PRELIMINARY COPY
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AIR & WATER TECHNOLOGIES CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
PRELIMINARY PROXY MATERIALS
AIR & WATER TECHNOLOGIES CORPORATION
U.S. Highway 22 West and Station Road
Branchburg, New Jersey 08876
To Our Stockholders:
You are cordially invited to attend the Annual Meeting (the
"Meeting") of Stockholders of Air & Water Technologies Corporation (the
"Company") to be held on Thursday, May 29, 1997 at 10:00 a.m. local time, at
the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, New Jersey 07059.
At the Meeting, you will be asked to vote upon the proposals set forth in the
formal Notice (the "Notice") of the Meeting which follows this letter.
As set forth in the Notice, one of the items of business to be
addressed at the Meeting is to consider and act upon a proposal to amend the
Company's Restated Certificate of Incorporation, as amended, (the "Certificate
of Incorporation") to effect a one-for-[ ] reverse stock split of the
Company's Class A Common Stock (the "Common Stock"). This proposal will
decrease the number of outstanding shares of Common Stock from approximately
32 million to ____ million.
PLEASE NOTE THAT THE REVERSE STOCK SPLIT WILL NOT CHANGE YOUR PROPORTIONATE
EQUITY INTERESTS IN THE COMPANY, EXCEPT AS MAY RESULT FROM THE ELIMINATION OF
FRACTIONAL SHARES.
The Board of Directors believes that the recent per share price
of the Company's Common Stock has had a negative effect on the marketability
of the Common Stock. Management of the Company believes that a reverse stock
split could position the Company more attractively with institutional
investors and retail stock brokers who generally have restrictions on
investing in low priced stocks. The reverse stock split also could improve the
Company's ability to invest capital in promising acquisitions or technologies
by increasing the number of potential investors and investment vehicles. The
terms under which financing transactions could be concluded may also be more
favorable with a higher priced stock.
The Board of Directors unanimously recommends that the
Company's stockholders approve each of the proposals set forth in the Notice.
The enclosed Proxy Statement sets forth more detailed information regarding
these proposals. Please carefully review the information in the Proxy
Statement.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, IT IS VERY
IMPORTANT THAT YOU MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ENVELOPE PROVIDED AS SOON AS POSSIBLE. IF YOU ATTEND THE MEETING, YOU MAY
REVOKE THE PROXY AT THAT TIME BY REQUESTING THE RIGHT TO VOTE IN PERSON.
Sincerely,
---------------------------------
ROBERT B. SHEH
Chairman of the Board of Directors
PRELIMINARY PROXY MATERIALS
AIR & WATER TECHNOLOGIES CORPORATION
U.S. Highway 22 West and Station Road
Branchburg, New Jersey 08876
-------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1997
To the Stockholders of
Air & Water Technologies Corporation:
Notice is hereby given that the Annual Meeting of Stockholders
of Air & Water Technologies Corporation ("AWT" or the "Company") will be held
on Thursday, May 29, 1997 at 10:00 a.m., local time, at the Somerset Hills
Hotel, 200 Liberty Corner Road, Warren, New Jersey 07059, to consider and act
on the following:
1. To elect six members of the Board of Directors to serve for the
ensuing year;
2. To ratify the appointment by the Board of Directors of McGladrey &
Pullen, LLP, as independent auditors for the Company's 1997 fiscal
year;
3. To consider and approve a proposal to amend the Company's Restated
Certificate of Incorporation, as amended, (the "Amendment") to
effect a one-for-[ ] reverse stock split of the Company's
Class A Common Stock (the "Common Stock") as a result of which
holders of the Common Stock will receive one share of Common Stock
for each [ ] shares of Common Stock owned on the effective
date of the Amendment; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on April
__, 1997 will be entitled to vote at the Annual Meeting. A list of such
stockholders will be available at the time and place of meeting and, during
the ten days prior to the meeting, at the Company's executive offices located
at U.S. Highway 22 West and Station Road, Branchburg, New Jersey 08876.
A copy of the Company's 1996 Annual Report is enclosed herewith.
By Order of the Board of Directors
DOUGLAS A. SATZGER
Secretary
Branchburg, New Jersey
April __, 1997
- ------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED STAMPED ENVELOPE. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR
TO ITS USE BY DELIVERING TO THE COMPANY A WRITTEN NOTICE OF REVOCATION OR DULY
EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER WHO HAS EXECUTED A PROXY
BUT IS PRESENT AT THE ANNUAL MEETING AND WHO WISHES TO VOTE IN PERSON MAY
DO SO BY REVOKING HIS, HER OR ITS PROXY AS DESCRIBED IN THE PRECEDING
SENTENCE.
- ------------------------------------------------------------------------------
These materials constitute preliminary proxy materials filed with respect to a
forthcoming annual meeting of stockholders. Certain information, including
information relating to the proposed reverse stock split, will be revised to
reflect actual facts at the time the definitive proxy statements are mailed to
stockholders.
AIR & WATER TECHNOLOGIES CORPORATION
U.S. Highway 22 West and Station Road
Branchburg, New Jersey 08876
-------------
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Air & Water Technologies Corporation
("AWT" or the "Company") of proxies for use at the Annual Meeting of
Stockholders (the "Annual Meeting") or at any adjournments or postponements
thereof. The Annual Meeting will be held on Thursday, May 29, 1997 at 10:00
a.m., local time, at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren,
New Jersey 07059 for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders.
If a stockholder properly executes and returns the enclosed
form of proxy, it will be voted according to his, her or its instructions. If
no instructions are given, it will be voted FOR the election as directors of
the six nominees named below, FOR ratification of the appointment by the Board
of Directors of McGladrey & Pullen, LLP, as independent auditors of the
Company for its 1997 fiscal year, FOR approval of the amendment (the
"Amendment") to the Company's Restated Certificate of Incorporation, as
amended (the "Certificate of Incorporation") to effect a one-for-[ ]
reverse stock split of the Company's Class A Common Stock (the "Common
Stock"), and in the discretion of the proxies named on the proxy card with
respect to any other matters properly brought before the Annual Meeting. Any
proxy given by a stockholder may be revoked by the stockholder at any time
before it is voted by written notice to the Secretary of the Company, by a
duly executed proxy bearing a later date, or by voting in person at the
meeting. No appraisal rights exist for any action proposed to be taken at the
Annual Meeting.
The cost of soliciting proxies, including expenses in
connection with preparing and mailing this Proxy Statement, will be borne by
the Company. The solicitation of proxies may be made by directors, officers
and regular employees of the Company or any of its subsidiaries personally or
by mail, telephone, facsimile communication or telegraph. No additional
compensation will be paid for such solicitation. In addition, arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to forward proxy soliciting material to the beneficial owners of
stock held of record by such persons, and the Company will reimburse them for
reasonable out-of-pocket expenses incurred by them in so doing. In addition,
the Company has engaged the services of Kissel-Blake, Inc. to solicit proxies
and will pay such proxy soliciting agent $5,500 plus expenses in connection
therewith. Solicitation by such firm may be by mail, personal interview,
telephone or telegraph.
So far as the management of the Company is aware, stockholders
will take action on no matters other than those described in this Proxy
Statement. In the event that any other matters properly come before the
meeting that call for a vote of stockholders, the persons named as proxies in
the enclosed form of proxy will vote in accordance with their best judgment on
such other matters.
The Company is mailing this Proxy Statement and the
accompanying form of proxy to stockholders on or about April ____, 1997.
VOTING
The Board of Directors has fixed the close of business on April
____, 1997 as the record date (the "Record Date") for determining stockholders
entitled to notice of and to vote at the Annual Meeting. On the Record Date,
there were outstanding [32,019,254] shares of the Company's Common Stock,
$.001 par value per share and 1,200,000 shares of the Company's 5 1/2% Series
A Convertible Exchangeable Preferred Stock, $.01 par value per share (the
"Series A Preferred Stock"). Shares of the Company's Common Stock and Series
A Preferred Stock are entitled to be voted at the Annual Meeting. Holders of
issued and outstanding shares of Common Stock are entitled to one vote for
each share they hold. Holders of Series A Preferred Stock are entitled to
that number of votes equal to the number of votes to which the shares of
Common Stock issuable upon conversion of such shares of Series A Preferred
Stock would have been entitled if such shares of Common Stock had been
outstanding on the Record Date. The presence in person or by proxy of a
majority of the votes entitled to be cast will constitute a quorum for
purposes of conducting business at the Annual Meeting. Shares represented by
proxies that are marked "abstain" will be counted as shares present for
purposes of determining the presence of a quorum on all matters. Proxies
relating to "street name" shares that are voted by brokers on some but not all
of the matters will be treated as shares present for purposes of determining
the presence of a quorum on all matters.
Pursuant to the By-Laws, directors of the Company shall be
elected by a plurality vote of the votes cast at the Annual Meeting. All
other questions shall be determined by a majority of the shares entitled to
vote at the Annual Meeting, except as may otherwise be provided in the
Company's Certificate of Incorporation or By-Laws or by law. Abstentions and
broker non-votes will not count as "votes cast" for or against a nominee for
director. The proposal to ratify the appointment of auditors and the proposal
to amend the Certificate of Incorporation each require the approval of a
majority of the shares entitled to vote at the Annual Meeting. Other than
with respect to the proposal to amend the Certificate of Incorporation, broker
non-votes will not be considered "entitled to vote" on any proposal as to
which shares held in "street name" may not be voted without instruction from
the beneficial owners of such shares. Abstentions with respect to Proposals 2
and 3 will have the same effect as votes against such proposals. With respect
to Proposal 3, broker non-votes will have the same effect as negative votes.
PROPOSAL 1:
ELECTION OF DIRECTORS
Information Concerning the Nominees
The Company's Certificate of Incorporation and By-Laws provide
for the Company's business to be managed by or under the direction of the
Board of Directors. Under the Company's By-Laws, the number of directors is
fixed from time to time by the Board of Directors and directors serve in
office until the next annual meeting of stockholders and until their
successors have been elected and qualified or until their earlier death,
resignation or removal.
Pursuant to the terms of the Investment Agreement dated as of
March 30, 1994 among the Company, Compagnie Generale des Eaux ("CGE") and
Anjou International Company ("Anjou") (the "Investment Agreement"), the
Company has agreed that CGE will have representation on the Board of Directors
(and all committees thereof other than any Special Committee of "Independent
Directors" (as defined below)) that is proportionate to the aggregate number
of shares of Common Stock owned by CGE (rounded down to the next whole number
if CGE owns in the aggregate less than one-half of the outstanding shares of
Common Stock, treating the shares of the Series A Preferred Stock owned by CGE
as having been converted, or, if otherwise, rounded up to the next whole
number). See "Certain Relationships and Related Transactions--Certain
Covenants of the Company."
