<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996
REGISTRATION NO. 333-12069
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CULLIGAN WATER TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0350629
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE CULLIGAN PARKWAY
NORTHBROOK, ILLINOIS 60062
(847) 205-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
EDWARD A. CHRISTENSEN, ESQ.
ONE CULLIGAN PARKWAY
NORTHBROOK, ILLINOIS 60062
(847) 205-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
GREGORY A. FERNICOLA, ESQ. DEIRDRE M. VON MOLTKE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM SIDLEY & AUSTIN
919 THIRD AVENUE ONE FIRST NATIONAL PLAZA
NEW YORK, NEW YORK 10022 CHICAGO, ILLINOIS 60603
(212) 735-3000 (312) 853-7000
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value, including
associated Rights........................ 5,744,160 $39.3125 $225,817,290 $77,869(3)
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</TABLE>
(1) Includes an aggregate of 749,239 shares of Common Stock that the
Underwriters have the option to purchase from the Company to cover over-
allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee and based on the average of the high and low sales prices
of the Common Stock as reported on the New York Stock Exchange on
September 12, 1996 pursuant to Rule 457(c) under the Securities Act.
(3) Previously paid.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION
8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains a Prospectus relating to a public
offering in the United States of an aggregate of 3,995,937 shares of Common
Stock, par value $.01 per share, of the Company (the "United States
Offering"), together with separate Prospectus pages relating to a concurrent
offering outside the United States of an aggregate of 998,984 shares of Common
Stock, par value $.01 per share, of the Company (the "International
Offering"). The complete Prospectus for the United States Offering follows
immediately. Following such Prospectus are the alternate pages for the
Prospectus for the International Offering: a front cover page, the sections
entitled "Certain United States Federal Tax Consequences to Non-United States
Holders," "Underwriting," "Legal Matters" and "Experts" and a back cover page.
The front cover page, the sections entitled "Certain United States Federal Tax
Consequences to Non-United States Holders," "Underwriting," "Legal Matters"
and "Experts" and the back cover page of the Prospectus for the International
Offering will appear in lieu of the front cover page, the section entitled
"Underwriting," "Legal Matters" and "Experts" and the back cover page of the
Prospectus for the United States Offering. All other pages of the Prospectus
for the United States Offering are to be used for both the United States and
the International Offerings.
Ten copies of the complete Prospectus for each of the United States and
International Offerings in the exact forms in which they are to be used after
effectiveness will be filed with the Securities and Exchange Commission
pursuant to Rule 424(b) of the General Rules and Regulations under the
Securities Act of 1933.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 4, 1996
[LOGO OF CULLIGAN]
4,994,921 SHARES
CULLIGAN WATER TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------
Of the 4,994,921 shares of Common Stock offered, 3,995,937 shares are being
offered hereby in the United States and 998,984 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting."
All of the shares of Common Stock offered are being sold by the Selling
Stockholders. The Selling Stockholders consist of (i) certain entities
affiliated with Carl C. Icahn, a former director of the Company and (ii) Steven
J. Green, a former director of the Company, and an entity affiliated with Mr.
Green. See "Principal and Selling Stockholders." The Company will not receive
any of the proceeds from the offerings, unless the over-allotment options
referred to below are exercised.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
The last reported sale price of the Common Stock, which is listed under the
symbol "CUL", on the New York Stock Exchange on October 2, 1996 was $37.875 per
share. See "Price Range of Common Stock."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
INITIAL
PUBLIC
OFFERING UNDERWRITING PROCEEDS TO SELLING
PRICE DISCOUNT(1) STOCKHOLDERS(2)
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<S> <C> <C> <C>
Per Share.......................... $ $ $
Total(3)........................... $ $ $
</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of approximately $500,000 payable by
the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 599,391 shares at the initial public offering
price per share, less the underwriting discount, solely to cover over-
allotments. Additionally, the Company has granted the International
Underwriters an over-allotment option with respect to an additional 149,848
shares as part of the concurrent international offering. If such options
are exercised in full, the total initial public offering price and
underwriting discount will be $ and $ , respectively, and the
proceeds to the Company will be $ . See "Underwriting."
-----------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about ,1996, against payment therefor in immediately
available funds.
GOLDMAN, SACHS & CO. BEAR, STEARNS & CO. INC.
NATWEST SECURITIES LIMITED SMITH BARNEY INC. JEFFERIES & COMPANY, INC.
-----------
The date of this Prospectus is , 1996.
<PAGE>
Inside Front Cover:
Pictures of WaterWare by Culligan (R) faucet mount system, Culligan (R) Mark 100
electronic water softener, Aqua-Cleer (R) reverse osmosis drinking unit, 5-
gallon bottled water, Everpure (R) products for the foodservice industry and
reverse osmosis demineralization unit and "Hey Culligan Man" (R) logo.
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
ADDITIONAL INFORMATION
Culligan Water Technologies, Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission (the "Commission").
The Company has furnished and intends to furnish reports to its stockholders,
which will include financial statements audited by its independent
accountants, and such other reports as it may determine to furnish or as
required by law, including Sections 13(a) and 15(d) of the Exchange Act.
Reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and the Commission's regional offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
at Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661.
Copies of such materials also may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The aforementioned reports, proxy statements and other
information concerning the Company can also be inspected at the offices of the
New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New
York 10005, on which the Company's Common Stock is listed. In addition, the
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Common Stock
being offered in the Offerings. This Prospectus, which forms part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement or to a document
incorporated by reference herein, reference is made to such exhibit or
document for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
The Registration Statement and the exhibits and schedules thereto filed by
the Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as the Regional Offices of the Commission at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
information can be obtained by mail from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference and made a part hereof:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1996;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
April 30, 1996 and July 31, 1996;
3. The description of the Common Stock incorporated by reference in the
Company's Registration Statement on Form 8-A dated November 22, 1995;
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4. The description of the rights associated with the Common Stock included
in the Company's Registration Statement on Form 8-A dated September 16,
1996; and
5. All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offerings of the shares
of Common Stock.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to the Company,
One Culligan Parkway, Northbrook, Illinois, 60062. Attention: Corporate
Secretary, telephone (847) 205-6000.
----------------
Any statement contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, appearing elsewhere in this Prospectus or
incorporated herein by reference. Unless the context otherwise requires, all
references herein to the "Company" and "Culligan" are to Culligan Water
Technologies, Inc., a Delaware corporation, and its consolidated subsidiaries,
and all references herein to "Common Stock" are to the Company's common stock,
par value $.01 per share, and the associated rights described under
"Description of Capital Stock--Stockholder Rights Plan." Unless otherwise
specified, the information in this Prospectus assumes that the over-allotment
options granted to the Underwriters are not exercised.
THE COMPANY
Culligan is one of the world's leading manufacturers and distributors of
water purification and treatment products and services for household and
consumer, and commercial and industrial applications. Products and services
offered by the Company range from those designed to solve common residential
water problems, such as filters for tap water and household water softeners, to
highly sophisticated equipment and services, such as ultrafiltration and
microfiltration products, desalination systems and portable deionization
services ("PDS"), designed for complex commercial and industrial applications.
In addition, since the Company entered the five-gallon bottled water market in
1987, Culligan's licensed bottled water sales have grown to rank fifth in the
five-gallon bottled water market in the United States. In mid-1996, Culligan
launched a line of water filtration products for sale through department stores
and do-it-yourself outlets utilizing the WaterWare by Culligan(R) tradename.
Water purification and treatment has developed into a multi-billion dollar
global industry in response to increasingly limited potable water supplies,
global economic expansion, the increasing need for high-quality or ultrapure
water by commercial and industrial companies, heightened public health and
safety concerns relating to drinking water, and the promulgation of numerous
governmental regulations governing water quality. The United States
Environmental Protection Agency's Science Advisory Board, an independent panel
established by Congress, has cited drinking water contamination as one of the
highest ranking environmental risks. In addition, the recently enacted Safe
Drinking Water Act demonstrates a heightened public awareness of the importance
of safe drinking water and a recognition of the need for cost-effective
technological solutions, such as those supplied by Culligan, to protect public
health. The Company believes that it enjoys a competitive advantage in the
water purification and treatment industry based on its widely recognized brand
names, extensive distribution network, technological expertise, broad range of
products and substantial cash flow available for investment, product
development and marketing activities. The Company provides complete solutions
to pre-use water problems through a combination of testing, product selection,
installation, monitoring and service.
The Company has been an active participant in the water purification and
treatment industry since 1936, and its Culligan(R) and Everpure(R) brands,
which are associated with high-quality pure water, are among the most
recognized in the industry. The Company's products are sold and serviced in
over 90 countries through a worldwide network of over 1,400 sales and service
centers. Supporting this distribution network, the Company maintains
manufacturing facilities in the United States, Italy, Spain and Canada. During
the last 15 years, the Company's residential water treatment systems have been
installed in over 2.5 million households in the United States, representing the
largest installed base in the country. In addition, over 1.3 million of the
Company's commercial, industrial, municipal and desalination systems have been
installed worldwide. The Company's customer base includes such
5
<PAGE>
well known names as McDonald's(R), Coca-Cola(R), Pepsi-Cola(R), Starbucks(R),
7-Eleven(R), Navistar, Owens-Corning, Eli Lilly, Carnival Cruise Lines,
Ingersoll-Rand and Union Carbide.
With net sales of $330.8 million for the twelve months ended July 31, 1996,
the Company is one of the leaders in the highly fragmented water purification
and treatment industry. The Company and its dealers provide a wide range of
services to support its products and offer a full line of accessories and
replacement parts. Approximately 48% of the Company's net sales in fiscal 1996
were derived from sources believed to be recurring in nature, such as servicing
installed equipment, sales of replacement parts, filters and other consumables,
equipment rental and royalties. In fiscal 1996, approximately 40% of the
Company's net sales were from export and international sales. The Company
conducts its activities in two principal areas: (i) household and consumer,
including bottled water, and (ii) commercial and industrial, including portable
deionization services and operate and maintain ("O&M") and build, own and
operate water and wastewater treatment services.
RECENT DEVELOPMENTS
With the hiring of a new chief executive officer in January 1995 and the
Spin-off of Culligan as an independent company in September 1995, the Company
re-focused on growth. Management's business plan is designed to direct
Culligan's resources towards enhancing the Company's leadership position in a
growing yet fragmented industry. In the twelve months since becoming an
independent public company, Culligan's accomplishments include the following:
STRATEGIC ACQUISITIONS. Made four strategic acquisitions to expand the
Company's existing businesses:
. BRUNER, a manufacturer and distributor of water treatment products
primarily for commercial and industrial applications, broadening
Culligan's commercial presence and complementing its existing channels of
distribution;
. CULLIGAN OPERATING SERVICES, created from the purchase of an O&M business
for water and wastewater treatment facilities in the southeastern United
States, establishing Culligan's presence in the wastewater treatment
market, providing synergies with its existing equipment business, and
reinforcing Culligan's position as the complete water solutions provider;
. ULTRA PURE SYSTEMS, the owner of proprietary carbon block filter
technology and a manufacturer of carbon block filters, facilitating the
launch of Culligan's consumer filter product line and its Water by
Culligan(R) co-branding strategy;
. ENERSERVE, which builds, owns and operates desalination and other water
treatment facilities and sells water by the gallon to hotels and
communities in the Caribbean, furthering Culligan's build, own and
operate strategy;
DEALER ACQUISITIONS. Instituted a dealer acquisition program designed to
strengthen Culligan's position in major markets. In the last 14 months,
Culligan has acquired five domestic and three European dealers as well as a PDS
business;
CONSUMER PRODUCTS. Launched a line of consumer water filtration products for
sale through department stores and do-it-yourself outlets under the WaterWare
by Culligan(R) brand. The line includes faucet mount filters, under-counter
systems and a whole house sediment and rust filtration system, with products
expected to be available in over 5,000 retail stores by the end of 1997;
6
<PAGE>
MARKETING PARTNERSHIPS/CO-BRANDING. Entered into a marketing partnership with
Health o Meter, the parent of Mr. Coffee, for co-branded pour through pitchers.
Initiated plans for additional marketing partnerships under which Culligan will
supply filtration elements for refrigerator water/ice dispenser systems,
integral faucet systems, coffee makers and other products, all prominently
displaying the Water by Culligan(R) logo, furthering Culligan's strategy to co-
brand with partners having strong market shares who can offer rapid channel
access with the opportunity to obtain recurring revenues from replacement
filter sales;
INTERNATIONAL EXPANSION. Reorganized international operations, restoring the
division to profitability in fiscal 1996 and enhancing revenue growth, and
expanded Culligan's worldwide reach by signing joint venture agreements or
letters of intent with partners in Australia, India and the Middle East; and
BRAND REINFORCEMENT. Launched, in partnership with Culligan's U.S. dealer
organization, a national television advertising program designed to reinforce
Culligan's position as the preeminent brand name in the water purification and
treatment industry.
These accomplishments, combined with programs to maximize manufacturing
efficiency and service quality, are intended to establish Culligan as the
global water solutions company and are reflected in the Company's recent
financial results. Net sales and adjusted income before interest and taxes
(excluding a gain from an insurance settlement) for the first six months of the
current fiscal year each increased by approximately 17.5% compared to the
comparable period of the prior year. See "Selected Historical and Pro Forma
Financial Data."
BUSINESS STRATEGY
Consistent with its focus on growth, the Company continues to pursue
expansion of its existing operations as well as growth through acquisitions.
EXPANSION OF EXISTING OPERATIONS
LEVERAGE THE COMPANY'S BRAND NAMES. Culligan(R) is the preeminent brand name
in the water purification and treatment industry. Management plans to continue
to extend its Culligan(R) and Everpure(R) brands to additional product and
market categories. Specifically, Culligan plans to (i) add more products and
outlets to its WaterWare by Culligan(R) consumer line, (ii) seek additional
opportunities for joint marketing efforts in which Culligan can satisfy
filtration needs under its Water by Culligan(R) logo, designed to gain rapid
channel access and recurring revenue, and (iii) market aggressively a full
product and service offering to commercial customers with process water,
foodservice and medical applications. Culligan, in partnership with its
dealers, plans to spend approximately $15 million in the current fiscal year on
advertising to promote its products and reinforce its brand names, up from
$14.1 million spent in its last fiscal year.
LEVERAGE AND EXPAND THE COMPANY'S DISTRIBUTION NETWORK. Management believes
that additional revenue can be derived from the existing network of Culligan
dealers. Many dealers do not currently offer the Company's complete line of
household, commercial and industrial products, bottled water and PDS. The
Company believes it can facilitate the offering of a more complete line of
products in more territories by providing increased technical support and
customer financing as well as through other joint marketing arrangements with
dealers. The Company also has expanded, and believes it can continue to expand,
its distribution network by extending the coverage of Company-owned dealerships
in selected markets and by converting competitors' dealers to Culligan dealers
in order to penetrate additional territories. The Company believes substantial
opportunity also exists to sell additional products directly through Company-
owned major market dealerships and through complementary channels, utilizing
the nationwide dealer network for installation and ongoing service.
7
<PAGE>
EUROPEAN GROWTH. The Company plans to broaden its offering of products and
services in the countries it currently serves in Europe. The Company is
actively building its operations in the United Kingdom and Germany to
complement its already strong and growing businesses in France, Italy, Spain
and Belgium. Because of the historical differences in the Company's marketing
focus on a country-by-country basis, management believes it can expand its
European business by aggressively marketing proven products in markets where
they previously were not part of its business emphasis.
INCREASE RESOURCES AVAILABLE TO THE COMMERCIAL AND INDUSTRIAL BUSINESS. The
Company continually seeks to expand its markets by focusing on the evolving
product and application needs of its customers. To support that effort, the
Company has completed recent acquisitions that enhance Culligan's capabilities
in the areas of build, own and operate, bid/job specifications and O&M markets,
complementing Culligan's existing strengths and allowing the Company to offer a
full range of services for process water, foodservice and medical applications.
Further, the Company has increased dealer technical and marketing support.
Culligan believes that its technical, financial and global resources uniquely
position it to provide commercial and industrial customers having small to
medium-sized projects with superior solutions and after-sale support.
GROWTH THROUGH ACQUISITIONS AND JOINT VENTURES
STRATEGIC ACQUISITIONS. The Company is actively pursuing acquisitions in the
fragmented water purification and treatment industry to enhance its portfolio
of products and services, to better utilize its distribution strength and to
take advantage of its vertically integrated structure. The Company's strategy
focuses on adding products, technology, and/or distribution expertise,
consistent with its targeting of the household and consumer market and small
and medium-sized commercial and industrial projects. For example, the Company
recently acquired Ultra Pure Systems, the owner of proprietary carbon block
filter technology and a manufacturer of carbon block filters, which facilitated
the launch of Culligan's consumer filter product line and its Water by
Culligan(R) co-branding strategy.
DEALER PARTNERSHIPS AND ACQUISITIONS. The Company actively seeks to work with
key existing and prospective dealers in an effort to accelerate their growth by
supplying needed capital and expertise and by entering into various joint
marketing and service programs. To supplement its dealer partnership program,
the Company expects to continue to acquire dealerships in major markets to,
among other things, broaden the product lines offered in such markets. The
Company currently owns 34 of its approximately 1,100 dealerships worldwide.
Based on management's estimates that the average dealer has six dollars of
equipment, service and other revenue for every dollar of purchases from the
Company, management believes that dealer partnerships and acquisitions offer
substantial opportunity for growth.
INTERNATIONAL JOINT VENTURES. Culligan's products, technologies and
expertise, including point-of-use filtration technologies and small systems
expertise, are ideally suited to the water treatment needs of developing
nations. The Company plans to enter many such countries in joint ventures with
local partners to accelerate market penetration and take advantage of local
knowledge. For example, the Company has signed a letter of intent for a joint
venture agreement in India with an Indian partner that already has a strong
presence in the water purification and treatment industry; however, no
assurance can be given that such joint venture will be completed.
8
<PAGE>
GENERAL
The Company is a holding company formed in 1993 and conducts all of its
operations through its subsidiaries. In September 1995, the Company's former
parent, Samsonite Corporation ("Samsonite"), previously named Astrum
International Corp. ("Astrum"), distributed to its stockholders all of the
Company's then outstanding common stock (the "Spin-off"). As a result of the
Spin-off, the Company became a separate public company. In the fourth quarter
of fiscal 1996, the Company successfully completed a public offering of
4,025,000 shares of Common Stock.
The Company's executive offices are located at One Culligan Parkway,
Northbrook, Illinois 60062-6209 and its telephone number is (847) 205-6000.
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Selling
Stockholders:
United States Offering.............. 3,995,937 shares
International Offering.............. 998,984 shares
-------------
Total............................. 4,994,921 shares
Common Stock to be outstanding after
the Offerings(1)..................... 20,590,718 shares
Use of proceeds....................... The Company will not receive any of the
proceeds of the Offerings, unless the
Underwriters' over-allotment options are
exercised. See "Use of Proceeds."
Listing............................... The Common Stock is listed on the NYSE
under the symbol "CUL".
</TABLE>
- --------
(1) Based on shares outstanding on the date of this Prospectus and includes
653,668 shares being sold in the Offerings that will be acquired upon
exercise of outstanding stock options. See "Principal and Selling
Stockholders." Does not include (i) 982,426 shares issuable upon exercise
of outstanding stock options at a weighted average exercise price of $12.35
per share, most of which are subject to time and performance-based vesting
criteria, (ii) 763,500 additional shares reserved for issuance pursuant to
the Company's Amended and Restated 1995 Stock Option and Incentive
Compensation Plan and Directors' Stock Plan or (iii) 749,239 shares of
Common Stock issuable upon exercise in full of the Underwriters' over-
allotment options. See "Use of Proceeds."
9
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider the
risk factors set forth below, as well as the other information contained in
this Prospectus.
SIGNIFICANT NON-CASH CHARGES OF THE COMPANY; REPORTED LOSSES
As a result of the emergence from bankruptcy of Astrum, Samsonite's
predecessor, on June 30, 1993, Astrum and all its subsidiaries, including the
Company, were required to adjust their assets and liabilities to reflect their
fair values. The reorganization value in excess of identifiable assets of the
Company, which was $112 million at the time of Astrum's emergence from
bankruptcy, was amortized through charges to the consolidated statement of
operations over a three year period that ended in June 1996. While these
amounts represent non-cash charges, they have had an adverse effect on
reported results of operations in fiscal years 1994, 1995 and 1996 and in the
six months ended July 31, 1996. The losses so reported as a result of the
amortization of these charges have had a similar effect on reported
stockholders' equity. See "Selected Historical and Pro Forma Consolidated
Financial Data."
