collection of
notes or accounts receivable in advance of or beyond their regular due dates or
the dates when the same would have been collected in the ordinary course of
business consistent with past practice, or (vii) change any method or principle
of accounting in a manner that is inconsistent with past practice except to the
extent required by generally accepted accounting principles as advised by the
Company's regular independent accountants;
(i) settle or compromise any suit or claim or threatened suit or
claim where the amount involved is greater than $5 million;
(j) other than in the ordinary course of business consistent with
past practice, (i) modify, amend or terminate any contract, (ii) waive, release,
relinquish or assign any contract (or any of the rights of the Company or any of
its subsidiaries thereunder), right or claim, or (iii) cancel or forgive any
indebtedness owed to the Company or any of its subsidiaries; provided, however,
that neither the Company nor any of its subsidiaries may under any circumstance
waive or release any of its rights under any confidentiality agreement to which
it is a party;
(k) file any income Tax Return (other than in the ordinary course in
a manner consistent with past practice), make any Tax election not required by
law or settle or compromise any Tax liability;
(l) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated, except in the ordinary course of
business consistent with past practice;
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<PAGE> 31
(m) acquire (by merger, consolidation, acquisition of stock or
assets, combination or other similar transaction) any material corporation,
partnership or other business organization or division or assets thereof;
(n) enter into any material contract or agreement other than in the
ordinary course of business consistent with past practice;
(o) except as may be required as a result of a change in law or in
GAAP, make any change in its methods of accounting, including Tax accounting
policies and procedures;
(p) enter into any agreement of a nature that would be required to
be filed as an exhibit to Form 10-K under the Exchange Act;
(q) except as specifically permitted pursuant to Section 6.10 take,
or agree to commit to take, or fail to take any action that would result or is
reasonably likely to result in any of the conditions to the Offer set forth in
Annex I or any of the conditions to the Merger set forth in Article VII not
being satisfied, or would make any representation or warranty of the Company
contained herein inaccurate in any material respect at, or as of any time prior
to, the Effective Time, or that would impair the ability of the Company to
consummate the Merger in accordance with the terms hereof or materially delay
such consummation;
(r) convene any regular or special meeting (or any adjournment
thereof) of the stockholders of the Company other than the meeting contemplated
by Section 2.10 of this Agreement;
(s) agree in writing or otherwise to take any of the foregoing
actions prohibited under this Section 6.1.
Notwithstanding the foregoing provisions of this Section 6.1, any action taken
by or with the consent of the full Board of Directors after the time directors
nominated by the Purchaser have been elected or appointed to, and shall
constitute a majority of, the Company Board pursuant to Section 1.3 hereof,
shall not constitute a violation of this Section 6.1.
SECTION 6.2 Access to Information. From the date of this Agreement
until the Effective Time, the Company will, and will cause its subsidiaries, and
each of their respective officers, directors, employees, counsel, advisors and
representatives (collectively, the "Company Representatives") to, give Parent
and the Purchaser and their respective officers, employees, counsel, advisors
and representatives (collectively, the "Parent Representatives") full access
during normal business hours, to the offices and other facilities and to the
books and records of the Company and its subsidiaries and will cause the Company
Representatives and the Company's subsidiaries to furnish Parent, the Purchaser
and the Parent Representatives to the extent available with such financial and
operating data and such other information (with sensitivity to competitive
information) with respect to the business and operations of the Company and its
subsidiaries as Parent and the Purchaser may from time to time reasonably
request provided that the foregoing shall not require the Company to permit any
inspection, or to disclose
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any information, which would result in the disclosure of any trade secrets of
third parties or violate any obligation of the Company with respect to
confidentiality if such disclosure would reasonably be expected to result in
liability to the Company, and provided that the Company shall have used
reasonable best efforts to obtain the consent of such third party to such
inspection or disclosure. The Confidentiality Agreement dated March 15, 1999, as
amended through the date hereof, between Parent and the Company (the
"Confidentiality Agreement") shall apply with respect to the Evaluation
Materials (as defined in the Confidentiality Agreement). The Company shall
furnish promptly to Parent and the Purchaser a copy of each report, schedule,
registration statement and other document filed by it or its subsidiaries during
such period pursuant to the requirements of federal or state or foreign
securities laws. The Company shall cause its independent auditors to allow the
review of the work papers of such auditors relating to the Company and its
subsidiaries. No review pursuant to this Section 6.2 shall affect any
representation or warranty given by the Company.
SECTION 6.3 Efforts.
(a) Subject to the terms and conditions provided herein, each of the
Company, Parent and the Purchaser shall, and the Company shall cause each of its
subsidiaries to, cooperate and use their respective reasonable best efforts to
take, or cause to be made, all filings necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including but not limited to
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Proxy Statement, any required filings or requests for additional
information under the HSR Act, or other foreign filings and any amendments to
any thereof. In addition, if at any time prior to the Effective Time any event
or circumstance relating to either the Company or Parent or the Purchaser or any
of their respective subsidiaries should be discovered by the Company or Parent,
as the case may be, which should be set forth in an amendment to the Offer
Documents or Schedule 14D-9, the discovering party will promptly inform the
other party of such event or circumstance.
(b) Each of the parties will use its reasonable best efforts to
obtain as promptly as practicable all Consents of any Governmental Entity or any
other person required in connection with, and waivers of any Violations that may
be caused by, the consummation of the transactions contemplated by the Offer and
this Agreement.
(c) Neither the Company nor the Company Board nor any committee
thereof shall withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to Parent or Purchaser, the recommendation of the Company Board
of this Agreement, the Offer or the Merger, or approve or recommend, or propose
publicly to approve or recommend, an Acquisition Transaction, unless the Company
Board determines in good faith by a vote of a majority of the members of the
full Company Board that failing to take such action would create a reasonable
likelihood of a breach of the fiduciary duties of the Company Board, after
consultation with and receipt of advice from its outside counsel to such effect.
Nothing contained in this Section 6.3(c) shall prohibit the Company from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any required disclosure to the
Company's stockholders if the Company Board determines in good
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faith by a vote of a majority of the members of the full Company Board, based on
the opinion of outside counsel, that a failure so to disclose would be
inconsistent with its obligations under applicable law. Any withdrawal,
modification or change of the recommendation of the Company Board of this
Agreement, the Merger or the Offer shall not change the approval of the Company
Board for purpose of causing any state takeover statute or other law or the
Rights Agreement or the Rights to be inapplicable to this Agreement, the Merger,
the Company Stock Option Agreement and the Support Agreements, and the
transactions contemplated hereby and thereby.
(d) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use their respective reasonable best efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the parties hereto shall
take or cause to be taken all such necessary action, including, without
limitation, the execution and delivery of such further instruments and documents
as may be reasonably requested by the other party for such purposes or otherwise
to consummate and make effective the transactions contemplated hereby.
SECTION 6.4 Public Announcements. The Company, on the one hand, and
Parent and the Purchaser, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Offer, the Merger and the other transactions
contemplated hereby, agree to provide to the other party for review a copy of
any such press release or statement, and shall not issue any such press release
or make any such public statement prior to such consultation and review, unless
required by applicable law or any listing agreement with a securities exchange.
SECTION 6.5 Employee Benefit Arrangements.
(a) Except for employees subject to collective bargaining
agreements, until December 31, 2000, Parent shall maintain, or cause the
Surviving Corporation to maintain compensation and employee benefits
substantially equivalent in the aggregate to those provided by the Company
immediately prior to the Effective Time (not taking into account equity-based
incentive compensation provided by the Company). Parent agrees that, from and
after the Effective Time, Parent will honor or will cause the Surviving
Corporation to honor, all obligations under the Listed Plans. Notwithstanding
the foregoing, from and after the Effective Time, the Surviving Corporation
shall have the right to amend, modify, alter or terminate any Plan to the extent
the terms of such Plans permit such action; provided, however, that for a period
of no less than 12 months following the Effective Time, the Surviving
Corporation shall neither terminate nor adversely amend or modify the Company's
severance pay policy in effect as of April 1, 1999, other than with respect to
requiring a binding waiver and release from the terminated employee prior to the
payment of severance benefits.
(b) Except for employees subject to collective bargaining
agreements, for purposes of determining eligibility to participate, vesting and
accrual or entitlement to benefits where length of service is relevant under any
employee benefit plan of the Parent or the Surviv-
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ing Corporation, the Employees shall receive service credit for service with the
Company and any of its subsidiaries to the same extent such service credit was
granted under the Plans, subject to offsets for previously accrued benefits and
to no duplication of benefits (except that no such credit shall be applied for
benefit accrual or entitlement purposes under defined benefit pension plans).
Such employees shall also be given credit for any deductible or co-payment
amounts paid in respect of the plan year in which the Effective Time occurs, to
the extent that, following the Effective Time, they participate in any Parent
Plan for which deductibles or co-payments are required. Parent agrees that it
shall also cause each Parent Plan to waive (i) any pre-existing condition
restriction which was waived under the terms of any analogous Plan immediately
prior to the Effective Time or (ii) waiting period limitation which would
otherwise be applicable to an Employee on or after the Effective Time to the
extent such Employee had satisfied any similar waiting period limitation under
an analogous Plan prior to the Effective Time.
(c) Parent hereby acknowledges and agrees that consummation of the
transactions contemplated by this Agreement constitute a "Change of Control" of
the Company for purposes of the Plans.
SECTION 6.6 Indemnification.
(a) Parent agrees that all rights to indemnification now existing in
favor of any director, officer, or employee of the Company and its subsidiaries
(the "Indemnified Parties") as provided in their respective charters or by-laws
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time. After the Effective
Time, Parent agrees to cause the Surviving Corporation to honor all rights to
indemnification referred to in the preceding sentence.
(b) Parent agrees that the Company, and from and after the Effective
Time, the Surviving Corporation shall cause to be maintained in effect for not
less than six years (except as provided in the last sentence of this Section
6.6(b)) from the Effective Time the current policies of the directors' and
officers' liability insurance maintained by the Company; provided that the
Surviving Corporation may substitute therefor other policies not less
advantageous (other than to a de minimis extent) to the beneficiaries of the
current policies and provided that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time; and provided, however, that the Surviving Corporation shall not
be required to pay an annual premium in excess of 200% of the last annual
premium paid by the Company prior to the date hereof (which the Company
represents to be not more than $400,000 for the 12-month period ending December
31, 1998) and if the Surviving Corporation is unable to obtain the insurance
required by this Section 6.6(b) it shall obtain as much comparable insurance as
possible for an annual premium equal to such maximum amount. The provisions of
the immediately preceding sentence shall be deemed to have been satisfied if
prepaid policies have been obtained by the Company prior to the Effective Time,
which policies provide such directors and officers with coverage for an
aggregate period of six years with respect to claims arising from facts or
events that occurred on or before the Effective Time, including, without
limitation, in respect of the transactions contemplated by this Agreement and
for a premium not in excess of the aggregate of the premiums set forth in the
preceding sentence.
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Notwithstanding the foregoing, at any time on or after the second anniversary of
the Effective Time, Parent may, at its election, undertake to provide funds to
the Surviving Corporation to the extent necessary so that the Surviving
Corporation may self-insure with respect to the level of insurance coverage
required under this Section 6.6(b) in lieu of causing to remain in effect any
directors' and officers' liability insurance policy.
(c) From and after the Effective Time, any Indemnified Party wishing
to claim indemnification under paragraph (a) of this Section 6.6, upon learning
of any such claim, action, suit, proceeding or investigation, shall promptly
notify Parent thereof. In the event of any such claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time), (i)
Parent or the Surviving Corporation shall have the right, from and after the
purchase of Shares pursuant to the Offer, to assume the defense thereof and
Parent shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, (ii) the Indemnified Parties
will cooperate in the defense of any such matter and (iii) Parent shall not be
liable for any settlement effected without its prior written consent, provided
that Parent shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final, that such person is not entitled to
indemnification under applicable law.
(d) In the event Parent or the Purchaser or any of their successors
or assigns, (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, to the extent necessary
to effectuate the purposes of this Section 6.6, proper provision shall be made
so that the successors and assigns of Parent and the Purchaser assume the
obligations set forth in this Section 6.6.
SECTION 6.7 Notification of Certain Matters. Parent and the Company
shall promptly notify each other of (i) the occurrence or non-occurrence of any
fact or event which would be reasonably likely (A) to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or (B)
to cause any covenant, condition or agreement under this Agreement not to be
complied with or satisfied in any material respect and (ii) any failure of the
Company or Parent, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder in any
material respect; provided, however, that no such notification shall modify the
representations or warranties of any party or the conditions to the obligations
of any party hereunder. Each of the Company, Parent and the Purchaser shall give
prompt notice to the other parties hereof of any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement.
SECTION 6.8 Rights Agreement. The Company covenants and agrees that
it will not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii) take
any action which would allow any Person (as defined in the Rights Agreement)
other than Parent or the Purchaser
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to acquire beneficial ownership of 15% or more of the Common Shares without
causing a Distribution Date or a Triggering Event to occur.
SECTION 6.9 State Takeover Laws. The Company shall, upon the request
of the Purchaser, take all reasonable steps to assist in any challenge by the
Purchaser to the validity or applicability to the transactions contemplated by
this Agreement, including the Offer and the Merger, of any state takeover law.
SECTION 6.10 No Solicitation.
(a) The Company, its controlled affiliates and their respective
officers, directors, employees, representatives and agents shall immediately
cease any existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any acquisition or exchange of all or any
material portion of the assets of, or any equity interest in, the Company or any
of its subsidiaries or any business combination with the Company or any of its
subsidiaries. The Company agrees that, prior to the Effective Time, it shall
not, and shall not authorize or permit any of its subsidiaries or any of its or
its subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate, encourage or facilitate, or
furnish or disclose non-public information in furtherance of, any inquiries or
the making of any proposal with respect to any merger, liquidation,
recapitalization, consolidation or other business combination involving the
Company or any of its subsidiaries or acquisition of any capital stock or any
material portion of the assets of the Company or its subsidiaries, or any
combination of the foregoing (an "Acquisition Transaction"), or negotiate,
explore or otherwise engage in discussions with any person (other than the
Purchaser, Parent or their respective directors, officers, employees, agents and
representatives) with respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by this
Agreement; provided that prior to the purchase of a majority of the Shares
pursuant to the Offer, the Company may furnish information, pursuant to a
customary confidentiality agreement with terms not more favorable to such third
party than the Confidentiality Agreement, to, and negotiate or otherwise engage
in discussions with, any party who delivers a bona fide written proposal for an
Acquisition Transaction for which all necessary financing is then in the
judgment of the Company Board readily obtainable, if the Company Board
determines in good faith by a vote of a majority of the members of the full
Company Board that failing to take such action would create a reasonable
likelihood of a breach of the fiduciary duties of the Company Board (after
consultation and receipt of advice from its outside legal counsel to such
effect) and such a proposal is, in the written opinion of each of SSB and J.P.
Morgan, more favorable to the Company's stockholders from a financial point of
view than the transactions contemplated by this Agreement as the same has been
proposed to be amended by Parent pursuant to Section 6.10(b). This Section 6.10
shall not limit the Company's rights under Section 6.1 to effect specified
divestitures.
(b) From and after the execution of this Agreement, the Company
shall promptly advise the Purchaser in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations or proposals relating to
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an Acquisition Transaction, identify the offeror and furnish to the Purchaser a
copy of any such proposal or inquiry, if it is in writing, relating to an
Acquisition Transaction. The Company shall promptly advise Parent of any
material development relating to such proposal, including the results of any
discussions or negotiations with respect thereto. Notwithstanding anything in
this Agreement to the contrary, prior to the approval of an Acquisition
Transaction by the Company Board in accordance with Section 8.1(e), Company
shall give Parent sufficient notice of the material terms and conditions of any
such Acquisition Transaction, and negotiate in good faith with Parent for a
period of not less than three business days after receipt of a written proposal
or a written summary of any oral proposal to make such adjustments in the terms
and conditions of this Agreement as would enable Company to proceed with the
transactions contemplated herein.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions. The respective obligations of Parent, the
Purchaser and the Company to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) Stockholder Approval. The stockholders of the Company shall have
duly approved the transactions contemplated by this Agreement, if required by
applicable law.
(b) Purchase of Shares. Parent, the Purchaser or any of their
affiliates shall have accepted for payment and paid for Shares pursuant to the
Offer in accordance with the terms hereof.
(c) Injunctions; Illegality. The consummation of the Merger shall
not be restrained, enjoined or prohibited by any order, judgment, decree,
injunction or ruling of a court of competent jurisdiction or any Governmental
Entity provided, however, that each of the parties shall have used reasonable
best efforts to prevent the entry of any such injunction or other order and to
appeal any injunction or other order that may be entered; and there shall not
have been any statute, rule or regulation enacted, promulgated or deemed
applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger or has the effect of making the purchase of Shares
illegal.
(d) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the Merger shall have expired or terminated and all
approvals or consents listed on Section 5.3 of the Parent Disclosure Schedule
(or waiting periods thereunder have been terminated or expired) (the "Foreign
Approval Law") shall have been received or obtained.
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ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding any approval thereof by the stockholders of the Company
(with any termination by Parent also being an effective termination by the
Purchaser):
(a) by the mutual written consent of the Company, by action of its
Board of Directors and Parent (in accordance with Section 1.3(c), if
applicable);
(b) by the Company if (i) the Purchaser fails to commence the Offer
in violation of Section 1.1 hereof, (ii) the Purchaser shall not have accepted
for payment and paid for Shares pursuant to the Offer in accordance with the
terms thereof on or before October 31, 1999 or (iii) the Purchaser fails to
purchase validly tendered Shares in violation of the terms of this Agreement;
(c) by Parent or the Company if the Offer is terminated or withdrawn
pursuant to its terms without any Shares being purchased thereunder; provided,
however, that neither Parent nor the Company may terminate this Agreement
pursuant to this Section 8.1(c) if such party shall have materially breached
this Agreement;
(d) by Parent or the Company if any court or other Governmental
Entity shall have issued an order, decree, judgment or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger and such order, decree or ruling or other action shall have become final
and nonappealable;
(e) by the Company if, prior to the purchase of a majority of the
Shares pursuant to the Offer in accordance with the terms of this Agreement, and
following compliance with the Company of its obligations under Section 6.10, (i)
the Company Board approves an Acquisition Transaction, for which all necessary
financing is then in the judgment of the Company Board readily obtainable, on
terms which a majority of the members of the full Company Board have determined
in good faith after consultation and receipt of advice from its outside legal
counsel to the effect that failing to take such action would create a reasonable
likelihood of a breach of the fiduciary duties of the Company's Board, and (ii)
such Acquisition Transaction is, in the written opinion of each of SSB and J.P.
Morgan, more favorable from a financial point of view to the Company's
stockholders than the transactions contemplated by this Agreement (as the same
has been proposed to be amended by Parent); provided that the termination
described in this Section 8.1(e) shall not be effective unless and until the
Company shall have paid to Parent all of the fees and expenses described in
Section 8.3(b) including, without limitation, the Termination Fee (as
hereinafter defined);
(f) by Parent, if the Company breaches any of its covenants in
Sections 6.3(c), 6.8 or 6.10, if the Company Board shall have withdrawn or
modified (including by
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amendment of the Schedule 14D-9) in a manner adverse to the Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger, shall
have approved or recommended another Acquisition Transaction, or shall have
resolved to effect any of the foregoing (and such resolution shall be made
public);
(g) by Parent if the Minimum Condition (as defined in Annex I) shall
not have been satisfied by the expiration date of the Offer and on or prior to
such date (A) a third party shall have made or caused to be made a proposal or
public announcement of a proposal to the Company or its stockholders with
respect to (i) the acquisition of the Company by merger, tender offer or
otherwise; (ii) a merger, consolidation or similar business combination with the
Company or any of its subsidiaries; (iii) the acquisition of 50% or more of the
assets of the Company and its subsidiaries, taken as a whole, or any material
asset of the Company or any of its subsidiaries; (iv) the acquisition of 50% or
more of the outstanding Common Shares; (v) the adoption by the Company of a plan
of liquidation or the declaration or payment of an extraordinary dividend; or
(vi) the repurchase by the Company or any of its subsidiaries of 50% or more of
the outstanding Common Shares at a price in excess of the Offer Price or (B) any
person (including the Company or any of its affiliates or subsidiaries), other
than Parent or any of its affiliates, shall have become the beneficial owner of
more than 50% of the Common Shares.
SECTION 8.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party or its
directors, officers, employees or stockholders, other than the provisions of
this Section 8.2 and Section 8.3, which shall survive any such termination.
Nothing contained in this Article VIII shall relieve any party from liability
for any breach of this Agreement.
SECTION 8.3 Fees and Expenses.
(a) Whether or not the Merger is consummated, except as otherwise
specifically provided herein, all costs and expenses incurred in connection with
the Offer, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
(b) In the event that this Agreement is terminated pursuant to
Section 8.1(e), (f) or (g) (B) or pursuant to Section 8.1(c) following the
termination of the Offer by the Purchaser as a result of the failure to satisfy
any of the conditions set forth in paragraph (c) (1) of Annex I, then the
Company shall simultaneously with such termination (or, in the case of a
termination by Parent, within one business day thereafter) reimburse Parent for
the out-of-pocket fees and expenses of Parent and the Purchaser (including
printing fees, filing fees and fees and expenses of its legal and financial
advisors) related to the Offer, this Agreement, the transactions contemplated
hereby and any related financing up to a maximum of $25 million (collectively
"Expenses"), and at the same time pay Parent a termination fee of $220 million
(the "Termination Fee") in immediately available funds by wire transfer to an
account designated by Parent. In the event that (x) this Agreement is terminated
pursuant to Section 8.1(g)(A) or pursuant to Section 8.1(c) following the
termination of the Offer by the Purchaser as a result of the
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failure to satisfy any of the conditions set forth in paragraph (c)(2), (3) or
(4) of Annex I, and (y) within twelve months of the date of such termination,
the Company shall enter into an agreement for an Acquisition Transaction with
any person other than Parent and its affiliates, then, prior to or
simultaneously with entering into such agreement, the Company shall pay Parent
the Termination Fee and reimburse Parent and the Purchaser for their Expenses,
in each case in immediately available funds by wire transfer to an amount
designated by Parent. Without limiting the foregoing, in the event this
Agreement is terminated pursuant to Section 8.1(c) as a result of the failure to
satisfy the conditions set forth in paragraph (e) of Annex I, then the Company
shall promptly (and in any event with one business day after such termination)
reimburse Parent for Expenses in immediately available funds by wire transfer to
an account designated by Parent.
(c) The prevailing party in any legal action undertaken to enforce
this Agreement or any provision hereof shall be entitled to recover from the
other party the costs and expenses (including attorneys' and expert witness
fees) incurred in connection with such action.
SECTION 8.4 Amendment. Subject to Section 1.3(c), this Agreement may
be amended by the Company, Parent and the Purchaser at any time before or after
any approval of this Agreement by the stockholders of the Company but, after any
such approval, no amendment shall be made which decreases the Merger Price or
which adversely affects the rights of the Company's stockholders hereunder
without the approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the parties.
SECTION 8.5 Extension; Waiver. Subject to Section 1.3(c), at any
time prior to the Effective Time, the parties hereto may (i) extend the time for
the performance of any of the obligations or other acts of any other party
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein by any other party or in any document, certificate or writing
delivered pursuant hereto by any other party or (iii) waive compliance with any
of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Section 3.1 and Section 6.6 shall survive the Effective Time indefinitely
(except to the extent a shorter period of time is explicitly specified therein).
SECTION 9.2 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments
referred to herein, including the Company Stock Option Agreement) constitutes
the entire agreement and
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supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of each other
party, except that Parent may assign its rights and the Purchaser may assign its
rights, interest and obligations to any affiliate or direct or indirect
subsidiary of Parent without the consent of the Company provided that no such
assignment shall relieve Parent of any liability for any breach by such
assignee. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
SECTION 9.3 Validity. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement, each of which shall
remain in full force and effect or the validity or enforceability of such
provisions in any other jurisdiction.
SECTION 9.4 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by overnight courier or facsimile to
the respective parties as follows:
If to Parent or the Purchaser:
Vivendi
42, Avenue de Friedland
75380 Paris Cedex 08
France
Attention: Guillaume Hannezo
Fax: (011) 331-71-71-14-15
with a copy to:
Cabinet Bredin Prat
130 rue du Faubourg Saint Honore
75008
Paris
Attention: Elena M. Baxter, Esq.
and:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
Attention: Daniel A. Neff, Esq.
Trevor S. Norwitz, Esq.
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If to the Company:
United States Filter Corporation
40-004 Code Street
Palm Desert, California 92211
Attention: Steve Stanczak, Esq.
Fax:
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, CA 90071-3144
Telecopy: (213) 687-5600
Attention: Rod A. Guerra, Jr., Esq.
Brian J. McCarthy, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
SECTION 9.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.6 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 9.7 Counterparts. This Agreement may be executed in two or
more counterparts, by facsimile, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
SECTION 9.8 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and, except with
respect to Section 6.6, nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.9 Certain Definitions. As used in this Agreement:
(a) the term "affiliate", as applied to any Person, shall mean any
other person directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the
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management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise;
(b) the term "Person" or "person" shall include individuals,
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act); and
(c) the term "subsidiary" or "subsidiaries" means, with respect to
Parent, the Company or any other person, any corporation, partnership, joint
venture or other legal entity of which Parent, the Company or such other person,
as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests the
holders of which are generally entitled to 50% or more of the vote for the
election of the board of directors or other governing body of such corporation
or other entity or 50% or more of the profits of such corporation or other
entity.
SECTION 9.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 9.11 Jurisdiction.
(a) Any legal action or proceeding with respect to this Agreement or
any matters arising out of or in connection with this Agreement or otherwise,
and any action for enforcement of any judgment in respect thereof shall be
brought exclusively in the courts of the State of New York or of the United
States of America for the Southern District of New York, the Court of Chancery
of Delaware or the courts of the United States of America for the District of
Delaware and, by execution and delivery of this Agreement, the Company, Parent
and the Purchaser each hereby accepts for itself and in respect of its property,
generally and unconditionally, the exclusive jurisdiction of the aforesaid
courts and appellate courts thereof. The Company, Parent and the Purchaser
irrevocably consent to service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, or by recognized international
express carrier or delivery service, to the Company, Parent or the Purchaser at
their respective addresses referred to in Section 9.4 hereof.
(b) Each of Parent and the Purchaser hereby designates Vivendi North
America, Inc. as its respective agent for service of process, and service upon
Parent or the Purchaser shall be deemed to be effective upon service of Vivendi
North America, Inc., 800 Third Avenue, 38th Floor, Attention: General Counsel,
as aforesaid or of its successor designated in accordance with the following
sentence. Parent or the Purchaser may designate another corporate agent or law
firm reasonably acceptable to the Company and located in the Borough of
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Manhattan, in the City of New York, as successor agent for service of process
upon 30-days prior written notice to the Company.
(c) The Company, Parent and the Purchaser each hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Agreement or otherwise brought in the courts referred to above and
hereby further irrevocably waives and agrees, to the extent permitted by
applicable law, not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall affect the right of any party hereto to serve process in
any other manner permitted by law.
* * *
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its respective officer thereunto duly authorized,
all as of the day and year first above written.
VIVENDI
By: /s/ Jean-Marie Messier
-----------------------------------------
Name: Jean-Marie Messier
Title: Chairman and Chief Executive
Officer
EAU ACQUISITION CORP.
By: /s/ Jean-Marie Messier
-----------------------------------------
Name: Jean-Marie Messier
Title: President
UNITED STATES FILTER CORPORATION
By: /s/ Richard J. Heckmann
-----------------------------------------
Name: Richard J. Heckmann
Title: Chairman and Chief Executive
Officer
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<PAGE> 46
ANNEX I
CONDITIONS TO THE OFFER
The capitalized terms used in this Annex I shall have the meanings
set forth in the Agreement and Plan of Merger to which this Annex is attached,
except that the term "Merger Agreement" shall be deemed to refer to such
Agreement and Plan of Merger.