The Board of Directors has nominated for election as directors
at the Annual Meeting three individuals designated by CGE out of a total of
six directors (Messrs. Sheh, Brunais and Kriegel) and an additional
Independent Director (a director not employed by the Company or CGE or their
respective affiliates) satisfactory to CGE (Ms. Green). The Chairman of the
Board of Directors is also designated by CGE. The Board of Directors has also
nominated Messrs. DeBenedictis and Morris as directors for election at the
Annual Meeting.
The Board of Directors of the Company has recommended that the
stockholders elect six directors at the Annual Meeting. Each director elected
at the Annual Meeting will hold office until the next annual meeting of
Stockholders and until his successor is duly elected and qualified, or until
his earlier death, resignation or removal from office. The Board of Directors
recommends that the stockholders elect the nominees named below as directors
of the Company. The persons named in the enclosed proxy intend to vote the
shares represented by such proxy, unless the stockholder executing the proxy
otherwise instructs, for the election to the Board of Directors of each of the
six nominees named below.
The Company has no reason to believe that any such nominees
will be unable, if elected, to serve as a director. If such an event should
occur, however, the persons named in the enclosed proxy intend to vote the
shares represented by the enclosed proxy for the remainder of the nominees,
and for such substitute nominee or nominees as the Company's current Board of
Directors may select.
All of the nominees for director named below currently serve as
directors of the Company for terms expiring at the Annual Meeting and, other
than Robert P. Sheh and Alain Brunais, were last elected at the Company's 1996
Annual Meeting of Stockholders.
Positions and Other Relationships with the
Name Age Company and Business Experience
- ---- --- ------------------------------------------
Robert B. Sheh................. 57 Chairman of the Board of Directors,
President and Chief Executive Officer.
Mr. Sheh was elected Chairman of the
Board, President and Chief Executive
Officer of AWT in November 1996.
Prior to joining AWT, Mr. Sheh served
from 1992 to July 1996 as Chief
Executive Officer and President of
International Technology Corporation,
a publicly-traded engineering services
firm. From 1971-1992, Mr. Sheh
served as a senior executive in
various capacities with The Parsons
Corporation, a leading engineering and
construction firm, including as
President of Ralph M. Parsons Company
from 1989-1992. Mr. Sheh has been
designated by CGE as Chief Executive
Officer and a director of AWT under
the Investment Agreement.
Alain Brunais.................. 48 Director, Vice President and Chief
Financial Officer. Mr. Brunais was
elected Vice President and Chief
Financial Officer of AWT in September
1994 and a director in November 1996.
Prior to joining AWT, Mr. Brunais was
responsible since 1990 for foreign
investment, primarily in the United
Kingdom under the direction of the
Finance Director of CGE. From 1983 to
1989 he was responsible for corporate
development for Ciments Francais in
the U.S. and Canada. Prior thereto,
Mr. Brunais organized a sales and
services network for Aerospatiale
General Aviation line of aircraft in
Europe, Africa and North America. Mr.
Brunais has been designated by CGE as
Chief Financial Officer and a director
of AWT under the Investment Agreement.
Nicholas DeBenedictis.......... 51 Director and member of the Audit
Committee. Mr. DeBenedictis was
elected as a director of AWT on June
14, 1994. Mr. DeBenedictis has been
Chairman of Philadelphia Suburban
Corporation ("PSC") (the parent
company of Philadelphia Suburban Water
Company, one of America's leading
investor-owned water utilities) since
May 1993. Mr. DeBenedictis joined
PSC in July 1992 as its President and
Chief Executive Officer, and from July
1992 to May 1993 also served as
Chairman of PSC's principal
subsidiary, Philadelphia Suburban
Water Company. From 1989 to 1992, Mr.
DeBenedictis was Senior Vice President
of Corporate and Public Affairs for
Philadelphia Electric Company. Prior
thereto, he served as President of the
Greater Philadelphia Chamber of
Commerce. Mr. DeBenedictis also
formerly served as Secretary for the
Department of Environmental Resources
(1983 to 1986) and Director of the
Office of Economic Development (1981
to 1983) for the Commonwealth of
Pennsylvania. He serves on the Board
of Directors of the PNC East Bank
Advisory Board, the Provident National
Life Insurance Company, the P.H.
Glatfelter Company, the Greater
Philadelphia Chamber of Commerce, the
Philadelphia Convention and Visitors
Bureau, the Pennsylvania Environmental
Council, and the Board of Drexel
University.
Carol Lynn Green............... 50 Director and member of the
Compensation and Stock Option
Committee. Ms. Green was elected as
a director of AWT on June 14, 1994.
Ms. Green is a Partner in the
Washington, DC law office of Bryan
Cave LLP where she has practiced
environmental law since 1986. Prior
thereto, Ms. Green served at the
United States Department of Justice
from 1980 to 1986 as the first
Assistant Chief of the Environmental
Enforcement Section. At the Justice
Department, Ms. Green was liaison
with the EPA on Clean Water Act
enforcement and worked with the EPA in
developing the First Superfund
settlement policy and designing some
of the early Superfund generator
settlements. She currently serves on
the National Environmental Policy
Institute's panel to reinvent the
EPA's enforcement and compliance
programs.
William V. Kriegel............ 51 Director. Mr. Kriegel was elected as
a director of AWT on June 14, 1994.
Mr. Kriegel is Chairman of the Board,
President, Chief Executive Officer and
a Director of Sithe Energies, Inc. and
all of its subsidiaries since 1981.
Prior to coming to the United States
in 1984, Mr. Kriegel co-founded an
unaffiliated French energy company
that within three years of its
formation in 1980 became France's
largest privately-owned company
engaged in the development of small
hydro-electric projects. In 1978, he
co-founded S.I.I.F., an unaffiliated
company specializing in the purchase
and rehabilitation of residential
buildings and historical properties in
France. Mr. Kriegel has been
designated by CGE as a Director of AWT
under the Investment Agreement.
John W. Morris................. 75 Director and member of the Audit
Committee and Compensation and Stock
Option Committee. General Morris
became a director of AWT in June 1992.
From 1988 to October 1992, General
Morris served as a director of Metcalf
& Eddy Companies Inc. General Morris
has been President of JW Morris Ltd.,
an engineering consulting firm, for
more than five years. In addition, he
presently serves as President of the
National Waterways Foundation,
Chairman of the Water Resources
Congress and Chairman of the
Environmental Effects Committee of the
U.S. Committee on Large Dams. From
1986 to 1987 he served as President
and Chairman of the Engineering Group
of Planning Research Corporations.
General Morris served as the Chief of
Engineers, U.S. Army Corps of
Engineers, from 1976 to 1980.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION
OF EACH NOMINEE FOR DIRECTOR NAMED ABOVE.
Committees of the Board of Directors and Meetings Held
During the Company's fiscal year ended October 31, 1996
("Fiscal 1996"), the Board of Directors of the Company held a total of eight
meetings.
The Compensation and Stock Option Committee of the Board of
Directors met once during Fiscal 1996. Mr. Morris and Ms. Green (since
January 21, 1997) are currently members of the Compensation and Stock Option
Committee, which reviews, approves and makes recommendations on the Company's
compensation policies, practices and procedures to ensure that legal and
fiduciary responsibilities of the Board of Directors are carried out and that
such policies, practices and procedures contribute to the success of the
Company. The Compensation and Stock Option Committee also administers the
Company's 1989 Long-Term Incentive Compensation Plan.
The Audit Committee of the Board of Directors met five times
during Fiscal 1996. Messrs. DeBenedictis and Morris currently serve as
members of the Audit Committee, which reviews the engagement of the Company's
independent auditors, reviews annual financial statements, considers matters
relating to accounting policy and internal controls and reviews the scope of
annual audits.
The Company does not have a standing Nominating Committee.
During Fiscal 1996, each of the incumbent directors of the
Company attended at least 75% of the aggregate number of meetings of the Board
of Directors and Committees on which he or she served during the period he or
she served on the Board of Directors.
Compensation Committee Interlocks and Insider Participation
On and prior to August 12, 1996, the Compensation and Stock
Option Committee (the "Compensation Committee") of the Board of Directors
consisted of Messrs. Deschamps, Senior, Morris and Ms. Green. Mr. Senior
resigned from the Board of Directors of AWT on August 12, 1996. Mr. Deschamps
resigned from the Board of Directors of AWT on January 21, 1997. Since January
21, 1997, the Compensation Committee consists of Mr. Morris and Ms. Green.
Mr. Deschamps is Adjunct Director General of CGE. Mr. Senior is a Managing
Director of Allen & Company, which has performed investment banking and other
services for the Company from time to time including serving as financial
advisor to the Company in connection with the transactions contemplated by the
Investment Agreement. Ms. Green is a partner at the law firm of Bryan Cave
LLP, which has performed various legal services for the Company from time to
time.
Compensation of Directors
Directors who are not employees of AWT or any of its affiliated
companies receive an annual fee of $18,000 for service on the Board of
Directors and an additional $7,500 per annum for service on each Committee
thereof. Directors are also reimbursed for out-of-pocket expenses of
attending Board and Committee meetings. In addition, pursuant to the 1989
Long-Term Incentive Compensation Plan, on July 31 of each year, each director
who is a member of the Compensation and Stock Option Committee with
responsibility for administering the Plan as of such date is granted a
non-qualified option to purchase either (i) 3,000 shares of Common Stock, if
the director has served less than one year on the Committee, or (ii) 500
shares of Common Stock, if the director has served one year or more on the
Committee. The options granted vest annually in four equal installments
commencing one year from the date of grant with exercise prices equal to the
fair market value of the Common Stock on the grant date. The 1989 Long-Term
Incentive Compensation Plan provides that, upon a "change-in-control" of the
Company (as determined by the Board of Directors), any outstanding options not
therefore fully exercisable shall immediately become exercisable in their
entirety.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to AWT under Rule 16a-3(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), during the fiscal year ended October
31, 1996 and Form 5 and amendments thereto furnished to AWT with respect to
the fiscal year ended October 31, 1996, the Company has not identified any
persons having filed a late report under Section 16(a) of the Securities
Exchange Act of 1934.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information as of March 15, 1997
(unless otherwise noted in the notes following the table), as to the
beneficial ownership of AWT's capital stock by (i) each person owning
beneficially more than five percent of the outstanding shares of its Common
Stock, (ii) each person who is a director or executive officer or was a
director or executive officer of AWT at the end of Fiscal 1996 and (iii) all
officers and directors of AWT as a group. The persons named in the table have
sole voting and dispositive power with respect to all shares of Common Stock
unless otherwise noted in the notes following the table.
