SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
Filed by the Registrant |X|
Filed by a Party Other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AIR & WATER TECHNOLOGIES CORPORATION
(Name of Registrant as Specified In Its Charter)
None
(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 (set forth amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee previously paid 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:
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 of
Stockholders (the "Annual Meeting") of Air & Water Technologies Corporation
(the "Company") to be held on Wednesday, June 24, 1998, at 11:00 a.m.,
local time, at the Hotel Intercontinental, 111 East 48th Street, New York,
New York 10017. At the Annual Meeting, you will be asked to vote upon the
proposals set forth in the formal Notice of the Annual Meeting (the
"Notice") which follows this letter.
As set forth in the Notice, at the Annual Meeting, stockholders will
be asked to consider and vote upon (i) the election of eight directors to
the Company's Board of Directors, (ii) the ratification of the selection of
McGladrey & Pullen, LLP as the Company's independent auditors for the
Company's 1998 fiscal year and (iii) a proposal to amend the Company's
Restated Certificate of Incorporation, as amended, to change the name of
the Company to "Aqua Alliance Inc."
The Board of Directors believes that it is in the best interests of
the Company to change its corporate name because such a change will reflect
the Company's focus on its core water and wastewater businesses as part of
its revised business strategy.
The Board of Directors unanimously recommends that the Company's
stockholders approve each of the proposals set forth in the Notice. Vivendi
(formerly named Compagnie Generale des Eaux), the beneficial owner of
approximately 83.0% of the outstanding shares of common stock and voting
power of the Company, has informed the Company that it intends to vote in
favor of the proposals. 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 ANNUAL 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 ANNUAL
MEETING, YOU MAY REVOKE THIS PROXY AT THAT TIME BY REQUESTING THE RIGHT TO
VOTE IN PERSON.
Sincerely,
Thierry M. Mallet
President and Chief Executive Officer
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 JUNE 24, 1998
To the Stockholders of
Air & Water Technologies Corporation:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Air & Water Technologies Corporation (the "Company")
will be held on Wednesday, June 24, 1998, at 11:00 a.m., local time, at the
Hotel Intercontinental, 111 East 48th Street, New York, New York 10017, to
consider and act on the following:
1. To elect eight 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 1998 fiscal year;
3. To approve a proposed amendment to the Company's Restated
Certificate of Incorporation, as amended, to change the name of
the Company to "Aqua Alliance Inc."; and
4. To transact such other business as may properly come before the
Annual Meeting or any
adjournments or postponements thereof.
Only stockholders of record at the close of business on May 22, 1998
will be entitled to vote at the Annual Meeting. A list of such stockholders
will be available at the time and place of the Annual Meeting and, during
the ten days prior to the Annual 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 1997 Annual Report to Stockholders is
enclosed herewith.
By Order of the Board of Directors,
Thierry M. Mallet
President and Chief Executive Officer
Branchburg, New Jersey
June 3, 1998
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.
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 Wednesday, June 24, 1998, at 11:00 a.m.,
local time, at the Hotel Intercontinental, 111 East 48th Street, New York,
New York 10017, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders.
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 eight 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 1998 fiscal year, FOR approval of the amendment (the
"Amendment") to the Company's Restated Certificate of Incorporation, as
amended (the "Restated Certificate of Incorporation"), to change the name
of the Company to "Aqua Alliance Inc." and in the discretion of the proxies
named on the proxy card with respect to any other matters properly brought
before the Annual Meeting. On May 15, 1998, Compagnie Generale des Eaux, a
French company and the Company's largest stockholder, changed its name to
Vivendi ("Vivendi"). Vivendi, the beneficial owner of approximately 83.0%
of the outstanding shares of common stock and voting power of the Company,
has informed the Company that it intends to vote in favor of the proposals.
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
Annual 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, facsimile communication 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
Annual 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 June 3, 1998.
VOTING
The Board of Directors has fixed the close of business on May 22,
1998 as the record date (the "Record Date") for determining stockholders
entitled to notice of and to vote at the Annual Meeting. Shares of the
Company's Class A Common Stock, par value $.001 per share (the "Class A
Common Stock"), are entitled to be voted at the Annual Meeting. Holders of
issued and outstanding shares of Class A Common Stock are entitled to one
vote for each share they hold. On the Record Date, there were outstanding
185,176,527 shares of the Company's Class A Common Stock. The presence in
person or by proxy of a majority of the shares of Class A Common Stock
entitled to vote 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 and entitled to vote 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 proposals will be treated as shares present for purposes of
determining the presence of a quorum with respect to all proposals.
However, proxies relating to "street name" shares will not be considered
"entitled to vote" for purposes of determining the presence of a quorum
with respect to any proposal as to which such shares may not be voted
without instruction from the beneficial owners of such shares (as to such
proposals, such proxies are hereinafter referred to as "broker non-votes").
Pursuant to the Company's By-Laws, directors of the Company shall be
elected by the affirmative vote of a plurality of the votes cast at the
Annual Meeting. 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 independent auditors requires the affirmative vote of a
majority of shares of Class A Common Stock present in person or represented
by proxy and entitled to vote at the Annual Meeting. Abstentions will count
as votes against the appointment of independent auditors; broker non-votes
will not count as votes for or against the appointment of independent
auditors. The proposal to approve the Amendment requires the approval of a
majority of the shares of Class A Common Stock outstanding at the close of
business on May 22, 1998. Abstentions and broker non-votes will count as
votes against the proposal to approve the Amendment.
PROPOSAL 1:
ELECTION OF DIRECTORS
INFORMATION CONCERNING THE NOMINEES
The Company's Restated 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 from office.
Under the terms of the Investment Agreement, dated as of March 30,
1994, among the Company, Vivendi, and Vivendi's indirect wholly-owned
subsidiary, Anjou International Company, a Delaware corporation ("Anjou"),
as amended as of September 24, 1997 (the "Investment Agreement"), the
Company has agreed that Vivendi will have the right to designate as members
of the Company's Board of Directors (and all committees thereof other than
any special committee of Independent Directors (as defined below)) at least
that number of directors that is proportionate to the aggregate whole
number of shares of Class A Common Stock owned by Vivendi, with such number
of directors to be rounded up to the next whole number (so long as Vivendi
beneficially owns in the aggregate at least one-half of the outstanding
shares of Class A Common Stock and rounded down if Vivendi beneficially
owns in the aggregate less than one-half of the outstanding shares of Class
A Common Stock). For purposes of the Investment Agreement, "Independent
Director" is defined as any director who is not an employee, agent or
representative of the Company, Vivendi or any of their respective
Affiliates or Associates (as such terms are defined in the Investment
Agreement) and may include any person acting as outside counsel or
financial advisor for either the Company or Vivendi or any of their
respective Affiliates or Associates. Although the Investment Agreement
requires the Company to maintain three Independent Directors, the Company
currently has only two Independent Directors. All Independent Directors
must be satisfactory to Vivendi. The Chairman of the Board of Directors of
the Company also shall be designated by Vivendi. See "Certain Relationships
and Related Transactions--The Investment Agreement--Certain Covenants of
the Company."
The Board of Directors has nominated for election as directors at the
Annual Meeting six individuals designated by Vivendi out of a total of
eight directors: Messrs. Kriegel, Banon, Brunais, Caille, Jobard and
Mallet. The Board of Directors also has nominated Ms. Hesse and Lt. Gen.
Morris as Independent Directors satisfactory to Vivendi. Mr. Kriegel also
has been designated by Vivendi as Chairman of the Board of Directors of the
Company.
The Board of Directors of the Company recommends that the
stockholders elect the eight nominees named below as directors of the
Company. Each director elected at the Annual Meeting will hold office until
the next annual meeting of stockholders and until his or her successor is
duly elected and qualified, or until his or her earlier death, resignation
or removal from office. 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 eight nominees named below. Vivendi, the beneficial owner of
approximately 83.0% of the outstanding shares of Class A Common Stock and
voting power of the Company, has informed the Company that it intends to
vote in favor of this proposal.
The Company has no reason to believe that any such nominee 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, other than Ms. Hesse,
currently serve as directors of the Company for terms expiring at the
Annual Meeting and, other than Messrs. Banon, Caille, Jobard and Mallet,
were last elected at the Company's 1997 Annual Meeting of Stockholders.
Messrs. Banon, Caille, Jobard and Mallet were elected as directors on
October 9 ,1997, May 29, 1997, March 23, 1998 and October 26, 1997,
respectively.
POSITIONS AND OTHER RELATIONSHIPS WITH
NAME AGE THE COMPANY AND BUSINESS EXPERIENCE
- --------------------------- ------ --------------------------------------
William V. Kriegel......... 52 Chairman of the Board of Directors.
