-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TPyL+8RzvBfgUjer4/e2dfimHUGQ8a3CTAsA5TeCzV0wtcyKXtK0kOpMRFDTnKZ9 2l8QHfz+lkX3CTnaqPqEvw== 0000898431-96-000165.txt : 19961213 0000898431-96-000165.hdr.sgml : 19961213 ACCESSION NUMBER: 0000898431-96-000165 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19961212 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATES FILTER CORP CENTRAL INDEX KEY: 0000318025 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 330266015 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-17745 FILM NUMBER: 96679922 BUSINESS ADDRESS: STREET 1: 40-004 COOK STREET CITY: PALM DESERT STATE: CA ZIP: 92211 BUSINESS PHONE: 6193400098 MAIL ADDRESS: STREET 1: 40-004 COOK STREET CITY: PALM DESERT STATE: CA ZIP: 92211 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN TOXXIC CONTROL INC DATE OF NAME CHANGE: 19910401 FORMER COMPANY: FORMER CONFORMED NAME: NOVAN ENERGY INC DATE OF NAME CHANGE: 19871227 S-3 1 As filed with the Securities and Exchange Commission on December 12, 1996 Registration No. 333-______ _________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _________________________________ United States Filter Corporation (Exact name of registrant as specified in its charter) DELAWARE 3589 (State or other jurisdiction (Primary Standard Industrial of incorporation or organization) Classification Code Number) 33-0266015 (I.R.S. Employer Identification No.) 40-004 COOK STREET PALM DESERT, CALIFORNIA 92211 (619) 340-0098 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ___________________ DAMIAN C. GEORGINO VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY UNITED STATES FILTER CORPORATION 40-004 COOK STREET PALM DESERT, CALIFORNIA 92211 (619) 340-0098 (Name, address, including zip code, and telephone number, including area code, of agent for service) ___________________ Copy to: JANICE C. HARTMAN KIRKPATRICK & LOCKHART LLP 1500 OLIVER BUILDING PITTSBURGH, PENNSYLVANIA 15222 (412) 355-6500 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to time after this registration statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ____ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. X ___ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ____ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ____ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ____ ______________________________ CALCULATION OF REGISTRATION FEE TITLE OF EACH CLASS PROPOSED PROPOSED OF MAXIMUM MAXIMUM SECURITIES AMOUNT TO OFFERING AGGREGATE AMOUNT OF TO BE BE PRICE PER OFFERING REGISTRATION REGISTERED REGISTERED SHARE (1) PRICE (1) FEE Common stock, par value $.01 per 80,412 share shares $31.56 $2,537,803 $770 (1) Estimated solely for the purpose of calculating the registration fee; computed in accordance with Rule 457(c) on the basis of the average of the high and low sales prices for the Common Stock on December 11, 1996 as reported on the New York Stock Exchange Composite Tape. ______________________________ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. Information contained herein in subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION DATED DECEMBER 12, 1996 PROSPECTUS , 1996 80,412 SHARES UNITED STATES FILTER CORPORATION COMMON STOCK (PAR VALUE $.01 PER SHARE) ___________________ This prospectus provides for the offering of up to an aggregate of 80,412 shares (the "Shares") of the Common Stock, par value $.01 per share ("Common Stock"), of United States Filter Corporation (the "Company"). The Shares were acquired by the Selling Stockholder named herein on September 30, 1996 in consideration of the sale to the Company of a portion of the stock of Kisco Water Treatment Company pursuant to the terms of a Stock Purchase Agreement dated as of September 20, 1996 (the "Stock Purchase Agreement"). As of the date of this Prospectus, 9,460 of the Shares are held in escrow to secure the indemnity obligations of the Selling Stockholder under the Stock Purchase Agreement. See "Selling Stockholder." The Shares may be offered or sold by or for the account of the Selling Stockholder from time to time or at one time on one or more exchanges or otherwise, at prices and on terms to be determined at the time of sale, to purchasers directly or by or through brokers or dealers who may receive compensation in the form of discounts, commissions or concessions. The Selling 1 Stockholder and any such brokers or dealers may be deemed to be "underwriters" within the meaning of the United States Securities Act of 1933, as amended (the "Securities Act"), and any discounts, concessions and commissions received by any such brokers and dealers may be deemed to be underwriting commissions or discounts under the Securities Act. The Company will not receive any of the proceeds from any sale of the Shares offered hereby. See "Use of Proceeds," "Selling Stockholder" and "Plan of Distribution." The Common Stock is listed on the New York Stock Exchange (the "NYSE") and traded under the symbol "USF." The last reported sale price of the Common Stock on the NYSE on December 11, 1996 was $31.875 per share. _____________________ SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK. _____________________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 2 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files periodic reports, proxy solicitation materials and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy solicitation materials and other information can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional Offices located at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Such reports, proxy and information statements and other information may be found on the Commission's site address, http://www.sec.gov. The Common Stock is listed on the NYSE. Such reports, proxy solicitation materials and other information can also be inspected and copied at the NYSE at 20 Broad Street, New York, New York 10005. The Company has filed with the Commission a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act with respect to the offering made hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain portions of which are omitted in accordance with the rules and regulations of the Commission. Such additional information may be obtained from the Commission's principal office in Washington, D.C. as set forth above. For further information, reference is hereby made to the Registration Statement, including the exhibits filed as a part thereof or otherwise incorporated herein. Statements made in this Prospectus as to the contents of any documents referred to are not necessarily complete, and in each instance reference is made to such exhibit for a more complete description and each such statement is modified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company (File No. 1- 10728) with the Commission pursuant to the Exchange Act are incorporated by reference: The Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996; the Company's Current Reports on Form 8-K dated May 31, 1996 (as amended on 3 Form 8-K/A dated June 28, 1996), June 10, 1996, June 27, 1996 and July 15, 1996 (two such Current Reports), August 23, 1996, September 6, 1996, October 28, 1996, November 6, 1996 and December 2, 1996; and the description of the Common Stock contained in the Company's Registration Statement on Form 8-A, as the same may be amended. All documents and reports subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering made by this Prospectus shall be deemed to be incorporated by reference herein. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide to each person to whom a copy of this Prospectus is delivered, upon the written or oral request of such person, without charge, a copy of any or all of the documents that are incorporated herein by reference, other than exhibits to such information (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to Vice President, General Counsel and Secretary, United States Filter Corporation, 40-004 Cook Street, Palm Desert, California 92211 (telephone (619) 340-0098). THE COMPANY The Company is a leading global provider of industrial and municipal water and wastewater treatment systems, products and services, with an installed base of systems that the Company believes is one of the largest worldwide. The Company offers a single-source solution to industrial and municipal customers through what the Company believes is the industry's broadest range of cost-effective systems, products, services and proven technologies. In addition, the Company has one of the industry's largest networks of sales and service facilities. The Company capitalizes on its large installed base, extensive distribution network and manufacturing capabilities to provide customers with ongoing local service and maintenance. The Company is also a leading provider of service deionization and outsourced water services, including the operation of water and wastewater treatment systems at customer sites. The Company's principal executive offices are located at 40- 004 Cook Street, Palm Desert, California 92211, and its telephone 4 number is (619) 340-0098. References herein to the Company refer to United States Filter Corporation and its subsidiaries, unless the context requires otherwise. RISK FACTORS Prospective investors should consider carefully the following factors relating to the business of the Company, together with the other information and financial data included or incorporated by reference in this Prospectus, before acquiring the securities offered hereby. Information contained or incorporated by reference in this Prospectus includes "forward- looking statements" which can be identified by the use of forward-looking terminology such as "believes," "contemplates," "expects," "may," "will," "should," "would" or "anticipates" or the negative thereof or other variations thereon or comparable terminology. No assurance can be given that the future results covered by the forward-looking statements will be achieved. The following matters constitute cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties, that could cause actual results to vary materially from the future results covered in such forward-looking statements. Other factors could also cause actual results to vary materially from the future results covered in such forward-looking statements. ACQUISITION STRATEGY In pursuit of its strategic objective of becoming the leading global single-source provider of water and wastewater treatment systems and services, the Company has, since 1991, acquired and successfully integrated more than 45 United States based and international businesses with strong market positions and substantial water and wastewater treatment expertise. The Company plans to continue to pursue acquisitions that complement its technologies, products and services, broaden its customer base and expand its global distribution network. The Company's acquisition strategy entails the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities and potential profitability of acquisition candidates and in integrating the operations of acquired companies. Although the Company generally has been successful in pursuing these acquisitions, there can be no assurance that acquisition opportunities will continue to be available, that the Company will have access to the capital required to finance potential acquisitions, that the Company will continue to acquire businesses or that any business acquired will be integrated successfully or prove profitable. 