RISKS ASSOCIATED WITH IMPLEMENTING BUSINESS STRATEGY
GENERAL. The Company's business strategy includes initiatives to increase
advertising expenditures, expand its distribution network in both new and
existing markets, expand its direct sales force, develop new products, make
strategic acquisitions of businesses, products and technology, introduce
existing products and technologies into new markets and distribution channels
and introduce new products and services internationally. The Company's
strategic plan should be considered in light of the risks, expenses and
difficulties frequently encountered in growing a business enterprise. The
Company expects to incur significant costs in attempting to implement the
initiatives described above. Successful implementation of those initiatives
will depend on numerous factors, many of which are beyond the Company's
control, including economic, competitive and other conditions and
uncertainties and no assurance can be given that the Company will be
successful in implementing its business strategy. The Company's growth
strategy is expected to require greater capital for its successful execution
than the Company has previously required. There can be no assurance that the
Company will grow as desired. See "Prospectus Summary--Business Strategy."
ACQUISITIONS. The Company's business strategy depends in part on its ability
to effect acquisitions in the fragmented water purification and treatment
industry. The Company continually explores acquisition opportunities; however,
at the present time, the Company has no agreement with respect to any
potential acquisition. The purchase price for potential acquisitions, which
could involve consideration substantially in excess of amounts previously paid
by the Company for acquisitions, may be paid in cash, through the issuance of
Common Stock (which would increase the number of shares of Common Stock
outstanding) or other securities of the Company, borrowings, or a combination
thereof. There can be no assurance that the Company will be able to make
acquisitions on terms favorable to the Company. With respect to recently
completed and potential future acquisitions, the Company may encounter various
associated risks, including the possible inability to integrate an acquired
business into the Company's manufacturing systems, increased goodwill
amortization, increased leverage, diversion of management's attention and
unanticipated problems or liabilities, some or all of which could have a
material adverse effect on the Company's operations and financial performance.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
Approximately 40% of the Company's net sales for fiscal 1996 were
attributable to export and international sales. The Company's operations may
be affected by economic, political and governmental conditions in some of the
countries where the Company has manufacturing facilities or where its products
are sold. In addition, changes in economic or political conditions in any of
the countries in which the Company operates could result in unfavorable
exchange rates, new or additional
10
<PAGE>
currency or exchange controls, other restrictions being imposed on the
operations of the Company or expropriation. The Company's operations also may
be adversely affected by significant fluctuations in the value of the U.S.
dollar and the failure of a partner in an international joint venture to meet
performance expectations. See "Prospectus Summary--Business Strategy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPETITION
The markets in which the Company competes are highly competitive. The
Company competes with many domestic and international companies in its global
markets. The principal methods of competition in the markets in which the
Company competes are distribution capabilities, product specifications,
product knowledge and reputation, technology, service and price. The Company
has a significant number of competitors, some of which have greater resources
than the Company.
TECHNOLOGICAL AND REGULATORY CHANGE
The water purification and treatment industry is characterized by changing
technology, competitively imposed process standards and regulatory
requirements, each of which influences the demand for the Company's products
and services. Changes in legislative, regulatory or industrial requirements
may render certain of the Company's purification and treatment products and
processes obsolete. Acceptance of new products may also be affected by the
adoption of new government regulations requiring stricter standards. The
Company's ability to anticipate changes in technology and regulatory standards
and to develop and introduce new and enhanced products successfully on a
timely basis will be a significant factor in the Company's ability to grow and
to remain competitive. There can be no assurance that the Company will be able
to achieve the technological advances that may be necessary for it to remain
competitive or that certain of its products will not become obsolete. In
addition, the Company is subject to the risks generally associated with new
product introductions and applications, including lack of market acceptance,
delays in development or failure of products to operate properly.
RESTRICTIVE COVENANTS
The Company's bank credit facility (the "Credit Facility") requires the
Company to achieve and maintain certain financial ratios. In addition, the
Credit Facility contains numerous financial and operating covenants, including
restrictions on the ability of the Company to pay dividends, incur
indebtedness, merge, consolidate or transfer all or substantially all of its
assets, make certain sales of assets, and create, incur or permit the
existence of certain liens. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." Such financial ratios, restrictions and covenants affect the
operating flexibility of the Company. The failure to maintain the ratios or to
comply with the covenants would result in a default and permit the lenders
under the Credit Facility to accelerate the maturity of the indebtedness
governed by the Credit Facility and related instruments.
CONTROLLING STOCKHOLDERS
Prior to giving effect to the Offerings, certain entities affiliated with
Carl C. Icahn (collectively, "Icahn") and affiliates of Apollo Advisors, L.P.
(collectively "Apollo") beneficially own approximately 17.3% and 36.8%,
respectively, of the outstanding Common Stock. Upon completion of the
Offerings, Icahn will no longer beneficially own any shares of Common Stock
and Apollo will own approximately 35.6% of the outstanding Common Stock (34.4%
if the over-allotment options granted to the Underwriters are exercised in
full). By reason of such percentage ownership, Apollo may have significant
control over the management and policies of the Company.
11
<PAGE>
The level of ownership of the outstanding Common Stock by the Company's
principal stockholders may have the effect of making more difficult or of
discouraging, absent the support of such stockholders, a proxy contest, a
merger involving the Company, a tender offer, an open market purchase program
or other purchases of the Common Stock that could give holders of such stock
the opportunity to realize a premium over the then-prevailing market price for
their shares of the Common Stock. See "Principal and Selling Stockholders."
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation,
Amended and Restated By-Laws and the Company's stockholder rights plan,
together or separately, may discourage potential acquisition proposals, delay
or prevent a change in control of the Company and limit the price that certain
investors might be willing to pay in the future for shares of the Common
Stock. These provisions include a classified board of directors, the ability
to issue, without further stockholder approval, preferred stock with rights
and privileges which would be senior to the Common Stock and advance notice
procedures for stockholders to nominate candidates for election as directors
of the Company and submit proposals for consideration at stockholders'
meetings. See "Description of Capital Stock--Certain Charter and By-Laws
Provisions" and "--Stockholder Rights Plan."
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
Common Stock, or the availability of Common Stock for future sales, will have
on the market price of the Common Stock prevailing from time to time. Sales in
the public market of substantial amounts of Common Stock (including shares of
Common Stock acquired upon the exercise of options), or the perception that
such sales could occur, could adversely affect prevailing market prices for
the Common Stock. See "Shares Eligible for Future Sale."
DIVIDEND POLICY
The Company does not intend to declare any cash dividends on its Common
Stock in the foreseeable future. See "Dividend Policy."
12
<PAGE>
USE OF PROCEEDS
The Company will receive no part of the proceeds from the sale of shares of
Common Stock contemplated hereby, unless the Underwriters' over-allotment
options are exercised. If such over-allotment options are exercised in full,
the Company will receive net proceeds (after payment of the estimated expenses
of the Offerings) of approximately $ million which it will use to repay
indebtedness under the Credit Facility. During the first six months of fiscal
1997, borrowings under the Credit Facility bore interest at a weighted average
interest rate of 6.8% per annum. The Company will bear all expenses incurred
in connection with the Offerings, other than underwriting discounts and
commissions borne by the Selling Stockholders.
CAPITALIZATION
The following table sets forth the Company's capitalization as of July 31,
1996. The information set forth in the table should be read in conjunction
with "Selected Historical and Pro Forma Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JULY 31, 1996
-------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents........................................ $ 5,533
========
Short-term debt:
Notes payable and current maturities of long-term debt......... $ 10,073
========
Long-term debt:
Notes payable to banks......................................... $ 39,524
Other.......................................................... 1,158
--------
Total long-term debt......................................... 40,682
========
Stockholders' equity:
Common stock, $.01 par value per share:
60,000,000 shares authorized; 19,918,950 shares issued
and outstanding (1)......................................... 199
Additional paid-in capital..................................... 196,011
Retained earnings (deficit).................................... (78,252)
Foreign currency translation adjustment........................ (518)
--------
Total stockholders' equity................................... 117,440
--------
Total capitalization......................................... $168,195
========
</TABLE>
- --------
(1) Does not include (i) 1,650,594 shares issuable upon exercise of
outstanding stock options at a weighted average exercise price of $10.78
per share, most of which are subject to time and performance-based vesting
criteria, (ii) 762,000 additional shares reserved for issuance pursuant to
the Company's Amended and Restated 1995 Stock Option and Incentive
Compensation Plan and Directors' Stock Plan or (iii) 749,239 shares of
Common Stock issuable upon exercise in full of the Underwriters' over-
allotment options. See "Use of Proceeds."
13
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the NYSE under the symbol "CUL." The
following table sets forth the high and low sale prices per share of the
Common Stock as reported on the NYSE since December 15, 1995.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ------ ------
<S> <C> <C>
Dec. 15, 1995-Jan. 31, 1996................................. 28 1/4 22 1/2
Feb. 1, 1996-Apr. 30, 1996.................................. 33 3/4 27 5/8
May 1, 1996-July 31, 1996................................... 40 3/4 32 3/4
August 1, 1996-October 2, 1996.............................. 40 1/4 32 7/8
</TABLE>
From the Spin-off until December 15, 1995, there was no established public
trading market for the Common Stock. During such period, approximately 84% of
the Common Stock was held by four beneficial owners and the Common Stock was
not listed on any securities exchange. During that period, the Common Stock
was traded in interdealer and over-the-counter bulletin board transactions.
The range of the bid quotations for the Common Stock from the Spin-off through
December 14, 1995 ranged from a high of $25 per share on December 12, 1995 to
a low of $14 per share on September 28, 1995. Although the quotations for the
period prior to December 15, 1995 have been obtained from sources believed to
be reliable, no assurances can be given with respect to the accuracy of such
quotations or as to whether other bid prices higher or lower than those set
forth above may have been quoted. In addition, such quotations reflect
interdealer prices, which may not include retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
At August 31, 1996, there were 93 holders of record of the Common Stock.
DIVIDEND POLICY
The Company has not declared any cash dividends on the Common Stock since
the Spin-off. The Company currently anticipates that it will not pay cash
dividends on shares of the Common Stock in the foreseeable future. The payment
of dividends will be a business decision to be made by the Company's Board of
Directors from time to time based on such considerations as the Board of
Directors deems relevant, will be payable only out of funds legally available
under Delaware law and will be subject to any restrictions which may be
contained in the Company's debt instruments. The payment of cash dividends on
the Common Stock is currently restricted by the Credit Facility. For a
description of dividends paid during periods prior to the Spin-off, see the
Company's Consolidated Financial Statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended January 31, 1996. Such
dividends paid prior to the Spin-off are not indicative of the Company's
present or future dividend policy.
14
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The selected historical financial data presented below are derived from the
Company's audited consolidated financial statements. The Company's
consolidated financial statements as of and for the fiscal years ended January
31, 1994, January 31, 1995 and January 31, 1996 have been audited by KPMG Peat
Marwick LLP ("Peat Marwick"), independent auditors. Peat Marwick's report on
the Company's consolidated financial statements for the fiscal year ended
January 31, 1994 contains language that (i) explains the financial statements
for periods subsequent to June 30, 1993 are presented on a different cost
basis than for prior periods and, therefore, are not comparable; and (ii)
highlights changes in methods for accounting for income taxes and post-
retirement benefits other than pensions. The selected historical data as of
and for the six months ended July 31, 1995 and 1996 are unaudited but, in the
opinion of management, include all adjustments (consisting of normal recurring
adjustments) necessary for the fair presentation of the financial data for
such periods.
The selected pro forma statement of operations data for the fiscal year
ended January 31, 1996 give effect to (i) the Company's borrowings under the
Credit Facility during July 1995 that were used to repay an outstanding note
payable to Samsonite (the "Refinancing") and (ii) the public offering of
4,025,000 shares of the Company's Common Stock in the fourth quarter of 1996
(the "Initial Offering"), the proceeds from which were used to repay
borrowings under the Credit Facility, in each case as if they had occurred on
February 1, 1995. The pro forma statement of operations is based on the
audited consolidated financial statements of the Company for the fiscal year
ended January 31, 1996. The pro forma statement of operations is not
necessarily indicative of the results of operations that would have been
reported if such transactions had occurred on the date referred to, nor are
they necessarily indicative of the results of operations to be expected in the
future.
The selected financial information presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended January 31, 1996 which are incorporated by reference herein.
15
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY (A) REORGANIZED COMPANY (A)
---------------------------- --------------------------------------------------------------
FIVE SEVEN
YEAR ENDED MONTHS MONTHS YEAR ENDED PRO FORMA SIX MONTHS ENDED
JANUARY 31, ENDED ENDED JANUARY 31, YEAR ENDED JULY 31,
------------------ JUNE 30, JANUARY 31, ------------------ JANUARY 31, ------------------
1992 1993 1993 1994 1995 1996 1996 (B) 1995 1996
-------- -------- -------- ----------- -------- -------- ----------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net Sales.................... $259,805 $261,924 $109,748 $154,325 $280,051 $304,502 $304,502 $148,982 $175,312
Cost of Goods Sold (f)....... 142,590 144,343 60,894 87,112 155,829 168,363 168,363 80,679 97,202
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross Profit................. 117,215 117,581 48,854 67,213 124,222 136,139 136,139 68,303 78,110
Selling, General and
Administrative (f).......... 91,157 87,817 36,339 50,341 91,989 95,723 95,723 48,510 54,050
Administrative Expenses
Allocated from Samsonite
(c)......................... -- -- -- -- 1,095 -- -- -- --
Restructuring Expenses (d)... -- -- -- 2,103 5,917 -- -- -- --
Amortization of Intangible
Assets (e).................. 1,704 1,745 731 22,554 38,691 38,802 38,802 19,321 16,345
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating Income (Loss)...... 24,354 28,019 11,784 (7,785) (13,470) 1,614 1,614 472 7,715
Other Income (Expense), Net
(g)......................... 2,924 151 (324) 1,919 398 2,867 2,867 1,244 2,969
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (Loss) Before Interest
and Taxes................... 27,278 28,170 11,460 (5,866) (13,072) 4,481 4,481 1,716 10,684
Interest Income.............. 4,288 4,253 1,436 886 1,439 1,576 1,576 770 1,093
Interest Expense (h)......... (2,115) (2,229) (1,039) (11,576) (19,085) (12,426) (5,193) (7,373) (2,705)
Income Taxes................. (13,013) (15,678) (4,387) (3,434) (5,678) (14,910) (17,803) (6,280) (9,659)
Cumulative Effect of Changes
in Accounting Principles for
--Postretirement Benefits
(Net of Taxes of $220)..... (3,708) -- -- -- -- -- -- -- --
--Income Taxes.............. -- 4,602 -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Income (Loss)............ $ 12,730 $ 19,118 $ 7,470 $(19,990) $(36,396) $(21,279) $(16,939) $(11,167) $ (587)
======== ======== ======== ======== ======== ======== ======== ======== ========
Outstanding Shares (000's)... 19,914 19,915
Net Loss Per Share........... $ (0.85) $ (0.03)
======== ========
OTHER DATA:
Income (Loss) Before Interest
and Taxes................... $ 27,278 $ 28,170 $ 11,460 $ (5,866) $(13,072) $ 4,481 $ 4,481 $ 1,716 $ 10,684
"Fresh Start" Amortization
and Depreciation............ -- -- -- 24,089 40,743 40,238 40,238 20,157 16,879
Administrative Expenses
Allocated from Samsonite.... -- -- -- -- 1,095 -- -- -- --
Restructuring Expenses....... -- -- -- 2,103 5,917 -- -- -- --
Gain on Insurance Settlement. -- -- -- -- -- -- -- -- (1,880)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Adjusted Income Before
Interest and Taxes.......... 27,278 28,170 11,460 20,326 34,683 44,719 44,719 21,873 25,683
Depreciation and Amortization
(Other than "Fresh Start").. 8,786 9,067 3,906 4,161 7,227 7,973 7,973 3,667 4,303
-------- -------- -------- -------- -------- -------- -------- -------- --------
EBITDA (i)................... $ 36,064 $ 37,237 $ 15,366 $ 24,487 $ 41,910 $ 52,692 $ 52,692 $ 25,540 $ 29,986
- -------------------------------
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
(see footnotes beginning on page 18)
16
<PAGE>
IMPACT OF FAIR VALUE ADJUSTMENTS ATTRIBUTABLE TO THE REORGANIZATION OF ASTRUM
AND ITEMS NOT EXPECTED TO RECUR:
Included in the Reorganized Company's statements of operations subsequent to
June 30, 1993, are amortization and depreciation related to adjustments of
assets and liabilities to fair value in connection with the adoption of the
American Institute of Certified Public Accountants Statement of Position 90-7
entitled "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7"). The most significant adjustment relates to
reorganization value in excess of identifiable assets which was amortized over
a three year period that ended in June of 1996. In addition, the Reorganized
Company's statement of operations for the six months ended July 31, 1996
includes a gain from an insurance settlement which is not expected to recur.
Due to the significance of these items, and considering that they are either
of a short duration or nonrecurring, management believes that it is useful to
isolate their impact on the statements of operations. The after-tax impact on
net income and the impact on net loss per share are shown below. This
information does not represent and should not be considered an alternative to
net income, any other measure of performance as determined by generally
accepted accounting principles or as an indicator of operating performance.
<TABLE>
<CAPTION>
PRO FORMA SIX MONTHS
YEAR ENDED ENDED
JANUARY 31, JULY 31,
1996 1996
----------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Amortization of Reorganization Value in Excess of
Identifiable Assets(e).......................... $(37,322) $(15,551)
Gain on Insurance Settlement(g).................. -- 1,880
Income Tax Provision............................. -- (733)
-------- --------
After-Tax Impact on Net Income................... $(37,322) $(14,404)
======== ========
Impact on Net Loss Per Share..................... $ (1.87) $ (0.72)
======== ========
</TABLE>
(see footnotes beginning on page 18)
17
<PAGE>
- -------
(a) In June 1993, Samsonite's predecessor, Astrum, completed a financial
restructuring pursuant to a plan of reorganization under Chapter 11 of the
United States Bankruptcy Code (the "Plan"). Effective June 30, 1993 and
pursuant to SOP 90-7, Astrum and all its subsidiaries, including the
Company, were required to adjust their assets and liabilities to their
fair ("fresh start") values. Due to the effect of SOP 90-7, Amortization
of Intangible Assets and Interest Expense (see notes (e) and (h) below)
for the periods before and after June 30, 1993 are not comparable. The
information for the "Predecessor Company" reflects activity occurring
through June 30, 1993, prior to the effectiveness of the Plan and the
information for the "Reorganized Company" reflects activity occurring
after such date.
(b) The pro forma statement of operations data for fiscal 1996 gives effect to
the Refinancing and the Initial Offering, in each case as if they had
occurred on February 1, 1995. The effects of these transactions are set
forth below.
(i) Refinancing: Pro forma interest expense as a result of the Refinancing
decreased by $1.3 million for fiscal 1996, reflecting the capitalization
of the Company as a stand alone company and the borrowing under the
Credit Facility. The interest rate on the borrowing under the Credit
Facility was assumed to be 8.0% as compared to the interest rate on the
note payable to Samsonite of 11.5%.
(ii) Initial Offering: Reflects the sale of 4,025,000 shares of Common Stock
in the Initial Offering and a reduction in interest expense of $5.9
million for fiscal 1996, reflecting the repayment of borrowings under
the Credit Facility with the net proceeds from the Initial Offering and
the reduction in the assumed interest rate to 6.5% resulting from the
reduced borrowings. A fluctuation of 1/8% in the interest rate would
result in a corresponding increase or decrease in interest expense for
fiscal 1996 of $18,254.
(iii) Income taxes have been adjusted to reflect the adjustments described
in (i) and (ii) above.
(c) Administrative Expenses Allocated from Samsonite represent certain
accounting and management services performed for the benefit of the
Company primarily related to Astrum's reorganization and the Spin-off. In
prior years, these services were not provided, and are not anticipated to
recur on an on-going basis.