Mr. Kriegel was elected Chairman of
the Board on October 24, 1997 and has
served as a director of the Company
since June 14, 1994. Mr. Kriegel has
served as 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
cofounded 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 hydroelectric projects. Since
December 1996, Mr. Kriegel has served
as Chairman of the Board and Chief
Executive Officer of Anjou, the
United States holding company
subsidiary of Vivendi. In this
capacity, Mr. Kriegel is the
representative of Vivendi in the
United States. Mr. Kriegel has been
designated by Vivendi as a director
of the Company and Chairman of the
Board of Directors under the
Investment Agreement.
Jean-Claude Banon.......... 49 Director and Chairman of the Business
Planning Committee and member of the
Compensation and Stock Option
Committee. Mr. Banon was elected as a
director of the Company on October 9,
1997. Since 1989, Mr. Banon has been
Managing Director of General
Utilities PLC, the holding company
for Vivendi's investments in the
water industry in the United Kingdom,
and since 1992, he has been Managing
Director of General Utilities
Holdings Ltd., the holding company
for all Vivendi activities in the
United Kingdom. In this capacity, Mr.
Banon is the representative of
Vivendi in the United Kingdom. Prior
to 1989, Mr. Banon was General
Management Delegate responsible for
overseeing the development of
Vivendi's business in the United
States. Mr. Banon has been designated
by Vivendi as a director of the
Company under the Investment
Agreement.
Alain Brunais.............. 49 Director. Mr. Brunais was elected
Vice President and Chief Financial
Officer of the Company in September
1994, a director in November 1996 and
Senior Vice President in May 1997.
Prior to joining the Company, Mr.
Brunais was responsible since 1990
for foreign investment, primarily in
the United Kingdom under the
direction of the Finance Director of
Vivendi. From 1983 to 1989 he was
responsible for corporate development
for Ciments Francais in the United
States 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
Vivendi as Chief Financial Officer
and a director of the Company under
the Investment Agreement.
Daniel Caille.............. 46 Director and member of the Business
Planning Committee. Mr. Caille was
elected as a director of the Company
on May 29, 1997. Mr. Caille presently
serves as the Chief Executive of
Vivendi's worldwide water business
which has annual revenues in excess
of $7 billion. Previously, Mr. Caille
served as Chairman of the Board of
Compagnie Generale de Sante,
Vivendi's health care subsidiary,
which he founded in 1987. Mr. Caille
joined Vivendi in 1982 as director of
research and development and created
Anjou Recherche, Vivendi's center for
research and development related to
its water and wastewater activities,
and he served as Director of Anjou
Recherche from 1982 to 1990. Mr.
Caille has been designated by Vivendi
as a director of the Company under
the Investment Agreement.
Martha O. Hesse............ 55 Ms. Hesse is currently President of
Hesse Gas Company, which she founded
in 1990. During 1990, she was Senior
Vice President of First Chicago
Corporation. From 1986 to 1989, she
was Chairman of the Federal Energy
Regulatory Commission (FERC), and
from 1982 to 1986, she served as
Assistant Secretary for Management
and Administration, U.S. Department
of Energy. Ms. Hesse also co-founded
SEI Information Technology, where she
served as Chief Operating Officer and
a director from 1969 to 1980. Ms.
Hesse presently serves as a director
of Pinnacle West Capital Corporation,
Mutual Trust Life Insurance Company,
Laidlaw, Inc., where she serves as
Chairman of the Compliance and Ethics
Committee, and Arizona Public Service
Company, where since 1996 she has
served as Chairman of the Audit
Committee. Ms. Hesse also is a member
of The Beacon Council and the CIGNA
Utilities Advisory Board.
Francois Jobard............ 45 Director. Mr. Jobard was elected as a
director of the Company on March 23,
1998. Mr. Jobard presently serves as
the Chief Financial Officer of
Vivendi's International Water
Division. Previously, Mr. Jobard was
Charge de Mission to Vivendi's Chief
Financial Officer. Prior to joining
Vivendi in 1994, Mr. Jobard was a
partner in an international strategy
consulting firm from 1987 to 1994 and
from 1985 to 1987 served as Charge de
Mission to the General Management of
Institut de Developpement Industriel
in France. Mr. Jobard began his
career with Texas Instruments where
he served in several international
financial executive positions. Mr.
Jobard has been designated by Vivendi
as a director of the Company under
the Investment Agreement.
Thierry M. Mallet.......... 38 Director and member of the Business
Planning Committee. Mr. Mallet was
appointed President and Chief
Executive Officer of the Company on
October 24, 1997 and was elected as a
director of the Company on October
26, 1997. Prior to joining the
Company, Mr. Mallet served from 1995
as "Consejo Delegado" (President and
Chief Executive Officer) of Sociedad
Mediterranea de Aguas ("SMA") which
manages the water and wastewater
business of Vivendi in Spain. Prior
to SMA, Mr. Mallet was Charge de
Mission to the General Management of
Vivendi in Paris. Mr. Mallet has been
designated by Vivendi as President,
Chief Executive Officer and a
director of the Company under the
Investment Agreement.
John W. Morris............. 76 Director and member of the Audit
Committee, the Compensation and Stock
Option Committee and the Business
Planning Committee. Lt. Gen. Morris
became a director of the Company in
June 1992. From 1988 to October 1992,
Lt. Gen. Morris served as a director
of Metcalf & Eddy Companies Inc. Lt.
Gen. Morris has been President of
J.W. 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. Lt. Gen.
Morris served as the Chief of
Engineers, U.S. Army Corps of
Engineers, from 1976 to 1980.
BOARD OF DIRECTORS AND COMMITTEES
Board Meetings. During the Company's fiscal year ended October 31,
1997, the Board of Directors of the Company held a total of thirteen
meetings. During the fiscal year ended October 31, 1997, each director
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.
Committees of the Board. The Board of Directors of the Company has an
Audit Committee and a Compensation and Stock Option Committee, and, in
connection with the recently completed recapitalization of the Company (the
"Recapitalization"), established the Special Committee and the Business
Planning Committee.
The Audit Committee of the Board of Directors met three times during
the fiscal year ended October 31, 1997. Ms. Carol Lynn Green and Lt. Gen.
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 Compensation and Stock Option Committee of the Board of Directors
met three times during the fiscal year ended October 31, 1997. Mr. Banon,
Ms. Carol Lynn Green and Lt. Gen. Morris currently are 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 "Long-Term Incentive Plan").
The Company does not have a standing Nominating Committee.
In a special meeting of the Board of Directors of the Company on June
23, 1997, the Board of Directors decided, in anticipation of entering into
discussions with Vivendi and in accordance with the Investment Agreement,
that Ms. Green and Lt. Gen. Morris, the Company's directors not affiliated
with Vivendi, would be appointed as a special committee (the "Special
Committee") of Independent Directors to consider any recapitalization
proposal by Vivendi.
In connection with the Recapitalization, the Company established a
new business planning committee of the Board of Directors (the "Business
Planning Committee") to review the business strategies prepared by senior
management and, as appropriate, make recommendations on the formulation and
implementation of those strategies that have as their objective increasing
stockholder value. The Business Planning Committee, which will remain in
place through the end of fiscal year 1999, is comprised of three Vivendi
appointed directors and two directors who are unaffiliated with and
independent of Vivendi. Among other things, the Business Planning Committee
will identify areas where Vivendi's management expertise and the Company's
business may be effectively integrated. Mr. Caille, Ms. Green, Mr. Mallet
and Lt. Gen. Morris currently serve as members of the Business Planning
Committee. Mr. Banon currently serves as the Chairman of the Business
Planning Committee.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company 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. In addition, directors are reimbursed for out-of-pocket
expenses of attending Board and committee meetings. Each Special Committee
member also has received a fee of $100,000 for his or her service on the
Special Committee.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ended October 31,
1997, 1996 and 1995, the cash compensation paid by the Company, as well as
certain other compensation paid or accrued for those years, to the Chief
Executive Officer of the Company and each of the four most highly
compensated executive officers of the Company other than the Chief
Executive Officer in all capacities in which they served. Messrs. Houdaille
and Sheh each ceased to be an executive officer of the Company as of
November 1996 and October 1997, respectively.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ----------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) AWARD(S) ($) OPTIONS (#) ($)
------------------ ---- ---------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alain Houdaille(1)* ..... 1996 106,121 195,000 0 0 45,840(2)
President and Chief
Executive Officer
Robert B. Sheh(3)* ...... 1997 407,697 0 0 50,000(4) 523,213(5)
Chairman of the
Board of Directors,
President and Chief
Executive Officer
Thierry M. Mallet(6) .... 1997 0 0 0 0 0
President, Chief
Executive Officer
and Director
Alain Brunais ........... 1997 209,810 0 0 0 75,788(7)
Senior Vice 1996 207,450 75,000 0 18,000(8) 77,000(9)
President, Chief 1995 203,674 85,000 0 0 74,000(10)
Financial Officer
and Director
George C. Mammola ....... 1997 216,229 0 0 0 15,000(11)
Senior Vice President 1996 213,996 55,000 0 35,500(12) 15,750(13)
and President, 1995 210,000 110,000 0 0 8,868(14)
Research-Cottrell,
Inc.