5 INTERNATIONAL TRANSACTIONS The Company has made and expects it will continue to make acquisitions and expects to obtain contracts in markets outside the United States. While these activities may provide important opportunities for the Company to offer its products and services internationally, they also entail the risks associated with conducting business internationally, including the risk of currency fluctuations, slower payment of invoices, nationalization and possible social, political and economic instability. In particular, the purchase price for the pending acquisition by the company of the businesses of the Process Equipment Division ("PED") of United Utilities Plc is Pound/Sterling 125.5 million, comprised of approximately Pound/Sterling 100.5 million in cash and Pound/Sterling 25.0 million in shares of Common Stock. The Company has entered into a forward contact pursuant to which it is obligated to purchase 100.0 million British pounds sterling for approximately $159.3 million at any time between December 16, 1996 and February 14, 1997, for the purpose of hedging the cash portion of the price of its acquisition of PED. With respect to the remaining Pound/Sterling 0.5 million cash portion of the consideration and the Pound/Sterling 25.0 million in shares of Common Stock, to the extent the value of the United States dollar declines relative to pounds sterling prior to the closing of the acquisition, the cost to the Company of acquiring PED would increase. In addition, if the acquisition of PED is not consummated, or the acquisition is consummated after February 14, 1997, the Company would be at risk with respect to the Pound/Sterling 100.0 million it purchased pursuant to such forward contract to the extent that the value of the British pound sterling decreases relative to the value of other currencies. RELIANCE ON KEY PERSONNEL The Company's operations are dependent on the continued efforts of senior management, in particular Richard J. Heckmann, the Company's Chairman of the Board, President and Chief Executive Officer. There are no employment agreements between the Company and the members of its senior management, except Thierry Reyners, the Company's Executive Vice President--European Group. Should any of the senior managers be unable to continue in their present roles, the Company's prospects could be adversely affected. PROFITABILITY OF FIXED PRICE CONTRACTS A significant portion of the Company's revenues are generated under fixed price contracts. To the extent that original cost estimates are inaccurate, costs to complete 6 increase, delivery schedules are delayed or progress under a contract is otherwise impeded, revenue recognition and profitability from a particular contract may be adversely affected. The Company routinely records upward or downward adjustments with respect to fixed price contracts due to changes in estimates of costs to complete such contracts. There can be no assurance that future downward adjustments will not be material. CYCLICALITY AND SEASONALITY The sale of capital equipment within the water treatment industry is cyclical and influenced by various economic factors including interest rates and general fluctuations of the business cycle. A significant portion of the Company's revenues are derived from capital equipment sales. While the Company sells capital equipment to customers in diverse industries and in global markets, cyclicality of capital equipment sales and instability of general economic conditions could have an adverse effect on the Company's revenues and profitability. The sale of water and wastewater distribution equipment and supplies is also cyclical and influenced by various economic factors including interest rates, land development and housing construction industry cycles. Sales of such equipment and supplies are also subject to seasonal fluctuation in northern climates. As a result of recent acquisitions, the sale of water and wastewater distribution equipment and supplies is a significant component of the Company's business. Cyclicality and seasonality of water and wastewater distribution equipment and supplies sales could have an adverse effect on the Company's revenues and profitability. POTENTIAL ENVIRONMENTAL RISKS The Company's business and products may be significantly influenced by the constantly changing body of environmental laws and regulations, which require that certain environmental standards be met and impose liability for the failure to comply with such standards. The Company is also subject to inherent risks associated with environmental conditions at facilities owned, and the state of compliance with environmental laws, by businesses acquired by the Company. While the Company endeavors at each of its facilities to assure compliance with environmental laws and regulations, there can be no assurance that the Company's operations or activities, or historical operations by others at the Company's locations, will not result in cleanup obligations, civil or criminal enforcement actions or private actions that could have a material adverse effect on the Company. In that regard federal and state environmental regulatory 7 authorities have commenced civil enforcement actions related to alleged multiple violations of applicable wastewater pretreatment standards by a wholly owned subsidiary of the Company at a Connecticut ion exchange regeneration facility acquired by the Company in October 1995 from Anjou International Company ("Anjou"). A grand jury investigation is pending which is believed to relate to the same conditions that were the subject of the civil actions. The Company has certain rights of indemnification from Anjou which may be available with respect to these matters. In addition, the Company's activities as owner and operator of certain hazardous waste treatment and recovery facilities are subject to stringent laws and regulations and compliance reviews. Failure of these facilities to comply with those regulations could result in substantial fines and the suspension or revocation of the facility's hazardous waste permit. In other matters, the Company has been notified by the United States Environmental Protection Agency that it is a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") at certain sites to which the Company or its predecessors allegedly sent waste in the past. It is possible that the Company could receive other such notices under CERCLA or analogous state laws in the future. The Company does not believe that its liability, if any, relating to such matters will be material. However, there can be no assurance that such matters will not be material. In addition, to some extent, the liabilities and risks imposed by environmental laws on the Company's customers may adversely impact demand for certain of the Company's products or services or impose greater liabilities and risks on the Company, which could also have an adverse effect on the Company's competitive or financial position. COMPETITION The water and wastewater treatment industry is fragmented and highly competitive. The Company competes with many United States based and international companies in its global markets. The principal methods of competition in the markets in which the Company competes are technology, prompt availability of local service capability, price, product specifications, customized design, product knowledge and reputation, ability to obtain sufficient performance bonds, timely delivery, the relative ease of system operation and maintenance, and the prompt availability of replacement parts. In the municipal contract bid process, pricing and ability to meet bid specifications are the primary considerations. While no competitor is considered dominant, there are competitors which have significantly greater resources than the Company, which, among other things, could be a competitive disadvantage to the Company in securing certain projects. 8 TECHNOLOGICAL AND REGULATORY CHANGE The water and wastewater treatment business is characterized by changing technology, competitively imposed process standards and regulatory requirements, each of which influences the demand for the Company's products and services. Changes in regulatory or industrial requirements may render certain of the Company's treatment products and processes obsolete. Acceptance of new products may also be affected by the adoption of new government regulations requiring stricter standards. The Company's ability to anticipate changes in technology and regulatory standards and to develop successfully and introduce new and enhanced products on a timely basis will be a significant factor in the Company's ability to grow and to remain competitive. There can be no assurance that the Company will be able to achieve the technological advances that may be necessary for it to remain competitive or that certain of its products will not become obsolete. In addition, the Company is subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in development or failure of products to operate properly. MUNICIPAL AND WASTEWATER MARKET Completion of certain recent and pending acquisitions will increase significantly the percentage of the Company's revenues derived from municipal customers. While municipalities represent an important market in the water and wastewater treatment industry, contractor selection processes and funding for projects in the municipal sector entail certain additional risks not typically encountered with industrial customers. Competition for selection of a municipal contractor typically occurs through a formal bidding process which can require the commitment of significant resources and greater lead times than industrial projects. In addition, demand in the municipal market is dependent upon the availability of funding at the local level, which may be the subject of increasing pressure as local governments are expected to bear a greater share of the cost of public services. A company recently acquired by the Company, Zimpro Environmental, Inc. ("Zimpro"), is party to certain agreements (entered into in 1990 at the time Zimpro was acquired from unrelated third parties by the entities from which it was later acquired by the Company), pursuant to which Zimpro agreed, among other things, to pay the original sellers a royalty of 3.0% of its annual consolidated net sales of certain products in excess of $35.0 million through October 25, 2000. Under certain interpretations of such agreements, with which the Company disagrees, Zimpro could be liable for such royalties with respect to the net sales attributable to products, systems and services 9 of certain defined wastewater treatment businesses acquired by Zimpro or the Company or the Company's other subsidiaries after May 31, 1996. The defined businesses include, among others, manufacturing machinery and equipment, and engineering, installation, operation and maintenance services related thereto, for the treatment and disposal of waste liquids, toxic waste and sludge. One of the prior sellers has revealed in a letter to the Company an interpretation contrary to that of the Company. The Company believes that it would have meritorious defenses to any claim based upon any such interpretation and would vigorously pursue the elimination of any threat to expand what it believes to be its obligations pursuant to such agreements. SHARES ELIGIBLE FOR FUTURE SALE The market price of the Common Stock could be adversely affected by the availability for public sale of shares held on November 10, 1996 by security holders of the Company, including: (i) up to 3,750,093 shares which may be delivered by Laidlaw Inc. or its affiliates ("Laidlaw"), at Laidlaw's option in lieu of cash, at maturity pursuant to the terms of 5-3/4% Exchangeable Notes due 2000 of Laidlaw (the amount of shares or cash delivered or paid to be dependent within certain limits upon the value of the Common Stock at maturity); (ii) 7,636,363 shares issuable upon conversion of the Company's 6% Convertible Subordinated Notes due 2005 at a conversion price of $18.33 per share of Common Stock; (iii) 9,113,924 shares issuable upon conversion of the Company's 4-1/2% Convertible Subordinated Notes at a conversion price of $39.50 per share of Common Stock; (iv) 2,908,171 outstanding shares that are currently registered for sale under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to two shelf registration statements; and (v) 7,036,939 shares which are subject to agreements pursuant to which the holders have certain rights to request the Company to register the sale of such holders' Common Stock under the Securities Act and/or, subject to certain conditions, to include certain percentages of such shares in other registration statements filed by the Company (1,980,000 of which shares also may be sold from time to time by the holder thereof pursuant to Rule 144 under the Securities Act). In addition, the Company has registered for sale under the Securities Act 5,777,380 shares which may be issuable by the Company from time to time in connection with acquisitions of businesses from third parties. USE OF PROCEEDS The Selling Stockholder will receive all of the net proceeds from any sale of the Shares offered hereby, and none of such proceeds will be available for use by the Company or otherwise for the Company's benefit. 