Conditions to the Offer. Notwithstanding any other provisions of the
Offer, the Purchaser shall not be required to accept for payment or pay for any
tendered Shares and may terminate or, subject to the terms of the Merger
Agreement, amend the Offer, if (i) there shall not be validly tendered and not
properly withdrawn prior to the expiration date for the Offer (the "Expiration
Date") that number of Shares which represents at least a majority of the total
number of outstanding Shares on a fully diluted basis on the date of purchase
(the "Minimum Condition"), (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated, and any applicable approvals or
consents have not been obtained under any Foreign Approval Laws (or any
applicable waiting periods thereunder have not expired or been terminated),
(iii) the Company shall not have delivered to the Purchaser and Parent a duly
executed FIRPTA certificate in the form of Attachment 1 hereto, or (iv) at any
time on or after the date of the Merger Agreement and prior to the time of
payment for any Shares, any of the following events (each, an "Event") shall
occur:
(a) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, ruling, condition, judgment,
order or injunction enacted, enforced, promulgated, proposed, amended,
issued or deemed applicable to the Offer, by any Governmental Entity that
could reasonably be expected to, directly or indirectly: (1) make illegal
or otherwise prohibit consummation of the Offer or the Merger, (2)
prohibit or materially limit the ownership or operation by Parent or the
Purchaser of all or a portion of the business or assets of the Company and
its subsidiaries or compel Parent or the Purchaser to dispose of or hold
separately all or a portion of the business or assets of Parent or the
Purchaser or the Company and its subsidiaries, or seek to impose a
limitation on the ability of Parent or the Purchaser to conduct its
business or own such assets, (3) impose a limitations on the ability of
Parent or the Purchaser effectively to acquire, hold or exercise full
rights of ownership of the Shares, including, without limitation, the
right to vote any Shares acquired or owned by the Purchaser or Parent on
all matters properly presented to the Company's stockholders, (4) require
divestiture by Parent or the Purchaser of Shares, in the case of any of
the foregoing in clauses (2), (3) or (4), which would reasonably be
expected, individually or in the aggregate, to have a material adverse
effect on the respective businesses of the Company or Compagnie Generale
des Eaux, or (5) result in a Material Adverse Effect on the Company or
Parent;
(b) there shall be instituted or pending any action or
proceeding by any Governmental Entity seeking any of the consequences
referred to in clauses (1) through (4) of paragraph (a) above; or
(c) (1) it shall have been publicly disclosed or the Purchaser
shall have otherwise learned that beneficial ownership (determined for the
purposes of this
<PAGE> 47
paragraph (c) as set forth in Rule 13d-3 promulgated under the Exchange
Act) of 50% or more of the outstanding Common Shares has been acquired by
any person (including the Company or any of its subsidiaries or
affiliates) or group (as defined in Section 13(d)(3) under the Exchange
Act), (2) the Company Board or any committee thereof shall have withdrawn,
or shall have modified or amended in a manner adverse to Parent or the
Purchaser, the approval, adoption or recommendation, as the case may be,
of the Offer, the Merger or the Merger Agreement, or approved or
recommended any, merger, consolidation, other business combination, sale
of material assets, takeover proposal or other acquisition of Common
Shares other than the Offer and the Merger, (3) a third party shall have
entered into a definitive agreement or a written agreement in principle
with the Company with respect to a tender offer or exchange offer for any
Common Shares or a merger, consolidation, other business combination with
the Company or sale of material assets with or involving the Company or
any of its subsidiaries (except as specifically permitted by Section 6.1
of the Merger Agreement), or (4) the Company Board or any committee
thereof shall have resolved to do any of the foregoing (and such
resolution shall be made public); or
(d) the Company and the Purchaser and Parent shall have
reached an agreement that the Offer or the Merger Agreement be terminated,
or the Merger Agreement shall have been terminated in accordance with its
terms; or
(e) (i) any of the representations and warranties of the
Company set forth in the Merger Agreement, when read without any exception
or qualification as to materiality or to Material Adverse Effect on the
Company, shall not be true and correct as of the date of the Merger
Agreement except where the failure or failures to be so true and correct
would not, individually or in the aggregate, reasonably be expected to
adversely affect the value of the Company and its subsidiaries taken as a
whole, in an amount equal to or in excess of $500 million, (ii) any of the
representations and warranties of the Company set forth in Section 4.3 of
the Merger Agreement shall not be true and correct (except for immaterial
inaccuracies), as if such representations and warranties were made at the
time of such determination; or (iii) the Company shall have breached or
failed to observe or perform in any material respect any of its covenants
or agreements under the Merger Agreement, provided, however, that any
breach or failure to observe or perform by the Company which is capable of
being cured without a material adverse effect upon the Company and its
subsidiaries or Parent and its subsidiaries, shall not be deemed a breach
or failure to observe or perform by the Company if, without a material
adverse effect upon the Company and its subsidiaries or Parent and its
subsidiaries, such breach or failure to perform or observe is cured by the
Company within five business days after written notice thereof by Parent
is provided; or
(f) any Consent (other than the filing of a certificate of
merger or approval by the stockholders of the Company of the Merger if
required by the General Corporation Law of Delaware) required to be filed,
occurred or been obtained by the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement, the Offer
and the consummation of the transactions contemplated by this
-2-
<PAGE> 48
Agreement shall not have been filed or obtained or shall not have occurred
except where the failure to obtain such Consent could not reasonably be
expected to have individually or in the aggregate a Material Adverse
Effect on the Company; or
(g) there shall have occurred, and continued to exist, (1) any
general suspension of, or limitation on prices for, trading in securities
on the New York Stock Exchange or the Paris Bourse, (2) (excluding any
coordinated trading halt-triggered solely as a result of a specified
decrease in a market index and suspensions on limitations resulting solely
from physical damage or interference with such exchanges not related to
market conditions), (3) any decline of at least 35% in the CAC-40 Index
from the close of business on the last trading day immediately preceding
the date of the Merger Agreement, (4) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, France or the European Union, or a material limitation (whether or
not mandatory) by any Governmental Entity on the extension of credit by
banks or other lending institutions, or (5) in the case of any of the
foregoing clauses (1) and (2) existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof.
The foregoing conditions (including those set forth in clauses (i),
(ii) and (iii) of the initial paragraph) are for the benefit of Parent and the
Purchaser and may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to any such conditions and may be waived by Parent or
the Purchaser, in whole or in part, at any time and from time to time in their
reasonable discretion, in each case, subject to the terms of the Merger
Agreement. The failure by Parent or the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. Any reasonable determination by the Purchaser concerning
the events described in this Annex I will be final and binding on all parties.
-3-
<PAGE> 49
ANNEX II-A
LIST OF PARTIES TO
SUPPORT AGREEMENTS
Richard J. Heckmann
Andrew D. Seidel
Kevin L. Spence
Lion Advisors, L.P.
Apollo Investment Fund, L.P.
Lee M. Bass
John A. Cardwell
Jeffrey L. Hart
Fine Line Inc.
William P. Hallman, Jr.
Peter Sterling
Ardon E. Moore
Jason M. Taylor Grantor Trust
Ronda Leigh Taylor Grant Trust
Agua Partners
<PAGE> 50
ANNEX II-B
FORMS OF
SUPPORT AGREEMENTS
(see attached)
<PAGE> 51
ANNEX III
FORMS OF EMPLOYMENT AGREEMENTS
(see attached)
<PAGE> 52
ANNEX IV
FORM OF
COMPANY STOCK OPTION AGREEMENT
(see attached)
<PAGE> 53
Attachment 1
FORM OF
FIRPTA CERTIFICATE OF COMPANY
FIRPTA CERTIFICATE
Reference is made to the Agreement and Plan of Merger by and among
Vivendi, Eau Acquisition Corp. and United States Filter Corporation (the
"Company") dated as of March 22, 1999 (the "Merger Agreement"). Section 1445 of
the Internal Revenue Code of 1986, as amended (the "Code"), provides that a
transferee of a U.S. real property interest must withhold tax if the transferor
is a foreign person. In order to inform the transferee pursuant to Treasury
Regulation Sections 1.897-2(h)(2) and 1.1445-2(c)(3) that withholding of tax is
not required upon the disposition by the holders of interests in the Company of
their interests in the Company, the undersigned hereby certifies on behalf of
the Company that:
1. The address of the Company is: 40-004 Code Street, Palm Desert,
California 92211
2. The employer identification number of the Company is: 33-0266015
3. The Company is not, will not be from the date hereof through the
Effective Time (as defined in the Merger Agreement), and has not
been during the applicable period specified in Code Section
897(c)(1)(A)(ii) a United States real property holding corporation
(as defined in Code Section 897(c)(2)).
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief, it is true, correct
and complete, and I further declare that I have authority, as a responsible
corporate officer, to sign this document on behalf of the Company.
UNITED STATES FILTER CORPORATION
By:
-----------------------------------------
Name:
Title:
Date:
<PAGE> 1
EXHIBIT (c)(2)
FORM OF SUPPORT AGREEMENT
SUPPORT AGREEMENT (this "Agreement"), dated as of March 22, 1999, by
and between VIVENDI, a societe anonyme organized under the laws of France
("Parent"), and [Apollo Investment Fund, L.P.] [Lion Advisors, L.P. on behalf of
an investment account under management], ("Seller").
WHEREAS, concurrently herewith, Parent, Eau Acquisition Corp. (the
"Purchaser"), a Delaware corporation and a subsidiary of Parent, and United
States Filter Corporation (the "Company"), a Delaware corporation, are entering
into an Agreement and Plan of Merger of even date herewith (the "Merger
Agreement", which term for purposes of this Agreement shall not include any
amendment or waiver to such Merger Agreement which decreases the Offer Price or
the number of Shares to be purchased in the Offer or changes the form of
consideration payable in the Offer). Capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement, pursuant to
which the Purchaser agrees to make a tender offer (the "Offer") for all
outstanding Shares of the Company, at $31.50 per Share (including any increase
in the price per share paid to tendering shareholders pursuant to the Offer, the
"Offer Price") net to the seller in cash, to be followed by a merger (the
"Merger") of the Purchaser with and into the Company at the same Offer Price;
WHEREAS, as of the date hereof, Seller beneficially owns [6,877,805]
[6,875,054] Shares (the "Owned Shares");
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement and make the Offer, Parent and the Purchaser have required that
Seller agree, and Seller hereby agrees, to tender pursuant to the Offer the
Owned Shares, together with any Shares acquired after the date hereof and prior
to the termination of the Offer, whether upon the exercise of options,
conversion of convertible securities or otherwise (collectively, the "Tender
Shares") on the terms and subject to the conditions provided for in this
Agreement; and
WHEREAS, as a condition to its willingness to enter into this
Agreement, Seller has requested, and Parent has agreed, that Parent purchase or
cause the Purchaser to purchase the Owned Shares in the event the Owned Shares
are not purchased in the Offer;
WHEREAS, immediately prior to the execution and delivery of this
Agreement, Parent has entered into Support Agreements similar to this Agreement
with certain members of the Company's management and another significant
shareholder of the Company;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and to Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause the
record owner of such shares to validly tender), pursuant to and in accordance
with the terms of the Offer, as soon as practicable after such request but in no
event later than ten business days after the date of
<PAGE> 2
commencement, the Tender Shares by physical delivery of the certificates
therefor (or delivery via transfer to Purchaser's account at the Depository
Trust Company), and to not withdraw such Tender Shares, except following
termination of the Offer pursuant to its terms or as otherwise contemplated
herein. Seller hereby acknowledges and agrees that Parent's and the Purchaser's
obligation to accept for payment and pay for the Tender Shares in the Offer is
subject to the terms and conditions of the Offer. Seller hereby permits Parent
and the Purchaser to publish and disclose in the Offer Documents and, if
approval of the Company's stockholders is required under applicable law, the
Proxy Statement (including all documents and schedules filed with the Securities
and Exchange Commission) its identity and ownership of the Tender Shares and the
nature of its commitments, arrangements and understandings under this Agreement,
subject to providing a copy of said disclosure to Seller and considering any
reasonable comments thereon provided by Seller).
1.2 Voting. Subject to Section 1.3 and Section 2, Seller hereby
agrees that, during the time this Agreement is in effect, at any meeting of the
stockholders of the Company, however called, Seller shall at the written
direction of Parent, (a) vote the Tender Shares in favor of the Merger; (b) vote
the Tender Shares against any action or agreement that would result in a breach
of any covenant, representation or warranty or any other obligation or agreement
of the Company under the Merger Agreement; and (c) vote the Tender Shares
against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, including, but not
limited to: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; (iii) any change in the
management or board of directors of the Company, except as otherwise agreed to
in writing by the Purchaser; (iv) any material change in the present
capitalization or dividend policy of the Company; or (v) any other material
change in the Company's corporate structure or business. Seller hereby revokes
any proxy previously granted by it with respect to the Tender Shares.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(i) Subject to Section 2, Seller hereby irrevocably grants to, and
appoints, Guillaume Hannezo and Eric Lecoys, or either of them, in their
respective capacities as officers or directors of Parent, and any individual who
shall hereafter succeed to any such office or directorship of Parent, and each
of them individually, Seller's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of Seller, to vote the
Tender Shares in favor of the Merger and other transactions contemplated by the
Merger Agreement, against any Acquisition Transaction and otherwise as
contemplated by Section 1.2.
(ii) Seller represents that any proxies heretofore given in respect
of the Tender Shares are not irrevocable, and that any such proxies are hereby
revoked.
-2-
<PAGE> 3
(iii) Seller understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon Seller's execution and delivery of
this Agreement. Seller hereby affirms that the irrevocable proxy set forth in
this Section 1.3 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of Seller under this Agreement. Seller hereby further affirms that
the irrevocable proxy is coupled with an interest. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the Delaware General Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not (i) except to Parent or the Purchaser, transfer (which term shall
include, without limitation, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of the Tender Shares or any interest
therein, (ii) except with Parent, enter into any contract, option or other
agreement or understanding with respect to any transfer of any or all of the
Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney
or other authorization in or with respect to the Tender Shares, (iv) deposit any
Tender Shares into a voting trust or enter into a voting agreement or
arrangement with respect to the Tender Shares or (v) take any other action that
would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement or which would make any representation or warranty of Seller hereunder
untrue or incorrect.
1.5 No Solicitation. Seller hereby agrees that it shall not, and
shall not permit or authorize any of its affiliates, representatives or agents
to, directly or indirectly, encourage, solicit, explore, participate in or
initiate discussions or negotiations with, or provide or disclose any
information to, any corporation, partnership, person or other entity or group
(other than Parent, the Purchaser or any of their affiliates or representatives)
concerning any Acquisition Transaction or enter into any agreement, arrangement
or understanding requiring the Company to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by the Merger
Agreement. Seller will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Transaction. From and after the execution of this Agreement, Seller
shall immediately advise Parent in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations or proposals relating to
an Acquisition Transaction, identify the offeror and furnish to Parent a copy of
any such proposal or inquiry, if it is in writing, or a written summary of any
oral proposal or inquiry relating to an Acquisition Transaction. Seller shall
promptly advise Parent in writing of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto.
1.6 Reasonable Best Efforts. Seller shall promptly consult with
Parent and use reasonable best efforts to provide any necessary information and
material with respect to all filings made by Seller with any Governmental Entity
in connection with this Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby. Parent acknowledges that Seller will file a
Schedule 13D in connection with the Agreement.
-3-
<PAGE> 4
1.7 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that it may have.
1.8 Parent's Commitment to Purchase Owned Shares. Parent hereby
agrees that, if (i) the Offer is terminated, abandoned or withdrawn by the
Purchaser or (ii) the Offer is consummated and the Owned Shares are not
purchased by the Purchaser pursuant to the Offer, (other than as a result of a
breach of this Agreement by Seller) then Parent will purchase or cause the
Purchaser to purchase, and the Seller shall sell, the Owned Shares at a purchase
price per share equal to the Offer Price, on the 10th Business Day after the
date of such termination, abandonment, withdrawal or consummation of the Offer;
provided that (x) all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and any equivalent foreign
laws, required for the purchase of the Owned Shares upon such exercise shall
have expired or been waived, (y) there shall not be in effect any preliminary or
final injunction or other order issued by any court or governmental,
administrative or regulatory agency or authority prohibiting the purchase of the
Owned Shares pursuant to this Agreement and (z) Seller's representations and
warranties herein shall be true in all material respects at such time except to
the extent that the failure to be so true in all material respects would not
adversely affect the benefits to be received by Parent. Parent and the Purchaser
will use their best efforts to obtain all necessary regulatory approvals so as
to enable them to pay the aggregate Offer Price (or have a third party to pay
the aggregate Offer Price) to Seller no later than June 15, 1999 in accordance
with all applicable securities laws and other legal constraints. In that regard,
Seller shall cooperate with Parent and the Purchaser, including by transferring
against payment of the Offer Price on or before June 15, 1999 the Tender Shares
at Parent's request to a third party designated by Parent or the Purchaser on
terms reasonably specified by them, provided that such terms do not increase
Seller's obligations or liabilities in any respect or reduce the benefits to be
obtained by Seller hereunder. If the Owned Shares have not been purchased and
paid for in the Offer or under the preceding sentences of this Section 1.8 by
June 15, 1999, (and so long as Seller's representations and warranties herein
shall be true in all material respects except where the failure to be so true in
all material respects would not adversely affect the benefits to be received by
Parent or the third party so designated by Parent), then Seller may sell such
Shares, in one or more transactions in the sole discretion of Seller, to persons
other than the Parent or Purchaser and such sold Shares shall not be subject to
Sections 1.1 to 1.4 hereof. In the event Seller sells any Owned Shares for
anything less than the Offer Price, Parent shall, promptly after such sale, pay
to Seller in US Dollars the difference between the amount received in such sale
and the amount that Seller would have received had such Shares been sold in the
Offer or under the preceding sentences of this Section 1.8 (plus any "gross-up"
in respect of French withholding tax, if any). Seller shall use such efforts as
it reasonably determines are appropriate to obtain a fair price for any such
Shares sold under the second preceding sentence, it being agreed that Seller may
seek to sell all such Shares promptly and with no retained obligation or
liability.
2. Expiration. Sections 1.1 through 1.4 of this Agreement and the
parties' obligations thereunder shall terminate on the earlier of the payment
for the Tender Shares pursuant to the Offer or in accordance with to Section
1.8.
-4-
<PAGE> 5
3. Representation and Warranties. Seller hereby represents and
warrants to Parent as follows:
(a) Title. Seller has good and valid title to the Owned
Shares, free and clear of any lien, charge, encumbrance or claim of
whatever nature (other than liens in respect of pledges to secure
margin or similar borrowings). Upon the purchase of the Tender
Shares by Parent or the Purchaser, Purchaser will receive good and
valid title to the Tender Shares, free and clear of any lien,
charge, encumbrance or similar claim of whatever nature.
(b) Ownership of Shares. On the date hereof, the Owned Shares
are owned beneficially by Seller and, on the date hereof, except as
described in Seller's Schedule 13D filings, the Owned Shares
constitute all of the Shares owned of record or beneficially by
Seller. Except as described in Seller's Schedule 13D filings, Seller
has sole voting power and sole power of disposition with respect to
all of the Owned Shares, with no restrictions on Seller's rights of
disposition pertaining thereto, subject to applicable federal and
state securities laws (including Rules 144 and 145) and any liens in
the ordinary course of business that will not interfere the Seller's
obligations hereunder.
(c) Power; Binding Agreement. Seller has the legal capacity,
power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of
this Agreement by Seller will not violate any other agreement to
which Seller is a party including, without limitation, any voting
agreement, stockholders agreement or voting trust. This Agreement
has been duly and validly executed and delivered by Seller and
constitutes a valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms.
(d) No Conflicts. Other than in connection with or in
compliance with the provisions of the Exchange Act and the HSR Act,
no authorization, consent or approval of, or filing with, any court
or any public body or authority is necessary for the consummation by
Seller of the transactions contemplated by this Agreement which
would reasonably be expected to materially restrict or hinder the
performance of Seller's obligations hereunder. The execution,
delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not constitute a breach,
violation or default (or any event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result
in a right of termination or acceleration under, or result in the
creation of any lien, encumbrance, pledge, charge or claim upon any
of the properties or assets of Seller under, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or
other instrument to which Seller is a party or by which its
properties or assets are bound which would reasonably be expected to
materially restrict or hinder the performance of Seller's actions
hereunder.
-5-
<PAGE> 6
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's,
financial adviser's or other similar fee or commission in connection
with the transactions contemplated hereby based upon arrangements
made by or on behalf of Seller.
(f) Information. Seller understands and acknowledges that
Parent and the Purchaser have been conducting a due diligence
investigation of the Company and may have information which is
material regarding the Company and its financial performance and
prospects and which is not publicly disclosed. Seller agrees that it
shall not take any action against Parent or the Purchaser in respect
of such information .
Parent and the Purchaser hereby represent and warrant to Seller as
follows:
(g) Power; Binding Agreement. Each of Parent and the Purchaser
has the legal capacity, power and authority to enter into and
perform all of its obligations under this Agreement. The execution,
delivery and performance of this Agreement by Parent and the
Purchaser will not violate any other agreement to which Parent or
the Purchaser are parties including, without limitation, any voting
agreement, stockholders agreement or voting trust. This Agreement
has been duly and validly executed and delivered by Parent and the
Purchaser and constitutes a valid and binding agreement of each of
Parent and the Purchaser, enforceable against them in accordance
with its terms.
(h) No Conflicts. Other than in connection with or in
compliance with the provisions of the Exchange Act and the HSR Act,
no authorization, consent or approval of, or filing with, any court
or any public body or authority is necessary for the consummation by
Parent and the Purchaser of the transactions contemplated by this
Agreement which would reasonably be expected to materially restrict
or hinder the performance of Parent's obligations hereunder. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not
constitute a breach, violation or default (or any event which, with
notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, encumbrance, pledge,
charge or claim upon any of the properties or assets of Parent or
the Purchaser under, any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument to which Parent
or the Purchaser is a party or by which their properties or assets
are bound which would reasonably be expected to materially restrict
or hinder the performance of their obligations hereunder.
(i) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's,
financial adviser's or other similar fee or commission in connection
with the transactions contemplated
-6-
<PAGE> 7
hereby based upon arrangements made by or on behalf of Parent or the
Purchaser for which Seller would be responsible.
4. Additional Shares. Seller hereby agrees, while this Agreement is
in effect, to promptly notify Parent of the number of any new Shares acquired by
Seller, if any, after the date hereof.
5. Further Assurances. From time to time, at the request of one
party hereto and without further consideration, the other party shall execute
and deliver such additional documents and take all such further action as may be
reasonably necessary or desirable in connection with the performance of its
obligations hereunder. Parent shall cause the Company to provide a Certificate
to Seller that it is not a U.S. real property holding company.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein
shall terminate upon Seller's sale of the Tender Shares to the Purchaser in the
Offer or pursuant to Section 1.8, other than Seller's representations and
warranties in Section 3(a) which shall survive the sale of the Tender Shares.
6.2 Entire Agreement; Assignment. This Agreement (i) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (ii)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect wholly
owned subsidiary of Parent, but no assignment shall relieve Parent of its
obligations hereunder if the assignee does not perform its obligations and
Seller may assign its rights and obligations hereunder to one or more persons
reasonably acceptable to Purchaser to whom it transfers Tender Shares in
accordance herewith, so long as such persons agree in writing with Parent and
Seller to be bound by the provisions hereof applicable to Seller.
6.3 Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telegram, telex or telecopy or by any courier service, such as Federal
Express, providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
-7-
<PAGE> 8
If to Seller:
c/o Michael D. Weiner, Esq.
Apollo Advisors, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Fax: (310) 201-4166
copy to Seller's Counsel:
Patrick J. Dooley, Esq.
Akin Gump Strauss Hauer & Feld, L.L.P.
590 Madison Avenue
New York, NY 10022
Fax: (212) 872-1002
If to Parent:
VIVENDI
42, Avenue de Friedland
75380 Paris Cedex 08
Attention: Guillaume Hannezo
Fax: (011) 331-7171-1415
copy to:
Cabinet Bredin Prat
130 rue du Faubourg Saint Honore
75008
Paris
Attention: Elena M. Baxter, Esq.
Fax: (011) 331-4359-7001
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
Fax: (212) 403-2000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
-8-
<PAGE> 9
6.5 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. Each of Seller, Parent and the Purchaser irrevocably submits to
the exclusive jurisdiction of any Delaware state or federal court sitting in the
State of Delaware in any action arising out of or relating to this Agreement,
hereby irrevocably agrees that all claims in respect of such action may be heard
and determined in such Delaware state or federal court, and hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding and the right
to trial by jury.
6.6 Specific Performance. Each of Parent and Seller recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other to sustain damages for which it would not
have an adequate remedy at law, and therefore each of Parent and Seller agrees
that in the event of any such breach the other shall be entitled to the remedy
of specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
6.10 No Agency; Indemnification. Nothing herein shall be deemed
create any agency or partnership relationship between the parties hereto. Parent
shall indemnify Seller and hold Seller harmless from and against any loss, claim
or liability arising out of a third party claim relating to Seller's entering
into this Agreement and the consummation of the transactions contemplated
hereby, and each party shall indemnify the other against breaches of its
representations and warranties.
* * *
-9-
<PAGE> 10
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to
be duly executed as of the day and year first above written.
[APOLLO INVESTMENT FUND, L.P.
By: APOLLO ADVISORS, L.P.
ITS GENERAL PARTNER
By: APOLLO CAPITAL MANAGEMENT,
INC., ITS GENERAL PARTNER
By: /s/ Michael D. Weiner
----------------------------------------
Name: Michael D. Weiner
Title: Vice President]
[LION ADVISORS, L.P.
By: LION CAPITAL MANAGEMENT, INC.
ITS GENERAL PARTNER
By: /s/ Michael D. Weiner
----------------------------------------
Name: Michael D. Weiner
Title: Vice-President]
VIVENDI
By: /s/ Jean-Marie Messier
----------------------------------------
Name: Jean-Marie Messier
Title: Chairman and Chief
Executive Officer
-10-
<PAGE> 1
EXHIBIT (c)(3)
EXECUTION COPY
SUPPORT AGREEMENT
SUPPORT AGREEMENT (this "Agreement"), dated as of March 22, 1999, by
and between VIVENDI, a societe anonyme organized under the laws of France
("Parent"), and each of the individuals and entities listed on Annex A hereto
(individually or collectively, "Seller").
WHEREAS, concurrently herewith, Parent, Eau Acquisition Corp. (the
"Purchaser"), a Delaware corporation and a subsidiary of Parent, and United
States Filter Corporation (the "Company"), a Delaware corporation, are entering
into an Agreement and Plan of Merger of even date herewith (the "Merger
Agreement", which term shall not include any amendment to such Agreement which
decreases the Offer Price or changes the form of consideration payable in the
Offer, unless Seller consents to the inclusion of such amendment in such term).
Capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement, pursuant to which the Purchaser agrees to make a tender
offer (the "Offer") for all outstanding Shares of the Company, at $31.50 per
Share (the "Offer Price") net to the seller in cash, to be followed by a merger
(the "Merger") of the Purchaser with and into the Company;
WHEREAS, as of the date hereof, Seller beneficially owns directly
that number of Shares (the "Owned Shares") set forth opposite his name on Annex
A hereto;
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement and make the Offer, Parent and the Purchaser have required that
Seller agree, and Seller hereby agrees, (i) if requested by Parent, to tender
pursuant to the Offer the Owned Shares, together with any Shares acquired after
the date hereof and prior to the termination of the Offer, whether upon the
exercise of options, conversion of convertible securities or otherwise
(collectively, the "Tender Shares") on the terms and subject to the conditions
provided for in this Agreement and (ii) to enter into the other agreements set
forth herein; and
WHEREAS, as a condition to its willingness to enter into this
Agreement, Seller has requested, and Parent has agreed, that Parent purchase or
cause the Purchaser to purchase the Owned Shares in the event the Owned Shares
are not purchased in the Offer;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and to Vote.