Douglas A. Satzger(15)*.. 1997 206,003 0 0 0 5,970(16)
Senior Vice 1996 211,622 32,000 0 41,500(17) 13,750(18)
President, 1995 200,013 55,000 0 0 10,750(19)
General Counsel
and Secretary
Patrick L. McMahon ...... 1997 190,784 40,000 0 0 16,650(20)
Senior Vice President 1996 170,019 75,000 0 19,000(21) 2,200(22)
and President, 1995 66,003(23) 60,000 0 0 1,100(24)
Professional Services
Group, Inc.
</TABLE>
- --------------------
* No longer employed by the Company.
(1) Mr. Houdaille served as President and Chief Executive Officer of the
Company from May 1996 to November 1996.
(2) "All Other Compensation" for Mr. Houdaille for fiscal year 1996 consists
of $45,840 of housing expenses paid on behalf of Mr. Houdaille.
(3) Mr. Sheh served as Chairman of the Board of Directors, President and
Chief Executive Officer of the Company from November 1996 to October
1997.
(4) Mr. Sheh was granted 50,000 options exercisable at $6.31 per share
pursuant to the Company's Long-Term Incentive
Plan.
(5) "All Other Compensation" for Mr. Sheh for fiscal year 1997 consists of
$89,415 paid to Mr. Sheh as relocation expenses, approximately $23,077
representing accrued and unpaid vacation, $10,721 resulting from an
automobile leased for Mr. Sheh by the Company and $400,000 payable
pursuant to the Sheh Separation Agreement (as defined hereinafter).
Subject to the terms and conditions of the Sheh Separation Agreement,
the Company also shall pay to Mr. Sheh an aggregate of $400,000 in two
equal installments in fiscal 1998 and 1999.
(6) Mr. Mallet was appointed President and Chief Executive Officer of the
Company on October 24, 1997 and it is presently anticipated that he
will be paid an annual salary of approximately $300,000 per year. In
connection with Mr. Mallet's move to the United States, the Company
has made an employee relocation loan to Mr. Mallet in the amount of
$900,000. The loan does not bear interest and is due at the earlier of
the end of his term of employment or 2013.
(7) "All Other Compensation" for Mr. Brunais for fiscal year 1997 consists
of approximately $65,036 paid as a housing allowance on behalf of Mr.
Brunais, approximately $7,752 resulting from an automobile leased for
Mr. Brunais by the Company and $3,000 contributed to the Company's
Savings and Retirement Plan on behalf of Mr. Brunais.
(8) Mr. Brunais was granted 18,000 options exercisable at $6.563 per share
pursuant to the Company's Long-Term Incentive Plan.
(9) "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.
(10) "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.
(11) "All Other Compensation" for Mr. Mammola for fiscal year 1997 consists
of approximately $12,000 paid as an automobile allowance and $3,000
contributed to the Company's Savings and Retirement Plan on behalf of
Mr. Mammola.
(12) Mr. Mammola was granted 20,157 options exercisable at $6.563 per share
pursuant to the Company's Long-Term Incentive Plan and 15,343 options
exercisable at $8.00 per share pursuant
to the Company's "Fresh Start" program.
(13) "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 the Company's Savings and Retirement Plan on behalf of
Mr. Mammola.
(14) "All Other Compensation" for Mr. Mammola for fiscal year 1995 consists
of $4,055 contributed to the Company's Savings and Retirement Plan on
behalf of Mr. Mammola and $4,813 paid to Mr. Mammola as an automobile
allowance.
(15) Contemporaneous with the Company's pending move in July 1998 to
Wakefield, Massachusetts, Mr. Satzger ended his term as Senior Vice
President, General Counsel and Secretary of the Company effective June
1, 1998 and will continue for a limited period as a consultant to the
Company. The Company currently is holding discussions with Mr. Satzger
with respect to the terms of a severance and consulting agreement.
(16) "All Other Compensation" for Mr. Satzger for fiscal year 1997 consists
of $2,970 resulting from an automobile leased for Mr. Satzger by the
Company and $3,000 contributed to the Company's Savings and Retirement
Plan on behalf of Mr. Satzger.
(17) Mr. Satzger was granted 20,167 options exercisable at $6.563 per share
pursuant to the Company's Long-Term Incentive Plan and 21,333 options
exercisable at $8.00 per share pursuant
to the Company's "Fresh Start" program.
(18) "All Other Compensation" for Mr. Satzger for fiscal year 1996 consists
of approximately $10,000 paid to Mr. Satzger as an automobile
allowance and $3,750 contributed to the Company's Savings and
Retirement Plan on behalf of Mr. Satzger.
(19) "All Other Compensation" for Mr. Satzger for fiscal year 1995 consists
of approximately $7,000 paid to Mr. Satzger as an automobile allowance
and $3,750 contributed to the Company's Savings and Retirement Plan on
behalf of Mr. Satzger.
(20) "All Other Compensation" for Mr. McMahon for fiscal year 1997 consists
of $8,946 resulting from an automobile leased for Mr. McMahon by the
Company and $7,704 contributed to PSG's Pension Plan.
(21) Mr. McMahon was granted 9,000 options exercisable at $6.563 per share
pursuant to the Company's Long-Term Incentive Plan and 10,000 options
exercisable at $8.00 per share pursuant
to the Company's "Fresh Start" program.
(22) "All Other Compensation" for Mr. McMahon for fiscal year 1996 consists
of approximately $2,200 resulting from an automobile leased for Mr.
McMahon by PSG.
(23) 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.
(24) "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.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the named
executive officers concerning unexercised options held as of October 31,
1997. No options were exercised during fiscal 1997 by any of the named
executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END AT FISCAL YEAR-END(1)
--------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) (#) (#) (#)
---- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Alain Houdaille(3)*........... 0 0 0 0
Robert B. Sheh(4)*............ 50,000 0 0(2) 0(2)
Thierry M. Mallet(5).......... 0 0 0 0
Alain Brunais(6).............. 52,800 15,200 0(2) 0(2)
George C. Mammola(7).......... 28,642 6,858 0(2) 0(2)
Douglas A. Satzger(8)*........ 33,142 8,358 0(2) 0(2)
Patrick L. McMahon(9)......... 11,750 7,250 0(2) 0(2)
</TABLE>
- ------------------
* No longer employed by the Company.
(1) The value of unexercised in-the-money options at fiscal year-end
assumes a fair market value for the Class A Common Stock of $1.50, the
closing sale price per share of the Class A Common Stock as reported
on the American Stock Exchange Composite Tape for October 31, 1997.
(2) The exercisable and unexercisable options held by Messrs. Sheh, Brunais,
Mammola, Satzger and McMahon were
not in-the-money as of October 31, 1997.
(3) Mr. Houdaille served as President and Chief Executive Officer of the
Company from May 1996 to November 1996.
(4) On October 24, 1997, Mr. Sheh and the Company jointly entered into an
agreement, which terminated the Employment Agreement (as defined
hereinafter) dated November 7, 1996, and entered into the Sheh
Separation Agreement relating to their relationship thereafter. The
options held by Mr. Sheh as of such date are currently exercisable at
an exercise price of $6.310 per share. The options were granted in
November 1996 pursuant to the Employment Agreement.
(5) Mr. Mallet was appointed President and Chief Executive Officer of the
Company on October 24, 1997.
(6) 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.
(7) 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.
(8) The exercise price of the options held by Mr. Satzger is (i) $6.563
per share in the case of his option to purchase 20,167 shares granted
in March 1996 or (ii) $8.00 per share in the case of his option to
purchase 21,333 shares granted in January 1996. Contemporaneous with
the Company's pending move in July 1998 to Wakefield, Massachusetts,
Mr. Satzger ended his term as Senior Vice President, General Counsel
and Secretary of the Company effective June 1, 1998 and will continue
for a limited period as a consultant to the Company. The Company
currently is holding discussions with Mr. Satzger with respect to the
terms of a severance and consulting agreement.
(9) The exercise price of options held by Mr. McMahon is (i) $6.563 per
share in the case of his option to purchase 9,000 shares granted in
March 1996 or (ii) $8.00 per share in the case of his option to
purchase 10,000 shares granted in January 1996.
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
<TABLE>
<CAPTION>
YEARS OF SERVICE
BONUS ----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ---------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C>
$ 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
</TABLE>
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 thirty-five years. No separate accounts are maintained and no
amounts are vested until a participant reaches retirement in the employ of
the Company. The benefit amounts set forth in the table above are not
subject to reduction for Social Security benefits or for other offsets. At
the present time, none of the named executive officers is a participant in
the Company's Supplemental Pension Plan.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Employment Contracts. On November 7, 1996, the Company entered into
an employment agreement (the "Employment Agreement") with Robert B. Sheh,
pursuant to which Mr. Sheh served as President and Chief Executive Officer
of the Company. Consistent with the terms of the Investment Agreement, Mr.
