<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CULLIGAN WATER TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
LOGO
May 14, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at the offices of the Company at One Culligan Parkway, Northbrook,
Illinois at 10:00 a.m. local time on Friday, June 13, 1997.
This booklet includes the Notice of the Meeting and the Proxy Statement
containing information about the meeting, the nominees for election as
directors of the Company and the proposals to be considered at the meeting.
Our Annual Report to Stockholders for the fiscal year ended January 31, 1997
is also being mailed with this booklet. In addition to the formal items of
business to be brought before the meeting, the meeting will feature a report
on the operations of your Company in fiscal 1997, followed by a question and
answer period.
It is important that your shares be voted whether or not you plan to be
present at the meeting. Please complete, sign, date and return the enclosed
form of proxy promptly. If you attend the meeting and wish to vote your shares
personally, you may revoke your proxy.
Sincerely,
/s/ Douglas A. Pertz
Douglas A. Pertz
President and Chief Executive Officer
<PAGE>
CULLIGAN WATER TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Culligan Water Technologies, Inc. will
be held at the offices of the Company at One Culligan Parkway, Northbrook,
Illinois on Friday, June 13, 1997, at 10:00 a.m. local time for the following
purposes:
1. To elect four directors comprising the class of directors of the Company
with three-year terms expiring in 2000.
2. To approve the Culligan Water Technologies, Inc. 1997 Stock Option and
Incentive Compensation Plan.
3. To ratify and approve the appointment of KPMG Peat Marwick LLP as
independent auditors.
4. To transact other such business as properly may come before the meeting.
Stockholders of record at the close of business on April 25, 1997 are
entitled to receive notice of, and to vote at, the annual meeting or any
adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Edward A. Christensen
Edward A. Christensen
Secretary
Culligan Water Technologies, Inc.
One Culligan Parkway
Northbrook, Illinois 60062
May 14, 1997
<PAGE>
CULLIGAN WATER TECHNOLOGIES, INC.
One Culligan Parkway
Northbrook, Illinois 60062
PROXY STATEMENT
INTRODUCTION
GENERAL
The accompanying proxy is solicited by the Board of Directors of Culligan
Water Technologies, Inc. (the "Company" or "Culligan") in connection with the
Annual Meeting of Stockholders of the Company to be held on Friday, June 13,
1997, at 10:00 a.m., local time, at the offices of the Company at One Culligan
Parkway, Northbrook, Illinois (the "Meeting"), and at any adjournment or
postponement of the Meeting. It is expected that this Proxy Statement and the
accompanying form of proxy will first be mailed to stockholders on or about
May 14, 1997. The mailing address of the Company's principal executive office
is One Culligan Parkway, Northbrook, Illinois 60062.
The Board intends to present to the Meeting:
1. the election of four directors comprising the class of directors of the
Company with three-year terms expiring in 2000 or until their successors
have been duly elected and qualified;
2. a proposal to approve the Culligan Water Technologies, Inc. 1997 Stock
Option and Incentive Compensation Plan; and
3. a proposal to ratify and approve the appointment of KPMG Peat Marwick
LLP as independent auditors for the Company.
When a proxy is returned properly dated and signed, the shares represented
thereby will be voted by the persons named as proxies in accordance with each
stockholder's directions. Stockholders may specify their choices by marking
the appropriate boxes on the enclosed proxy. If a proxy is dated, signed and
returned without specifying choices, the shares will be voted as recommended
by the Board of Directors of the Company FOR the election of the nominees for
director named below and FOR Proposals (2) and (3).
Shares can be voted only if the stockholder is present in person or by
proxy. Whether or not you plan to attend in person, you are encouraged to vote
your shares by signing and returning the enclosed proxy card. Your vote is
important. The proxy may be revoked by the stockholder at any time prior to
the time it is voted by giving notice of such revocation either personally or
in writing to the Secretary of the Company, by execution of a later dated
proxy card, or by attending and voting at the Meeting.
The Board does not know of any other matter to be acted upon at the Meeting.
If any other matter should come before the Meeting, the holders of the proxies
solicited hereby will vote thereon in their discretion. The Company's By-laws
prescribe the matters that may be brought before the meeting by a stockholder
only by giving advance written notice to the Company. For purposes of the
Meeting, such notice must have been received by the Secretary at the Company's
address not later than January 14, 1997. No such notice was received by the
Company and, as a result, no additional matters may be brought before the
Meeting by stockholders.
VOTING SECURITIES
All holders of record of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), at the close of business on April 25, 1997 are
entitled to vote at the Meeting. At the close of business on such day, the
Company had 21,384,130 shares of Common Stock outstanding. Each share of
Common Stock entitles the holder to one vote.
1
<PAGE>
The presence, in person or by proxy, of stockholders entitled to cast at
least a majority of the votes which all stockholders are entitled to cast
shall constitute a quorum. A plurality of the shares present at the Meeting in
person or by proxy and entitled to vote on the election of directors is
required for the election of directors, and the affirmative vote of a majority
of the shares of Common Stock present at the Meeting in person or by proxy and
entitled to vote at the Meeting is required for approval of Proposals (2) and
(3). Under applicable Delaware law, in tabulating the vote for the election of
Directors, "non-votes" and directions to withhold will be disregarded and will
have no effect on the outcome of the vote. Where a stockholder by marking a
proxy card or ballot abstains from voting, such stockholder is nonetheless
deemed to be present and, accordingly, abstaining will have the same effect as
a negative vote. When there is a "non-vote" with respect to a proposal, the
shares represented by such non-vote will not be deemed to be present and,
accordingly, will have no effect on the vote for such proposal. A "non-vote"
occurs when a nominee holding shares for a beneficial owner votes on one
proposal but does not vote on another proposal because the nominee does not
have discretionary voting power and has not received instructions from the
beneficial owner.
The Company has been informed that an aggregate of 7,334,859 shares of
Common Stock owned by Apollo Investment Fund, LP and affiliates, constituting
in the aggregate approximately 34.3% of the Company's outstanding Common
Stock, will be voted in accordance with the recommendation of the Board of
Directors FOR the election of the nominees for election as directors named
below and FOR Proposals (2) and (3).
2
<PAGE>
PROPOSAL 1--ELECTION OF DIRECTORS
DIRECTORS
GENERAL
The Board of Directors is classified into three classes whose terms are
staggered to expire in different years. The term of office of one class of
directors expires each year in rotation so that one class is elected at each
Annual Meeting of Stockholders for a full three-year term. The terms of four
of the present directors are expiring at this annual meeting. Directors
elected at the Meeting will hold office for a three-year term expiring in 2000
or until their successors are elected and qualified. The other directors will
continue in office for the remainder of their respective terms or until their
successors are elected and qualified.
Each nominee has consented to serve as a director if elected. If any nominee
in this Proxy Statement should for any reason become unavailable for election,
the proxy holders will vote for such other nominee as may be proposed by the
Board of Directors or, alternatively, the Board of Directors may reduce the
number of directors to be elected at the meeting.
All of the Company's directors, other than Mr. Carl Spielvogel, Mr. Andrew
Africk and Mr. Bernard Attal, were first elected directors by the Company's
sole stockholder and former parent, Samsonite Corporation ("Samsonite"), prior
to the Company's spin-off from Samsonite in September 1995 (the "Spin-off").
Mr. Spielvogel, Mr. Africk and Mr. Attal were elected to the Board of
Directors of the Company by the Company's directors in April 1997, September
1996 and April 1996, respectively, to terms expiring in 1998, 1998 and 1997,
respectively, in accordance with the provisions of the Company's Certificate
of Incorporation which requires directorships to be apportioned by the Board
of Directors to equalize so far as possible the number of directors in each
class.
The Board of Directors recommends that the four nominees named below be
elected as directors of the Company, with each director to hold office until
the Annual Meeting of Stockholders in 2000 and until his successor is elected
and qualified or until his prior death, resignation or removal. Information
about the four nominees and the other directors continuing in office is as
follows:
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2000
R. Theodore Ammon, 47. Mr. Ammon was appointed a director of the Company in
connection with the Spin-off. Mr. Ammon has been the Chairman of the Board and
Chief Executive Officer of Big Flower Press Holdings, Inc., a holding company
for one of the largest printers of advertising inserts in the United States
since 1993. Mr. Ammon was a General Partner of Kohlberg Kravis Roberts & Co.
(a New York and San Francisco-based investment firm) from 1990 to 1992, and an
executive of such firm prior to 1990. Mr. Ammon is a member of the Board of
Directors of Samsonite, Host Marriott Corporation and Foodbrands America, Inc.
In addition, Mr. Ammon serves on the Board of Directors of the New York YMCA,
Jazz @ Lincoln Center and the Institute of International Education and on the
Board of Trustees of Bucknell University.
Bernard Attal, 33. Mr. Attal was elected a director of the Company in April
1996. Mr. Attal is President of Heights Advisors, which acts as a financial
advisor and a representative for certain European institutional investors with
respect to their investments in the United States. Prior to 1995, Mr. Attal
was a Vice President of Credit Lyonnais Securities. Mr. Attal is a also a
director of Samsonite and New California Life Holdings, Inc.
Robert H. Falk, 58. Mr. Falk was appointed a director of the Company in
connection with the Spin-off. Mr. Falk has been an officer since April 1992 of
Apollo Capital Management, Inc. and Lion Capital Management, Inc., which
respectively act as general partners of Apollo Advisors, LP and Lion Advisors,
LP. Mr. Falk is a limited partner of Apollo Advisors, LP, which, together with
its affiliates, acts as managing general partner of Apollo Investment Fund,
LP, AIF II, LP and Apollo Investment Fund III, LP, private securities
investment funds, and a limited partner of Lion Advisors, LP, which acts as
financial advisor to and
3
<PAGE>
representative for certain institutional investors with respect to securities
investments. Prior to 1992, Mr. Falk was a partner in the law firm of Skadden,
Arps, Slate, Meagher & Flom. Mr. Falk is also a director of Samsonite,
Converse, Inc., Florsheim Group Inc. and Salant Corporation.
Mark H. Rachesky, M.D. 38. Dr. Rachesky was appointed a director of the
Company in connection with the Spin-off. Since June 1996. Dr. Rachesky has
been a principal of MHR Fund Management LLC, an investment manager of a
distressed securities fund. For more than five years prior thereto, Dr.
Rachesky was employed by Starfire Holding Corporation (formerly known as Icahn
Holding Corporation), where he initially served as a senior investment officer
and, for the last three years, as its sole Managing Director and, in that
capacity, as Carl C. Icahn's chief investment advisor. Dr. Rachesky is also a
director of Samsonite and Cadus Pharmaceutical Corporation.
DIRECTORS CONTINUING IN OFFICE IN THE CLASS OF 1998
Leon D. Black, 45. Mr. Black was appointed a director of the Company in
connection with the Spin-off. Mr. Black is one of the founding principals of
Apollo Advisors, LP, which, together with its affiliates, acts as managing
general partner of Apollo Investment Fund, LP, AIF II, LP and Apollo
Investment Fund III, LP, private securities investment funds, and of Lion
Advisors, LP, which acts as financial advisor to and representative for
certain institutional investors with respect to securities investments, and of
Apollo Real Estate Advisors, LP, which serves as managing general partner of
Apollo Real Estate Investment Advisors, LP, a private real estate oriented
investment fund. Mr. Black is also a director of Samsonite, Big Flower Press
Holdings, Inc., Converse, Inc., Furniture Brands International Incorporated,
Vail Resorts, Inc. and Telemundo Group, Inc.
Andrew Africk, 30. Mr. Africk was elected a director of the Company in
September 1996. Mr. Africk has been employed by Apollo Capital Management,
Inc. and Lion Capital Management, Inc., for more than five years and has been
an officer of such entities for more than two years. Mr. Africk is also a
director of LaSalle Re Holdings, Inc., Continental Graphics Holdings, Inc. and
Microbes, Inc.