1.1 Tender. Seller hereby agrees that if, but only if, it is so
requested by Parent, it will validly tender (or cause the record owner of such
shares to validly tender), pursuant to and in accordance with the terms of the
Offer, as soon as practicable after such request but in no event later than the
then scheduled expiration date of the Offer, the Tender Shares by physical
delivery of the certificates therefor, and to not withdraw such Tender Shares,
except following termination of the Offer pursuant to its terms. Seller hereby
permits Parent and the Purchaser to publish and disclose in the Offer Documents
and, if approval of the Company's stockholders is required under applicable law,
the Proxy Statement (including all documents and
<PAGE> 2
schedules filed with the Securities and Exchange Commission) its identity and
ownership of the Tender Shares and the nature of its commitments, arrangements
and understandings under this Agreement.
1.2 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the stockholders of the Company,
however called, Seller shall (a) vote the Tender Shares in favor of the Merger;
(b) vote the Tender Shares against any action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Tender
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, including, but not
limited to: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; (iii) any change in the
management or board of directors of the Company, except as otherwise agreed to
in writing by the Purchaser; (iv) any material change in the present
capitalization or dividend policy of the Company; or (v) any other material
change in the Company's corporate structure or business. Seller hereby revokes
any proxy previously granted by him with respect to the Tender Shares.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(i) Seller hereby irrevocably grants to, and appoints, Guillaume
Hannezo and Eric Lecoys, or either of them, in their respective capacities as
officers or directors of Parent, and any individual who shall hereafter succeed
to any such office or directorship of Parent, and each of them individually,
Seller's proxy and attorney-in-fact (with full power of substitution), for and
in the name, place and stead of Seller, to vote the Tender Shares in favor of
the Merger and other transactions contemplated by the Merger Agreement, against
any Acquisition Transaction and otherwise as contemplated by Section 1.2.
(ii) Seller represents that any proxies heretofore given in respect
of the Tender Shares are not irrevocable, and that any such proxies are hereby
revoked.
(iii) Seller understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon Seller's execution and delivery of
this Agreement. Seller hereby affirms that the irrevocable proxy set forth in
this Section 1.3 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of Seller under this Agreement. Seller hereby further affirms that
the irrevocable proxy is coupled with an interest and may under no circumstances
be revoked. Seller hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the Delaware General Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not (i) except to Parent or the Purchaser, transfer (which term shall
include, without limitation, any sale, gift,
-2-
<PAGE> 3
pledge or other disposition), or consent to any transfer of, any or all of the
Tender Shares or any interest therein, (ii) except with Parent, enter into any
contract, option or other agreement or understanding with respect to any
transfer of any or all of the Tender Shares or any interest therein, (iii) grant
any proxy, power-of-attorney or other authorization in or with respect to the
Tender Shares, (iv) deposit any Tender Shares into a voting trust or enter into
a voting agreement or arrangement with respect to the Tender Shares or (v) take
any other action that would in any way restrict, limit or interfere with the
performance of its obligations hereunder or the transactions contemplated hereby
or by the Merger Agreement or which would make any representation or warranty of
Seller hereunder untrue or incorrect.
1.5 No Solicitation. Seller hereby agrees that it shall not, and
shall not permit or authorize any of its affiliates, representatives or agents
to, directly or indirectly, encourage, solicit, explore, participate in or
initiate discussions or negotiations with, or provide or disclose any
information to, any corporation, partnership, person or other entity or group
(other than Parent, the Purchaser or any of their affiliates or representatives)
concerning any Acquisition Transaction or enter into any agreement, arrangement
or understanding requiring the Company to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by the Merger
Agreement. Seller will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Transaction. From and after the execution of this Agreement, Seller
shall immediately advise Parent in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations or proposals relating to
an Acquisition Transaction, identify the offeror and furnish to Parent a copy of
any such proposal or inquiry, if it is in writing, or a written summary of any
oral proposal or inquiry relating to an Acquisition Transaction. Seller shall
promptly advise Parent in writing of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto.
Any action taken by the Company or any member of the Board of Directors of the
Company including, if applicable, any representative of Seller acting in such
capacity, in accordance with the proviso to the second sentence of Section
6.10(a) of the Merger Agreement shall be deemed not to violate this Section 1.5.
1.6 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, Seller hereby agrees to use all reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Seller shall promptly consult with Parent and provide
any necessary information and material with respect to all filings made by
Seller with any Governmental Entity in connection with this Agreement and the
Merger Agreement and the transactions contemplated hereby and thereby.
1.7 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that it may have.
1.8 Parent's Commitment to Purchase Owned Shares. Parent hereby
agrees that, if (i) the Offer is terminated, abandoned or withdrawn by the
Purchaser or (ii) the Offer is consummated and the Owned Shares are not
purchased by the Purchaser pursuant to the Offer, then Parent will purchase or
cause the Purchaser to purchase, the Owned Shares at a purchase price per share
equal to the Offer Price (or such higher price as may be paid to tendering
-3-
<PAGE> 4
shareholders pursuant to the Offer), on the 5th Business Day after the date of
such termination, abandonment, withdrawal or consummation of the Offer; provided
that (x) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and any equivalent foreign laws,
required for the purchase of the Owned Shares upon such exercise shall have
expired or been waived, (y) there shall not be in effect any preliminary or
final injunction or other order issued by any court or governmental,
administrative or regulatory agency or authority prohibiting the purchase of the
Owned Shares pursuant to this Agreement and (z) Seller's representations and
warranties herein shall be true in all material respects at such time.
1.9 Reasonable Efforts. Parent agrees (a) to cause the Purchaser to
institute the Offer as soon as reasonably practicable after execution of this
Agreement and the Merger Agreement and ( b) to reasonably promptly file an
application under the HSR Act and equivalent foreign laws to purchase the Owned
Shares.
2. Expiration. This Agreement and the parties' obligations hereunder
shall terminate on the earlier of the payment for the Owned Shares pursuant to
the Offer or pursuant to Section 1.8 and the 181st day after the termination of
the Merger Agreement.
3. Representation and Warranties. Seller hereby represents and
warrants to Parent as follows:
(a) Title. Seller has good and valid title to the Owned
Shares, free and clear of any lien, pledge, charge, encumbrance or
claim of whatever nature, except the pledge of the Owned Shares to
secure margin borrowings. Upon the purchase of the Tender Shares by
Parent or the Purchaser, Seller will deliver good and valid title to
the Tender Shares, free and clear of any lien, charge, encumbrance
or claim of whatever nature.
(b) Ownership of Shares. On the date hereof, the Owned Shares
are owned of record or beneficially by Seller and, on the date
hereof, the Owned Shares constitute all of the Shares owned of
record or beneficially by Seller. Seller has sole voting power and
sole power of disposition with respect to all of the Owned Shares,
with no restrictions, subject to applicable federal securities laws,
on Seller's rights of disposition pertaining thereto.
(c) Power; Binding Agreement. Seller has the legal capacity,
power and authority to enter into and perform all of its obligations
under this Agreement. This Agreement has been duly and validly
executed and delivered by Seller and constitutes a valid and binding
agreement of Seller, enforceable against Seller in accordance with
its terms.
(d) No Conflicts. Other than in connection with or in
compliance with the provisions of the Exchange Act and the HSR Act,
no authorization, consent or approval of, or filing with, any court
or any public body or authority is necessary for the consummation by
Seller of the transactions contemplated by this Agreement. Subject
to the release of the margin loan pledge at or prior to the
-4-
<PAGE> 5
purchase of the Owned Shares, the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby will not constitute a breach,
violation or default (or any event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result
in a right of termination or acceleration under, or result in the
creation of any lien, encumbrance, pledge, charge or claim upon any
of the properties or assets of Seller under, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or
other instrument to which Seller is a party or by which its
properties or assets are bound.
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's,
financial adviser's or other similar fee or commission in connection
with the transactions contemplated hereby based upon arrangements
made by or on behalf of Seller.
(f) Information. Seller understands and acknowledges that
Parent and the Purchaser have been conducting a due diligence
investigation of the Company and may have information which is
material regarding the Company and its financial performance and
prospects and which is not publicly disclosed. Seller agrees that it
shall not take any action against Parent or the Purchaser in respect
of such information.
4. Additional Shares. Seller hereby agrees, while this Agreement is
in effect, to promptly notify Parent of the number of any new Shares acquired by
Seller, if any, after the date hereof.
5. Further Assurances. From time to time, at the Parent's request
and without further consideration, Seller shall execute and deliver such
additional documents and take all such further action as may be reasonably
necessary or desirable to consummate and make effective the transactions
contemplated by Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein
shall terminate upon Seller's sale of the Tender Shares to the Purchaser in the
Offer or pursuant to Section 1.8, other than Seller's representations and
warranties in Sections 3(a) and (b) which shall survive the sale of the Tender
Shares and the termination of this Agreement following such sale.
6.2 Entire Agreement; Assignment. This Agreement (i) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (ii)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
-5-
<PAGE> 6
6.3 Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telegram, telex or telecopy or by any courier service, such as Federal
Express, providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
If to Seller:
c/o Ardon Moore
Agent and Attorney-in-fact
201 Main Street,
Suite 3200
Fort Worth, Texas 76102
Fax: 817-
copy to Seller's Counsel:
Kelly, Hart & Hallman
201 Main Street
Suite 2500
Forth Worth, Texas 76102
Attention: F. Richard Bernasek
Fax: 817-878-9285
If to Parent:
VIVENDI
42 Avenue de Friedland
75380 Paris Cedex 08
France
Attention: Guillaume Hannezo
Fax: (011) 331-7171-1415
-6-
<PAGE> 7
copy to:
Cabinet Bredin Prat
130 rue du Faubourg Saint Honore
75008
Paris
Attention: Elena M. Baxter, Esq.
Fax: (011) 331-4359-7001
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Trevor S. Norwitz, Esq.
Fax: (212) 403-2000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. Each of Seller, Parent and the Purchaser irrevocably submits to
the exclusive jurisdiction of any Delaware state or federal court sitting in the
State of Delaware in any action arising out of or relating to this Agreement,
hereby irrevocably agrees that all claims in respect of such action may be heard
and determined in such Delaware state or federal court, and hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding.
6.6 Specific Performance. Each of Parent and Seller recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other to sustain damages for which it would not
have an adequate remedy at law, and therefore each of Parent and Seller agrees
that in the event of any such breach the other shall be entitled to the remedy
of specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
-7-
<PAGE> 8
6.9 Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
* * *
-8-
<PAGE> 9
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to
be duly executed as of the day and year first above written.
VIVENDI
By: /s/ Jean-Marie Messier
---------------------------------------------
Name: Jean-Marie Messier
Title: Chairman and Chief Executive Officer
SELLERS
/s/ Lee M. Bass*
---------------------------------------------
Name: Lee M. Bass
/s/ John A. Cardwell*
---------------------------------------------
Name: John A. Cardwell
/s/ Jeffrey L. Hart*
---------------------------------------------
Name: Jeffrey L. Hart
/s/ Fine Line Inc.*
---------------------------------------------
Name: Fine Line Inc.
/s/ William P. Hallman, Jr.*
---------------------------------------------
Name: William P. Hallman, Jr.
/s/ Peter Sterling*
---------------------------------------------
Name: Peter Sterling
/s/ Ardon E. Moore
---------------------------------------------
Name: Ardon E. Moore
/s/ Jason M. Taylor Grantor Trust*
---------------------------------------------
Name: Jason M. Taylor Grantor Trust
/s/ Rhonda Leigh Taylor Grantor Trust*
---------------------------------------------
Name: Rhonda Leigh Taylor Grantor Trust
/s/ Agua Partners*
---------------------------------------------
Name: Agua Partners
* By: /s/ Ardon E. Moore
-------------------------------------------
Ardon E. Moore, Agent
and Attorney-in-Fact
-9-
<PAGE> 10
ANNEX A
<TABLE>
<CAPTION>
Seller Shares Beneficially Owned
- ------ -------------------------
<S> <C>
Lee M. Bass 4,857,277
John A. Cardwell 216,000
Jeffrey L. Hart 72,000
Fine Line Inc. 1,231,559
William P. Hallman, Jr 61,578
Peter Sterling 61,578
Ardon E. Moore 148,480
Jason M. Taylor Grantor Trust 30,789
Ronda Leigh Taylor Grantor Trust 30,789
Agua Partners 1,289,950
</TABLE>
<PAGE> 1
EXHIBIT (c)(4)
EXECUTION COPY
MANAGEMENT SUPPORT AGREEMENT
SUPPORT AGREEMENT (this "Agreement"), dated as of March 22, 1999, by
and between Vivendi, a societe anonyme organized under the laws of France
("Parent"), and Richard J. Heckmann ("Seller").
WHEREAS, concurrently herewith, Parent, Eau Acquisition Corp. (the
"Purchaser"), a Delaware corporation and a subsidiary of Parent, and United
States Filter Corporation (the "Company"), a Delaware corporation, are entering
into an Agreement and Plan of Merger of even date herewith (the "Merger
Agreement", which term shall not include any amendment to such Agreement which
decreases the Offer Price or changes the form of consideration payable in the
Offer, unless Seller consents to the inclusion of such amendment in such term).
Capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement, pursuant to which the Purchaser agrees to make a tender
offer (the "Offer") for all outstanding Shares of the Company, at $31.50 per
Share (the "Offer Price") net to the seller in cash, to be followed by a merger
(the "Merger") of the Purchaser with and into the Company;
WHEREAS, as of the date hereof, Seller is an executive officer of
the Company beneficially owns directly 647,658 Shares (the "Owned Shares") and
options to acquire 761,650 Shares, and other equity-linked securities and
arrangements (the "Options");
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement and make the Offer, Parent and the Purchaser have required that
Seller agree, and Seller hereby agrees, (i) to tender pursuant to the Offer the
Owned Shares, together with any Shares acquired after the date hereof and prior
to the termination of the Offer, whether upon the exercise of Options,
conversion of convertible securities or otherwise (collectively, the "Tender
Shares") on the terms and subject to the conditions provided for in this
Agreement and (ii) to enter into the other agreements set forth herein; and
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and to Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause the
record owner of such shares to validly tender), pursuant to and in accordance
with the terms of the Offer, as soon as practicable after commencement of the
Offer but in no event later than ten business days after the date of
commencement of the Offer, the Tender Shares by physical delivery of the
certificates therefor and to not withdraw such Tender Shares, except following
termination of the Offer pursuant to its terms. Seller hereby acknowledges and
agrees that Parent's and the Purchaser's obligation to accept for payment and
pay for the Tender Shares is subject to the terms and conditions of the Offer.
Seller hereby permits Parent and the Purchaser to publish and disclose in the
Offer Documents and, if approval of the Company's stockholders is required
<PAGE> 2
under applicable law, the Proxy Statement (including all documents and schedules
filed with the Securities and Exchange Commission) its identity and ownership of
the Tender Shares and the nature of its commitments, arrangements and
understandings under this Agreement.
1.2 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the stockholders of the Company,
however called, Seller shall (a) vote the Tender Shares in favor of the Merger;
(b) vote the Tender Shares against any action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Tender
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, including, but not
limited to: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; (iii) any change in the
management or board of directors of the Company, except as otherwise agreed to
in writing by the Purchaser; (iv) any material change in the present
capitalization or dividend policy of the Company; or (v) any other material
change in the Company's corporate structure or business. Seller hereby revokes
any proxy previously granted by him with respect to the Tender Shares.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(i) Seller hereby irrevocably grants to, and appoints, Michel
Avenas, Christian G. Farman and Jean-Marie Messier, or any of them, in their
respective capacities as officers of the Purchaser or Parent, and any individual
who shall hereafter succeed to any such office of the Purchaser or Parent, and
each of them individually, Seller's proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of Seller, to vote the
Tender Shares in favor of the Merger and other transactions contemplated by the
Merger Agreement, against any Acquisition Transaction and otherwise as
contemplated by Section 1.2.
(ii) Seller represents that any proxies heretofore given in respect
of the Tender Shares are not irrevocable, and that any such proxies are hereby
revoked.
(iii) Seller understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon Seller's execution and delivery of
this Agreement. Seller hereby affirms that the irrevocable proxy set forth in
this Section 1.3 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of Seller under this Agreement consistent with Seller's duties as an
officer or Director of the Company and in accordance with the terms of the
Merger Agreement. Seller hereby further affirms that the irrevocable proxy is
coupled with an interest and may under no circumstances be revoked. Seller
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 212(e)
of the Delaware General Corporation Law.
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<PAGE> 3
1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not (i) except to the Purchaser, transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Options or Tender Shares or any interest
therein, (ii) except with Parent, enter into any contract, option or other
agreement or understanding with respect to any transfer of any or all of the
Options or Tender Shares or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to the Options or
Tender Shares, (iv) deposit any Options or Tender Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Tender Shares
or (v) take any other action that would in any way restrict, limit or interfere
with the performance of its obligations hereunder or the transactions
contemplated hereby or by the Merger Agreement or which would make any
representation or warranty of Seller hereunder untrue or incorrect.
1.5 No Solicitation. Seller hereby agrees that it shall not, and
shall not permit or authorize any of its affiliates, representatives or agents
to, directly or indirectly, encourage, solicit, explore, participate in or
initiate discussions or negotiations with, or provide or disclose any
information to, any corporation, partnership, person or other entity or group
(other than Parent, the Purchaser or any of their affiliates or representatives)
concerning any Acquisition Transaction or enter into any agreement, arrangement
or understanding requiring the Company to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by the Merger
Agreement. Seller will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Transaction. From and after the execution of this Agreement, Seller
shall immediately advise Parent in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations or proposals relating to
an Acquisition Transaction, identify the offeror and furnish to Parent a copy of
any such proposal or inquiry, if it is in writing, or a written summary of any
oral proposal or inquiry relating to an Acquisition Transaction. Seller shall
promptly advise Parent in writing of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto.
Any action taken by the Company or any member of the Board of Directors of the
Company including, if applicable, any representative of Seller acting in such
capacity, in accordance with the proviso to the second sentence of Section
6.10(a) of the Merger Agreement shall be deemed not to violate this Section 1.5.
1.6 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, Seller hereby agrees to use all reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Seller shall promptly consult with Parent and provide
any necessary information and material with respect to all filings made by
Seller with any Governmental Entity in connection with this Agreement and the
Merger Agreement and the transactions contemplated hereby and thereby.
1.7 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that it may have.
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<PAGE> 4
1.8 Option; Payment for Tender Shares in Excess of the Offer Price.
(a) In order to induce Parent and Purchaser to enter into the
Merger Agreement, Seller hereby grants to Parent an irrevocable
option (the "Stock Option") to purchase the Tender Shares at a
purchase price per share equal to the Offer Price (the "Purchase
Price"), on the terms described below. If (i) the Tender Shares are
purchased pursuant to the Offer, (ii) the Merger Agreement is
terminated pursuant to Section 8.1 (e), (f) or (g), or the Offer is
terminated following the failure of any of the conditions set forth
in clauses (c) or (e) of Annex I of the Merger Agreement to be
satisfied, the Stock Option shall, in either such case, become
exercisable in whole or in part upon the first to occur of either
such event and remain exercisable, in whole or in part, until the
date which is 120 days after the date of the occurrence of such
event; provided that the Stock Option may only be exercised if (x)
all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and any
equivalent foreign laws, required for the purchase of the Tender
Shares upon such exercise shall have expired or been waived (and
such 120-day period shall be tolled if it would otherwise expire
pending such expiration or waiver) and (ii) there shall not be in
effect any preliminary or final injunction or other order issued by
any court or governmental, administrative or regulatory agency or
authority prohibiting the exercise of the Stock Option pursuant to
this Agreement. In the event that Parent wishes to exercise the
Stock Option, Parent shall send a written notice (the "Notice") to
Seller identifying the place and date (not less than one nor more
than 20 business days from the date of the Notice) for the closing
of such purchase.
(b) Seller hereby agrees that any incremental value Seller has
in the equity of the Company (including any Shares and Options
beneficially owned by Seller) resulting from or attributable to an
Acquisition Transaction (other than with Parent or the Purchaser)
that is entered into or consummated within 12 months of the
termination of the Merger Agreement that exceeds $31.50 per share
(an "Excess Amount") shall belong to Parent. Seller accordingly
agrees to hold in trust for the benefit of Parent, and to remit to
Parent within two days of any receipt thereof (or, if earlier,
entitlement to receive), any Excess Amount or Amounts that Seller
shall receive or be entitled to receive from any person. Seller
acknowledges that this provision is a material inducement to Parent
and Purchaser to enter into this Agreement, and is intended to
ensure that Seller would not have a personal incentive to favor a
competing transaction over the transactions contemplated by the
Merger Agreement. Accordingly, Seller hereby agrees to reimburse
Parent and Purchaser for any fees and expenses (including reasonable
attorneys fees) incurred by Parent and Purchaser in connection with
any successful litigation, dispute or other attempt to recover
Excess Amounts.
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<PAGE> 5
2. Expiration. This Agreement and Seller's obligation to tender
provided hereto shall terminate on the earlier of the payment for the Shares
pursuant to the Offer and the 181st day after the termination of the Merger
Agreement.
3. Representation and Warranties. Seller hereby represents and
warrants to Parent as follows:
(a) Title. Seller has good and valid title to the Owned
Shares, free and clear of any lien, pledge, charge, encumbrance or
claim of whatever nature and, upon the purchase of the Tender Shares
by the Purchaser, Seller will deliver good and valid title to the
Tender Shares, free and clear of any lien, charge, encumbrance or
claim of whatever nature.
(b) Ownership of Shares. On the date hereof, the Owned Shares
are owned of record or beneficially by Seller and, on the date
hereof, the Owned Shares constitute all of the Shares owned of
record or beneficially by Seller. Seller has sole voting power and
sole power of disposition with respect to all of the Owned Shares,
with no restrictions, subject to applicable federal securities laws,
on Seller's rights of disposition pertaining thereto.
(c) Power; Binding Agreement. Seller has the legal capacity,
power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of
this Agreement by Seller will not violate any other agreement to
which Seller is a party including, without limitation, any voting
agreement, stockholders agreement or voting trust. This Agreement
has been duly and validly executed and delivered by Seller and
constitutes a valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms.
(d) No Conflicts. Other than in connection with or in
compliance with the provisions of the Exchange Act and the HSR Act,
no authorization, consent or approval of, or filing with, any court
or any public body or authority is necessary for the consummation by
Seller of the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not
constitute a breach, violation or default (or any event which, with
notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, encumbrance, pledge,
charge or claim upon any of the properties or assets of Seller
under, any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument to which Seller is a party or
by which its properties or assets are bound.
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's,
financial adviser's or other
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<PAGE> 6
similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of
Seller.
4. Additional Shares. Seller hereby agrees, while this Agreement is
in effect, to promptly notify Parent of the number of any new Shares acquired by
Seller, if any, after the date hereof.
5. Further Assurances. From time to time, at the Parent's request
and without further consideration, Seller shall execute and deliver such
additional documents and take all such further action as may be reasonably
necessary or desirable to consummate and make effective the transactions
contemplated by Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein
shall terminate upon Seller's sale of the Tender Shares to the Purchaser in the
Offer or pursuant to exercise of the Stock Option, other than Seller's
representation and warranty in Sections 3(a) and (b) which shall survive the
sale of the Tender Shares and the termination of this Agreement following such
sale.
6.2 Entire Agreement; Assignment. This Agreement (i) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (ii)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telegram, telex or telecopy or by any courier service, such as Federal
Express, providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
If to Seller:
c/o United States Filter Corporation
40-004 Code Street
Palm Desert, California 92211
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<PAGE> 7
copy to Seller's Counsel:
Diamond & Ostrow LLP
1900 Avenue of the Stars, Suite 600
Los Angeles, California 90067
Telecopy: 310-785-9555
Attention: Michael H. Diamond
If to Parent:
Vivendi
42, Avenue de Friedland
75380 Paris Cedex 08
France
Attention: Guilluame Hannezo
Fax: (011) 331-71-71-14-15
copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
Trevor S. Norwitz, Esq.
Fax: (212) 403-2000
and
Cabinet Bredin Prat
130 rue du Faubourg Saint Honore
75008 Paris Cedex
France
Attention: Elena M. Baxter, Esq.
Fax: (011) 331-4359-7001
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. Each of Seller, Parent and the Purchaser irrevocably submits to
the exclusive jurisdiction of any Delaware state or federal court sitting in the
State of Delaware in any action arising out of or relating to this Agreement,
hereby irrevocably agrees that all claims in respect of such action may be heard
and determined in such Delaware state or federal court, and hereby irrevocably
waives, to the fullest
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<PAGE> 8
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.
6.6 Specific Performance. Seller recognizes and acknowledges that a
breach by it of any covenants or agreements contained in this Agreement will
cause Parent to sustain damages for which it would not have an adequate remedy
at law, and therefore Seller agrees that in the event of any such breach Parent
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
* * *
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<PAGE> 9
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to
be duly executed as of the day and year first above written.
VIVENDI
By: /s/ Jean-Marie Messier
--------------------------------------------
Name: Jean-Marie Messier
Title: Chairman and Chief Executive Officer
RICHARD J. HECKMANN
/s/ Richard J. Heckmann
--------------------------------------------
Name: Richard J. Heckmann
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<PAGE> 1
EXHIBIT (c)(5)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of March 22,
1999, among United States Filter Corporation (the "Company"), Vivendi ("Parent")
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 has entered, as of even date herewith, into
that certain Agreement and Plan of Merger (the "Merger Agreement") by and among
Parent, Eau Acquisition Corp. and the Company, dated as of March 22, 1999,
pursuant to which, among other things, the Company shall become a subsidiary of
Parent (such transaction or series of transactions, the "Transaction"); and
WHEREAS, Parent desires to insure the continued availability to the
Company of the Employee's services, managerial skills and business experience
following consummation of the Transaction and his commitment not to compete with
the Company for a certain period of time, and the Employee is willing to render
such services and provide such commitment, all upon and subject to the terms and
conditions contained in this Agreement; and
WHEREAS, the Employee and the Company previously entered into a
certain written First Amended and Restated Employment Agreement, effective as of
September 30, 1998 (the "Prior Agreement"), and now desire to supercede the
Prior Agreement in its entirety, contingent upon consummation of the
Transaction; and
WHEREAS, in addition to the terms and conditions of employment set
forth herein, the parties wish to set forth herein provisions with respect to
certain payments being made to the Employee pursuant to the Prior Agreement and
the Merger Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, the Company and the Employee agree as
follows:
1. Employment and Employment Term.
(a) Employment.
Subject to the terms and provisions set forth in this Agreement, the
Company hereby employs the Employee during the Employment Term (as
hereinafter defined) as Chairman of the Board of Directors of the
Company (the "Board") and its Chief Executive Officer, and Parent
agrees to cause the Employee to be elected as Chairman of the Board,
a member of the Executive Committee of Vivendi Water Branch, and a
director of Generale des Eaux during the Employment Term, and the
Employee hereby accepts such employment.
<PAGE> 2
(b) Employment Term.
The period of employment under this Agreement (the "Employment
Term") shall commence as of the date on which the Effective Time (as
defined in the Merger Agreement) occurs (the "Effective Date") and
shall continue for a period of four (4) years thereafter, or until
earlier terminated as herein provided.