<TABLE>
<CAPTION>
Number of Shares
of Percent of
Class A Class A
Name of Person or Group Common Stock Common Stock
<S> <C> <C> <C>
Nicholas DeBenedictis....................................... 0 *
Carol L. Green.............................................. 0 *
William Kriegel............................................. 0 *
John W. Morris.............................................. 3,079 *
Robert B. Sheh.............................................. 50,000 (1) *
Alain Brunais............................................... 36,900 (2) *
Donald A. Deieso............................................ 24,758 (3) *
George C. Mammola........................................... 18,759 (4) *
Michael M. Stump............................................ 1,000 (5) *
Patrick L. McMahon.......................................... 7,000 (6) *
Jekabs P. Vittands.......................................... 20,272 (7) *
Compagnie Generale des Eaux................................. 18,408,975 (8) 49.9
52 Rue d'Anjou
75384 Paris Cedex 08
France
State of Wisconsin Investment Board......................... 3,107,775 9.7
P.O. Box 7842
Madison, Wisconsin 53207
The Capital Group Companies, Inc............................ 2,430,100 (9) 7.6
333 South Hope Street
Los Angeles, California 90071
U.S. Bancorp and Qualivest Capital Management, Inc.......... 3,267,000 (10) 10.2
111 S.W. Fifth St. 1500
Portland, Oregon 97204
All directors and officers as a group (14 persons).......... 18,634,307 (11) 50.7
</TABLE>
- --------------
*Less than 1% ownership
(1) Represents 50,000 shares which may be acquired within 60 days of the
date of the table.
(2) Includes 34,900 shares which may be acquired within 60 days of the
date of the table.
(3) Includes 24,258 shares which may be acquired within 60 days of the
date of the table. On February 26, 1997, Mr. Deieso resigned from
his position as President and Chief Executive Officer of Metcalf &
Eddy. See "Employment Contracts and Termination and Change-in-
Control Arrangements." The options held by Mr. Deieso to acquire
24,258 shares will expire within 90 days of February 26, 1997.
(4) Represents 18,759 shares which may be acquired within 60 days of the
date of the table.
(5) On December 4, 1996, Mr. Stump resigned as President and Chief
Executive Officer of PSG. See "Employment Contracts and Termination
and Change-in-Control Arrangements."
(6) Represents 7,000 shares which may be acquired within 60 days of the
date of the table.
(7) Includes 14,790 shares which may be acquired within 60 days of the
date of the table.
(8) Includes 4,800,000 shares of Common Stock underlying the 1,200,000
shares of the Series A Preferred Stock beneficially owned by CGE.
CGE owns all of the outstanding shares of the Series A Preferred
Stock.
(9) As reported by The Capital Group Companies, Inc. in a Report on
Schedule 13G for the year ended December 31, 1996, filed with the
Commission on February 14, 1997. Pursuant to such Schedule 13G, The
Capital Group Companies, Inc. reports that it does not have
investment power or voting power over any of the shares of Common
Stock but that it may be deemed to "beneficially own" such
securities by virtue of Rule 13d-3 under the Act. Includes 2,100
shares of Common Stock underlying the $63,000 principal amount of 8%
Convertible Subordinated Debentures, due 2015 owned by The Capital
Group Companies, Inc.
(10) As reported by U.S. Bancorp and Qualivest Capital Management, Inc. in a
Report on Schedule G for the year ended December 31, 1996, filed with
the Commission on February 14, 1997.
(11) Includes 209,871 shares which may be acquired within 60 days of the date
of the table. Includes 18,408,975 shares owned by CGE.
[The remainder of this page left intentionally blank.]
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table shows, for the fiscal years ended October
31, 1996, 1995 and 1994 the cash compensation paid by AWT, as well as certain
other compensation accrued for those years, to each of the most highly
compensated executive officers of AWT in all capacities in which they served.
Messrs. Elia, Houdaille, Deieso and Stump each ceased to be an executive
officer of AWT as of April 1996, November 1996, February 1997 and December
1996, respectively.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
------------------- -----------------------------
Restricted Securities
Stock Underlying All Other
Salary Bonus Award(s) Options Compensation
Name and Principal Position Year ($) ($) ($) (#) ($)
- --------------------------- ---- ------ ----- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Claudio Elia 1996 157,606 300,000 0 60,000 (1) 0
Chairman of the Board 1995 275,000 300,000 0 0 1,500 (2)
and Chief Executive 1994 99,429 (3) 0 2,500 (4) 100,000 (5) 0
Officer
Alain Houdaille (6) 1996 106,121 195,000 0 0 45,840 (7)
President and Chief
Executive Officer
Alain Brunais 1996 207,450 75,000 0 18,000 (1) 77,000 (8)
Vice President, Chief 1995 203,674 85,000 0 0 74,000 (9)
Financial Officer and 1994 39,168 17,000 0 50,000 (10) 40,000 (11)
Director
Donald A. Deieso 1996 213,896 85,000 0 46,500 (1) 35,250 (12)
President and Chief 1995 210,000 170,000 0 0 23,500 (13)
Executive Officer, 1994 195,023 0 0 0 0
Metcalf & Eddy, Inc.
George C. Mammola 1996 213,996 55,000 0 35,500 (1) 15,750 (14)
President and Chief 1995 210,000 110,000 0 0 8,868 (15)
Executive Officer, 1994 184,080 0 0 0 693 (16)
Research-Cottrell, Inc.
Michael M. Stump 1996 234,060 0 0 20,000 (1) 22,579 (17)
President and Chief 1995 220,000 180,000 0 0 13,600 (18)
Executive Officer, 1994 65,824 (19 110,000 0 40,000 (5) 0
Professional Services
Group
Patrick L. McMahon 1996 170,019 75,000 0 12,000 (1) 2,200 (20)
President and Chief 1995 66,003 (21 60,000 0 10,000 (22) 1,100 (23)
Executive Officer,
Professional Services
Group
</TABLE>
- ---------------
(1) Mr. Elia was granted 60,000 options exercisable at $6.563 per share
pursuant to AWT's 1989 Long Term Incentive Plan. Mr. Brunais was granted
18,000 options exercisable at $6.563 per share pursuant to AWT's 1989 Long
Term Incentive Plan. Mr. Deieso was granted 20,129 options exercisable at
$6.563 per share pursuant to AWT's Long Term Incentive Plan and 26,371
options exercisable at $8.00 per share pursuant to AWT's "Fresh Start"
program. Mr. Mammola was granted 20,157 options exercisable at $6.563 per
share pursuant to AWT's 1989 Long Term Incentive Plan and 15,343 options
exercisable at $8.00 per share pursuant to AWT's "Fresh Start" program.
Mr. Stump was granted 20,000 options exercisable at $6.563 per share
pursuant to AWT's 1989 Long Term Incentive Plan. Mr. McMahon was granted
12,000 options at $6.563 per share pursuant to AWT's 1989 Long Term
Incentive Plan.
(2) "All Other Compensation" for Mr. Elia for fiscal year 1995 consists of
$1,500 contributed to AWT's Savings and Retirement Plan on behalf of Mr.
Elia.
(3) Represents amounts paid to Mr. Elia during fiscal year 1994 since
joining AWT on June 14, 1994. Mr. Elia was paid a base salary of
$275,000.
(4) As of October 31, 1995, Mr. Elia held 2,500 shares of restricted
Common Stock, vesting over a four-year period, with an aggregate
value of $12,500. The Company's 1989 Long-Term Incentive
Compensation Plan provides that, upon a "change-in-control" of the
Company (as determined by the Board of Directors), all restrictions
on these shares will lapse.
(5) In August 1994, Mr. Elia was granted options to purchase 100,000
shares of Common Stock and Mr. Stump was granted options to purchase
40,000 shares of Common Stock. The options vest over four years, 25%
of the options vesting on each anniversary of the issuance date.
(6) Mr. Houdaille served as President and Chief Executive Officer of the
Company from May 1996 to November 1996.
(7) "All Other Compensation" for Mr. Houdaille for fiscal year 1996 consists
of $45,840 of housing expenses paid on behalf of Mr. Houdaille.
(8) "All Other Compensation" for Mr. Brunais for fiscal year 1996 consists of
approximately $71,000 paid as a housing allowance on behalf of Mr. Brunais
and approximately $6,000 paid as an automobile allowance.
(9) "All Other Compensation" for Mr. Brunais for fiscal year 1995 consists of
approximately $71,000 paid as a housing allowance on behalf of Mr. Brunais
and approximately $3,000 paid as an automobile allowance.
(10) Mr. Brunais was granted 50,000 options exercisable at $8.00 per share
pursuant to AWT's 1989 Long Term Incentive Plan.
(11) "All Other Compensation" for Mr. Brunais for fiscal year 1994 consists
of $40,000 paid as a housing allowance on behalf of Mr. Brunais.
(12) "All Other Compensation" for Mr. Deieso for fiscal year 1996 consists of
approximately $12,000 paid as an automobile allowance, $3,750
contributed to AWT's Savings and Retirement Plan on behalf of Mr.
Deieso, and $19,500 credited to AWT's Supplemental Pension Plan on
behalf of Mr. Deieso.
(13) "All Other Compensation" for Mr. Deieso for fiscal year 1995 consists of
$3,750 contributed to AWT's Savings and Retirement Plan on behalf of Mr.
Deieso, $12,750 credited to AWT's Supplemental Pension Plan on behalf of
Mr. Deieso, and $7,000 paid to Mr. Deieso as an automobile allowance.
(14) "All Other Compensation" for Mr. Mammola for fiscal year 1996 consists
of approximately $12,000 paid as an automobile allowance and $3,750
contributed to AWT's Savings and Retirement Plan on behalf of Mr.
Mammola.
(15) "All Other Compensation" for Mr. Mammola for fiscal year 1995 consists
of $4,055 contributed to AWT's Savings and Retirement Plan on behalf of
Mr. Mammola and $4,813 paid to Mr. Mammola as an automobile allowance.
(16) "All Other Compensation" for Mr. Mammola for fiscal year 1994 consists
of $693 contributed to AWT's Savings and Retirement Plan on behalf of
Mr. Mammola.
(17) "All Other Compensation" for Mr. Stump for fiscal year 1996 consists of
$9,065 paid to PSG's Pension Plan on behalf of Mr. Stump, $9,100 of life
insurance paid on behalf of Mr. Stump, $4,164 paid as an automobile
allowance, and $250 of country club subscriptions paid on behalf of Mr.