Sheh was appointed President and Chief Executive Officer pursuant to
Vivendi's right to designate the Chief Executive Officer of the Company.
The Employment Agreement provided 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 provided that Mr. Sheh would be eligible to receive a
supplemental bonus of up to 60% of Mr. Sheh's base salary in each fiscal
year, which bonus would be determined by the Board of Directors of the
Company. 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 years of his service. If Mr.
Sheh's employment was terminated by the Company for cause, the Employment
Agreement provided that the Company would pay to Mr. Sheh only his base
salary through the date of termination. If Mr. Sheh's employment was
terminated without cause (absent death or disability), the Employment
Agreement provided for Mr. Sheh to receive certain payments for a period of
two years from the date of termination.
On October 24, 1997, Mr. Sheh and the Company jointly entered into an
agreement (the "Sheh Separation Agreement"), which terminated the
Employment Agreement and provided for the following: (i) except for certain
non-competition and confidentiality provisions which shall survive, the
termination of the Employment Agreement, (ii) the resignation of Mr. Sheh
as a director of the Company, and (iii) the payment of certain amounts to
Mr. Sheh over a two-year period.
Change in Senior Management. On October 24, 1997, Mr. Sheh was
succeeded by Thierry M. Mallet as President and Chief Executive Officer of
the Company, and the Board of Directors of the Company appointed then
serving director William V. Kriegel as Mr. Sheh's successor as Chairman of
the Board of the Company. On October 26, 1997, the Board also named Mr.
Mallet as a director of the Company. Mr. Kriegel has been a director of the
Company since 1994. Since December 1996, he has served as Chairman of the
Board, Chief Executive Officer and a director of Anjou. Mr. Kriegel is also
Chairman of the Board, President, Chief Executive Officer and a director of
Sithe Energies, Inc. and all of its subsidiaries. Prior to his appointment,
Mr. Mallet served as President and Chief Executive Officer of Vivendi's
water and wastewater activities in Spain.
Options. The Company's Long-Term Incentive 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On and prior to January 21, 1997, the Compensation and Stock Option
Committee of the Board of Directors consisted of Mr. Jean-Dominique
Deschamps, Ms. Green and Lt. Gen. Morris. Mr. Deschamps resigned from the
Board of Directors of the Company on January 21, 1997. From January 21,
1997 to October 9, 1997, the Compensation and Stock Option Committee
consisted of Ms. Green and Lt. Gen. Morris. On October 9, 1997, Mr. Banon
was elected as a director of the Company. Since October 9, 1997, the
Compensation and Stock Option Committee has consisted of Mr. Banon, Ms.
Green and Lt. Gen. Morris. Mr. Deschamps is Adjunct Director General of
Vivendi. Ms. Green is a partner at the law firm of Bryan, Cave LLP, which
has performed limited legal services for the Company from time to time. Ms.
Green has not personally represented the Company. Since 1989, Mr. Banon has
been Managing Director of General Utilities PLC, the holding company for
Vivendi's investments in the water industry in the United Kingdom, and
since 1992 he has been Managing Director of General Utilities Holdings
Ltd., the holding company for all Vivendi activities in the United Kingdom.
Mr. Banon has been designated by Vivendi as a director of the Company under
the Investment Agreement.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors
(the "Committee") is composed of independent nonemployee directors, and no
member of the Committee is a former or current officer of the Company. In
fiscal 1997, the Committee adopted a new charter under which the
Committee's responsibilities include the establishment of the Company's
total compensation philosophy and approval of policies and programs
designed to attract, retain and motivate management and other key
employees.
TOTAL COMPENSATION PROGRAM
In connection with a change in the senior management of the Company
and the development of a new business strategy to improve the financial
performance of the Company and rebuild stockholder value, the Company
initiated a review of the executive compensation program during fiscal
1997. The Company engaged the services of independent compensation
consulting firms to assist it in the compensation program review process.
The consultants reviewed the compensation practices of publicly held
engineering, environmental services and general industry companies with
whom the Company competes for management talent. On the basis of this
information and other factors, the Committee adopted a revised total
compensation philosophy, strategy and program designed to align management
and key employees with business objectives and stockholder interests. The
objectives of the total compensation program are to:
o Focus management on building stockholder value
o Motivate management/employees to achieve Company financial goals
o Recruit and retain talented individuals
o Align stockholder and management and key employee interests
through stock ownership
o Emphasize pay for performance by means of highly leveraged
compensation
o Provide total compensation above competitive levels based on
performance
o Reinforce the Company's vision and values
o Reduce fixed compensation costs
The Company's compensation program has three major components: base
salary, annual incentives and long-term incentives. Each component has a
different purpose, and the components are provided in various forms and
structured to meet changing business objectives as described below:
Base Salary. Base salary is targeted at the average of competitive
salaries paid to key management of companies of similar size and
marketplace orientation. Salaries of executive officers are reviewed by the
Committee annually. In fiscal 1997, salary increases were granted to only
two executive officers. This was done to recognize increased job
responsibilities.
Annual Incentive Compensation. The Annual Management Bonus Plan is
designated to motivate and reward corporate management for achieving or
exceeding specific fiscal-year financial and nonfinancial objectives. Bonus
payments for corporate officers are determined on the basis of overall
consolidated results of the Company. A percentage of the annual bonus
payment is discretionary and is paid on the basis of quality of the
individual participant's performance. To account for the management changes
and the Company's financial results, the annual Management Bonus Plan for
fiscal 1997 was structured on a six-month basis in which bonus payments
were linked to the Company's financial targets for the last two quarters of
the year.
Long-term Incentive Compensation. The Company may grant stock
options, stock and other performance awards to management and key employees
under the 1996 Stock Incentive Plan. The stock awards are the primary
vehicle used to align management and stockholder interests to create value
and to motivate and retain key management. The Company historically has
used stock options as the major element. No stock option or other awards
were granted to executive officers in fiscal 1997 other than to Mr. Robert
B. Sheh, the Chairman of the Board, President and Chief Executive Officer
of the Company.
REPORT ON CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Sheh did not receive a salary increase or earn any bonus for
fiscal 1997. Mr. Sheh received a grant of 50,000 stock options in November
1996 as part of his employment contract. Mr. Sheh's employment with the
Company was terminated October 24, 1997. Mr. Thierry M. Mallet was
appointed President and Chief Executive Officer of the Company on October
24, 1997 and will initially be paid an annual salary of approximately
$300,000.
TAX DEDUCTIBILITY UNDER CODE SECTION 162
Section 162(m) of the Internal Revenue Code, as amended (the "Code"),
limits the deductibility of compensation in excess of $1,000,000 paid to
any of the Company's named executive officers (that appear 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
Code 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 Code Section 162(m)
against the value of the benefit the Company may derive from such
compliance, and reserves the right to pay compensation that might not be
fully deductible if it concludes that such burdens outweigh such benefits.
Jean-Claude Banon
Carol Lynn Green
John W. Morris
PERFORMANCE GRAPH FOR CLASS A COMMON STOCK
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 Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that might incorporate future filings, including this
Proxy Statement, in whole or in part, the preceding report and the Stock
Performance Graph below shall not be incorporated by reference into any
such filings.
AIR & WATER TECHNOLOGIES CORPORATION
STOCK PERFORMANCE GRAPH
[GRAPHIC OMITTED]
Oct. 92 Oct. 93 Oct. 94 Oct. 95 Oct. 96 Oct. 97
------- ------- ------- ------- ------- -------
AWT................ 100 107 54 38 46 12
S&P................ 100 115 119 151 187 247
Fidelity........... 100 107 99 116 136 157
The above chart shows a comparison of cumulative total return for the
period from November 1, 1992 through October 31, 1997, in (i) the Company's
Class A Common Stock, (ii) the S&P 500 Composite Stock Price Index ("S&P")
and (iii) the Fidelity Select Environmental Services Fund ("Fidelity"). The
stock price performance shown on the graph above is not necessarily
indicative of future performance.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) of the Exchange Act
during the fiscal year ended October 31, 1997, and Form 5 and amendments
thereto furnished to the Company with respect to the fiscal year ended
October 31, 1997, the Company has not identified any persons as having
filed a late report under Section 16(a) of the Exchange Act during the
fiscal year ended October 31, 1997 or prior fiscal years.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information regarding the beneficial
ownership of the Company's capital stock as of June 1, 1998 with respect to
(i) each of the Company's directors and nominees for director, (ii) each
named executive officer of the Company, (iii) each person known by the
Company to beneficially own in excess of 5% of the outstanding shares of
Class A Common Stock and (iv) all directors and executive officers as a
group. Unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the shares beneficially owned.