2. Positions, Responsibilities and Duties.
(a) In General.
During the Employment Term, the Employee shall be employed as, and
the Company shall at all times cause the Employee to be, the Chief
Executive Officer of the Company. In addition, Parent agrees to
cause the Employee to be elected as Chairman of the Board, a member
of the Executive Committee of Vivendi Water Branch, and a director
of Generale des Eaux during the Employment Term. In such positions,
the Employee shall have the duties, responsibilities and authority
normally associated with the office and position of chairman and
chief executive officer of a corporation of the Company's size and
type and as a director of companies of the size and type of Vivendi
Water Branch and Generale des Eaux. No other employee of the Company
shall have authority and responsibilities that are equal to or
greater than those of the Employee. All other officers and other
employees of the Company shall report directly to the Employee or
the Employee's designees. The Employee will be responsible in
conjunction with the President of Generale des Eaux for studying and
implementing the world-wide integration of Vivendi Water Branch and
the Company. The Employee will report to the Chairman of Parent and
the Chairman of Generale des Eaux in the context of such
integration. The Chairman of Parent and the Employee may mutually
agree to provide the Employee with specific responsibilities or
projects on a case-by-case basis in the context of the development
of Parent's world-wide operations and activities (e.g., developing
opportunities for initial public offerings of Parent's United States
utilities and related entities).
(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 efficiently the duties and
responsibilities contemplated by this Agreement. 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 boards of
directors of other corporations, and similar type activities, to the
extent that such other activities do not inhibit or prohibit the
performance of the Employee's duties under this Agreement or
conflict in any way with the business of the Com-
2
<PAGE> 3
pany; provided, however, that the Employee shall not serve on the
board of any commercial business or hold any other position with
respect to any commercial business without the consent of the Board,
which consent shall not be unreasonably withheld.
3. Compensation and Benefits.
(a) Base Salary.
During the Employment Term, the Employee shall receive an initial
base salary ("Base Salary") of $950,000 per annum, payable in
accordance with the Company's payroll practices generally applicable
to the Company's senior executives. Such Base Salary shall be
reviewed for increase but not decrease by the Board not less
frequently than annually during the Employment Term. In conducting
any such annual review, 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
other comparable executives and companies, the performance of the
Employee and other pertinent factors. If increased, such increased
Base Salary shall then constitute "Base Salary" for purposes of this
Agreement.
(b) Cash Incentive Compensation.
(i) During the Employment Term, the Employee shall be entitled to
participate in all incentive compensation plans and programs
maintained generally by the Company for the benefit of its
senior executives.
(ii) Without limiting the foregoing, for each fiscal year of the
Company ending with or within the Employment Term, the
Employee shall have the opportunity to earn an annual
incentive of not less than sixty percent (60%) of his then
current Base Salary, subject to such performance goals as may
from time to time be determined by the Executive Committee of
Parent. 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 prior to the year to which such
annual incentive relates to defer the receipt or alter the
payment thereof.
(c) Equity Grant.
In consideration for the Employee's services hereunder and the
covenants set forth in Section 7, the Company shall, or the Parent
shall on behalf of the Company in satisfaction of the Company's
obligation, deliver to the Employee an aggregate of 289,056 shares
of Parent common stock (the "Stock Grant"), subject to the terms of
this Section 3(c). On each of the first four (4) anniversaries of
the Effective
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<PAGE> 4
Date (each, a "Grant Date"), the Company shall, or the Parent shall
on behalf of the Company, deliver to the Employee 72,264 shares of
Parent common stock, representing one quarter (1/4) of the Stock
Grant, if the Employee is employed hereunder as of such Grant Date;
provided, however, that in the event that the Employee's employment
hereunder is terminated because of his death or Disability, that
portion of the Stock Grant not already delivered to the Employee
shall be immediately delivered to the Employee (or his estate or
beneficiaries, if applicable); and provided, further, that if the
Employee's employment hereunder is terminated by the Employee for
Good Reason (as defined in Section 4(b)(iv)) or by the Company
without Cause (as defined in Section 4(b)(vii)), the portions of the
Stock Grant not already delivered shall be delivered on the
scheduled Grant Dates so long as the Employee is not in violation of
Section 7(b) (as determined, if applicable, by arbitration under
Section 9(i)) and the Employee provides consulting services to the
Company during the remainder of the scheduled Employment Term, as
may be reasonably requested by the Parent Executive Committee from
time to time, for which services the Company shall reimburse the
Employee for his reasonable expenses incurred in the performance
thereof. In the event that the Employee's employment hereunder is
terminated by the Employee without Good Reason (as defined in
Section 4(b)(iv)), or by the Company for Cause (as defined in
Section 4(b)(vii)) or the Employee violates Section 7(b) (as
determined, if applicable, by arbitration under Section 9(i)), the
Employee shall forfeit all rights to receive any portion of the
Stock Grant for which the Grant Date had not occurred as of the Date
of Termination. The number and kind of shares to be granted under
this Section 3(c) shall be equitably adjusted to reflect changes in
Parent's capitalization, such as a stock split or extraordinary
dividend, or corporate transactions, such as a merger, spin-off,
recapitalization or consolidation. With respect to each share of
Parent common stock to be granted under this Section 3(c) that has
not been forfeited and with respect to which the Employee (or his
estate or beneficiaries, if applicable) has not yet become a
shareholder, the Company shall pay to the Employee an amount in cash
equal to the regular quarterly cash dividend, if any, paid by the
Parent on its common stock. Such payment shall be made within ten
(10) days following the applicable dividend payment date.
(d) 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
employee benefit plans and programs provided or maintained generally
by the Company to its senior executives (including, without
limitation, pension, profit sharing, savings, medical, disability,
life and accident plans and programs and deferred compensation plans
and programs).
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<PAGE> 5
(e) Vacation and Fringe Benefits.
(i) During the Employment Term, the Employee shall be entitled to
paid vacation and fringe benefits as provided generally to
senior executives of the Company.
(ii) Without limiting the foregoing, during the Employment Term,
the Company will lease for the Employee an automobile for the
Employee's business and private use, the make and model of
which shall be at least comparable to the make and model
provided to the Employee immediately preceding the Effective
Date, and the Company will pay all deposit requirements,
servicing and maintenance costs, insurance premiums and the
cost of the gasoline for authorized business use. The term of
any one such automobile lease shall not exceed thirty-six (36)
months other than at the discretion of the Employee.
(f) 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 substantially equivalent to that provided to the Employee as
of the date of this Agreement.
(g) 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 with
respect to senior executives of the Company.
(h) Indemnification.
The Company shall maintain directors and officers liability
insurance in commercially reasonable amounts (as reasonably
determined by the Board) to the extent provided as of the date of
this Agreement, 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.
(i) Payments and Benefits in Connection with the Transaction.
The Employee shall, as of the Effective Date, be entitled to receive
a lump sum in cash from the Company equal to five (5) times the sum
of (x) his Base Salary in
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<PAGE> 6
effect as of the Effective Date, plus (y) the Employee's target
bonus under the Company's Annual Incentive Compensation Plan for the
year in which the Effective Date occurs. Such amount shall be paid
to the Employee within five (5) business days following the
Effective Date (provided such amount has not been paid under the
Prior Agreement or the Company's Executive Severance Pay Plan prior
to such date) but in no event shall such amount exceed $7,500,000.
In addition, the Employee's benefit in the U.S. Filter Supplemental
Executive Retirement Plan shall become fully vested as of the
Effective Date.
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 be, shall be entitled to receive
from the Company:
(i) any unpaid Base Salary through the Date of Termination (as
defined in Section 4(b)(iv));
(ii) an immediate lump sum in cash equal to the minimum annual
incentive (determined without regard to any performance goals)
provided by Section 3(b)(ii) for the year in which the Date of
Termination (as defined in Section 4(b)(iv)) occurs multiplied
by a fraction, the numerator of which is the number of days of
such fiscal year through such 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) for the year
in which the Date of Termination (as defined in Section
4(b)(iv)) occurs plus (B) twenty-four (24) times the monthly
rate of Base Salary at the rate in effect on the Date of
Termination (as defined in Section 4(b)(iv));
(iv) a lump sum amount, payable within five (5) days following the
Date of Termination (as defined in Section 4(b)(iv)), in
respect of 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.
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<PAGE> 7
For purposes of this Agreement, "Disability" means the Employee's
inability to render, for a period of six (6) consecutive months,
services hereunder by reason of permanent disability, as determined
by the written medical opinion of an independent medical physician
mutually acceptable to the Employee and the Company. If the Employee
and the Company cannot agree as to such an independent medical
physician each shall appoint one medical physician and those two
physicians shall appoint a third physician who shall make such
determination.
(b) Termination for Any Other Reason.
(i) In the event that the Employee's employment hereunder is
terminated by the Employee for Good Reason (as defined in
Section 4(b)(v)) or by the Company without Cause (as defined
in Section 4(b)(vii)) (other than for Disability), then the
Company shall pay the Employee (A) any unpaid Base Salary
through the Date of Termination (as defined in Section
4(b)(iv)), plus (B) an amount equal to the minimum annual
incentive (determined without regard to any performance goals)
provided in Section 3(b)(ii) for the year in which the Date of
Termination (as defined in Section 4(b)(iv)) occurs multiplied
by a fraction, the numerator of which is the number of days
from the beginning of such fiscal year through such Date of
Termination (as defined in Section 4(b)(iv)), 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
(collectively, the "Accrued Obligations").
(ii) Furthermore, and in addition to the foregoing, in the event
that the Employee's employment with the Company is terminated
by the Employee for Good Reason or by the Company without
Cause (other than Disability), then the Company shall also pay
the Employee, within five (5) business days following the Date
of Termination (as defined in Section 4(b)(iv)), a lump sum in
cash equal to the number of years (including fractions
thereof) remaining in the Employment Term (without taking into
account such early termination thereof) multiplied by the sum
of (x) his then current Base Salary plus (y) the target annual
incentive bonus for the year in which such Date of Termination
occurs (determined without regard to any performance goals).
(iii) In the event that the Employee's employment hereunder is
terminated by the Employee without Good Reason or by the
Company for Cause, the Company shall pay the Employee the
Accrued Obligations (other than the amounts under Section
4(b)(i)(B)).
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<PAGE> 8
(iv) For purposes of this Agreement, "Date of Termination" means
(A) in the case of Disability, the last day of the six (6)
month period referred to in Section 4(a), and (B) in all other
cases, the actual date on which the Employee's employment
terminates during the Term of Employment.
(v) For purposes of this Agreement, "Good Reason" for the
Employee's termination of his employment hereunder shall mean,
without the Employee's prior written consent, (A) the
relocation of the Company's principal offices more than 150
miles from its location immediately prior to the Effective
Date or the Company requiring the Employee to be based at any
location other than such principal offices, (B) a breach by
the Company of any material provision of this Agreement which
is not cured within five (5) business days following written
notification of such breach, or (C) the occurrence of a Change
in Control (as defined in Section 4(b)(vi)).
(vi) "Change in Control" shall mean the occurrence of any of the
following:
(A) the acquisition by any Person (including any 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 direct or indirect
"beneficial ownership" (within the meaning of Rule 13d-3
under the Exchange Act) of securities of the Parent
representing 50% or more of the combined voting power of
the securities of the Parent;
(B) during any period of two (2) consecutive years (not
including any period prior to the Effective Date),
individuals who at the beginning of such period
constitute the board of directors of Parent (the "Parent
Board"), and any new director (other than a director
whose initial assumption of office is in connection with
an actual or threatened election contest, including but
not limited to a consent solicitation, relating to the
election of directors of Parent) whose election by the
Parent Board or nomination for election by the Parent's
stockholders was approved by a vote of at least
two-thirds of the directors then still in office who
either were directors at the beginning of the period or
whose election or nomination for election was previously
so approved, cease for any reason to constitute at least
a majority thereof;
(C) there is consummated a merger, consolidation,
recapitalization, reorganization or other similar
transaction (any such transaction, a "Business
Combination") between the Parent or any direct or
indirect subsidiary of the Parent and any other
corporation, other
8
<PAGE> 9
than (1) a Business Combination which would result in
the voting securities of the Parent outstanding
immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding
or by being converted into voting securities of the
surviving entity or any parent thereof) at least 50% of
the combined voting power of the securities of the
Parent or such surviving entity or any parent thereof
outstanding immediately after such Business Combination,
or (2) a merger or consolidation effected to implement a
recapitalization of the Parent (or similar transaction)
in which no Person is or becomes the "beneficial owner,"
directly or indirectly, of securities of the Parent
representing 50% or more of the combined voting power of
the Parent's then outstanding securities;
(D) the Parent is placed under judicial administration or
supervision in connection with the Parent's filing for
bankruptcy;
(E) there is consummated an agreement for the sale or
disposition by the Parent of all or substantially all of
the Parent's assets, other than a sale or disposition by
the Parent of all or substantially all of the Parent's
assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by
stockholders of the Parent in substantially the same
proportions as their ownership of the Parent immediately
prior to such sale;
(F) the Parent ceases to be the beneficial owner, directly
or indirectly, of securities of the Company representing
more than 50% of the combined voting power of the
Company's securities; or
(G) there is consummated a sale or other disposition of all
or substantially all of the assets of the Company, other
than a sale or disposition of all or substantially all
of the Company's assets to an entity, at least 50% of
the combined voting power of the voting securities of
which are owned by stockholders of the Parent in
substantially the same proportions as their ownership of
the Parent immediately prior to such sale.
(vii) Termination by the Company of the Employee for "Cause" as used
in this Agreement shall be limited to the following: the
Employee's conviction of, or a plea of guilty to, a felony
involving moral turpitude or willful violation of Section 7(b)
or the Employee's willful gross negligence, material
misconduct or material breach of this Agreement, resulting in
material injury to the Company. For purposes of this
definition, no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in
9
<PAGE> 10
good faith and without reasonable belief that the Executive's
act, or failure to act, was in the best interest of the
Company. No termination for Cause shall be effective without
(A) a resolution adopted by a majority of the Parent Executive
Committee which sets forth the act (or failure to act)
constituting Cause for termination, (B) if such act or failure
to act is susceptible to cure, a reasonable period to effect
such cure, and (C) opportunity for a hearing in arbitration,
using the rules of the American Arbitration Association, as
such rules are in effect in Los Angeles, California on the
date of delivery of demand for arbitration, and otherwise in
accordance with Section 9(i).
(c) Continuation of Employee Benefits.
Upon the termination of the Employee's employment hereunder for any
reason, the Company shall continue, until the fourth anniversary of the
Effective Date, 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 benefit levels
and on terms and conditions (including with respect to cost to the
Employee and/or the Employee's family) no less favorable than that to
which the Employee and/or his family was entitled immediately prior to his
Date of Termination (except for any changes made with respect to active
senior executives of the Company); provided, however, that, in the event
Employee's employment hereunder is terminated for Disability, such
coverage shall continue for twenty-four (24) months following the Date of
Termination. In the event that the Employee and/or the Employee's family's
participation in any such program is barred, the Company shall arrange to
provide the Employee and/or the Employee's family with benefits
substantially similar to those which the Employee and/or the Employee's
family would otherwise have been entitled to receive under such plans and
programs 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, as
amended, if permitted by applicable law.
(d) No Mitigation or Offset.
The Company agrees that, if the Employee's employment with the Company
terminates, the Employee is not required to seek other employment or to
attempt in any way to reduce any amounts payable to or in respect of the
Employee by the Company pursuant to this Agreement. Further, the amount of
any payment or benefit provided for in this Agreement shall not be reduced
by any 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, except
with respect to Section 4(c) benefits
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<PAGE> 11
to the extent the Employee receives substantially equivalent benefits from
a successor employer.
5. Additional Tax Payments.
(a) Excise Tax Gross-Up.
If any payment or benefit to which the Employee becomes entitled in
connection with the Transaction pursuant to this Agreement, the
Merger Agreement or otherwise (the "Total Payments") will be subject
to the tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor 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
and any taxes on the Total Payments other than the Excise Tax and
any federal, state and local income and employment 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, the Company and the Employee shall rely
upon the assumption and determinations of Arthur Andersen LLP or
such other certified accounting firm as may be mutually agreed upon
by the Employee and the Company (the "Accounting Firm"). All fees
and expenses of the Accounting Firm shall be borne solely by the
Company. Any determinations by the Accounting Firm shall be binding
upon the Company and the Employee, and they agree to take a position
consistent with such determination (i) on any return, report,
information return or other document (including, without limitation,
any related or supporting information) with respect to taxes of the
Company or the Employee, (ii) in any proceeding, formal or informal,
before any taxing authority, and (iii) otherwise. In the event that
the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time the Gross-Up Payment is
determined, 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 and employment 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 and employment 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 the Gross-Up Payment
is determined (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 rate provided in section 1274(b)(2)(B) of the
Code) at the time that the amount of such excess is finally
determined. The Gross-Up Pay-
11
<PAGE> 12
ment shall be paid within five (5) business days after the amount
thereof is determined, but in no event later than thirty (30) days
prior to the date on which payment of the Excise Tax in respect of
which such Gross-Up Payment is determined is due. 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 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 remainder 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 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).
Notwithstanding the foregoing, and subject to the Company's and
Parent's obligations under Section 5(b), the Company shall not be
required to pay a Gross-Up Payment with respect to an amount of the
Excise Tax equal to the excess of (i) over (ii), where (i) equals
the Excise Tax that actually becomes due with respect to the Total
Payments and (ii) equals that amount of Excise Tax that would have
become due with respect to the Total Payments assuming that, with
respect to the Company stock options granted to the Employee on
October 9, 1998 (the "October Grant"), (x) the cash payout of the
October Grant pursuant to Section 2.9 of the Merger Agreement was
subject to Q&A 24(c) of the proposed Treasury Regulations
promulgated under section 280G of the Code (the "Regulations") and
(y) for purposes of Q&A 24(c)(2) under the Regulations, the
percentage used to calculate the amount reflecting the lapse of the
obligation to continue to perform services was one percent (1%)
(such excess amount shall hereinafter be referred to as the "Option
Excise Tax").
(b) Company's Tax Position.
The Company shall, and the Parent shall cause the Company to, take
the position (i) on any return, report, information return or other
document (including, without limitation, any related or supporting
information) with respect to taxes of the Company or the Employee,
(ii) in any proceeding, formal or informal, before any taxing
authority, and (iii) otherwise, that the Option Excise Tax is not
due, and the Company shall not, nor shall the Parent cause the
Company to, withhold any amounts in respect thereof without the
prior written consent of the Employee. The Company shall, at its own
expense, contest in good faith any assessment or proposed assessment
by the Internal Revenue Service (the "IRS") against the Company in
respect of the Excise Tax with respect to the Option Excise Tax. The
Employee shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the
payment by the Employee or the Company of the Option Excise Tax.
Such notification shall be given as soon as
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<PAGE> 13
practicable but no later than ten (10) business days after the
Employee is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim
is requested to be paid. The Employee shall also give the Company
any information reasonably requested by the Company relating to such
claim; take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company' cooperate with the Company in good faith in order
effectively to contest such claim; and permit the Company to
participate in any proceedings relating to such claim. Such contest
shall include pursuing any and all administrative and judicial
remedies available to the Company. In the event that there is a
Final Determination (as defined below) pursuant to which the IRS
makes an assessment against the Company in respect of the Option
Excise Tax, the Company shall remit such amount to the IRS and the
Company shall be entitled to reimbursement of such amount. The
Company shall effect such reimbursement only by means of withholding
from the final tranche of the Stock Grant a number of shares having
a value equal to the amount of the Option Excise Tax (rounding down
to the next whole share); provided, however, that the Company shall
be entitled to withhold from any cash payments to the Employee
following the payment of such tranche of the Stock Grant an amount
equal to the remainder of such Option Excise Tax.
For purposes of this Agreement, "Final Determination" shall mean:
(x) a decision, judgment, decree, or other order by any court of
competent jurisdiction, which decision, judgment, decree, or
other order has become final and not subject to further
appeal; or
(y) a closing agreement entered into under section 7121 of the
Code or any other binding settlement agreement entered into
with the IRS, in either case with the consent of the Employee,
which consent shall not be unreasonably withheld.
6. Legal Fees.
The Company shall pay to the Employee all legal fees and expenses
reasonably incurred by the Employee in disputing in good faith any issue
hereunder relating to the termination of the Employee's employment, in
seeking in good faith to obtain or enforce any benefit or right provided
by this Agreement or in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within
five (5) business days after delivery of the Employee's written requests
for payment accompanied with such evidence of fees and expenses incurred
as the Company reasonably may require.
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<PAGE> 14
7. Protective Covenants.
(a) Compensation, Benefits Suspended if Section 7(b) Breached.
Except as more specifically provided with respect to the Stock Grant
in Section 3(c), the Employee agrees that if, during the Employment
Term, he breaches his obligations under Section 7(b), any payments
and benefits to which the Employee would otherwise have been
entitled shall be suspended for one (1) year, or, if less, the
remaining balance of the period with respect to which the Employee
would otherwise be so entitled to such payments 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.
(b) Non-Disclosure; Non-Compete; Non-Solicitation.
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 thereof); provided, however, that the Employee may
retain copies of such documents as are necessary for the preparation
of his federal or state income tax returns. In consideration for the
payments under this Agreement and any payments received by the
Employee pursuant to the Transaction for his equity interests in the
Company, during the scheduled Employment Term (notwithstanding any
earlier termination of the Employment Term), the Employee will not
in any manner directly or indirectly, through any person, firm or
corporation, alone or as a member of a partnership or as an officer,
director, stockholder, investor or employee of or consultant to any
other corporation or enterprise or otherwise engage or assist any
other person, firm, corporation or enterprise in engaging in any
business then being conducted by the Company (but not later than as
of the Date of Termination) in any geographic area in which the
Company is then conducting such business. In consideration for the
payments under this Agreement and any payments received by the
Employee pursuant to the Transaction for his
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<PAGE> 15
equity interests in the Company, the Employee will not during the
scheduled Employment Term (notwithstanding any earlier termination
of the Employment Term) 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.
(c) False, Defamatory, or Disparaging Statements.
The Employee agrees that 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. Promptly after
the Employee's Date of Termination, the Company agrees that it shall
instruct the officers and the directors of the Company not to make
any false, defamatory or disparaging statements about the Employee
after such Date of Termination.
(d) Injunctions to Prevent Breaches of Protective Covenants.
The parties hereto agree that the Company would be damaged
irreparably in the event any provision of paragraphs (b) or (c),
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 would be damaged
irreparably in the event any provision of paragraph (c), next above,
were not performed by the Company in accordance with its terms 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 injunctions to
prevent any breach or threatened breach of any such provisions and
to enforce such provision specifically (without posting a bond or
other security).
8. 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.
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<PAGE> 16
(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 and substance satisfactory to the Employee,
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would be required to
perform if no such succession had taken place.
9. Miscellaneous.
(a) Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, 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 92211
If to the Employee: RICHARD J. HECKMANN
72551 Clancy Lane
Rancho Mirage, CA 92270
With a copy to: MICHAEL DIAMOND, ESQ.
1900 Avenue of the Stars
Suite 600
Los Angeles, CA 90067
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<PAGE> 17
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.
If any provision of this Agreement as applied to any part or to any
circumstances will be adjudged by a court to be invalid or
unenforceable, the same will in no way affect any other provision of
this Agreement, the application of such provision in any other
circumstances, or the validity or enforceability of this Agreement.
The parties hereto intend this Agreement to be enforced as written.
If any provision or any part thereof is held to be invalid or
unenforceable because of the duration thereof, the level of
restrictions or the geographic scope thereof, all parties agree that
the court or arbitrator making such determination will have the
power to reduce the duration, restrictions or geographic scope of
such provision, and/or to delete specific words or phrases in an its
modified form such provision will then be enforceable.
(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 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 the
Employee's beneficiary(ies), estate or legal representative(s).
(h) Entire Agreement.
This Agreement contains the entire agreement between the parties
concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the parties with
respect to the subject matter hereof, including without limitation
the Prior Agreement and the Company's Executive Severance Pay Plan.
However, nothing
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<PAGE> 18
in this Agreement shall adversely affect the Employee's rights to
benefits vested and accrued prior to the Effective Date, other than
benefits which vest or accrue upon a "Change of Control" as defined
in the Prior Agreement and the Company's Executive Severance Pay
Plan, as the case may be. The Employee expressly agrees and
acknowledges that the payments for his Company stock options set
forth in Section 2.9 of the Merger Agreement are the sole payments
in connection with or with respect to his Company stock options to
which he is or will be entitled, and that the Prior Agreement has
not been amended subsequent to September 30, 1998.
(i) Arbitration.
(i) Any dispute, controversy or claim arising out of or
relating to this Agreement, a breach thereof or the
coverage or enforceability of this Section 9(i) shall be
settled by arbitration in Los Angeles, California (or
such other location as the Company and the Employee may
mutually agree), conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association, as such rules are in effect in Los Angeles
on the date of delivery of demand for arbitration. The
arbitration of any such issue, including the
determination of the amount of damages, shall be to the
exclusion of any court of law. This provision shall not
limit, nor be limited by, any additional right to seek
injunctive relief under Section 7(d).
(ii) There shall be three arbitrators, one to be chosen by
each party at will within ten (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 ten (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.
(iii) The Company shall pay the fees and expenses incurred in
connection with any arbitration arising out of this
Agreement, unless a majority of the arbitrators
concludes that such arbitration procedure was not
instituted in good faith by the Employee.
(j) Representation.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of
its obligations under this
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<PAGE> 19
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.
10. Termination of Agreement.
This Agreement shall be void and of no further force or effect upon the
termination of the Merger Agreement.
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<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of
March 22, 1999.
PARENT:
VIVENDI
By: /s/ Jean-Marie Messier
-------------------------------------
Its: Chairman and Chief Executive Officer
-------------------------------------
(title)
COMPANY:
UNITED STATES FILTER CORPORATION,
a Delaware corporation
By: /s/ Kevin L. Spence
-----------------------------------
Its: Executive Vice President, CFO
-----------------------------------
(title)
EMPLOYEE:
By: /s/ Richard J. Heckmann
-----------------------------------
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<PAGE> 1
Company pursuant to this Agreement. Further, the amount of any
payment or benefit provided for in this Agreement shall not be
reduced by any 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, except with respect
to Section 4(c) benefits to the extent the Employee receives
substantially equivalent benefits from a successor employer.
5. ADDITIONAL TAX PAYMENTS.
(a) EXCISE TAX GROSS-UP.
If any payment or benefit to which the Employee becomes
entitled in connection with the Transaction pursuant to this
Agreement, the Merger Agreement or otherwise (the "Total
Payments") will be subject to the tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code")
(or any successor 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 and
any taxes on the Total Payments other than the Excise Tax and
any federal, state and local income and employment 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,
the Company and the Employee shall rely upon the assumption
and determinations of Arthur Andersen LLP or such other
certified accounting firm as may be mutually agreed upon by
the Employee and the Company (the "Accounting Firm"). All fees
and expenses of the Accounting Firm shall be borne solely by
the Company. Any determinations by the Accounting Firm shall
be binding upon the Company and the Employee, and they agree
to take a position consistent with such determination (i) on
any return, report, information return or other document
(including, without limitation, any related or supporting
information) with respect to taxes of the Company or the
Employee, (ii) in any proceeding, formal or informal, before
any taxing authority, and (iii) otherwise. In the event that
the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time the Gross-Up
Payment is determined, 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 and employment 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 and employment 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 the Gross-Up Payment is determined (including
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<PAGE> 2
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 rate provided in section 1274(b)(2)(B) of the
Code) at the time that the amount of such excess is finally
determined. The Gross-Up Payment shall be paid within five (5)
business days after the amount thereof is determined, but in
no event later than thirty (30) days prior to the date on
which payment of the Excise Tax in respect of which such
Gross-Up Payment is determined is due. 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 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 remainder 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 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).