10 SELLING STOCKHOLDER The Shares which may be offered pursuant to this Prospectus will be offered by or for the account of Thomas J. Goulet (the "Selling Stockholder"), who acquired the Shares on September 30, 1996 pursuant to the Stock Purchase Agreement. The 80,412 Shares constitute all of the shares of Common Stock beneficially owned by the Selling Stockholder and represented less than 1% of the shares of Common Stock outstanding on November 10, 1996. Pursuant to the terms of an Escrow Agreement dated September 30, 1996 (the "Escrow Agreement"), 9,460 of the Shares (the "Escrow Shares") are held in escrow as of the date of this prospectus to secure the indemnity obligations of the Selling Stockholder under the Stock Purchase Agreement. The Selling Stockholder is obligated to deposit the proceeds of any sale of the Escrow Shares in the escrow. The Escrow Agreement provides that any Escrow Shares, or the proceeds of any disposition of any Escrow Shares, not previously used or set aside to satisfy claims made under the Escrow Agreement and not held pending the resolution of disputed claims will be released from the escrow account on March 31, 1997. The Selling Stockholder intends to sell all of the Shares including those held for his account under the Escrow Agreement. PLAN OF DISTRIBUTION Shares offered hereby may be sold from time to time or at one time by or for the account of the Selling Stockholder on one or more exchanges or otherwise; directly to purchasers in negotiated transactions; by or through brokers or dealers, which may include Donaldson, Lufkin & Jenrette Securities Corporation, in ordinary brokerage transactions or transactions in which a broker or dealer solicits purchasers; in block trades in which brokers or dealers will attempt to sell Shares as agent but may position and resell a portion of the block as principal; in transactions in which a broker or dealer purchases as principal for resale for its own account; or in any combination of the foregoing methods. Shares may be sold at a fixed offering price, which may be changed, at the prevailing market price at the time of sale, at prices related to such prevailing market price or at negotiated prices. Brokers or dealers may arrange for others to participate in any such transaction and may receive compensation in the form of discounts, commissions or concessions payable by the Company and/or the purchasers of Shares. The proceeds to the Selling Stockholder from any sale of Shares will be net of any expenses to be borne by the Selling Stockholder. If required at the time that a particular offer of Shares is made, a supplement to this Prospectus will be delivered that describes any material arrangements for the distribution of Shares and the terms of the 11 offering, including, without limitation, any discounts, commissions or concessions and other items constituting compensation from the Selling Stockholder or otherwise. The Company may agree to indemnify participating brokers or dealers against certain civil liabilities, including liabilities under the Securities Act. The Company and the Selling Stockholder are obligated to indemnify each other against certain civil liabilities arising under the Securities Act. The Selling Stockholder and any such brokers or dealers may be deemed to be "underwriters" within the meaning of the Securities Act, in which event any discounts, commissions or concessions received by such brokers or dealers and any profit on the resale of the Shares purchased by such brokers or dealers may be deemed to be underwriting commissions or discounts under the Securities Act. The Company has informed the Selling Stockholder that the provisions of Rules 10b-6 and 10b-7 under the Exchange Act may apply to their sales of Shares and has furnished the Selling Stockholder with a copy of these rules. The Company also has advised the Selling Stockholder of the requirement for delivery of a prospectus in connection with any sale of the Shares. Any Shares covered by this Prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than pursuant to this Prospectus. There is no assurance that the Selling Stockholder will sell any or all of the Shares. The Selling Stockholder may transfer, devise or gift such Shares by other means not described herein. The Company has agreed to reimburse the Selling Stockholder to the extent the net proceeds from the sale, in whole or in part, of the Shares pursuant to the Registration Statement are less than $31.875 per Share, plus 7% interest per annum from December 9, 1996 through the date of sale, and to purchase the Shares which have not been sold pursuant to the Registration Statement on or before January 31, 1997, at $31.875 per Share. The Company will pay all of the expenses, including, but not limited to, fees and expenses of compliance with state securities or "blue sky" laws, incident to the registration of the Shares, other than certain stock transfer taxes. VALIDITY OF COMMON STOCK The validity of the Shares of Common Stock offered hereby will be passed upon for the Company by Damian C. Georgino, Vice President, General Counsel and Secretary of the Company. 12 INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The consolidated financial statements of United States Filter Corporation and its subsidiaries as of March 31, 1995 and 1996 and for each of the three years in the period ended March 31, 1996, except for the consolidated financial statements of Davis Water & Waste Industries, Inc. and its subsidiaries as of April 30, 1996 and 1995 and for each of the three years in the period ended April 30, 1996, have been audited by KPMG Peat Marwick LLP, independent certified public accountants, as stated in their report incorporated by reference herein. The consolidated financial statements of Davis Water & Waste Industries, Inc. and its subsidiaries, which have been consolidated with those of the Company, have been audited by Price Waterhouse LLP as stated in their report incorporated herein by reference. Such financial statements of the Company and its consolidated subsidiaries are incorporated by reference herein in reliance upon the report of such firms. Both of the foregoing accounting firms are independent auditors. The combined financial statements of the Systems and Manufacturing Group of Wheelabrator Technologies Inc. as of December 31, 1994 and 1995 and for each of the years in the three year period ended December 31, 1995 have been incorporated by reference herein in reliance upon the report of KPMG peat Marwick LLP, independent certified public accountants, which report is incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The aggregated financial statements of the United Utilities PLc Process Equipment Division as of March 31, 1996 have been incorporated by reference herein in reliance upon the report of KPMG Audit Plc, independent chartered accountants, which report is incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Davis Water & Waste Industries, Inc. incorporated in this Prospectus by reference to the audited historical financial statements included in United States Filter Corporation's Form 8-K dated June 27, 1996 have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements of Zimpro Environmental, Inc. as of December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995 incorporated herein by reference, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon incorporated by reference elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 13 The audited financial statements of WaterPro Supplies Corporation as of December 31, 1995 and for the period from April 7, 1995 to December 31, 1995 incorporated by reference in this prospectus have been audited by Arthur Andersen LLP, independent public accountants as indicated in their report with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in giving said report. 14 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION 80,412 SHARES OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT UNITED STATES FILTER CORPORATION RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES COMMON STOCK IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. _____________ ________________ TABLE OF CONTENTS PROSPECTUS PAGE ________________ Available Information . . . 2 Incorporation of Certain Documents by Reference . 2 The Company . . . . . . . . 3 Risk Factors . . . . . . . 3 Use of Proceeds . . . . . . 5 Selling Stockholder . . . . 5 Plan of Distribution . . . 5 Validity of Common Stock . 6 Independent Certified Public Accountants . . . . . . . . 6 ___________, 1996 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses to be paid by the Company in connection with the distribution of the securities being registered, other than underwriting discounts and commissions, which will be borne by the Selling Stockholder, are as follows: Securities and Exchange Commission Filing Fee . . . $ 770 Accounting Fees and Expenses . . . . . . . . . . . . 5,000 Legal Fees and Expenses . . . . . . . . . . . . . . . 5,000 Miscellaneous Expenses . . . . . . . . . . . . . . . 230 Total . . . . . . . . . . . . . . . $11,000 ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Certificate of Incorporation and the By-laws of the Company provide for the indemnification of directors and officers to the fullest extent permitted by the General Corporation Law of the State of Delaware, the state of incorporation of the Company. Section 145 of the General Corporation Law of the State of Delaware authorizes indemnification when a person is made a party or is threatened to be made a party to any proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving as a director, officer, employee or agent of another enterprise, at the request of the corporation, and if such person acted in good faith and in a manner reasonably believed by him or her to be in, or not opposed to, the best interests of the corporation. With respect to any criminal proceeding, such person must have had no reasonable cause to believe that his or her conduct was unlawful. If it is determined that the conduct of such person meets these standards, he or she may be indemnified for expenses incurred (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such proceeding. If such a proceeding is brought by or in the right of the corporation (i.e., a derivative suit), such person may be indemnified against expenses actually and reasonably incurred if he or she acted in good faith and in a manner reasonably believed by him or her to be in, or not opposed to, the best interests of the corporation. There can be no indemnification with respect to any matter as to which such person is adjudged to be liable to the corporation; however, a court may, even in such case, allow II-2 such indemnification to such person for such expenses as the court deems proper. Where such person is successful in any such proceeding, he or she is entitled to be indemnified against expenses actually and reasonably incurred by him or her. In all other cases, indemnification is made by the corporation upon determination by it that indemnification of such person is proper because such person has met the applicable standard of conduct. The Company maintains an errors and omissions liability policy for the benefit of its officers and directors, which may cover certain liabilities of such individuals to the Company. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits. The following exhibits are filed as part of this registration statement: EXHIBIT NUMBER DESCRIPTION ------- ----------- 5.01 Opinion of Damian C. Georgino as to the legality of the securities being registered 23.01 Consent of Damian C. Georgino (included in Exhibit 5.01) 23.02 Consents of KPMG Peat Marwick LLP and KPMG Audit Plc 23.03 Consent of Price Waterhouse LLP 23.04 Consent of Ernst & Young LLP 23.05 Consent of Arthur Andersen LLP 24.01 Powers of Attorney (included on signature page of this registration statement) 99.01 Stock Purchase Agreement dated as of September 20, 1996 among United States Filter Corporation, Thomas J. Goulet, M&I Ventures Corporation, Kisco Water Treatment Company and Illinois Water Treatment, Inc. 99.02 Amendment to Stock Purchase Agreement dated as of September 30, 1996 among Thomas J. Goulet, M&I Ventures Corporation, United States Filter Corporation, Illinois Water Treatment, Inc. and Kisco Water Treatment Company II-3 EXHIBIT NUMBER DESCRIPTION ------- ----------- 99.03 Option, Transfer and Registration Rights Agreement dated as of September 30, 1996 among the registrant, Thomas J. Goulet and M&I Ventures Corporation 99.04 Indemnity Escrow Agreement dated as of September 30, 1996 among the registrant, Thomas J. Goulet and M&I Ventures Corporation ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. Provided, however, that paragraphs (i) and (ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement II-4 relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post- effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Palm Desert, State of California, on December 12, 1996. UNITED STATES FILTER CORPORATION By: /s/ Richard J. Heckmann --------------------------------- Richard J. Heckmann Chairman of the Board, President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kevin L. Spence and Damian C. Georgino, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documentation in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Capacity Date --------- -------- ----- /s/ Richard J. Heckmann Chairman of the December 12, 1996 -------------------------- Board, President Richard J. Heckman and Chief Executive Officer (Principal Executive Officer) and a Director /s/ Kevin L. Spence Vice President December 12, 1996 -------------------------- and Chief Kevin L. Spence Financial Officer (Principal Financial and Accounting Officer) /s/ Michael J. Reardon Executive Vice December 12, 1996 -------------------------- President and a Michael J. Reardon Director /s/ Tim L. Traff Senior Vice December 12, 1996 -------------------------- President and a Tim L. Traff Director /s/ James E. Clark Director December 12, 1996 -------------------------- James E. Clark Director -------------------------- John L. Diederich Director -------------------------- Robert S. Hillas Director -------------------------- Arthur B. Laffer /s/ Alfred E. Osborne, Jr. Director December 12, 1996 -------------------------- Alfred E. Osborne, Jr. Director -------------------------- J. Danforth Quayle /s/ C. Howard Wilkins, Jr. Director December 12, 1996 -------------------------- C. Howard Wilkins, Jr. EXHIBIT INDEX EXHIBIT SEQUENTIAL PAGE NUMBER DESCRIPTION NUMBER ------- ----------- --------------- 5.01 Opinion of Damian C. Georgino as to the legality of the securities being registered 23.01 Consent of Damian C. Georgino (included in Exhibit 5.01) 23.02 Consents of KPMG Peat Marwick LLP and KPMG Audit Plc 23.03 Consent of Price Waterhouse LLP 23.04 Consent of Ernst & Young LLP 23.05 Consent of Arthur Andersen LLP 24.01 Powers of Attorney (included on signature page of this registration statement) 99.01 Stock Purchase Agreement dated as of September 20, 1996 among United States Filter Corporation, Thomas J. Goulet, M&I Ventures Corporation, Kisco Water Treatment Company and Illinois Water Treatment, Inc. 99.02 Amendment to Stock Purchase Agreement dated as of September 30, 1996 among Thomas J. Goulet, M&I Ventures Corporation, United States Filter Corporation, Illinois Water Treatment, Inc. and Kisco Water Treatment Company 99.03 Option, Transfer and Registration Rights Agreement dated as of September 30, 1996 among the registrant, Thomas J. Goulet and M&I Ventures Corporation 99.04 Agreement dated as of September 30, 1996 among the registrant, Thomas J. Goulet and M&I Ventures Corporation EX-23 2 Exhibit 23.02 INDEPENDENT AUDITORS' CONSENT To the Board of Directors and Shareholders United States Filter Corporation: We consent to the use of our reports incorporated by reference herein and the reference to our firm under the heading "Independent Certified Public Accountants" in the Prospectus. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Orange County, California December 11, 1996 INDEPENDENT AUDITORS' CONSENT To the Board of Directors and Shareholders United States Filter Corporation: We consent to the use of our reports incorporated by reference herein and the reference to our firm under the heading "Independent Certified Public Accountants" in the Prospectus. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Chicago, Illinois December 11, 1996 CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS To the Board of Directors and Shareholders United Utilities PLC We consent to the use of our report dated 16 October 1996 relating to the aggregated financial statements of the United Utilities PLC Process Division as of 31 March 1996 and 1995 and for each of the years in the two year period ended 31 March 1996 and the reference to our firm under the heading "Independent Certified Public Accountants" in the prospectus to be dated 12 December 1996. /s/ KPMG Audit Plc KPMG Audit Plc Chartered Accountants Manchester Registered Auditors 12 December 1996 EX-23 3 Exhibit 23.03 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of United States Filter Corporation of our report dated June 13, 1996 relating to the consolidated financial statements of Davis Water & Waste Industries, Inc., which appears in the Current Report on Form 8-K of United States Filter Corporation dated June 27, 1996. We also consent to the reference to us under the heading "Independent Certified Public Accountants" in such Prospectus. Price Waterhouse LLP Atlanta, Georgia December 11, 1996 EX-23 4 Exhibit 23.04 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Independent Certified Public Accountants" in the Registration Statement (Form S-3) and related Prospectus of United States Filter Corporation for the registration of 80,412 shares of its common stock and to the incorporation by reference therein of our report dated February 8, 1996, except for Notes 4 and 10, as to which the date is May 10, 1996, with respect to the consolidated financial statements of Zimpro Environmental, Inc. included in the Current Report on Form 8-K of United States Filter Corporation dated May 31, 1996, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Ernst & Young LLP Minneapolis, Minnesota December 11, 1996 EX-23 5 Exhibit 23.05 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated February 8, 1996 included in United States Filter Corporation's Report on Form 8-K dated November 6, 1996 and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP Arthur Andersen LLP Minneapolis, Minnesota December 11, 1996 EX-99 6 Exhibit 99.01 STOCK PURCHASE AGREEMENT Stock Purchase Agreement ("Agreement"), dated as of the 20th day of September, 1996, by and among THOMAS J. GOULET, an individual ("Goulet"), M&I Ventures Corporation, a Wisconsin corporation ("M&I"), UNITED STATES FILTER CORPORATION, a Delaware corporation ("USF"), through its wholly-owned subsidiary, ILLINOIS WATER TREATMENT, INC., a Delaware corporation ("Buyer"), and KISCO WATER TREATMENT COMPANY, a Missouri corporation (the "Company"). Goulet and M&I are hereinafter individually referred to as "Seller" and collectively referred to as "Sellers". Sellers desire to sell all of the issued and outstanding shares of capital stock of the Company, consisting of an aggregate of 582,000 shares of common stock issued and issuable under the outstanding warrant to purchase capital stock of the Company held by M&I (the "Warrant") (the "Company Shares") to Buyer, and Buyer desires to purchase the Company Shares, on the terms and subject to the conditions set forth below. Goulet is the holder of 351,000 shares and M&I is entitled to issuance of 231,000 shares by exercise of the Warrant. In consideration of the representations, warranties, covenants and agreements contained herein, Sellers, Buyer and the Company, each intending to be legally bound hereby, agree as set forth below. ARTICLE I. DEFINITIONS; CONSTRUCTION 1.1 Definitions. As used in this Agreement, the following terms have the meanings specified in this Section 1.1. All accounting terms not specifically defined herein shall be construed in accordance with Accounting Principles. "Accounting Principles" has the meaning given that term in Section 2.6(a). "Adjusted Closing Balance Sheet" has the meaning given that term in Section 2.6(a). "Affiliate" means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person. "Agreement" means this Stock Purchase Agreement, as it may be amended from time to time. "Benefit Plan" has the meaning given that term in Section 3.21(a). "Business" means the manufacture of commercial and industrial water treatment equipment as currently conducted by the Company. "Buyer" means Illinois Water Treatment, Inc., a Delaware corporation and a wholly-owned subsidiary of USF. "Buyer Damages" has the meaning given that term in Section 7.2. "Buyer Indemnitees" has the meaning given that term in Section 7.2. "Ceiling Amount" has the meaning given that term in Section 7.4(b). "CERCLIS" means the United States Comprehensive Environmental Response Compensation Liability Information System List pursuant to Superfund. "Closing" has the meaning given that term in Section 2.3. "Closing Date" has the meaning given that term in Section 2.3. "Code" means the United States Internal Revenue Code of 1986, as amended, and the applicable rulings and regulations thereunder. "Company Group" has the meaning given that term in Section 3.21(b). "Company Plan" has the meaning given that term in Section 3.21(a). "Company Shares" has the meaning given that term in the introductory paragraph of this Agreement. "Contract" and "Contracts" have the respective meanings given those terms in Section 3.13. "Damages" has the meaning given that term in Section 7.7. "Defined Benefit Plan" has the meaning given that term in Section 3.21(e). "Encumbrance" means any liability, debt, mortgage, deed of trust, pledge, security interest, encumbrance, option, right of first refusal, agreement of sale, adverse claim, easement, lien, assessment, restrictive covenant, encroachment, burden or - 2 - charge of any kind or nature whatsoever or any item similar or related to the foregoing. "Environmental Law" means any applicable Law relating to public health and safety or protection of the environment, including common law nuisance, property damage and similar common law theories. "ERISA" means the United States Employee Retirement Income Security Act of 1974, as amended, and the applicable rulings and regulations thereunder. "FASB" means the United States Financial Accounting Standards Board or its successor. "Final Closing Balance Sheet" has the meaning given to that term in Section 2.6(d). "Financial Statements" has the meaning given that term in Section 3.7(b). "Governing Documents" means, with respect to any Person who is not a natural Person, the certificate or articles of incorporation, bylaws, deed of trust, formation or governing agreement and other charter documents or organization or governing documents or instruments of such Person. "Governmental Body" means any court, government (federal, state, local or foreign), department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority or instrumentality. "Indemnified Party" has the meaning given that term in Section 7.7. "Indemnifying Party" has the meaning given that term in Section 7.7. "Intellectual Property" has the meaning given that term in Section 3.20. "IRS" means the United States Internal Revenue Service. "Knowledge of the Company" means the best knowledge of the Company and/or the Sellers based upon reasonable inquiry. "Law" means any applicable federal, state, municipal, local or foreign statute, law, ordinance, rule, regulation or order of any kind or nature whatsoever including any public policy, order of any Governmental Body or principle of common law. - 3 - "Litigation" has the meaning given that term in Section 3.12. "Multiemployer Plan" has the meaning given that term in Section 3.21(f). "NYSE" means the New York Stock Exchange. "Net Operating Assets" has the meaning given that term in Section 2.5. "Other Agreement" means each other agreement or document contemplated hereby to be executed and delivered in connection with the transactions contemplated by this Agreement on or before Closing. "PBGC" means the United States Pension Benefit Guaranty Corporation. "PCBs" means polychlorinated biphenyls. "Permit" and "Permits" have the respective meanings given those terms in Section 3.14. "Person" means and includes a natural person, a corporation, an association, a partnership, a limited liability company, a trust, a joint venture, an unincorporated organization, a business, any other legal entity, and a Governmental Body. "Post-Closing Purchase Price Adjustment" means