NUMBER OF SHARES OF PERCENT OF SHARES
CLASS A COMMON STOCK OF CLASS A COMMON
NAME OF PERSON OR GROUP BENEFICIALLY OWNED STOCK OUTSTANDING
- -----------------------------------------------------------------------------
William V. Kriegel.................. 0 *
Thierry M. Mallet................... 0 *
Alain Brunais....................... 53,800(1) *
Jean-Claude Banon................... 0 *
Daniel Caille....................... 0 *
Carol Lynn Green.................... 0 *
Martha O. Hesse..................... 5,429 *
Francois Jobard..................... 0 *
John W. Morris...................... 8,079 *
Alain Houdaille(2)**................ 0 *
Robert B. Sheh(3)**................. 50,000(4) *
George C. Mammola................... 29,522(5) *
Douglas A. Satzger(6)**............. 35,142(7) *
Patrick L. McMahon.................. 11,750(8) *
Joseph R. Vidal..................... 5,675(9) *
Gail M. Fulwider.................... 0 *
Robert S. Volland................... 34,850(10) *
Jekabs P. Vittands.................. 25,672(11) *
Vivendi............................. 153,609,975(12) 83.0
52 Rue d'Anjou
75384 Paris Cedex 08 France
All directors and officers as
a group (14 persons).............. 169,348(13) *
- ------------------
* Less than 1% ownership.
** No longer employed by the Company.
(1) Includes 52,800 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(2) Mr. Houdaille served as President and Chief Executive Officer of the
Company from May 1996 to November 1996.
(3) Mr. Sheh served as Chairman of the Board of Directors, President and
Chief Executive Officer of the Company from November 1996 to October
1997.
(4) Represents 50,000 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table. On October 24, 1997, Mr. Sheh
and the Company jointly entered into an agreement, which terminated
the Employment Agreement dated November 7, 1996, and entered into the
Sheh Separation Agreement relating to their relationship thereafter.
(5) Includes 28,642 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(6) Contemporaneous with the Company's pending move in July 1998 to
Wakefield, Massachusetts, Mr. Satzger ended his term as Senior Vice
President, General Counsel and Secretary of the Company effective June
1, 1998 and will continue for a limited period as a consultant to the
Company. The Company currently is holding discussions with Mr. Satzger
with respect to the terms of a severance and consulting agreement.
(7) Includes 33,142 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(8) Represents 11,750 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(9) Includes 5,460 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(10) Includes 31,850 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(11) Includes 20,190 shares of Class A Common Stock which may be acquired
within 60 days of the date of this table.
(12) Includes 40,988,215 shares of Class A Common Stock owned indirectly
through Anjou.
(13) Includes 150,692 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LETTER AGREEMENT
Pursuant to a letter agreement dated March 18, 1994, between the
Company and Vivendi, Vivendi purchased 500,000 shares of the Company's
Class A Common Stock, at $10.00 per share for a total purchase price of
$5.0 million. Vivendi also agreed in the letter agreement that, subject to
approval by Vivendi, Vivendi 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 wastewater management and air pollution projects, which Vivendi
acknowledged could reach or exceed the level of letters of credit carried
by the Company at March 18, 1994.
THE INVESTMENT AGREEMENT
On June 14, 1994, the stockholders of the Company approved the
issuance of Company securities in accordance with the Investment Agreement
pursuant to which, among other things, the Company (i) issued to Vivendi
1,200,000 shares of 5 1/2% Series A Convertible Exchangeable Preferred
Stock, par value $.01 per share, of the Company (the "Series A Preferred
Stock"), convertible into 4,800,000 shares of Class A Common Stock, for
cash consideration of $60 million, and (ii) issued to Anjou an aggregate of
6,701,500 shares of Class A Common Stock in connection with the acquisition
from Anjou of Professional Services Group ("PSG") and PSG Canada, Inc. As a
result, Vivendi increased its ownership interest in the Company to
approximately 48% of the total voting power of the Company's voting
securities. In addition, the Company benefited from certain financial
undertakings from Vivendi, including a $125 million unsecured term loan
from Vivendi, and became Vivendi's exclusive vehicle in the United States,
its possessions and its territories for Vivendi's water and wastewater
management and air pollution activities, subject to certain exceptions.
Vivendi also has representation on the Company's Board of Directors and the
right to designate the Company's Chairman of the Board of Directors, Chief
Executive Officer and Chief Financial Officer, all as further described
below.
CERTAIN COVENANTS OF THE COMPANY
Representation on the Board of Directors; Management. Under the terms
of the Investment Agreement, the Company has agreed that Vivendi will have
the right to designate as members of the Company's Board of Directors at
least that number of directors that is proportionate to the aggregate
number of shares of Class A Common Stock beneficially owned by Vivendi
(subject to a minimum of three Independent Directors). Although the
Investment Agreement requires the Company to maintain three Independent
Directors, the Company currently has only two Independent Directors. The
Company has further agreed that Vivendi will have proportionate
representation on all committees of the Board (other than any special
committee of Independent Directors) to the same extent as Vivendi is
entitled to representation on the Board of Directors. All Independent
Directors must be satisfactory to Vivendi. The Chairman of the Board of
Directors of the Company also shall be designated by Vivendi.
The Company also has agreed in the Investment Agreement that Vivendi
shall have the right to designate the Chief Executive Officer and the Chief
Financial Officer of the Company.
At the Annual Meeting held on May 29, 1997, stockholders of the
Company elected three directors who were designated by Vivendi (Messrs.
Sheh, Brunais and Kriegel). Also in accordance with the terms of the
Investment Agreement, the Board of Directors appointed, as designees of
Vivendi, Mr. Sheh as Chairman of the Board of Directors, President and
Chief Executive Officer and Mr. Brunais as Senior Vice President and Chief
Financial Officer. At meetings of the Board held on May 29, 1997 and
October 9, 1997, the Board of Directors elected Messrs. Caille and Banon,
respectively, to fill the vacancies on the Board. On October 24, 1997, the
Board of Directors of the Company appointed Vivendi's designee Mr. Kriegel
as Mr. Sheh's replacement as Chairman of the Board and also appointed
Vivendi's designee Mr. Mallet as Mr. Sheh's successor as President and
Chief Executive Officer of the Company. Mr. Mallet was elected to the Board
of Directors as Vivendi's designee on October 26, 1997. At a meeting of the
Board held on March 23, 1998, the Board of Directors elected Mr. Jobard as
a director of the Company.
Registration Rights. Pursuant to the terms of the Investment
Agreement, Vivendi and Anjou have the right to require on up to four
occasions that the Company register all shares of Class A Common Stock,
shares of Series A Preferred Stock or the Company's 5 1/2% Convertible
Subordinated Notes (collectively, the "Registrable Securities") owned from
time to time by Vivendi and its Affiliates (as defined in the Investment
Agreement) 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 Class A
Common Stock, (iii) to effect a Demand Registration within six months of
Vivendi or Anjou selling any Registrable Securities pursuant to a Piggyback
Registration (as defined below) or (iv) to effect a Demand Registration if
the Company shall have filed or announced its intention to file a
registration statement of an offering of shares of Class A Common Stock for
its own account and shall be taking steps in pursuance thereof or if the
Company shall have completed such a registered offering within the
immediately preceding ninety days. In addition, Vivendi and Anjou have the
right to participate in registrations by the Company of its Class A Common
Stock (a "Piggyback Registration"). The Company will pay all registration
expenses on behalf of Vivendi 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 Vivendi beneficially owns directly or indirectly at least 26% of the
outstanding shares of Class A Common Stock on a fully-diluted basis,
Vivendi 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 Vivendi, subject to
confidentiality obligations that at the time may be owed by the Company to
third parties and subject to appropriate confidentiality arrangements and
requirements of law.
CERTAIN COVENANTS OF VIVENDI
Exclusivity. Under the terms of the original Investment Agreement,
dated as of March 30, 1994, Vivendi agreed on behalf of itself and its
Affiliates that, for so long as Vivendi (with its Affiliates) is the
largest stockholder of the Company, the Company would be Vivendi's
exclusive vehicle in the United States, its possessions and its territories
for Vivendi's water and wastewater management and air pollution activities.
Vivendi also agreed to assist (and to cause its Affiliates to assist) the
Company in developing its water and wastewater management and air pollution
activities in both Canada and Mexico, subject to existing contractual
agreements and taking into account the respective interests of the Company
and Vivendi and its Affiliates. In addition, Vivendi agreed to offer (and
to cause its Affiliates to offer) the Company active participation in any
new water management investments by Vivendi (or its Affiliates) in the
United States which are too capital intensive for the Company to undertake
on a stand-alone basis.