Notwithstanding the foregoing, and subject to the Company's
and Parent's obligations under Section 5(b), the Company shall
not be required to pay a Gross-Up Payment with respect to an
amount of the Excise Tax equal to the excess of (i) over (ii),
where (i) equals the Excise Tax that actually becomes due with
respect to the Total Payments and (ii) equals that amount of
Excise Tax that would have become due with respect to the
Total Payments assuming that, with respect to the Company
stock options granted to the Employee on October 9, 1998 (the
"October Grant"), (x) the cash payout of the October Grant
pursuant to Section 2.9 of the Merger Agreement was subject to
Q&A 24(c) of the proposed Treasury Regulations promulgated
under section 280G of the Code (the "Regulations") and (y) for
purposes of Q&A 24(c)(2) under the Regulations, the percentage
used to calculate the amount reflecting the lapse of the
obligation to continue to perform services was one percent
(1%) (such excess amount shall hereinafter be referred to as
the "Option Excise Tax").
(b) COMPANY'S TAX POSITION.
The Company shall, and the Parent shall cause the Company to,
take the position (i) on any return, report, information
return or other document (including, without limitation, any
related or supporting information) with respect to taxes of
the Company or the Employee, (ii) in any proceeding, formal or
informal, before any taxing authority, and (iii) otherwise,
that the Option Excise Tax is not due, and the Company shall
not, nor shall the Parent cause the Company to, withhold any
amounts in respect thereof without the prior written consent
of the Employee. The Company shall, at its own expense,
contest in good faith any assessment or proposed assessment by
the Internal Revenue Service (the "IRS") against the Com-
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<PAGE> 3
pany in respect of the Excise Tax with respect to the Option
Excise Tax. The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Employee or the
Company of the Option Excise Tax. Such notification shall be
given as soon as practicable but no later than ten (10)
business days after the Employee is informed in writing of
such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be
paid. The Employee shall also give the Company any information
reasonably requested by the Company relating to such claim;
take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company' cooperate with the Company
in good faith in order effectively to contest such claim; and
permit the Company to participate in any proceedings relating
to such claim. Such contest shall include pursuing any and all
administrative and judicial remedies available to the Company.
In the event that there is a Final Determination (as defined
below) pursuant to which the IRS makes an assessment against
the Company in respect of the Option Excise Tax, the Company
shall remit such amount to the IRS and the Company shall be
entitled to reimbursement of such amount. The Company shall
effect such reimbursement only by means of withholding from
the final tranche of the Stock Grant a number of shares having
a value equal to the amount of the Option Excise Tax (rounding
down to the next whole share); provided, however, that the
Company shall be entitled to withhold from any cash payments
to the Employee following the payment of such tranche of the
Stock Grant an amount equal to the remainder of such Option
Excise Tax.
For purposes of this Agreement, "Final Determination" shall
mean:
(x) a decision, judgment, decree, or other order by any court
of competent jurisdiction, which decision, judgment,
decree, or other order has become final and not subject to
further appeal; or
(y) a closing agreement entered into under section 7121 of the
Code or any other binding settlement agreement entered
into with the IRS, in either case with the consent of the
Employee, which consent shall not be unreasonably
withheld.
6. LEGAL FEES.
The Company shall pay to the Employee all legal fees and expenses
incurred by the Employee in disputing in good faith any issue hereunder
relating to the termination of the Employee's employment, in seeking in
good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code to
any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery
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<PAGE> 4
of the Employee's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
7. PROTECTIVE COVENANTS.
(a) COMPENSATION, BENEFITS SUSPENDED IF SECTION 7 (b) BREACHED.
Except as more specifically provided with respect to the Stock
Grant in Section 3(c), the Employee agrees that if, during the
Employment Term, he breaches his obligations under Section
7(b), any payments and benefits to which the Employee would
otherwise have been entitled shall be suspended for one (1)
year, or, if less, the remaining balance of the period with
respect to which the Employee would otherwise be so entitled
to such payments 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.
(b) NON-DISCLOSURE; NON-COMPETE; NON-SOLICITATION.
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 thereof); provided, however,
that the Employee may retain copies of such documents as are
necessary for the preparation of his federal or state income
tax returns. In consideration for the payments under this
Agreement and any payments received by the Employee pursuant
to the Transaction for his equity interests in the Company,
during the scheduled Employment Term (notwithstanding any
earlier termination of the Employment Term), the Employee will
not in any manner directly or indirectly, through any person,
firm or corporation, alone or as a member of a partnership or
as an officer, director, stockholder, investor or employee of
or consultant to any other corporation or enterprise or
otherwise engage or assist any other person, firm, corporation
or enterprise in engaging in any business then being conducted
by the Company (but not later than as of the Date of
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<PAGE> 5
Termination) in any geographic area in which the Company is
then conducting such business. In consideration for the
payments under this Agreement and any payments received by the
Employee pursuant to the Transaction for his equity interests
in the Company, the Employee will not during the scheduled
Employment Term (notwithstanding any earlier termination of
the Employment Term) 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.
(c) FALSE, DEFAMATORY, OR DISPARAGING STATEMENTS.
The Employee agrees that 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. Promptly after the Employee's Date of Termination,
the Company agrees that it shall instruct the officers and the
directors of the Company not to make any false, defamatory or
disparaging statements about the Employee after such Date of
Termination.
(d) INJUNCTIONS TO PREVENT BREACHES OF PROTECTIVE COVENANTS.
The parties hereto agree that the Company would be damaged
irreparably in the event any provision of paragraphs (b) or
(c), 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 would be damaged
irreparably in the event any provision of paragraph (c), next
above, were not performed by the Company in accordance with
its terms 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 injunctions to prevent any breach or threatened
breach of any such provisions and to enforce such provision
specifically (without posting a bond or other security).
8. 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 juris-
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<PAGE> 6
diction. 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 and substance
satisfactory to the Employee, expressly to assume and agree to
perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such
succession had taken place.
9. MISCELLANEOUS.
(a) APPLICABLE LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, 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 92211
If to the Employee: ANDREW D. SEIDEL
47-280 Prince's Plume Lane
Palm Desert, CA 92260
With a copy to: MICHAEL DIAMOND, ESQ.
1900 Avenue of the Stars
Suite 600
Los Angeles, CA 90067
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<PAGE> 7
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.
If any provision of this Agreement as applied to any part or to
any circumstances will be adjudged by a court to be invalid or
unenforceable, the same will in no way affect any other
provision of this Agreement, the application of such provision
in any other circumstances, or the validity or enforceability
of this Agreement. The parties hereto intend this Agreement to
be enforced as written. If any provision or any part thereof is
held to be invalid or unenforceable because of the duration
thereof, the level of restrictions or the geographic scope
thereof, all parties agree that the court or arbitrator making
such determination will have the power to reduce the duration,
restrictions or geographic scope of such provision, and/or to
delete specific words or phrases in an its modified form such
provision will then be enforceable.
(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 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 the Employee's beneficiary(ies), estate or legal
representative(s).
(h) ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the
parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the parties with
respect to the subject matter hereof, including without
limitation the Prior Agreement and the Company's Executive
Severance Pay Plan. However, nothing
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<PAGE> 8
in this Agreement shall adversely affect the Employee's rights
to benefits vested and accrued prior to the Effective Date,
other than benefits which vest or accrue upon a "Change of
Control" as defined in the Prior Agreement and the Company's
Executive Severance Pay Plan, as the case may be, which are
not satisfied under Section 3(h). The Employee expressly
agrees and acknowledges that the payments for his Company
stock options set forth in Section 2.9 of the Merger Agreement
are the sole payments in connection with or with respect to
his Company stock options to which he is or will be entitled,
and that the Prior Agreement has not been amended subsequent
to September 30, 1998.
(i) ARBITRATION.
(i) Any dispute, controversy or claim arising out of or
relating to this Agreement, a breach thereof or the
coverage or enforceability of this Section 9(i) shall
be settled by arbitration in Los Angeles, California
(or such other location as the Company and the
Employee may mutually agree), conducted in accordance
with the Commercial Arbitration Rules of the American
Arbitration Association, as such rules are in effect
in Los Angeles on the date of delivery of demand for
arbitration. The arbitration of any such issue,
including the determination of the amount of damages,
shall be to the exclusion of any court of law. This
provision shall not limit, nor be limited by, any
additional right to seek injunctive relief under
Section 7(d).
(ii) There shall be three arbitrators, one to be chosen by
each party at will within ten (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 ten (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.
(iii) The Company shall pay the fees and expenses incurred
in connection with any arbitration arising out of
this Agreement, unless a majority of the arbitrators
concludes that such arbitration procedure was not
instituted in good faith by the Employee.
(j) REPRESENTATION.
The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement and that
the performance of its obligations under this
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<PAGE> 9
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.
10. TERMINATION OF AGREEMENT.
This Agreement shall be void and of no further force or effect upon the
termination of the Merger Agreement.
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement
as of March 22, 1999.
PARENT:
VIVENDI
By: __________________________________
Its:___________________________________
(title)
COMPANY:
UNITED STATES FILTER CORPORATION,
a Delaware corporation
By: __________________________________
Its:___________________________________
(title)
EMPLOYEE:
By: __________________________________
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<PAGE> 1
Exhibit (c)(7)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of
March 22, 1999, among United States Filter Corporation (the "Company"), Vivendi
("Parent") and Kevin L. Spence (the "Employee").
WITNESSETH
WHEREAS, Employee is currently Executive Vice President and
Chief Financial Officer of the Company; and
WHEREAS, the Company has entered, as of even date herewith,
into that certain Agreement and Plan of Merger (the "Merger Agreement") by and
among Parent, Eau Acquisition Corp. and the Company, dated as of March 22, 1999,
pursuant to which, among other things, the Company shall become a subsidiary of
Parent (such transaction or series of transactions, the "Transaction"); and
WHEREAS, Parent desires to insure the continued availability
to the Company of the Employee's services, managerial skills and business
experience following consummation of the Transaction and his commitment not to
compete with the Company for a certain period of time, and the Employee is
willing to render such services and provide such commitment, all upon and
subject to the terms and conditions contained in this Agreement; and
WHEREAS, the Employee and the Company previously entered into
a certain written Employment Agreement, effective as of August 26, 1998 (the
"Prior Agreement"), and now desire to supercede the Prior Agreement in its
entirety, contingent upon consummation of the Transaction; and
WHEREAS, in addition to the terms and conditions of employment
set forth herein, the parties wish to set forth herein provisions with respect
to certain payments being made to the Employee pursuant to the Prior Agreement
and the Merger Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, the Company and the Employee agree as
follows:
1. EMPLOYMENT AND EMPLOYMENT TERM.
(a) EMPLOYMENT.
Subject to the terms and provisions set forth in this
Agreement, the Company hereby employs the Employee during the Employment Term
(as hereinafter defined) as Executive Vice President and Chief Financial Officer
of the Company.
(b) EMPLOYMENT TERM.
The period of employment under this Agreement (the "Employment
Term") shall commence as of the date on which the Effective
Time (as defined in the Merger
<PAGE> 2
Agreement) occurs (the "Effective Date") and shall continue
for a period of three (3) years thereafter, or until earlier
terminated as herein provided.
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,
Executive Vice President and Chief Financial Officer of the
Company. The Executive's duties, responsibilities and authority
shall be consistent with the Executive's position and shall
include such other duties, responsibilities and authority as
may be assigned to the Executive by the Board of Directors of
the Company (the "Board") or the Chief Executive Officer of the
Company.
(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 efficiently the
duties and responsibilities contemplated by this Agreement.
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 boards of directors of
other corporations, and similar type activities, to the extent
that such other activities do not inhibit or prohibit the
performance of the Employee's duties under this Agreement or
conflict in any way with the business of the Company; provided,
however, that the Employee shall not serve on the board of any
commercial business or hold any other position with respect to
any commercial business without the consent of the Board, which
consent shall not be unreasonably withheld.
3. COMPENSATION AND BENEFITS.
(a) BASE SALARY.
During the Employment Term, the Employee shall receive an
initial base salary ("Base Salary") of $350,000 per annum,
payable in accordance with the Company's payroll practices
generally applicable to the Company's senior executives. Such
Base Salary shall be reviewed for increase but not decrease by
the Board not less frequently than annually during the
Employment Term. In conducting any such annual review, 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 other
comparable executives and companies, the performance of the
Employee and other pertinent factors. If increased,
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<PAGE> 3
such increased Base Salary shall then constitute "Base Salary"
for purposes of this Agreement.
(b) BONUSES, INCENTIVE, SAVINGS AND RETIREMENT PLANS, WELFARE
BENEFIT PLANS.
The Employee 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. The Employee, and the Employee'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.
(c) EQUITY GRANT.
In consideration for the Employee's services hereunder and the
covenants set forth in Section 7, the Company shall, or the
Parent shall on behalf of the Company, deliver to the Employee
an aggregate of 49,341 shares of Parent common stock (the
"Stock Grant"), subject to the terms of this Section 3(c). On
each of the first three (3) anniversaries of the Effective Date
(each, a "Grant Date"), the Company shall, or the Parent shall
on behalf of the Company, deliver to the Employee 16,447 shares
of Parent common stock, representing one third (1/3) of the
Stock Grant, if the Employee is employed hereunder as of such
Grant Date; provided, however, that in the event that the
Employee's employment hereunder is terminated because of his
death or Disability, that portion of the Stock Grant not
already delivered to the Employee shall be immediately
delivered to the Employee (or his estate or beneficiaries, if
applicable); and provided, further, that if the Employee's
employment hereunder is terminated by the Employee for Good
Reason (as defined in Section 4(b)(iv)) or by the Company
without Cause (as defined in Section 4(b)(vii)), the portions
of the Stock Grant not already delivered shall be delivered on
the scheduled Grant Dates so long as the Employee is not in
violation of Section 7(b) (as determined, if applicable, by
arbitration under Section 9(i)) and the Employee provides
consulting services to the Company during the remainder of the
scheduled Employment Term, as may be reasonably requested by
the Parent Executive Committee from time to time, for which
services the Company shall reimburse the Employee for his
reasonable expenses incurred in the performance thereof. In the
event that the Employee's employment hereunder is terminated by
the Employee without Good Reason (as defined in Section
4(b)(iv)), or by the Company for Cause (as defined in Section
4(b)(vii)) or the Employee violates Section 7(b) (as
determined, if applicable, by arbitration under Section 9(i)),
the Employee shall forfeit all rights to receive any portion of
the Stock Grant for which the Grant Date had not occurred as of
the Date of Termination. The number and kind of shares to be
granted
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<PAGE> 4
under this Section 3(c) shall be equitably adjusted to reflect
changes in Parent's capitalization, such as a stock split or
extraordinary dividend, or corporate transactions, such as a
merger, spin-off, recapitalization or consolidation. With
respect to each share of Parent common stock to be granted
under this Section 3(c) that has not been forfeited and with
respect to which the Employee (or his estate or beneficiaries,
if applicable) has not yet become a shareholder, the Company
shall pay to the Employee an amount in cash equal to the
regular quarterly cash dividend, if any, paid by the Parent on
its common stock. Such payment shall be made within ten (10)
days following the applicable dividend payment date.
(d) VACATION AND FRINGE BENEFITS.
(i) During the Employment Term, the Employee shall be
entitled to paid vacation and fringe benefits as
provided generally to similarly situated executive
employees of the Company.
(ii) The Employee shall be entitled to 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.
(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 substantially equivalent to that provided to the
Employee as of the date of this Agreement.
(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 with respect to 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 Board) to the extent provided as of the date
of this Agreement, and the Employee shall be covered under such
insurance to the same extent as other similarly situated
executive employees 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.
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<PAGE> 5
(h) PAYMENT AND BENEFITS IN CONNECTION WITH THE TRANSACTION.
The Employee shall, as of the Effective Date, be entitled to
receive a lump sum in cash from the Company equal to three (3)
times the sum of (x) his Base Salary in effect as of the
Effective Date (provided such amount has not been paid under
the Prior Agreement), plus (y) the Employee's target bonus
under the Company's Annual Incentive Compensation Plan for the
year in which the Effective Date occurs. Such amount shall be
paid to the Employee within five (5) business days following
the Effective Date but in no event shall such amount exceed
$1,950,000. In addition, the Employee's benefit in the U.S.
Filter Supplemental Executive Retirement Plan shall become
fully vested as of the Effective Date.
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 be, shall be entitled
to receive from the Company:
(i) any unpaid Base Salary through the Date of
Termination (as defined in Section 4(b)(iv));
(ii) an immediate lump sum in cash equal to the minimum
annual incentive (determined without regard to any
performance goals) provided by Section 3(b)(ii) for
the year in which the Date of Termination (as defined
in Section 4(b)(iv)) occurs multiplied by a fraction,
the numerator of which is the number of days of such
fiscal year through such Date of Termination and the
denominator of which is 365;
(iii) an immediate lump sum amount equal to the sum of (A)
150 percent (150%) times the minimum annual incentive
(determined without regard to any performance goals)
provided by Section 3(b)(ii) for the year in which
the Date of Termination (as defined in Section
4(b)(iv)) occurs plus (B) 150 percent (150%) times
the annual rate of Base Salary at the rate in effect
on the Date of Termination (as defined in Section
4(b)(iv));
(iv) a lump sum amount, payable within five (5) days
following the Date of Termination (as defined in
Section 4(b)(iv)), in respect of 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
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<PAGE> 6
(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 (6)
consecutive months, services hereunder by reason of permanent
disability, as determined by the written medical opinion of an
independent medical physician mutually acceptable to the
Employee and the Company. If the Employee and the Company
cannot agree as to such an independent medical physician each
shall appoint one medical physician and those two physicians
shall appoint a third physician who shall make such
determination.
(b) TERMINATION FOR ANY OTHER REASON.
(i) In the event that the Employee's employment hereunder
is terminated by the Employee for Good Reason (as
defined in Section 4(b)(v)) or by the Company without
Cause (as defined in Section 4(b)(vii)) (other than
for Disability), then the Company shall pay the
Employee (A) any unpaid Base Salary through the Date
of Termination (as defined in Section 4(b)(iv)), plus
(B) an amount equal to the minimum annual incentive
(determined without regard to any performance goals)
provided in Section 3(b)(ii) for the year in which
the Date of Termination (as defined in Section
4(b)(iv)) occurs multiplied by a fraction, the
numerator of which is the number of days from the
beginning of such fiscal year through such Date of
Termination (as defined in Section 4(b)(iv)), 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 (collectively, the "Accrued
Obligations").
(ii) Furthermore, and in addition to the foregoing, in the
event that the Employee's employment with the Company
is terminated by the Employee for Good Reason or by
the Company without Cause (other than Disability),
then the Company shall also pay the Employee, within
five (5) business days following the Date of
Termination (as defined in Section 4(b)(iv)), a lump
sum in cash equal to the number of years (including
fractions thereof) remaining in the Employment Term
(without taking into account such early termination
thereof) multiplied by the sum of (x) his then
current Base Salary plus (y) the target annual
incentive bonus for the year in which such Date of
Termination occurs (determined without regard to any
performance goals).
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<PAGE> 7
(iii) In the event that the Employee's employment hereunder
is terminated by the Employee without Good Reason or
by the Company for Cause, the Company shall pay the
Employee the Accrued Obligations (other than the
amounts under Section 4(b)(i)(B)).
(iv) For purposes of this Agreement, "Date of Termination"
means (A) in the case of Disability, the last day of
the six (6) month period referred to in Section 4(a),
and (B) in all other cases, the actual date on which
the Employee's employment terminates during the Term
of Employment.
(v) For purposes of this Agreement, "Good Reason" for the
Employee's termination of his employment hereunder
shall mean, without the Employee's prior written
consent, (A) the relocation of the Company's
principal offices more than 150 miles from its
location immediately prior to the Effective Date or
the Company requiring the Employee to be based at any
location other than such principal offices, (B) a
breach by the Company of any material provision of
this Agreement which is not cured within five (5)
business days following written notification of such
breach, or (C) the occurrence of a Change in Control
(as defined in Section 4(b)(vi)).
(vi) "Change in Control" shall mean the occurrence of any
of the following:
(A) the acquisition by any Person (including any
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 direct or
indirect "beneficial ownership" (within the
meaning of Rule 13d-3 under the Exchange
Act) of securities of the Parent
representing 50% or more of the combined
voting power of the securities of the
Parent;
(B) during any period of two (2) consecutive
years (not including any period prior to the
Effective Date), individuals who at the
beginning of such period constitute the
board of directors of Parent (the "Parent
Board"), and any new director (other than a
director whose initial assumption of office
is in connection with an actual or
threatened election contest, including but
not limited to a consent solicitation,
relating to the election of directors of
Parent) whose election by the Parent Board
or nomination for election by the Parent's
stockholders was approved by a vote of at
least two-thirds of the directors then still
in office who either were directors at the
beginning of the period or whose election or
nomination for election was previously so
approved, cease for any reason to constitute
at least a majority thereof;
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<PAGE> 8
(C) there is consummated a merger,
consolidation, recapitalization,
reorganization or other similar transaction
(any such transaction, a "Business
Combination") between the Parent or any
direct or indirect subsidiary of the Parent
and any other corporation, other than (1) a
Business Combination which would result in
the voting securities of the Parent
outstanding immediately prior to such merger
or consolidation continuing to represent
(either by remaining outstanding or by being
converted into voting securities of the
surviving entity or any parent thereof) at
least 50% of the combined voting power of
the securities of the Parent or such
surviving entity or any parent thereof
outstanding immediately after such Business
Combination, or (2) a merger or
consolidation effected to implement a
recapitalization of the Parent (or similar
transaction) in which no Person is or
becomes the "beneficial owner," directly or
indirectly, of securities of the Parent
representing 50% or more of the combined
voting power of the Parent's then
outstanding securities;
(D) the Parent is placed under judicial
administration or supervision in connection
with the Parent's filing for bankruptcy;
(E) there is consummated an agreement for the
sale or disposition by the Parent of all or
substantially all of the Parent's assets,
other than a sale or disposition by the
Parent of all or substantially all of the
Parent's assets to an entity, at least 50%
of the combined voting power of the voting
securities of which are owned by
stockholders of the Parent in substantially
the same proportions as their ownership of
the Parent immediately prior to such sale;
(F) the Parent ceases to be the beneficial
owner, directly or indirectly, of securities
of the Company representing more than 50% of
the combined voting power of the Company's
securities; or
(G) there is consummated a sale or other
disposition of all or substantially all of
the assets of the Company, other than a sale
or disposition of all or substantially all
of the Company's assets to an entity, at
least 50% of the combined voting power of
the voting securities of which are owned by
stockholders of the Parent in substantially
the same proportions as their ownership of
the Parent immediately prior to such sale.
(vii) Termination by the Company of the Employee for
"Cause" as used in this Agreement shall be limited to
the following: the Employee's conviction of, or a
plea of guilty to, a felony involving moral turpitude
or willful violation of Section 7(b) or the
Employee's willful gross negli-
8
<PAGE> 9
gence, material misconduct or material breach of this
Agreement, resulting in material injury to the
Company. For purposes of this definition, no act, or
failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without
reasonable belief that the Executive's act, or
failure to act, was in the best interest of the
Company. No termination for Cause shall be effective
without (A) a resolution adopted by a majority of the
Parent Executive Committee which sets forth the act
(or failure to act) constituting Cause for
termination, (B) if such act or failure to act is
susceptible to cure, a reasonable period to effect
such cure, and (C) opportunity for a hearing in
arbitration, using the rules of the American
Arbitration Association, as such rules are in effect
in Los Angeles, California on the date of delivery of
demand for arbitration, and otherwise in accordance
with Section 9(i).
(c) CONTINUATION OF EMPLOYEE BENEFITS.
Upon the termination of the Employee's employment hereunder
for any reason, the Company shall continue, until the third
anniversary of the Effective Date, 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 benefit levels and
on terms and conditions (including with respect to cost to the
Employee and/or the Employee's family) no less favorable than
that to which the Employee and/or his family was entitled
immediately prior to his Date of Termination (except for any
changes made with respect to active senior executives of the
Company); provided, however, that, in the event Employee's
employment hereunder is terminated for Disability, such
coverage shall continue for eighteen (18) 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, as
amended, if permitted by applicable law.
(d) NO MITIGATION OR OFFSET.
The Company agrees that, if the Employee's employment with the
Company terminates, the Employee is not required to seek other
employment or to attempt in any way to reduce any amounts
payable to or in respect of the Employee by the Company
pursuant to this Agreement. Further, the amount of any payment
or benefit provided for in this Agreement shall not be reduced
by any compensation
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<PAGE> 10
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, except with respect to Section 4(c) benefits to the
extent the Employee receives substantially equivalent benefits
from a successor employer.
5. ADDITIONAL TAX PAYMENTS.
(a) EXCISE TAX GROSS-UP.
If any payment or benefit to which the Employee becomes
entitled in connection with the Transaction pursuant to this
Agreement, the Merger Agreement or otherwise (the "Total
Payments") will be subject to the tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code")
(or any successor 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 and
any taxes on the Total Payments other than the Excise Tax and
any federal, state and local income and employment 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,
the Company and the Employee shall rely upon the assumption
and determinations of Arthur Andersen LLP or such other
certified accounting firm as may be mutually agreed upon by
the Employee and the Company (the "Accounting Firm"). All fees
and expenses of the Accounting Firm shall be borne solely by
the Company. Any determinations by the Accounting Firm shall
be binding upon the Company and the Employee, and they agree
to take a position consistent with such determination (i) on
any return, report, information return or other document
(including, without limitation, any related or supporting
information) with respect to taxes of the Company or the
Employee, (ii) in any proceeding, formal or informal, before
any taxing authority, and (iii) otherwise. In the event that
the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time the Gross-Up
Payment is determined, 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 and employment 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 and employment 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 the Gross-Up Payment is determined (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
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<PAGE> 11
Gross-Up Payment in respect of such excess (plus any interest
payable with respect to such excess at the rate provided in
section 1274(b)(2)(B) of the Code) at the time that the amount
of such excess is finally determined. The Gross-Up Payment
shall be paid within five (5) business days after the amount
thereof is determined, but in no event later than thirty (30)
days prior to the date on which payment of the Excise Tax in
respect of which such Gross-Up Payment is determined is due.
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 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 remainder 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 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).
Notwithstanding the foregoing, and subject to the Company's
and Parent's obligations under Section 5(b), the Company shall
not be required to pay a Gross-Up Payment with respect to an
amount of the Excise Tax equal to the excess of (i) over (ii),
where (i) equals the Excise Tax that actually becomes due with
respect to the Total Payments and (ii) equals that amount of
Excise Tax that would have become due with respect to the
Total Payments assuming that, with respect to the Company
stock options granted to the Employee on October 9, 1998 (the
"October Grant"), (x) the cash payout of the October Grant
pursuant to Section 2.9 of the Merger Agreement was subject to
Q&A 24(c) of the proposed Treasury Regulations promulgated
under section 280G of the Code (the "Regulations") and (y) for
purposes of Q&A 24(c)(2) under the Regulations, the percentage
used to calculate the amount reflecting the lapse of the
obligation to continue to perform services was one percent
(1%) (such excess amount shall hereinafter be referred to as
the "Option Excise Tax").
(b) COMPANY'S TAX POSITION.