the post-closing adjustment to the Purchase Price pursuant to Section 2.5. "Preliminary Closing Balance Sheet" has the meaning given that term in Section 2.6(a). "Purchase Price" has the meaning given that term in Section 2.2. "Qualified Plan" has the meaning given that term in Section 3.21(d). "Real Property" has the meaning given that term in Section 3.15. "Receivables" has the meaning given that term in Section 3.10. "Regulated Material" means any hazardous substance as defined by any Environmental Law and any other material regulated by any applicable Environmental Law, including petroleum, - 4 - petroleum-related material, crude oil or any fraction thereof, PCBs, and friable asbestos. "Related Party" has the meaning given that term in Section 3.16. "SEC" means the United States Securities and Exchange Commission. "Security Right" means, with respect to any security, any option, warrant, subscription right, preemptive right, other right, proxy, put, call, demand, plan, commitment, agreement, understanding or arrangement of any kind relating to such security, whether issued or unissued, or any other security convertible into or exchangeable for any such security. "Security Right" includes any right relating to issuance, sale, assignment, transfer, purchase, redemption, conversion, exchange, registration or voting and includes rights conferred by statute, by the issuer's Governing Documents or by agreement. "Seller Damages" has the meaning given that term in Section 7.3. "Seller Indemnitees" has the meaning given that term is Section 7.3. "Selling Group" means a member, whether past or present, of Seller's affiliated group of corporations within the meaning of Code Section 1504(a). "Securities Act" means the United States Securities Act of 1933, as amended. "Subsidiary" means any corporation, partnership, joint venture or other entity in which the Company owns, directly or indirectly, more than 20% of the outstanding voting securities or equity interests. "Superfund" means the United States Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. Sections 6901 et seq., as amended. "Tax" means any domestic or foreign federal, state, county or local tax, levy, impost or other charge of any kind whatsoever, including any interest or penalty thereon or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to any Tax, including any schedule or attachment thereto, and including any amendment thereof. - 5 - "Transfer Agreement" means the Option, Transfer and Registration Agreement substantially in the form of Exhibit 1.1. "USF" means United States Filter Corporation, a Delaware corporation. "USF Common Stock" means USF's common stock, par value $0.01 per share. "USF Shares" has the meaning given that term in Section 2.4. "USF Share Value" has the meaning given that term in Section 2.4. 1.2 Construction. As used herein, unless the context otherwise requires: (i) references to "Article" or "Section" are to an article or section hereof; (ii) all "Exhibits" and "Schedules" referred to herein are to Exhibits and Schedules attached hereto and are incorporated herein by reference and made a part hereof; (iii) "include", "includes" and "including" are deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import; and (iv) the headings of the various articles, sections and other subdivisions hereof are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. ARTICLE II. THE TRANSACTION 2.1 Sale and Purchase of Company Shares. Upon the terms and subject to the conditions of this Agreement and in consideration of the Purchase Price, Sellers shall sell, assign, transfer and deliver the Company Shares to Buyer, and Buyer shall purchase from Sellers and take delivery of the Company Shares, at the Closing, free of all Encumbrances. 2.2 Purchase Price. The aggregate purchase price for the Company Shares shall be US$4,250,000 (the "Purchase Price") increased or decreased by the Post-Closing Purchase Price Adjustment, if any. 2.3 Closing. The consummation of the purchase and sale of the Company Shares and the other transactions contemplated hereby (the "Closing") shall take place at 10:00 a.m., local time, on September 30, 1996, at the offices of von Briesen, Purtell & Roper, s.c., 411 East Wisconsin Avenue, Suite 700, Milwaukee, Wisconsin, or at such other time, date or place as the parties agree (the "Closing Date"). - 6 - 2.4 Payment. Upon the terms and subject to the conditions of this Agreement, (i) at Closing, Buyer shall deliver the Purchase Price to Sellers pro rata by delivery of that number of ________ shares of common stock of USF, par value $0.01 (rounded in the aggregate to the nearest whole share; collectively, such shares together with any shares of common stock of USF delivered to Sellers pursuant to the Post-Closing Purchase Price Adjustment, the "USF Shares") that is equal to the Purchase Price less the amount to be held in escrow pursuant to Section 7.4 (the "Escrow Amount"), divided by the closing price for the USF Shares as reported by the NYSE on the fifth to the last trading day preceding the Closing Date (the "USF Share Value"), and (ii) subject to Buyer's right to hold in escrow USF Shares pursuant to Section 7.4 for the time period described therein. Within five (5) business days after the determination of the Post-Closing Purchase Price Adjustment is made and the time period described in Section 7.4 has expired, Buyer and Sellers shall settle the Post-Closing Purchase Price Adjustment as follows: (x) if the Post-Closing Purchase Price Adjustment results in an increase in the Purchase Price, Buyer shall deliver to Sellers, pro rata, ________ that number of shares of common stock of USF, valued at the USF Share Value, equal to the Post-Closing Purchase Price Adjustment (or cash in the event the Put Right or the Call Offer provided for in the Transfer Agreement have been exercised), and (y) if the Post-Closing Purchase Price Adjustment results in a decrease in the Purchase Price, that number of USF Shares valued at the USF Share Value (or cash, if applicable), equal to the Post- Closing Purchase Price Adjustment shall be distributed to Buyer from the escrow established pursuant to Section 7.4(b). 2.5 Post-Closing Purchase Price Adjustment. If the Net Operating Assets of the Company at the close of business on the Closing Date as shown on the Adjusted Closing Balance Sheet ("Closing Balance") is more than $5,000 greater or more than $5,000 less than $1,513,414.88, the total Net Operating Assets balance on June 30, 1996 ("June Balance"), then the Purchase Price shall be increased or decreased (as appropriate), dollar- for dollar, by the amount of such excess or deficiency (i.e., to the extent that the Closing Balance exceeds the June Balance plus $5,000 or is less than the June Balance less $5,000). "Net Operating Assets" means the Company's total assets (other than cash and cash equivalents) less liabilities, as adjusted and calculated in accordance with the procedure established for delivering the Final Closing Balance Sheet in Section 2.6. Prior to or at Closing, the Company will distribute existing cash in payment of expenses pursuant to Sections 3.24 and 8.1, and to redeem its outstanding preferred stock and outstanding subordinated debt, with any remaining cash to be distributed pro rata to Sellers as a dividend. - 7 - 2.6 Closing Balance Sheets. (a) Preliminary and Adjusted Closing Balance Sheets. Promptly after the Closing, Seller shall prepare a consolidated balance sheet of the Company as of the close of business on the Closing Date (the "Preliminary Closing Balance Sheet"). The Preliminary Closing Balance Sheet shall be prepared in accordance with the Accounting Principles but will not reflect the results of the physical inventory taken on September 30, 1996. As used herein, "Accounting Principles" mean the set of principles and methodologies applied on a basis consistent with past practices of the Company, except that no item shall fail to be included therein or excluded therefrom on the basis of materiality, individually or collectively. The parties shall conduct a physical count of the inventory of the Company as of the close of business on September 30, 1996 in accordance with generally accepted auditing standards. The results of such inventory will be included in the Adjusted Closing Balance Sheet. Buyer shall examine and review the Preliminary Closing Balance Sheet in accordance with generally accepted auditing standards and, based upon such examination, make such adjustments, if any, to the Preliminary Closing Balance Sheet as shall in its judgment be required to cause the Preliminary Closing Balance Sheet to reflect fairly those items required to be reflected therein in accordance with the Accounting Principles (after examination and any adjustment, the "Adjusted Closing Balance Sheet"). (b) Delivery of Adjusted Closing Balance Sheet. Within 30 days after Seller has delivered to Buyer the Preliminary Closing Balance Sheet, the Adjusted Closing Balance Sheet shall be delivered by Buyer to Sellers. Sellers and their representatives shall be provided complete access to all work papers and other information used by Buyer in preparing the Adjusted Closing Balance Sheet. The Adjusted Closing Balance Sheet, when delivered by Buyer to Sellers, shall be deemed conclusive and binding on the parties for purposes of determining the Post-Closing Purchase Price Adjustment, unless Seller notifies Buyer in writing within thirty (30) days after receipt of the Adjusted Closing Balance Sheet of its disagreement therewith, which notice shall state with reasonable specificity the reasons for any disagreement and identify the items and amounts in dispute. (c) Arbitration. If any disagreement concerning the Post-Closing Purchase Price Adjustment is not resolved by Buyer and Sellers within thirty (30) days following the receipt by Buyer of notice from Seller of a disagreement concerning the Post-Closing Purchase Price Adjustment, the undisputed amount, if any, shall be paid in accordance with Section 2.5, and Buyer and Sellers shall promptly engage, on standard terms and conditions for a matter of such nature, a nationally recognized firm of independent accountants to resolve such dispute. The firm of - 8 - independent accountants shall be proposed in writing by Buyer to Sellers. In the absence of prompt agreement on the identity of the independent accountants, the Chicago office of the accounting firm of Ernst & Young, LLP shall be engaged by the parties. The engagement agreement with the independent accountants shall require the independent accountants to make their determination with respect to the items in dispute within ninety (90) days following the receipt by Sellers of the Adjusted Closing Balance Sheet. Buyer and Sellers shall each pay one-half of the cost of the fees and expenses of such independent accountants at the time of payment of the Post-Closing Purchase Price Adjustment. The resolution by the independent accountants of any dispute concerning the Post-Closing Purchase Price Adjustment shall be final, binding and conclusive upon the parties and shall be the parties' sole and exclusive remedy regarding any dispute concerning the Post-Closing Purchase Price Adjustment. (d) Final Closing Balance Sheet. The Adjusted Closing Balance Sheet, as modified by the parties' agreement and by any determination by the independent accountants as described in this Section 2.6, shall be the "Final Closing Balance Sheet". 2.7 Transfer Agreement. The USF Shares shall be entitled to the benefits of and subject to the restrictions contained in the Transfer Agreement. 2.8 USF Guaranty. USF guaranties the performance by Buyer of its obligations under Article II and Section 6.4, subject to all of the applicable terms and conditions thereof. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER(S) AND THE COMPANY As an inducement to Buyer and USF to enter into this Agreement and consummate the transactions contemplated hereby, and subject to the limitations set forth below and in Article VII, each of the Sellers and the Company, severally but not jointly, represents and warrants to Buyer and USF as follows. Each Seller's responsibility for breach of any representation or warranty hereunder shall be limited to such Seller's pro rata ________ share of the Escrow Amount and the Sellers aggregate responsibility for such a breach shall be limited to the Ceiling Amount (with the exception of any liability under Section 7.6). 