Pursuant to the Recapitalization Agreement, dated as of September 14,
1997, among the Company, Vivendi and Anjou, as amended as of January 26,
1998 (the "Recapitalization Agreement"), and the Investment Agreement, as
amended by the Recapitalization Agreement, Vivendi agreed on behalf of
itself and its Affiliates that, for so long as Vivendi (with its
Affiliates) is the largest stockholder of the Company, the Company shall be
Vivendi's exclusive vehicle in the United States, its possessions and its
territories for its water management and wastewater management and air
pollution activities; provided that the foregoing shall not apply to any
acquisition or investment by Vivendi (or any of its Affiliates) of a
privately-owned, publicly-traded or publicly-owned company in the water
utility sector whose primary business is the production, distribution
and/or sale of potable, fire, bulk, draining or irrigation water (a "Water
Utility"), nor to Vivendi's present or future investments in Consumers
Water Company and Philadelphia Suburban Corporation (such Water Utilities,
Consumers Water Company and Philadelphia Suburban Corporation hereinafter
referred to collectively as the "Water Businesses").
In addition, Vivendi has agreed to assist (and cause its Affiliates to
assist) the Company in developing its water management and wastewater
management and air pollution activities in both Canada and Mexico, subject
to contractual agreements as of March 30, 1994 and taking into account the
respective interests of the Company and Vivendi and its Affiliates. Vivendi
also agreed to offer the Company an active participation in any proposed
water management or wastewater management activities by Vivendi (or any of
its Affiliates) in the United States (which shall be deemed to exclude the
Water Businesses), which investment is too capital intensive for the
Company to undertake on a stand-alone basis.
In addition, in the event Vivendi (or any of its Affiliates) acquires
control of a Water Business which is also engaged in wastewater activities
similar to those conducted by the Company as of the date of the original
Investment Agreement, then Vivendi (or such Affiliate) has agreed to use
reasonable efforts to cause, subject to the fiduciary duties of the board
of directors of such Water Business and other applicable regulatory
standards, that Water Business to offer to the Company the opportunity to
obtain "operating and maintenance" contracts with the wastewater management
business of, and the opportunity to obtain engineering contracts with, such
Water Business on terms which are commercially reasonable in the judgment
of such Water Business; provided that the foregoing shall not apply to any
existing business of Consumers Water Company or Philadelphia Suburban
Corporation as of the date of the original Investment Agreement.
In addition, Vivendi (and its Affiliates) and the Company agreed to
establish a privileged commercial relationship for the development of air
pollution activities in Europe.
Finally, the Investment Agreement, as amended, provides that the
exclusivity provision shall have no application to Kruger, Inc., a
distributor of water treatment plant parts and components and an indirect
subsidiary of Omnium Traitement et de Valorisation.
Affiliate Transactions. Vivendi has agreed on behalf of itself and its
Affiliates that any transactions (or series of related transactions in a
chain) between the Company and any of its Affiliates and Vivendi or any of
its Affiliates will be on an arm's length basis. Any such transaction (or
such series of 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 acting in a separate meeting or by unanimous
written consent. The Company, Vivendi and Anjou have further agreed that
all actions by the Company with respect to any claim by the Company against
Vivendi or its Affiliates under the Investment Agreement will be taken only
by majority approval of such Independent Directors or a special committee
thereof, so acting in a separate meeting or by unanimous written consent.
Sales of Shares. Vivendi has also agreed to give the Company one day's
prior written notice of any sale of shares of Class A Common Stock or
Series A Preferred Stock held by Vivendi or its Affiliates if, to the
knowledge of Vivendi, such sale would result in any person beneficially
owning more than 15% of the outstanding shares of Class A Common Stock.
INVOLVEMENT OF VIVENDI IN FINANCING ARRANGEMENTS
On March 10, 1995, the Company entered into a $70 million three-year
Rsenior secured bank credit facility (the "Bank Credit Facility") with The
First National Bank of Chicago and Societe Generale, New York Branch
("Societe Generale"), acting as co-agents for a syndicate which includes
seven additional banks (the "Lending Banks"). As of December 12, 1997, the
configuration and structure of the Bank Credit Facility was revised. As a
result of this revision, Societe Generale purchased and assumed from all of
the other Lending Banks all of such banks' rights and obligations under the
Bank Credit Facility, becoming the sole lending bank thereunder, and the
Company and Societe Generale entered into an amendment to extend the Bank
Credit Facility until December 11, 1998. The Bank Credit Facility had been
scheduled to expire on March 31, 1998. The amendment waives the Company's
compliance with certain covenants and amends others. The prior amendments
and waiver would have terminated on December 15, 1997 had the Bank Credit
Facility not been amended. The Company intends to enter into discussions
regarding the establishment of a new credit facility prior to the maturity
of the Bank Credit Facility. Vivendi also has reaffirmed to Societe
Generale the terms of Vivendi's existing credit support of the Company,
including a commitment by Vivendi to maintain a minimum 48% voting equity
ownership interest and to check to ensure that the Company will have
sufficient financial resources to meet its obligations under the Bank
Credit Facility. As of May 8, 1998, the Company had $22.6 million of
outstanding letters of credit and no borrowings under the Bank Credit
Facility (unused capacity of $47.4 million).
The Bank Credit Facility is primarily designed to finance working
capital requirements and provide 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
lesser of $70 million or 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
(London Interbank Offered Rate) plus 1.25% (6.9% at October 31, 1997), or
at a defined bank rate approximating prime (8.5% at October 31, 1997). The
Bank Credit Facility also allows for certain additional borrowings,
including, among other things, project financing and foreign borrowing
facilities, subject to limitations, and contains certain financial and
other restrictive covenants, including, among other things, the maintenance
of certain financial ratios, and restrictions on the incurrence of
additional indebtedness, acquisitions, the sale of assets, the payment of
dividends and the repurchase of subordinated debt. In addition, the related
agreement requires Vivendi to maintain its support of the Company,
including a minimum 48% voting equity ownership interest in the Company and
its right to designate at least 48% of the Company's Board of Directors, as
well as to appoint the Chief Executive Officer and the Chief Financial
Officer of the Company. The Company compensates Vivendi for its support in
an amount equal to 0.95% per annum of the outstanding commitment of its
credit facilities ($1.2 million for the year ended October 31, 1997).
As of October 31, 1997, the Company had outstanding borrowings of $125
million under an unsecured term loan from Vivendi (the "Vivendi Note") and
$60 million under a fully utilized seven-year revolving credit facility
with Anjou (the "Anjou Note"). The Company incurred approximately $8.7
million and $3.7 million of interest on the Vivendi Note and Anjou Note,
respectively, during fiscal 1997. Pursuant to the terms of the
Recapitalization Agreement, the Company repaid the Vivendi Note and Anjou
Note with a portion of the gross proceeds from the Rights Offering (as
defined hereinafter) and terminated the related credit agreements.
RECAPITALIZATION AGREEMENT
On September 24, 1997, the Company entered into the Recapitalization
Agreement with Vivendi and Anjou, whereby the Company would retire all of
the outstanding shares of Series A Preferred Stock and conduct the Rights
Offering, a portion of the gross proceeds from which would be used to repay
the Vivendi Note and the Anjou Note. Pursuant to the Recapitalization
Agreement, the Company, Vivendi and Anjou also entered into agreements with
respect to certain other matters. The purpose of the Recapitalization and
related transactions was to improve the Company's overall liquidity, while
offering public stockholders the opportunity to participate in the
Company's recovery. The Recapitalization was intended to substantially
reduce the Company's interest and dividend requirements, enhance the
Company's ability to fund its working capital requirements, capital
expenditures and other corporate needs and provide liquidity for public
stockholders in an informed trading market. In accordance with the terms of
the Investment Agreement, the terms and conditions of the Recapitalization
Agreement were negotiated at arm's length between Vivendi and the Special
Committee and were approved by the Board of Directors of the Company based
in part on the recommendation of the Special Committee. On January 26,
1998, the Company, Vivendi and Anjou entered into an amendment to the
Recapitalization Agreement to implement certain technical amendments
thereto. In accordance with the terms of the Investment Agreement, the
terms and conditions of the amendment to the Recapitalization Agreement
were approved by the Board of Directors of the Company and the Special
Committee.
EXCHANGE
On January 28, 1998, pursuant to the terms of the Recapitalization
Agreement, the Company exchanged (the "Exchange") the outstanding 1,200,000
shares of Series A Preferred Stock held by Vivendi and its subsidiaries
(representing all of the issued and outstanding shares of Series A
Preferred Stock) for 34,285,714 shares of Class A Common Stock. Immediately
following the Exchange, Vivendi beneficially owned in the aggregate
approximately 72.2% of the outstanding shares of Class A Common Stock and
voting power of the Company.
The Company did not declare the September 30, 1997 and December 31,
1997 quarterly dividends aggregating $1,650,000 on the Series A Preferred
Stock, all of which was held by Vivendi, due to its concerns over liquidity
and the adequacy of its surplus. The dividends in arrears on the Series A
Preferred Stock have not been paid and were extinguished pursuant to the
Exchange. The Company paid $2.5 million in dividends to Vivendi on the
Series A Preferred Stock in fiscal 1997.