(d) The Company implemented a plan to consolidate the production facilities
and administrative functions of certain operations in Europe. The
severance, other personnel related costs and facility shut-down expenses
related to the restructuring resulted in charges in fiscal 1994 and fiscal
1995 of $2.1 million and $5.9 million, respectively.
(e) Amortization of Intangible Assets consists of the following:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY(A) REORGANIZED COMPANY(A)
---------------------- -------------------------------------------
FIVE SEVEN
EXPECTED YEAR ENDED MONTHS MONTHS YEAR ENDED SIX MONTHS
USEFUL JANUARY 31, ENDED ENDED JANUARY 31, ENDED JULY 31,
LIFE ------------- JUNE 30, JANUARY 31, --------------- ---------------
(YEARS) 1992 1993 1993 1994 1995 1996 1995 1996
-------- ------ ------ -------- ----------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amortization of Reorganization Value in
Excess of Identifiable Assets........... 3 -- -- -- $21,771 $37,322 $37,322 $18,660 $15,551
Amortization of Trademarks............... 40 -- -- -- 758 1,300 1,300 650 650
------- ------ ------ ---- ------- ------- ------- ------- -------
"Fresh Start" Amortization............... -- -- -- -- 22,529 38,622 38,622 19,310 16,201
Amortization of Other Intangibles........ 3 to 40 $1,704 $1,745 $731 25 69 180 11 144
------ ------ ---- ------- ------- ------- ------- -------
Amortization of Intangible Assets........ $1,704 $1,745 $731 $22,554 $38,691 $38,802 $19,321 $16,345
--------------------------------------------------
====== ====== ==== ======= ======= ======= ======= =======
</TABLE>
"Fresh Start" Amortization represents the expense arising solely as a result
of "fresh start" accounting in accordance with SOP 90-7.
(f) Depreciation included in Cost of Goods Sold and Selling, General and
Administrative related to adjustments of assets and liabilities to fair
value in connection with the adoption of SOP 90-7 consists of the
following:
<TABLE>
<CAPTION>
SIX
MONTHS
SEVEN MONTHS YEAR ENDED ENDED
ENDED JANUARY 31, JULY 31,
JANUARY 31, ------------- ---------
1994 1995 1996 1995 1996
------------ ------ ------ ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
"Fresh Start" Depreciation in Cost of
Goods Sold............................ $1,040 $1,414 $1,077 $565 $452
"Fresh Start" Depreciation in Selling,
General and Administrative............ 520 707 539 282 226
------ ------ ------ ---- ----
Total "Fresh Start" Depreciation....... $1,560 $2,121 $1,616 $847 $678
====== ====== ====== ==== ====
</TABLE>
Property and equipment revalued in connection with the adoption of SOP 90-7
are being depreciated over their respective estimated useful lives,
primarily ranging from two to six years.
(g) Other Income (Expense), Net for the six month period ended July 31, 1996
includes a gain of $1.9 million on an insurance settlement associated with
a fire at the Company's Belgian facility in July 1993.
(h) Interest Expense for periods subsequent to June 30, 1993 includes interest
on the $150 million note payable to Samsonite issued in connection with
Astrum's reorganization. A principal payment of $20 million to Samsonite
and a $30 million contribution by Samsonite to equity capital of the
Company on December 1, 1994 and January 31, 1995, respectively, reduced
the outstanding principal during fiscal 1995. The outstanding balance of
such note was repaid in full in connection with the Refinancing.
(i) EBITDA is defined as income before interest and taxes, restructuring
expenses, gain on insurance settlement and administrative expenses
allocated from Samsonite plus depreciation and amortization. The Company
believes that EBITDA provides useful information regarding a company's
financial performance. EBITDA should not be considered in isolation or as
an alternative to net income, an indicator of the Company's operating
performance, or an alternative to the Company's cash flow from operating
activities as a measure of liquidity.
18
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY REORGANIZED COMPANY(A)
---------------------- -----------------------------------------------
AS OF JANUARY 31, AS OF JANUARY 31,
---------------------- -------------------------------- AS OF JULY 31,
1992 1993 1994 1995 1996(B) 1996
--------- --------- -------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property, Plant and
Equipment, Net......... $ 43,555 $ 45,326 $ 68,043 $ 68,974 $ 70,749 $ 68,120
Total Assets............ 280,595(c) 305,183(c) 331,035(c) 303,431 292,570 292,977
Long-Term Debt and
Capital Lease
Obligations (Including
Current Debt).......... 11,676 11,959 159,404 114,635(d) 48,324 50,755
Total Liabilities....... 104,797 113,101 278,734 255,187 173,481 175,537
Stockholders' Equity.... 175,798 192,082 52,301(e) 48,244 119,089 117,440
</TABLE>
- --------
(a) Includes the effects of SOP 90-7 "fresh start" reporting recorded at June
30, 1993, net of depreciation and amortization. Pursuant to SOP 90-7, the
net book value of property and equipment was increased by $28 million,
intangible and other assets were increased by $110 million, and a deferred
tax liability of $35 million was recorded. In addition, in June 1993, the
Company issued a subordinated note payable to Samsonite in the amount of
$150 million.
(b) During fiscal 1996, the Company completed the sale of 4,025,000 shares of
Common Stock in the Initial Offering. Net proceeds included in equity
capital at January 31, 1996 are approximately $87 million. The Company
used such proceeds to repay borrowings under the Credit Facility. Also
during fiscal 1996, prior to the Spin-off, Samsonite contributed
approximately $5 million to equity capital of the Company.
(c) Prior to January 25, 1991, all of the Company's domestic cash requirements
were funded through the centralized cash management system of Samsonite.
At January 25, 1991, the Company assumed responsibility for its cash
management and Samsonite transferred $35 million to the Company. As a
result of this change, cash increased by $32 million and $20 million at
January 31, 1992 and 1993, respectively. At January 31, 1994, cash
decreased $91 million primarily as a result of payments of dividends and
intercompany payables in connection with Astrum's reorganization.
(d) During fiscal 1995, a principal payment of $20 million to Samsonite and a
$30 million contribution by Samsonite to equity capital of the Company
were made on December 1, 1994 and January 31, 1995, respectively, related
to the note payable to Samsonite.
(e) During fiscal 1994, the Company paid dividends to Samsonite of $76
million. In addition, the effects of "fresh start" reporting recorded at
June 30, 1993, net of the impact of issuing the $150 million note payable
to Samsonite, reduced equity capital by approximately $47 million.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and accompanying notes included in the
Company's Annual Report on Form 10-K for the year ended January 31, 1996 filed
with the Securities and Exchange Commission. As a result of the Spin-off, the
Company became a separate public company in September 1995. Following the
Spin-off, the Company completed a public offering of 4,025,000 shares of
Common Stock. The Company's fiscal year ends on January 31. The following
discussion and analysis of results of operations compare (i) the Company's
results of operations for the six months ended July 31, 1996 with the
Company's results of operations for the six months ended July 31, 1995, (ii)
the Company's results of operations for fiscal 1996 with the Company's results
of operations for fiscal 1995, and (iii) the Company's results of operations
for fiscal 1995 with the combined results of operations for the five months
ended June 30, 1993 for the Predecessor Company and the Reorganized Company's
results of operations for the seven months ended January 31, 1994. Due to a
revaluation of assets and liabilities and the adoption of a new basis of
accounting from "fresh start" reporting, the results of operations for periods
subsequent to June 30, 1993 are not comparable to the results of operations
for prior periods.
RESULTS OF OPERATIONS
COMPARATIVE SUMMARY OF OPERATING RESULTS
As an aid to understanding the Company's operations on a comparative basis,
the following table presents certain statements of operations and other data
for fiscal 1994, 1995 and 1996 and the six months ended July 31, 1995 and
1996.
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL 1994 FISCAL 1995 FISCAL 1996 ENDED JULY 31,
------------- -------------- ------------- ----------------------------
1995 1996
------------- -------------
% OF % OF % OF % OF % OF
NET NET NET NET NET
DOLLARS SALES DOLLARS SALES DOLLARS SALES DOLLARS SALES DOLLARS SALES
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $264.1 100.0% $280.1 100.0% $304.5 100.0% $149.0 100.0% $175.3 100.0%
Gross Profit............ 116.1 44.0% 124.2 44.3% 136.1 44.7% 68.3 45.8% 78.1 44.6%
Selling, General and
Administrative
Expenses............... 86.7 32.8% 92.0 32.8% 95.7 31.4% 48.5 32.6% 54.1 30.9%
Administrative Expenses
Allocated From
Samsonite.............. -- 1.1 -- -- --
Restructuring Expenses.. 2.1 5.9 -- -- --
Amortization of
Intangible Assets...... 23.3 38.7 38.8 19.3 16.3
------ ------ ------ ------ ------
Operating Income (Loss). 4.0 (13.5) 1.6 0.5 7.7
Other Income (Expense),
Net (a)................ 1.6 0.4 2.9 1.2 3.0
------ ------ ------ ------ ------
Income (Loss) Before
Interest and Taxes..... $ 5.6 ($13.1) $ 4.5 $ 1.7 $ 10.7
====== ====== ====== ====== ======
Adjusted Income Before
Interest and Taxes(b).. $ 31.8 12.0% $ 34.7 12.4% $ 44.7 14.7% $ 21.9 14.7% $ 25.7 14.7%
EBITDA(b)............... $ 39.9 15.1% $ 41.9 15.0% $ 52.7 17.3% $ 25.5 17.1% $ 30.0 17.1%
</TABLE>
- --------
(a) Other Income (Expense), Net for the six month period ended July 31, 1996
includes a gain of $1.9 million on an insurance settlement associated with
a fire at the Company's Belgian facility in July 1993.
20
<PAGE>
(b) Adjusted income before interest and taxes and EBITDA have been calculated
as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
JANUARY 31, JULY 31,
------------------- -----------
1994 1995 1996 1995 1996
----- ------ ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Income (Loss) Before Interest and Taxes.... $ 5.6 ($13.1) $ 4.5 $ 1.7 $10.7
"Fresh Start" Amortization and
Depreciation.............................. 24.1 40.8 40.2 20.2 16.9
Administrative Expenses Allocated from
Samsonite................................. -- 1.1 -- -- --
Restructuring Expenses..................... 2.1 5.9 -- -- --
Gain on Insurance Settlement............... -- -- -- -- (1.9)
----- ------ ----- ----- -----
Adjusted Income Before Interest and Taxes.. 31.8 34.7 44.7 21.9 25.7
Depreciation and Amortization (Other than
"Fresh Start")............................ 8.1 7.2 8.0 3.6 4.3
----- ------ ----- ----- -----
EBITDA..................................... $39.9 $ 41.9 $52.7 $25.5 $30.0
===== ====== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JULY 31, 1996 COMPARED TO SIX MONTHS ENDED JULY 31, 1995
Net Sales: Net sales increased $26.3 million, or 17.7%, from $149.0 million
for the six months ended July 31, 1995 to $175.3 million for the six months
ended July 31, 1996. Household product sales increased $12.4 million, or
15.3%, primarily due to increased sales at Company-owned dealerships in both
the U.S. and France and the continued demand for the Company's drinking and
bottled water products in the U.S. Approximately $2.0 million of the increase
in household product sales was attributable to the acquisition of retail
dealers made during the last two quarters of fiscal 1996. Commercial and
industrial product sales increased $13.9 million, or 20.2%, primarily due to
acquisitions consummated in the fourth quarter of fiscal 1996 and increased
market penetration in non-U.S. markets.
Gross Profit: Gross profit increased to $78.1 million for the six months
ended July 31, 1996 from $68.3 million in the prior year, an increase of $9.8
million, or 14.3%. Gross profit as a percentage of sales decreased to 44.6%
for the six month period ended July 31, 1996 from 45.8% during the prior
year's comparable period. This decrease resulted from an expected shift in
product mix primarily resulting from the acquisitions of commercial and
industrial product lines completed at the end of fiscal 1996.
Selling, General and Administrative ("SG&A"): As a percentage of sales, SG&A
was 30.9% for the six month period ended July 31, 1996, decreasing, as a
percentage of sales, by 1.7% from the prior year's comparable period. The
improvement was related to continued cost containment initiatives as well as
the impact from acquired businesses which have, after integration, a SG&A
level as a percentage of sales below the Company's historical levels.
Amortization of Intangible Assets: Amortization of intangible assets
decreased by $3.0 million in the six month period of fiscal 1997 from the
prior year's comparable period due to the "Reorganization Value in Excess of
Identifiable Assets" attributable to the Company's former parent, which became
fully amortized in June 1996. This decrease was slightly offset by
amortization related to intangibles recorded in connection with the Company's
acquisitions consummated during the fourth quarter of fiscal 1996.
Amortization of intangible assets related to such "Reorganization Value in
Excess of Identifiable Assets" was $15.6 million in the six months ended July
31, 1996 and $18.7 million in the six months ended July 31, 1995.
Other Income (Expense), Net: In the first six months of fiscal 1997, other
income (expense), net included a gain of $1.9 million from an insurance
settlement related to a fire at the Company's Belgian facility in July 1993.
21
<PAGE>
Adjusted Income Before Interest and Taxes: For the six month period ended
July 31, 1996, adjusted income before interest and taxes increased $3.8
million, or 17.4%, to $25.7 million from $21.9 million for the prior year's
comparable period due principally to the reasons described above.
EBITDA: EBITDA as a percentage of sales was 17.1% in each of the six month
periods. Increased sales and the improvement in SG&A as a percentage of sales
were offset by expected decreases in the gross profit percentages.
Interest Income (Expense), Net: Interest expense, net of interest income,
decreased to $1.6 million during the first six months of fiscal 1997 from $6.6
million in the prior year's comparable period due to a reduction in borrowings
resulting from the repayment of debt with proceeds from the Company's equity
offering in the fourth quarter of fiscal 1996 and more favorable interest
rates resulting from the refinancing of debt in July 1995.
Income Taxes: The effective tax rate differs from the statutory rate
primarily because of the nondeductibility of the "Amortization of
Reorganization Value in Excess of Identifiable Assets."
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales: The Company achieved record sales and earnings in fiscal 1996.
Sales were $304.5 million in fiscal 1996, an increase of $24.4 million or 8.7%
from the fiscal 1995 total of $280.1 million. All business units reported
increased sales, led by household product sales which increased $18.0 million
or 12.4%, largely due to strong sales growth outside the U.S., the inclusion
of the sales of an acquired retail dealer and moderate gains in sales of U.S.
drinking water products. Commercial and industrial product sales improved $6.4
million or 4.8%, as these product categories continued to benefit from
improved business conditions in non-U.S. markets and the continued improvement
domestically by the Company's Everpure subsidiary. Changes in currency
exchange rates had a favorable effect of $6.6 million in the year-to-year
comparison.
Gross Profit: Gross profit increased to $136.1 million in fiscal 1996
compared to $124.2 million in fiscal 1995, a 9.6% improvement. The Company's
gross profit as a percentage of sales improved to 44.7% from 44.3%. The
principal reasons for the improved margins as a percentage of sales were the
mix of products sold internationally, as well as improved profitability
related to commercial and industrial projects, both domestically and
internationally.
Selling, General and Administrative Expenses: As a percentage of sales, SG&A
was 31.4% in fiscal 1996 as compared with 32.8% in fiscal 1995. The
improvement was due to cost and work force reductions internationally,
operational cost improvements domestically and administrative cost containment
initiatives implemented by the Company's new management team.
Restructuring Expenses: The restructuring of the Company's European
manufacturing and distribution operations resulted in charges totaling $5.9
million in fiscal 1995. The charges included severance costs, inventory
writedowns, architectural fees, and one time retention bonuses for key
management employees responsible for carrying out the restructuring. The
remaining restructuring charges to be paid amount to $1.3 million.
Amortization of Intangible Assets: Amortization of intangible assets
increased slightly to $38.8 million in fiscal 1996 from $38.7 million in
fiscal 1995 as a result of amortization related to the intangible assets
recorded in connection with the Company's acquisitions consummated during the
fourth quarter of fiscal 1996. Amortization of intangible assets in fiscal
1996 and fiscal 1995 includes $37.3 million of "Amortization of Reorganization
Value in Excess of Identifiable Assets" resulting from "fresh start"
accounting as required by SOP 90-7.
22
<PAGE>
Other Income (Expense), Net: The increase in other income (expense), net in
fiscal 1996 from fiscal 1995 was the result of earnings reported from an
affiliate recorded under the equity method of accounting.
Adjusted Income Before Interest and Taxes: Adjusted income before interest
and taxes increased $10.0 million or 28.8% from $34.7 million in fiscal 1995
to $44.7 million in fiscal 1996 due principally to the reasons described
above.
EBITDA: EBITDA as a percentage of sales increased to 17.3% in fiscal 1996
from 15.0% in fiscal 1995 due primarily to increased sales and an improvement
in gross profit margins and SG&A as a percentage of sales.
Interest Income (Expense), Net: Interest income (expense), net decreased to
$10.9 million in fiscal 1996 from $17.6 million in fiscal 1995 principally as
a result of a reduction in borrowings during the year, and more favorable
interest rates as a result of the Refinancing in July 1995.
Income Taxes: The effective tax rate differs from the statutory rate
primarily because of the nondeductibility of the "Amortization of
Reorganization Value in Excess of Identifiable Assets" and differences in non-
U.S. tax rates.
FISCAL 1995 COMPARED TO COMBINED RESULTS FOR FISCAL 1994
Net Sales: Net sales increased $16.0 million, or 6.1%, from $264.1 million
in fiscal 1994 to $280.1 million in fiscal 1995. Household product sales
increased by $13.5 million, or 10.2%. This increase was due primarily to the
success of continued product promotions and an improvement in both the U.S.
and European economies. Commercial and industrial sales increased $2.5
million, or 1.9%, primarily as a result of strong sales of commercial filter
products, both domestically and in non-U.S. markets, offset, in part, by an
unfavorable foreign exchange impact of $0.6 million.
Gross Profit: Gross profit increased to $124.2 million in fiscal 1995 from
$116.1 million in fiscal 1994, an increase of $8.1 million, or 7.0%. Gross
profit as a percentage of sales increased to 44.3% in fiscal 1995 from 44.0%
in fiscal 1994 principally as a result of a more favorable product mix and
greater utilization of manufacturing capacity. Margins on household products
remained constant year-to-year, while margins on commercial and industrial
products improved slightly due to manufacturing efficiencies.
Selling, General and Administrative Expenses: SG&A expenses as a percentage
of sales remained constant at 32.8%. Increases due to inflation were offset by
the impact of higher sales volumes.
Administrative Expenses Allocated from Samsonite: Administrative expenses
allocated from Samsonite represent certain accounting and management services
performed for the benefit of the Company primarily related to the
reorganization of Astrum and the Spin-off. These services were not provided to
the Company in prior years, and are not expected to recur.
Restructuring Expenses: The severance, other personnel related costs and
facility shut-down expenses related to the European restructuring resulted in
charges in fiscal 1994 and fiscal 1995 of $2.1 million and $5.9 million,
respectively.
Amortization of Intangible Assets: Amortization of intangible assets
increased to $38.7 million in fiscal 1995 from $23.3 million in fiscal 1994
due to the inclusion of a full year of "Amortization of Reorganization Value
in Excess of Identifiable Assets" in fiscal 1995 resulting from "fresh start"
accounting as required by SOP 90-7 as compared to only seven months of such
amortization being included in the prior year.
23
<PAGE>
Other Income (Expense), Net: Other income (expense), net decreased to $0.4
million in fiscal 1995 from $1.6 million in fiscal 1994. This decrease was due
to the recognition of a gain from an insurance settlement related to the fire
that destroyed the Company's Belgian plant in fiscal 1994.
Adjusted Income Before Interest and Taxes: Adjusted income before interest
and taxes increased $2.9 million, or 9.1%, from $31.8 million in fiscal 1994
to $34.7 million in fiscal 1995, due primarily to the reasons described above.
EBITDA: EBITDA as a percentage of sales was 15.0% in fiscal 1995, remaining
relatively constant compared to fiscal 1994.
Interest Income (Expense), Net: Interest income decreased to $1.4 million in
fiscal 1995 from $2.3 million in fiscal 1994, a decrease of $0.9 million. This
decrease resulted from reduced available cash due to payments of $93.5 million
to the Company's parent in June 1993 related to Astrum's reorganization.
Interest expense increased to $19.1 million in fiscal 1995 from $12.6 million
in fiscal 1994, an increase of $6.5 million. Fiscal 1995 interest expense
included twelve months of interest on a note due to Samsonite as compared to
only seven months of interest being included in fiscal 1994.