Carl Spielvogel, 68. Mr. Spielvogel was elected a director of the Company in
April 1997. Mr. Spielvogel is Chairman and Chief Executive Officer of Carl
Spielvogel Associates, Inc., an international management and marketing
consulting company. From 1994 to April 1997, he was Chairman and Chief
Executive Officer of the United Auto Group, Inc., the nation's largest
publicly-owned automobile dealership group. For more than five years prior
thereto, he was Chairman and Chairman of the Executive Committee of Bates
Worldwide, Inc., one of the world's largest marketing and advertising
communications companies. Mr. Spielvogel is a member of the Boards of
Directors of Hasbro, Inc., Alliant Foodservice, Inc. (formerly Kraft
Foodservice, Inc.) and Data Broadcasting, Inc.
DIRECTORS CONTINUING IN OFFICE IN THE CLASS OF 1999
Douglas A. Pertz, 42. Mr. Pertz joined the Company in his present position
in January 1995. From 1994 until January 1995, he was Corporate Vice President
and Group Executive of the Danaher Corporation ("Danaher"), a manufacturer of
products in the tool, process/environmental controls and transportation
industries and was also President and a director of Danaher's subsidiary,
Hennessy Industries, a manufacturer of transportation equipment. In addition,
from 1990 to January 1995, he was President, Chief Executive Officer and a
director of Danaher's subsidiary, NMTC, Inc. d/b/a Matco Tools, a manufacturer
of hand tools, and NMTC, Inc.'s predecessor company, Matco Tools Corporation.
Mr. Pertz has been a director of the Company since the Spin-off.
Robert L. Rosen, 50. Mr. Rosen was appointed a director of the Company in
connection with the Spin-off. Mr. Rosen is Chief Executive Officer of RLR
Partners, LLC., a private investment partnership founded in April 1987. From
1987 until August 1993, Mr. Rosen served as Chairman of the Board and Chief
Executive Officer of Damon Corporation and its predecessor which operates one
of the leading clinical laboratory testing networks in
4
<PAGE>
the United States. Damon Corporation was acquired by Corning, Inc. in August
1993. Since October 1995, Mr. Rosen has been Vice Chairman and Director of AFP
Imaging Corporation, which manufactures and distributes equipment that
produces hard copy images used in both the medical diagnostic and graphic arts
industry. Mr. Rosen is also a director of Samsonite, Municipal Advantage Fund,
Inc., Municipal Partners Fund, Inc., Municipal Partners Fund II, Inc. and the
Spring Mountain Group.
Marc J. Rowan, 34. Mr. Rowan was appointed a director of the Company in
connection with the Spin-off. Mr. Rowan has also been a director of Samsonite
since June 1993. Mr. Rowan is one of the founding principals of Apollo
Advisors, LP, which, together with its affiliates, acts as managing general
partner of Apollo Investment Fund, LP, AIF II, LP and Apollo Investment Fund
III, LP, private securities investment funds, and of Lion Advisors, LP, which
acts as financial advisor to and representative for certain institutional
investors with respect to securities investment. Mr. Rowan is also a director
of Farley, Inc., Samsonite and Vail Resorts, Inc.
Stephen J. Solarz, 56. Mr. Solarz was appointed a director of the Company in
connection with the Spin-off. Mr. Solarz was elected, in 1974, to the House of
Representatives from Brooklyn's 13th Congressional District (the "House") and
was re-elected seven times. In the House he served on four committees: Foreign
Affairs, Merchant Marine and Fisheries, Intelligence, and the Joint Economic
Committee. Mr. Solarz ranked third in seniority on the House Foreign Affairs
Committee, where he chaired the Subcommittee on Asian and Pacific Affairs and
the Subcommittee on Africa. Since his departure from the House, Mr. Solarz has
been president of Solarz and Associates, a global consulting firm and Senior
Counselor with APCO Associates, a Washington, D.C. public affairs firm with
offices in Canada, Europe and Asia. He chairs the George Washington University
Policy Forum and the Central-Asian American Enterprise Fund, a position to
which he was appointed by President Clinton. Mr. Solarz is also a director of
Samsonite and IRI International Corporation in addition to a number of
nonprofit Boards in the foreign policy field, including the Council on Foreign
Relations, the National Democratic Institute and the National Endowment for
Democracy. He is a member of the Brandeis University Board of Trustees and
serves as Vice Chairman of the International Crisis Group which is dedicated
to anticipating and preventing international crises originating from human
causes.
BOARD OF DIRECTOR'S AND COMMITTEE MEETINGS
The Company's current Board of Directors, other than Messrs. Africk, Attal
and Spielvogel, were first elected upon the Spin-off by the Company's former
parent and sole stockholder. Prior to the Spin-off, the Company's Board of
Directors consisted of executive officers of the former parent and all board
actions were taken by unanimous written consent. In Fiscal 1997 the Company's
Board of Directors met six times. Each incumbent director attended more than
75% of such meetings and of all committees that he was eligible to attend in
Fiscal 1997, except Messrs. Ammon, Rachesky and Solarz.
The Company's Board of Directors has an Executive Committee, an Audit
Committee and a Compensation Committee.
The Executive Committee has all powers and rights necessary to exercise the
full authority of the Board of Directors in the management of the business and
affairs of the Company when necessary in between meetings of the Board of
Directors. The members of the Executive Committee are Messrs. Falk, Pertz and
Rowan. The Executive Committee met one time and acted by unanimous consent
five times in Fiscal 1997.
The Audit Committee is primarily concerned with the effectiveness of the
Company's accounting policies and practices, financial reporting and internal
controls. The Audit Committee is authorized to (i) make recommendations to the
Board of Directors regarding the engagement of the Company's independent
accountants; (ii) review the plan, scope and results of the annual audit, the
independent accountants' letter of comments and management's response thereto,
and the scope of any non-audit services which may be performed by the
independent accountants; (iii) manage the Company's policies and procedures
with respect to internal accounting and financial controls; and (iv) review
any changes in accounting policy. The members of the Audit Committee are
Messrs. Ammon and Rosen. The Audit Committee met four times in Fiscal 1997.
5
<PAGE>
The Compensation Committee is authorized and directed to review and approve
the compensation and benefits of the executive officers, to review and approve
the annual salary plans, to review management organization and development, to
review and advise management regarding the benefits, including bonuses, and
other terms and conditions of employment of other employees, to administer any
stock option plans which may be adopted and the granting of opinions under
such plans, and to review and recommend for the approval of the Board the
compensation of directors. The members of the Compensation Committee are
Messrs. Ammon, Falk and Rowan. The Compensation Committee met once and acted
once by unanimous written consent in Fiscal 1997.
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors receive an annual fee of
$25,000 payable quarterly. Directors are also reimbursed for all reasonable
travel and other expenses of attending meetings of the Board or a committee
thereof. Directors have the option of receiving their fee in cash or in Common
Stock having an equivalent value determined in accordance with the Company's
Directors' Stock Plan. Substantially all of the Company's directors
participate in such plan. During fiscal 1997 an aggregate of 3,173 shares of
Common Stock were issued to directors under the plan.
FILINGS PURSUANT TO SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
persons who own more than 10% of a registered class of the Company's equity
securities ("reporting persons") to file with the Securities and Exchange
Commission (the "Commission") initial reports of ownership and reports of
changes in ownership of equity securities of the Company. Reporting persons
are required to furnish the Company with copies of all forms they file
pursuant to such section.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, during Fiscal 1997, all reports required by
section 16(a) were filed with the Commission on a timely basis other than
Messrs. Africk and Hendrix, whose initial reports on Form 3, and other than
Messrs. Christensen, Rosati and Wellings whose reports on Form 4 for the month
of December 1996 with respect to the option grants reported elsewhere herein
(see "Executive Compensation--Certain Option Information", were not timely
filed through clerical error.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (currently comprised of Messrs. Ammon, Falk and
Rowan) of the Board of Directors of the Company (the "Committee") reviews and
approves the salary and bonus for the Company's Chief Executive Officer,
reviews the salaries and bonuses of the executive officers of the Company and
reviews and approves grants of options to purchase shares of Common Stock and
other equity-based compensation awards under the Company's stock option and
incentive compensation plans.
OBJECTIVES
The Committee's primary objectives are to retain the best qualified people
and to insure that they are properly motivated to promote both the Company's
short-term and long-term objectives. In furtherance of the foregoing, the
Committee, in establishing the components and levels of compensation for its
executive officers, seeks (i) to enable the Company to attract and retain
highly qualified executives and (ii) to provide financial incentives in the
form of cash bonuses and equity compensation (each of which generally has been
contingent on the attainment of performance goals) in order to align the
interests of executive officers more closely with those of the stockholders of
the Company and to motivate such executives to increase stockholder value by
improving corporate performance and profitability.
6
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with the Company's
President and Chief Executive Officer which is being extended for a period of
two years through January 31, 2000. The Committee has considered the
advisability of using employment agreements and has determined that the use of
employment agreements in selected instances is in the best interest of the
Company because they may facilitate (consistent with the Committee's overall
objectives) the Company's ability to attract and retain the services of the
most highly qualified executive officers. The Committee believes that the use
of employment agreements by the Company in selected instances provides long-
term stability, and the Committee has determined that the practice of using
employment agreements to retain the services of senior executive officers in
selected instances should continue in the future. Each employment agreement
entered into by the Company reflects the terms that the Committee felt were
appropriate and/or necessary to retain the services of the particular
executive.
COMPONENTS OF EXECUTIVE COMPENSATION
There are two components of the Company's executive compensation program:
.Cash compensation.
.Equity compensation.
CASH COMPENSATION
Cash compensation is comprised of base salary and annual cash incentive
bonuses. Because, as noted above, the Chief Executive Officer of the Company
was party to an employment agreement with the Company, his cash compensation
level was subject to the provisions of such employment agreement. After
consultation with an independent consultant on executive compensation, the
Committee arrived at appropriate cash compensation levels in the process of
negotiating such agreement.
The Company offers each of its executive officers an opportunity to earn
additional cash compensation in the form of annual incentive bonuses that are
awarded if the Company attains specified performance goals. The Committee
believes that making a significant portion of executive officer compensation
subject to the Company attaining specified performance goals motivates the
executive officers to increase their individual efforts on behalf of the
Company. The Committee also believes that it is appropriate that the Company's
executive officers receive lower compensation when the Company does not attain
its specified performance goals and higher compensation when the Company
attains such goals.
Annual bonus amounts for the named executive officers were generally
conditioned on the Company's attainment of specified performance goals. The
performance goals relating to such bonuses for the fiscal year ended January
31, 1997 were measured in terms of the Company's earnings before interest,
taxes, and amortization of intangibles and were derived with reference to the
Company's business plan for fiscal 1997. The Company successfully attained
these performance goals for the 1997 fiscal year and, therefore, each
executive officer earned the bonus disclosed in the bonus column of the
Summary Compensation Table.
The Committee reviews the overall compensation of individual executive
officers from time to time. In determining adjustments to cash compensation
for a particular year, the Committee considers short-term compensation at
companies comparable to the Company in size, market capitalization and/or
principal business. In making adjustments to salaries and/or bonuses, the
Committee also makes determinations regarding the performance of individual
officers, based primarily on the chief executive officer's recommendation.
EQUITY COMPENSATION
Equity compensation is currently comprised of stock options. Stock option
grants reflect the Committee's desire to provide a meaningful incentive for
executives to increase the value of the Company's equity over the
7
<PAGE>
long term. The Committee generally seeks to have a substantial portion of each
stock option for executive officers grant vest only if the Company attains
specified performance goals. In that connection, in Fiscal 1997, options to
purchase 280,000 shares were granted to executive officers of the Company,
other than the Company's Chief Executive Officer, as described elsewhere
herein and options to purchase 262,500 shares were granted to other officers
and key employees of the Company and its subsidiaries. In addition, the
Company has granted options to purchase 300,000 shares to the Company's Chief
Executive Officer in connection with the extension of his employment
agreement.
