SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party Other than the Registrant |_|
Check the appropriate box:
|_| 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 "Aqualliance 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.
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 "Aqualliance 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
May 22, 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 "Aqualliance 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. 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. 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 May 22, 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, Compagnie Generale des Eaux, a French company and
the Company's largest stockholder ("CGE"), and CGE'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 CGE 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 CGE, with such number of
directors to be rounded up to the next whole number (so long as CGE
beneficially owns in the aggregate at least one-half of the outstanding
shares of Class A Common Stock and rounded down if CGE 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, CGE 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 CGE 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
CGE. The Chairman of the Board of Directors of the Company also shall be
designated by CGE. 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 CGE 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 CGE. Mr. Kriegel also has been
designated by CGE 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. CGE, 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 co-founded an unaffiliated
French energy company that within three
years of its formation in 1980 became
France's largest privately-owned company
engaged in the development of small
hydro-electric projects. 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 CGE. In this
capacity, Mr. Kriegel is the
representative of CGE in the United
States. Mr. Kriegel has been designated
by CGE 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 CGE'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 CGE activities in the United
Kingdom. In this capacity, Mr. Banon is
the representative of CGE in the United
Kingdom. Prior to 1989, Mr. Banon was
General Management Delegate responsible
for overseeing the development of CGE's
business in the United States. Mr. Banon
has been designated by CGE 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 CGE. 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 CGE 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 CGE'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, CGE's health care
subsidiary, which he founded in 1987.
Mr. Caille joined CGE in 1982 as
director of research and development and
created Anjou Recherche, CGE'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 CGE 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 CGE's
International Water Division.
Previously, Mr. Jobard was Charge de
Mission to CGE's Chief Financial
Officer. Prior to joining CGE 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 CGE as a director of the
Company under the Investment Agreement.
Thierry M. Mallet........ 37 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 CGE in Spain.
Prior to SMA, Mr. Mallet was Charge de
Mission to the General Management of CGE
in Paris. Mr. Mallet has been designated
by CGE 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. 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 CGE and in accordance with the Investment Agreement, that
Ms. Green and Lt. Gen. Morris, the Company's directors not affiliated with
CGE, would be appointed as a special committee (the "Special Committee") of
Independent Directors to consider any recapitalization proposal by CGE.
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 CGE
appointed directors and two directors who are unaffiliated with and
independent of CGE. Among other things, the Business Planning Committee
will identify areas where CGE'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 President, 1996 207,450 75,000 0 18,000(8) 77,000(9)
Chief Financial Officer 1995 203,674 85,000 0 0 74,000(10)
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 ...... 1997 206,003 0 0 0 5,970(15)
Senior Vice President, 1996 211,622 32,000 0 41,500(16) 13,750(17)
General Counsel and 1995 200,013 55,000 0 0 10,750(18)
Secretary
Patrick L. McMahon ...... 1997 190,784 40,000 0 0 16,650(19)
Senior Vice President 1996 170,019 75,000 0 19,000(20) 2,200(21)
and President, 1995 66,003(22) 60,000 0 0 1,100(23)
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) "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.
(16) 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.
(17) "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.
(18) "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.
(19) "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.
(20) 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.
(21) "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.
(22) 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.
(23) "All Other Compensation" for Mr. McMahon during fiscal year 1995
consists of approximately $1,100 resulting from an automobile leased
for Mr. McMahon by PSG.
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 VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL 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.
(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 CGE'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 CGE'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
CGE. 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
CGE'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 CGE activities in the United Kingdom. Mr. Banon has
been designated by CGE 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 offices 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 May 11, 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 OF
CLASS A COMMON STOCK CLASS A COMMON STOCK
NAME OF PERSON OR GROUP BENEFICIALLY OWNED 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.............. 35,142(6) *
Patrick L. McMahon.............. 11,750(7) *
Joseph R. Vidal................. 5,675(8) *
Gail M. Fulwider................ 0 *
Robert S. Volland............... 34,850(9) *
Jekabs P. Vittands.............. 25,672(10) *
Compagnie Generale des Eaux..... 153,609,975(11) 83.0
52 Rue d'Anjou
75384 Paris Cedex 08 France
All directors and officers as
a group (15 persons)............ 204,490(12) *
- ------------------
* 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) Includes 33,142 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(7) Represents 11,750 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(8) Includes 5,460 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(9) Includes 31,850 shares of Class A Common Stock which may be acquired
within 60 days of the date of the table.
(10) Includes 20,190 shares of Class A Common Stock which may be acquired
within 60 days of the date of this table.
(11) Includes 40,988,215 shares of Class A Common Stock owned indirectly
through Anjou.
(12) Includes 183,834 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 CGE, CGE 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. CGE also agreed in the letter agreement that, subject to approval
by CGE, CGE would co-sign on a case-by-case basis with the Company
applications for letters of credit with respect to the Company's water and
wastewater management and air pollution projects, which CGE acknowledged
could reach or exceed the level of letters of credit carried by the Company
at March 18, 1994.