The Company shall, and the Parent shall cause the Company to,
take the position (i) on any return, report, information
return or other document (including, without limitation, any
related or supporting information) with respect to taxes of
the Company or the Employee, (ii) in any proceeding, formal or
informal, before any taxing authority, and (iii) otherwise,
that the Option Excise Tax is not due, and the Company shall
not, nor shall the Parent cause the Company to, withhold any
amounts in respect thereof without the prior written consent
of the Employee. The Company shall, at its own expense,
contest in good faith any assessment or proposed assessment by
the Internal Revenue Service (the "IRS") against the Company
in respect of the Excise Tax with respect to the Option Excise
Tax. The Employee shall notify the Company in writing of any
claim by the Internal Revenue
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<PAGE> 12
Service that, if successful, would require the payment by the
Employee or the Company of the Option Excise Tax. Such
notification shall be given as soon as practicable but no
later than ten (10) business days after the Employee is
informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such
claim is requested to be paid. The Employee shall also give
the Company any information reasonably requested by the
Company relating to such claim; take such action in connection
with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company'
cooperate with the Company in good faith in order effectively
to contest such claim; and permit the Company to participate
in any proceedings relating to such claim. Such contest shall
include pursuing any and all administrative and judicial
remedies available to the Company. In the event that there is
a Final Determination (as defined below) pursuant to which the
IRS makes an assessment against the Company in respect of the
Option Excise Tax, the Company shall remit such amount to the
IRS and the Company shall be entitled to reimbursement of such
amount. The Company shall effect such reimbursement only by
means of withholding from the final tranche of the Stock Grant
a number of shares having a value equal to the amount of the
Option Excise Tax (rounding down to the next whole share);
provided, however, that the Company shall be entitled to
withhold from any cash payments to the Employee following the
payment of such tranche of the Stock Grant an amount equal to
the remainder of such Option Excise Tax.
For purposes of this Agreement, "Final Determination" shall
mean:
(x) a decision, judgment, decree, or other order by any court
of competent jurisdiction, which decision, judgment,
decree, or other order has become final and not subject to
further appeal; or
(y) a closing agreement entered into under section 7121 of the
Code or any other binding settlement agreement entered
into with the IRS, in either case with the consent of the
Employee, which consent shall not be unreasonably
withheld.
6. LEGAL FEES.
The Company shall pay to the Employee all legal fees and expenses
incurred by the Employee in disputing in good faith any issue hereunder
relating to the termination of the Employee's employment, in seeking in
good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code to
any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of the Employee's written
requests for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
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<PAGE> 13
7. PROTECTIVE COVENANTS.
(a) COMPENSATION, BENEFITS SUSPENDED IF SECTION 7 (b) BREACHED.
Except as more specifically provided with respect to the Stock
Grant in Section 3(c), the Employee agrees that if, during the
Employment Term, he breaches his obligations under Section
7(b), any payments and benefits to which the Employee would
otherwise have been entitled shall be suspended for one (1)
year, or, if less, the remaining balance of the period with
respect to which the Employee would otherwise be so entitled
to such payments 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.
(b) NON-DISCLOSURE; NON-COMPETE; NON-SOLICITATION.
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 thereof); provided, however,
that the Employee may retain copies of such documents as are
necessary for the preparation of his federal or state income
tax returns. In consideration for the payments under this
Agreement and any payments received by the Employee pursuant
to the Transaction for his equity interests in the Company,
during the scheduled Employment Term (notwithstanding any
earlier termination of the Employment Term), the Employee will
not in any manner directly or indirectly, through any person,
firm or corporation, alone or as a member of a partnership or
as an officer, director, stockholder, investor or employee of
or consultant to any other corporation or enterprise or
otherwise engage or assist any other person, firm, corporation
or enterprise in engaging in any business then being conducted
by the Company (but not later than as of the Date of
Termination) in any geographic area in which the Company is
then conducting such business. In consideration for the
payments under this Agreement and any payments received by the
Employee pursuant to the Transaction for his equity in-
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<PAGE> 14
terests in the Company, the Employee will not during the
scheduled Employment Term (notwithstanding any earlier
termination of the Employment Term) 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.
(c) FALSE, DEFAMATORY, OR DISPARAGING STATEMENTS.
The Employee agrees that 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. Promptly after the Employee's Date of Termination,
the Company agrees that it shall instruct the officers and the
directors of the Company not to make any false, defamatory or
disparaging statements about the Employee after such Date of
Termination.
(d) INJUNCTIONS TO PREVENT BREACHES OF PROTECTIVE COVENANTS.
The parties hereto agree that the Company would be damaged
irreparably in the event any provision of paragraphs (b) or
(c), 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 would be damaged
irreparably in the event any provision of paragraph (c), next
above, were not performed by the Company in accordance with
its terms 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 injunctions to prevent any breach or threatened
breach of any such provisions and to enforce such provision
specifically (without posting a bond or other security).
8. 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.
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<PAGE> 15
(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 and substance
satisfactory to the Employee, expressly to assume and agree to
perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such
succession had taken place.
9. MISCELLANEOUS.
(a) APPLICABLE LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, 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 92211
If to the Employee: KEVIN L. SPENCE
43717 Via Majorca
Palm Desert, CA 92260
With a copy to: MICHAEL DIAMOND, ESQ.
1900 Avenue of the Stars
Suite 600
Los Angeles, CA 90067
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.
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<PAGE> 16
(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.
If any provision of this Agreement as applied to any part or
to any circumstances will be adjudged by a court to be invalid
or unenforceable, the same will in no way affect any other
provision of this Agreement, the application of such provision
in any other circumstances, or the validity or enforceability
of this Agreement. The parties hereto intend this Agreement to
be enforced as written. If any provision or any part thereof
is held to be invalid or unenforceable because of the duration
thereof, the level of restrictions or the geographic scope
thereof, all parties agree that the court or arbitrator making
such determination will have the power to reduce the duration,
restrictions or geographic scope of such provision, and/or to
delete specific words or phrases in an its modified form such
provision will then be enforceable.
(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 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 the Employee's beneficiary(ies),
estate or legal representative(s).
(h) ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the
parties concerning the subject matter hereof and supersedes
all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral,
between the parties with respect to the subject matter hereof,
including without limitation the Prior Agreement and the
Company's Executive Severance Pay Plan. However, nothing in
this Agreement shall adversely affect the Employee's rights to
benefits vested and accrued prior to the Effective Date, other
than benefits which vest or accrue upon a "Change of Control"
as defined in the Prior Agreement and the Company's Executive
Severance Pay Plan, as the case may be, which are not
satisfied under
16
<PAGE> 17
Section 3(h). The Employee expressly agrees and acknowledges
that the payments for his Company stock options set forth in
Section 2.9 of the Merger Agreement are the sole payments in
connection with or with respect to his Company stock options
to which he is or will be entitled, and that the Prior
Agreement has not been amended subsequent to September 30,
1998.
(i) ARBITRATION.
(i) Any dispute, controversy or claim arising out of or
relating to this Agreement, a breach thereof or the
coverage or enforceability of this Section 9(i) shall
be settled by arbitration in Los Angeles, California
(or such other location as the Company and the
Employee may mutually agree), conducted in accordance
with the Commercial Arbitration Rules of the American
Arbitration Association, as such rules are in effect
in Los Angeles on the date of delivery of demand for
arbitration. The arbitration of any such issue,
including the determination of the amount of damages,
shall be to the exclusion of any court of law. This
provision shall not limit, nor be limited by, any
additional right to seek injunctive relief under
Section 7(d).
(ii) There shall be three arbitrators, one to be chosen by
each party at will within ten (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 ten (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.
(iii) The Company shall pay the fees and expenses incurred
in connection with any arbitration arising out of
this Agreement, unless a majority of the arbitrators
concludes that such arbitration procedure was not
instituted in good faith by the Employee.
(j) REPRESENTATION.
The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement and that
the performance of its obligations under this Agreement will
not violate any agreement between the Company and any other
person, firm or organization or any applicable laws or
regulations.
17
<PAGE> 18
(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.
10. TERMINATION OF AGREEMENT.
This Agreement shall be void and of no further force or effect upon the
termination of the Merger Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement
as of March 22, 1999.
PARENT:
VIVENDI
By: __________________________________
Its:___________________________________
(title)
COMPANY:
UNITED STATES FILTER CORPORATION,
a Delaware corporation
By: __________________________________
Its:___________________________________
(title)
EMPLOYEE:
By: __________________________________
19
<PAGE> 1
EXHIBIT (c)(8)
EXECUTION COPY
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT dated as of March 22, 1999 is by and
between United States Filter Corporation, a Delaware corporation (the
"Company"), and Vivendi, a societe anonyme organized under the laws of France
(the "Grantee").
RECITALS
The Grantee, the Company and Purchaser propose to enter into the
Merger Agreement.
As a condition and inducement to the Grantee's willingness to enter
into the Merger Agreement, the Grantee has requested that the Company agree, and
the Company has agreed, to grant the Grantee the Option.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the Company and the Grantee agree as follows:
1. Capitalized Terms. Certain capitalized terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
therein ascribed. Those capitalized terms used but not defined herein (including
in Annex A hereto) that are defined in the Merger Agreement are used herein with
the same meanings as ascribed to them therein; provided, however, that, as used
in this Agreement, "Person" shall have the meaning specified in Sections 3(a)(9)
and 13(d)(3) of the Exchange Act.
2. The Option.
(a) Grant of Option. Subject to the terms and conditions set forth
herein, the Company hereby grants to the Grantee an irrevocable option to
purchase, out of the authorized but unissued Shares, 36,223,552 Shares (as
adjusted as set forth herein) (the "Option Shares"), at the Exercise Price.
(b) Exercise Price. The exercise price (the "Exercise Price") of the
Option shall be $31.50 per Option Share.
Term. The Option shall be exercisable at any time and from time to
time following the occurrence of an Exercise Event and shall remain in full
force and effect until the earliest to occur of (i) the Effective Time, (ii) the
first anniversary of the receipt by Grantee of written notice from the Company
of the occurrence of an Exercise Event and (iii) termination of the Merger
Agreement in accordance with its terms other than a termination with respect to
which an Exercise Event shall occur (the "Option Term"). If the Option is not
theretofore exercised, the rights and obligations set forth in this Agreement
shall terminate at the expiration of the Option Term. "Exercise Event" shall
mean any of the events giving rise to the obligation of the Company to pay the
Termination Fee under Section 8.3 of the Merger Agreement.
<PAGE> 2
(c) Exercise of Option.
(i) The Grantee may exercise the Option, in whole or in part, at any
time and from time to time during the Option Term. Notwithstanding the
expiration of the Option Term, the Grantee shall be entitled to purchase those
Option Shares with respect to which it has exercised the Option in accordance
with the terms hereof prior to the expiration of the Option Term.
(ii) If the Grantee wishes to exercise the Option, it shall send a
written notice (an "Exercise Notice") (the date of which being herein referred
to as the "Notice Date") to the Company specifying (i) the total number of
Option Shares it intends to purchase pursuant to such exercise and (ii) a place
and a date (the "Closing Date") not earlier than three Business Days nor later
than 15 Business Days from the Notice Date for the closing of the purchase and
sale pursuant to the Option (the "Closing").
(iii) If the Closing cannot be effected by reason of the application
of any Law, Regulation or Order, the Closing Date shall be extended to the tenth
Business Day following the expiration or termination of the restriction imposed
by such Law, Regulation or Order. Without limiting the foregoing, if prior
notification to, or Authorization of, any Governmental Entity is required in
connection with the purchase of such Option Shares by virtue of the application
of such Law, Regulation or Order, the Grantee and, if applicable, the Company
shall promptly file the required notice or application for Authorization and the
Grantee, with the cooperation of the Company, shall expeditiously process the
same.
(iv) Notwithstanding Section 2(c)(iii) if the Closing Date shall not
have occur-red within nine months after the related Notice Date as a result of
one or more restrictions imposed by the application of any Law, Regulation or
Order, the exercise of the Option effected on the Notice Date shall be deemed to
have expired.
(d) Payment and Delivery of Certificates.
(i) At each Closing, the Grantee shall pay to the Company in
immediately available funds by wire transfer to a bank account designated by the
Company an amount equal to the Exercise Price multiplied by the number of Option
Shares to be purchased on such Closing Date.
(ii) At each Closing, simultaneously with the delivery of
immediately available funds as provided above, the Company shall deliver to the
Grantee a certificate or certificates representing the Option Shares to be
purchased at such Closing, which Option Shares shall be duly authorized, validly
issued, fully paid and nonassessable and free and clear of all Liens, and the
Grantee shall deliver to the Company its written agreement that the Grantee will
not offer to sell or otherwise dispose of such Option Shares in violation of
applicable Law or the provisions of this Agreement.
(e) Certificates. Certificates for the Option Shares delivered at
each Closing shall be endorsed with a restrictive legend that shall read
substantially as follows:
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<PAGE> 3
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MARCH 21,
1999. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR.
A new certificate or certificates evidencing the same number of Shares will be
issued to the Grantee in lieu of the certificate bearing the above legend, and
such new certificate shall not bear such legend, insofar as it applies to the
Securities Act, if the Grantee shall have delivered to the Company a copy of a
letter from the staff of the Securities and Exchange Commission, or an opinion
of counsel in form and substance reasonably satisfactory to the Company and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act.
(f) If at the time of issuance of any Common Shares pursuant to any
exercise of the Option, the Company shall have issued any share purchase rights
or similar securities to holders of Common Shares, then each Option Share
purchased pursuant to the Option shall also include rights with terms
substantially the same as and at least as favorable to the Grantee as those
issued to other holders of Common Shares.
3. Adjustment Upon Changes in Capitalization, Etc.
(a) In the event of any change in the Shares by reason of a stock
dividend, split-up, combination, recapitalization, exchange of shares or similar
transaction, the type and number of shares or securities subject to the Option,
and the Exercise Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction, so that
the Grantee shall receive upon exercise of the Option the same class and number
of outstanding shares or other securities or property that Grantee would have
received in respect of the Shares if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable.
(b) If any additional Shares are issued after the date of this
Agreement (other than pursuant to an event described in Section 3(a) above), the
number of Shares then remaining subject to the Option shall be adjusted so that,
after such issuance of additional Shares, such number of Shares then remaining
subject to the Option, together with shares theretofore issued pursuant to the
Option, equals 19.9% of the number of Shares then issued and outstanding.
(c) To the extent any of the provisions of this Agreement apply to
the Exercise Price, they shall be deemed to refer to the Exercise Price as
adjusted pursuant to this Section 3.
4. Repurchase at the Option of Grantee.
(a) At the request of the Grantee made at any time and from time to
time after the occurrence of an Exercise Event and prior to 120 days after the
expiration of the Option Term (the "Put Period"), the Company (or any successor
thereto) shall, at the election of the
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<PAGE> 4
Grantee (the "Put Right"), repurchase from the Grantee (i) that portion of the
Option relating to all or any part of the Unexercised Option Shares (or as to
which the Option has been exercised but the Closing has not occurred) and (ii)
all or any portion of the Shares purchased by the Grantee pursuant hereto and
with respect to which the Grantee then has ownership. The date on which the
Grantee exercises its rights under this Section 4 is referred to as the "Put
Date." Such repurchase shall be at an aggregate price (the "Put Consideration")
equal to the sum of:
(i) the aggregate Exercise Price paid by the Grantee for any
Option Shares which the Grantee owns and as to which the Grantee is
exercising the Put Right;
(ii) the excess, if any, of the Applicable Price over the
Exercise Price paid by the Grantee for each Option Share as to which
the Grantee is exercising the Put Right multiplied by the number of
such shares; and
(iii) the excess, if any, of (x) the Applicable Price per
Share over (y) the Exercise Price multiplied by the number of
Unexercised Option Shares as to which the Grantee is exercising the
Put Right.
(b) If the Grantee exercises its rights under this Section 4, the
Company shall, within ten Business Days after the Put Date, pay the Put
Consideration in immediately available funds to an account specified by the
Grantee, and the Grantee shall promptly thereupon surrender to the Company the
Option or portion of the Option and the certificates evidencing the Shares
purchased thereunder. The Grantee shall warrant to the Company that, immediately
prior to the repurchase thereof pursuant to this Section 4, the Grantee had sole
record and Beneficial Ownership of the Option or such shares, or both, as the
case may be, and that the Option or such shares, or both, as the case may be,
were then held free and clear of all Liens.
(c) If the Option has been exercised, in whole or in part, as to any
Option Shares subject to the Put Right but the Closing thereunder has not
occurred, the payment of the Put Consideration shall, to that extent, render
such exercise null and void.
(d) Notwithstanding any provision to the contrary in this Agreement
the Grantee may not exercise its rights pursuant to this Section 4 in a manner
that would result in Total Profit of more than the Profit Cap; provided,
however, that nothing in this sentence shall limit the Grantee's ability to
exercise the Option in accordance with its terms.
5. Repurchase at the Option of the Company.
(a) To the extent the Grantee shall not have previously exercised
its rights under Section 4, at the request of the Company made at any time after
the tenth day following the closing of the purchase and sale of any Option
Shares pursuant to Section 2 hereof and for a period ending 120-days after the
expiration of Option Term (the "Call Period"), the Company may repurchase from
the Grantee, and the Grantee shall sell, or cause to be sold, to the Company,
all (but not less than all) of the Shares acquired by the Grantee pursuant
hereto and with respect to which the Grantee has ownership at the time of such
repurchase at a price per
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<PAGE> 5
share equal to the greater of (A) the Current Market Price and (B) the Exercise
Price per share in respect of the shares so acquired (such price per share
multiplied by the number of Shares to be repurchased pursuant to this Section 5
being herein called the "Call Consideration"). The date on which the Company
exercises its rights under this Section 5 is referred to as the "Call Date."
(b) If the Company exercises its rights under this Section 5, the
Company shall, within ten Business Days pay the Call Consideration in
immediately available funds, and the Grantee shall surrender to the Company
certificates evidencing the Shares purchased hereunder, and the Grantee shall
warrant to the Company that, immediately prior to the repurchase thereof
pursuant to this Section 5, the Grantee had sole record and Beneficial Ownership
of such shares and that such shares were then held free and clear of all Liens.
(c) To the extent that the Grantee shall exercise the Option, the
Grantee shall, unless the Grantee shall exercise the Put Right or the Company
shall exercise the Call Right, retain sole ownership of the Shares so acquired
through the end of the Call Period.
(d) Notwithstanding any provision to the contrary in this Agreement,
the aggregate of the Call Consideration paid for all Option Shares shall not
exceed the Profit Cap.
6. Registration Rights.
(a) The Company shall, if requested by the Grantee at any time and
from time to time during the Registration Period, as expeditiously as
practicable, prepare, file and cause to be made effective up to two registration
statements under the Securities Act if such registration is required in order to
permit the offering, sale and delivery of any or all Shares or other securities
that have been acquired by or are issuable to the Grantee upon exercise of the
Option in accordance with the intended method of sale or other disposition
stated by the Grantee, including, at the sole discretion of the Company, a
"shelf" registration statement under Rule 415 under the Securities Act or any
successor provision, and the Company shall use all reasonable efforts to qualify
such shares or other securities under any applicable state securities laws. The
Company shall use all reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties that are required therefor and to keep such registration statement
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sale or other disposition. The obligations of the Company hereunder
to file a registration statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding 60 days in the aggregate
if the Board of Directors of the Company shall have determined in good faith
that the filing of such registration or the maintenance of its effectiveness
would require disclosure of nonpublic information that would materially and
adversely affect the Company. For purposes of determining whether two requests
have been made under this Section 6, only requests relating to a registration
statement that has become effective under the Securities Act and pursuant to
which the Grantee has disposed of all shares covered thereby in the manner
contemplated therein shall be counted. Notwithstanding any other provision of
this Section 6, any request for registration shall permit the Company, upon
notice given within 20 days of the request for registration, to repurchase from
the Grantee any
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<PAGE> 6
shares as to which the Grantee requests registration at a price per share equal
to the Current Market Price at the date the Company notifies the Grantee of its
decision to so repurchase. The Registration Expenses shall be for the account of
the Company.
(b) The Grantee shall provide all information reasonably requested
by the Company for inclusion in any registration statement to be filed
hereunder. Grantee shall choose the managing underwriter in any registration
contemplated by this Section 6. If during the Registration Period the Company
shall propose to register under the Securities Act the offering, sale and
delivery of Shares for cash for its own account or for any other stockholder of
the Company pursuant to a firm underwriting, it shall, in addition to the
Company's other obligations under this Section 6, allow the Grantee the right to
participate in such registration provided that the Grantee participates in the
underwriting; provided, however, that, if the managing underwriter of such
offering advises the Company in writing that in its opinion the number of Shares
requested to be included in such registration exceeds the number that can be
sold in such offering, the Company shall, after fully including therein all
securities to be sold by the Company, include the shares requested to be
included therein by Grantee pro rata (based on the number of Shares intended to
be included therein) with the shares intended to be included therein by Persons
other than the Company.
(c) In connection with any offering, sale and delivery of Shares
pursuant to a registration statement effected pursuant to this Section 6, the
Company and the Grantee shall provide each other and each underwriter of the
offering with customary representations, warranties and covenants, including
covenants of indemnification and contribution and, with respect to an
underwritten offering, enter into an underwriting agreement and other documents
in form and substance customary for transactions of such type.
7. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement in no
event shall the Grantee's Total Profit exceed the Profit Cap and, if it
otherwise would exceed such amount, (A) in connection with the Put Right or any
sale to a third party, the Grantee, at its sole election, shall either (i)
deliver to the Company for cancellation Option Shares previously purchased by
Grantee, (ii) pay cash or other consideration to the Company, (iii) reduce the
amount of the fee payable to Grantee under Section 8.3 of the Merger Agreement
or (iv) undertake any combination thereof, and (B) in connection with the Call
Right, Grantee shall deliver to the Company for cancellation Option Shares (or
other securities into which such Option Shares are converted or exchanged), in
either case, so that the Grantee's Total Profit shall not exceed the Profit Cap
after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Stock Option may not be exercised for a number of Option Shares that would, as
of the Notice Date, result in a Notional Total Profit of more than the Profit
Cap, and, if exercise of the Option otherwise would exceed the Profit Cap, the
Grantee, at its sole option, may reduce the number of Option shares as to which
this Option is being exercised, increase the Exercise Price for that number of
Option Shares set forth in the Exercise Notice so that the Notional Total Profit
shall not exceed the
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<PAGE> 7
Profit Cap; provided, however, that nothing in this sentence shall restrict any
exercise of the Option otherwise permitted by this Section 7(b) on any
subsequent date at the Exercise Price set forth in Section 2(b) if such exercise
would not then be restricted under this Section 7(b).
(c) If an Exercise Event shall occur, the Grantee may elect, in lieu
of receiving any portion of the Termination Fee, to exercise a portion of the
Option.
8. Listing. If the Shares or any other securities then subject to
the Option are then listed on the NYSE, the Company, upon the occurrence of an
Exercise Event, will promptly file an application to list on the NYSE the Shares
or other securities then subject to the Option and will use all reasonable
efforts to cause such listing application to be approved as promptly as
practicable.
9. Replacement of Agreement. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, the Company will execute and deliver a new Agreement of
like tenor and date.
10. Miscellaneous.
(a) Expenses. Except as otherwise provided in the Merger Agreement
or as otherwise expressly provided herein, each of the parties hereto shall bear
and pay all costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third Party Beneficiary; Severability.
Except as otherwise set forth in the Merger Agreement, this Agreement (including
the Merger Agreement and the other documents and instruments referred to herein
and therein) (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
(d) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as
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<PAGE> 8
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
(e) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware, regardless of
the Laws that might otherwise govern under applicable principles of conflicts of
law.
(f) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(g) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses or sent by electronic
transmission to the telecopier number specified below:
If to the Company to:
United States Filter Corporation
40-004 Cook Street
Palm Desert, CA 92211
Telecopy:
Attention: Steve Stanczak, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, CA 90071-3144
Telecopy: (213) 687-5600
Attention: Rod A. Guerra, Jr., Esq.
Brian J. McCarthy, Esq.
If to Grantee to:
VIVENDI S.A.
42, Avenue de Friedland
75380
Paris
Telecopy: (011) 331-7171-1137
Attention: Chief Financial Officer
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<PAGE> 9
with a copy to:
Cabinet Bredin Prat
130 rue du Faubourg Saint Honore
75008
Paris
Telecopy: (011) 331-4359-7001
Attention: Elena M. Baxter, Esq.
and:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
Attention: Daniel A. Neff, Esq.
Trevor S. Norwitz, Esq..
(h) Counterparts. This Agreement and any amendments hereto may be
executed in counterparts, each of which shall be deemed an original and all of
which taken together shall constitute but a single document.
(i) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be sold, assigned
or otherwise disposed of or transferred by either of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
party, except that the Grantee may assign this Agreement to a wholly owned
Subsidiary of the Grantee; provided, however, that no such assignment shall have
the effect of releasing the Grantee from its obligations hereunder. Subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(j) Further Assurances. In the event of any exercise of the Option
by the Grantee, the Company and the Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(k) Specific Performance. The parties hereto hereby acknowledge and
agree that the failure of any party to this Agreement to perform its agreements
and covenants hereunder will cause irreparable injury to the other party to this
Agreement for which damages, even if available, will not be an adequate remedy.
Accordingly, each of the parties hereto hereby consents to the granting of
equitable relief (including specific performance and injunctive relief) by any
court of competent jurisdiction to enforce any party's obligations hereunder.
The parties further agree to waive any requirement for the securing or posting
of any bond in connection with the obtaining of any such equitable relief and
that this provision is without prejudice to any other rights that the parties
hereto may have for any failure to perform this Agreement.
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<PAGE> 10
IN WITNESS WHEREOF, the Company and the Grantee have caused this
Stock Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
UNITED STATES FILTER CORPORATION
By: /s/ Richard J. Heckmann
--------------------------------------------
Name: Richard J. Heckmann
Title: Chairman and Chief Executive Officer
VIVENDI S.A.
By: /s/ Jean-Marie Messier
--------------------------------------------
Name: Jean-Marie Messier
Title: President Directeur General
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<PAGE> 11
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Stock Option Agreement shall
have the meanings set forth below unless the context shall otherwise require:
"Agreement" shall mean this Stock Option Agreement.
"Applicable Price" means the highest of (i) the highest purchase
price per share paid pursuant to a third party's tender or exchange offer made
for Shares after the date hereof and on or prior to the Put Date, (ii) the price
per share to be paid by any third Person for Shares pursuant to an agreement for
a Business Combination Transaction entered into on or prior to the Put Date, and
(iii) the Current Market Price. If the consideration to be offered, paid or
received pursuant to either of the foregoing clauses (i) or (ii) shall be other
than in cash, the value of such consideration shall be determined in good faith
by an independent nationally recognized investment banking firm jointly selected
by the Grantee and the Company, which determination shall be conclusive for all
purposes of this Agreement.
"Authorization" shall mean any and all permits, licenses,
authorizations, orders certificates, registrations or other approvals granted by
any Governmental Entity.
"Beneficial Ownership," "Beneficial Owner" and "Beneficially Own"
shall have the meanings ascribed to them in Rule 13d-3 under the Exchange Act.
"Business Combination Transaction" shall mean (i) a consolidation,
exchange of shares or merger of the Company with any Person, other than the
Grantee or one of its subsidiaries, and, in the case of a merger, in which the
Company shall not be the continuing or surviving corporation, (ii) a merger of
the Company with a Person, other than the Grantee or one of its Subsidiaries, in
which the Company shall be the continuing or surviving corporation but the then
outstanding Shares shall be changed into or exchanged for stock or other
securities of the Company or any other Person or cash or any other property or
the shares of Company Common Stock outstanding immediately before such merger
shall after such merger represent less than 70% of the common shares and common
share equivalents of the Company outstanding immediately after the merger or
(iii) a sale, lease or other transfer of all or substantially all the assets of
the Company to any Person, other than the Grantee or one of its Subsidiaries.
"Business Day" shall mean a day other than Saturday, Sunday or a
federal holiday.
"Call Consideration" shall have the meaning ascribed to such term in
Section 5 herein.
"Call Date" shall have the meaning ascribed to such term in Section
5 herein.
"Call Period" shall have the meaning ascribed to such term in
Section 5 herein.