CHIEF EXECUTIVE OFFICER COMPENSATION
In fiscal 1997, the compensation of Mr. Pertz was determined primarily
pursuant to the Employment Agreement entered into when he was hired to fill
that position. Approximately 56% of Mr. Pertz's cash compensation in fiscal
1997 was represented by an annual incentive bonus based on the achievement of
certain performance goals and a special one-time incentive bonus and
approximately 60% of his options are subject to certain performance vesting
targets. This is consistent with the Committee's belief that providing
financial incentives in the form of cash bonuses and equity compensation, a
substantial portion of which is contingent on the attainment of performance
goals, best aligns the interest of executive officers with those of the
stockholders of the Company and motivates such executives to increase
stockholder value by improving corporate performance and profitability. Since
joining the Company in January 1995, Mr. Pertz has assembled a new management
team that has refocused the Company on growth and led it to record results.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Code generally limits to $1,000,000 the Company's
federal income tax deduction for compensation paid in any year to each of its
Chief Executive Officer and the four other most highest paid executive
officers, to the extent such compensation is not "performance based" within
the meaning of Section 162(m). The Committee will, in general, seek to qualify
compensation paid to its executive officers for deductibility under Section
162(m), although the Committee believes it is appropriate to retain the
flexibility to authorize payments of compensation that may not qualify for
deductibility if, in the Committee's judgment, it is in the Company's best
interest to do so.
The Compensation Committee
of the Board of Directors
R. Theodore Ammon
Robert H. Falk
Marc J. Rowan
8
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The performance graph below compares the cumulative total return to
stockholders since September 12, 1995, the date of the distribution of the
Common Stock in the Spin-off, through January 31, 1997, for a holder of Common
Stock against the cumulative total return of the Standard & Poor's 500 Stock
Index (the "S&P 500") and a group of peer companies. The performance graph is
included in compliance with the rules of the Securities and Exchange
Commission. For periods prior to the Company's listing on the New York Stock
Exchange on December 15, 1995, there was no established public trading market
for the Common Stock and the Common Stock was traded in interdealer and over-
the counter bulletin board transactions. Prices for such period represent
quotations obtained from sources believed to be reliable but no assurance can
be given as to their accuracy. 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. The stock
price performance depicted in the performance graph is not necessarily
indicative of future stock price performance.
9/12/95* 1/31/97
-------- -------
Culligan $100 $271.85
500 $100 $136.37
Peer Group $100 $187.37
The peer group consists of the following corporations in the water
purification and treatment industry: Ionics, Inc., Osmonics, Inc. and United
States Filter Corporation. Companies in indices were weighted by market
capitalization; indexed to 100 at September 12, 1995. All dividends, if any,
were reinvested over the period.
- --------
* The first trading day after the Spin-off and the registration of the
Company's Common Stock under Section 12 of the Exchange Act.
9
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long term compensation that
the Company paid to its Chief Executive Officer and certain other of its
executive officers (the "Named Executive Officers") in each of the past three
fiscal years:
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
FISCAL COMPENSATION COMPENSATION SECURITIES
YEAR ------------ ------------ OTHER ANNUAL UNDERLYING ALL OTHER
ENDED SALARY BONUS COMPENSATION OPTIONS/SAR COMPENSATION
NAME AND PRINCIPAL POSITION JANUARY 31 ($) ($) ($) (#) ($)
- --------------------------- ---------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Pertz......... 1997 275,000 350,000 12,415 300,000(1) --
President & Chief Execu-
tive 1996 275,000 410,000 276,202(2)
Officer 1995 491,426(3)
Michael E. Salvati....... 1997 80,773 70,000 7,704 60,000(4) --
Vice President, Finance
&
Chief Financial Officer
since
July 1996
Edward A. Christensen.... 1997 175,000 80,000 40,024 40,000(5) --
Vice President, General 1996 79,161 30,000 3,900 35,000(6) --
Counsel & Secretary
since
September 1995
Ronald Rosati............ 1997 153,942 125,000 39,211 60,000(5)
Group President, Retail 1996 45,769 28,000 4,583 22,500(6)
Market & Point of Use
since September 1995
Kenneth I. Wellings...... 1997 154,807 130,000 38,208(8) 60,000(5) 38,843(9)
Group President, Inter-
national 1996 114,789 145,778(7) 62,231(8) 40,000(6)
1995 103,870 99,720 31,670(8)
</TABLE>
- --------
(1) Consists of options granted under the Company's 1997 Stock Option and
Incentive Compensation Plan in connection with an extension of Mr. Pertz's
Employment Agreement.
(2) Includes, for Mr. Pertz, payments pursuant to his Employment Agreement
described below of $215,000 consisting of a one-time payment representing
payments he would have received from his former employer had he not
accepted employment with the Company and $61,202 consisting of relocation
and similar expenses. See "--Employment Contracts and Termination of
Employment and Change-in-Control Arrangements--Pertz Employment
Agreement."
(3) Mr. Pertz started in his position January 30, 1995, and therefore did not
receive any compensation in the fiscal year ended January 31, 1995 except
for the granting of options as described in the above table. The terms of
such options are described below. See "--Employment Contracts and
Termination of Employment and Change-in-Control Arrangements--Pertz
Employment Agreement."
(4) Consists of options granted under the Company's 1995 Amended and Restated
Stock Option and Incentive Compensation Plan, 10,000 of which have an
exercise price of $35.63 and the remainder of which have an exercise price
of $33.13.
(5) Consists of options granted under the Company's 1995 Amended and Restated
Stock Option and Incentive Compensation Plan having an exercise price of
$35.63.
(6) Consists of options granted under the Company's 1995 Amended and Restated
Stock Option and Incentive Compensation Plan having an exercise price of
$12.23.
(7) Includes a payment of $70,778 to Mr. Wellings representing a one time
special payment made pursuant to his termination agreement.
(8) Includes for Mr. Wellings foreign service allowances of $29,275 in fiscal
1997, $55,000 in fiscal 1996 and of $25,385 in fiscal 1995.
(9) Represents the exercise by Mr. Wellings of options to purchase 1,500
shares of common stock.
10
<PAGE>
CERTAIN OPTION INFORMATION
The Company has an Amended and Restated 1995 Stock Option and Incentive
Compensation Plan in which officers and other employees participate and, as
described elsewhere herein, a 1997 Stock Option and Incentive Compensation
Plan. See "Proposal 2--Adoption of 1997 Stock Option Plan. Certain information
concerning options granted to Named Executive Officers in Fiscal 1997 is set
forth below:
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTIONS TERM
---------------------------------------------- ----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED OR BASE
OPTION/SARS TO EMPLOYEES PRICE EXPIRATION
GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
----------- -------------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Pertz(1)..... 300,000 35.0% $33.25 2007 $ 6,273,210 $ 15,897.570
Michael E. Salvati(2)... 50,000 5.8% $33.13 2006 $ 1,041,750 $ 2,640,035
10,000 1.2% $35.63 2006 $ 224,075 $ 576,850
Edward A.
Christensen(2)......... 40,000 4.7% $35.63 2006 $ 896,300 $ 2,271,400
Ronald Rosati(2)........ 60,000 7.0% $35.63 2006 $ 1,344,450 $ 3,407,100
Kenneth I. Wellings(2).. 60,000 7.0% $35.63 2006 $ 1.344,450 $ 3,407,100
</TABLE>
- --------
(1) Represents options for 300,000 shares granted to Mr. Pertz in connection
with the extension of his employment agreement with the Company. See "--
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements."
(2) Represents options granted under the Company's Amended and Restated 1995
Stock Option and Incentive Award Plan.
There were no Options/SARs exercises and no long-term incentive plan awards
for the year ended January 31, 1997, except for the exercise by Mr. Wellings
of options to purchase 1,500 shares of Common Stock at an exercise price of
$12.23 per share.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/
AT FY-END (#) SARS AT FY-END ($)(1)
SHARES VALUE --------------- ---------------------
ACQUIRED ON REALIZED EXERCISABLE/
NAME EXERCISE (#) ($) EXERCISABLE/ UNEXERCISABLE
- ---- ------------ -------- UNEXERCISABLE ---------------------
<S> <C> <C> <C> <C>
Douglas A. Pertz (2).... -- -- 327,617/463,809 $7,623,648/$3,811,835
Michael E. Salvati...... -- -- 0/ 60,000 $ 0/$ 6,000
Edward A. Christensen... -- -- 8,050/ 66,950 $ 169,211/$ 566,489
Ronald Rosati........... -- -- 5,175/ 77,325 $ 108,779/$ 364,172
Kenneth I. Wellings..... 1,500 $38,843 14,500/ 84,000 $ 304,790/$ 786,480
</TABLE>
- --------
(1) Based on a closing market price on January 31, 1997 of $33.25 per share as
reported on the Composite Transaction Reporting System.
(2) Includes options for 300,000 shares granted to Mr. Pertz in connection
with the extension of his employment agreement with the Company having an
exercise price of $33.25 per share. See "--Employment Contracts and
Termination of Employment and Change-in-Control Arrangements."
11
<PAGE>
PENSION AND CERTAIN OTHER BENEFIT PLANS
PENSION AND SUPPLEMENTAL RETIREMENT PLANS
The following table provides information with respect to estimated annual
combined benefits payable upon retirement at normal retirement age in
specified compensation and years of service classifications under the Culligan
Employees' Pension Plan and the Culligan International Company Supplemental
Retirement Plan:
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------
FINAL AVERAGE EARNINGS 15 20 25 30 35
- ---------------------- ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
$125,000................................... 25,000 33,000 41,000 49,000 58,000
150,000................................... 30,000 40,000 50,000 60,000 71,000
175,000................................... 36,000 48,000 60,000 72,000 84,000
200,000................................... 41,000 55,000 69,000 83,000 97,000
225,000................................... 47,000 63,000 78,000 94,000 110,000
250,000................................... 53,000 70,000 88,000 105,000 123,000
300,000................................... 53,000 70,000 88,000 105,000 123,000
400,000................................... 53,000 70,000 88,000 105,000 123,000
450,000................................... 53,000 70,000 88,000 105,000 123,000
500,000................................... 53,000 70,000 88,000 105,000 123,000
</TABLE>
Compensation covered by such plans is total cash compensation paid,
including any amount contributed by the employee under a Section 401(k) plan,
excluding (i) reimbursement of expenses, (ii) tax and housing allowances and
(iii) amounts paid under any long term incentive program. The benefits shown
above are payable on a life annuity basis and are not subject to any social
security or other offset amounts.
<TABLE>
<CAPTION>
MICHAEL
DOUGLAS E. EDWARD A. RONALD KENNETH I.
A. PERTZ SALVATI CHRISTENSEN ROSATI WELLINGS
-------- -------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Current Covered Compensa-
tion....................... $150,000 $150,000 $150,000 $150,000 $150,000
Estimated Years of Credited
Service at Age 60*......... 19 years 16 years 8 years 17 years 30 years
Years of Credited Service at
January 1, 1997............ 3 years 0 years 1.5 years 1.5 years 20.5 years
</TABLE>
EMPLOYEE SAVINGS PLAN
The Company maintains an employee savings plan for employees of the
Company's principal domestic subsidiaries, which is qualified under Section
401(k) of the Internal Revenue Code (the "Savings Plan"). Any full time
employee and part-time employee who has completed one year of service of a
covered operations area is eligible to participate in the Savings Plan.
Participating employees may elect to contribute from 1% to 12% of their
compensation on a tax-deferred basis to the maximum permitted by IRS
regulations and from 1% to 12% as after-tax contributions, provided however
that the total contribution cannot be greater than 12% of pay and certain
other limitations apply to highly compensated employees.
The Company matches the employee's contribution up to 6% of compensation at
50 cents on the dollar. A participating employee's elective contributions are
fully vested when made; the portion matched by the Company becomes vested
based on years of service, as follows: less than 3 years, 0%; 3 years but less
than 5 years, 50%; fully vested at 5 years of service. Full vesting also
occurs on retirement on or after age 55, permanent disability, or death. Upon
retirement, death, or certain other withdrawal events, benefits will be paid
in a single lump sum or in equal installments from one to ten years.
PROFIT SHARING PLANS
The Company maintains separate profit sharing plans for employees of certain
of its subsidiaries (the "Profit Sharing Plans"). Any employee who has
completed one year of service and is age 18 or over is eligible to
12
<PAGE>
participate in the Profit Sharing Plans. Eligible compensation includes base
salary but not bonuses, overtime, or, generally, other cash compensation. The
Culligan and Everpure Profit Sharing Plans provide for annual contributions in
an amount set by the Board of Directors, not less than 7% and not to exceed
10% of the excess pre-tax net profits as defined in the Profit Sharing Plans
of the covered operations area. The amount of contribution for the Culligan
Retail Division Profit Sharing Plan is 5% of pre-tax net profits or 4% of
eligible compensation. Contributions are allocated to individual accounts of
participants in proportion to their eligible compensation. The compensation
included is also subject to certain limits established by the IRS.