Income Taxes: The effective tax rate differs from the statutory rate
primarily because of the non-deductibility of the "Amortization of
Reorganization Value in Excess of Identifiable Assets."
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash requirements consist principally of working
capital requirements, scheduled payments of principal on its outstanding
indebtedness and capital expenditures. The Company believes that cash flow
from operating activities and periodic borrowings will be adequate to meet the
Company's operating cash requirements in the future.
Cash provided by operating activities was $13.4 million, $12.4 million and
$13.0 million in fiscal 1996, 1995 and 1994, respectively. The increase in
cash provided by operating activities of $1.0 million in fiscal 1996 was
principally due to improved operating results and reduced interest expense,
offset by increased investments in working capital. In fiscal 1995, cash flows
from operations were adversely impacted from the full year interest expense
relating to a $150 million note payable to Samsonite as compared to only seven
months in fiscal 1994. This adverse impact in fiscal 1995 was offset by
favorable working capital changes. In the six months ended July 31, 1996 cash
provided by operating activities was $1.3 million, an increase of $1.9 million
from the prior year's comparable period resulting from improved operating
results and reduced interest offset by increases in working capital which were
required to fund the higher sales volume and new initiatives such as the
introduction of new consumer products in the current year.
Cash utilized for capital expenditures during the six months ended July 31,
1996 and in fiscal 1996, 1995 and 1994 was $7.4 million, $8.8 million, $10.8
million, and $7.7 million, respectively. During the first six months of fiscal
1997, capital expenditures have increased over historical levels due to
expenditures associated with new dealerships in the U.S. and France and the
expansion of manufacturing operations at the Company's Everpure facility.
Capital expenditures are expected to continue to be made, as required, for the
purpose of maintaining and improving operating facilities and equipment to
increase manufacturing efficiencies and enhance the Company's competitiveness
and profitability on a worldwide basis.
At July 31, 1996, the Company had available credit under the Credit Facility
of $114 million. The Company's Credit Facility is available, among other
things, to finance the working capital needs of the Company, fund standby
letters of credit to support international debt and finance acquisitions.
Loans obtained under the Credit Facility bear interest, at the election of the
Company, at either the bank's
24
<PAGE>
base rate or a Eurodollar rate, in both cases, together with an applicable
margin based on the consolidated financial performance of the Company.
In the fourth quarter of fiscal 1996, the Company completed a public
offering of 4,025,000 shares of Common Stock, at $23.50 per share, providing
net proceeds of approximately $87 million which were used to repay
indebtedness under the Credit Facility. The offering proceeds have provided
the Company with a capital structure which will enable it to pursue its
acquisition initiatives and strategically compete in the water industry today.
Since the Spin-off, the Company completed several acquisitions of businesses
which complement existing products and operations of the Company. The
aggregate purchase price of approximately $21.6 million, which includes the
assumption of approximately $3.9 million of debt, was financed through
borrowings under the Credit Facility. The Company intends to continue to make
strategic acquisitions as part of its business strategy and presently expects
to finance these activities either by internally generated funds, bank
borrowings, public offerings or private placements of equity or debt
securities, or a combination of the foregoing. No assurance can be given,
however, with respect to the financial or business effect of any possible
future acquisitions.
The Company's principal non-U.S. operations are located in Western Europe,
the economies of which are not considered to be highly inflationary. The
Company's subsidiaries in Spain, Italy and Belgium are subject to currency
fluctuations because these subsidiaries have monetary assets and liabilities
denominated in other than their respective local currencies. It is the
Company's policy not to speculate in non-U.S. currencies, but rather to hedge
against currency changes by using bank borrowings by its non-U.S. subsidiaries
to reduce the extent to which its monetary assets are at risk. From time to
time, the Company has entered into forward exchange contracts in order to
hedge its exposure on certain intercompany transactions. As of July 31, 1996,
the Company had three forward exchange contracts. One of such contracts for $2
million expired in August 1996 and the other two contracts for $4.3 million
expire in July 1997. Net assets of the Company's non-U.S. subsidiaries
translated at July 31, 1996 exchange rates were approximately $41.0 million at
July 31, 1996, an increase of approximately 10% from January 31, 1996.
25
<PAGE>
BUSINESS
The Company serves the household and consumer market, including the bottled
water market, and the commercial and industrial markets, including PDS and
other markets, offering a broad range of products and services. The Company's
product lines include filtration devices, reverse osmosis systems,
desalination facilities, bottled water, water softeners, deionizers and
ultrafiltration products. Product sizes range from small devices for
residential customers to large multi-process systems that are custom
engineered and manufactured for industrial customers. Through its independent
dealers, Company-owned dealers and international distributors, the Company
also offers a full line of accessories, replacement parts and services. In
addition, the Company is a major provider of PDS both domestically and
internationally.
The Company conducts its activities in two principal areas: household and
consumer, including bottled water, and commercial and industrial, including
PDS.
HOUSEHOLD AND CONSUMER. The Company is the leading manufacturer and
distributor of water purification and treatment products to the residential
market in the United States. These products include a broad range of filters,
reverse osmosis units and water softeners that address residential water
problems, including the removal of lead, cysts and other health-related
contaminants, the elimination of chlorine and unpleasant odors and tastes from
water and the softening of water by removing minerals. Culligan's leading
position in the U.S. residential market is due in large part to its product
quality and strong brand recognition, popularized by its famous "Hey Culligan
Man"(R) commercials, as well as its extensive dealer network which is
available for installation and service. Culligan's licensed bottled water
sales have grown to rank fifth in the five-gallon bottled water market in the
United States with an estimated 250,000 accounts and is the only brand in the
five-gallon bottled water business with a nationwide distribution network.
This year, Culligan, through its newly-formed Consumer Markets Division,
launched a line of water filtration products for sale through department
stores and do-it-yourself outlets utilizing the WaterWare by Culligan(R)
tradename. The line includes faucet mount filters, under-counter systems and a
whole house sediment and rust filtration system, with products expected to be
available in over 5,000 retail stores by the end of 1997. This line offers
additional price point alternatives to consumers who are becoming increasingly
aware of, and concerned about, water quality and provides Culligan the
opportunity to leverage its strong brand recognition and to broaden its
customer reach. Culligan has also entered into a marketing partnership with
Health o Meter, the parent of Mr. Coffee, for co-branded pour through
pitchers. The Company has also initiated plans for additional marketing
partnerships under which Culligan will supply filtration elements for
refrigerator water/ice dispenser systems, integral faucet systems, coffee
makers and other products, all prominently displaying the Water by Culligan(R)
logo, furthering Culligan's strategy to co-brand with partners having strong
market shares who can offer rapid channel access with the opportunity to
obtain recurring revenues from replacement filter sales.
In its last fiscal year, household and consumer products and services,
including bottled water royalties, accounted for approximately 54% of the
Company's net sales.
COMMERCIAL AND INDUSTRIAL. Commercial users require water treatment systems
that both remove dissolved minerals and health-related contaminants from the
available water supply and produce large quantities of processed water on a
cost-effective basis. The Company's commercial products are used extensively
in industries where consistently high-quality water is needed to ensure
uniformity of taste, appearance and product quality.
Through its Everpure subsidiary, the Company is the leading supplier of
water filtration products used in the foodservice industry. Currently,
Everpure filtration systems are installed in nearly all McDonald's, Burger
King and Starbucks locations worldwide. Other commercial customers such as
26
<PAGE>
airlines, hotels, restaurants, office buildings and apartment complexes use
Culligan products to condition, filter, deionize and otherwise treat large
quantities of water.
The Company's industrial treatment systems are custom engineered and combine
multiple processes, including clarification, depth filtration, carbon
filtration, softening, reverse osmosis, deionization, submicron cartridge
filtration and ultraviolet disinfection. These processes can be configured to
meet a wide variety of manufacturing needs and applications. Industrial users
of the Company's products include manufacturers of electronic products,
laboratories, research facilities, food processers, chemical processers,
pharmaceutical manufacturers and printers.
The Company's newly-acquired Bruner operation designs and manufactures water
softeners, filters, deionizers, dealkalizers, demineralizers, degasifiers and
reverse osmosis systems in standard and custom design configurations for
commercial and industrial applications worldwide. Bruner products are sold
through an extensive network of independent sales representatives supported by
sales and service locations in the United States and abroad.
In the commercial and industrial markets, the Company typically targets
small to medium-sized projects, the pricing and specifications of which are
generally based on negotiations with customers rather than on competitive
bidding. These projects can be effectively serviced and supported by the
Company and its worldwide dealer organization.
The Company is one of the leading suppliers of PDS to commercial and
industrial customers in the United States and Europe through its network of
over 380 outlets and approximately 250 regeneration facilities.
The Company also serves the municipal and desalination markets. In the
municipal market, the Company supplies pre-use water treatment equipment to
small community systems. The Company currently has in place in North America,
Europe and the Middle East over 690 pre-engineered, packaged Multi-Tech(R) and
similar Non-U.S. OFSY Omnifiltration(R) systems for small community water
treatment. In addition, the Company's Bruner operation also offers self-
contained Bruner packaged water treatment plants in the municipal market. The
Multi-Tech(R) and Bruner systems are engineered to help smaller communities
meet the requirements of the Safe Drinking Water Act on a cost-effective
basis. Through Culligan Operating Services, the Company also provides O&M
services for water and wastewater treatment facilities for communities and
commercial users primarily in Florida and the Southeastern United States. The
Company has produced major desalination systems throughout the world. The
Company's recently acquired Enerserve operation builds, owns and operates
desalination and other water and wastewater treatment systems in the
Caribbean.
In medical markets, the Company is a leading manufacturer of reverse osmosis
units that comprise an integral part of the kidney dialysis equipment used by
hospitals, hemodialysis centers and other health service providers. The
Company's reverse osmosis unit is one of a limited number of such units
registered by the United States Food and Drug Administration as a medical
device approved for this purpose.
In its last fiscal year, commercial and industrial products, including PDS
and other services, accounted for approximately 46% of the Company's net
sales.
DEALER AND DISTRIBUTION NETWORK. The Company believes that the size and
scope of its dealer and distributor network make it uniquely positioned in the
water purification and treatment industry. Today there are approximately 1,100
independent Culligan dealers and distributors and 34 Company-owned dealers who
distribute and service Culligan products throughout the United States, Canada
and Western Europe as well as other foreign markets. In addition, there are
over 350 distributors and authorized agents in the United States and Western
Europe as well as in other foreign markets that
27
<PAGE>
distribute water filtration products of the Company's Everpure subsidiary for
the food service industry and other commercial businesses. The Company's
newly-acquired Bruner operation has approximately 97 sales representatives
that distribute its products in the United States and internationally. The
Company believes that this diverse geographical distribution network allows it
to react rapidly to changing customer needs as well as to market conditions.
As part of its distribution system, the Company currently owns 23 Culligan
dealers in North America which had total revenues of approximately $58.8
million in fiscal 1996. The Company-owned dealers are primarily located in
major metropolitan markets. Such markets include the New York City/New Jersey,
Los Angeles, Chicago, Houston and San Francisco metropolitan areas. As part of
its growth strategy, the Company recently acquired dealerships in Dallas,
Texas, San Diego, California, Glendale, California and Elkhart, Indiana to
expand its market presence. In Europe, the Company has 11 Company-owned
dealers principally in France, three of which were acquired in fiscal 1996.
Company-owned dealer operations generally have a high percentage of revenues
which are derived from sources believed to be recurring in nature (estimated
to be approximately 70% of total revenues), such as servicing equipment, sales
of replacement parts, filters and other consumables, equipment rental and
royalties. The Company's dealer and distribution network enables it to offer
complete solutions to pre-use water problems for residential, commercial and
industrial customers through a combination of testing, product selection,
installation, monitoring and service. The Company is continuously upgrading
and expanding its dealer network coverage. The Company also has utilized its
dealer network and distributors to introduce new product lines and enter new
markets.
28
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information about persons known to
the Company who are the beneficial owners of more than 5% of the Common Stock,
and as to the beneficial ownership of the Common Stock by each of the
Company's directors and executive officers and all of the Company's directors
and executive officers as a group, as of August 31, 1996. The table also sets
forth the beneficial ownership of the Selling Stockholders after giving effect
to the Offerings. Except as otherwise indicated, to the knowledge of the
Company, the persons identified below have sole voting power and sole
investment power with respect to the shares they beneficially own.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP OF OWNERSHIP OF
COMMON STOCK COMMON STOCK
BEFORE THE AFTER THE
OFFERINGS(1) OFFERINGS(1)
NAME AND ADDRESS/OR TITLE -------------------- SHARES --------------------
OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Apollo Investment Fund,
L.P....................... 7,334,859(2) 36.8% -- 7,334,859(2) 35.6%
c/o Apollo Advisors, L.P.
2 Manhattanville Road
Purchase, New York 10577
Carl C. Icahn.............. 3,451,803(3) 17.3% 3,451,803 0 0%
c/o Icahn Associates Corp.
114 W. 47th Street, 19th
Floor
New York, New York 10036
Steven J. Green............ 1,543,118(4) 7.5% 1,543,118 0 0%
40301 Fisher Island Drive
Fisher Island, Florida
33109
R. Theodore Ammon.......... 174(5) * -- 174(5) *
Big Flower Press Holdings,
Inc.
3 E. 54th Street, 19th
Floor
New York, New York 10022
Bernard Attal.............. 174(5) * -- 174(5) *
c/o Credit Lyonnais
1301 Sixth Ave., 38th Fl.
New York, New York 10022
Leon D. Black.............. 174(5) * -- 174(5) *
Apollo Management, L.P.
1301 Ave. of the Americas
New York, New York 10019
Robert H. Falk............. 174(5) * -- 174(5) *
Apollo Management, L.P.
1301 Ave. of the Americas
New York, New York 10019
Robert L. Rosen............ 174(5) * -- 174(5) *
RLR Partners, L.P.
825 Third Avenue, 40th Fl.
New York, New York 10022
Marc J. Rowan.............. 174(5) * -- 174(5) *
Apollo Management, L.P.
1301 Ave. of the Americas
New York, New York 10019
Douglas A. Pertz........... 170,408(6) * -- 170,408(6) *
President and Chief
Executive Officer
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP OF OWNERSHIP OF
COMMON STOCK COMMON STOCK
BEFORE THE AFTER THE
OFFERINGS OFFERINGS(1)
NAME AND ADDRESS/OR TITLE OF ------------------- SHARES -------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Michael E. Salvati.............. 0(7) * -- 0(7) *
Vice President, Finance and
Chief Financial Officer
Edward A. Christensen........... 3,000(8) * -- 3,000(8) *
Vice President, General Counsel
and Secretary
Ronald A. Rosati................ 6,660(9) * -- 6,660(9) *
Vice President, Consumer
Markets
Kenneth I. Wellings............. 6,500(10) * -- 6,500(10)
Vice President, International
All directors and executive
officers as a group............ 187,612(11) * -- 187,612(11) *
</TABLE>
- --------
*Less than 1.0%
(1) Percentage amount assumes the exercise by such persons of all options to
acquire shares of Common Stock and no exercise by any other person.
(2) Includes 3,666,696 shares beneficially held by Lion Advisors, L.P. for
the benefit of an investment account under management over which Lion
Advisors, L.P. holds investment, voting and dispositive power. Lion
Advisors, L.P. is an affiliate of Apollo Advisors, L.P. ("Apollo
Advisors"), the managing general partner of Apollo Investment Fund, L.P.
Each of Messrs. Leon Black and John Hannan, directors of each of Apollo
Capital Management, Inc. and Lion Capital Management, Inc., the general
partners of each of Apollo Advisors and Lion Advisors, L.P.,
respectively, and Messrs. Falk and Rowan, disclaim beneficial ownership
of all of the indicated shares.
(3) Includes shares held by Chelonian Corp. (14,964 shares), Meadow Walk
Limited Partnership (2,426,146 shares), each of which entities is
controlled by Mr. Icahn, and Icahn Charitable Foundation (250,693 shares)
and The Icahn Family Foundation (760,000 shares), which are recipients of
the shares from entities controlled by Mr. Icahn. Mr. Icahn has advised
the Company that this shall not be construed as an admission that Mr.
Icahn is the beneficial owner of any securities held of record by such
entities. Mr. Icahn was a director of the Company from the Spin-off
through July 1996.
(4) Includes 889,450 shares of Common Stock held of record by Green Family
Investments, L.P., a partnership of which a corporation controlled by Mr.
Green is sole general partner. Mr. Green has advised the Company that
this shall not be construed as an admission that Mr. Green is the
beneficial owner of such shares. Also includes currently exercisable
options to purchase 653,668 shares of Common Stock at an exercise price
of $8.38 per share. Such options will be exercised in connection with the
Offerings and the shares issuable upon such exercise will be sold in the
Offerings. Mr. Green was a director of the Company from the Spin-off
through May 1996.
(5) Consists of shares issuable in lieu of directors' fees under the
Company's Directors' Stock Plan for the quarter ended July 31, 1996. The
exact number of shares issuable under such plan for future quarters in
lieu of directors' fees is not currently determinable.
(6) Includes presently exercisable options to purchase 163,808 shares; does
not include options for 327,618 shares that are not currently
exercisable.
(7) Does not include options for 50,000 shares that are not currently
exercisable.
(8) Includes presently exercisable options to purchase 2,800 shares; does not
include options for 32,200 shares that are not currently exercisable.
(9) Includes currently exercisable options to purchase 1,800 shares; does not
include options for 20,700 shares that are not currently exercisable.
(10) Includes currently exercisable options to purchase 6,500 shares; does not
include options for 32,000 shares that are not currently exercisable.
(11) Does not include options that are not currently exercisable or shares
issuable in lieu of directors' fees under the Company's Directors' Stock
Plan in respect of future quarters.
30
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 60,000,000 shares of
Common Stock, par value $.01 per share (the "Common Stock"), and 2,000,000
shares of preferred stock, par value $.01 per share (the "Preferred Stock").
As of the date hereof, there are 19,937,050 shares of Common Stock issued and
outstanding. Although no shares of Preferred Stock have been issued as of the
date hereof, an aggregate of 300,000 shares have been reserved for issuance in
connection with the Company's stockholder rights plan described below under
"Stockholder Rights Plan." The following description of the capital stock of
the Company and of certain provisions of the Company's Restated Certificate of
Incorporation (the "Charter") and the Company's Amended and Restated By-Laws
(the "By-Laws") is a summary of the principal terms thereof. Reference is
hereby made to the full text of the Charter and By-Laws, copies of which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part.
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding Preferred Stock, holders
of Common Stock are entitled to receive ratably such dividends as may from
time to time be declared by the Board of Directors out of funds legally
available therefor. See "Price Range of Common Stock and Dividends." In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock would be entitled to share ratably in all assets of the Company
available for distribution to holders of Common Stock remaining after payment
of liabilities and liquidation preference of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive rights and have no rights to
convert their Common Stock into any other securities and there are no
redemption provisions with respect to such shares. All of the outstanding
shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue the Preferred Stock in one
or more classes or series and to fix the designations, powers, preferences and
rights of the shares of each such class or series, including dividend rates,
conversion rights, voting rights, terms of redemption and liquidation
preferences and the number of shares constituting each such class or series,
without any further vote or action by the stockholders. Although no shares of
Preferred Stock have been issued as of the date hereof, an aggregate of
300,000 shares of junior participating preferred stock have been reserved for
issuance in connection with the stockholder rights plan described below under
"Stockholder Rights Plan." The Company has no other present plans to issue any
shares of the Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is The First National
Bank of Boston.
CERTAIN CHARTER AND BY-LAWS PROVISIONS
The Charter and the By-Laws contain certain provisions that could make more
difficult the acquisition of the Company by means of a tender offer, a proxy
contest or otherwise.
CLASSIFIED BOARD OF DIRECTORS AND RELATED PROVISIONS. The Charter provides
that the Board of Directors shall be divided into three classes, designated
Class I, Class II and Class III, which shall be as nearly equal in number as
possible. Class I directors, who will serve for a term ending with the annual
meeting of stockholders to be held in 1999, currently consists of four
directors, Class II directors, who will serve for a term ending with the
annual meeting of stockholders to be held in 1997,
31
<PAGE>
consists of four directors and Class III directors, who will serve for a term
ending with the annual meeting of stockholders to be held in 1998, consists of
one director. A director may be removed by the stockholders, but only for
cause, and only by the affirmative vote of the holders, voting as a single
class of a majority of the total number of votes entitled to be cast by all
holders of the voting stock (the "Voting Stock") which shall include the
Common Stock and any class or series of Preferred Stock which by its terms may
be voted on all matters submitted to stockholders of the Company generally.