RIGHTS OFFERING
On January 26, 1998, the Board of Directors of the Company declared a
dividend to holders of record of its Class A Common Stock as of the close
of business on January 29, 1998 of 120,000,000 transferable subscription
rights (the "Rights") which allowed Rights holders to subscribe for and
purchase shares of its common stock and allowed subscribing Rights holders
(other than Vivendi and Anjou) also to receive transferable three-year
warrants (the "Warrants") to purchase shares of Class A Common Stock (the
"Rights Offering"). The terms of the Rights Offering are set forth in the
Company's Prospectus dated January 30, 1998.
The Rights Offering expired on March 4, 1998. In the Rights Offering,
98,160,427 Rights were exercised to purchase 99,840,089 shares of Class A
Common Stock, of which 1,679,662 shares were purchased pursuant to an
oversubscription privilege. In accordance with the terms of the
Recapitalization Agreement, Vivendi and Anjou each exercised its basic
subscription privilege in full for an aggregate basic subscription of
86,682,816 shares of Class A Common Stock, and Vivendi subscribed for and
purchased 19,031,470 additional shares of Class A Common Stock available as
a result of unexercised Rights in the Rights Offering, for a total
aggregate subscription of $185 million.
In addition, 3,949,099 Warrants to acquire in the aggregate 3,949,099
shares of Class A Common Stock were issued to subscribers (other than
Vivendi and Anjou) in the Rights Offering. In accordance with the terms of
the Rights Offering, neither Vivendi nor Anjou received any Warrants. On
March 12, 1998, the Company was notified that the Warrants had been
approved for listing on the American Stock Exchange, Inc. (the "AMEX"). The
Warrants currently trade on the AMEX under the symbol "AWT.WS."
The Company received gross proceeds of approximately $208 million from
the Rights Offering, including approximately $23 million of publicly raised
proceeds. The Company used a portion of the gross proceeds from the Rights
Offering to repay the Vivendi Note and Anjou Note. The remaining $23
million of proceeds, representing all of the publicly-raised proceeds, will
be retained for general corporate purposes, including a reduction in
outstanding amounts under the Bank Credit Facility.
Following the Rights Offering, Vivendi beneficially owns an aggregate
of 153,609,975 shares of Class A Common Stock, representing approximately
83.0% of the issued and outstanding Class A Common Stock and voting
power of the Company.
CONSENT SOLICITATION
Concurrently with the Rights Offering, pursuant to the terms of the
Recapitalization Agreement, the Company solicited the consent (the "Consent
Solicitation") of the holders of at least a majority in principal amount
(the "Requisite Consents") of the Company's 8% Convertible Subordinated
Debentures due 2015 (the "Convertible Debentures") to amend a certain
provision of the indenture (the "Indenture") governing the Convertible
Debentures permitting holders to require the Company to repurchase the
Convertible Debentures if any person acquires beneficial ownership of 75%
or more of the voting power of the Company (the "Change of Control
Provision").
On February 23, 1998, the Consent Solicitation expired. In the Consent
Solicitation, the Company received the consent of $105,937,000 aggregate
principal amount of the outstanding Convertible Debentures, representing
approximately 92.1% of the outstanding principal amount of the Convertible
Debentures, to amend the Change of Control Provision. On February 23, 1998,
the Company and The Chase Manhattan Bank, as Trustee, executed a
Supplemental Indenture (the "Supplemental Indenture"), which amended the
Indenture to exempt acquisitions by Vivendi or any of its Affiliates (as
defined therein) of voting power equal to or greater than 75% from the
application of the Change of Control Provision. Following the execution of
the Supplemental Indenture and pursuant to the terms of the Consent
Solicitation, the Company made an aggregate payment of approximately
$477,000 to holders of Convertible Debentures who provided their consents.
CHARTER AMENDMENT
Pursuant to the Recapitalization Agreement, on January 26, 1998, the
Board of Directors of the Company adopted a resolution setting forth
proposed amendments to the Restated Certificate of Incorporation of the
Company (the "Charter Amendment"). On February 6, 1998, Vivendi and Anjou,
the beneficial owners at such time of an aggregate of approximately 72.2%
of the outstanding Class A Common Stock and voting power of the Company,
provided their written consent to the Charter Amendment. The consent of
Vivendi and Anjou was sufficient to adopt the Charter Amendment without any
further vote of the Company's stockholders. On March 2, 1998, the Company
filed a certificate of amendment to its Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware which
increased the number of shares of Class A Common Stock that the Company is
authorized to issue from 95,000,000 shares to 255,000,000 shares. The
Charter Amendment became effective upon such filing.
Prior to the filing of the Charter Amendment, the Company had
authorized for issuance 100,000,000 shares of common stock, par value $.001
per share, of which 95,000,000 shares were shares of Class A Common Stock
and 5,000,000 shares were shares of the Company's Class B Common Stock, par
value $.001 per share (the "Class B Common Stock"). The terms of the Class
A Common Stock and the Class B Common Stock are identical in all respects
except that the Class B Common Stock is not entitled to vote. Following the
filing of the Charter Amendment, the Company is authorized to issue
260,000,000 shares of common stock, par value $.001 per share, of which
255,000,000 shares are shares of Class A Common Stock and 5,000,000 shares
are shares of Class B Common Stock. No shares of Class B Common Stock
currently are issued and outstanding.
OTHER
Business Planning Committee
In connection with the Recapitalization, the Company established the
Business Planning Committee to review the business strategies prepared by
senior management of the Company and, as appropriate, make recommendations
on the formulation and implementation of those strategies that have as
their objective increasing stockholder value. The Business Planning
Committee, which will remain in place through the end of fiscal year 1999,
is comprised of three Vivendi appointed directors and two directors who are
unaffiliated with and independent of Vivendi.
Among other things, the Business Planning Committee will identify
areas where Vivendi's management expertise and the Company's business may
be effectively integrated. The Chairman of the Business Planning Committee
currently is Mr. Banon. Mr. Caille, Ms. Green, Mr. Mallet and Lt. Gen.
Morris currently serve as members of the Business Planning Committee.
Analyst Conferences
The Board of Directors of the Company also has agreed, for as long as
shares of Class A Common Stock of the Company are traded on the AMEX or any
other national securities exchange or national quotation system, to cause
management of the Company to hold semi-annual analyst conferences, conduct
conference calls concurrent with earnings releases, promote analyst
coverage of its stock and initiate a stockholder relations program.
USF&G Bonding Guarantees
Pursuant to the Recapitalization Agreement, Vivendi and the Company
agreed that from September 30, 1997 and continuing until the consummation
of the Recapitalization, Vivendi (or one of its affiliates) would enter
into guarantees of certain obligations of the Company relating to the
bonding of certain contracts under the Master Surety Agreement, dated as of
October 31, 1995 (the "Master Surety Agreement"), between United States
Fidelity and Guaranty Company and certain of its affiliates ("USF&G") and
the Company and its subsidiaries. In consideration, Vivendi (or one of its
affiliates) would receive assurances from USF&G that, in the event of a
default by the Company, USF&G would assign and transfer to Vivendi (or one
of its affiliates) any and all of USF&G's resultant rights in the bonded
commercial contract (whether arising under the Master Surety Agreement, or
by operation of law, or otherwise). Anjou has entered into an agreement
with USF&G regarding an arrangement pursuant to which, until terminated at
Anjou's discretion, Anjou will enter into guarantees of certain obligations
of the Company relating to the bonding of certain contracts under the
Master Surety Agreement. Such guarantees would cover, in each instance, 30%
of the aggregate amount of the bonds executed, procured or provided on
behalf of the Company or its subsidiaries on or after October 1, 1997 and
certain penalty amounts, up to $45 million. Vivendi will receive a fee of
1% of the lesser of (i) 30% of the aggregate amount of the bonds executed,
procured or provided on behalf of the Company or its subsidiaries on or
after October 1, 1997 and certain penalty amounts, or (ii) $45 million.
There can be no assurance that USF&G will be willing to continue to provide
bid and performance bonds to the Company without a guarantee from Vivendi
or one of its affiliates.
No Short-Form Merger
In addition, in connection with the Recapitalization, Vivendi has
agreed for a period of three years from the closing date of the
Recapitalization, which date occurred on March 9, 1998, not to acquire the
Company by way of a short-form merger without the approval of a majority of
the Independent Directors of the Company.
Clarification of Investment Agreement
The Recapitalization Agreement also amends and restates the
exclusivity provision of the Investment Agreement to clarify that the
exclusivity provision in the original Investment Agreement should apply to
both water management and wastewater management activities, but shall not
apply to certain water utility-related investments, acquisitions or
activities by Vivendi or its Affiliates (as defined in the Investment
Agreement), to Vivendi's present or future investments in Consumers Water
Company and Philadelphia Suburban Corporation or to OTV-Kruger, Inc. See
"Certain Relationships and Related Transactions--The Investment
Agreement--Certain Covenants of Vivendi--Exclusivity."