Upon retirement, death or certain other withdrawal events, benefits will be
paid in a single lump sum or equal installments from one to ten years or life
expectancy, if less.
EMPLOYMENT ARRANGEMENTS
Original Pertz Employment Agreement. The Company entered into an employment
agreement (the "Pertz Employment Agreement") as of January 1995 with Douglas
A. Pertz pursuant to which Mr. Pertz serves as the Chief Executive Officer and
President of the Company. The agreement summarized below has been filed as an
exhibit to the Company's Registration Statement on Form 10 and the following
summary is qualified in its entirety by reference to the agreement as filed.
The Pertz Employment Agreement provides that Mr. Pertz will receive an
annual salary of $275,000 and provides further that he will become entitled to
receive an annual incentive bonus of up to $275,000 if certain performance
goals, developed jointly by the Compensation Committee of the Board of
Directors and Mr. Pertz, are attained.
In connection with the Pertz Employment Agreement, the Company issued to Mr.
Pertz options to purchase 491,426 shares of Culligan Common Stock.
Approximately 60% vest in three equal annual installments upon the attainment
by the Company of performance goals developed jointly by the Compensation
Committee and Mr. Pertz and the remainder of which vest in three equal annual
installments so long as Mr. Pertz remains employed with the Company. At
January 31, 1997, options for 327,617 shares had vested and the remainder will
vest subject to the satisfaction of future vesting criteria. The options have
an exercise price of $9.98 per share, subject to adjustment.
The Pertz Employment Agreement contains confidentiality and non-competition
provisions that prevent Mr. Pertz from disclosing confidential information
about the Company and from competing with the Company during the term of his
employment therewith and for an additional year thereafter. The non-
competition provision also prevents Mr. Pertz from soliciting suppliers,
customers and affiliates of the Company during the term of his employment with
the Company and for an additional two years thereafter. The Pertz Employment
Agreement includes customary provisions concerning indemnification and the
payment of legal fees.
The term of employment under the Pertz Employment Agreement was stated to
expire on January 31, 1998.
In connection with the extension of Mr. Pertz's employment for an additional
two-year term pursuant to the new employment agreement described below,
effective January 31, 1997, the Pertz Employment Agreement was amended to
increase Mr. Pertz's base salary for the fiscal year ending January 31, 1998
to $350,000, to increase the annual incentive bonus for such fiscal year to up
to $350,000, and to modify the calculation of the severance payment due to him
upon termination under certain circumstances to be greater of (i) $525,000 and
(ii) $43,750 multiplied by the sum of 24 and the number of full calendar
months remaining in the term of the Pertz Employment Agreement. The
circumstances under which such a payment is due to Mr. Pertz include a
termination by the Company for any reason other than "cause" (as defined) or a
termination by Mr. Pertz constituting "good reason" including the occurrence
of a "change in control" as defined.
New Agreement with Mr. Pertz. As of February 1, 1997, the Company entered
into a new two-year employment agreement with Mr. Pertz (the "New Agreement"),
which will become effective on February 1,
13
<PAGE>
1998 upon the expiration of the term of the Pertz Employment Agreement. The
terms of the New Agreement are substantially the same as the Pertz Employment
Agreement, except as described below.
The term of employment under the new Agreement expires on January 31, 2000.
If the Company declines to renew the New Agreement for an additional two
years, Mr. Pertz will become entitled to receive a payment of $400,000.
The New Agreement provides that Mr. Pertz will receive an annual salary of
$400,000 commencing February 1, 1998 and provides further that he will become
entitled to receive an annual incentive bonus of up to $400,000 if certain
performance goals, developed jointly by the Compensation Committee of the
Board of Directors and Mr. Pertz, are attained.
In connection with the New Agreement, the Company has granted to Mr. Pertz
options to purchase an additional 300,000 shares of Common Stock, of which 60%
vest in five equal annual installments upon the attainment by the Company of
certain performance goals and the remainder of which vest in five equal annual
installments so long as Mr. Pertz remains employed by the Company. The five-
year period commences on February 1, 1997 and includes the fiscal year ending
January 31, 1998. The options have an exercise price of $33.25 per share,
subject to adjustment.
Under the New Agreement, if Mr. Pertz's employment is terminated by the
Company without "cause" or by Mr. Pertz for "good reason," Mr. Pertz will
become entitled to receive certain severance benefits including a payment
equal to the greater of (i) $600,000 and (ii) $50,000 multiplied by the number
of full calendar months remaining in the term of the New Agreement.
Termination Agreements and Arrangements. In connection with the employment
of Messrs. Christensen, Hendrix, Rosati, Wellings and Salvati, the Company
agreed that they would be entitled to receive twelve-months and, in the case
of Mr. Salvati, eighteen-months, base salary if it should terminate their
employment, other than for cause.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Falk, Rowan and
Ammon. There were no Compensation Committee interlocks or insider
participation within the meaning of the applicable regulations of the
Securities and Exchange Commission.
OWNERSHIP OF COMMON STOCK
Based on a review of statements filed with the Commission pursuant to
Section 13 of the Exchange Act, 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 nominees for directors and
executive officers named in the Cash Compensation Table and all of the
Company's directors and named executive officers as a group, as of April 30,
1997. 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>
NUMBER OF SHARES
NAME AND ADDRESS/OR TITLE OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
- --------------------------------------------- ------------------ -------
<S> <C> <C>
Apollo Investment Fund, LP (1).................... 7,334,859(1) 34.3%
c/o Apollo Advisors, LP
2 Manhattanville Road
Purchase, New York 10577
Janus Capital Corporation (2)..................... 2,378,300(2) 11.1%
100 Fillmore Street
Denver, CO 80206-4923
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS/OR TITLE OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
- --------------------------------------------- ------------------ -------
<S> <C> <C>
American Express Company (3)...................... 2,280,050(4) 10.7%
American Express Tower
200 Vesey Street
New York, NY 10285
Mellon Bank Corporation (4)....................... 1,810,000(3) 8.5%
One Mellon Bank Center
Pittsburgh, PA 15258
Andrew D. Africk.................................. 167 *
Apollo Management LP
1301 Avenue of the Americas 38th Floor
New York, NY 10285
R. Theodore Ammon................................. 501 *
Big Flower Press Holdings, Inc.
3 E. 54th Street 19th Floor
New York, NY 10022
Bernard Attal..................................... 501 *
Apollo Management LP
1301 Avenue of the Americas 38th Floor
New York, NY 10019
Leon D. Black..................................... 501 *
Apollo Management LP
1301 Avenue of the Americas 38th Floor
New York, NY 10019
Robert H. Falk.................................... 501 *
Apollo Management LP
1301 Avenue of the Americas 38th Floor
New York, NY 10019
Robert L. Rosen................................... 501 *
RLR Partners, LP
825 Third Ave., 40th Floor
New York, NY 10022
Marc Rowan........................................ 501 *
Apollo Management LP
1301 Avenue of the Americas 38th Floor
New York, NY 10019
Douglas A. Pertz.................................. 334,217(5) 1.5%
President and Chief Executive Officer
Michael E. Salvati................................ 1,000(6) *
Vice President, Finance and
Chief Financial Officer
Edward A. Christensen............................. 8,250(7) *
Vice President, General Counsel and Secretary
Calvin R. Hendrix................................. 0(8)
Group President--North America
Ronald Rosati..................................... 10,035(9) *
Vice President, Point-of-Use & Retail Markets
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS/OR TITLE OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
- --------------------------------------------- ------------------ -------
<S> <C> <C>
Kenneth I. Wellings............................... 14,500(10) *
Vice President, International
All directors and executive officers as a group... 371,175(11) 1.7%
</TABLE>
- --------
* Less than 1.0%
(1) Includes 3,666,696 shares beneficially held by Lion Advisors, LP for the
benefit of an investment account under management over which Lion
Advisors, LP holds investment, voting and dispositive power. Lion
Advisors, LP is an affiliate of Apollo Advisors, LP ("Apollo Advisors"),
the managing general partner of Apollo Investment Fund, LP. 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, LP, respectively, and
Messrs. Falk and Rowan, disclaim beneficial ownership of all of the
indicated shares. See "Proposal 1--Election of Directors."
(2) Based on an amended Schedule 13G filed with the Commission, at December
31, 1996 portfolios managed by Janus Capital Corporation beneficially
owned 2,378,300 shares of Culligan Common Stock (11.1% of the outstanding
Common Stock) of which 1,282,900 shares (6.0%) were held by Janus Value
Fund.
(3) Based on Amendment No. 1 to Schedule 13G filed with the Commission on May
7, 1997 by American Express Company and American Express Financial
Corporation an aggregate of 2,280,050 shares of Culligan Common Stock
(10.7% of the outstanding Common Stock) were beneficially owned by
American Express Financial Corporation (of which shared dispositive power
was reported as to 1,196,750 shares).
(4) Based on a Schedule 13G filed with the Commission at December 31, 1996 by
Mellon Bank Corporation an aggregate of 1,810,000 shares of Common Stock
(8.5% of the outstanding Common Stock) were beneficially owned by Mellon
Bank, N.A., Mellon Capital Management Corporation, The Dreyfus Corporation
and Dreyfus Investment Advisors, Inc.
(5) Includes presently exercisable option to purchase 327,617 shares. Does not
include options for 163,809 shares not presently exercisable or options
for 300,000 shares granted in connection with an extension of Mr. Pertz's
employment agreement. See "--Employment Contracts and Termination of
Employment and Change-in-Control Arrangements--Pertz Employment
Agreement."
(6) Does not include options for 60,000 shares under the Company's Amended and
Restated 1995 Stock Option and Incentive Compensation Plan that are not
presently exercisable.
(7) Includes options for 8,050 shares under the Company's 1995 Amended and
Restated Stock Option and Incentive Compensation Plan that are presently
exercisable; does not include options for 66,950 shares under such plan
that are not presently exercisable.
(8) Does not include options for 80,000 shares under the Company's 1995
Amended and Restated Stock Option and Incentive Compensation Plan that are
not presently exercisable.
(9) Includes options for 5,175 shares under the Company's 1995 Amended and
Restated Stock Option and Incentive Compensation Plan that are presently
exercisable; does not include options for 77,325 shares under such plan
that are not presently exercisable. Does not reflect the sale of 4,860
shares by Mr. Rosati subsequent to March 31, 1997.
(10) Consists of options for 14,500 shares presently exercisable under the
Company's 1995 Amended and Restated Stock Option and Incentive
Compensation Plan; does not include options for 84,000 shares under such
plan that are not presently exercisable.
(11) Does not include options that are not presently exercisable; percentage
amount assumes the exercise by such persons of all options to acquire
shares of the Company's Common Stock and no exercise by any other person.
16
<PAGE>
CERTAIN TRANSACTIONS
TAX SHARING AGREEMENT
Prior to the Spin-off, Culligan's results of operations were included in
Samsonite's consolidated United States federal income tax returns. In
connection with the Spin-off, Culligan and Samsonite entered into a Tax
Sharing Agreement (the "Tax Sharing Agreement") providing, among other things,
for the allocation between Samsonite and Culligan of federal and state tax
liabilities for all periods prior to completion of the Spin-off. The Tax-
Sharing Agreement has been filed as an exhibit to the Company's Registration
Statement on Form 10 and the following summary is qualified in its entirety by
reference thereto. Under the Tax Sharing Agreement, Samsonite agreed to
reflect in its intercompany tax receivable account all taxes payable with
respect to the operations of Culligan and its subsidiaries which are reported
on a consolidated or combined basis with Samsonite for taxable periods (or
portions thereof) prior to the Spin-off. In Fiscal 1997, the balance in
Samsonite's intercompany tax receivable account from Culligan was reduced by a
credit of approximately $521,000 and the remaining liability of approximately
$6.7 million was repaid in full.