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<PAGE> 12
"Closing" shall have the meaning ascribed to such term in Section 2
herein.
"Closing Date" shall have the meaning ascribed to such term in
Section 2 herein.
"Current Market Price" shall mean, as of any date, the average of
the closing prices (or, if such securities should not trade on any trading day,
the average of the bid and asked prices therefor on such day) of the Shares as
reported on the New York Stock Exchange Composite Tape during the ten
consecutive trading days ending on (and including) the trading day immediately
prior to such date or, if the Shares are not quoted thereon, on The Nasdaq Stock
Market or, if the Shares are not quoted thereon, on the principal trading market
(as defined in Regulation M under the Exchange Act) on which such shares are
traded as reported by a recognized source during such ten Business Day period.
"Exercise Event" shall have the meaning ascribed to such term in
Section 2(c).
"Exercise Notice" shall have the meaning ascribed to such term in
Section 2(d) herein.
"Exercise Price" shall have the meaning ascribed to such term in
Section 2 herein.
"Law" shall mean all laws, statutes and ordinances of the United
States, any state of the United States, any foreign country, any foreign state
and any political subdivision thereof, including all decisions of Governmental
Entities having the effect of law in each such jurisdiction.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Laws of any jurisdiction.
"Merger Agreement" shall mean that certain Agreement and Plan of
Merger dated as of the date hereof among United States Filter Corporation, a
Delaware corporation, Eau Acquisition Corp., a Delaware corporation, and
VIVENDI, a societe anonyme organized under the laws of France.
"Notice Date" shall have the meaning ascribed to such term in
Section 2 herein.
"Notional Total Profit" shall mean, with respect to any number of
Option Shares as to which the Grantee may propose to exercise the Option, the
Total Profit determined as of the date of the Exercise Notice assuming that the
Option were exercised on such date for such number of Option Shares and assuming
such Option Shares, together with all other Option Shares held by the Grantee
and its Affiliates as of such date, were sold for cash at the closing market
price for the Shares as of the close of business on the preceding trading day
(less customary brokerage commissions) and including all amounts theretofore
received or concurrently being paid to the Grantee pursuant to clauses (i), (ii)
and (iii) of the definition of Total Profit.
A-2
<PAGE> 13
"Option" shall mean the option granted by the Company to Grantee
pursuant to Section 2 herein.
"Option Shares" shall have the meaning ascribed to such term in
Section 2 herein.
"Option Term" shall have the meaning ascribed to such term in
Section 2 herein.
"Order" shall mean any judgment, order or decree of any Governmental
Entity.
"Profit Cap" shall mean $237 million.
"Put Consideration" shall have the meaning ascribed to such term in
Section 4 herein.
"Put Date" shall have the meaning ascribed to such term in Section 4
herein.
"Put Period" shall have the meaning ascribed to such term in Section
4 herein.
"Put Right" shall have the meaning ascribed to such term in Section
4 herein.
"Registration Expenses" shall mean the expenses associated with the
preparation and filing of any registration statement pursuant to Section 6
herein and any sale covered thereby (including any fees related to blue sky
qualifications and filing fees in respect of the National Association of
Securities Dealers, Inc.), but excluding underwriting discounts or commissions
or brokers' fees in respect to shares to be sold by the Grantee and the fees and
disbursements of the Grantee's counsel.
"Registration Period" shall mean the period of two years following
the first exercise of the Option by the Grantee.
"Regulation" shall mean any rule or regulation of any Governmental
Entity having the effect of Law or of any rule or regulation of any
self-regulatory organization, such as the NYSE.
"Total Profit" shall mean the aggregate (before income taxes) of the
following: (i) all amounts to be received by the Grantee or concurrently being
paid to the Grantee pursuant to Section 4 for the repurchase of all or part of
the unexercised portion of the Option, (ii) (A) the amounts to be received by
the Grantee or concurrently being paid to the Grantee pursuant to the sale of
Option Shares (or any other securities into which such Option Shares are
converted or exchanged), including sales made pursuant to a registration
statement under the Securities Act or any exemption therefrom, less (B)
aggregate Exercise Price paid by the Grantee for such Option Shares and (iii)
all amounts received by the Grantee from the Company or concurrently being paid
to the Grantee pursuant to Section 8.3 of the Merger Agreement.
"Unexercised Option Shares" shall mean, from and after the Exercise
Date until the expiration of the Option Term, those Option Shares as to which
the Option remains unexercised from time to time.
A-3
<PAGE> 1
EXHIBIT (c)(9)
United States Filter Corporation
40-004 Cook Street
Palm desert, CA 92210
March 15, 1999
Vivendi
42, avenue de Friedland
75380 Paris Cedex 08, France
Re: Confidentiality Agreement
Gentlemen:
You have expressed an interest in exploring a possible transaction (the
"Transaction") with United States Filter Corporation (the "Company") relating
to a possible acquisition of the Company and have requested that the Company
furnish you with certain information.
As used herein, "Evaluation Material" means all information relating to
the Company, whether oral, written or otherwise (including any such information
furnished prior to the execution of this Agreement), furnished to you or your
directors, officers, partners, advisors (including financial advisors),
subsidiaries or other entities controlled by you directly or indirectly
("Controlled Entities"), employees, agents or representatives (collectively,
"Representatives"), by the Company or its Representatives and all reports,
analyses, compilations, studies and other materials prepared by you or your
Representatives (in whatever form maintained, whether documentary, computer
storage or otherwise) containing, reflecting or based upon, in whole or in part,
any such information. The term "Evaluation Material" does not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by you, your Representatives or anyone to whom you
or any of your Representatives transmit any Evaluation Material or (ii) is or
becomes known or available to you on a non-confidential basis from a source
<PAGE> 2
Vivendi
March 15, 1998
Page 2
(other than the Company or one of its Representatives) who, insofar as is known
to you after reasonable due inquiry, is not prohibited from transmitting the
information to you or your Representatives by a contractual, legal, fiduciary or
other obligation.
In consideration of your being furnished with the Evaluation Material,
you agree that:
1. Subject to paragraph 3 below, the Evaluation Material will be kept
confidential in accordance with the terms hereof and will not, without the
prior written consent of the Company, be disclosed by you or your
Representatives, in whole or in part, and will not be used by you or your
Representatives, directly or indirectly, for any purpose other than in
connection with evaluating a possible Transaction. Moreover, you agree to
disclose that you are evaluating the Transaction and transmit Evaluation
Material to your Representatives only for the purpose of evaluating such
Transaction and are informed by you of the confidential nature of the Evaluation
Material and agree to act in accordance with the confidentiality provisions of
this Agreement. In any event, you will be responsible for any actions by your
Representatives which are not in accordance with the provisions hereof;
provided, however, that you shall not be responsible for any such actions by any
of your Representatives who is not one of your directors, partners, officers,
Affiliates or employees and who furnishes to the Company a letter substantially
in the form of Exhibit A.
2. Subject to paragraph 3 below, without the prior written consent of
the Company, neither you nor your Representatives will disclose to any person
any information regarding a possible Transaction involving the Company or any
information relating in any way to the Evaluation Material, including, without
limitation (i) the fact that discussions or negotiations with the Company are
taking place concerning a possible Transaction, including the status thereof or
the termination of discussions or negotiations with the Company, (ii) any of the
terms, conditions or other facts with respect to any such possible Transaction
or of your consideration of a possible Transaction or (iii) that this Agreement
exists, that Evaluation Material has been made available to you. The Company,
its subsidiaries, and its Representatives shall be subject to the restrictions
contained in the immediately preceding sentence. The term "person" as used in
this Agreement shall be broadly interpreted to include, without limitation, any
corporation, company, group, partnership, entity or individual; and the term
"Company" shall include, without limitation, its subsidiaries.
<PAGE> 3
Vivendi
March 15, 1998
Page 3
3. In the event that you, your Representatives or anyone to whom you or
your Representatives supply Evaluation Material or any of the facts or
information referred to in paragraph 2, above, are requested or required (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand, any informal or formal investigation by
any government or governmental agency or authority or otherwise) to disclose any
Evaluation Material or any of the facts or information referred to in the prior
paragraph or any information relating to a possible Transaction or such person's
opinion, judgment, view or recommendation concerning the Company as developed
from the Evaluation Material, you agree (i) to immediately notify the Company of
the existence, terms and circumstances surrounding such a request, (ii) to
consult with the Company on the advisability of taking legally available steps
to resist or narrow such request and (iii) if disclosure of such information is
required, to furnish only that portion of the Evaluation Material which, in the
opinion of your counsel, you are legally required to disclose and to cooperate
with any reasonable action by the Company to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be accorded
the Evaluation Material.
4. You hereby acknowledge that you are aware, and that you will advise
such of your Representatives who are informed in accordance with the terms of
this Agreement, that the United States securities laws prohibit any person who
has received from an issuer material non-public information concerning the
matters which are the subject of this Agreement from purchasing or selling
securities of such issuer or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities.
5. You hereby acknowledge that the Evaluation Material is being
furnished to you in consideration of your agreement that, for a period of two
years from the date hereof, neither you nor any of your Controlled Entities
shall, directly or indirectly, without the consent of the Company (a)(x)
solicit, seek or offer to effect or effect, (xx) negotiate with or provide any
information to the Company's Board of Directors, any director or officer of the
Company, any stockholder of the Company, any employee or union or other labor
organization representing employees of the Company or any other person with
respect to, (xxx) make any statement or proposal, whether written or oral,
either alone or in concert with others, to the Board of Directors of the
Company, any directors or officers of the Company or any stockholder of the
Company, any employee or union or other labor organization representing
employees of the Company or any other person with respect to,
<PAGE> 4
Vivendi
March 15, 1998
Page 4
or (xxxx) make any public announcement (except as required by law in respect of
actions permitted hereby) or proposal or offer whatsoever (including, but not
limited to, any "solicitation" of "proxies" as such terms are defined or used in
Regulation 14A of the Exchange Act) with respect to (i) any form of business
combination or similar or other extraordinary transaction involving the Company
or any of its subsidiaries or other entities controlled by the Company (the
"Company Controlled Entities"), including, without limitation, a merger, tender
or exchange offer or liquidation of the Company assets, (ii) any form of
restructuring, recapitalization or similar transaction with respect to the
Company or any Company Controlled Entities, (iii) any purchase of any securities
or assets, or rights or options to acquire any securities or assets (through
purchase, exchange, conversion or otherwise), of the Company or any Company
Controlled Entities, (iv) any proposal to seek representation on the Board of
Directors of the Company or otherwise to seek to control or influence the
management, Board of Directors or policies of the Company or any Company
Controlled Entities, (v) any request or proposal to waive, terminate or amend
the provisions of this letter or (vi) any proposal or other statement
inconsistent with the terms of this agreement or (b) instigate, encourage, join,
act in concert with or assist (including, but not limited to, providing or
assisting in any way in obtaining financing for, or acting as a joint or
co-bidder for the Company) any third party to do any of the foregoing (the
actions referred to in (a) and (b) in this sentence are referred to as
"Prohibited Actions"), unless and until you have received the prior written
invitation or approval of a majority of the Board of Directors of the Company to
do any of the foregoing (it being agreed and understood that the entering into
of this Agreement shall not constitute such invitation). If at any time during
such period you are approached by any party concerning your or their
participation in a transaction involving the Company assets, businesses or
securities or any other Prohibited Actions, you will promptly inform the Company
of the nature of such contact and the parties thereto unless you terminate such
contact immediately upon becoming aware of the subject matter thereof.
Notwithstanding the foregoing provisions of this paragraph, such provisions
shall not apply in the event the Company enters into a definitive agreement or
an agreement in principle with a third party (other than the undersigned) with
respect to a transaction referred to in clause (a)(i) or (ii) of this paragraph
or a third party engages in any of the activities referred to in clause(a)(xxxx)
with respect to a transaction referred to in clause (a)(i), (ii) or (iv) of this
paragraph. You further agree that for a period of two years from the date hereof
you will not offer to hire or hire any person currently or formerly employed by
the Company with whom you have had contact, or about whom you have become aware,
during the period of your investigation of the Company provided however, that
the foregoing provision will not prevent you from employing any such person
<PAGE> 5
Vivendi
March 15, 1998
Page 5
who contacts you on his or her own initiative or in response to any general
solicitation or advertisement concerning available positions.
6. You agree that prior to the consummation of a Transaction, without
the prior consent of the Company, neither you nor your Controlled Entities shall
directly or indirectly, initiate, engage or participate in any discussions or
negotiations or enter into any agreement or arrangements regarding the sale of
any assets or securities of the Company, except for agreements with bona fide
financial institutions providing financing for such Transaction which require
sales of certain assets to third parties prior to a certain time.
7. Although the Company has endeavored to include in the Evaluation
Material information known to it which it believes to be relevant for the
purpose of your investigation, you understand that neither the Company nor any
of its Representatives has made or will make any representation or warranty as
to the accuracy or completeness of the Evaluation Material; except as may be
contained in a definitive agreement with respect to a Transaction. You agree
that neither the Company nor its Representatives shall have any liability to you
or any of your Representatives resulting from the Evaluation Material or for
your or your Representatives' consideration of, or participation in a process
relating to, a possible Transaction.
8. Promptly upon request from the Company, you shall redeliver to the
Company or destroy all tangible Evaluation Material and any other tangible
material containing, prepared on the basis of, or reflecting any information in
the Evaluation Material (whether prepared by the Company, its advisors or
otherwise), including all reports, analyses, compilations, studies and other
materials containing or based on the Evaluation Material or reflecting your
review of, or interest in, the Company, and will not retain any copies, extracts
or other reproductions in whole or in part of such tangible material. Upon the
request of the Company, any such destruction shall be certified in writing to
the Company by an authorized officer supervising the same.
9. You acknowledge and agree that in the event of any breach of this
Agreement, the Company would be irreparably and immediately harmed and could
not be made whole by monetary damages. It is accordingly agreed that the
Company, in addition to any other remedy to which it may be entitled in law or
equity, shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to compel specific performance of this Agreement, without the
need for proof of actual damages. You also agree to reim-
<PAGE> 6
Vivendi
March 15, 1998
Page 6
burse the Company for all costs and expenses, including attorney's fees,
incurred by the Company in successfully enforcing your or your Representatives'
obligations hereunder.
10. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, including, without limitation, ss.
5-1401 and 5-1402 of the New York General Obligations Law and NYCPLR 327(b). You
hereby irrevocably and unconditionally submit to the jurisdiction of any court
of the state of New York or any federal court sitting in the State of New York
for purposes of any suit, action or other proceeding arising out of this
Agreement or the Transaction contemplated hereby, which is brought by or against
the Company (and you agree not to commence any action, suit or proceedings
relating thereto except in such courts) and agree that service of any process,
summons, notice or document by U.S. registered mail to Vivendi, 42, avenue de
Friedland, 75380 Paris Cedex 08, France, with a copy by hand delivery, first
class U.S. mail or overnight courier to Wachtell, Lipton, Rosen & Katz
(attention: Daniel A. Neff, Esq.), 51 West 52nd Street, New York, New York
10019, shall be effective service of process for any action, suit or proceeding
brought against you in any such court. You hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the Transaction contemplated
hereby, which is brought by or against the Company, in the courts of the State
of New York or any federal court sitting in the State of New York and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such action suit or proceeding brought in any such court
has been brought in an inconvenient forum.
11. You and the Company agree that unless and until a definitive
written agreement between the Company and you with respect to a Transaction has
been executed and delivered, neither the Company nor you will be under any legal
obligation of any kind whatsoever with respect thereto. The agreements set forth
in this Agreement may be modified or waived only by a separate writing by the
Company and you which expressly modifies or waives such agreements.
12. You agree that you and your Representatives will direct all
inquiries and any requests for information concerning the Company to Kevin L.
Spence or such other individuals named by the Company and not contact any other
members of management or employees of the Company, without the prior consent of
the Company. Notwithstanding anything else contained in this Agreement, (i) you
may contact Apollo Investment Fund L.P.("Apollo") at any time in connection with
a Sale Transaction and you may enter into an
<PAGE> 7
Vivendi
March 15, 1998
Page 7
agreement to purchase or an option agreement to purchase any shares of common
stock of the Company owned by Apollo, and (ii) you may not contact other
stockholders of the Company without the prior consent of Richard J. Heckmann,
provided that any consent previously given by Mr. Heckmann to contact AXA
Assurances I.A.R.D. Mutelle and its affiliates and the Bass family and its
affiliates will be deemed to satisfy the requirements of this clause.
13. It is understood and agreed that no failure or delay by either
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
14. This Agreement shall inure to the benefit of any successor in
interest to the Company. In addition, the confidentiality provisions of this
Agreement shall inure to the benefit of any person that may acquire, after the
date hereof, any subsidiary or division of the Company with respect to
Evaluation Material concerning the business or affairs of such subsidiary or
division. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and all of which shall constitute the same agreement.
15. In the event the Company or any of its subsidiaries has entered
into or enters into a confidentiality agreement with any third party with
respect to a possible acquisition of or other business combination involving the
Company ( a "Third Party Agreement") and the Third Party Agreement contains
terms similar to or relating to the matters covered hereby, and such terms of
the Third Party Agreement are more favorable to such third party than the terms
contained herein, then the Company shall notify you of such terms and this
Agreement shall be deemed to be amended so that you will be entitled to the
benefit of such more favorable terms.
<PAGE> 8
Vivendi
March 15, 1998
Page 8
Very truly yours,
United States Filter Corporation
By: /s/ KEVIN SPENCE
------------------------------
Name: Kevin Spence
Title: Executive V.P. CFO
Confirmed and Agreed to as of the date first written above:
Vivendi
By: /s/ GUILLAUME HANNEZO
- --------------------------------
Name: Guillaume Hannezo
Authorized Officer
<PAGE> 9
Vivendi
March 15, 1998
Page 9
EXHIBIT A
Representative's Letter
_______________, 199_
United States Filter Corporation
40-004 Cook Street
Palm Desert, CA 92211
Vivendi
42, avenue de Friedland
75380 Paris Cedex 08, France
Ladies and Gentlemen:
The undersigned agrees to be bound by the confidentiality provisions of
the letter agreement dated March __, 1999 between Vivendi and United States
Filter Corporation, a copy of which is attached hereto.
Very truly yours,
[ ]
By: _____________________
Name:
Title:
<PAGE> 1
Exhibit (c)(10)
March 22, 1999
Richard J. Heckmann
Chief Executive Officer
United States Filter Corporation
40-004 Cook Street
Palm Desert, CA 92211
Dear Richard:
This letter agreement (this "Letter Agreement") sets forth the
understanding among United States Filter Company (the "Company"), Vivendi
("Parent") and you regarding your right to purchase the Company's airplane.
You shall be entitled to purchase the Company's Canadair Challenger
aircraft, model No. 601-3ER, tail No. N502F, at its then depreciated cost, at
such time as you retire or, if earlier, at such time as the Company determines
that it shall sell such aircraft to any third party. You may, in your sole
discretion, deliver to the Company previously acquired shares of Parent stock
in payment or partial payment of such purchase price, which shares shall be
valued at their fair market value on the date such shares are delivered to the
Company.
This Letter Agreement is entered into as of the date hereof;
provided, however, that its effectiveness is conditioned on the consummation of
the transactions contemplated by the Agreement and Plan of Merger by and among
the Parent, EAU Acquisition Corp. and the Company, dated as of March 22, 1999.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Letter Agreement
on this March 22, 1999.
VIVENDI
By: /s/ Jean-Marie Messier
------------------------------------
Title: President Directeur General
---------------------------------
UNITED STATES FILTER CORPORATION
By: /s/ Richard J. Heckmann
------------------------------------
Title: C.E.O.
---------------------------------
RICHARD J. HECKMANN
/s/ Richard J. Heckmann
---------------------------------------
-2-
<PAGE> 1
EXHIBIT (C)(11)
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the three
fiscal years ended March 31, 1998 for the Company's Chief Executive Officer and
for the four other most highly compensated executive officers of the Company for
fiscal 1998 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
-------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(1) COMPENSATION(2)
--------------------------- ------ ------- ------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Heckmann............. 1998 450,000 450,000 -- 150,000 5,322
Chairman of the Board, Chief 1997 450,000 300,000 -- 187,499 3,320
Executive Officer And 1996 414,731 150,000 -- 150,000 --
President
Harry K. Hornish, Jr.(3)........ 1998 251,270 100,000 -- 15,000 2,479
President and Chief Operating 1997 115,575 100,000 -- --(4) 3,538
Officer -- Waterworks 1996 -- -- -- -- --
Distribution Group
Nicholas C. Memmo............... 1998 215,923 55,000 -- 25,000 4,718
President and Chief Operating 1997 199,154 37,500 -- 15,000 4,923
Officer -- North American 1996 189,042 37,500 -- 17,500 5,014
Process Water Group
Andrew D. Seidel................ 1998 213,462 55,000 -- 25,000 4,536
President and Chief Operating 1997 181,249 20,000 -- 15,000 5,322
Officer -- North American 1996 153,535 -- -- 15,000 4,980
Wastewater Group
Kevin L. Spence................. 1998 204,654 33,000 -- 20,000 3,647
Executive Vice President and 1997 180,001 65,000 -- 15,000 6,209
Chief Financial Officer 1996 164,774 41,500 -- 15,000 4,865
</TABLE>
- ---------------
(1) Represents options granted pursuant to the Company's 1991 Employee Stock
Option Plan to purchase shares of Common Stock. Option grants during fiscal
1998 are described in greater detail below.
(2) Represents the Company's 50% matching contribution to the Company's 401(k)
Plan.
(3) In connection with the acquisition of The Utility Supply Group, Inc.
("USG"), Mr. Hornish became an employee of the Company on October 25, 1996.
See " -- Executive Severance Plan and Employment Agreements."
(4) Mr. Hornish received options to purchase 67,111 shares of Common Stock in
exchange for outstanding options to purchase shares of Common Stock of USG
in connection with the acquisition of USG by the Company.
<PAGE> 2
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information with respect to stock options
granted to the Named Executive Officers in fiscal 1998 under the Company's 1991
Employee Stock Option Plan. The options listed below are included in the Summary
Compensation Table above.
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS POTENTIAL REALIZABLE VALUE
NUMBER OF GRANTED AT ASSUMED RATES OF
SECURITIES TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES FOR OPTION TERM(2)
OPTIONS IN FISCAL EXERCISE EXPIRATION -------------------------------
NAME GRANTED(1) YEAR PRICE($/SH) DATE 5% 10%
---- ----------- ---------- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Heckmann.... 150,000 6.9% $27.25 6/30/07 $ 2,570,607 $ 6,514,422
Harry K. Hornish,
Jr................... 15,000 0.9% 27.25 6/30/07 257,061 651,442
Nicholas C. Memmo...... 25,000 1.1% 27.25 6/30/07 428,434 1,085,737
Andrew D. Seidel....... 25,000 1.1% 27.25 6/30/07 428,434 1,085,737
Kevin L. Spence........ 20,000 0.9% 27.25 6/30/07 342,748 868,590
Increase in Value to
All
Stockholders(3)...... $1,643,628,842 $4,165,278,193
</TABLE>
- ---------------
(1) Options granted pursuant to the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock. The exercise price may be paid in cash or
in shares of the Company's Common Stock. Of the options granted to Messrs.
Heckmann, Hornish, Memmo, Seidel and Spence, 25% are vested and the
remaining options will vest in equal increments on July 1, 1998, 1999 and
2000.
(2) Calculated over a ten-year period representing the life of the options.
(3) Represents/the increase in value to all stockholders assuming the Company's
Common Stock appreciates 5% or 10% in value per year, compounded over a
ten-year period, equivalent to the life of the options granted to the Named
Executive Officers. Calculated using a Common Stock price of $27.25, the
closing price on June 30, 1997, on the NYSE, which is the exercise price of
substantially all of the options granted in fiscal 1998, and the total
weighted average number of 95,909,000 shares of Common Stock outstanding in
fiscal 1998.
OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR END OPTION VALUE
The table below sets forth information with respect to stock options
exercised by the named Executive Officers in fiscal 1998 and the number of
unexercised options held by such persons on March 31, 1998, on a pre-tax basis:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS
ON EXERCISE OF VALUE MARCH 31, 1998 AT MARCH 31, 1998
OPTIONS(1) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
--------------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Richard J. Heckmann..... -- $ -- 499,149/262,500 $11,204,836/3,808,601
Harry K. Hornish, Jr.... 15,000 437,378 30,861/11,250 892,068/88,594
Nicholas C. Memmo....... 6,000 97,694 116,563/32,812 2,726,446/404,560
Andrew D. Seidel........ 5,000 115,556 102,624/31,874 2,390,581/384,588
Kevin L. Spence......... 10,000 224,862 96,374/28,124 2,250,523/355,057
</TABLE>
- ---------------
(1) Represents options under the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock.
(2) The dollar value reported is based on the difference between the exercise
price of the outstanding option and the closing price of the Company's
Common Stock on the NYSE on March 31, 1998, of $35.125 per share.
2
<PAGE> 3
RETIREMENT PROGRAM
Effective April 1, 1995, the Company established a non-qualified defined
benefit pension plan for its senior executives, including Messrs. Heckmann,
Memmo, Seidel and Spence. Under this plan (the "Retirement Program"), the
executive becomes entitled to receive from the Company at age 60 an annual
retirement income, payable for 15 years equal to 50% of the executive's final
five year average compensation. Earnings covered by the Retirement Program
include salaries and incentive compensation. Benefits accrue on a percentage
basis over the number of years of service of the executive from his date of hire
with the Company to the attainment of age 60. The benefit accrued vests
commencing after five years of service, 50% at that time, and 10% each year
thereafter. A reduced benefit is payable at age 55 and if the executive's
employment with the Company terminates before age 55, a deferred benefit, to the
extent vested, is payable at or after age 55 based upon the executive's accrued
benefit prior to termination.
As of August 1997, the following are the benefits payable per year for 15
years under the Retirement Program for Messrs. Heckmann, Memmo, Seidel and
Spence, assuming that their covered compensation increases at a rate of 5%
annually and that their employment with the Company continues until age 60: Mr.
Heckmann $636,545; Mr. Memmo $443,451; Mr. Seidel $443,451; and Mr. Spence
$280,371.
All benefits under the Retirement Program are payable out of the general
assets of the Company. Any funding established by the Company to provide a
source for the payment of Retirement Program benefits would remain subject to
the general creditors of the Company.
EXECUTIVE SEVERANCE PAY PLAN AND EMPLOYMENT AGREEMENTS
Executive Severance Pay Plan. The United States Filter Corporation
Executive Severance Pay Plan (the "Severance Plan") was adopted by the Board of
Directors on June 9, 1998 effective as of January 1, 1998. It entitles eligible
executives to certain severance benefits only upon termination of employment by
the Company without cause (as defined) or termination by the employee for good
reason (as defined) provided that, except following a change of control (as
defined below), they do not compete with the Company or solicit its employees
during the remainder of the term of the employment agreement and for one year
thereafter. The Severance Plan also requires that confidential information not
be disclosed. A change of control of the Company generally is defined to occur
if (i) any person or group acquires 50% or more of the Company's voting
securities, (ii) during any two year period there is a change in a majority of
the Board of Directors of the Company, (iii) there is a consolidation or merger
of the Company or a transfer of substantially all of the Company's assets or
(iv) a plan of complete liquidation of the Company is approved by the
stockholders.
Initially only the Chief Executive Officer has been designated to
participate in the Severance Plan. It replaces his Executive Retention Agreement
previously in force. Other executive officers may be designated as participants
in the future (which may be in lieu of any Retention Agreement or other
severance arrangement to which any such executive officer is a party). The
benefit provided to the Chief Executive Officer in connection with an eligible
termination is the sum of his base salary plus the minimum annual incentive
(determined without regard to any performance goals) for the balance of the term
of his employment agreement.