The purpose of a classified board is to promote conditions of continuity and
stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors, by guaranteeing that in the ordinary
course at least two-thirds of the directors will at all times have had at
least one year's experience as directors of the Company. However, for similar
reasons, a classified board may deter certain mergers, tender offers or other
takeover attempts which some or a majority of the holders of the Company's
stock may deem to be in their best interest, since it would take two annual
meetings of stockholders to elect a majority of the Board of Directors.
Similarly, a classified board structure would delay stockholders who do not
like the policies of the Board of Directors from removing a majority of the
Board of Directors at a single annual meeting.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER
PROPOSALS. The By-Laws establish an advance notice procedure for stockholders
to make nominations of candidates for election as directors, or bring other
business before an annual meeting of stockholders of the Company (the
"Stockholder Notice Procedure").
The Stockholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Company's Board, or by a stockholder
who has given timely written notice to the Secretary of the Company prior to
the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Stockholder Notice Procedure
provides that at an annual meeting only such business may be conducted as has
been specified in the notice of the meeting given by or at the direction of
the Company's Board (or any duly authorized committee thereof) or brought
before the meeting by, or at the direction of, the Company's Board (or any
duly authorized committee thereof) or by a stockholder who has given timely
written notice to the Secretary of the Company of such stockholder's intention
to bring such business before such meeting.
Under the Stockholder Notice Procedure, for notice of stockholder
nominations to be made or business to be conducted at an annual meeting to be
timely, such notice must be received by the Company not less than 60 days nor
more than 90 days prior to the date of the annual meeting or, in the event
that less than 70 days notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, not later than the close of
business on the 10th day following the day on which such notice was mailed or
such public disclosure was made, whichever first occurs. Under the Stockholder
Notice Procedure, for notice of a stockholder nomination to be made at a
special meeting at which directors are to be elected to be timely, such notice
must be received by the Company not later than the close of business on the
10th day following the day on which such notice of the date of the special
meeting was mailed or public disclosure of the date of the special meeting was
made, whichever first occurs.
In addition, under the Stockholder Notice Procedure, a stockholder's notice
to the Company proposing to nominate a person for election as a director or
conduct certain business at an annual meeting must contain certain specified
information. If the Chairman of the Board of Directors presiding at a meeting
determines that a person was not nominated, or other business was not brought
before the meeting, in accordance with the Stockholder Notice Procedure, such
person will not be eligible for election as a director, or such business will
not be conducted at such meeting, as the case may be.
STOCKHOLDER RIGHTS PLAN
On September 13, 1996, the Company declared a dividend distribution of one
right (a "Right") for each outstanding share of Common Stock to stockholders
of record at the close of business on
32
<PAGE>
September 26, 1996 (the "Record Date"). Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock, par value $0.01 per share (the "Series A
Preferred Stock"), at a purchase price of $78, subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and The First National Bank of Boston,
as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) ten business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired beneficial ownership
of 15% or more of the outstanding shares of Common Stock, other than an
Exempted Person (the "Stock Acquisition Date"), or (ii) ten business days (or
such later date as the Board shall determine) following the commencement of a
tender offer or exchange offer that would result in a person or group becoming
an Acquiring Person. "Exempted Person" indicates any person who is the
beneficial owner, on September 3, 1996, of 15% or more of the outstanding
Common Stock and such person's affiliates and associates, provided that such
person, and such person's affiliates and associates, do not increase their
percentage ownership of the Common Stock by more than five percentage points
over their percentage ownership on such date.
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common
Stock certificates, (ii) new Common Stock certificates issued after the Record
Date will contain a notation incorporating the Rights Agreement by reference
and (iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with
the Common Stock represented by such certificate. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence
of a Triggering Event (as defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Series A Preferred
Stock will be issued.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on September 13, 1997, unless earlier redeemed or
extended by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of the Common Stock as of the close of business
on the Distribution Date and, thereafter, the separate Rights Certificates
alone will represent the Rights. Except as otherwise determined by the Board,
only shares of Common Stock issued prior to the Distribution Date will be
issued with Rights.
In the event that a person becomes an Acquiring Person (except pursuant to
an offer for all outstanding shares of Common Stock that the disinterested
directors determine not to be inadequate and to otherwise be in the best
interests of the Company and its stockholders), each holder of a Right will
thereafter have the right to receive, upon exercise, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company)
having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of the event
set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void. However, Rights are not
exercisable following the occurrence of the event set forth above until such
time as the Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $78 per Right, each Right not owned by
an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $156
worth of Common Stock (or other consideration, as noted above) for $78.
Assuming that the Common Stock had a per share value of $39 at such time, the
holder of each valid Right would be entitled to purchase four shares of Common
Stock for $78.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction
(other than a merger which follows an offer
33
<PAGE>
described in the second preceding paragraph), or (ii) fifty percent (50%) or
more of the Company's assets, cash flow or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the Right. The events set forth in this paragraph
and in the second preceding paragraph are referred to as the "Triggering
Events."
At any time until ten business days following the Stock Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of
$.005 per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board). Immediately upon the action of the Board ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.005 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Stock (or other consideration) of the Company or
for common stock of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement may be amended by the Board
prior to the Distribution Date. After the Distribution Date, the provisions of
the Rights Agreement may be amended by the Board in order to cure any
ambiguity, to make changes which do not adversely affect the interests of
holders of Rights, or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to lengthen a time period
relating to when the Rights may be redeemed may be made at such time as the
Rights are not redeemable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should
not interfere with any merger or other business combination approved by the
Board since the Rights may be redeemed by the Company at any time until ten
(10) business days following the Stock Acquisition Date.
STATUTORY PROVISIONS
Section 203 of the Delaware General Corporation Law (the "GCL") prohibits
certain transactions between a Delaware corporation and an "interested
stockholder," which is defined as a person who, together with any affiliates
and/or associates of such person, beneficially owns, directly or indirectly,
15% or more of the outstanding voting shares of a Delaware corporation. This
provision prohibits certain business combinations (defined broadly to include
mergers, consolidations, sales or other dispositions of assets having an
aggregate value in excess of 10% of the consolidated assets of the
corporation, and certain transactions that would increase the interested
stockholder's proportionate share ownership in the corporation) between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder acquired its stock, unless (i) the business
combination is approved by the corporation's board of directors prior to the
date the interested stockholder acquired shares, (ii) the interested
stockholder acquired at least 85% of the voting stock of the corporation in
the transaction in which it became an interested stockholder or (iii) the
business combination is approved by a majority of the board of directors and
by the affirmative vote of two-thirds of the votes entitled to be cast by
disinterested stockholders at an annual or special meeting. A Delaware
corporation, pursuant to a provision in its certificate of incorporation or
by-laws, may elect not to be governed by Section 203 of the GCL in which case
such election becomes effective one year after its adoption. In the Charter,
the Company has elected not to be governed by Section 203 of the GCL. Such
election became effective in September 1996.
34
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The Company has 19,937,050 shares of Common Stock outstanding on the date of
this Prospectus, all of which will be freely tradeable without restriction or
further registration under the Securities Act, except for any shares held or
purchased by an "affiliate" of the Company as that term is defined in Rule 144
under the Securities Act (an "Affiliate"). Any shares purchased in the
Offerings or otherwise held by an Affiliate of the Company may not be resold
except pursuant to an effective registration statement filed by the Company or
an applicable exemption from registration, including an exemption under Rule
144.
In general, under Rule 144 as currently in effect, an Affiliate of the
Company is entitled to sell, within any three-month period, a number of shares
of Common Stock that does not exceed the greater of 1% of the then outstanding
shares of the Company's Common Stock (approximately 199,370 shares) or the
average weekly trading volume in the Company's Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain restrictions on the manner of sale, notice requirements, and the
availability of current public information about the Company.
In connection with the Spin-off, the Company entered into a registration
rights agreement (the "Registration Rights Agreement") for the benefit of
Apollo and the Selling Stockholders. As of the date of this Prospectus,
approximately 11.7 million shares of outstanding Common Stock constitute
registrable common stock under the Registration Rights Agreement, of which
4,341,253 are being sold pursuant to the Offerings.
Subject to certain exceptions, Apollo (which owns approximately 7.3 million
outstanding shares of Common Stock) has agreed with the Underwriters not to
offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for or
warrants, options or rights to acquire, Common Stock, directly or indirectly,
for a period of 90 days after the date of this Prospectus without the prior
written consent of Goldman, Sachs & Co. In addition, the Company will agree
not to effect a registration, without the prior consent of Goldman, Sachs &
Co., with respect to the sale of any shares of Common Stock by any stockholder
of the Company (other than a registration on Form S-8) for a period of 90 days
after the date of this Prospectus.
The Company has filed with the Commission registration statements on Form S-
8 with respect to an aggregate of approximately 2.4 million shares of Common
Stock issuable or reserved for issuance upon exercise of stock options and for
issuance under the Company's Directors' Stock Plan.
No prediction can be made as to the effect, if any, that market sales of
shares of Common Stock or the availability of shares of Common Stock for sale
will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of substantial amounts of the Company's Common Stock
in the public market could adversely affect prevailing market prices of the
Company's Common Stock.
35
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Selling Stockholders have agreed to sell to each of the U.S. Underwriters
named below (the "U.S. Underwriters"), and each of such U.S. Underwriters, for
whom Goldman, Sachs & Co., Bear, Stearns & Co. Inc., NatWest Securities
Limited, Smith Barney Inc. and Jefferies & Company, Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Selling Stockholders, the respective number of shares of Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
U.S. UNDERWRITERS COMMON STOCK
----------------- ------------
<S> <C>
Goldman, Sachs & Co. ........................................
Bear, Stearns & Co. Inc......................................
NatWest Securities Limited...................................
Smith Barney Inc. ...........................................
Jefferies & Company, Inc.....................................
---------
Total.................................................... 3,995,937
=========
</TABLE>
Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and the other selling terms may from
time to time be varied by the Representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters
of the international offering (the "International Underwriters") providing for
the concurrent offer and sale of 998,984 shares of Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two
offerings will be identical. The closing of the offering made hereby is a
condition to the closing of the international offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International, Bear, Stearns International Limited, NatWest Securities
Limited, Smith Barney Inc. and Jefferies International Limited.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions,
it will offer, sell or deliver the shares of Common Stock, directly or
indirectly, only in the United States
36
<PAGE>
of America (including the States and the District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction (the
"United States") and to U.S. persons, which term shall mean, for purposes of
this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the
laws of the United States or any political subdivision thereof and whose
office most directly involved with the purchase is located in the United
States. Each of the International Underwriters has agreed pursuant to the
Agreement Between that, as a part of the distribution of the shares offered as
part of the international offering and subject to certain exceptions, it will
(i) not, directly or indirectly, offer, sell or deliver shares of Common Stock
(a) in the United States or to any U.S. persons or (b) to any person who it
believes intends to reoffer, resell or deliver the shares in the United States
or to any U.S. persons and (ii) cause any dealer to whom it may sell such
shares at any concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall
be the initial public offering price, less an amount not greater than the
selling concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
599,391 additional shares of Common Stock, solely to cover over-allotments, if
any. If the U.S. Underwriters exercise such over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
3,995,937 shares of Common Stock offered hereby. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
149,848 additional shares of Common Stock.
The Company and Apollo have agreed, for a period of 90 days after the date
of this Prospectus, not to offer, sell, contract to sell or otherwise dispose
of any shares of Common Stock or securities which are substantially similar to
the shares of Common Stock including, but not limited to, securities that are
convertible into or exchangeable for, or that represent the right to receive,
shares of Common Stock or any substantially similar securities without the
prior written consent of Goldman, Sachs & Co., other than (i) pursuant to
employee stock option plans or on the conversion or exchange of convertible or
exchangeable securities or stock options outstanding on the date of this
Prospectus, (ii) the shares of Common Stock offered in connection with the
Offerings, (iii) in the case of the Company, in consideration for
acquisitions, provided that any recipient of Common Stock in such acquisition
agrees to be bound by a restriction not to offer, sell, contract to sell or
otherwise dispose of such shares during the remainder of such 90-day period,
without the prior written consent of Goldman, Sachs & Co. and (iv) in the case
of Apollo, in transactions with an affiliate or not requiring registration
under the Securities Act, provided that in each case any affiliate or
transferee of Common Stock in such transaction agrees to be bound by a
restriction not to offer, sell, contract to sell or otherwise dispose of such
shares during the remainder of such 90-day period, without the prior written
consent of Goldman, Sachs & Co. In addition, the Company has agreed not to
effect a registration with respect to the sale of any shares of Common Stock
by any stockholder of the Company (other than a registration on Form S-8) for
a period of 90 days after the date of this Prospectus without the prior
written consent of Goldman, Sachs & Co.
The Company and the Selling Stockholders have agreed to indemnify the
several U.S. Underwriters and International Underwriters against certain
liabilities, including liabilities under the Securities Act.
37
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the Common Stock have been passed upon
for the Company by Skadden, Arps, Slate, Meagher & Flom, New York, New York,
and for the Underwriters by Sidley & Austin, Chicago, Illinois. Skadden, Arps,
Slate, Meagher & Flom has from time to time represented certain of the
Underwriters in connection with unrelated legal matters.
EXPERTS
The financial statements and schedule of the Company as of January 31, 1995
and 1996, and for each of the periods in the three year period ended January
31, 1996, have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP contains an explanatory paragraph that states that
Astrum was required to establish a new basis of accounting and adjust the
recorded amounts of assets and liabilities to fair market values at June 30,
1993. The Company's consolidated financial statements include the continuing
impact of the recapitalization.
38
<PAGE>
Inside Back Cover:
Pictures of Multi-Tech (R) municipal water system, a large desalination system,
an industrial water treatment system, a distilled water remineralization system
and four of the Company's offices.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information.................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 13
Capitalization............................................................ 13
Price Range of Common Stock............................................... 14
Dividend Policy........................................................... 14
Selected Historical and Pro Forma Consolidated Financial Data............. 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 26
Principal and Selling Stockholders........................................ 29
Description of Capital Stock.............................................. 31
Shares Eligible for Future Sale........................................... 35
Underwriting.............................................................. 36
Legal Matters............................................................. 38
Experts................................................................... 38
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,994,921 SHARES
CULLIGAN WATER TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------
[LOGO] CULLIGAN
-----------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
NATWEST SECURITIES LIMITED
SMITH BARNEY INC.
JEFFERIES & COMPANY, INC.
REPRESENTATIVES OF THE U.S. UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 4, 1996
[LOGO] CULLIGAN
4,994,921 SHARES
CULLIGAN WATER TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------
Of the 4,994,921 shares of Common Stock offered, 998,984 shares are being
offered hereby in an international offering outside the United States and
3,995,937 shares are being offered in a concurrent United States offering. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both offerings. See "Underwriting."
All of the shares of Common Stock offered are being sold by the Selling
Stockholders. The Selling Stockholders consist of (i) certain corporations
affiliated with Carl C. Icahn, a former director of the Company and (ii) Steven
J. Green, a former director of the Company, and an entity affiliated with Mr.
Green. See "Principal and Selling Stockholders." The Company will not receive
any of the proceeds from the offerings, unless the over-allotment options
referred to below are exercised.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
The last reported sale price of the Common Stock, which is listed under the
symbol "CUL", on the New York Stock Exchange on October 2, 1996 was $37.875 per
share. See "Price Range of Common Stock."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL
PUBLIC
OFFERING UNDERWRITING PROCEEDS TO SELLING
PRICE DISCOUNT(1) STOCKHOLDERS(2)
----------- ------------ -------------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
Total(3)........................... $ $ $
</TABLE>
- -----
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of approximately $500,000 payable by
the Company.
(3) The Company has granted the International Underwriters an option for 30
days to purchase up to an additional 149,848 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Company has granted the U.S.
Underwriters an over-allotment option with respect to an additional 599,391
shares as part of the concurrent United States offering. If such options
are exercised in full, the total initial public offering price and
underwriting discount will be $ and $ , respectively, and the
proceeds to the Company will be $ . See "Underwriting."
-----------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that certificates for the shares will be ready for delivery in New
York, New York, on or about ,1996, against payment therefor in
immediately available funds.
GOLDMAN SACHS INTERNATIONAL BEAR, STEARNS INTERNATIONAL LIMITED
NATWEST SECURITIES LIMITED SMITH BARNEY INC. JEFFERIES INTERNATIONAL LIMITED
-----------
The date of this Prospectus is , 1996.
A-1
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States Federal tax
consequences of the acquisition, ownership, and disposition of Common Stock by
a holder that, for United States Federal income tax purposes, is not a "United
States person" (a "Non-United States Holder"). This discussion is based upon
the United States Federal tax law now in effect, which is subject to change,
possibly retroactively. For purposes of this discussion, a "United States
person" means a citizen or resident of the United States; a corporation,
partnership, or other entity created or organized in the United States or
under the laws of the United States or of any political subdivision thereof;
or an estate or trust whose income is includable in gross income for United
States Federal income tax purposes regardless of its source. This discussion
does not consider any specific facts or circumstances that may apply to a
particular Non-United States Holder. Prospective investors are urged to
consult their tax advisors regarding the United States Federal tax
consequences of acquiring, holding, and disposing of Common Stock, as well as
any tax consequences that may arise under the laws of any foreign, state,
local, or other taxing jurisdiction.
DIVIDENDS
Dividends paid to a Non-United States Holder will generally be subject to
withholding of United States Federal income tax at the rate of 30% unless the
dividend is effectively connected with the conduct of a trade or business
within the United States by the Non-United States Holder, in which case the
dividend will be subject to United States Federal income tax on net income on
the same basis that applies to United States persons generally. In the case of
a Non-United States Holder which is a corporation, such effectively connected
income also may be subject to the branch profits tax (which is generally
imposed on a foreign corporation on the repatriation from the United States of
effectively connected earnings and profits). Non-United States Holders should
consult any applicable income tax treaties that may provide for a lower rate
of withholding or other rules different from those described above. A Non-
United States Holder may be required to satisfy certain certification
requirements in order to claim treaty benefits or otherwise claim a reduction
of or exemption from withholding under the foregoing rules.
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
Federal income tax on gain recognized on a sale or other disposition of Common
Stock unless (i) the gain is effectively connected with the conduct of a trade
or business within the United States by the Non-United States Holder, (ii) in
the case of a Non-United States Holder who is a nonresident alien individual
and holds the Common Stock as a capital asset, such holder is present in the
United States for 183 or more days in the taxable year of disposition and
either such individual has a "tax home" in the United States or the gain is
attributable to an office or other fixed place of business maintained by such
individual in the United States or (iii) the Company is or has been a "U.S.
real property holding corporation" for United States Federal income tax
purposes (which the Company does not believe that it is or is likely to
become) and, assuming that the Common Stock is considered to be "regularly
traded on an established securities market" for tax purposes, the Non-United
States Holder holds or has held, directly or indirectly, at any time during
the five-year period ending on the date of disposition, more than five percent
of the Common Stock. Gain that is effectively connected with the conduct of a
trade or business within the United States by the Non-United States Holder
will be subject to United States Federal income tax on net income on the same
basis that applies to United States persons generally (and, with respect to
corporate holders, under certain circumstances, the branch profits tax) but
will not be subject to withholding. Non-United States Holders should consult
any applicable treaties that may provide for different rules.
36
<PAGE>
PROPOSED REGULATIONS
Recently proposed Treasury regulations (the "Proposed Regulations"), if
finalized in their current form, could affect the procedures to be followed by
a Non-United States Holder in establishing non-United States person status for
purposes of the United States Federal withholding rules. The Proposed
Regulations are not currently effective but, if finalized in their current
form, would be effective for payments made after December 31, 1997.
Prospective investors are urged to consult their tax advisors regarding the
effect, if any, of the Proposed Regulations on their purchase, ownership, and
disposition of the Common Stock.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is not a citizen
or resident of the United States at the date of death will be included in such
individual's estate for United States Federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Internal Revenue Service and to each
Non-United States Holder the amount of dividends paid to, and the tax withheld
with respect to, such holder, regardless of whether any tax was actually
withheld. This information may also be made available to the tax authorities
of a country in which the Non-United States Holder resides.