Stump.
(18) "All Other Compensation" for Mr. Stump for fiscal year 1995 consists of
$3,000 contributed to Mr. Stump's 401(k) plan as a matching
contribution, $6,000 contributed to PSG's Pension Plan on behalf of Mr.
Stump, $4,236 paid to Mr. Stump as an automobile allowance, $232 of
country club subscriptions paid on behalf of Mr. Stump, and $132 of
other compensation paid to or on behalf of Mr. Stump.
(19) Represents amounts paid to Mr. Stump during fiscal year 1994 since
joining the Company on June 14, 1994. Mr. Stump was paid a base salary
of $177,171 per annum for fiscal year 1994.
(20) "All Other Compensation" for Mr. McMahon during fiscal year 1996
consists of approximately $2,200 resulting from an automobile leased for
Mr. McMahon by PSG.
(21) Represents amounts paid to Mr. McMahon during fiscal year 1995 since
joining PSG in May 1995. Mr. McMahon was paid a base salary of $170,000.
(22) Mr. McMahon was granted 10,000 options exercisable at $5.75 per share in
June 1995.
(23) "All Other Compensation" for Mr. McMahon during fiscal year 1995
consists of approximately $1,100 resulting from an automobile leased for
Mr. McMahon by PSG.
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EMPLOYMENT CONTRACTS AND TERMINATION
AND CHANGE-IN-CONTROL ARRANGEMENTS
On December 4, 1996, Mr. Stump resigned as President and Chief
Executive Officer of PSG. PSG and Mr. Stump have entered into an agreement
dated December 16, 1996 (the "Separation Agreement") relating to their
relationship following the termination of his employment, which supersedes all
rights and obligations (other than obligations imposed upon Mr. Stump
pertaining to confidentiality, non-compete, and intellectual property)
outstanding pursuant to the Employment Agreement with Mr. Stump. Under the
terms of the Separation Agreement: (a) Mr. Stump agreed not to compete with
PSG and Metcalf & Eddy during the period beginning on December 4, 1996 and
ending on December 31, 1997; (b) Mr. Stump released the Company, all of its
affiliated entities (including PSG, Metcalf & Eddy, and Research-Cottrell),
and others (collectively the "Releasees") from any and all claims which he has
or had against each or any of the Releasees regarding all events that have
occurred through and including December 16, 1996; (c) PSG agreed to pay Mr.
Stump $269,175 prior to January 4, 1997; (d) PSG agreed to pay $9,381 to Mr.
Stump's lawyers; (e) all stock options held by Mr. Stump at the time of the
termination of his employment were canceled; (f) PSG agreed to forgive a loan
to Mr. Stump in the amount of $90,375 (including accrued interest) and an
advance of $20,000; (g) Mr. Stump agreed to cooperate fully with the Company
and PSG with respect to any civil litigation, civil investigation, or civil
governmental proceeding now pending or hereafter instituted; and (h) Mr. Stump
agreed to indemnify and hold each and all of the Releasees harmless from and
against any and all claims arising out of any breach of the Separation
Agreement by Mr. Stump.
On November 7, 1996 the Company entered into an employment
agreement (the "Employment Agreement") with Robert B. Sheh, pursuant to which
Mr. Sheh serves as Chief Executive Officer and President of the Company. The
Employment Agreement provides for an annual base salary of $400,000, with such
increases as determined by the Board of Directors of the Company from time to
time in its sole discretion. In addition, the Employment Agreement provides
that Mr. Sheh will be eligible to receive a supplemental bonus of up to 60% of
Mr. Sheh's base salary in each fiscal year, which bonus shall be determined by
the Board of Directors of the Company in its sole discretion. Mr. Sheh was
awarded 50,000 fully vested options upon commencement of employment, with
50,000 options to be awarded each year at the beginning of the second, third,
fourth and fifth fiscal year (if Mr. Sheh is still employed by the Company
under the terms of the Employment Agreement). If Mr. Sheh's employment is
terminated by the Company for cause, the Company shall pay to Mr. Sheh only
his base salary through the date of termination. If Mr. Sheh's employment
shall terminate upon death or Disability (as defined), the Company shall pay
Mr. Sheh his Contract Payments (as defined) for a period of twelve months. If
the Company terminates Mr. Sheh's employment without cause, the Company shall
pay Mr. Sheh the Contract Payments for a period of two years. If Mr. Sheh
terminates his employment with the Company for any reason (other than a Change
of Control, as defined), Mr. Sheh shall receive only his base salary through
the date of termination. If Mr. Sheh's employment is terminated by a Change
of Control, Mr. Sheh shall receive the Contract Payments for a period of two
years.
On February 26, 1997, Mr. Deieso resigned as President and
Chief Executive Officer of Metcalf & Eddy to pursue other interests. Pursuant
to the terms of the Company's 1989 Long-Term Incentive Compensation Plan, the
stock options held by Mr. Deieso as of February 26, 1997 will be exercisable
for a period of 90 days from such date. The Company has appointed Jekabs P.
Vittands as Chief Operating Officer of Metcalf & Eddy to replace Mr. Deieso.
Mr. Vittands previously was a Senior Vice President of Metcalf & Eddy.
Options
AWT's 1989 Long-Term Incentive Compensation Plan provides
that, upon a "change-in-control" of the Company (as determined by the Board of
Directors), any outstanding options not theretofore fully exercisable shall
immediately become exercisable in their entirety. The Board of Directors has
determined that the consummation of the transactions contemplated by the
Investment Agreement constituted a "change-in-control" for purposes of such
plan.
SUPPLEMENTAL PENSION PLAN
The following table shows the estimated annual benefits payable
upon retirement to participants in the Company's Supplemental Pension Plan.
Estimated Annual Retirement Benefits
----------------------------------------------------
Bonus Remuneration Years of Service
------------------ ----------------------------------------------------
15 20 25 30 35
$25,000 $5,625 $7,500 $9,375 $11,250 $13,125
50,000 11,250 15,000 18,750 22,500 26,250
75,000 16,875 22,500 28,125 33,750 39,375
100,000 22,500 30,000 37,500 45,000 52,500
125,000 28,125 37,500 46,875 56,250 65,625
The unfunded Supplemental Pension Plan provides additional
annual retirement benefits equal to 1.5% of the average of the participant's
final five bonuses multiplied by the participant's years of service, up to a
maximum of 35 years. No separate accounts are maintained and no amounts are
vested until a participant reaches retirement in the employ of AWT. The
benefit amounts set forth in the table above are not subject to reduction for
social security benefits or for other offsets. During the fiscal year ended
October 31, 1996, Donald A. Deieso, who is named in the Summary Compensation
Table, was the only active employee participating in the plan. By reason of
Mr. Deieso's resignation from his employment with the Company on February 26,
1997, he forfeited all benefits under the plan. See "Employment Contracts and
Termination and Change-in-Control Arrangements."
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUES
The following table sets forth information with respect to the
named executives concerning unexercised options, held as of October 31, 1996.
No options were exercised during Fiscal 1996 by any of the named executive
officers.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at FY-End Options at FY-End (1)
---------------------------------- ----------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name (#) (#) (#) (#)
- ---- ----------- ------------- ----------- -------------
Claudio Elia (Estate) (3) 83,000 77,000 0 (2) 0 (2)
Alain Brunais (4) 34,900 33,100 0 (2) 0 (2)
Donald A. Deieso (5) 24,256 22,244 0 (2) 0 (2)
George C. Mammola (6) 18,758 16,742 0 (2) 0 (2)
Michael M. Stump (7) 31,000 29,000 0 (2) 0 (2)
Patrick L. McMahon (8) 9,100 12,900 0 (2) 0 (2)
</TABLE>
(1) The value of unexercised in-the-money options at fiscal year end assumes a
fair market value for the Common Stock of $6.375, the closing sale price
per share of the Common Stock as reported on the American Stock Exchange
Composite Tape for October 31, 1996.
(2) The exercisable and unexercisable options held by Messrs. Elia (Estate),
Brunais, Deieso, Mammola, Stump and McMahon were not in-the-money as of
October 31, 1996.
(3) Effective April 3, 1996, Mr. Elia ceased to be an executive of AWT due to
his death, and the options held by Mr. Elia as of such date are currently
held and exercisable by his estate. The exercise price of the options held
by Mr. Elia's estate is (i) $6.563 per share in the case of the option to
purchase 60,000 shares granted in March 1996 or (ii) $8.00 per share in the
case of the option to purchase 100,000 shares granted in August 1994.
(4) The exercise price of the options held by Mr. Brunais is (i) $6.563 per
share in the case of his option to purchase 18,000 shares granted in March
1996 or (ii) $8.00 per share in the case of his option to purchase 50,000
shares granted in August 1994.
(5) The exercise price of the options held by Mr. Deieso is (i) $6.563 per
share in the case of his option to purchase 20,129 shares granted in March
1996 or (ii) $8.00 per share in the case of his option to purchase 26,371
shares granted in January 1996. Mr. Deieso resigned as President and Chief
Executive Officer of Metcalf & Eddy on February 26, 1997. The options held
by Mr. Deieso as of the date of this chart will expire 90 days following
February 26, 1997.
(6) The exercise price of the options held by Mr. Mammola is (i) $6.563 per
share in the case of his option to purchase 20,157 shares granted in March
1996 or (ii) $8.00 per share in the case of his option to purchase 15,343
shares granted in January 1996.
(7) The exercise price of the options held by Mr. Stump is (i) $6.563 per
share in the case of his option to purchase 20,000 shares granted in March
1996 or (ii) $8.00 per share in the case of his option to purchase 40,000
shares granted in August 1994. Pursuant to the Separation Agreement, each
of the options held by Mr. Stump was terminated as of December 16, 1996.
(8) The exercise price of the options held by Mr. McMahon is (i) $6.563 per
share in the case of his option to purchase 12,000 shares granted in March
1996 or (ii) $5.75 per share in the case of his option to purchase 10,000
shares granted in August 1994.
[The remainder of this page left intentionally blank.]
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act that might incorporate future filings, including
this Proxy Statement, in whole or in part, the following report and the
Performance Graph on Page 16 shall not be incorporated by reference into any
such filings.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
Decisions on compensation of the Company's executives generally
are made by the Compensation and Stock Option Committee of the Board of
Directors (the "Compensation Committee" or "Committee"). Prior to August 12,
1996, the Compensation and Stock Option Committee (the "Compensation
Committee") of the Board of Directors consisted of Messrs. Deschamps, Senior,
Morris and Ms. Green. Mr. Senior resigned from the Board of Directors of AWT
on August 12, 1996. Mr. Deschamps resigned from the Board of Directors of AWT
on January 21, 1997. Since January 21, 1997, the Compensation Committee
consists of Mr. Morris and Ms. Green. The Compensation Committee, as
constituted prior to August 12, 1996, among other things, approved (i) Mr.