LOAN PROGRAM
The Company has a program for encouraging the purchase by employees of
shares of common stock. The program provides that, if requested by employees
purchasing shares of Common Stock, the Company would make loans to such
employees in an amount not to exceed 75% of the aggregate purchase price of
the shares purchased. Pursuant to its loan program the Company made loans of
$105,750 to Mr. Pertz, $85,658 to Mr. Rosati (which was repaid in full in
April 1997), $27,375 to Mr. Salvati and $3,525 to Mr. Christensen. Such loans
bear interest at floating rates based on the interest rate payable from time
to time on borrowings under the Company's credit facility, and mature on the
earliest of (a) December 15, 2000, (b) 90 days following termination of the
employee's employment with the Company or (c) acceleration of the maturity of
the loan as a result of certain events of default.
17
<PAGE>
PROPOSAL 2--ADOPTION OF 1997 STOCK OPTION PLAN
GENERAL
On January 4, 1997, the Company's Board of Directors, on the recommendation
of the Company's Compensation Committee, approved subject to ratification and
approval by stockholders, the Culligan 1997 Stock Option and Incentive Award
Plan (the "Stock Option Plan"). The following description of the Stock Option
Plan is not intended to be complete. The form of the Stock Option Plan
summarized below is attached as Annex A and the following summary is qualified
in its entirety by reference to the Stock Option Plan attached hereto.
The purpose of the Stock Option Plan is to benefit the stockholders of the
Company by enabling the Company to attract and retain the services of the most
highly qualified professional and managerial employees and other persons
rendering services to the Company, which the Board considers essential to the
long-range success of the Company, by providing long term incentives linked to
interests of the stockholders of the Company.
The Company believes that options provide an important tool for increasing
the value of the Company's equity over the long term and that options should
play an important role in any compensation package designed to attract the
most qualified and talented executives and other key employees. The Stock
Option Plan provides for an authorization of 1,000,000 shares of Common Stock
for issuance thereunder. As of the date of this Proxy Statement, options to
purchase 988,100 shares have been granted to employees of the Company pursuant
to the Company's Amended and Restated 1995 Stock Option and Incentive
Compensation Plan (the "1995 Stock Option Plan") and options to purchase only
61,900 shares remain available for future grant under such plan. Because of
the limited number of options that remain available for future grant under the
1995 Stock Option Plan, the Board of Directors has approved the Stock Option
Plan. The Stock Option Plan contains provisions that are substantially
identical to those of the 1995 Stock Option Plan.
The Stock Option Plan is administered by the Committee. The Committee will,
at all times, consist of two or more persons, each of whom is a "disinterested
person" within the meaning of Rule 16b-3. Subject to the terms of the Stock
Option Plan, the Committee will have full authority to determine, among other
things, the persons to whom awards under the Stock Option Plan ("Awards") will
be made, the number of shares of Common Stock subject to Awards, and the
specific terms and conditions applicable to Awards, including, but not limited
to, the duration, vesting and exercise or other realization periods,
performance criteria, if any, the circumstances for forfeiture and the form
and timing of payment with respect to any Award.
Grants of a variety of Awards, including stock options, stock appreciation
rights, restricted stock and restricted stock units may be made under the
Stock Option Plan to selected employees and independent contractors of the
Company and its present or future subsidiaries, in the discretion of the
Committee. Stock options may be either incentive stock options, as such term
is defined in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or nonqualified stock options. The exercise price of a
nonqualified stock option may be at or below the fair market value per share
of Common Stock on the date of grant but not below 50% of Fair Market Value
(as defined in the Stock Option Plan); generally, the exercise price of an
incentive stock option may not be less than the fair market value per share of
Common Stock on the date of grant. Stock options will become exercisable in
accordance with a schedule established at the time of grant. The Committee
will determine each stock option's expiration date; provided that no incentive
stock option may be exercised more than ten years after the date of grant. The
Stock Option Plan provides that the exercise price for stock options granted
thereunder may, as determined by the Committee, be payable in cash, shares of
Common Stock, a combination of cash and Common Stock or by such other payment
method as the Committee may prescribe.
In addition to the foregoing Awards, the Committee may, in its sole
discretion, grant such other forms of stock-based and cash-based Awards as it
may determine to be consistent with the purpose of the Stock Option Plan.
18
<PAGE>
Awards under the Stock Option Plan may be granted to officers, other
employees and independent contractors of the Company or any of its
subsidiaries in the sole discretion of the Committee. Directors are not
eligible to participate in the Stock Option Plan. As of the date of this Proxy
Statement, options for 396,000 shares under the Stock Option Plan have been
granted to current executive officers as a group and options for 592,100
shares have been granted to all employees, including all current officers who
are not executive officers, as a group under the 1995 Stock Option Plan. In
addition, the Company has granted Mr. Pertz options to purchase 300,000 shares
under the Stock Option Plan in connection with the extension of his employment
agreement. Information as to options granted to Named Executive Officers is
set forth in the tables under "Proposal 1. Election of Directors--Cash
Compensation--Certain Option Information." Inasmuch as future Awards under the
Stock Option Plan will be granted at the sole discretion of the Committee and
that performance criteria may vary from year to year and participant to
participant, benefits under the Stock Option Plan are not determinable.
The Stock Option Plan may, at any time and from time to time, be altered,
amended, suspended, or terminated by the Board of Directors, in whole or in
part. No amendment may be made, however, that adversely affects any of the
rights of a grantee under any Award theretofore granted, without such
grantee's consent.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of certain United States federal
income tax consequences under current federal income tax laws relating to an
Award under the Stock Option Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
income and other tax consequences.
NONQUALIFIED STOCK OPTIONS ("NQSO")
An optionee will not recognize any taxable income upon the grant of an NQSO.
The Company will not be entitled to tax deduction with respect to the grant of
NQSO's.
Upon exercise of an NQSO, the excess of the fair market value of the Common
Stock on the exercise date over the exercise price will be taxable as
compensation income to the optionee and will be subject to applicable
withholding taxes. The Company will generally be entitled to a tax deduction
at that time in the amount of such compensation income. The optionee's tax
basis for the Common Stock received pursuant to the exercise of an NQSO will
equal the sum of the compensation income recognized and the exercise price.
In the event of a sale or other disposition of the Common Stock received
upon the exercise of an NQSO any appreciation or depreciation after the
exercise date generally will be taxed as capital gain or loss and will be
long-term capital gain or loss if the holding period for such Common Stock
(which begins upon such exercise) is more than one year.
INCENTIVE STOCK OPTIONS ("ISO")
An optionee will not recognize any taxable income at the time of grant or
timely exercise of an ISO and the Company will not be entitled to a tax
deduction with respect to such grant or exercise. Exercise of an ISO may,
however, give rise to taxable compensation income subject to applicable
withholding taxes, and a corresponding tax deduction to the Company, if the
ISO is not exercised on a timely basis (generally, while the optionee is
employed by the Company (or certain subsidiaries of the Company) or within 90
days after termination of employment) or if the optionee engages in a
"disqualifying disposition" as described below. The excess of the fair market
value, on the date of the exercise of an ISO, of the Common Stock acquired
upon exercise and over the exercise price constitutes an item of tax
preference for purposes of the federal alternative minimum tax.
A sale or exchange by an optionee of the Common Stock acquired upon the
exercise of an ISO more than one year after the transfer of such Common Stock
to such optionee and more than two years after the date of grant of the ISO
generally will result in any difference between the net sale proceeds and the
exercise price being
19
<PAGE>
treated as long-term capital gain or loss to the optionee. If such sale or
exchange takes place within two years after the date of grant of the ISO or
within one year from the date of transfer of the Common Stock to the optionee,
such sale or exchange will generally constitute a "disqualifying disposition"
of such Common Stock that will have the following results: any excess of (i)
the lesser of (a) the fair market value of the Common Stock at the time of
exercise of the ISO and (b) the amount realized on such disqualifying
disposition of the Common Stock over (ii) the exercise price of such ISO will
be taxable as compensation income to the optionee, subject to applicable
withholding taxes, and the Company will be entitled to a tax deduction in the
amount of such compensation income. Any further gain or loss after the date of
exercise generally will qualify as capital gain or loss and will not result in
any deduction by the Company.
----------------
The affirmative vote of a majority of the votes cast with respect to
Proposal 2 is required for its approval. The Board of Directors recommends a
vote FOR Proposal 2.
20
<PAGE>
PROPOSAL 3--RATIFY AND APPROVE SELECTION OF AUDITORS
The Board of Directors on the recommendation of the Company's Audit
Committee has selected, subject to ratification and approval by stockholders,
KPMG Peat Marwick LLP ("KPMG"), to serve as independent auditors for the
Company. KPMG has served as independent auditors for the Company for 19 years.
Representatives of KPMG are expected to be present at the Meeting with an
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
----------------
The affirmative vote of a majority of the votes cast with respect to
Proposal 3 is required for its approval. The Board of Directors recommends a
vote FOR Proposal 3.
OTHER MATTERS
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of proxies by use of the mails, some of the officers,
directors and regular employees of the Company and its subsidiaries, none of
whom will receive additional compensation therefor, may solicit proxies in
person or by telephone, telegraph or other means. As is customary, the Company
will, upon request, reimburse brokerage firms, banks, trustees, nominees and
other persons for their out-of-pocket expenses in forwarding proxy materials
to their principals.
SHAREHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
From time to time, shareholders present proposals which may be proper
subjects for inclusion in the proxy statement and for consideration at the
annual meeting. To be considered, proposals must be submitted on a timely
basis. Proposals for the 1998 Annual Meeting must be received by the Company
no later than January 14, 1998, except that if the date of such meeting is
changed by more than 30 days from its currently contemplated date, a
reasonable time before solicitation of proxies for such meeting is made. Any
such proposals, as well as any questions related thereto, should be submitted
in writing to the Secretary of the Company.
STOCKHOLDER NOMINATIONS
A stockholder may also nominate an individual for election as a director at
the annual meeting but, pursuant to the Company's bylaws, written notice of
such nomination must be received by the Secretary of the Company at One
Culligan Parkway, Northbrook, Illinois, not later than ninety days in advance
of such meeting. A copy of the Company's bylaws specifying the requirements
for stockholder nominations will be furnished to any stockholder without
charge upon written request to the Secretary.
STOCKHOLDER LIST
A listing of the Company's stockholders of record will be available for
examination by stockholders during normal business hours at the offices of the
Company, at One Culligan Parkway, Northbrook, Illinois, at least ten days
prior to the annual meeting.
21
<PAGE>
REVOCABILITY OF PROXY
A stockholder giving the enclosed proxy may revoke it at any time before it
is exercised by filing with the Company a written notice of revocation or by a
duly executed and presented proxy bearing a later date or by voting in person
at the meeting.
Dated: May 14, 1997
By Order of the Board of Directors
Edward A. Christensen
Secretary
22
<PAGE>
ANNEX A
CULLIGAN WATER TECHNOLOGIES, INC.
1997 STOCK OPTION AND INCENTIVE AWARD PLAN
1.PURPOSE
Culligan Water Technologies, Inc. ("Culligan") hereby establishes the
Culligan 1997 Stock Option and Incentive Award Plan (the "Plan"). As used
herein, the term "Company" refers to Culligan and its wholly owned subsidiary,
Culligan International Company.
The purpose of the Plan is to align the interests of officers, other
employees and independent contractors of Culligan and its subsidiaries with
those of Culligan's stockholders; to reinforce corporate, organizational and
business-development goals; to promote the achievement of year-to-year and
long-range financial and other business objectives; and to reward the
performance of individual officers, other employees and independent
contractors in fulfilling their personal responsibilities for long-range
achievements.
2.DEFINITIONS
The following terms, as used herein, shall have the following meanings:
(a) "Annual Incentive Compensation Award" shall mean an Award, pursuant to
the Annual Incentive Compensation Program, contingent upon the
attainment of Performance Goals with respect to a Performance Period.
(b) "Annual Incentive Compensation Program" shall mean the program set
forth in Section 8 of the Plan.
(c) "Award" shall mean any Option, Restricted Stock, Stock Unit, Incentive
Unit, Annual Incentive Compensation Award or freestanding SAR granted
pursuant to the Plan.
(d) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document between the Company and a Participant evidencing
an Award.