Under temporary United States Treasury regulations, United States
information reporting requirements and backup withholding tax will generally
not apply to dividends paid on the Common Stock to a Non-United States Holder
at an address outside the United States. Payment by a United States office of
a broker of the proceeds of a sale of Common Stock is subject to both backup
withholding at a rate of 31% and information reporting unless the holder
certifies its Non-United States Holder status under penalties of perjury or
otherwise establishes an exemption. Information reporting requirements (but
not backup withholding) will also apply to payment of the proceeds of sales of
Common Stock by foreign offices of United States brokers, or foreign brokers
with certain types of relationships to the United States, unless the broker
has documentary evidence in its records that the holder is a Non-United States
Holder and certain other conditions are met, or the holder otherwise
establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-United
States Holder's United States Federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
37
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the International Underwriting
Agreement, the Selling Stockholders have agreed to sell to each of the
International Underwriters named below (the "International Underwriters"), and
each of such International Underwriters, for whom Goldman Sachs International,
Bear, Stearns International Limited, NatWest Securities Limited, Smith Barney
Inc. and Jefferies International Limited are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Selling
Stockholders, the respective number of shares of Common Stock set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
INTERNATIONAL UNDERWRITERS COMMON STOCK
-------------------------- ------------
<S> <C>
Goldman Sachs International...................................
Bear, Stearns International Limited...........................
NatWest Securities Limited....................................
Smith Barney Inc. ............................................
Jefferies International Limited...............................
-------
Total..................................................... 998,984
=======
</TABLE>
Under the terms and conditions of the International Underwriting Agreement,
the International Underwriters are committed to take and pay for all of the
shares offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth
on the cover page of this Prospectus and in part to certain securities dealers
at such price less a concession of $per share. The International Underwriters
may allow, and such dealers may reallow, a concession not in excess of $per
share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and the other selling
terms may from time to time be varied by the Representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "U.S. Underwriting Agreement") with the underwriters of the
U.S. offering (the "U.S. Underwriters") providing for the concurrent offer and
sale of 3,995,937 shares of Common Stock in a U.S. offering inside the United
States. The offering price and aggregate underwriting discounts and
commissions per share for the two offerings will be identical. The closing of
the offering made hereby is a condition to the closing of the U.S. offering,
and vice versa. The representatives of the U.S. Underwriters are Goldman,
Sachs & Co., Bear, Stearns & Co. Inc., NatWest Securities Limited, Smith
Barney Inc. and Jefferies & Company, Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters has agreed that, as a part of the distribution of the
shares offered as a part of the U.S. Offering and subject to certain
38
<PAGE>
exceptions, it will offer, sell or deliver the shares of Common Stock,
directly or indirectly, only in the United States of America (including the
States and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction (the "United States") and to U.S.
persons, which term shall mean, for purposes of this paragraph: (a) any
individual who is a resident of the United States or (b) any corporation,
partnership or other entity organized in or under the laws of the United
States or any political subdivision thereof and whose office most directly
involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that,
as a part of the distribution of the shares offered hereby and subject to
certain exceptions, it will (i) not, directly or indirectly, offer, sell or
deliver shares of Common Stock (a) in the United States or to any U.S. persons
or (b) to any person who it believes intends to reoffer, resell or deliver the
shares in the United States or to any U.S. persons and (ii) cause any dealer
to whom it may sell such shares at any concession to agree to observe a
similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall
be the initial public offering price, less an amount not greater than the
selling concession.
The Company has granted the International Underwriters an option exercisable
for 30 days after the date of this Prospectus to purchase up to an aggregate
of 149,848 additional shares of Common Stock, solely to cover over-allotments,
if any. If the International Underwriters exercise such over-allotment option,
the International Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 998,984 shares of Common Stock offered hereby. The Company
has granted the U.S. Underwriters a similar option to purchase up to an
aggregate of 599,391 additional shares of Common Stock.
The Company and Apollo have agreed, for a period of 90 days after the date
of this Prospectus, not to offer, sell, contract to sell or otherwise dispose
of any shares of Common Stock or securities which are substantially similar to
the shares of Common Stock including, but not limited to, securities that are
convertible into or exchangeable for, or that represent the right to receive,
shares of Common Stock or any substantially similar securities without the
prior written consent of Goldman, Sachs & Co., other than (i) pursuant to
employee stock option plans or on the conversion or exchange of convertible or
exchangeable securities or stock options outstanding on the date of this
Prospectus, (ii) the shares of Common Stock offered in connection with the
Offerings, (iii) in the case of the Company, in consideration for
acquisitions, provided that any recipient of Common Stock in such acquisition
agrees to be bound by a restriction not to offer, sell, contract to sell or
otherwise dispose of such shares during the remainder of such 90-day period,
without the prior written consent of Goldman, Sachs & Co. and (iv) in the case
of Apollo, in transactions with an affiliate or not requiring registration
under the Securities Act, provided that in each case any affiliate or
transferee of Common Stock in such transaction agrees to be bound by a
restriction not to offer, sell, contract to sell or otherwise dispose of such
shares during the remainder of such 90-day period, without the prior written
consent of Goldman, Sachs & Co. In addition, the Company has agreed not to
effect a registration with respect to the sale of any shares of Common Stock
by any stockholder of the Company (other than a registration on Form S-8) for
a period of 90 days after the date of this Prospectus without the prior
written consent of Goldman, Sachs & Co.
Each International Underwriter has also agreed that (a) it has not offered
or sold and prior to the date six months after the date of issue of the shares
of Common Stock will not offer or sell any shares of Common Stock to persons
in the United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result
39
<PAGE>
in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995, (b) it has complied, and will
comply, with all applicable provisions of the Financial Services Act of 1986
of Great Britain with respect to anything done by it in relation to the shares
of Common Stock in, from or otherwise involving the United Kingdom, and (c) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of the
shares of Common Stock to a person whose is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 of Great Britain or is a person to whom the document
may otherwise lawfully be issued or passed on.
Buyers of shares of Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practice of the
country of purchase in addition to the initial public offering price.
The Company and the Selling Stockholders have agreed to indemnify the
several International Underwriters and U.S. Underwriters against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock have been passed upon
for the Company by Skadden, Arps, Slate, Meagher & Flom, New York, New York,
and for the Underwriters by Sidley & Austin, Chicago, Illinois. Skadden, Arps,
Slate, Meagher & Flom, has from time to time represented certain of the
Underwriters in connection with unrelated legal matters.
EXPERTS
The financial statements and schedule of the Company as of January 31, 1995
and 1996, and for each of the periods in the three year period ended January
31, 1996, have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP contains an explanatory paragraph that states that
Astrum was required to establish a new basis of accounting and adjust the
recorded amounts of assets and liabilities to fair market values at June 30,
1993. The Company's consolidated financial statements include the continuing
impact of the recapitalization.
40
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information.................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 13
Capitalization............................................................ 13
Price Range of Common Stock............................................... 14
Dividend Policy........................................................... 14
Selected Historical and Pro Forma Consolidated Financial Data............. 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 26
Principal and Selling Stockholders........................................ 29
Description of Capital Stock.............................................. 31
Shares Eligible for Future Sale........................................... 35
Certain United States Federal Tax Consequences to Non-United States
Holders.................................................................. 36
Underwriting.............................................................. 38
Legal Matters............................................................. 40
Experts................................................................... 40
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,994,921 SHARES
CULLIGAN WATER TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------
[LOGO] CULLIGAN
-----------
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL
LIMITED
NATWEST SECURITIES LIMITED
SMITH BARNEY INC.
JEFFERIES INTERNATIONAL LIMITED
REPRESENTATIVES OF THE INTERNATIONAL
UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC registration fee........................................... $ 77,869
NASD filing fee................................................ $ 23,082
Printing and engraving expenses................................ $175,000*
Accountants' fees and expenses................................. $ 50,000*
Attorneys' fees and expenses................................... $ 75,000*
Blue sky fees and expenses..................................... $ 15,000*
Miscellaneous.................................................. $ 84,049*
--------
Total...................................................... $500,000*
========
</TABLE>
- --------
*Estimated
The Company will pay all of such expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "GCL") empowers a
corporation, subject to certain limitations, to indemnify its directors and
officers against expenses (including attorneys' fees, judgments, fines and
certain settlements) actually and reasonably incurred by them in connection
with any suit or proceeding to which they are a party so long as they acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to criminal action or
proceeding, so long as they had no reasonable cause to believe their conduct
to have been unlawful.
The Charter provides that the Company shall indemnify the directors and
officers of the Company to the fullest extent permitted by Delaware law.
In addition, the By-Laws provide that the Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Company), by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Company and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
The By-Laws provide that the Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the Company or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or
II-1
<PAGE>
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company; except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the Company
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the
State of Delaware or such other court shall deem proper.
The By-Laws provide that any indemnification under the above two paragraphs
(unless ordered by a court) shall be made by the Company only as authorized in
the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in the above two paragraphs. Such
determination shall be made (1) by the Board of Directors of the Company by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, even though less than a quorum or (2) if there are
such directors or if such directors so direct, by independent legal counsel in
a written opinion, or (3) by the stockholders of the Company.
The By-Laws provide that to the extent that a director or officer of the
Company has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim,
issue or matter therein, the Company shall indemnify him against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
The By-Laws further provide that expenses incurred by a director or officer
in defending or investigating a threatened or pending action, suit or
proceeding shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Company as
authorized in the By-Laws. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors of the Company deems appropriate.
The By-Laws provide that the indemnification and advancement of expenses
provided by, or granted pursuant to, the By-Laws shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
The Company intends to purchase and maintain insurance on behalf of any
person who is or was a director or officer of the Company, or is or was a
director or officer of the Company serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Company would have the
power or the obligation to indemnify him against such liability under the By-
Laws.
The Company has entered into indemnification agreements with each of the
Company's directors and officers. The indemnification agreements require,
among other things, the Company to indemnify the officers and directors to the
fullest extent permitted by law, and to advance to such directors and officers
all related expenses, subject to reimbursement, if it is subsequently
determined that indemnification is not permitted. The Company will also
indemnify and advance all expenses incurred by such directors and officers
seeking to enforce their rights under the indemnification agreements, and
cover directors and officers under the Company's directors' and officers'
liability insurance.
II-2
<PAGE>
Although such indemnification agreements will offer substantially the same
scope of coverage afforded by provisions in the Charter and the By-Laws, they
provide greater assurance to directors and officers that indemnification will
be available because, as a contract, it cannot be modified unilaterally in the
future by the Board of Directors of the Company or by the stockholders to
eliminate the rights provided therein.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
4.1 Rights Agreement between the Company and The First National Bank of
Boston, as Rights Agent (Incorporated by reference to Exhibit 3 to the
Registrant's Registration Statement on Form 8-A filed with the Commission
on September 16, 1996.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom.
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney.*
</TABLE>
- --------
*Previously filed.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the Common Stock being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act)
that is incorporated by reference in the Registration Statement shall be
deemed to be new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in Northbrook, Illinois on October 4, 1996.
CULLIGAN WATER TECHNOLOGIES, INC.
/s/ Edward A. Christensen
By: _________________________________
Name: Edward A. Christensen
Title: Vice President, General
Counsel and Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President and Chief October 4, 1996
____________________________________ Executive Officer and
Douglas A. Pertz Director
* Vice President, Finance and October 4, 1996
____________________________________ Chief Financial Officer
Michael E. Salvati (principal financial and
accounting officer)
/s/ Andrew D. Africk Director October 4, 1996
____________________________________
Andrew D. Africk
* Director October 4, 1996
____________________________________
R. Theodore Ammon
* Director October 4, 1996
____________________________________
Bernard Attal
* Director October 4, 1996
____________________________________
Leon D. Black
* Director October 4, 1996
____________________________________
Robert H. Falk
Director
____________________________________
Mark H. Rachesky
* Director October 4, 1996
____________________________________
Robert L. Rosen
* Director October 4, 1996
____________________________________
Marc J. Rowan
* Director October 4, 1996
____________________________________
Stephen J. Solarz
</TABLE>
/s/ Edward A.
Christensen
*By: _____________________
Edward A. Christensen
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
4.1 Rights Agreement between the Company and The First National
Bank of Boston, as Rights Agent (Incorporated by reference to
Exhibit 3 to the Registrant's Registration Statement on Form
8-A filed with the Commission on September 16, 1996).
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom.
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom (included in
Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney.*
</TABLE>
- --------
*Previously filed.
<PAGE>
Draft 10/3/96
CULLIGAN WATER TECHNOLOGIES, INC.
COMMON STOCK
($.01 PAR VALUE)
----------------------
UNDERWRITING AGREEMENT
(U.S. VERSION)
----------------------
October __, 1996
Goldman, Sachs & Co.,
Bear, Stearns & Co. Inc.
NatWest Securities Limited
Smith Barney Inc.
Jefferies & Company, Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Certain stockholders named in Schedule II hereto (the "Selling
Stockholders") of Culligan Water Technologies, Inc., a Delaware corporation (the
"Company"), propose, subject to the terms and conditions stated herein, to sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 3,995,937 shares (the "Firm Shares") and, at the election of the
Underwriters, the Company proposes to issue and sell up to 599,391 additional
shares (the "Optional Shares") of Common Stock, par value $.01 per share
("Stock") of the Company (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof being collectively
called the "Shares").
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of 1,148,832 shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International, Bear,
Stearns International Limited, NatWest Securities Limited, Smith Barney Inc. and
Jefferies International Limited are acting as lead managers. Anything herein or
therein to the contrary notwithstanding, the respective closings under this
Agreement and the International Agreement are hereby expressly made conditional
on one another. The Underwriters hereunder and the International Underwriters
are simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Stock between the two
syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the International Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages as included in the registration statement and amendments
thereto as mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein,
and except as the context may otherwise require, references hereinafter to the
Shares shall include all the shares of Stock which may be sold
<PAGE>
pursuant to either this Agreement or the International Underwriting Agreement,
and references herein to any prospectus whether in preliminary or final form,
and whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form S-3 (File No. 333-12069) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, but
including all documents incorporated by reference in the prospectus
contained therein, to you for each of the other Underwriters, have been
declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to the Initial Registration
Statement or other document incorporated by reference therein has
heretofore been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or threatened
by the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Act is hereinafter
called a "Preliminary Prospectus"); the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including (i) the information contained
in the form of final prospectus filed with the Commission pursuant to Rule
424(b) under the Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the Initial Registration
Statement at the time it was declared effective and (ii) the documents
incorporated by reference in the prospectus contained in the registration
statement at the time such part of the registration statement became
effective, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the Act,
is hereinafter called the "Prospectus"; and any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item 12
of Form S-3 under the Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include any documents filed after the date of such
Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as
the case may be; and any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any annual report of the
Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after
the effective date of the Registration Statement that is incorporated by
reference in the Registration Statement;
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof,
2
<PAGE>
conformed in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or by a
Selling Stockholder expressly for use in the preparation of the answers
therein to Item 7 of Form S-3;
(iii) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the case
may be, conformed in all material respects to the requirements of the Act
or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(iv) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Item 7 of Form S-3;
(v) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the amount of issued and
outstanding capital stock (other than upon exercise of stock options
outstanding as of such dates) or long-term debt of the Company or any of
its subsidiaries, other than borrowings by the Company not in excess of $20
million in the aggregate, or any material adverse change, or
3
<PAGE>
any development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(vi) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries;
(vii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(viii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and conform to the description of the Stock contained in
the Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares and except as set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims;
(ix) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein and in the International
Underwriting Agreement, will be duly and validly issued and fully paid and
non-assessable and will conform to the description of the Stock contained
in the Prospectus;
(x) The issue and sale of the Shares to be sold by the Company
hereunder and under the International Underwriting Agreement and the
compliance by the Company with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action result
in any violation of the provisions of the Certificate of Incorporation or
By-laws of the Company or any statute
4
<PAGE>
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any
of their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state or foreign securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters and the
International Underwriters;
(xi) Neither the Company nor any of its subsidiaries is (i) in
violation of its Certificate of Incorporation or By-laws or (ii) in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party or
by which it or any of its properties may be bound, except, in the case of
(ii) only, defaults which do not and will not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(xii) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, under the caption "Certain United States
Tax Consequences to Non-U.S. Holders", and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and complete in all
material respects;
(xiii) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually or
in the aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xiv) The Company is not regulated or required to be registered as an
"investment company" under the Investment Company Act of 1940, as amended
(the "Investment Company Act");
(xv) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(xvi) KPMG Peat Marwick LLP, who have certified certain financial
statements of the Company and its subsidiaries, are, to the best knowledge
of the Company, independent public accountants as required by the Act and
the rules and regulations of the Commission thereunder;
(xvii) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities
5
<PAGE>
registered pursuant to the Registration Statement or in any being
registered pursuant to any other registration statement filed by the
Company under the Act, except for the contracts, agreements and
understandings that are referenced in the Prospectus and except for
registration rights applicable to shares of Stock underlying stock options
(which rights do not apply with respect to the offering of the Shares and
the International Shares); and
(xviii) The historical financial information set forth in the
Prospectus under "Selected Historical and Pro Forma Consolidated Financial
Data" presents fairly, in all material respects, on the basis stated in the
Prospectus the information set forth therein.
The pro forma information included in the Prospectus presents fairly the
information shown therein; has been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and other pro forma information, has been properly compiled on
the pro forma basis described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate under the circumstances.
(b) Each of the Selling Stockholders severally represents and warrants to,
and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary for
the execution and delivery by such Selling Stockholder of this Agreement,
the International Underwriting Agreement and the Power of Attorney
hereinafter referred to, and for the sale and delivery of the Shares to be
sold by such Selling Stockholder hereunder and under the International
Underwriting Agreement, have been obtained; and such Selling Stockholder
has full right, power and authority to enter into this Agreement, the
International Underwriting Agreement and the Power of Attorney and to sell,
assign, transfer and deliver the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting Agreement;
(ii) The sale of the Shares to be sold by such Selling Stockholder
hereunder and under the International Underwriting Agreement and the
compliance by such Selling Stockholder with all of the provisions of this
Agreement, the International Underwriting Agreement and the Power of
Attorney and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder is bound, or to which any of the property or
assets of such Selling Stockholder is subject, nor will such action result
in any violation of the provisions of the Certificate of Incorporation or
By-laws of such Selling Stockholder if such Selling Stockholder is a
corporation or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to each Time
of Delivery (as defined in Section 4 hereof) such Selling Stockholder will
have, good and valid title to the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting Agreement,
free and clear of all liens, encumbrances, equities or claims (except, in
the case of Steven J. Green, for 653,668 Shares to be issued to Steven J.
Green immediately prior to the First Time of Delivery pursuant to the
exercise of currently exercisable stock options, which Shares will, upon
such issuance, be held by Steven J. Green free and clear of all liens,
encumbrances, equities or claims and, in the case of Meadow Walk Limited
Partnership, for 2,426,146 Shares held by Meadow Walk Limited Partnership
that are subject to liens of banks, which liens shall be released
immediately prior
6
<PAGE>
to the First Time of Delivery); and, upon delivery of such Shares and
payment therefor pursuant hereto and thereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims, will
pass to the several Underwriters or the International Underwriters, as the
case may be;
(iv) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares;
(v) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by such Selling
Stockholder expressly for use therein, such Preliminary Prospectus and the
Registration Statement did, and the Prospectus and any further amendments
or supplements to the Registration Statement and the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading;
(vi) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or at
the First Time of Delivery (as hereinafter defined) a properly completed
and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations
in lieu of thereof);
(vii) Such Selling Stockholder has duly executed and delivered a Power
of Attorney, in the form heretofore furnished to you (the "Power of
Attorney"), appointing the persons indicated in Schedule II hereto, and
each of them, as such Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement
and the International Underwriting Agreement on behalf of such Selling
Stockholder, to determine the purchase price to be paid by the Underwriters
and the International Underwriters to the Selling Stockholders as provided
in Section 2 hereof, to authorize the delivery of the Shares to be sold by
such Selling Stockholder hereunder and otherwise to act on behalf of such
Selling Stockholder in connection with the transactions contemplated by
this Agreement and the International Underwriting Agreement;
(viii) The obligations of the Selling Stockholders hereunder shall not
be terminated by operation of law, whether by the death or incapacity of
any individual Selling Stockholder or, in the case of an estate or trust,
by the death or incapacity of any executor or trustee or the termination of
such estate or trust, or in the case of a partnership or corporation, by
the dissolution of such partnership or corporation, or by the occurrence by
any other event; if any individual Selling Stockholder or any such executor
or trustee should die or become incapacitated, or any such estate or trust
should be terminated, or if any such partnership or corporation should be
dissolved, or if any other such event should occur, before the delivery of
the Shares hereunder, certificates representing the Shares shall be
delivered by or on behalf of the Selling Stockholders in accordance with
the terms and conditions of this Agreement and of the International
Underwriting Agreement; and actions taken by the
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Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid as
if such death, incapacity, termination, dissolution or other event had not
occurred, regardless of whether or not the Attorneys-in-Fact, or any of
them, shall have received notice of such death, incapacity, termination,
dissolution or other event; and
(ix) Such Selling Stockholders consent to the inclusion in the
Registration Statement and the transactions contemplated hereby of all the
Shares (including 653,668 shares of Stock underlying stock options held by
Steven J. Green, the 599,391 Optional Shares and the 149,848 International
Shares to be issued upon exercise of the International Underwriters' Over-
allotment Option).