3.1 Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has the corporate power and authority to own or lease its properties, carry on its business as now conducted, enter into this Agreement and the Other Agreements to which it is or is to become a party and perform its obligations hereunder and thereunder. - 9 - 3.2 Authorization; Enforceability. This Agreement and each Other Agreement to which Sellers or the Company, or any of them, is a party have been duly executed and delivered by and constitute the legal, valid and binding obligations of such party, enforceable against it in accordance with their respective terms. Each Other Agreement to which either Sellers or the Company is to become a party pursuant to the provisions hereof, when executed and delivered by such party, will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with the terms of such Other Agreement. All actions contemplated by this Section and this Agreement have been duly and validly authorized by all necessary proceedings by Sellers and the Company. 3.3 Company Shares; Capitalization. The authorized capital stock of the Company consists solely of 601,250 shares of capital stock, US$.08 par value per share, of which 600,000 shares are common stock and 1,250 shares are 6% Cumulative Preferred Stock and none are held in its treasury. At Closing, the Company Shares will constitute all of the issued and outstanding shares of capital stock of the Company. The Company Shares are or will at Closing be owned of record, legally and beneficially by Sellers as follows: 351,000 shares of common stock held by Goulet and 231,000 shares of common stock issuable to M&I upon exercise of the Warrant (which also holds the 1,250 shares of Preferred Stock to be redeemed at or prior to Closing). Except as set forth on Schedule 3.3, there are no Security Rights relating to any of the Company Shares. All rights and powers to vote the Company Shares are (or would upon exercise of the Warrant be) held exclusively by Sellers. The Company represents that all of the Company Shares are or will be validly issued prior to the Closing, fully paid and nonassessable, were not issued in violation of the terms of any agreement or other understanding, and were issued in compliance with all applicable federal and state securities or "blue sky" laws and regulations. 3.4 Subsidiaries and Investments. The Company does not own, nor has it ever owned, any shares of capital stock of or other equity interest in any corporation, partnership, joint venture or other entity. 3.5 Qualification. The Company is duly qualified and in good standing as a foreign corporation and is duly authorized to transact business in each jurisdiction wherein the character of the properties owned or leased by it or the nature of the activities conducted by it makes such qualification and good standing necessary. 3.6 No Violation of Laws or Agreements; Consents. Neither the execution and delivery of this Agreement or any Other Agreement to which Sellers or the Company is or is to become a party, the consummation of the transactions contemplated hereby - 10 - or thereby nor the compliance with or fulfillment of the terms, conditions or provisions hereof or thereof by Sellers or the Company will: (i) contravene any provision of the Governing Documents of the Company, (ii) conflict with, result in a breach of, constitute a default or an event of default (or an event that might, with the passage of time or the giving of notice or any of them, constitute a default or event of default) under any of the terms of, result in the termination of, result in the loss of any right under, or give to any other Person the right to cause such a termination of or loss under, any asset of the Company, including any Permit, Intellectual Property, license, franchise, indenture, mortgage or any other contract, agreement or instrument to which either Sellers or the Company is a party or by which any of the Company's assets may be bound or affected, (iii) result in the creation, maturation or acceleration of any liability or obligation of the Company (or give to any other Person the right to cause such a creation, maturation or acceleration), (iv) violate any Law or violate any judgment or order of any Governmental Body to which the Company is subject or by which any of the Company assets may be bound or affected, or (v) result in the creation or imposition of any Encumbrance upon any of the Company Shares or asset of the Company or give to any other Person any interest or right therein. No consent, approval or authorization of, or registration or filing with, any Person is required in connection with the execution or delivery by Sellers or the Company, or any of them, of this Agreement or any of the Other Agreements to which either, or any of them is or is to become a party pursuant to the provisions hereof or the consummation by or the Company, or any of them, of the transactions contemplated hereby or thereby. 3.7 Financial Information. (a) Records. The books of account and related records of the Company reflect accurately and in detail its assets, liabilities, revenues, expenses and other transactions. (b) Financial Statements. Attached as Exhibit 3.7(b) are the consolidated and consolidating balance sheets, income statements and statements of cash flows for the Company at September 30, 1995, 1994, 1993 and for the years then ended, and attached hereto as Exhibit 3.7(b) are the unaudited annual balance sheets and income statements for the Company at July 31, 1996 and for the periods then ended (collectively, the "Financial Statements"). The Financial Statements (i) are accurate, correct and complete in accordance with the books of account and records of the Company, (ii) have been prepared in accordance with the Accounting Principles on a consistent basis throughout the indicated periods, and (iii) present fairly the consolidated financial condition, assets, and liabilities and results of operation of the Company at the dates and for the relevant periods indicated in accordance with the Accounting Principles. - 11 - (c) Undisclosed Liabilities. The Company has no debt, obligation or liability, absolute, fixed, contingent or otherwise, of any nature whatsoever, whether due or to become due, including, to the Knowledge of the Company, any unasserted claim, whether incurred directly or by any predecessor thereto, and whether arising out of any act, omission, transaction, circumstance, sale of goods or services, state of facts or other condition, except: (i) those reflected or reserved against on the Financial Statements in the amounts shown therein; (ii) those not required under Accounting Principles to be reflected or reserved against in the Financial Statements that are expressly quantified and set forth in the Contracts identified pursuant to Section 3.13; (iii) those disclosed on Schedule 3.7(c) attached hereto; and (iv) those of the same nature as those set forth on the Financial Statements (or not required to be so set forth pursuant to the Accounting Principles) that have arisen in the ordinary course of business of the Company after the date of the latest Financial Statements through the date hereof, all of which have been consistent in amount and character with past practice and experience, and none of which, individually or in the aggregate, has had or will have a material adverse effect on the business, financial condition or prospects of the Company and none of which represents a liability for breach of contract or warranty or has arisen out of tort, infringement of any intellectual property rights, or violation of Law or is claimed in any pending or threatened legal proceeding. (d) No Changes. Since the date of the Financial Statements, to the Closing Date, the Company has conducted its business only in the ordinary course. Without limiting the generality of the foregoing sentence, since the date of the Financial Statements, there has not been any: (i) material adverse change in the financial condition, assets, liabilities, net worth, earning power, business or prospects of the Company; (ii) material damage or destruction to any asset of the Company, whether or not covered by insurance; (iii) strike or other labor trouble at the Company; (iv) creation of any Encumbrance on any asset of the Company; (v) except as provided for in Section 2.5, declaration or payment of any dividend or other distribution on or with respect to or redemption or purchase by the Company of any shares of capital stock of the Company, including any of the Company Shares; (vi) increase in the salary, wage or bonus of any managerial employee of the Company except those done in the normal course of business for periodic raises in accordance with past business practices, or any increase in the number of such employees; (vii) asset acquisition or expenditure in excess of US$5,000, other than the purchase of inventory in the ordinary course of business; (viii) amendment to any Company Plan; (ix) change in any method of accounting; (x) payment to or transaction with any Related Party, which payment or transaction is not specifically disclosed on Schedule 3.16; (xi) disposition of any asset (other than inventory in the ordinary course of business) - 12 - for less than fair market value; (xii) payment, prepayment or discharge of any liability other than in the ordinary course of business or any failure to pay any liability when due, (xiii) write-offs or write-downs of any assets of the Company; (xiv) creation, termination or amendment of, or waiver of any right under, any material agreement of the Company; or (xv) agreement or commitment to do any of the foregoing. 3.8 Taxes. (a) Tax Returns; Payment. The Company has filed or caused to be filed on a timely basis, or will file or cause to be filed on a timely basis, all Tax Returns that are required to be filed by it prior to or on the Closing Date with respect to the Company's interest therein pursuant to the Law of each governmental authority with taxing power over it. To the Knowledge of the Company all such Tax Returns were or will be, as the case may be, correct and complete. The Company has paid all Taxes that have become due as shown on such Tax Returns or pursuant to any assessment received as an adjustment to such Tax Returns, except such Taxes, if any, as are being contested in good faith and disclosed on the attached Schedule 3.8. The Company is not currently the beneficiary of any extension of time within which to file any Tax Return. No claim has been made by a taxing authority of a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation in that jurisdiction. (b) Withholding. The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. 3.9 Inventory. All of the inventory owned by the Company is valued on the books and records of the Company and in the Financial Statements at lower of cost or market, the cost thereof being determined on a LIFO basis in accordance with Accounting Principles. To the Knowledge of the Company, all other finished goods inventory of the Company is in good, merchantable and useable condition and is salable in the ordinary course of business within a reasonable time and at normal profit margins, and all of the raw materials and work-in-process inventory of the Company can reasonably be expected to be consumed in the ordinary course of business within a reasonable period of time. None of the Company's inventory is obsolete or has been consigned to others or is on consignment from others. 3.10 Receivables. Schedule 3.10, attached hereto, discloses all trade and other accounts receivable of the Company ("Receivables") outstanding as of September 19, 1996 presented on an aged basis and separately identifies each account and the total amount of each related Receivable. All Receivables, - 13 - whether reflected on the Financial Statements disclosed on Schedule 3.10 hereto or created after the date of the Financial Statements, arose from bona fide sale transactions of the _________ Company, and to the Knowledge of the Company no portion of any Receivable is subject to counterclaim, defense or set-off or is otherwise in dispute except as set forth in Schedule 3.10. Except to the extent of the recorded reserve for doubtful accounts, to the Knowledge of the Company all of the Receivables, net of the reserves reflected on the Final Closing Balance Sheet are collectible in the ordinary course of business and should be fully collected within (i) one hundred twenty (120) days after having been created or (ii), for those Receivables set forth on Schedule 3.10 as being over 120 days old, 120 days after the Closing Date, in each case using commercially reasonable efforts, except for contract reserves and retainages. 