(e) "Board" shall mean the Board of Directors of Culligan.
(f) "Cause" shall mean, unless otherwise defined in the applicable Award
Agreement (i) the engaging by the Participant in willful misconduct
that is injurious to the Company or its Subsidiaries, (ii) the
embezzlement or misappropriation of funds or property of the Company or
its Subsidiaries by the Participant or the conviction of the
Participant of a felony or the entrance of a plea of guilty or nolo
contendre by the Participant to a felony, or (iii) the willful failure
or refusal by the Participant to substantially perform his duties or
responsibilities that continues after being brought to the attention of
the Participant (other than any such failure resulting from the
Participant's incapacity due to Disability). For purposes of this
paragraph, no act, or failure to act, on the Participant's part shall
be considered "willful" unless done, or omitted to be done, by him not
in good faith and without reasonable belief that his action or omission
was in the best interest of the Company. Determination of Cause shall
be made by the Committee in its sole discretion. Any such determination
shall be final and binding on a Participant.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Committee" shall mean the Compensation Committee of the Board.
(i) "Company" shall mean, collectively, Culligan Water Technologies, Inc.
and Culligan International Company.
(j) "Culligan" shall mean Culligan Water Technologies, Inc.
(k) "DERs" shall mean dividend equivalent rights credited in respect of
Stock Units granted hereunder.
A-1
<PAGE>
(l) "Disability" shall mean a physical or mental condition that Culligan
determines prevents the Participant from substantially performing his
duties or responsibilities for a period of at least six months.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" of a share of Stock on any date shall be the fair
market value of such Stock as determined by the Committee in its sole
discretion; provided that (A) if the Stock is admitted to trading on a
national securities exchange, Fair Market Value on any date shall be
the last sale price reported for the Stock on such exchange on such
date or, if none, the next earlier date on which a sale was reported;
(B) if the Stock is admitted to quotation on the Nasdaq National Market
or other comparable quotation system, Fair Market Value on any date
shall be the last sale price reported for the Stock on such system on
such date or, if none, the next earlier date on which a sale was
reported; or (C) if the Stock is admitted to quotation on the Nasdaq
Stock Market, Fair Market Value on any date shall be the average of the
highest bid and lowest asked prices of the Stock on such system on such
date.
(o) "Incentive Stock Option" shall mean an Option that meets the
requirements of Section 422 of the Code, or any successor provision,
and that is designated by the Committee as an Incentive Stock Option.
(p) "Incentive Unit" shall mean a unit that is assigned a dollar value and
that relates to a Long-Term Incentive Compensation Award.
(q) "Long-Term Incentive Compensation Award" shall mean an Award, granted
pursuant to the Long-Term Incentive Compensation Program, the payment
of which is contingent upon the attainment of Performance Goals with
respect to a Performance Period.
(r) "Long-Term Incentive Compensation Program" shall mean the program set
forth in Section 7 of the Plan.
(s) "Nonqualified Stock Option" shall mean an Option other than an
Incentive Stock Option.
(t) "Option" shall mean the right, granted pursuant to this Plan, of a
holder to purchase shares of Stock under the Stock Option and SAR
Program at an exercise price and upon the terms to be specified by the
Committee.
(u) "Participant" shall mean an officer, other employee or independent
contractor of the Company or any of the Subsidiaries who is, pursuant
to Section 4 of the Plan, selected to participate herein.
(v) "Performance Goal" shall mean the criteria and objectives, determined
by the Committee, that must be met during the applicable Performance
Period as a condition of vesting or of the Participant's receipt of
payment (or, in the case of Restricted Stock, the lapse of
restrictions) with respect to an Award.
(w) "Performance Period" shall mean (i) with respect to the Long-Term
Incentive Compensation Program, the period of three (3) consecutive
Plan Years or such other period (which in no case may be less than one
(1) Plan Year) as may be determined by the Committee, (ii) with respect
to the Annual Incentive Compensation Program, each Plan Year and (iii)
with respect to all other Awards, such period as the Committee shall
determine.
(x) "Plan" shall mean the Culligan Water Technologies, Inc. 1997 Stock
Option and Incentive Award Plan.
(y) "Plan Year" shall mean the Company's fiscal year.
(z) "Restricted Stock" shall mean any shares of Stock issued to a
Participant, without payment to the Company, pursuant to Section 7(a)
of the Plan.
(aa) "Retirement" shall mean retirement of a Participant from the employ of
the Company or any of its Subsidiaries in accordance with the terms of
the Culligan Employees' Pension Plan or any successor
A-2
<PAGE>
plan thereto or, if a Participant is not covered by such plan, such
retirement on or after such Participant's 65th birthday.
(bb) "SAR" shall mean a tandem or freestanding stock appreciation right,
granted to a Participant under Section 6(a) or 6(b), as the case may
be, to be paid an amount measured by the appreciation in the Fair
Market Value of Stock from the date of grant to the date of exercise
of the right.
(cc) "Stock" shall mean shares of common stock, par value $.01 per share,
of Culligan.
(dd) "Stock Option and SAR Program" shall mean the program set forth in
Section 6 hereof.
(ee) "Stock Unit" shall mean a unit that represents a share of Stock and
that relates to a Long-Term Incentive Compensation Award.
(ff) "Subsidiary" shall mean any entity in which Culligan directly or
through intervening subsidiaries owns at least a majority interest of
the total combined voting power or value of all classes of stock or,
in the case of an unincorporated entity, at least a majority in the
capital and profits.
(gg) "Ten Percent Stockholder" shall mean a Participant who, at the time an
Incentive Stock Option is to be granted to such Participant, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company.
3.ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
the authority in its sole discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom
and the time or times at which Awards shall be granted; to determine the type
and number of Awards to be granted, the number of shares of Stock to which an
Award may relate and the terms, conditions, restrictions and performance
criteria relating to any Award; to determine whether, to what extent, and
under what circumstances an Award may be settled, cancelled, forfeited,
exchanged or surrendered (provided that in no event shall the foregoing be
construed to permit the repricing of an Option (whether by amendment,
cancellation and regrant or otherwise) to a lower exercise price); to make
adjustments in the Performance Goals in recognition of unusual or non-
recurring events affecting the Company or the financial statements of the
Company, or in response to changes in applicable laws, regulations or
accounting principles; to construe and interpret the Plan and any Award; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of Award Agreements; and to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
The Committee shall consist of two or more persons each of whom is a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange
Act. The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated such duties may employ one or
more persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, the Participants (or any person claiming any rights
under the Plan from or through any Participant) and any stockholder.
No member of the Board or the Committee shall be liable for any action taken
or determination made in good faith with respect to the Plan or any Award
granted hereunder.
A-3
<PAGE>
4.ELIGIBILITY
Awards may be granted to officers, other employees and independent
contractors of the Company or any of its Subsidiaries in the sole discretion
of the Committee. In determining the persons to whom Awards shall be granted
and the type of Award, the Committee shall take into account such factors as
the Committee shall deem relevant in connection with accomplishing the
purposes of the Plan.
5.STOCK SUBJECT TO THE PLAN; LIMITATION ON GRANTS
The maximum number of shares of Stock reserved for issuance pursuant to the
Plan shall be 1,000,000 shares, subject to adjustment as provided herein. Such
shares may, in whole or in part, be authorized but unissued shares or shares
that shall have been or may be reacquired by the Company in the open market,
in private transactions or otherwise. If any shares subject to an Award are
forfeited, cancelled, exchanged or surrendered or if an Award otherwise
terminates or expires without a distribution of shares to the Participant, the
shares of Stock with respect to such Award shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration,
again be available for Awards under the Plan. Upon the exercise of any Award
granted in tandem with any other Awards, the tandem Award shall be cancelled
to the extent of the number of shares of Stock as to which the Award is
exercised and, notwithstanding the foregoing, such number of cancelled shares
shall no longer be available for Awards under the Plan. Upon a cash payment
made in respect of outstanding Stock Units or freestanding SARs, the number of
shares represented by such Stock Units or SARs shall no longer be available
for Awards under the Plan. Upon withholding of Stock Units to satisfy
withholding tax liability of a participant, the number of shares so withheld
shall no longer be available for Awards under the Plan.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange or other
similar corporate transaction or event affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate to any
or all of (i) the number and kind of shares of Stock that may thereafter be
issued in connection with Awards, (ii) the number and kind of shares of Stock
issued or issuable in respect of outstanding Awards and (iii) the exercise
price, grant price, or purchase price relating to any Award; provided that,
with respect to Incentive Stock Options, such adjustment shall be made in
accordance with Section 424 of the Code.
6.STOCK OPTION AND SAR PROGRAM
Each Option or freestanding SAR granted pursuant to this Section 6 shall be
evidenced by an Award Agreement, in such form and containing such terms and
conditions as the Committee shall from time to time approve, which Award
Agreement shall comply with and be subject to the following terms and
conditions, as applicable.
(a)STOCK OPTIONS
(1) Number of Shares. Each Award Agreement shall state the number of
shares of Stock to which the Option relates. In the event that the Company
becomes subject to Section 162(m) of the Code, then beginning with the Plan
Year during which the Company becomes subject to Section 162(m), the number
of shares of Stock subject to Options granted to any one Participant in any
Plan Year, shall not exceed one-third of the total number of shares of
Stock reserved for issuance pursuant to the Plan as provided in Section 5
hereof.
(2) Type of Option. Each Award Agreement shall specifically state that
the Option constitutes an Incentive Stock Option or a Nonqualified Stock
Option.
A-4
<PAGE>
(3) Exercise Price. Each Award Agreement shall state the exercise price,
which shall not be less than fifty percent (50%) of the Fair Market Value
of the shares of Stock covered by the Option on the date of grant. The
exercise price shall be subject to adjustment as provided in Section 5
hereof.
(4) Method and Time of Payment. The exercise price shall be paid in full
at the time of exercise. The exercise price may be paid in cash or by
check, by the tender by the Participant to the Company of outstanding
shares of Stock, a copy of irrevocable instructions to a registered
broker/dealer to deliver promptly to the Company an amount of proceeds from
the sale of shares of Stock to be issued pursuant to the Options being
exercised or of a loan made with respect to shares of Stock to be issued
pursuant to the Options being exercised sufficient, in either case, to pay
the exercise price or a combination of any of the foregoing, in an amount
having a combined value equal to such exercise price. The value of any
Stock tendered pursuant to the preceding sentence shall be the Fair Market
Value of such Stock as of the last trading day prior to the date of
exercise.
(5) Term and Exercisability of Options. Each Award Agreement shall
provide that each Option shall become exercisable under the terms and in
accordance with the vesting schedule that shall be established by the
Committee at the time that the Award is granted; provided that the
Committee shall have the authority to accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it, in its
sole discretion, deems appropriate. Options may be subject to such other
conditions including, but not limited to, restrictions on transferability
of the shares acquired upon exercise of such Options and Performance Goals
with respect to which the vesting of Options may be contingent, as the
Committee may prescribe in its discretion in the applicable Award
Agreement. The exercise period shall be ten (10) years from the date of the
grant of the Option or such shorter period as is determined by the
Committee. The exercise period shall be subject to earlier termination as
provided in Section 6(a)(6) hereof. An Option may be exercised, as to any
or all full shares of Stock as to which the Option has become exercisable,
by written notice delivered in person or by mail to the Secretary of the
Company, specifying the number of shares of Stock with respect to which the
Option is being exercised. For purposes of the preceding sentence, the date
of exercise shall be deemed to be the date upon which the Secretary of the
Company receives such notification.
(6) Termination of Employment. Unless otherwise provided in the
applicable Award Agreement, in the event that a Participant ceases to be
employed by (or, in the case of a non-employee, ceases to perform services
for the Company) the Company or any Subsidiary (in each case, a
"termination of employment"), all the outstanding Options held by such
Participant shall be treated as follows:
(A) Cause. If the Participant is terminated from his employment with
the Company or a Subsidiary for Cause, all the Options (whether vested
or unvested) shall automatically terminate and be cancelled (without
any action on the part of the Company) on the date of the termination
of employment.