Elia's salary and bonus for fiscal 1996 and (ii) approved the salary and
bonuses of Messrs. Brunais, Deieso, Mammola and Stump.
Compensation Policy for Executive Officers
Under the supervision of the Compensation Committee, the
Company has developed and implemented compensation policies and programs that
seek to retain and motivate employees of the Company whose performance
contributes to the Company's goal of maximizing shareholder value in an
industry that continues to experience sluggish growth, overcapacity, intense
competition and marginal profitability. The Compensation Committee is of the
opinion that managing through a depressed market, such as the environmental
markets of the last few years, requires dedicated employees who can keep the
Company on track and position it for future competitive advantage.
Historically, the Company has sought to combine salaries with stock option
awards, restricted stock awards and, when appropriate, selected cash bonuses
to provide a balanced compensation package for its executives. The balance
established by the Committee is designed to reward past performance, retain
key employees and encourage future performance. Under this structure,
long-term incentives are based upon the value of the Company's Common Stock in
order to more closely align executives' interests with those of shareholders.
Compensation decisions are made by the Compensation Committee after reviewing
recommendations prepared by the Company's Chief Executive Officer, with the
assistance of other Company personnel.
Beginning with fiscal 1995, the Company, with the guidance and
approval of the Compensation Committee, developed and implemented a revised,
variable management incentive compensation strategy that is designed to
recognize both short-term and longer term performance, attract and retain the
high quality executive and management talent that is necessary to continue the
Company's positive trends and to remain competitive. In developing this
incentive compensation strategy, which is comprised of an Annual Management
Bonus Plan and a Long Term Incentive Plan (the "Executive Incentive Plan"),
emphasis was placed on improving shareholder value. The strategy was
developed based upon the recommendations of a leading executive compensation
consulting firm.
The Annual Management Bonus Plan is designed to reward business
unit management teams for achieving or exceeding their specific fiscal year
operating objectives and has relatively broad management participation.
Annual management bonus potential for AWT's executives is determined based
upon the overall consolidated results of the Company. A portion of the annual
bonus is discretionary and is awarded based upon the quality of the individual
participant's performance.
A small number of the most senior executives are also
participants in the Executive Incentive Plan. This plan, which has a portion
of its potential value directly linked to AWT stock price performance, is
based upon the Company achieving its longer term objectives. The Executive
Incentive Plan features a series of overlapping three-year performance
periods, commencing with 1995 through 1997. The first potential payment to
eligible executives under the terms of the Executive Incentive Plan will not
be made until after 1997.
Section 162(m) of the Internal Revenue Code limits the
deductibility of compensation in excess of $1,000,000 paid to any of the
Company's named executive officers (that is, generally, the individuals
appearing in the summary compensation table in the proxy statement) in any
year. Certain "qualified performance based compensation" is not subject to
the limitation imposed by Section 162(m). The Committee generally intends to
qualify all compensation paid to its executive officers for full tax
deductibility; however, the Committee will balance the burden of compliance
with the technical and inflexible rules promulgated under Section 162(m)
against the value of the benefit the Company may derive from such compliance,
and reserves the right to pay compensation that may not be fully deductible if
it concludes that such burdens outweigh such benefits.
Discussion of 1996 Compensation for the Chairman and Executive Officer
Mr. Elia died in April of 1996 while serving as Chairman of the
Board of Directors and Chief Executive Officer of the Company. The
Compensation Committee, in determining Mr. Elia's 1996 bonus, carefully
reviewed Mr. Elia's service to the Company.
In November of 1996, the Company elected Robert B. Sheh as
Chairman of the Board of Directors, President and Chief Executive Officer.
The employment agreement with Mr. Sheh was approved by the Compensation
Committee.
COMPENSATION AND STOCK OPTION
COMMITTEE
Carol Lynn Green
John W. Morris
[The remainder of this page left intentionally blank.]
STOCK PERFORMANCE GRAPH
AIR & WATER TECHNOLOGIES CORPORATION
Notwithstanding anything to the contrary set forth in any of
the Company's previous filings under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, that might incorporate
future filings, including this Proxy Statement, in whole or in part, the
preceding report and the Performance Graph below shall not be incorporated by
reference into any such filings.
STOCK PERFORMANCE GRAPH
Oct. 91 Oct. 92 Oct. 93 Oct. 94 Oct. 95 Oct. 96
------- ------- ------- ------- ------- -------
AWT......... 100 60 65 33 23 28
S&P......... 100 110 126 132 166 206
Fidelity.... 100 96 103 95 112 131
The above chart shows a comparison of the cumulative total
return for the period from November 1, 1991 through October 31, 1996, in (i)
the Company's Common Stock, (ii) the S&P 500 Composite Stock Price Index, and
(iii) the Fidelity Select Environmental Services Fund. The stock price
performance shown on the graph above is not necessarily indicative of future
performance.
[The remainder of this page left intentionally blank.]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 14, 1994, the stockholders of AWT approved the issuance
of Company securities pursuant to an Investment Agreement dated as of March
30, 1994 (the "Investment Agreement"), among AWT, CGE, and Anjou pursuant to
which, among other things, AWT (i) issued to CGE 1,200,000 shares of a newly
designated series of Preferred Stock, designated as 5 1/2% Series A
Convertible Exchangeable Preferred Stock, convertible into 4,800,000 shares of
Common Stock, for cash consideration of $60,000,000, and (ii) issued to Anjou
an aggregate of 6,701,500 shares of Common Stock in connection with the
acquisition from Anjou of PSG and PSG Canada. As a result, CGE increased its
ownership interest in AWT to approximately 48% of the total voting power of the
Company's voting securities. In addition, AWT benefitted from certain
financial undertakings from CGE, including a $125,000,000 loan from CGE and
became CGE's exclusive vehicle in the United States, its possessions and its
territories for CGE's water and wastewater management and air pollution
activities. CGE also has representation on AWT's Board of Directors and the
right to designate AWT's Chief Executive Officer and Chief Financial Officer
all as further described below. In August 1996, the Company entered into a
seven year, $60 million unsecured revolving credit facility with Anjou.
CERTAIN COVENANTS OF THE COMPANY
Representation on the Board of Directors; Management
Under the terms of the Investment Agreement, the Company has
agreed that CGE will have the right to cause the Company to include, as
nominees for the Company's Board of Directors recommended by the Board for
election by the shareholders, a number of directors (rounded down to the next
whole number if CGE owns in the aggregate less than one-half of the
outstanding shares, treating the shares of Series A Preferred Stock owned by
CGE as having been converted into shares of Common Stock, or, if otherwise,
rounded up to the next whole number) that is equal to the product of the total
number of directors on the Board times a fraction the numerator of which is
the aggregate number of shares of Common Stock owned by CGE and its Affiliates
(assuming conversion of the Series A Preferred Stock (or other securities
convertible into or exercisable or exchangeable for shares of Common Stock)
held by CGE or its Affiliates) and the denominator of which is the total
number of shares of Common Stock outstanding (assuming conversion of the
Series A Preferred Stock (or other securities convertible into or exercisable
or exchangeable for Shares of Common Stock) held by CGE or its affiliates).
The Company has further agreed that CGE will have proportionate representation
on all Committees of the Board (other than any Special Committee of
Independent Directors) to the same extent as CGE is entitled to representation
on the Board of Directors. "Independent Director" is defined for purposes of
the Investment Agreement as any director who is not an employee, agent or
representative of the Company, CGE or any of their respective Affiliates or
Associates (as defined in the Investment Agreement) and may include any person
acting as outside counsel or financial advisor for either the Company or CGE
or any of their respective Affiliates or Associates. All Independent
Directors must be satisfactory to CGE.
AWT has also agreed in the Investment Agreement that CGE shall
have the right to designate the Chief Executive Officer and the Chief
Financial Officer of the Company.
At the Annual Meeting held on April 29, 1996, shareholders of
the Company elected four directors who were designated by CGE (Messrs.
Deschamps, Houdaille, Messier and Kriegel). Also in accordance with the terms
of the Investment Agreement, the Board of Directors appointed as designees of
CGE Mr. Alain Houdaille as Chief Executive Officer and Mr. Alain Brunais as
Chief Financial Officer.
Registration Rights
Pursuant to the terms of the Investment Agreement, CGE and
Anjou will have the right to require on up to four occasions that the Company
register all shares of Common Stock, Series A Preferred Stock or the Company's
5 1/2% Convertible Subordinated Notes (the "Convertible Debt") owned from time
to time by CGE and its Affiliates for sale to the public under the Securities
Act (a "Demand Registration"), provided that the Company is not obligated (i)
to effect more than one Demand Registration in any six-month period, (ii) to
effect a Demand Registration for less than five percent of the outstanding
Common Stock or (iii) to effect a Demand Registration within six months of CGE
or Anjou selling any shares pursuant to a Piggyback Registration (as defined
below). In addition, CGE and Anjou will have the right to participate in
registrations by the Company of its Common Stock (a "Piggyback Registration").
The Company will pay all registration expenses on behalf of CGE and Anjou,
including certain related fees and expenses, other than underwriting fees and
discounts.
Access to Books and Records
The Company has agreed that for so long as CGE beneficially
owns directly or indirectly at least 26% of the outstanding shares of Common
Stock on a fully-diluted basis, CGE will have access on reasonable terms to the
books, records and employees of the Company and its subsidiaries and to the
provision by the Company of all information reasonably requested by CGE,
subject to confidentiality obligations that may be owed at the time by the
Company to third parties and to appropriate confidentiality arrangements and
requirements of law.
CERTAIN COVENANTS OF CGE
Exclusivity
CGE has agreed in the Investment Agreement that, for so long as
CGE (with its affiliates) is the largest stockholder of the Company, AWT will
be CGE's exclusive vehicle in the United States, its possessions and its
territories for CGE's water and waste water management and air pollution
activities. CGE also agreed to assist the Company in developing its water and
waste water management and air pollution activities in both Canada and Mexico,
subject to certain limitations, and CGE and the Company agreed to establish a
privileged commercial relationship for the development of air pollution
activities in Europe.