2. Subject to the terms and conditions herein set forth, (a) each of the
Selling Stockholders agrees, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from each of the Selling Stockholders, at a purchase price per share of
$__________, the number of Firm Shares (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying the aggregate number of Firm Shares
to be sold by each of the Selling Stockholders as set forth opposite their
respective names in Schedule II hereto by a fraction, the numerator of which is
the aggregate number of Firm Shares to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from all of the Selling Stockholders hereunder and (b)
in the event and to the extent that the Underwriters shall exercise the election
to purchase Optional Shares as provided below, the Company agrees to issue and
sell to each of the Underwriters, and each of the Underwriters agrees, severally
and not jointly, to purchase from the Company, at the purchase price per share
set forth in clause (a) of this Section 2, that portion of the number of
Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction, the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 599,391 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Goldman, Sachs & Co. may request upon at least forty-eight
hours' prior notice to the Company and the Selling Stockholders, shall
be delivered by or on behalf of the Company, in the case of the Optional
Shares, and the Selling Stockholders, in the case of the Firm Shares, to
Goldman, Sachs
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& Co., through the facilities of the Depository Trust Company ("DTC") for
the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer, payable to the
order of the Company and each of the Selling Stockholders, as their
interests may appear, in federal (same day) funds. The Selling Stockholders
will cause the certificates representing the Firm Shares, and the Company
will cause the certificates representing the Optional Shares, to be made
available for checking and packaging at least twenty-four hours prior to
the Time of Delivery (as defined below) with respect thereto at the office
of DTC or its designated custodian (the "Designated Office"). The time and
date of such delivery and payment shall be, with respect to the Firm
Shares, 9:30 a.m., New York City time, on October __, 1996 or such other
time and date as Goldman, Sachs & Co., the Company and the Selling
Stockholders may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York time, on the date specified by Goldman, Sachs &
Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time
and date as Goldman, Sachs & Co. and the Company may agree upon in writing.
Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second
Time of Delivery", and each such time and date for delivery is herein
called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(j) hereof, will be delivered at the
offices of Sidley & Austin, 875 Third Avenue, New York, New York 10022 (the
"Closing Location"), and the Shares will be delivered at the Designated
Office, all at such Time of Delivery. A meeting will be held at the Closing
Location at 3:00 p.m., New York City time, on the New York Business Day
next preceding such Time of Delivery, at which meeting the final drafts of
the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this
Section 4, "New York Business Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof; to file
all reports and any definitive proxy or information statements required to
be filed by the Company with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
Prospectus and for so long as delivery of a prospectus is required in
connection with the offering or sale of the Shares; to advise you, promptly
after it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the
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suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any
such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process or to subject itself to taxes
in any jurisdiction;
(c) To use its best efforts to furnish, prior to 12:00 Noon, New York
City time, on the New York Business Day next succeeding the date of this
Agreement and from time to time, the Underwriters with copies of the
Prospectus in New York City in such quantities as you may reasonably
request, and, if the delivery of a prospectus is required at any time prior
to the expiration of nine months after the time of issue of the Prospectus
in connection with the offering or sale of the Shares and if at such time
any event shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any
other reason it shall be necessary during such period to amend or
supplement the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the Act
or the Exchange Act, to notify you and upon your request to file such
document and to prepare and furnish without charge to each Underwriter and
to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the Shares at any time nine months or
more after the time of issue of the Prospectus, upon your request but at
the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 90 days after the date of the Prospectus, (i) not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder and under the International Underwriting Agreement, any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than
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pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities or upon exercise of
stock options outstanding as of, the date of this Agreement), without your
prior written consent and (ii) except as provided hereunder and under the
International Underwriting Agreement, not to effect a registration under
the Act with respect to the sale of any Stock by any Stockholder of the
Company (other than a registration on Form S-8), without the prior written
consent of Goldman, Sachs & Co.; provided, that this paragraph (e) shall
not prohibit the issuance and sale of securities of the Company in
connection with acquisitions so long as such issuance and sale is exempt
from the registration requirements of Section 5 of the Act and the
recipient of such securities agrees to a substantially identical
restriction on transfer for the remainder of such 90 day period;
(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional publicly available information
concerning the business and financial condition of the Company as you may
from time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement and the International Underwriting Agreement in
the manner specified in the Prospectus under the caption "Use of Proceeds";
(i) To use its best efforts to list, subject to notice of issuance,
the Optional Shares, and to the extent not already listed, the Firm Shares,
on the New York Stock Exchange (the "Exchange"); and
(j) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that (a)
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
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Agreement, the Agreement between Syndicates, the Selling Agreement and the Blue
Sky Memorandum in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) all fees and expenses in connection with listing the
Shares on the Exchange; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (vi) the cost of preparing stock certificates;
(vii) the cost and charges of any transfer agent or registrar; (viii) any fees
and expenses of one counsel for each Selling Stockholder and (ix) all other
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section and (b) each
of the Selling Stockholders covenant and agree with the Underwriters that such
Selling Stockholder will pay or cause to be paid all costs and expenses incident
to the performance of such Selling Stockholder's obligations hereunder which are
not otherwise specifically provided for in this Section, including (i) any fees
and expenses of counsel for such Selling Stockholder (other than one counsel for
each Selling Stockholder referred to in Clause (a)(viii) above), and (ii) all
expenses and taxes incident to the sale and delivery of the Shares to be sold by
such Selling Stockholder to the Underwriters hereunder. In connection with
Clause (b)(ii) of the preceding sentence, Goldman, Sachs & Co. agrees to pay New
York State stock transfer tax, and the Selling Stockholder agrees to reimburse
Goldman, Sachs & Co. for associated carrying costs if such tax payment is not
rebated on the day of payment and for any portion of such tax payment not
rebated. It is understood, however, that, except as provided in this Section,
and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholder herein are, at and as of such Time of
Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 p.m.,
Washington D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Sidley & Austin, counsel for the Underwriters, shall have
furnished to you their opinion, dated such Time of Delivery, to the effect
set forth in Annex I hereto, and such counsel shall have received such
papers and information as they may reasonably request to enable them to
pass upon such matters;
(c) Edward A. Christensen, Vice President, General Counsel and
Secretary of the Company, shall have furnished to you his written opinion,
dated such Time of Delivery, to the effect set forth in Annex II hereto, in
form and substance satisfactory to you, and Skadden,
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Arps, Slate, Meagher & Flom, counsel for the Company, shall have furnished
to you their written opinion, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect set forth in Annex III hereto:
(d) The respective counsel for each of the Selling Stockholders, as
indicated in Schedule II hereto, shall each have furnished to you their
written opinion with respect to each of the Selling Stockholders for whom
they are acting as counsel, dated the First Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) A Power of Attorney has been duly executed and delivered by
such Selling Stockholders and constitutes a valid and binding
agreement of such Selling Stockholder in accordance with its terms;
(ii) This Agreement and the International Underwriting Agreement
have been duly executed and delivered by or on behalf of such Selling
Stockholder; and the sale of the Shares to be sold by such Selling
Stockholder hereunder and thereunder and the compliance by such
Selling Stockholder with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such
counsel to which such Selling Stockholder is a party or by which such
Selling Stockholder is bound, or to which any of the property or
assets of such Selling Stockholder is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of such Selling Stockholder if such Selling
Stockholder is a corporation or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(iii) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement and the International
Underwriting Agreement in connection with the Shares to be sold by
such Selling Stockholder hereunder or thereunder, except such as have
been obtained under the Act and such as may be required under state or
foreign securities or Blue Sky laws in connection with the purchase
and distribution of such Shares by the Underwriters or the
International Underwriters;
(iv) Immediately prior to the First Time of Delivery such Selling
Stockholder had good and valid title to the Shares to be sold at the
First Time of Delivery by such Selling Stockholder under this
Agreement and the International Underwriting Agreement, free and clear
of all liens, encumbrances, equities or claims, and full right, power
and authority to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder hereunder and thereunder; and
(v) Good and valid title to such Shares, free and clear of all
liens, encumbrances, equities or claims, has been transferred to each
of the several Underwriters or International Underwriters, as the case
may be.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States and in
rendering the opinion in subparagraph (iv) such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact
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as to ownership of, and liens, encumbrances, equities or claims on the Shares
sold by such Selling Stockholder, provided that such counsel shall state that
they believe that both you and they are justified in relying upon such
certificate.
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, KPMG Peat
Marwick LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex IV hereto;
(f)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been
any change in the amount of issued and outstanding capital stock (other
than upon exercise of stock options outstanding as of such dates) or long-
term debt of the Company or any of its subsidiaries, other than borrowings
by the Company not in excess of $__ million in the aggregate, or any
change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of which,
in any such case described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the Exchange; (ii) a suspension or material
limitation in trading in the Company's securities on the Exchange; (iii) a
general moratorium on commercial banking activities declared by either
Federal, New York or Illinois State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by
the United States of a national emergency or war, if the effect of any such
event specified in this Clause (iv) in the judgment of the Representatives
makes it impracticable or inadvisable to proceed with the public offering
or the delivery of the Shares being delivered at such Time of Delivery on
the terms and in the manner contemplated in the Prospectus;
(h) The Shares to be sold at such Time of Delivery shall have been
duly listed, subject to notice of issuance, on the Exchange;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each of Apollo Investment Fund, L.P.
and Lion Advisors, L.P. substantially to the effect set forth in Subsection
5(e) hereof in form and substance satisfactory to you;
(j) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
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(k) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of
officers of the Company and the Selling Stockholders, respectively,
satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Selling Stockholders, respectively,
herein at and as of such Time of Delivery, and as to the performance by the
Company and the Selling Stockholders of all of their respective obligations
hereunder to be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (a) and (f) of this Section and as to such
other matters as you may reasonably request in connection with the delivery
of the Shares hereunder.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending
any such action or claim as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through Goldman, Sachs & Co. expressly for use therein.
(b) Each of the Selling Stockholders will indemnify and hold harmless
each Underwriter against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action
or claim as such expenses are incurred; provided, however, that such
Selling Stockholder shall not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through Goldman, Sachs & Co. expressly for use therein.
(c) Each Underwriter will indemnify and hold harmless the Company and
each Selling Stockholder against any losses, claims, damages or liabilities
to which the Company or such
15
<PAGE>
Selling Stockholder may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through
Goldman, Sachs & Co. expressly for use therein; and will reimburse the
Company and each Selling Stockholder for any legal or other expenses
reasonably incurred by the Company or such Selling Stockholder in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified
party, effect the settlement or compromise of, or consent to the entry of
any judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to
such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act,
by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the Selling Stockholders on the one hand and the Underwriters on the other
from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection
(d) above, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
appropriate to
16
<PAGE>
reflect not only such relative benefits but also the relative fault of the
Company and the Selling Stockholders on the one hand and the Underwriters
on the other in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholders on
the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Shares
purchased under this Agreement (before deducting expenses) received by the
Company and the Selling Stockholders bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Shares purchased under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Selling Stockholders on the one hand or the Underwriters on
the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company, each of the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations in this
subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under
this Section 8 shall be in addition to any liability which the Company and
the respective Selling Stockholders may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon
the same terms and conditions, to each officer and director of the Company
and to each person, if any, who controls the Company or any Selling
Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery,
you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange
for the purchase of such Shares, then the Company and the Selling
Stockholders shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the
respective prescribed periods, you notify the Company and the Selling
Stockholders that you have so arranged for the purchase of such Shares, or
the Company and the Selling
17
<PAGE>
Stockholders notify you that they have so arranged for the purchase of such
Shares, you or the Company and the Selling Stockholders shall have the
right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in
the Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby
be made necessary. The term "Underwriter" as used in this Agreement shall
include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to
such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company and the Selling Stockholders as provided in subsection (a) above,
the aggregate number of such Shares which remains unpurchased does not
exceed one-eleventh of the aggregate number of all the Shares to be
purchased at such Time of Delivery, then the Company and the Selling
Stockholders shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed
to purchase hereunder at such Time of Delivery and, in addition, to require
each non-defaulting Underwriter to purchase its pro rata share (based on
the number of Shares which such Underwriter agreed to purchase hereunder)
of the Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company and the Selling Stockholders as provided in subsection (a) above,
the aggregate number of such Shares which remains unpurchased exceeds one-
eleventh of the aggregate number of all the Shares to be purchased at such
Time of Delivery, or if the Company and the Selling Stockholders shall not
exercise the right described in subsection (b) above to require non-
defaulting Underwriters to purchase Shares of a defaulting Underwriter or
Underwriters, then this Agreement (or, with respect to the Second Time of
Delivery, the obligations of the Underwriters to purchase and of the
Company to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter, the Company or the
Selling Stockholders, except for the expenses to be borne by the Company
and the Selling Stockholders and the Underwriters as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8 hereof;
but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, the Company, or any of the Selling Stockholders or any officer or
director or controlling person of the Company or any controlling person of any
Selling Stockholders, and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason, any Shares are not delivered by or on behalf of the
Company (with respect to the Optional Shares) and the Selling Stockholders (with
respect to the Firm Shares) as provided herein, the Company and each of the
Selling Stockholders pro rata (based on the number of Shares to be sold by the
Company and such Selling Stockholder hereunder) will reimburse the Underwriters
through you for all out-of-pocket expenses approved in writing by you, including
fees and disbursements of counsel, reasonably incurred by the Underwriters
18
<PAGE>
in making preparations for the purchase, sale and delivery of the Shares not so
delivered, but the Company and the Selling Stockholders shall then be under no
further liability to any Underwriter in respect of the Shares not so delivered
except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder required to be
in writing, if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(d) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company or the Selling Stockholders by you upon request. Any such statements,
requests, notices or agreements shall take effect at the time of receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and the Selling Stockholders and each person who controls the Company,
any Selling Stockholder or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company, each Selling Stockholder and for each of the
Representatives plus one for each counsel counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters, this letter and
such acceptance hereof shall constitute a binding agreement between each of the
Underwriters, the Company and each of the Selling Stockholders. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters
(U.S. Version), the form of which shall be submitted to the Company and the
Selling Stockholders for examination upon request, but without warranty on your
part as to the authority of the signers thereof.
19
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Culligan Water Technologies, Inc.
By: ________________________________
Name: ______________________________
Title: _____________________________
Chelonian Corp.
By: ________________________________
Name: ______________________________
Title: _____________________________
Meadow Walk Limited Partnership
By: ________________________________
Its: _______________________________
By: ________________________________
Name: ______________________________
Title: _____________________________
Icahn Charitable Foundation
By: ________________________________
Name: ______________________________
Title: _____________________________
20
<PAGE>
The Icahn Family Foundation
By: ________________________________
Name: ______________________________
Title: _____________________________
____________________________________
Steven J. Green
Green Family Holdings, L.P.
By: ________________________________
Its: _______________________________
By: ________________________________
Name: ______________________________
Title: _____________________________
Accepted as of the date hereof:
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
NatWest Securities Limited
Smith Barney Inc.
Jefferies & Company, Inc.
By: _________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
21
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
- ----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co. ...........
Bear, Stearns & Co. Inc. .......
NatWest Securities Limited .....
Smith Barney Inc. ..............
Jefferies & Company, Inc. ......
[Names of other Underwriters] ..
Total .....................
</TABLE>
22
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
-------------- ------------------
<S> <C> <C>
The Company ...................
The Selling Stockholder(s):
Chelonian Corp.(a)...........
Meadow Walk Limited
Partnership(b)..............
Icahn Charitable
Foundation(c)...............
The Icahn Family
Foundation(d)...............
Steven J. Green(e)...........
Green Family Holdings,
L.P.(f).....................
----------------- -----------------------
Total........................
================= =======================
</TABLE>
(a) This Selling Stockholder is represented by Mark Weitzen, Gordon,
Altman, Butowsky, Weitzen, Shalov & Wein, 114 W. 47th Street, New York, New York
10031 and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by Mark Weitzen, Gordon,
Altman, Butowsky, Weitzen, Shalov & Wein, 114 W. 47th Street, New York, New York
10031 and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(c) This Selling Stockholder is represented by Mark Weitzen, Gordon,
Altman, Butowsky, Weitzen, Shalov & Wein, 114 W. 47th Street, New York, New York
10031 and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(d) This Selling Stockholder is represented by Mark Weitzen, Gordon,
Altman, Butowsky, Weitzen, Shalov & Wein, 114 W. 47th Street, New York, New York
10031 and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(e) This Selling Stockholder is represented by Wilkie, Farr &
Gallagher, 153 E. 53rd, New York, New York 10022 and Joe Dempsey and Gregory Wm.
Hunt, and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(f) This Selling Stockholder is represented by Wilkie, Farr &
Gallagher, 153 E. 53rd, New York, New York 10022 and Joe Dempsey and Gregory Wm.
Hunt, and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
23
<PAGE>
ANNEX I
Pursuant to Section 7(b) of the Underwriting Agreement, Sidley & Austin
shall furnish an opinion to the Underwriters to the effect that:
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and corporate authority to own its properties and
conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
issued and outstanding as of the date hereof (including the Firm Shares)
have been duly and validly authorized and issued and are fully paid and
nonassessable; the Optional Shares, when certificates therefor have been
duly executed, countersigned and registered and delivered to and paid for
by the Underwriters in accordance with the terms of the Underwriting
Agreement, will constitute shares of Stock which have been duly authorized
and validly issued and are fully paid and nonassessable; and the Shares
conform in all material respects to the description of the Stock contained
in the Prospectus;
(iii) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company and the
Selling Stockholders;
(iv) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, under the caption "Certain United States
Tax Consequences to Non-U.S. Holders", insofar as they purport to describe
the provisions of laws referred to therein, and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and complete in all
material respects; and
(v) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no belief) comply as to form
in all material respects with the requirements of the Act and the rules and
regulations thereunder; nothing has come to their attention that causes
them to believe that, as of its effective date, the Registration Statement
or any further amendment thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related statements and
related schedules therein, as to which such counsel need express no belief)
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date or as of the Time
of Delivery, the Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no belief) contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the United
States of America and the laws of the State of Illinois and the General
Corporation Law of the State of Delaware.
1
<PAGE>
ANNEX II
Pursuant to Section 7(c) of the Underwriting Agreement, Edward A.