(B) Disability. If the Participant is terminated from his employment
with the Company or a Subsidiary by reason of Disability, all unvested
Options shall automatically terminate and be cancelled (without any
action on the part of the Company) on the date of termination of
employment. All Options that have vested prior to such date shall
remain exercisable for a period of one year following such date.
(C) Death. If the Participant dies while employed by the Company or a
Subsidiary, all unvested Options shall automatically terminate and be
cancelled (without any action on the part of the Company) on the date
of death. Following the Participant's death his executors,
administrators, legatees or distributees may exercise the Options that
have vested prior to the date of death for a period of one year
following the date of death.
(D) Other Terminations of Employment. If the Executive's employment
is terminated for any other reason, all unvested Options shall
automatically terminate and be cancelled (without any action on the
part of the Company) on the date of termination of employment. All
Options that have
A-5
<PAGE>
vested prior to such date shall remain exercisable for a period of 90
days following such date. Notwithstanding the foregoing, in the case of
a Nonqualified Stock Option, the Committee may provide, after the time
an Option is granted, that the Option may be exercised after the
periods provided for in this Section 6(a)(6), but in no event beyond
the original term of the Option.
(7) Tandem Stock Appreciation Rights. The Committee shall have authority
to grant a tandem SAR to the grantee of any Option under the Plan with
respect to all or some of the shares of Stock covered by such related
Option. A tandem SAR shall, except as provided in this paragraph (7), be
subject to the same terms and conditions as the related Option. Each tandem
SAR granted pursuant to the Plan shall be reflected in the Award Agreement
relating to the related Option.
(A) Time of Grant. A tandem SAR may be granted either at the time of
grant or at any time thereafter during the term of the Option; provided
that tandem SARs related to Incentive Stock Options may only be granted
at the time of grant of the related Option.
(B) Payment. A tandem SAR shall entitle the holder thereof, upon
exercise of the tandem SAR or any portion thereof, to receive payment
of an amount computed pursuant to paragraph (d) below and payable in
the form determined pursuant to paragraph (g) below.
(C) Exercise. A tandem SAR shall be exercisable at such time or times
and only to the extent that the related Option is or has become
exercisable and shall not be transferable except to the extent the
related Option is or has become transferable. A tandem SAR shall be
exercisable only if the Fair Market Value of a share of Stock on the
date of exercise exceeds the exercise price specified in the related
Option.
(D) Amount Payable. Upon the exercise of a tandem SAR, the
Participant shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a share of Stock
on the date of exercise of such SAR over the exercise price of the
related Option, by (ii) the number of shares of Stock as to which such
tandem SAR is being exercised. Notwithstanding the foregoing, the
Committee may limit in any manner the amount payable with respect to
any tandem SAR by including such a limit at the time it is granted.
(E) Treatment of Related Options and Tandem SARs Upon Exercise. Upon
the exercise of a tandem SAR, the related Option shall be cancelled to
the extent of the number of shares of Stock as to which the tandem SAR
is exercised and upon the exercise of an Option granted in connection
with a tandem SAR, the tandem SAR shall be cancelled to the extent of
the number of shares of Stock as to which the Option is exercised.
(F) Method of Exercise. Tandem SARs shall be exercised by a
Participant only by a written notice delivered in person or by mail to
the Secretary of the Company, specifying the number of shares of Stock
with respect to which the tandem SAR is being exercised. For purposes
of this paragraph (f), the date of exercise shall be deemed to be the
date upon which the Secretary of the Company receives such
notification.
(G) Form of Payment. Payment of the amount determined under paragraph
(d) above may be made solely in whole shares of Stock in a number
determined based upon their Fair Market Value on the date of exercise
of the tandem SAR or, at the sole discretion of the Committee, solely
in cash, or in a combination of cash and shares of Stock as the
Committee deems advisable. If the Committee decides to make full
payment in shares of Stock, and the amount payable results in a
fractional share, payment for the fractional share shall be made in
cash. Notwithstanding the foregoing, to the extent required by Rule
16b-3 promulgated under the Exchange Act, no payment in the form of
cash may be made upon the exercise of a tandem SAR to a Participant who
is subject to the reporting requirements of Section 16(a) of the
Exchange Act unless the exercise of such SAR is made during the period
beginning on the third business day and ending on the twelfth business
day following the date of release for publication of the Company's
quarterly or annual statements of earnings or is otherwise made under
circumstances that comply with such Rule 16b-3.
A-6
<PAGE>
(8) Incentive Stock Options. Options granted as Incentive Stock Options
shall be subject to the following special terms and conditions, in addition
to the general terms and conditions specified in this Section 6.
(A) Value of Shares. The aggregate Fair Market Value (determined as
of the date the Incentive Stock Option is granted) of the shares of
Stock with respect to which Incentive Stock Options granted under this
Plan and all other Plans of the Company become exercisable for the
first time by each Participant during any calendar year shall not
exceed $100,000.
(B) Exercise Price. The exercise price relating to any Incentive
Stock Option shall not be less than one hundred percent (100%) of the
Fair Market Value of the shares of Stock on the date of grant of such
Incentive Stock Option.
(C) Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (x) the exercise price shall not
be less than one hundred ten percent (110%) of the Fair Market Value of
the shares of Stock on the date of grant of such Incentive Stock Option
and (y) the exercise period shall not exceed five (5) years from the
date of grant of such Incentive Stock Option.
(b) FREESTANDING STOCK APPRECIATION RIGHTS. The Committee shall have authority
to grant a freestanding SAR that is not related to any Option.
Freestanding SARs shall be subject to the following terms and conditions:
(1) Number of Shares. Each Award Agreement shall state the number of
shares of Stock to which the freestanding SARs relate.
(2) Exercise Price. Each Award Agreement shall state the exercise price,
which shall not be less than one hundred percent (100%) of the Fair Market
Value of the shares of Stock (to which the freestanding SARs relate) on the
date of grant. The exercise price shall be subject to adjustment as
provided in Section 5 hereof.
(3) Term and Exercisability of Freestanding SARs. Each Award Agreement
shall provide the exercise schedule for the freestanding SAR as determined
by the Committee, provided that the Committee shall have the authority to
accelerate the exercisability of any freestanding SAR at such time and
under such circumstances as it, in its sole discretion, deems appropriate.
The exercise period shall be ten (10) years from the date of the grant of
the freestanding SAR or such shorter period as is determined by the
Committee. The exercise period shall be subject to earlier termination as
provided in paragraph (b)(7) hereof. A freestanding SAR may be exercised,
as to any or all full shares of Stock as to which the freestanding SAR has
become exercisable, by written notice delivered in person or by mail to the
Secretary of the Company, specifying the number of shares of Stock with
respect to which the freestanding SAR is being exercised. For purposes of
the preceding sentence, the date of exercise shall be deemed to be the date
upon which the Secretary of the Company receives such notification.
(4) Payment. A freestanding SAR shall entitle the holder thereof, upon
exercise of the freestanding SAR or any portion thereof, to receive payment
of an amount computed pursuant to paragraph (5) below.
(5) Amount Payable. Upon the exercise of a freestanding SAR, the
Participant shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a share of Stock on
the date of exercise of such SAR over the exercise price of such SAR by
(ii) the number of shares of Stock as to which such freestanding SAR is
being exercised. Notwithstanding the foregoing, the Committee may limit in
any manner the amount payable with respect to any freestanding SAR by
including such a limit at the time it is granted.
(6) Form of Payment. Payment of the amount determined under paragraph (5)
above may be made solely in whole shares of Stock in a number determined
based upon their Fair Market Value on the date of exercise of the
freestanding SAR or, at the sole discretion of the Committee, solely in
cash, or in a combination of cash and shares of Stock as the Committee
deems advisable. If the Committee decides to make full payment in shares of
Stock, and the amount payable results in a fractional share, payment for
the
A-7
<PAGE>
fractional share shall be made in cash. Notwithstanding the foregoing, to
the extent required by Rule 16b-3 promulgated under the Exchange Act, no
payment in the form of cash may be made upon the exercise of a freestanding
SAR to a Participant who is subject to the reporting requirements of
Section 16(a) of the Exchange Act unless the exercise of such SAR is made
during the period beginning on the third business day and ending on the
twelfth business day following the date of release for publication of the
Company's quarterly or annual statements of earnings or is otherwise made
under circumstances which comply with such Rule 16b-3.
(7) Termination. The terms and conditions set forth in Section 6(a)(6)
hereof, relating to exercisability of Options in the event of termination
of employment with the Company, shall apply equally with respect to the
exercisability of freestanding SARs following termination of employment.
7.LONG-TERM INCENTIVE COMPENSATION PROGRAM
Awards granted pursuant to this Section 7 shall be evidenced by an Award
Agreement in such form as the Committee shall from time to time approve and
the terms and conditions of such Awards shall be set forth therein. Awards may
be granted in the form of Restricted Stock, Stock Units or Incentive Units.
(a) RESTRICTED STOCK. The Committee shall determine the number of shares of
Restricted Stock granted pursuant to the Award and the Performance Goals for
the Performance Period, the attainment of which shall cause the restrictions
to lapse in whole or in part and allow all or a specified portion of the
Restricted Stock to vest, as specified in the Award Agreement.
(1) Restrictions. During the Performance Period, shares of Restricted
Stock may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and
distribution. Certificates for shares of Stock issued pursuant to Awards of
Restricted Stock shall bear an appropriate legend referring to such
restrictions, and any attempt to dispose of any such shares of Stock in
contravention of such restrictions shall be null and void and without
effect. During the Performance Period, such certificates shall be held in
escrow by an escrow agent appointed by the Committee.
(2) Ownership. Except to the extent otherwise set forth in the Award
Agreement, during the Performance Period the Participant shall possess all
incidents of ownership of such shares, subject to Section 7(a)(1),
including the right to receive dividends with respect to such shares and to
vote such shares.
(b) INCENTIVE UNITS. The Committee shall determine the value of Incentive
Units granted pursuant to the Award and the Performance Goals for the
Performance Period with respect to such Award. Unless otherwise provided by
the Committee in connection with specified terminations of employment, payment
in respect of Incentive Units shall be made only if and to the extent that the
Performance Goals with respect to such Performance Period are attained.
Performance Goals may include a level of performance below which no payment
shall be made and levels of performance at which specified percentages (which
may be greater than one hundred percent (100%)) of the value of the Incentive
Units shall be paid.
(c) STOCK UNITS. The Committee shall determine the number of Stock Units
granted pursuant to the Award and the Performance Goals for the Performance
Period with respect to such Award. Unless otherwise provided by the Committee
in connection with specified terminations of employment, payment in respect of
the Stock Units shall be made only if and to the extent that the Performance
Goals with respect to such Performance Period are attained. Performance Goals
may include a level of performance below which no payment shall be made and
levels of performance at which payment shall be made in respect of specified
percentages (not to exceed one hundred percent (100%)) of such Stock Units.
(1) DERs. (A) Outstanding Stock Units shall be credited with DERs based
upon dividends paid on outstanding shares of Stock between the date such
Stock Units are granted and the date of payment in respect of such Stock
Units. Such DERs, once credited, shall be converted into an equivalent
number of Stock Units (including fractional Stock Units).
A-8
<PAGE>
(B) DERs based on dividends paid in cash shall be credited, as of each
dividend payment date, in accordance with the following formula:
(A x B) / C
in which "A" equals the number of shares to which the Stock Units relate,
"B" equals the cash dividend per share and "C" equals the Fair Market Value
per share of Stock on the dividend payment date.
(C) If a dividend is paid in property other than cash, DERs shall be
credited, as of the dividend payment date, in accordance with the formula
set forth above, except that "B" shall equal the fair market value per
share of the property that the holder of the Stock Unit would have received
in respect of the number of shares of Stock underlying such Stock Unit had
such shares been owned as of the record date for such dividend.
(d) TIME AND FORM OF PAYMENT. Unless otherwise determined by the Committee,
all payments in respect of Stock Units and Incentive Units granted under this
Section 7 shall be made within a reasonable period after the end of the
Performance Period. Payments in respect of Stock Units and Incentive Units
shall be made either in cash or in Stock, or in a combination of cash and
Stock, as determined by the Committee. For purposes of the preceding sentence,
(1) the Fair Market Value of Stock (as of the date of payment) delivered in
full or partial payment of Incentive Units shall equal the portion of the
value of Incentive Units (determined as of the end of the Performance Period)
with respect to which such payment is being made and (2) the amount of cash
delivered in full or partial payment of Stock Units shall equal the Fair
Market Value (as of the end of the Performance Period) of the number of shares
of Stock relating to the Stock Units with respect to which such cash payment
is being made.