Affiliate Transactions
CGE has agreed on behalf of itself and its affiliates that any
transactions (or series of related transactions) between the Company and any
of its affiliates and CGE or any of its affiliates will be on an arm's length
basis. Any such transaction (or series of related transactions) having an
aggregate value in excess of $1,000,000 must be approved by a majority of the
Independent Directors or a special committee thereof. The Company, CGE and
Anjou have further agreed that all claims by the Company against CGE or its
Affiliates under the Investment Agreement may be taken only by majority
approval of such Independent Directors on Special Committee.
Sales of Shares
CGE has also agreed to give the Company one day's prior written
notice of any sale of Company securities by CGE if, to the knowledge of CGE,
such sale would result in any party's beneficially owning more than 15% of the
outstanding shares of Common Stock.
Letter Agreement
Pursuant to a letter agreement dated March 18, 1994 between the
Company and CGE, CGE purchased 500,000 shares of the Company's Common Stock at
$10 a share for a total purchase price of $5,000,000. CGE also agreed in the
letter agreement that, subject to approval by CGE, CGE would co-sign on a
case-by-case basis with the Company applications for letters of credit with
respect to the Company's water and waste water management and air pollution
projects, which CGE acknowledged could reach or exceed the level of letters of
credit carried by the Company at March 18, 1994.
ISSUANCE OF SERIES A PREFERRED STOCK
General
Pursuant to the terms of the Investment Agreement, AWT issued
to CGE, 1,200,000 shares of its 5 1/2% Series A Convertible Exchangeable
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"),
convertible into 4,800,000 shares of Common Stock, for an aggregate cash
purchase price of $60,000,000. The Series A Preferred Stock is exchangeable
at the option of the Company for the Company's 5 1/2% Convertible Subordinated
Notes with a maturity of 10 years from the date of issuance of such notes (the
"Convertible Debt").
Dividends
The holders of shares of Series A Preferred Stock are entitled
to receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, cumulative dividends at an annual rate of $2.75 per
share, payable in cash quarterly in arrears in equal amounts on March 31, June
30, September 30 and December 31 of each year (each a "Dividend Payment
Date"). Dividends other than for a full quarterly period accrue on the basis
of the actual number of days elapsed in a 365-day year. Quarterly dividends
which are not paid in full in cash cumulate without interest until declared
and paid by the Board of Directors. Holders of the Series A Preferred Stock
entitled to receive all accrued dividends in preference to and priority over
dividends on the Company's Common Stock, and no distribution in respect of the
Common Stock and no redemption, purchase, retirement or acquisition for value
of Common Stock may occur, or money be set apart therefor, unless all
dividends accrued on the Series A Preferred Stock through the immediately
preceding Dividend Payment Date have been declared and paid. If the Series A
Preferred Stock is exchanged into Convertible Debt, the interest rate will be
5 1/2% per annum. The Company paid $3,300,000 to CGE as dividends on the
Series A Preferred Stock during fiscal 1996.
Liquidation Preference
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, holders of shares of
Series A Preferred Stock will be entitled to be paid out of the assets of the
Company available for distribution to its stockholders an amount in cash equal
to $50 for each share outstanding, plus accrued and unpaid dividends thereon
to the date fixed for liquidation, dissolution or winding up, whether or not
declared to the date of such payment, before any payment shall be made or any
assets distributed to the holders of the Common Stock. Neither a voluntary
sale, lease, or other transfer of all or substantially all of the assets of
the Company, nor a consolidation or merger of the Company with or into another
person, will be considered a liquidation, dissolution or winding up of the
Company for these purposes.
Exchange
Commencing June 30, 1997, the Series A Preferred Stock is
exchangeable, in whole and not in part, at the sole option of the Company, at
any time, for the Company's Convertible Debt, having a maturity of ten years
from the date of issuance of the Series A Preferred Stock, on not less than 30
nor more than 60 days' prior written notice. Each share of Series A Preferred
Stock is exchangeable for $50 principal amount of Convertible Debt.
Conversion
The Series A Preferred Stock and Convertible Debt are
convertible, in whole or in part, at the option of the holder, at any time and
from time to time, into shares of Common Stock at a conversion price equal to
$12.50 per share of Common Stock. The ratio at which the Series A Preferred
Stock and Convertible Debt are convertible into shares of Common Stock is
subject to adjustment (using a weighted average in the case of items (iii),
(iv), (v) and (vi) below so as to preserve the fully diluted percentage of
Common Stock into which the Series A Preferred Stock and Convertible Debt are
convertible) in the event of: (i) stock dividends, stock reclassifications or
recapitalizations, stock splits, reverse splits and the like; (ii) dividends
or other distributions of cash or assets or evidence of indebtedness; (iii)
dividends or other distributions of securities or rights convertible into or
exercisable for shares of any class of common stock of the Company at a price
less than the then conversion price per common share of the Series A Preferred
Stock; (iv) issuance of shares of any class of common stock of the Company
(other than common stock issued upon conversion of the Series A Preferred
Stock, the Convertible Debt or the Company's 8% Convertible Subordinated
Debentures due May 15, 2015, or pursuant to the Company's stock option plans
or other stock related employee compensation plans approved by the Board of
Directors) at a price less than the then conversion price per common share of
the Series A Preferred Stock; (v) issuance of securities or rights convertible
into or exercisable for shares of any class of common stock of the Company at
a purchase price less than the then conversion price per common share of the
Series A Preferred Stock; and (vi) repurchase by the Company, directly or
indirectly, of shares of any class of common stock at a price in excess of the
then conversion price per common share of the Series A Preferred Stock.
Redemption
The Series A Preferred Stock is not redeemable before June 30,
1997. Between June 30, 1997 and June 30, 2000, the Series A Preferred Stock
will be redeemable, in whole or in part, at the option of the Company on not
less than 30 or more than 60 days' prior written notice. The Company may
exercise this option during such time period only if for 20 trading days
within any period of 30 consecutive trading days, including the last trading
day of such period, the closing price of the Common Stock exceeds $18.75,
subject to adjustments. After June 30, 2000, the Series A Preferred Stock
will be redeemable by the Company at any time. The same redemption provisions
apply to the Convertible Debt. The redemption price is 103.85% of the
liquidation preference, plus accrued and unpaid dividends to the date of
redemption, after June 30, 1997 and will decrease by .55% each year until it
reaches 100% of the liquidation preference, plus accrued and unpaid dividends
to the date of redemption, whereupon it will remain fixed. The Series A
Preferred Stock is perpetual preferred stock.
Voting
Holders of Series A Preferred Stock and Convertible Debt are
entitled to vote with the holders of Common Stock on all matters submitted for
a vote of holders of Common Stock, and are entitled to that number of votes
equal to the number of votes to which the shares of Common Stock issuable upon
conversion of such shares of Series A Preferred Stock and Convertible Debt
would have been entitled if such shares of Common Stock had been outstanding
at the time of the applicable vote and related record date. In addition, the
Series A Preferred Stock and Convertible Debt will vote separately as a class
on any amendments to the Certificate of Incorporation or By-Laws of the
Company, whether by merger, consolidation, combination, reclassification or
otherwise, which would alter or circumvent the voting powers, rights and
preferences of the Series A Preferred Stock or Convertible Debt. No amendment
or alteration of the dividends payable, liquidation preference or par value of
the Series A Preferred Stock, or interest rate and principal amount of the
Convertible Debt, may be effected without the consent of each holder of Series
A Preferred Stock or Convertible Debt, respectively.
Ranking
The Series A Preferred Stock with respect to dividend rights
and rights on liquidation, winding up and dissolution, ranks prior to all
classes of the Company's equity securities, including the Common Stock. The
Convertible Debt will be subordinated to the Company's senior debt and senior
subordinated debt.
Restrictions on Resale; Registration Rights
The Series A Preferred Stock and the Common Stock held by CGE
are each a "restricted security" as that term is defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"). Consequently,
resales of such shares by CGE, unless registered under the Securities Act, are
subject to the timing, volume and other limitations of Rule 144. Under the
Investment Agreement, CGE has certain registration rights with respect to such
shares. See "--Certain Covenants of the Company--Registration Rights" above.
CGE AND ANJOU CREDIT AGREEMENTS
In connection with the Investment Agreement, the Company and
CGE entered into a Credit Agreement dated as of June 14, 1994 pursuant to
which the Company received a $125,000,000 term loan from CGE. The term loan
is an unsecured facility bearing interest at a rate based upon one, two, three
or six-month LIBOR, as selected by AWT, plus 125 basis points and has a final
maturity of June 15, 2001. The term loan contains certain financial and other
restrictive covenants with respect to the Company relating to, among other
things, the maintenance of certain financial ratios, and restrictions on the
sale of assets and the payment of dividends on or the redemption, repurchase,
acquisition or retirement of securities of the Company or its subsidiaries.
On June 14, 1994, the Company utilized a substantial portion of the proceeds
from the term loan to retire its 11.18% Senior Notes with The Prudential
Insurance Company of America. Interest related to this term loan during fiscal
1996 amounted to approximately $8.8 million.
In August 1996, the Company entered into a $60 million
unsecured revolving credit facility with Anjou ("Anjou Credit Facility"). The
facility matures in August 2003. The borrowings under the facility bear
interest at LIBOR plus .6% (6% at October 31, 1996). In conjunction with this
new financing the Company reduced its more expensive $130 million Senior
Secured Credit Facility (the "Bank Credit Facility") to $50 million. As of
October 31, 1996, the Company's outstanding borrowings under the Anjou Credit
Facility totaled $60 million. Interest related to this facility during
fiscal 1996 amounted to approximately $714,000.
INVOLVEMENT OF CGE IN OTHER FINANCING ARRANGEMENTS
On March 10, 1995, the Company entered into a three-year bank
credit facility (the "Bank Credit Facility") with The First National Bank of
Chicago and Societe Generale, New York Branch, acting as co-agents for a
syndicate which includes seven additional banks. The Bank Credit Facility is
primarily designed to finance working capital requirements and allow for the
issuance of letters of credit, both subject to limitations and secured by a
first security interest in substantially all of the assets of the Company. Of
the total commitment under the terms of the Bank Credit Facility, borrowings
are limited to the sum of a percentage of certain eligible receivables,
inventories, net property, plant and equipment and costs and estimated
earnings in excess of billings, and bear interest at LIBOR (5.4% at October
31, 1996), as defined, plus .725% or at a defined bank rate approximating
prime (8.25% at October 31, 1996). The Bank Credit Facility also allows for
certain additional borrowings, including, among other things, project
financing and foreign borrowing facilities, subject to limitations. The Bank
Credit Facility requires CGE to maintain its support of the Company, including
a minimum 40% ownership interest in the Company and its right to designate its
proportionate share of the Company's Board of Directors as well as the Chief
Executive Officer and Chief Financial Officer. The Company compensates CGE
for its support in an amount equal to .95% per annum of the outstanding
commitment of its credit facilities ($1.2 million and $.8 million for the
years ended October 31, 1996 and 1995).