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 CGE
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, CGE 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 CGE, including a $125 million unsecured term loan from
CGE, and became CGE's exclusive vehicle in the United States, its
possessions and its territories for CGE's water and wastewater management
and air pollution activities, subject to certain exceptions. CGE 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 CGE 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 CGE (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 CGE will have proportionate representation on all committees of
the Board (other than any special committee of Independent Directors) to
the same extent as CGE is entitled to representation on the Board of
Directors. All Independent Directors must be satisfactory to CGE. The
Chairman of the Board of Directors of the Company also shall be designated
by CGE.
The Company also has agreed in the Investment Agreement that CGE shall
have the right to designate the Chief Executive Officer and the Chief
Financial Officer of the Company.
At the Annual Meeting held on May 29, 1997, stockholders of the
Company elected three directors who were designated by CGE (Messrs. Sheh,
Brunais and Kriegel). Also in accordance with the terms of the Investment
Agreement, the Board of Directors appointed, as designees of CGE, 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 CGE's designee Mr. Kriegel as Mr. Sheh's
replacement as Chairman of the Board and also appointed CGE'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 CGE'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, CGE 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 CGE 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 CGE 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, CGE 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 CGE and Anjou,
including certain related fees and expenses, other than underwriting fees
and discounts.
Access to Books and Records. The Company has agreed that for so long
as CGE beneficially owns directly or indirectly at least 26% of the
outstanding shares of Class A Common Stock on a fully-diluted basis, CGE
will have access on reasonable terms to the books, records and employees of
the Company and its subsidiaries and to the provision by the Company of all
information reasonably requested by CGE, subject to confidentiality
obligations that 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 CGE
Exclusivity. Under the terms of the original Investment Agreement,
dated as of March 30, 1994, CGE agreed on behalf of itself and its
Affiliates that, for so long as CGE (with its Affiliates) is the largest
stockholder of the Company, the Company would be CGE's exclusive vehicle in
the United States, its possessions and its territories for CGE's water and
wastewater management and air pollution activities. CGE also 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 CGE and its
Affiliates. In addition, CGE agreed to offer (and to cause its Affiliates
to offer) the Company active participation in any new water management
investments by CGE (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, CGE and Anjou, as amended as of January 26, 1998
(the "Recapitalization Agreement"), and the Investment Agreement, as
amended by the Recapitalization Agreement, CGE agreed on behalf of itself
and its Affiliates that, for so long as CGE (with its Affiliates) is the
largest stockholder of the Company, the Company shall be CGE'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 CGE (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 CGE'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, CGE 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 CGE and its Affiliates. CGE also
agreed to offer the Company an active participation in any proposed water
management or wastewater management activities by CGE (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 CGE (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 CGE (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, CGE (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. CGE 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 CGE 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, CGE and Anjou have further agreed that all actions by
the Company with respect to any claim by the Company against CGE 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. CGE 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 CGE or its Affiliates if, to the knowledge
of CGE, such sale would result in any person beneficially owning more than
15% of the outstanding shares of Class A Common Stock.
INVOLVEMENT OF CGE IN FINANCING ARRANGEMENTS
On March 10, 1995, the Company entered into a $70 million three-year
senior 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. CGE also has reaffirmed to Societe Generale
the terms of CGE's existing credit support of the Company, including a
commitment by CGE 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 CGE 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 CGE 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 CGE (the "CGE 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 CGE Note and Anjou Note, respectively,
during fiscal 1997. Pursuant to the terms of the Recapitalization
Agreement, the Company repaid the CGE 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 CGE 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 CGE Note and the Anjou Note. Pursuant to the Recapitalization
Agreement, the Company, CGE 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 CGE 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, CGE 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 CGE 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, CGE 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 CGE, 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 CGE 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 CGE 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, CGE 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 CGE 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 CGE
and Anjou) in the Rights Offering. In accordance with the terms of the
Rights Offering, neither CGE 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 CGE 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, CGE 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 CGE 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, CGE 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 CGE
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 CGE appointed directors and two directors who are
unaffiliated with and independent of CGE.
Among other things, the Business Planning Committee will identify
areas where CGE'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, CGE and the Company agreed
that from September 30, 1997 and continuing until the consummation of the
Recapitalization, CGE (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, CGE (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 CGE (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. CGE 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 CGE or
one of its affiliates.
No Short-Form Merger
In addition, in connection with the Recapitalization, CGE 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 CGE or its Affiliates (as defined in the Investment
Agreement), to CGE'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 CGE--Exclusivity."
OTHER CGE RELATED MATTERS
CGE 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. CGE 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 CGE
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, CGE 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 CGE. 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. CGE, 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
"Aqualliance 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. Holders of securities of the
Company may be required to exchange certificates representing such
securities for new certificates bearing the new corporate name.
The Board of Directors recommends a vote FOR this proposal. CGE, 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 January 22, 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
May 22, 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 "Aqualliance 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 Aqualliance 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
May 22, 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.
- ----------------------------------------------------------------------------
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).
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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
"AQUALLIANCE 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.
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Signature Date
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Signature(s) of Joint Owner(s) Date