3.11 Condition of Assets; Business; Title. (a) Condition of Assets; Business. The buildings, fixtures, improvements, machinery, equipment, tools, furniture, improvements and tangible personal property of the Company are in good operating condition and repair and are suitable for the purposes for which they are used in the Business. The Company is engaged in the Business and no other business. All of the Company's assets are reflected on the Financial Statements or, under Accounting Principles, are not required to be reflected thereon and include substantially all assets that are necessary for use in and operation of the Business. (b) Title. The Company has good and marketable title to all of its assets, free and clear of all of Encumbrances, except for those Encumbrances disclosed in Schedule 3.11(b) attached hereto. 3.12 No Pending Litigation or Proceedings. Except as described on Schedule 3.12, no action, suit, investigation, claim or proceeding of any nature or kind whatsoever, whether civil, criminal or administrative, by or before any Governmental Body or arbitrator ("Litigation") is pending or, to the Knowledge of and the Company, threatened against or affecting the Company, the Business, any of the Company's assets, any of the Company Shares, or any of the transactions contemplated by this Agreement or any Other Agreement, and to the Knowledge of the Company there is no basis for any Litigation. The Company has not been a party to any other litigation during the past five (5) years. There is presently no outstanding judgment, decree or order of any Governmental Body against or affecting the Company, the Business, any of the Company's assets, any of the Company Shares, or any of the transactions contemplated by this Agreement or any Other Agreement. Except as described on Schedule 3.12, the Company does not have pending any Litigation against any third party. - 14 - 3.13 Contracts; Compliance. Disclosed on Schedule 3.13, 3.15, 3.17, 3.19, 3.20 or 3.21, each of which are attached hereto, is a brief description of each contract, lease, indenture, mortgage, instrument, commitment or other agreement, arrangement or understanding, oral or written, formal or informal, to which the Company is a party or by which it or its assets may be affected, except for service agreements whose annual contract price is less than US$25,000, and that (i) is material to the Business or the Company's assets or operations, individually or in the aggregate, (ii) involves the purchase, sale or lease of any asset, materials, supplies, inventory or services in excess of US$25,000 per year, (iii) has an unexpired term of more than six (6) months from the date hereof, taking into account the effect of any renewal options, (iv) relates to the borrowing or lending of any money or guarantee of any obligation, (v) limits the right of the Company to compete in any line of business or otherwise restricts any right the Company may have, (vi) is an employment or consulting contract involving payment of compensation and benefits, or (vii) was not entered into in the ordinary course (each, a "Contract" and collectively, the "Contracts"). Each Contract is a legal, valid and binding obligation of the Company and is in full force and effect. To the Knowledge of the Company, the Company and each other party to each Contract has performed all obligations required to be performed by it thereunder and is not in breach or default, and is not alleged to be in breach or default, in any respect thereunder, and no event has occurred and no condition or state of facts exists (or would exist upon the giving the notice or the lapse of time or any of them) that would become or cause a breach, default or event of default thereunder, would give to any Person the right to cause such a termination or would cause an acceleration of any obligation thereunder. The Company is not currently renegotiating any contract in excess of US$25,000, except as those Contracts disclosed on Schedule 3.13 attached hereto, nor has the Company received any notice of non-renewal or price increase or sales or production allocation with respect to any Contract. 3.14 Permits; Compliance With Law. The Company holds all permits, certificates, licenses, franchises, privileges, approvals, registrations and authorizations required under any applicable Law or otherwise advisable in connection with the operation of its assets and Business (each, a "Permit" and collectively, "Permits"). Each permit is valid, subsisting and in full force and effect. The Company is in material compliance with and has fulfilled and performed its obligations under each Permit, and, to the Knowledge of the Company, no event or condition or state of facts exists (or would exist upon the giving of notice or lapse of time or any of them) that could constitute a breach or default under any Permit. Except as set forth in Schedule 3.14, the Company has received no notice of any violation of law and, to the Knowledge of the Company it is not - 15 - currently in violation of any law and no event has occurred or condition or state of facts exist which could give rise to any such violation. The Company has not received any notice of nonrenewal of any Permit. 3.15 Real Property. Schedule 3.15, attached hereto, discloses and summarizes all real properties currently used or leased by the Company or in which the Company has an interest (collectively, the "Real Property") and identifies the record title holder of all of the Real Property. The Company owns no Real Property. The Company has the right to quiet enjoyment of all Real Property in which it holds a leasehold interest for the full term, including all renewal rights, of the lease or similar agreement relating thereto. Copies of all title insurance policies written in favor of the Company and all surveys relating to the Real Property leased by the Company have been delivered to Buyer. To the Knowledge of the Company, the use and operation of all Real Property conform to all applicable building, zoning, safety and subdivision Laws, Environmental Laws and other Laws, and all restrictive covenants and restrictions and conditions affecting title. The Company has not received any written or oral notice of assessments for public improvements or condemnation against any Real Property. 3.16 Transactions With Related Parties. No Related Party is or has been during the past five (5) years a party to any transaction, agreement or understanding with the Company except pursuant to arrangements disclosed on Schedule 3.16, attached hereto. For this purpose a Related Party is defined as a Seller, an Affiliate of a Seller, including the Company, an officer or director of M&I or the Company, and any spouse, sibling, ancestor or lineal descendant of Goulet. 3.17 Labor Relations. Except as set forth in Schedule 3.17, no employee of the Company is represented by any union or other labor organization. No representation election, arbitration proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor trouble is pending or, to the Knowledge of the Company, threatened against, involving, affecting or potentially affecting the Company. No complaint against the Company is pending or, to the Knowledge of the Company, threatened before the National Labor Relations Board, the Equal Employment Opportunity Commission or any similar state or local agency, by or on behalf of any employee or the Company. Except as set forth in Schedule 3.17, the Company has no contingent liability for sick leave, vacation time, severance pay or any similar item. To the Knowledge of the Company, the Company has no contingent liability for any occupational disease of any of its employees, former employees or others. Neither the execution and delivery of this Agreement, the performance of the provisions hereof nor the consummation of the transactions contemplated hereby will - 16 - trigger any severance pay obligation under any contract or under any Law. 3.18 Products Liability; Warranties. To the Knowledge of the Company, there is no litigation, investigation, proceeding or claim pending or threatened against or relating to the Company, its properties or business, of facts or circumstances, which could reasonably give rise to a material claim for bodily injury or property damage resulting from accidents occurring at any time, alleged or otherwise growing out of or alleged to have grown out of the manufacture, sale, distribution, existence, maintenance and/or use of products distributed by the Company prior to Closing. To the Knowledge of the Company, the Company shall have no liability after the Closing Date not fully covered by insurance or warranties relating to any product manufactured, distributed or sold by the Company prior to the Closing Date, whether or not such liability relates to products that are defective or improperly designed or manufactured or in breach of any express or implied product warranty. The attached Schedule 3.18 discloses and describes the terms of all express product warranties under which the Company has distributed its products prior to the Closing Date. 3.19 Insurance. The attached Schedule 3.19 discloses all insurance policies with respect to which the Company is the owner, insured or beneficiary and the manner in which the Company provides coverage for workers compensation claims. The Company believes that the policies are reasonable, in both scope and amount, in light of the risk attendant to the Business. The Company will not have any liability after the Closing for retrospective or retroactive premium adjustments, except as disclosed on the attached Schedule 3.19. For the past five (5) years, all insurance policies covering product liability and general liability maintained by or for the benefit of the Company have been "occurrence" policies and not "claims made" policies. 3.20 Intellectual Property Rights. Except as disclosed in Schedule 3.20, there are no Intellectual Property rights, license agreements or the like used or granted to or owned by the Company. The attached Schedule 3.20 discloses all of the trademark and service mark rights, applications and registrations, trade names, fictitious names, service marks, logos and brand names, copyrights, copyright applications, letters patent, patent applications and licenses of any of the foregoing owned or used by the Company in or applicable to the Business. The Company has the entire right, title and interest in and to, or has the exclusive perpetual royalty-free right to use, the intellectual property rights disclosed on the attached Schedule 3.20 and all other processes, know-how, show-how, formulae, trade secrets, inventions, discoveries, improvements, blueprints, specifications, drawings, designs, and other proprietary rights necessary or applicable to or advisable for - 17 - use in the Business ("Intellectual Property"), free and clear of all Encumbrances. The Company has no Intellectual Property under license. The Intellectual Property is valid and not the subject of any interference, opposition, re-examination or cancellation. To the Knowledge of the Company, no person is infringing upon nor has any Person misappropriated any Intellectual Property. To the Knowledge of the Company, it is not infringing upon the Intellectual Property rights of any other Person. 