OTHER VIVENDI RELATED MATTERS
Vivendi has unconditionally guaranteed performance by PSG's
wholly-owned subsidiary, PS Group of Puerto Rico, Inc. ("PSG Puerto Rico"),
of PSG Puerto Rico's contract with the Puerto Rico Aqueduct and Sewer
Authority ("PRASA"). During the fiscal year ended October 31, 1997, PSG
Puerto Rico's contract with PRASA accounted for 39% of PSG's total sales
and 23% of the Company's total sales.
Following the Recapitalization, the Company will require additional
financial resources to develop and support each of its businesses at PSG
and Metcalf & Eddy, to undertake related long-term capital expenditures and
to participate in the emerging privatization market in the wastewater
management industry. Vivendi has informed the Company that it intends to
work with the Company to explore various ways to develop such financial
resources for these purposes, including, among others, the raising by
Vivendi of an investment fund or other off-balance sheet vehicle which
would invest, on a case-by-case basis, in various project financings
undertaken by the Company. It is anticipated that any such vehicle would
invest in such project finance activities of the Company on terms which are
commercially reasonable. As a result, Vivendi and the Company and possibly
others, investing either directly or indirectly through such vehicle or
otherwise, would share in the returns on such projects pro rata in relation
to their respective equity investments.
OTHER RELATED TRANSACTIONS
Ms. Green, who has been a director of the Company since June 1994, has
informed the Company of her decision not to stand for reelection. Ms. Green
is a partner at the law firm of Bryan, Cave LLP. Bryan, Cave LLP has
performed limited legal services for the Company from time to time. During
her term as a director, Ms. Green has not personally represented the
Company. The Company anticipates that Bryan, Cave LLP may continue to
perform legal services for the Company.
PROPOSAL 2:
TO RATIFY THE 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, 1998. McGladrey & Pullen, LLP also
served as the Company's independent auditors for the fiscal year ended
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 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 reports of McGladrey & Pullen, 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. 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 Vivendi. During the period from the end of the
1995 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. Vivendi,
the beneficial owner of approximately 83.0% of the outstanding shares of
Class A Common Stock and voting power of the Company, has informed the
Company that it intends to vote for this proposal. If the appointment is
not ratified by stockholders, the Board of Directors is not obligated to
appoint other independent auditors or public accountants, but the Board of
Directors will consider such unfavorable vote.
PROPOSAL 3:
TO CHANGE THE CORPORATE NAME
On May 12, 1998, the Board of Directors unanimously adopted, and
recommended that the stockholders of the Company approve, a proposal to
amend the Company's Restated Certificate of Incorporation to change the
name of the Company from "Air & Water Technologies Corporation" to "Aqua
Alliance Inc." The Board of Directors believes that it is in the best
interests of the Company to change its corporate name because such a change
will reflect the Company's focus on its core water and wastewater
businesses as part of its revised business strategy. A copy of the proposed
Amendment is attached hereto as Exhibit A.
The change of the Company's name will become effective upon the filing
of a certificate of amendment to the Company's Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware, which
is anticipated to be as soon as practicable following the date of the
Annual Meeting. The symbol for the Company's Class A Common Stock on the
AMEX will be changed from "AWT" to "AAI" and the symbol for the Company's
Warrants on the AMEX will be changed from "AWT.WS" to "AAI.WS," effective
as soon as practicable following the filing of the certificate of amendment
with the Secretary of State of the State of Delaware.
The change in the Company's name will not affect the validity or
transferability of the Company's outstanding securities or affect the
Company's capital or corporate structure. The Company's stockholders will
not be required to exchange any certificates representing any of the
Company's securities held by them.
The Board of Directors recommends a vote FOR this proposal. Vivendi,
the beneficial owner of approximately 83.0% of the outstanding shares of
Class A Common Stock and voting power of the Company, has informed the
Company that it intends to vote for this proposal. In accordance with
Delaware law and notwithstanding approval of the Amendment by the
stockholders, at any time prior to the effectiveness of the filing of the
certificate of amendment with the Secretary of State, the Board of
Directors may abandon such proposed Amendment without further action by the
stockholders.
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 Annual Meeting.
STOCKHOLDER PROPOSALS
Proposals of the Company's stockholders intended to be presented at
the Company's 1999 Annual Meeting of Stockholders must be received by the
Company no later than February 2, 1999 to be included in the Company's
proxy statement and form of proxy relating to such Annual Meeting. Any
proposal should be addressed to Air & Water Technologies Corporation, Attn:
Secretary, U.S. Highway 22 West and Station Road, Branchburg, New Jersey
08876 and should be sent by certified mail, return receipt requested.
THE COMPANY WILL FURNISH A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED OCTOBER 31, 1997 (INCLUDING FINANCIAL STATEMENTS AND
ANY FINANCIAL STATEMENT SCHEDULES BUT EXCLUDING OTHER EXHIBITS), WITHOUT
CHARGE, TO ANY PERSON UPON REQUEST ADDRESSED TO AIR & WATER TECHNOLOGIES
CORPORATION, ATTN: SECRETARY, U.S. HIGHWAY 22 WEST AND STATION ROAD,
BRANCHBURG, NEW JERSEY 08876.
By Order of the Board of Directors,
Thierry M. Mallet
President and Chief Executive Officer
June 3, 1998
Branchburg, New Jersey
EXHIBIT A
PROPOSED CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
AIR & WATER TECHNOLOGIES CORPORATION
- ----------------------------------------------------------------------------
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
- ----------------------------------------------------------------------------
Air & Water Technologies Corporation, a Delaware corporation
(the "Corporation"), does hereby certify as follows:
FIRST: The name of the Corporation is Air & Water Technologies
Corporation.
SECOND: Effective immediately upon filing of this Amendment and
without further action on the part of the Corporation or its stockholders
the provisions of Article FIRST of the Corporation's Amended and Restated
Certificate of Incorporation shall be amended as described herein.
THIRD: That the Restated Certificate of Incorporation of the
Corporation is hereby amended to change the name of the Corporation from
"Air & Water Technologies Corporation" to "Aqua Alliance Inc." and to
delete the current Article FIRST in its entirety and to set forth a new
Article FIRST as follows:
"FIRST: The name of the Corporation is Aqua Alliance Inc."
FOURTH: That this Amendment has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate
of Amendment to be executed in its corporate name this day of , 1998.
AIR & WATER TECHNOLOGIES
CORPORATION
By:____________________________________
Name: Thierry M. Mallet
Title: President and Chief Executive
Officer
APPENDIX I -- FORM OF PROXY
AIR & WATER TECHNOLOGIES CORPORATION
ANNUAL MEETING OF STOCKHOLDERS--JUNE 24, 1998
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking any previous proxies relating to these
shares, hereby acknowledges receipt of the Notice and Proxy Statement dated
June 3, 1998, in connection with the Annual Meeting of Stockholders (the
"Annual Meeting") of Air & Water Technologies Corporation (the "Company")
to be held on Wednesday, June 24, 1998, at 11:00 a.m., local time, at the
Hotel Intercontinental, 111 East 48th Street, New York, New York 10017, and
hereby constitutes and appoints William V. Kriegel, Thierry M. Mallet and
Alain Brunais, and each of them, his, her or its true and lawful agents and
proxies (the "proxies") with full power of substitution in each, to
represent and to vote all the shares of Class A Common Stock of the Company
that the undersigned may be entitled to vote on all matters coming before
the Annual Meeting and at any adjournments or postponements thereof, as
designated below FOR Proposals 1, 2 and 3 and in the discretion of the
proxies on all other matters as may properly come before the Annual Meeting
or any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT
MARK ANY BOXES.
Continued and to be signed on reverse.
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Continued from reverse.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. ELECTION OF DIRECTORS.
William V. Kriegel, Jean-Claude Banon, Alain Brunais, Daniel Caille,
Martha O. Hesse, Francois Jobard, Thierry M. Mallet and John W.
Morris (or if any nominee is not available for election, such
substitute as the Board of Directors may designate).
_ _
|_| FOR ALL |_| WITHHELD FOR ALL
WITHHELD FOR: (Write the name of the nominee(s) in the space provided
below).
______________________________
2. PROPOSAL TO RATIFY THE APPOINTMENT OF MCGLADREY & PULLEN, LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING OCTOBER 31,
1998.
_ _ _
|_| FOR |_| AGAINST |_| ABSTAIN
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY TO
"AQUA ALLIANCE INC."
_ _ _
|_| 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.
_______________________________________________
Signature Date
_______________________________________________
Signature(s) of Joint Owner(s) Date