The benefit provided to any other eligible executive under the Severance
Plan, should the Company designate any other executive as eligible, would
consist of base salary for the balance of the term of an employment agreement
that the Company would enter into with the executive plus target annual
incentive for the year in which employment terminated times the number of full
and partial years remaining in such employment term (determined without regard
to any performance goals); and a lump sum equal to the greater of the present
value of the health, life insurance, disability and accident insurance plans or
programs for the remaining term of the agreement, and 1.5 times the present
value of one year of such coverage.
Payment of the severance benefit shall be made within 30 days after
termination of employment.
Employment Agreement -- Chief Executive Officer. On June 9, 1998 the
Company entered into an employment agreement (the "CEO Agreement") with Richard
J. Heckmann, for his employment as Chief Executive Officer and President. The
CEO Agreement is effective as of January 1, 1998 for a term of
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63 months, and shall be automatically extended by one full calendar month on May
1, 1998, and on the first day of each month thereafter. It provides for an
annual base salary of $750,000, to be reviewed annually for increase by the
Compensation Committee, and for a minimum annual incentive of at least 60% of
base salary, subject to performance goals negotiated in good faith by the
Company and Mr. Heckmann. It also entitles Mr. Heckmann to participate in all
senior executive incentive compensation plans and programs and all employee
benefit, vacation, and fringe benefit plans and programs.
Upon termination of employment for whatever reason, the CEO Agreement
provides for the payment of any unpaid base salary through the date of
termination; a prorated annual incentive based on the minimum annual incentive
determined without regard to any performance goals; any deferred compensation,
accrued vacation or expenses owed; any other compensation or benefits provided
in accordance with any Company plans and programs; and continuation of Company
welfare plans for Mr. Heckmann and/or his family for the balance of the term of
the agreement (24 months when termination is due to death or disability.)
In the event of termination due to death or disability, the CEO Agreement
also provides a lump sum equal to two times the base salary in effect on the
date of termination plus two times the minimum annual incentive determined
without regard to any performance goals; and full and immediate vesting of any
unvested stock options or restricted stock awards.
In the event of termination by the Company without cause or by Mr. Heckmann
for good reason (both as defined in the CEO Agreement), the CEO Agreement
provides for the full and immediate vesting of any unvested stock options or
restricted stock awards and the payment of benefits under the Severance Plan,
described above. If such a termination occurs following a change of control (as
defined in the Severance Plan), Mr. Heckmann is entitled to an additional
payment, if necessary, to make him whole as a result of any excise tax imposed
by the United States Internal Revenue Code of 1986, as amended (the "Code") on
certain change of control payments.
As part of the CEO Agreement and the Severance Plan, Mr. Heckmann is
restricted from engaging in any business then being conducted by the Company
during the term of the CEO Agreement and, except if Mr. Heckmann is terminated
without cause or terminates for good reason following a change of control, for a
period of one year thereafter.
Retention and Employment Arrangements -- Named Executive Officers Other
than the Chief Executive Officer. The Company is a party to Executive Retention
Agreements with each of the Named Executive Officers, other than Mr. Heckmann
and Mr. Hornish (the "Other Executive Officers"). Each of those agreements (the
"Retention Agreements") is identical. The Retention Agreements provide for the
employment of the Other Executive Officers in their respective positions with
the Company or as otherwise determined, provided the duties to be performed are
those of a senior executive or manager of the Company. The Retention Agreements
provide that under certain conditions, including if the executive's employment
is terminated without cause, the executive has the right to receive from the
Company an amount equal to one times such individual's annual salary. Following
a change-of-control of the Company, the Retention Agreements provide for certain
benefits if, within one year of the change-of-control, the executive's
employment is terminated without cause, or if certain other conditions of the
executive's employment are altered. In any such event, the Other Executive
Officers have the right to receive the same multiple of their annual salary
above described, but including their latest incentive award or target incentive,
if greater, and the Company is also obligated to maintain for one year for the
executive the welfare and retirement plans available to the executive or to
provide an equivalent. Under the Retention Agreements, a change-of-control of
the Company generally is defined to occur if (i) any person or group acquires
50% or more of the Company's voting securities, (ii) during any two year period
there is a change in a majority of the Board of Directors of the Company, (iii)
there is a consolidation or merger of the Company or a transfer of substantially
all of the Company's assets or (iv) a plan of complete liquidation of the
Company is approved by the stockholders.
Mr. Hornish entered into a separate employment agreement with USG (the
"Hornish Agreement") which provides for the payment of $250,000 in base salary
per year for the period beginning October 25, 1996 and ending March 31, 1999.
The Hornish Agreement also provides for cash performance bonuses. For the period
beginning January 1, 1997 and ending March 31, 1998 and the period beginning
April 1, 1998 and
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ending March 31, 1999, the Hornish Agreement provides for bonuses of up to
$125,000 and $100,000, respectively, as well as additional annual bonuses of up
to 35% of Mr. Hornish's base salary. Pursuant to the Hornish Agreement, such
bonuses will be awarded if specified performance objectives are met.
PROPOSAL TO APPROVE THE SENIOR EXECUTIVE
ANNUAL INCENTIVE PLAN
On June 9, 1998, the Board of Directors of the Company adopted, subject to
approval by the stockholders of the Company, the United States Filter
Corporation Senior Executive Incentive Plan (the "Executive Incentive Plan") to
provide the chief executive officer of the Company and certain other key
employees with a performance-based annual Award (as defined below) for fiscal
years beginning on or after April 1, 1998. The Executive Incentive Plan was
designed by the Company with the assistance of a nationally-recognized
compensation consulting firm.
The Executive Incentive Plan is designed to satisfy the requirements for
deductibility under Section 162(m) of the Code. Section 162(m) of the Code
denies a deduction by a publicly-held company for annual compensation in excess
of $1 million per executive paid to any of the chief executive officer or the
four other most highly compensated executive officers who are employed at the
end of the fiscal year. Certain types of compensation, including compensation
paid based on the achievement of pre-established performance goals, are excluded
from this deduction limit. For compensation to qualify for this exclusion, the
material terms pursuant to which the compensation is to be paid, including the
performance goals, must be disclosed to, and approved by, the stockholders in a
separate vote prior to the payment of the compensation. The Executive Incentive
Plan is performance-based in that the Awards payable thereunder are determined
with reference to the Company's Net Income (as defined below). Accordingly, the
Executive Incentive Plan is being submitted to the stockholders for approval so
that payments thereunder will be exempt under Section 162(m) of the Code.
Administration. The Executive Incentive Plan is administered by the
Compensation Committee, which is currently composed of four members of the Board
of Directors who qualify as "outside directors" under Section 162(m) of the Code
(the "Committee"). The Committee has the authority to designate the key
employees eligible to participate in the Executive Incentive Plan (other than
the Chief Executive Officer), to certify attainment of performance goals and
other material terms, to construe and interpret the Executive Incentive Plan and
make all other determinations deemed necessary or advisable for the
administration of the Executive Incentive Plan.
Eligibility and Participation. The Chief Executive Officer of the Company
will participate automatically in the Executive Incentive Plan during each
fiscal year. In addition, the Committee may, in its sole discretion, select
other key employees of the Company to be eligible to participate in the
Executive Incentive Plan for any fiscal year. It is presently anticipated that
11 executives, including the Named Executive Officers, in addition to the Chief
Executive Officer will participate in the Executive Incentive Plan for the
fiscal year that began April 1, 1998.
Determination of Awards. Subject to the Committee's discretion to pay a
lesser amount, as of the first day of a fiscal year, the Chief Executive Officer
will be entitled to an Award equal to one percent (1.0%) of Net Income for such
fiscal year, not to exceed $3,000,000. Also subject to the Committee's
discretion to pay a lesser amount, each individual who becomes a participant
after the first day of a fiscal year shall be entitled to a prorated Award based
on the number of days of participation during such fiscal year.
For purposes of the Executive Incentive Plan, "Net Income" means the
consolidated net after-tax income of the Company, after adjustment to omit the
effects of any non-recurring or extraordinary items and the cumulative effects
of changes in accounting principles as shown in the Company's audited
consolidated statement of income.
Form and Payment of Awards. Subject to the Committee's written
certification of the Net Income achieved by the Company in connection with any
applicable fiscal year, Awards will be paid in a lump sum cash payment as soon
as practicable after the amount thereof has been determined. Except as otherwise
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provided below, no Award will be payable to any participant who is not an
employee of the Company on the last day of such fiscal year. The Committee may,
subject to such terms and conditions and within such limits as it may from time
to time establish, permit one or more participants to defer the receipt of
amounts due under the Executive Incentive Plan.
Termination of Employment. If a participant's employment with the Company
terminates due to death, disability, or retirement, the participant or his or
her beneficiary, as the case may be, will be paid a prorated Award in cash at
the same time that Awards are otherwise paid under the Executive Incentive Plan
based on the number of days of participation during the fiscal year in which the
termination occurs. If a participant's employment with the Company is terminated
for cause (as defined in the Executive Incentive Plan), his right to the payment
of an Award and all other rights under the Executive Incentive Plan will be
forfeited.
If a participant's employment with the Company is terminated involuntarily
by the Company without cause or voluntarily by the Participant for good reason
(as defined in the Executive Incentive Plan), he or she shall be entitled to an
Award to the extent provided in the Severance Plan.
Amendment and Termination. The Board of Directors may at any time and from
time to time amend or terminate the Executive Incentive Plan in whole or in
part; provided, that no amendment may be made after the date on which an
employee is selected as a participant for a fiscal year that would affect
adversely any of the rights of any participant for such fiscal year.
U.S. Federal Income Tax Consequences. All payments under the Executive
Incentive Plan will be taxable ordinary income to the participants under the
Code in the year of receipt and the Company will be entitled to a corresponding
U.S. federal income tax deduction at such time.
VOTE REQUIRED
Approval of the Executive Incentive Plan will require the affirmative vote
of at least a majority in voting interest of the stockholders present in person
or by proxy and voting at the Annual Meeting, assuming the presence of a quorum.
In addition, approval of the Executive Incentive Plan will require the total
votes cast "For" or "Against" the Executive Incentive Plan to constitute more
than 50% of the outstanding shares of Common Stock. If the stockholders do not
approve the Executive Incentive Plan, it will not be implemented, but the
Company reserves the right to adopt such other compensation plans and programs
as it deems appropriate and in the best interests of the Company and its
stockholders.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE EXECUTIVE INCENTIVE
PLAN AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" ADOPTION OF THE
EXECUTIVE INCENTIVE PLAN.
PROPOSAL TO APPROVE THE 1998 STOCK INCENTIVE PLAN
The Board of Directors of the Company adopted and approved effective as of
June 9, 1998 a new compensation plan to be sponsored and maintained by the
Company, to be known as the United States Filter Corporation 1998 Stock
Incentive Plan (the "Stock Incentive Plan"). The Stock Incentive Plan is subject
to approval by the Company's stockholders.
The Company believes that in order to attract, retain and motivate key
employees it is desirable to offer to such employees equity-based compensation.
The Stock Incentive Plan is intended to be a flexible vehicle under which a
variety of types of equity-based and cash-based compensation awards, including
stock options, stock appreciation rights, restricted stock and performance
awards, can be made. The closing price of the Company's Common Stock on June 23,
1998, as reported on the New York Stock Exchange Consolidated Transactions
Reporting System, was $28.3125 per share.
Administration. The Stock Incentive Plan would be administered by a
committee of the Board of Directors of the Company (the "Committee") comprised
of at least two persons. The Committee shall have
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the sole discretion to interpret the Stock Incentive Plan, establish and modify
administrative rules, impose conditions and restrictions on awards, and take
such other actions as it deems necessary or advisable. With respect to
participants who are not subject to Section 16 of the Exchange Act, the
Committee may delegate its authority under the Stock Incentive Plan to one or
more officers or employees of the Company. In addition, the full Board of
Directors of the Company can perform any of the functions of the Committee under
the Stock Incentive Plan.
Amount of Stock. The Stock Incentive Plan provides for awards of up to
3,000,000 shares of Common Stock. The number and kind of shares subject to
outstanding awards, the purchase price for such shares and the number and kind
of shares available for issuance under the Stock Incentive Plan is subject to
adjustments, in the sole discretion of the Committee, in connection with the
occurrence of mergers, recapitalizations and other significant corporate events
involving the Company. The shares to be offered under the Stock Incentive Plan
will be either authorized and unissued shares or issued shares which have been
reacquired by the Company.
Eligibility and Participation. The participants under the Stock Incentive
Plan will be those employees and consultants of the Company or any subsidiary
who are selected by the Committee to receive awards, including officers who are
also directors of the Company or its subsidiaries. Approximately 22,000 persons
will initially be eligible to participate. No participant can receive awards
under the Stock Incentive Plan in any calendar year in respect of more than
300,000 shares of Common Stock.
Amendment or Termination. The Stock Incentive Plan has no fixed expiration
date. The Committee will establish expiration and exercise dates on an
award-by-award basis. However, for the purpose of awarding incentive stock
options under Section 422 of the Code ("incentive stock options"), the Stock
Incentive Plan will expire ten years from its effective date and certain
provisions of the Stock Incentive Plan relating to performance-based awards
under Section 162(m) of the Code will expire on the fifth anniversary of the
date of stockholder approval of the Stock Incentive Plan.
Stock Options. The Committee may grant to a participant incentive stock
options, options which do not qualify as incentive stock options ("non-qualified
stock options") or a combination thereof. The terms and conditions of stock
option grants including the quantity, price, vesting periods, and other
conditions on exercise will be determined by the Committee. Incentive stock
option grants shall be made in accordance with Section 422 of the Code.
The exercise price for stock options will be determined by the Committee at
its discretion, provided that the exercise price per share for each stock option
shall be at least equal to 100% of the fair market value of one share of Common
Stock on the date when the stock option is granted.
Upon a participant's termination of employment for any reason, any stock
options which were not exercisable on the participant's termination date will
expire, unless otherwise determined by the Committee.
Upon a participant's termination of employment for reasons other than
death, disability or retirement, the participant's stock options will expire on
the date of termination, unless the right to exercise the options is extended by
the Committee at its discretion. In general, upon a participant's termination by
reason of death or disability, stock options which were exercisable on the
participant's termination date (or which are otherwise determined to be
exercisable by the Committee) may continue to be exercised by the participant
(or the participant's beneficiary) for a period of twelve months from the date
of the participant's termination of employment, unless extended by the
Committee. Upon a participant's termination by reason of retirement, stock
options which were exercisable upon the participant's termination date (or which
are otherwise determined to be exercisable by the Committee) may continue to be
exercised by the participant for a period of three months from the date of the
participant's termination of employment, unless extended by the Committee. If
upon the disability or retirement of the participant, the participant's age plus
years of continuous service with the company and its affiliates and predecessors
(as combined and rounded to the nearest month) equals 65 or more, then all of
the participant's options will be exercisable on the date of such disability or
retirement for the exercise period stated above. In no event, however, may the
options be exercised after the scheduled expiration date of the options.
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Subject to the Committee's discretion, payment for shares of Common Stock
on the exercise of stock options may be made in cash, by the delivery (actually
or by attestation) of shares of Common Stock held by the participant for at
least six months prior to the date of exercise, a combination of cash and shares
of Common Stock, or in any other form of consideration acceptable to the
Committee (including one or more "cashless" exercise forms).
Reload options ("Reloads") can be awarded in conjunction with stock options
which are granted under the Stock Incentive Plan. Reloads are stock options
granted to participants who tender shares to pay the exercise price of other
options or tender shares or elect to have shares withheld to pay withholding
taxes on the exercise of other options. Each Reload covers a number of shares
equal to the number of shares tendered or withheld, has an exercise price equal
to the fair market value of the underlying shares of Common Stock on the date of
grant of such Reload and expires on the stated expiration date of the original
option. The Committee may specify other terms and conditions applicable to
Reloads.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted by the Committee to a participant either separate from or in tandem with
non-qualified stock options or incentive stock options. SARs may be granted at
the time of the stock option grant or, with respect to non-qualified stock
options, at any time prior to the exercise of the stock option. A SAR entitles
the participant to receive, upon its exercise, a payment equal to (i) the excess
of the fair market value of a share of Common Stock on the exercise date over
the SAR exercise price, times (ii) the number of shares of Common Stock with
respect to which the SAR is exercised.
The exercise price of a SAR is determined by the Committee, but in the case
of SARs granted in tandem with stock options, may not be less than the exercise
price of the related stock option. Upon exercise of a SAR, payment will be made
in cash or shares of Common Stock, or a combination thereof, as determined at
the discretion of the Committee.
Restricted Shares. The Committee may award to a participant shares of
Common Stock subject to specified restrictions ("Restricted Shares"). The
Restricted Shares are subject to forfeiture if the participant does not meet
certain conditions such as continued employment over a specified forfeiture
period (the "Forfeiture Period") and/or the attainment of specified performance
targets over the Forfeiture Period. The terms and conditions of Restricted Share
awards are determined by the Committee. If vesting is based in whole or in part
on performance, the performance targets will also be determined by the Committee
but in the case of awards intended to qualify as "performance-based" for
purposes of Section 162(m) of the Code will include specified levels of one or
more of operating income, return on investment, return on stockholders' equity,
earnings before interest, taxes, depreciation and amortization and/or earnings
per share.
Participants who have been awarded Restricted Shares will have all of the
rights of a holder of outstanding shares of Common Stock, including the right to
vote such shares and to receive dividends. During the Forfeiture Period, the
Restricted Shares are nontransferable and may be held in custody by the Company
or its designated agent, or if the certificate is properly legended, by the
participant.
The Committee, at its sole discretion, may waive all restrictions with
respect to a Restricted Share award under certain circumstances (including the
death, disability, or retirement of a participant, or a material change in
circumstances arising after the date of grant) subject to such terms and
conditions as it deems appropriate.
Performance Awards. The Committee may grant performance awards to
participants under such terms and conditions as the Committee deems appropriate.
A performance award entitles a participant to receive a payment from the
Company, the amount of which is based upon the attainment of predetermined
performance targets over a specified award period. Performance awards may be
paid in cash, shares of Common Stock or a combination thereof, as determined by
the Committee.
Award periods will be established at the discretion of the Committee. The
performance targets will also be determined by the Committee but in the case of
awards intended to qualify as "performance-based" for purposes of Section 162(m)
of the Code will include specified levels of one or more of operating income,
return on investment, return on stockholders' equity, earnings before interest,
taxes, depreciation and
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amortization and/or earnings per share. When circumstances occur which cause
predetermined performance targets to be an inappropriate measure of achievement,
the Committee, at its discretion, may adjust the performance targets.
Change in Control. In the event of a change in control of the Company, all
stock options and SARs will immediately vest and become exercisable , the
restrictions on all Restricted Shares will immediately lapse and all performance
awards will immediately become payable. In general, events which constitute a
change in control include: (i) acquisition by a person of beneficial ownership
of shares representing 50% or more of the voting power of all classes of stock
of the Company; (ii) during any two consecutive years, the individuals who at
the beginning of such period constitute the Board no longer constitute at least
a majority of the Board; (iii) a reorganization, merger or consolidation; or
(iv) approval by the stockholders of the Company of a plan of complete
liquidation of the Company.
Federal Income Tax Consequences. The following is a summary of the
principal U. S. federal income tax consequences of Stock Incentive Plan benefits
under present tax law. The summary is not intended to be exhaustive and, among
other things, does not describe state, local or non-U.S. tax consequences.
Stock Options. No tax is incurred by the participant, and no amount is
deductible by the Company, upon the grant of a nonqualified stock option. At the
time of exercise of such an option, the difference between the exercise price
and the fair market value of the Common Stock will constitute ordinary income to
the participant. The Company will be allowed a deduction equal to the amount of
ordinary income recognized by the participant.
In the case of incentive stock options, although no income is recognized
upon exercise and the Company is not entitled to a deduction, the excess of the
fair market value of the Common Stock on the date of exercise over the exercise
price is counted in determining the participant's alternative minimum taxable
income. If the participant does not dispose of the shares acquired on the
exercise of an incentive stock option within one year after their receipt and
within two years after the grant of the incentive stock option, gain or loss
recognized on the disposition of the shares will be treated as long-term capital
gain or loss. In the event of an earlier disposition of shares acquired upon the
exercise of an incentive stock option, the participant may recognize ordinary
income, and if so, the Company will be entitled to a deduction in a like amount.
SARs. The participant will not recognize any income at the time of grant of
a SAR. Upon the exercise of a SAR, the cash and the value of any Common Stock
received will constitute ordinary income to the participant. The Company will be
entitled to a deduction in the amount of such income at the time of exercise.
Restricted Shares. A participant will normally not recognize taxable income
upon an award of Restricted Shares, and the Company will not be entitled to a
deduction until the lapse of the applicable restrictions. Upon the lapse of the
restrictions, the participant will recognize ordinary taxable income in an
amount equal to the fair market value of the Common Stock as to which the
restrictions have lapsed, and the Company will be entitled to a deduction in the
same amount. However, a participant may elect under Section 83(b) of the Code to
recognize taxable ordinary income in the year the Restricted Shares are awarded
in an amount equal to the fair market value of the shares at that time,
determined without regard to the restrictions. In such event, the Company will
then be entitled to a deduction in the same amount. Any gain or loss
subsequently recognized by the participant will be a capital gain or loss.
Performance Awards. Normally, a participant will not recognize taxable
income upon the award of such grants. Subsequently, when the conditions and
requirements for the grants have been satisfied and the payment determined, any
cash received and the fair market value of any Common Stock received will
constitute ordinary income to the participant. The Company will also then be
entitled to a deduction in the same amount.
VOTE REQUIRED
Approval of the Stock Incentive Plan will require the affirmative vote of
at least a majority in voting interest of the stockholders present in person or
by proxy and voting at the Annual Meeting and entitled to vote thereon, assuming
the presence of a quorum. In addition, approval of the Stock Incentive Plan will
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require the total votes cast "For" or "Against" the Stock Incentive Plan to
constitute more than 50% of the outstanding shares of Common Stock. If the
stockholders do not approve the Stock Incentive Plan, it will not be
implemented, but the Company reserves the right to adopt such other compensation
plans and programs as it deems appropriate and in the best interests of the
Company and its stockholders.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE STOCK INCENTIVE PLAN
AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" ADOPTION OF THE STOCK
INCENTIVE PLAN.
PROPOSAL TO APPROVE AN AMENDMENT TO
THE 1991 DIRECTORS STOCK OPTION PLAN
Stockholders are being asked to approve an amendment (the "Amendment") to
the Directors Plan. A vote in favor of this proposal will also be a vote in
favor of the Directors Plan, as so amended. The Board of Directors approved the
Amendment effective April 1, 1998, subject to the approval of the Company's
stockholders. The sole change effected by the Amendment is to increase the
stated exercise period of stock options granted under the Directors Plan from
four years to ten years.
The Company currently does not pay any cash compensation to its
non-employee Directors, although they are reimbursed for out-of-pocket expenses
incurred in attending meetings. Directors are compensated for their time and
efforts solely through grants of stock options. The Company believes that the
Amendment will provides non-employee directors a more meaningful opportunity to
acquire Common Stock of the Company and create a greater incentive for such
directors to serve on the Board of Directors of the Company and contribute to
its long-term growth and profitability objectives.
The following is a summary of the terms of the Directors Plan, as amended
by the Amendment.
General Provisions. The Directors Plan is administered by the Compensation
Committee. The persons eligible to participate in the Directors Plan are the
duly elected non-employee directors of the Company (presently eight
individuals). The Compensation Committee determines the meaning and application
of the provisions of the Directors Plan and related option agreements.
Options granted under the Directors Plan are non-qualified stock options.
The Directors Plan provides that each participant shall receive a grant of
options for the purchase of 12,000 shares of Common Stock on the first business
day of April in each calendar year. In addition, a participant shall receive a
grant of options for the purchase of 12,000 shares of Common Stock upon his or
her initial election to the Board, provided that if such election occurs after
September 30 of the year first elected, such initial grant shall be for 6,000
shares of Common Stock. The exercise price of each option granted under the
Directors Plan shall be equal to 100% of the fair market value of the underlying
shares on the date of grant. Each option is fully exercisable on the date of the
grant and has a term of ten years from the date of the grant. No options may be
granted after February 27, 2001.
Generally, options may be exercised only by the individual to whom the
option is granted, and are not transferable or assignable, except that in the
event of an optionee's death or legal disability, the optionee's heirs or legal
representatives may exercise the options for a period not to exceed one year.
Termination of Service. Options will cease to be exercisable within 30 days
after termination of the optionee's service to the Company, other than upon
termination due to death, disability or retirement or upon termination for
cause. Options will be exercisable within twelve months of death or disability
and within three months of retirement. Upon termination for cause, a
participant's options shall be rescinded.
Termination and Amendment of Plan. The Board of Directors may terminate or
amend the Directors Plan without the approval of the Company's stockholders, but
stockholder approval would be required in order to amend the plan to increase
the number of shares, to change the class of persons eligible to participate in
the
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plan, to extend the maximum ten-year exercise period or to permit an option
exercise price to be fixed at less than 100% of the fair market value as of the
date of grant.
Antidilution Provisions. The amount of shares reserved for issuance under
the Directors Plan and the terms of outstanding options shall be adjusted in the
event of changes in the outstanding Common Stock by reasons of stock dividends,
stock splits, reverse stock splits, split-ups, consolidations,
recapitalizations, reorganizations or like events.
Benefits Under the Directors Plan. Presently, eight Directors of the
Company and its subsidiaries are eligible to participate in the Directors Plan.
As of April 1, 1998, a grant was made to each of the non-employee directors of
an option for 12,000 shares of Common Stock of the Company, for an aggregate
grant of options for 84,000 shares of Common Stock at an exercise price of
$36.00 per share. On June 23, 1998 the closing price of the Common Stock on the
NYSE was $28.3125 per share.
Certain Federal Income Tax Consequences. The following is a brief summary
of the principal U.S. Federal income tax consequences of awards under the
Directors Plan based upon current U.S Federal income tax laws. The summary is
not intended to be exhaustive and, among other things, does not describe state,
local or non-U.S. tax consequences.
An optionee generally recognizes no taxable income as the result of the
grant of a non-qualified stock option. Upon exercise of such an option, the
optionee normally recognizes ordinary income in the amount of the excess of the
fair market value on the date of exercise over the option price. Upon the sale
of stock acquired by the exercise of a non-qualified stock option, any gain or
loss, based on the difference between the sale price and the fair market value
on the date of recognition of income, will be taxed as short-term or long-term
capital gain or loss, depending upon the length of time the optionee has held
the stock from the date of exercise. No tax deduction is available to the
Company with respect to the grant of the option or the sale of stock acquired
pursuant thereto. The Company would be entitled to a deduction equal to the
amount of ordinary income recognized by the optionee as a result of the exercise
of the option.
VOTE REQUIRED
Approval of the Directors Plan, as amended, will require the affirmative
vote of at least a majority in voting interest of the stockholders present in
person or by proxy at the Annual Meeting and entitled to vote thereon, assuming
the presence of a quorum. In addition, approval of the Directors Plan, as
amended, will require the total votes cast "For" or "Against" the Directors
Plan, as amended, to constitute more than 50% of the outstanding shares of
Common Stock.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE DIRECTORS PLAN, AS
AMENDED, AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" ADOPTION OF
THE DIRECTORS PLAN, AS SO AMENDED.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP as independent
certified public accountants for the Company for the fiscal year ended March 31,
1999 and has further directed that the appointment be submitted for ratification
by the stockholders at the Annual Meeting.
KPMG Peat Marwick LLP is an internationally recognized firm of independent
certified public accountants and has audited the Company's financial statements
since the 1992 fiscal year. A representative of KPMG Peat Marwick LLP will be
present at the Annual Meeting and will be available to make a statement, if he
or she so desires, and to respond to appropriate questions.
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