OTHER RELATED TRANSACTIONS
Mr. Senior, a Director of the Company from October 1987 to
August 1996, is a Managing Director of Allen & Company, which has performed
investment banking and other services for the Company from time to time.
Allen & Company served as a financial advisor to the Company in connection
with the transactions contemplated by the Investment Agreement. Pursuant to
this work, the Company agreed to pay certain fees to Allen & Company,
including a final payment of $2.5 million in fiscal 1996. Ms. Green, a
Director of the Company since June 1994, is a partner at the law firm of Bryan
Cave. Bryan Cave has performed various legal services for the Company from
time to time.
PROPOSAL 2:
TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed McGladrey & Pullen, LLP,
independent auditors, to audit the financial statements of the Company for the
fiscal year ending October 31, 1997. Arthur Andersen LLP had served as the
Company's independent public accountants during the fiscal year ending October
31, 1995. By letter dated March 13, 1996 (the "March 13 Letter"), the
Chairman of the Board and Chief Executive Officer of the Company advised
Arthur Andersen LLP that they would be replaced as the Company's independent
accountants effective March 13, 1996 and that the Company had appointed
McGladrey & Pullen, LLP, independent auditors, to audit the financial
statements of the Company for the fiscal year ending October 31, 1996, which
appointment was subsequently approved by the Company's stockholders.
The decision to change accountants was recommended by the Audit
Committee of the Board of Directors and was based upon the Audit Committee's
conclusion that McGladrey & Pullen, LLP (i) could provide substantially
identical accounting and auditing services to the Company at significantly
reduced costs, and (ii) as a member of RSM International ("RSMI"), is
affiliated with the French firm Salustro Reydel, also a member of RSMI, the
auditors for Compagnie Generale des Eaux (the Company's largest stockholder).
The reports of Arthur Andersen LLP on the Company's financial
statements for each of the two most recent fiscal years reported upon by them
contained no adverse opinion or a disclaimer of opinion, nor were the reports
qualified or modified as to uncertainty, audit scope or accounting principles,
other than the report with respect to the 1994 fiscal year, which contained an
uncertainty paragraph regarding the ultimate collectibility of a significant
account receivable. The uncertainty was resolved in the fiscal year 1995.
During those two fiscal years and the period from the end of the most recent
fiscal year to March 13, 1996, there was no disagreement with Arthur Andersen
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. During this period, there were no
"reportable events" as that term is defined in Item 304(a)(1)(v) of Regulation
S-K. The Company requested and Arthur Andersen LLP furnished it with a letter
addressed to the Securities and Exchange Commission stating that it agrees
with the above statements.
A representative of McGladrey & Pullen, LLP, is expected to be
present at the Annual Meeting with an opportunity to make a statement if he or
she desires to do so and to respond to appropriate questions. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. If the appointment is not
ratified by stockholders, the Board of Directors is not obligated to appoint
other independent public accountants, but the Board of Directors will consider
such unfavorable vote.
PROPOSAL 3:
THE REVERSE STOCK SPLIT
General
The Board of Directors has determined that it would be
advisable to amend and restate the Company's Certificate of Incorporation to
effect a one-for-[ ] reverse stock split (the "Reverse Stock Split") of the
Company's Common Stock. A copy of the Amendment to the Certificate of
Incorporation is attached hereto as Exhibit A. If the Amendment is approved
by the stockholders, each [ ] shares of Common Stock, par value $.001 per
share, (the "Old Common Stock") outstanding on the Effective Date (as defined
below) will be converted automatically into ONE share of new Common Stock, par
value $.001 per share, (the "New Common Stock"). To avoid the existence of
fractional shares of New Common Stock, stockholders who would otherwise be
entitled to receive fractional shares of New Common Stock shall receive a cash
distribution in lieu thereof. See "Exchange of Stock Certificates." The
"Effective Date" of the Reverse Stock Split will be the date on which the
Amendment is filed with the Secretary of State of Delaware, which is
anticipated to be as soon as practicable following the date of the Annual
Meeting.
Background of and Reasons for the Reverse Stock Split
On April __, 1997, the Board of Directors adopted resolutions
approving the Amendment and directing that the Amendment be placed on the
agenda for the consideration of the stockholders at the Annual Meeting.
The Common Stock began trading publicly on August 10, 1989 at
an initial offering price of $17.00 per share. On _________ __, 1997, the
closing price per share of Common Stock on the American Stock Exchange (the
"AMEX") was $_______. The Board of Directors believes that the present level
of per share market prices of the Common Stock impairs the acceptability of
the stock by portions of the financial community and the investing public.
Many investors look upon low priced stock as unduly speculative
in nature and, as a matter of policy, avoid investment in such stocks. The
Board of Directors also believes that the current per share price of the Common
Stock has reduced the effective marketability of the shares because of the
reluctance of many leading brokerage firms to recommend low priced stock to
their clients. Further, various brokerage house policies and practices tend
to discourage individual brokers from dealing in low priced stocks. Some of
those policies and practices pertain to the payment of brokers' commissions
and to time-consuming procedures which function to make the handling of low
priced stocks unattractive to brokers from an economic standpoint.
Additionally, several institutional investors have policies prohibiting them
from holding low priced stock in their own portfolios. In addition, the
structure of trading commissions also tends to have an adverse impact upon
holders of low priced stock because the brokerage commission on a sale of low
priced stock generally represents a higher percentage of the sales price than
the commission on higher priced issues.
The Board of Directors is optimistic that the decrease in the
number of shares of Common Stock outstanding as a consequence of the Reverse
Stock Split and the resulting anticipated increased price level will result in
greater interest in the Common Stock by the financial community and the
investing public.
There can be no assurance, however, that the foregoing will
occur or that the market price of the Common Stock immediately after
implementation of the Reverse Stock Split will increase, and if it increases,
no assurance that such increase can be maintained for any period of time, or
that such market price will approximate [ ] times the market price before
the Reverse Stock Split.
Dissenting stockholders have no appraisal rights under Delaware
law or under the Company's Certificate of Incorporation and Bylaws in
connection with Reverse Stock Split.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT ALL STOCKHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENT.
Effects of the Reverse Stock Split
General Effects. If the Amendment is approved by the
stockholders, the principal effect of the Reverse Stock Split will be to
decrease the number of outstanding shares of Common Stock from 32,019,254
shares to approximately ______ shares, based on share information as of March
15, 1997. The Reverse Stock Split would not affect the proportionate equity
interest in the Company of any holder of Common Stock, except as may result
from the provisions for the elimination of fractional shares as described
below. The Reverse Stock Split will not affect the registration of the Common
Stock under the Exchange Act or the listing of the Common Stock on the
American Stock Exchange.
In order that the Company may avoid the expense and
inconvenience of issuing and transferring fractional shares of New Common
Stock, stockholders who would otherwise be entitled to receive a fractional
share of New Common Stock (the "Fractional Stockholders") shall receive
payment in cash in lieu of receiving a fractional share of New Common Stock.
See "Exchange of Stock Certificates."
The Reverse Stock Split may leave certain stockholders with one
or more "odd lots" of New Common Stock, i.e., stock in amounts of less than
100 shares. These odd lots may be more difficult to sell or require greater
transactions cost per share to sell, than shares in even multiples of 100.
Effect on Stock Option Plans
As of March 15, 1997, there were outstanding options to
purchase shares and outstanding grants for the right to purchase shares under
the Company's stock incentive and employee stock purchase plans relating to an
aggregate of 1,610,292 shares of Common Stock. On that date 2,140,203 shares
of Common Stock remained available for grant under such plans. All of the
outstanding options and other grants include provisions for adjustments in the
number of shares covered thereby, and the exercise price thereof, in the event
of a reverse stock split by appropriate action of the Compensation and Stock
Option Committee of the Company's Board of Directors. If the Reverse Stock
Split is approved and effected, there would be reserved for issuance upon
exercise of all outstanding options and other grants a total of __________
shares of Common Stock. Each of the outstanding options would thereafter
evidence the right to purchase [ ]% of the shares of Common Stock previously
covered thereby and the exercise price per share would be [ ] times the
previous exercise price. Each of the outstanding grants of shares would
thereafter evidence the contingent obligation to deliver [ ]% of the shares
of Common Stock previously covered thereby. The number of shares available
for grant under the Company's stock incentive and employee stock purchase
plans would be decreased to approximately __________ shares of Common Stock.
Effect on Series A Preferred Stock
An aggregate of 4,800,000 shares of Common Stock are currently
reserved for issuance upon conversion of all outstanding shares of Series A
Preferred Stock. If the Reverse Stock Split is approved and effected, the
conversion rates for such shares of Preferred Stock would be adjusted
proportionately so that the new conversion rates would be [ ]% of the present
conversion rate and there would be reserved for issuance for this purpose
approximately [ ] shares of Common Stock. As a result, following the
Reverse Stock Split, each share of Series A Preferred Stock would thereafter
be convertible into [ ] shares of Common Stock instead of four shares. In
addition, the voting powers of the Series A Preferred Stock would thereafter
be reduced correspondingly.
Effect on Debentures
On March 15, 1997, the Company had outstanding $115,000,000 of
8% Convertible Subordinated Debentures (the "Debentures"). Pursuant to the
terms of the Indenture (the "Indenture') dated as of May 15, 1990, as
supplemented, by and between the Company and The Chase Manhattan Bank, any
Debenture or any portion of the principal amount thereof which is $1,000 or an
integral multiple of $1,000 may be converted into shares of Common Stock at
the initial conversion price of $30.00 per share (the "Conversion Price"). If
the Reverse Stock Split is approved and effected, the Conversion Price shall
be increased to [$ ] per share. Currently the number of shares of Common
Stock reserved for issuance upon conversion of the Debentures is 3,833,334,
which number shall be reduced to ________ if the Reverse Stock Split is
approved and effected.
Changes in Stockholders' Equity
As an additional result of the Reverse Stock Split, the
Company's stated capital, which consists of (i) the par value per share of
Common Stock multiplied by the number of shares of Common Stock issued and
(ii) par value per share of Series A Preferred Stock multiplied by the number
of shares of Series A Preferred Stock issued will be reduced by approximately
$______ to $_____ on the Effective Date. Following the Reverse Stock Split,
the stated capital will be decreased because the number of shares of Common
Stock issued and outstanding will be reduced. Correspondingly, the Company's
capital in excess of par value, which consists of the difference between the
Company's stated capital and the aggregate amount paid to the Company upon the
issuance by the Company of all currently outstanding Common Stock, will be
increased by approximately $________.