Christensen, the Vice President, Secretary and General Counsel of the Company,
shall furnish an opinion to the Underwriters to the effect that:
(i) The Company has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no material
liability or disability by reason of failure to be so qualified in any such
jurisdiction;
(ii) Each "Significant Subsidiary," as defined in Rule 405 of the
rules and regulations promulgated under the Act, of the Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each such subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable, and (except for
directors' qualifying shares) are owned of record directly or indirectly by
the Company, free and clear of all liens or encumbrances, except for liens
arising under the Company's credit agreement or any other document filed as
an exhibit to or incorporated by reference in the Registration Statement;
(iii) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a material adverse effect on
the current or future consolidated financial position, stockholders' equity
or results of operations of the Company and its subsidiaries; and, to the
best of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(iv) The issue and sale of the Shares to be issued by the Company
being delivered at such Time of Delivery by the Company and the compliance
by the Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such counsel to which
the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule
or regulation known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any
of their properties;
(v) Neither the Company, any of its Significant Subsidiaries nor, to
the best of such counsel's knowledge, any of the Company's other
subsidiaries is in violation of its Certificate of Incorporation or By-laws
and, to the best of such counsel's knowledge, neither the Company nor any
of its subsidiaries is in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound;
(vi) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Shares to be issued by the Company
being delivered at such Time of Delivery or the consummation by the Company
of the transactions contemplated by this Agreement and the International
Underwriting Agreement and the Company is not required to obtain any
consent, approval, authorization, order, registration or qualification of
or with any court or governmental agency or body in connection with the
sale of the Firm Shares, in each case except the registration under the Act
of the Shares, and such consents, approvals, authorizations, registrations
or qualifications as may be required under state or foreign securities or
Blue Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters and the International Underwriters; and
(vii) The documents incorporated by reference in the Prospectus or
any further amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial
1
<PAGE>
statements and related schedules therein, as to which such counsel need
express no opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder; and
I have no reason to believe that any of such documents, when such documents
became effective or were so filed, as the case may be, contained, in the
case of a registration statement which became effective under the Act, an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or, in the case of other documents which were filed under
the Exchange Act with the Commission, an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made when such documents were so filed, not misleading.
In rendering such opinion, such counsel may (i) state that he expresses no
opinion as to the laws of any jurisdiction other than the laws of the United
States of America, to the extent referred to therein, and the laws of the States
of New York and Florida and the General Corporation Law of the State of Delaware
and (ii) rely upon opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company, provided that such counsel shall
state that he believes that both you and he are justified in relying upon such
opinions and certificates.
2
<PAGE>
ANNEX III
Pursuant to Section 7(c) of the Underwriting Agreement, Skadden, Arps,
Slate, Meagher & Flom, counsel for the Company, shall furnish an opinion to the
Underwriters to the effect that:
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with power and corporate authority to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
issued and outstanding immediately prior to the date hereof have been duly
and validly authorized and issued and are fully paid and nonassessable; the
Firm Shares have been duly and validly authorized and issued and are fully
paid and nonassessable; the Optional Shares have been duly and validly
authorized for issuance and when delivered and paid for in full in
accordance with the Underwriting Agreement, will be duly and validly issued
and fully paid and nonassessable; and the Shares conform in all material
respects as to legal matters to the description of the Stock contained in
the Prospectus;
(iii) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company and the
Selling Stockholders; and
(iv) The Registration Statement as of its effective date and the
Prospectus as of its date and any further amendments and supplements
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) appeared on their face to be appropriately
responsive in all material respects to, and complied as to form in all
material respects with the requirements of the Act and the rules and
regulations thereunder, although they do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except to the extent set forth in
subsection (v) of this Annex III; they have no reason to believe that, as
of its effective date, the Registration Statement (taken together with the
documents incorporated by reference therein) or any further amendment
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related statements and related schedules therein,
as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus (taken together with the
documents incorporated by reference therein) or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules therein, as to
which such counsel need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus (taken together with the documents
incorporated by reference therein) or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contains an untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and they do not know of any amendment to the Registration
Statement required to be filed any contracts or other documents required to
be filed as an exhibit to the Registration Statement.
(v) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, under the caption "Certain United States
Tax Consequences to Non-U.S. Holders", insofar as they purport to describe
the provisions of laws referred to therein, and to select paragraphs under
the caption "Underwriting", insofar as they purport to describe the
provisions of the documents referred to therein, are accurate and complete
in all material respects; and
(vi) The Company is not regulated or required to be registered as an
"investment company" under the Investment Company Act.
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In rendering such opinion, such counsel may (i) state that they express no
opinion as to the laws of any jurisdiction other than the laws of the United
States of America, to the extent referred to therein, and the laws of the State
of Delaware and (ii) rely upon the opinions of local counsel and in respect of
matters of fact upon certificates of officers of the Company.
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ANNEX IV
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been furnished separately to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Representatives and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (v)(A)(i) below
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations,
nothing came to their attention that caused them to believe that the
unaudited condensed consolidated financial statements do not comply as to
form in all material respects with the applicable accounting requirements
of the Act and the related published rules and regulations;
(iv) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(v) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited
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<PAGE>
data and items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited
consolidated financial statements included in the Prospectus;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements
included in the Prospectus) or any increase in the consolidated long-
term debt of the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described
in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated
net income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(vi) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(v) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Prospectus, or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.
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Draft 10/3/96
CULLIGAN WATER TECHNOLOGIES, INC.
COMMON STOCK
($.01 PAR VALUE)
_____________________
UNDERWRITING AGREEMENT
(INTERNATIONAL VERSION)
-----------------------
October __, 1996
Goldman Sachs International,
Bear, Stearns International Limited
NatWest Securities Limited
Smith Barney Inc.
Jefferies International Limited
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.
Ladies and Gentlemen:
Certain stockholders named in Schedule II hereto (the "Selling
Stockholders") of Culligan Water Technologies, Inc., a Delaware corporation (the
"Company"), propose, subject to the terms and conditions stated herein, to sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 998,984 shares (the "Firm Shares") and, at the election of the Underwriters,
the Company proposes to issue and sell up to 149,848 additional shares (the
"Optional Shares") of Common Stock, par value $.01 per share (the "Stock") of
the Company (the Firm Shares and the Optional Shares which the Underwriters
elect to purchase pursuant to Section 2 hereof being collectively called the
"Shares").
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement, a copy of
which is attached hereto (the "U.S. Underwriting Agreement"), providing for the
offering by the Company and the Selling Stockholders of up to a total of
4,595,328 shares of Stock (the "U.S. Shares") including the overallotment option
thereunder, through arrangements with certain underwriters in the United States
(the "U.S. Underwriters"), for whom Goldman, Sachs & Co., Bear, Stearns & Co.
Inc., NatWest Securities Limited, Smith Barney Inc. and Jefferies & Company,
Inc. are acting as representatives. Anything herein and therein to the contrary
notwithstanding, the respective closings under this Agreement and the U.S.
Underwriting Agreement are hereby expressly made conditional on one another. The
Underwriters hereunder and the U.S. Underwriters are simultaneously entering
into an Agreement between U.S. and International Underwriting Syndicates (the
"Agreement between Syndicates") which provides, among other things, for the
transfer of shares of Stock between the two syndicates and for consultation by
you with Goldman, Sachs & Co. prior to exercising the rights of the Underwriters
under Section 7 hereof. Two forms of prospectus are to be used in connection
with the offering and sale of shares of Stock contemplated by the foregoing, one
relating to the Shares hereunder and the other relating to the U.S. Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages as included in the registration statement and amendments
thereto as mentioned below.
<PAGE>
Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as the context
may otherwise require, references hereinafter to the Shares shall include all of
the shares of Stock which may be sold pursuant to either this Agreement or the
U.S. Underwriting Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or supplemented, shall include
both of the U.S. and the international versions thereof.
In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters or
to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied mutatis mutandis as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company and each of the Selling Stockholders hereby make with the
Underwriters the same representations, warranties and agreements as are set
forth in Section 1 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
2. Subject to the terms and conditions herein set forth, (a) each of the
Selling Stockholders agrees, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from each of the Selling Stockholders, at a purchase price per share of
$_____, the number of Firm Shares (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying the aggregate number of Firm Shares
to be sold by each of the Selling Stockholders as set forth opposite their
respective names in Schedule II hereto by a fraction, the numerator of which is
the aggregate number of Firm Shares to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all the Underwriters from all the Selling Stockholders hereunder and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the purchase price per share set
forth in clause (a) of this Section 2, that portion of the number of Optional
Shares as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares) determined by multiplying such number
of Optional Shares by a fraction the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 149,848 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
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<PAGE>
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to and
with the Company and the Selling Stockholders the representations and agreements
of such Underwriter as a member of the selling group contained in Sections 3(d)
and 3(e) of the form of Selling Agreements.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as GSI may request upon at least forty-eight hours' prior notice to the
Company and the Selling Stockholders shall be delivered by or on behalf of the
Company, in the case of the Optional Shares, and the Selling Stockholders, in
the case of the Firm Shares, to GSI, through the facilities of the Depository
Trust Company ("DTC"), for the account of such Underwriter, against payment by
or on behalf of such Underwriter of the purchase price therefor by wire
transfer, payable to the order of the Company and each of the Selling
Stockholders, as their interests may appear, in federal (same day) funds. The
Selling Stockholders will cause the certificates representing the Firm Shares,
and the Company will cause the certificates representing the Optional Shares, to
be made available for checking and packaging at least twenty-four hours prior to
the Time of Delivery (as defined below) with respect thereto at the office of
DTC or its designated custodian (the "Designated Office"). The time and date of
such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m.,
New York City time, on October __, 1996 or such other time and date as GSI and
the Company and the Selling Stockholders may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York City time, on the date
specified by GSI in the written notice given by GSI of the Underwriters'
election to purchase such Optional Shares, or such other time and date as GSI
and the Company may agree upon in writing. Such time and date for delivery of
the Firm Shares is herein called the "First Time of Delivery", such time and
date for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7(k) of the U.S. Underwriting
Agreement, including the cross receipt for the Shares and any additional
documents requested by the Underwriters pursuant to Section 7(k) of the U.S.
Underwriting Agreement hereof, will be delivered at the offices of Sidley &
Austin, 875 Third Avenue, New York, New York 10022 (the "Closing Location"), and
the Shares will be delivered at the Designated Office, all at such Time of
Delivery. A meeting will be held at the Closing Location at 3:00 p.m., New York
City time, on the New York Business Day next preceding such Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company hereby makes to the Underwriters the same agreements as are
set forth in Section 5 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
6. The Company, each of the Selling Stockholders and the Underwriters
hereby agree with respect to certain expenses on the same terms as are set forth
in Section 6 of the U.S. Underwriting Agreement, which Section is incorporated
herein by this reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery, to the condition
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<PAGE>
that all representations and warranties and other statements of the Company and
the Selling Stockholders herein are, at and as of such Time of Delivery, true
and correct, the condition that the Company and the Selling Stockholders shall
have performed all of their obligations hereunder theretofore to be performed,
and additional conditions identical to those set forth in Section 7 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this reference.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through GSI expressly for use therein.
(b) Each of the Selling Stockholders will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that such Selling
Stockholder shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein.
(c) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company and each Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
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<PAGE>
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through GSI expressly for use therein; and will reimburse the
Company and each Selling Stockholder for any legal or other expenses reasonably
incurred by the Company and each Selling Stockholder in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(d) Promptly after receipt by an indemnified party under subsection (a), (b)
or (c) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (d) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Shares purchased under this Agreement,
in each case as set forth in the table on the cover page of the Prospectus
relating to such Shares. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or
5
<PAGE>
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, each
of the Selling Stockholders and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subsection (e) were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under this
Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company or any Selling Stockholder within the meaning of
the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company and the Selling Stockholders shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Shares, or the Company and the Selling
Stockholders notify you that they have so arranged for the purchase of such
Shares, you or the Company and the Selling Stockholders shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholders shall have the right to require
each
6
<PAGE>
non-defaulting Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligation of the
Underwriters to purchase and of the Company to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter, the Company or the Selling Stockholders, except for the expenses to
be borne by the Company and the Selling Stockholders and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders or any officer
or director or controlling person of the Company or any controlling person of
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof, but, if for any other reason any Shares are not delivered by or on
behalf of the Company (with respect to the Optional Shares) and the Selling
Stockholders (with respect to the Firm Shares) as provided herein, the Company
and each of the Selling Stockholders pro rata (based on the number of Shares to
be sold by the Company and such Selling Stockholder hereunder) will reimburse
the Underwriters through GSI for all out-of-pocket expenses approved in writing
by GSI, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives of the
Underwriters.
All statements, requests, notices and agreements hereunder required to be in
writing, if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774-1550; if to any Selling
Stockholder shall be delivered or sent by mail, telex or facsimile transmission
to counsel for such Selling Stockholder at its address set forth in Schedule II
hereto and if to the Company shall be
7
<PAGE>
delivered or sent by registered mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholders by GSI upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Stockholders or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company, each Selling Stockholder and one for each of
you plus one for each counsel counterparts hereof, and upon the acceptance
hereof by you, on behalf of each of the Underwriters, this letter and such
acceptance hereof shall constitute a binding agreement among each of the
Underwriters, the Company and each of the Selling Stockholders. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters
(International Version), the form of which shall be furnished to the Company and
the Selling Stockholders for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
8
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for a
Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Culligan Water Technologies, Inc.
By: ______________________________
Name: ____________________________
Title: ___________________________
Chelonian Corp.
By: ______________________________
Name: ____________________________
Title: ___________________________
Meadow Walk Limited Partnership
By: ______________________________
Its: _____________________________
By: ______________________________
Name: ____________________________
Title: ___________________________
Icahn Charitable Foundation
By: ______________________________
Name: ____________________________
Title: ___________________________
The Icahn Family Foundation
By: ______________________________
Name: ____________________________
Title: ___________________________
__________________________________
Steven J. Green
Green Family Holdings, L.P.
By: ______________________________
Its: _____________________________
By: ______________________________
Name: ____________________________
Title ____________________________
9
<PAGE>
Accepted as of the date hereof:
Goldman Sachs International
Bear, Stearns International Limited
NatWest Securities Limited
Smith Barney Inc.
Jefferies International Limited
By: Goldman Sachs International
By: ____________________________
(Attorney-in-fact)
On behalf of each of the Underwriters
10
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
<S> <C> <C>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
Goldman Sachs International................
Bear, Stearns International Limited........
NatWest Securities Limited.................
Smith Barney Inc...........................
Jefferies International Limited............
[Names of other Managers]..................
Total
</TABLE>
11
<PAGE>
SCHEDULE II
SHARES TO BE NUMBER OF OPTIONAL
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
--------------- ------------------
The Company ...........................
The Selling Stockholder(s):
Chelonian Corp.(a)........
Meadow Walk Limited Partnership(b)...
Icahn Charitable Foundation(c).......
The Icahn Family Foundation(d).......
Steven J. Green(e)...................
Green Family Holdings, L.P.(f).......
-------------- ------------------
Total.................................
============== ===================
(a) This Selling Stockholder is represented by Mark Weitzen, Gordon,
Altman, Butowsky, Weitzen, Shalov & Wein, 114 W. 47th Street, New York, New York
10031 and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by Mark Weitzen, Gordon,
Altman, Butowsky, Weitzen, Shalov & Wein, 114 W. 47th Street, New York, New York
10031 and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(c) This Selling Stockholder is represented by Mark Weitzen, Gordon,
Altman, Butowsky, Weitzen, Shalov & Wein, 114 W. 47th Street, New York, New York
10031 and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(d) This Selling Stockholder is represented by Mark Weitzen, Gordon,
Altman, Butowsky, Weitzen, Shalov & Wein, 114 W. 47th Street, New York, New York
10031 and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(e) This Selling Stockholder is represented by Wilkie, Farr &
Gallagher, 153 E. 53rd, New York, New York 10022 and has appointed Joe Dempsey
and Gregory Wm. Hunt, and each of them, as the Attorneys-in-Fact for such
Selling Stockholder.
(f) This Selling Stockholder is represented by Wilkie, Farr &
Gallagher, 153 E. 53rd, New York, New York 10022 and has appointed Joe Dempsey
and Gregory Wm. Hunt, and each of them, as the Attorneys-in-Fact for such
Selling Stockholder.
12
<PAGE>
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Tel: (212) 735-3000
Fax: (212) 735-2000
October 4, 1996
Culligan Water Technologies, Inc.
One Culligan Parkway
Northbrook, Illinois 60062
Re: Culligan Water Technologies, Inc.
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Culligan Water Technologies, Inc.,
a Delaware corporation (the "Company"), in connection with (a) the public
offering by certain stockholders of the Company (the "Selling Stockholders") of
(i) 4,341,253 shares (the "Outstanding Shares") of the Company's Common Stock,
par value $.01 per share ("Common Stock"), and (ii) 653,668 shares (the "Option
Shares" and, together with the Outstanding Shares, the "Firm Shares") of Common
Stock that will be acquired upon exercise of outstanding stock options and (b)
the issuance and sale by the Company of up to 749,239 shares (the "Over-
Allotment Shares") of Common Stock to cover over-allotments in connection with
the sale of the Firm Shares.
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933 (the "Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Company's
Registra-
<PAGE>
Culligan Water Technologies, Inc.
October 4, 1996
Page 2
tion Statement on Form S-3 (Registration No. 333-12069) as filed with the
Securities and Exchange Commission (the "Commission") on September 16, 1996
under the Act and Amendment No. 1 thereto as filed with the Commission on the
date hereof (as so amended, the "Registration Statement"); (ii) the form of
U.S. Underwriting Agreement and International Underwriting Agreement (together,
the "Underwriting Agreements") proposed to be entered into among the Company,
the Selling Stockholders, and Goldman Sachs & Co., Bear, Stearns & Co. Inc.,
NatWest Securities Limited, Smith Barney Inc. and Jefferies & Company, Inc. and
their affiliates, as representatives of the underwriters named therein (the
"Underwriters"), in each case filed as exhibits to the Registration Statement;
(iii) a specimen certificate evidencing the Common Stock; (iv) the Restated
Certificate of Incorporation of the Company, as presently in effect; (v) the
Amended and Restated By-Laws of the Company, as presently in effect; (vi) the
Stock Option Agreement, dated as of September 12, 1995, between Steven J. Green
and the Company (the "Option Agreement"); (vii) certain resolutions of the Board
of Directors of the Company and drafts of certain resolutions (the "Draft
Resolutions") of the Executive Committee of the Board of Directors of the
Company. We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company and such
agreements, certificates of public officials, certificates of officers or other
representatives of the Company and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company, we have assumed that such parties had or will have the power, corporate
or other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action,
<PAGE>
Culligan Water Technologies, Inc.
October 4, 1996
Page 3
corporate or other, and execution and delivery by such parties of such documents
and the validity and binding effect thereof. As to any facts material to the
opinions expressed herein which we have not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Company and others.
In rendering the opinions set forth in paragraphs 2 and 3 below, we
have assumed that the certificates evidencing the Option Shares and the Over-
Allotment Shares will conform to the specimen certificate examined by us, will
be manually signed by an authorized officer of the transfer agent and registrar
for the Common Stock and will be duly registered by such transfer agent and
registrar.
Members of our firm are admitted to the bar in the States of Delaware
and New York, and we do not express any opinion as to the laws of any other
jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Outstanding Shares have been duly authorized and validly
issued and are fully paid and nonassessable.
2. The Option Shares have been duly and validly authorized for
issuance and, when delivered and paid for in accordance with the terms of the
Option Agreement, will be validly issued, fully paid and nonassessable.
3. When (i) the Registration Statement becomes effective; (ii) the
Draft Resolutions have been adopted by the Executive Committee; (iii) the price
at which the Over-Allotment Shares are to be sold to the Underwriters pursuant
to the Underwriting Agreements and other matters relating to the issuance and
sale of the Over-Allotment Shares have been approved by the Executive Committee
in accordance with the Draft Resolutions; (iv) the Underwriting Agreements have
been duly executed and delivered; and (v) the Over-Allotment Shares are
delivered to and paid for by the Underwriters at a price per share not
<PAGE>
Culligan Water Technologies, Inc.
October 4, 1996
Page 4
less than the per share par value of the Common Stock as contemplated by the
Underwriting Agreements, the issuance and sale of the Over-Allotment Shares will
have been duly authorized, and the Over-Allotment Shares will be validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission.
Very truly yours,
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
<PAGE>
EXHIBIT 23.2
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Culligan Water Technologies, Inc.:
We consent to the use of our report dated March 15, 1996 relating to the
Company's consolidated financial statements and schedule as of January 31,
1995 and 1996 and for each of the periods in the three year period ended
January 31, 1996 incorporated herein by reference and to the reference to our
firm under the heading "Experts" in the Prospectus.
Our report contains an explanatory paragraph that states that the Company's
former parent, Astrum International Corp., was required to establish a new
basis of accounting and adjust the recorded amounts of assets and liabilities
to fair market values at June 30, 1993. The Company's consolidated financial
statements include the continuing impact of the recapitalization. As a result,
the consolidated financial statements for periods subsequent to June 30, 1993
are presented on a different cost basis than for prior periods and, therefore,
are not comparable.
Chicago, Illinois
October 3, 1996