(e) TERMINATION AND MISSED PERFORMANCE GOALS. Subject to such exceptions as
may be determined by the Committee, if the Participant's continuous employment
with the Company or any of its Subsidiaries shall terminate for any reason
prior to the expiration of the Performance Period of an Award, or to the
extent any Performance Goals for the Performance Period are not met, (i) any
shares of Restricted Stock remaining subject to restrictions shall thereupon
be forfeited by the Participant and transferred to, and reacquired by, the
Company at no cost to the Company and (ii) any and all rights to payment in
respect of Incentive Units and Stock Units shall be forfeited by the
Participant.
8.ANNUAL INCENTIVE COMPENSATION PROGRAM
Awards granted pursuant to this Section 8 shall be evidenced by an Award
Agreement in such form as the Committee shall from time to time approve and
the terms and conditions of such Awards shall be set forth therein.
(a) IN GENERAL. The Committee shall determine the amount of each Annual
Incentive Compensation Award and shall specify with respect to a Performance
Period the Performance Goals applicable to the Award. Unless otherwise
provided by the Committee in connection with specified terminations of
employment, payment in respect of Annual Incentive Compensation Awards shall
be made only if and to the extent that the Performance Goals with respect to
such Performance Period are attained. Performance Goals may include a level of
performance below which no payment shall be made and levels of performance at
which specified percentages (which may not be greater than one hundred percent
(100%)) of the Annual Incentive Compensation Award shall be paid.
(b) TIME AND FORM OF PAYMENT. Unless otherwise determined by the Committee,
all payments in respect of Annual Incentive Compensation Awards granted under
this Section 8 shall be made within a reasonable period after the end of the
Performance Period. Payments shall be made either in cash or in Stock, or in a
combination of cash and Stock, as determined by the Committee. For purposes of
the preceding sentence, the Fair Market Value of Stock (as of the date of
payment) delivered in full or partial payment of Annual Incentive Compensation
Awards shall equal the portion of the value of Annual Incentive Compensation
Awards (determined as of the end of the Performance Period) with respect to
which such payment is being made.
A-9
<PAGE>
(c) TERMINATION AND MISSED PERFORMANCE GOALS. Subject to such exceptions as
may be determined by the Committee, if the Participant's continuous employment
with the Company or any of its Subsidiaries shall terminate for any reason
prior to the expiration of the Performance Period of an Award, or to the
extent that any Performance Goals for the Performance Period are not met, any
and all rights to payment in respect of Annual Incentive Compensation Awards
shall be forfeited by the Participant.
9.GENERAL PROVISIONS
(a) COMPLIANCE WITH LEGAL REQUIREMENTS. The Plan and the granting and
exercising of Awards, and the other obligations of the Company under the Plan
and any Award Agreement or other agreement shall be subject to all applicable
federal and state laws, rules and regulations, and to such approvals by any
regulatory or governmental agency as may be required. The Company, in its
discretion, may postpone the issuance or delivery of Stock under any Award as
the Company may consider appropriate and may require any Participant to make
such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of Stock in compliance
with applicable laws, rules and regulations.
(b) NONTRANSFERABILITY. Upon the death of a Participant, outstanding Options
granted to such Participant may be exercised only by the executor or
administrator of the Participant's estate or by a person who shall have
acquired the right to such exercise by will or by the laws of descent and
distribution. No transfer of an Option by will or the laws of descent and
distribution shall be effective to bind the Company unless the Committee shall
have been furnished with (a) written notice thereof and with a copy of the
will and/or such evidence as the Committee may deem necessary to establish the
validity of the transfer and (b) an agreement by the transferee to comply with
all the terms and conditions of the Option that are or would have been
applicable to the Participant and to be bound by the acknowledgements made by
the Participant in connection with the grant of the Option.
During an Participant's lifetime, the Committee may permit the transfer,
assignment or other encumbrance of an outstanding Option unless (y) such
Option is an Incentive Stock Option and the Committee and the Participant
intend that it shall retain such status or (z) the award is meant to qualify
for the exemptions available under Rule 16b-3, nontransferability is necessary
under Rule 16b-3 in order for the Option to so qualify and the Committee and
the Participant intend that it shall continue to so qualify. Notwithstanding
the foregoing, subject to any conditions as the Committee may prescribe, any
Participant may, upon written notice to the Secretary of the Company, elect to
transfer any or all Options granted to such Participant pursuant to the Plan
to members of his or her immediate family, including, but not limited to,
children, grandchildren and spouse or to trusts for the benefit of such
immediate family members or to partnerships in which such family members are
the only partners; provided that no such transfer by any Participant may be
made in exchange for consideration.
(c) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or in any Award
granted or any Award Agreement or other agreement entered into pursuant hereto
shall confer upon any Participant the right to continue in the employ of the
Company or to be entitled to any remuneration or benefits not set forth in the
Plan or such Award Agreement or other agreement or to interfere with or limit
in any way the right of the Company to terminate such Participant's
employment.
(d) WITHHOLDING TAXES. Where a Participant or other person is entitled to
receive shares of Stock pursuant to the exercise of an Option or is otherwise
entitled to receive shares of Stock or cash pursuant to an Award hereunder,
the Company shall have the right to require the Participant or such other
person to pay to the Company the amount of any taxes that the Company may be
required to withhold before delivery to such Participant or other person of
cash or a certificate or certificates representing such shares.
Upon the disposition of shares of Stock acquired pursuant to the exercise of
an Incentive Stock Option, the Company shall have the right to require the
payment of the amount of any taxes that are required by law to be withheld
with respect to such disposition.
Unless otherwise prohibited by the Committee or by applicable law, a
Participant may satisfy any such withholding tax obligation by any of the
following methods or by a combination of such methods: (a) tendering
A-10
<PAGE>
a cash payment, (b) authorizing the Company to withhold from the shares of
Stock or cash otherwise payable to such Participant (1) one or more of such
shares having an aggregate Fair Market Value, determined as of the date the
withholding tax obligation arises, less than or equal to the amount of the
total withholding tax obligation or (2) cash in an amount less than or equal
to the amount of the total withholding tax obligation and (c) delivering to
the Company previously acquired shares of Stock (none of which shares may be
subject to any claim, lien, security interest, community property right or
other right of spouses or present or former family members, pledge, option,
voting agreement or other restriction or encumbrance of any nature whatsoever)
having an aggregate Fair Market Value, determined as of the date the
withholding tax obligation arises, less than or equal to the amount of the
total withholding tax obligation. A Participant's election to pay his or her
withholding tax obligation (in whole or in part) by the method described in
(b)(1) above is irrevocable once it is made, may be disapproved by the
Committee and, if made by any director, officer or other person who is subject
to Section 16(b) of the Exchange Act, must be made (x) only during the period
beginning on the third business day following the date of release of the
Company's quarterly or annual summary statement of sales and earnings and
ending on the twelfth business day following the date of such release or (y)
not less than six (6) months prior to the date such Participant's withholding
tax obligation arises.
(e) AMENDMENT AND TERMINATION OF THE PLAN. The Board or the Committee may at
any time and from time to time alter, amend, suspend, or terminate the Plan in
whole or in part; provided that no amendment that requires stockholder
approval in order for the Plan to continue to comply with Rule 16b-3
promulgated under the Exchange Act shall be effective unless the same shall be
approved by the requisite vote of the stockholders of Culligan.
Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any Participant, without such Participant's consent, under any Award
theretofore granted under the Plan. The power to grant Options under the Plan
shall automatically terminate ten (10) years after the adoption of the Plan by
the stockholders. If the Plan is terminated, any unexercised Option shall
continue to be exercisable in accordance with its terms and the terms of the
Plan in effect immediately prior to such termination.
(f) PARTICIPANT RIGHTS. No Participant shall have any claim to be granted
any Award under the Plan, and there is no obligation for uniformity of
treatment for Participants. Except as provided specifically herein, a
Participant or a transferee of an Award shall have no rights as a stockholder
with respect to any shares covered by any Award until the date of the issuance
of a Stock certificate to him for such shares.
(g) UNFUNDED STATUS OF AWARDS. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
(h) NO FRACTIONAL SHARES. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu
of such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
(i) GOVERNING LAW. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of New York without
giving effect to the conflict of laws principles thereof.
(j) EFFECTIVE DATE. The Plan shall take effect upon its adoption by the
Board, but the Plan (and any grants of Awards made prior to the stockholder
approval mentioned herein) shall be subject to the requisite approval of the
stockholders of Culligan. In the absence of such approval, such Awards shall
be null and void.
(k) BENEFICIARY. A Participant may file with the Committee a written
designation of a beneficiary on such form as may be prescribed by the
Committee and may, from time to time, amend or revoke such designation. If no
designated beneficiary survives the Participant, the executor or administrator
of the Participant's estate shall be deemed to be the grantee's beneficiary.
(l) INTERPRETATION. The Plan is designed and intended to comply with Rule
16b-3 promulgated under the Exchange Act and all provisions hereof shall be
construed in a manner to so comply.
A-11
<PAGE>
[LOGO OF CULLIGAN]
DIRECTIONS TO CULLIGAN
Culligan is at One Culligan Parkway in Northbrook, Illinois. The building is on
the east side of Sanders, just to the north of where Sanders intersects with
Willow Road (Palatine Express). (The intersection of Sanders and Willow is just
to the west of where Willow intersects with I-294.)
From O'Hare Airport
Take I-294 (the Tri-State Tollway north toward Milwaukee, Wisconsin. Exit at
Willow Road. After you exit the toll booth, stay in the center lane and turn
left (west) at the light. Continue on Willow Road about 1/4 mile. Turn right
(north) on Sanders. Culligan Parkway is the first road to the right.
From Downtown Chicago
Take I-90/94 (Kennedy Expressway) toward O'Hare Airport. After I-90 splits from
I-94, continue on I-90 toward the airport until it connects with I-294. Then
follow the directions above.
DETACH HERE
[X] Please mark
votes as in
this example.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of the nominees
named below and FOR Proposals 2 and 3.
- --------------------------------------------------------------------------------
1. Election of Four Directors for a three-year term expiring in 2000:
Nominees: R. Theodore Ammon, Bernard Attal, Robert H. Falk and Mark H.
Rachesky
FOR WITHHELD
[_] [_]
MARK HERE [_]
FOR ADDRESS
[_]__________________________________________ CHANGE AND
For all nominees except as noted above NOTE BELOW
2. Approval of Culligan Water Technologies, Inc. 1997 Stock Option and
Incentive Compensation Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Ratification and approval of the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company.
FOR AGAINST ABSTAIN
[_] [_] [_]
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this Proxy will be voted
FOR the election of the nominees named above and FOR proposals 2 and 3. Under
the Company's By-Laws, business transacted at the Annual Meeting of Stockholders
is confined to the purposes stated in the Notice of the Meeting. This Proxy
will, however, convey discretionary authority to the persons named herein as
proxies to vote on matters incident to the conduct of the Meeting.
Please Date, Sign and Return TODAY in the Enclosed Envelope.
This Proxy should bear your signature(s) exactly as your name(s) appear in the
stencil to the left. When signing as attorney, executor, administrator,
personal representative, trustee, guardian or corporate officer, please give
full title. For joint accounts, each joint owner should sign.
Signature:________________ Date:_______ Signature:_________________ Date:_______
<PAGE>
DETACH HERE
CULLIGAN WATER TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned hereby appoints Michael E. Salvati and Edward A.
Christensen, and each of them, with full power of substitution, attorneys and
proxies to represent and to vote all shares of Common Stock of Culligan Water
Technologies, Inc. which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of Culligan Water Technologies, Inc. to be held at the
offices of the Company at One Culligan Parkway, Northbrook, Illinois on Friday,
June 13, 1997 at 10:00 A.M. local time, and at any adjournments or postponements
thereof.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