The following table illustrates the principal effects of the
Reverse Stock Split discussed in the preceding paragraphs:
<TABLE>
<CAPTION>
Prior to Reverse After Reverse
Split and Amendment Split and Amendment
Number of Shares of Common Stock to Certificate to Certificate
- -------------------------------- ------------------- -------------------
<S> <C> <C>
Authorized................................................................... 100,000,000 100,000,000
Outstanding.................................................................. 32,019,254 [ ]
Reserved for future issuance upon exercise of options and pursuant to
employee stock purchase plan................................................ 3,750,495 [ ]
Reserved for issuance upon conversion of Preferred Stock..................... 4,800,000 [ ]
Reserved for issuance upon conversion of Debentures.......................... 3,833,334 [ ]
Available for future issuance by action of the Board of Directors (after
giving effect to the above reservations).................................... 55,596,917 [ ]
</TABLE>
Assuming the Amendment effecting the Reverse Stock Split is
approved, the Amendment will be filed with the Secretary of State of the
State of Delaware as promptly as practicable thereafter. The Amendment and
the proposed Reverse Stock Split would become effective upon the Effective
Date.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of
the Reverse Stock Split is based on current law, including the Internal
Revenue Code of 1986, as amended (the "Code"), and is for general information
only. The tax treatment of a stockholder may vary depending upon the
particular facts and circumstances of such stockholder. Certain stockholders,
including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, non-resident aliens, foreign corporations and
persons who do not hold the Common Stock as a capital asset, may be subject to
special rules not discussed below.
ACCORDINGLY, EACH STOCKHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE STOCK
SPLIT, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL OR FOREIGN
INCOME TAX AND OTHER LAWS.
The receipt of shares of New Common Stock (excluding fractional
shares of New Common Stock) in the Reverse Stock Split will be a nontaxable
transaction under the Code for federal income tax purposes. Consequently, a
stockholder receiving shares of New Common Stock will not recognize either
gain or loss, or any other type of income, with respect to whole shares of New
Common Stock received as a result of the Reverse Stock Split. In addition,
the aggregate tax basis of such stockholder's shares of Common Stock prior to
the Reverse Stock Split will carry over as the tax basis of the stockholder's
shares of New Common Stock. Each stockholder will be required to allocate
such stockholder's basis in such stockholder's shares of Common Stock ratably
among the total number of shares of New Common Stock owned following the
Reverse Stock Split. The holding period of the shares of New Common Stock
will also include the holding period during which the stockholder held the
Common Stock, provided that such Common Stock was held by the stockholder as a
capital asset on the Effective Date.
The receipt by a Fractional Stockholder of cash in lieu of a
fractional share of New Common Stock pursuant to the Reverse Stock Split will
be a taxable transaction for federal income tax purposes. The receipt of cash
in lieu of fractional shares of New Common Stock will result in gain or loss
(rather than dividend income) to the Fractional Stockholders measured by the
difference between the amount of cash received and the adjusted basis of the
fractional share assuming, as the Company believes, that such cash
distribution is undertaken solely for the purpose of saving the Company the
expense and inconvenience of issuing and transferring fractional shares of New
Common Stock. Capital gain or loss will be long term capital gain or loss if
on the Effective Date the shares of Common Stock have been held by the
Fractional Stockholder for longer than one year.
Based on certain exceptions contained in regulations issued by
the Internal Revenue Service, the Company does not believe that it or
Fractional Stockholders will be subject to backup withholding or informational
reporting with respect to the cash distributed to a Fractional Stockholder.
Exchange of Stock Certificates
If the proposal to implement the Reverse Stock Split is
adopted, stockholders will be required to exchange their stock certificates
for new certificates representing the shares of New Common Stock.
Stockholders of record on the Effective Date will be furnished the necessary
materials and instructions for the surrender and exchange of share
certificates at the appropriate time by the Company's Transfer Agent (the
"Transfer Agent"). Stockholders will not have to pay a transfer fee or other
fee in connection with the exchange of certificates. Stockholders should not
submit any certificates until requested to do so.
As soon as practicable after the Effective Date, the Transfer
Agent will send a letter of transmittal to each stockholder advising such
holder of the procedure for surrendering stock certificates in exchange for new
certificates representing the ownership of New Common Stock. No certificates
representing fractional shares shall be issued. In lieu thereof, a
certificate or certificates evidencing the aggregate of all fractional shares
otherwise issuable (rounded, if necessary, to the next higher whole share)
shall be issued to the Transfer Agent or its nominee, as agent for the
accounts of all holders of Common Stock otherwise entitled to have a fraction
of a share issued to them in connection with the Reverse Stock Split. Sales
of fractional interests will be effected by the Transfer Agent as soon as
practicable on the basis of prevailing market prices of the Common Stock on the
American Stock Exchange at the time of sale. After the Effective Date, the
Transfer Agent will pay to such stockholders their pro rata share of the net
proceeds derived from the sale of their fractional interests upon surrender of
their stock certificates. No service charges or brokerage commissions will be
payable by stockholders in connection with the sale of fractional interests,
all of which costs will be borne by the Company.
Until they have surrendered their stock certificates for
exchange, stockholders will not be entitled to receive any dividends or other
distributions that may be declared and payable to holders of record. Upon the
surrender of certificates representing Old Common Stock, certificates
representing New Common Stock together with any such withheld dividends or
other distributions, without interest, will be delivered. At the same time or
as soon as possible thereafter, any cash payment for a fractional share will
be paid (without interest).
Any stockholder whose certificate for Old Common Stock has been
lost, destroyed or stolen, will be entitled to issuance of a certificate
representing the shares of New Common Stock into which such shares will have
been converted upon compliance with such requirements as the Company and the
Transfer Agent customarily apply in connection with lost, stolen or destroyed
certificates.
STOCKHOLDER PROPOSALS
Proposals of the Company's stockholders intended to be
presented at the Company's 1998 Annual Meeting of Stockholders must be
received by the Company no later than November 30, 1997 to be included in the
Company's proxy statement and form of proxy relating to such annual meeting.
Any proposal should be addressed to Douglas A. Satzger, Esq., Secretary and
General Counsel, Air & Water Technologies Corporation, U.S. Highway 22 West
and Station Road, Branchburg, New Jersey 08876 and should be sent by
certified mail, return receipt requested.
OTHER MATTERS
The Board of Directors knows of no other matters to be
presented for action at the forthcoming Annual Meeting. However, the proxy
confers upon the persons named therein discretionary authority to act upon any
other matter that may properly come before the meeting.
[The remainder of this page left intentionally blank.]
The Company will furnish a copy of its Annual Report on Form
10-K (including financial statements and any financial statement schedules but
excluding other exhibits), without charge, to any person upon request addressed
to Douglas A. Satzger, Esq., Secretary and General Counsel, Air & Water
Technologies Corporation, U.S. Highway 22 West and Station Road, Branchburg,
New Jersey 08876.
By Order of the Board of Directors
DOUGLAS A. SATZGER
Secretary
April ____, 1997
Branchburg, New Jersey
[The remainder of this page left intentionally blank.]
EXHIBIT A
PROPOSED CERTIFICATE OF AMENDMENT
TO THE RESTATED CERTIFICATE OF INCORPORATION,
AS AMENDED, OF AIR & WATER TECHNOLOGIES CORPORATION
Air & Water Technologies Corporation (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "DGCL"), does hereby amend the
Restated Certificate of Incorporation, as amended, of the Corporation.
The undersigned hereby certifies that this amendment to the
Restated Certificate of Incorporation, as amended, of the Corporation has been
duly adopted in accordance with Section 242 of the DGCL.
Article FOURTH of the Restated Certificate of Incorporation, as
amended, of the Corporation is hereby amended to include the following text
after the last paragraph thereof:
7. Reverse Stock Split. Effective as of the close of business on the
date of filing this Amendment to the Restated Certificate of
Incorporation, as amended (the "Effective Time"), the filing of this
Amendment, shall effect a reverse stock split (the "Reverse Stock Split")
pursuant to which each [ ] shares of Class A Common Stock, $.001 par
value, of the Corporation issued and outstanding, shall be combined into
one (1) validly issued, fully paid and nonassessable share of Class A
Common Stock, $.001 par value, of the Corporation. The number of
authorized shares and the par value of the Class A Common Stock shall
not be affected by the Reverse Stock Split. No scrip or fractional
shares shall be issued by reason of this Amendment.
THE UNDERSIGNED, being the Chief Financial Officer of the
Corporation, for the purpose of amending the Restated Certificate of
Incorporation, as amended, of the Corporation pursuant to the DGCL, does make
this amendment to the Restated Certificate of Incorporation, as amended, of
the Corporation, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my
hand as of this _____ day of ________, 1997.
AIR & WATER TECHNOLOGIES
CORPORATION
By:
---------------------------------
Name: Alain Brunais
Title: Chief Financial Officer
ATTEST:
- -------------------------
Name:
Title:
APPENDIX I -- FORM OF PROXY
AIR & WATER TECHNOLOGIES CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- MAY 29, 1997
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints [
], [ ] and [ ], and each of them, his, her or its
true and lawful agents and proxies with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Stockholders of Air & Water
Technologies Corporation, to be held at the Somerset Hills Hotel, 200 Liberty
Corner Road, Warren, New Jersey 07059, on Thursday, May 29, 1997 at 10:00 a.m.
local time, and at any adjournments or postponements thereof, and to vote all
the shares of stock of the Company which the undersigned may be entitled to
vote on all matters coming before said meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL DIRECTORS, FOR PROPOSALS 2 AND 3
AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS. PLEASE MARK THIS
PROXY CARD, FILL IN THE DATE AND SIGN AND RETURN PROMPTLY IN THE ACCOMPANYING
ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND
3.
1. Election of Directors
FOR WITHHELD
Robert B. Sheh -------------------- --------------------
Alain Brunais -------------------- --------------------
Nicholas DeBenedictis -------------------- --------------------
Carol Lynn Green -------------------- --------------------
William Kriegel -------------------- --------------------
John W. Morris -------------------- --------------------
2. Ratify the appointment of McGladrey & Pullen, LLP as independent
auditors
FOR AGAINST ABSTAIN
- ------------------------- ------------------------- ------------------------
3. Amend the Company's Restated Certificate of Incorporation to effect
one-for-[ ] reverse split of the Company's Class A Common Stock
FOR AGAINST ABSTAIN
- ------------------------- ------------------------- ------------------------
Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
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Signature(s) Date