3.21 Employee Benefits. (a) Benefit Plans; Company Plans. The attached Schedule 3.21 discloses all written and unwritten "employee benefit plans" within the meaning of Section 3.3 of ERISA, and any other written and unwritten profit sharing, pension, savings, deferred compensation, fringe benefit, insurance, medical, medical reimbursement, life, disability, accident, post- retirement health or welfare benefit, stock option, stock purchase, sick pay, vacation, employment, severance, termination or other plan, agreement, contract, policy, trust fund or arrangement (each, a "Benefit Plan"), whether or not funded and whether or not terminated, (a) maintained or sponsored by the Company, or (b) with respect to which the Company (or Sellers with respect to the Company) has or may have liability or is obligated to contribute, or (c) that otherwise covers any of the current or former employees of the Company or their beneficiaries, or (d) as to which any such current or former employees or their beneficiaries participated or were entitled to participate or accrue or have accrued any rights thereunder (each, a "Company Plan"). (b) Company Group Matters; Funding. Neither the Company nor any corporation that may be aggregated with the Company under Section 414(b), (c), (m) or (o) of the Code (the "Company Group") has any obligation to contribute to or any direct or indirect liability under or with respect to any Benefit Plan of the type described in Sections 4063 and 4064 of ERISA or Section 413(c) of the Code. The Company does not have any liability, and after the Closing the Company will not have any liability, with respect to any Benefit Plan of any other member of the Company Group, whether as a result of delinquent contributions, distress terminations, fraudulent transfers, failure to pay premiums to the PBGC, withdrawal liability or otherwise. No accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) exists nor has any funding waiver from the IRS been received or requested with respect to any Company Plan or any Benefit Plan of any member of the Company Group and no excise or other Tax is due or owing because of any failure to comply with the minimum funding standards of the Code or ERISA with respect to any of such plans. - 18 - (c) Compliance. To the Knowledge of the Company, each of the Company Plans and all related trusts, insurance contracts and funds have been created, maintained, funded and administered in all respects in compliance with all applicable Laws and in compliance with the plan document, trust agreement, insurance policy or other writing creating the same or applicable thereto. No Company Plan is or is proposed to be under audit or investigation, and no completed audit of any Company Plan has resulted in the imposition of any Tax, fine or penalty. (d) Qualified Plans. No Company Plan is a qualified plan under Section 401(a) of the Code and exempt from United States Federal income tax under Section 501(a) of the Code (a "Qualified Plan"). (e) No Defined Benefit Plans. No Company Plan is a defined benefit plan within the meaning of Section 3(35) of ERISA (a "Defined Benefit Plan"). No Defined Benefit Plan sponsored or maintained by any member of the Company Group has been terminated or partially terminated after September 1, 1974, except as set forth on Schedule 3.21. Each Defined Benefit Plan identified as terminated on Schedule 3.21 has met the requirement for standard termination for single-employer plans contained in Section 4041(b) of ERISA. During the five (5) year period ending on the Closing Date, no member of the Company Group has transferred a Defined Benefit Plan to a corporation that was not, at the time of transfer, related to the transferor in any manner described in Sections 414(b), (c), (m) or (o) of the Code. (f) Multiemployer Plans. No Company Plan is a multiemployer plan within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a "Multiemployer Plan"). No member of the Company Group has withdrawn from any Multiemployer Plan or incurred any withdrawal liability to or under any Multiemployer Plan. No Company Plan covered any employee with any member of the Company Group in any foreign country or territory. (g) Prohibited Transactions; Fiduciary Duties; Post- retirement Benefits. No prohibited transaction (within the meaning of Section 406 of ERISA and Section 4975 of the Code) with respect to any Company Plan exists or has occurred that could subject the Company to any liability or Tax under Part 5 of Title I of ERISA or Section 4975 of the Code. To the Knowledge of the Company, no member of the Company Group, nor any administrator or fiduciary of any Company Plan, nor any agent of any of the foregoing, has engaged in any transaction or acted or failed to act in a manner that will subject the Company to any liability for a breach of fiduciary or other duty under ERISA or any other applicable Law. With the exception of the requirements of Section 4980B of the Code, no post-retirement benefits are provided under any Company Plan that is a welfare benefit plan as described in ERISA Section 3(1). - 19 - 3.22 Environmental Matters. (a) Compliance; No Liability. To the Knowledge of the Company, the Company has operated the Business and each parcel of Real Property in compliance with all applicable environmental Laws. To the Knowledge of the Company, the Company is not subject to any liability, penalty or expense (including legal fees) and will not hereafter suffer or incur any loss, liability, penalty or expense (including legal fees) by virtue of any violation of any Environmental Law occurring prior to the Closing. (b) Treatment; CERCLIS. The Company has not treated, stored, recycled or disposed of any Regulated Material on any real property, and, to the Knowledge of the Company, no other Person has treated, stored, recycled or disposed of any Regulated Material on any part of the Real Property. The Company has not transported any Regulated Material or arranged for the transportation of any Regulated Material to any location that is listed or proposed for listing on the National Priorities List pursuant to Superfund, on CERCLIS or any other location that is the subject of federal, state or local enforcement action or other investigation that may lead to claims against the Company for cleanup costs, remedial action, damages to natural resources, to other property or for personal injury including claims under Superfund. None of the Real Property is listed or, to the knowledge of Seller or the Company, proposed for listing on the National Priorities List pursuant to Superfund, CERCLIS or any state or local list of sites requiring investigation or cleanup. (c) Notices; Existing Claims; Certain Regulated Materials; Storage Tanks. The Company has not received any request for information, notice of claim, demand or other notification that it is or may be potentially responsible with respect to any investigation, abatement or cleanup of any threatened or actual release of any Regulated Material. The Company is not required to place any notice or restriction relating to the presence of any Regulated Material at any Real Property or in any deed to any Real Property. The Company has provided to Buyer a list of all sites to which the Company has transported any Regulated Material for recycling, treatment, disposal, other handling or otherwise. There has been no past, and there is no pending or contemplated, claim by the Company under any Environmental Law or Laws based on actions of others that may have impacted on the Real Property, and the Company has not entered into any agreement with any Person regarding any Environment Law, remedial action or other environmental liability or expense. All storage tanks located on the Real Property, whether underground or aboveground, are disclosed on Schedule 3.22, and all such tanks and associated piping are in sound condition and are not leaking and have not leaked. - 20 - 3.23 Customer Relations. Except as set forth on Schedule 3.23, to the knowledge of the Company, there exists no condition or state of facts or circumstances involving the Company's customers, suppliers, distributors or sales representatives that the Company can reasonably foresee could adversely affect the Business after the Closing Date. 3.24 Finders' Fees. Neither Seller nor the Company nor any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fee, commission or finders' fee in connection with any of the transactions contemplated hereby or by any Other Agreement, except with respect to Cleary Gull Reiland & McDevitt, Inc., who acted as financial advisor to the Company and whose fees will be paid by the Company at Closing. 3.25 Securities Matters. Each Seller is an "accredited investor" within the meaning of Rule 501 of the Securities Act. Each Seller is acquiring the USF Shares not with a view to or in connection with any distribution of such shares. 3.26 Disclosure. None of the representations or warranties of the Company contained herein and none of the information contained in the Schedules referred to in Article III is false or misleading in any material respect or omits to state a fact herein or therein necessary to make the statements herein or therein not misleading in any material respect. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER As an inducement to Sellers to enter into this Agreement and consummate the transactions contemplated hereby, each of USF and Buyer jointly and severally represents and warrants to Sellers as follows: 4.1 Organization. USF and Buyer are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware and the Commonwealth of Massachusetts, respectively, and have the corporate power and authority to own or lease its properties, carry on its business, enter into this Agreement and the Other Agreements to which it is or is to become a party and perform its obligations hereunder and thereunder. 4.2 Authorization; Enforceability. This Agreement and each Other Agreement to which Buyer or USF is a party, respectively, have been duly executed and delivered by and constitute the legal, valid and binding obligations of Buyer and USF, respectively, enforceable in accordance with their respective terms. Each Other Agreement to which Buyer and USF is to become a party pursuant to the provisions hereof, when executed and delivered by Buyer or USF, will constitute the legal, valid and - 21 - binding obligation of Buyer and USF, respectively, enforceable against Buyer and USF, as appropriate, in accordance with the terms of such Other Agreement. All actions contemplated by this Section have been duly and validly authorized by all necessary proceedings by Buyer and USF. 4.3 No Violation of Laws; Consents. Neither the execution and delivery of this Agreement or any Other Agreement to which Buyer or USF is or is to become a party, the consummation of the transactions contemplated hereby or thereby nor the compliance with or fulfillment of the terms, conditions or provisions hereof or thereof by Buyer or USF will: (i) contravene any provision of the Governing Documents of Buyer or USF, or (ii) violate any Law or any judgment or order of any Governmental Body to which Buyer or USF is subject or by which any of its assets may be bound or affected. Except for listing of the USF Shares on the NYSE, no consent, approval or authorization of, or registration or filing with, any person is required in connection with the execution or delivery by Buyer of this Agreement or any of the Other Agreement to which Buyer is or is to become a party pursuant to the provisions hereof or the consummation by Buyer of the transactions contemplated hereby or thereby. 4.4 No Pending Litigation or Proceedings. No Litigation is pending or, to the knowledge of Buyer, threatened against or affecting Buyer in connection with any of the transactions contemplated by this Agreement or any Other Agreement to which Buyer is or is to become a party. There is presently no outstanding judgment, decree or order of any Governmental Body against or affecting Buyer in connection with the transactions contemplated by this Agreement or any Other Agreement to which Buyer is or is to become a party. 4.5 Capitalization. The authorized capital stock of USF consists of 150,000,000 shares of common stock. The authorized capital stock of Buyer consists of 400 shares of common stock, par value $100.00 per share. The USF Shares to be issued to Sellers pursuant to this Agreement will be duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights created by statute, the USF's Certificate of Incorporation or by-laws or any agreement to which the Buyer or USF is a party or is bound. 4.6 SEC Filings. Buyer has delivered or made available to each Seller all material filings made by USF under the Securities Exchange Act of 1934 since the end of its most recent fiscal year. 4.7 Finders' Fees. Neither Buyer nor any of its officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fee, commission or - 22 - finders' fee in connection with any of the transactions contemplated hereby. ARTICLE V. CERTAIN COVENANTS 5.1 Conduct of Business Pending Closing. From and after the date hereof and until the Closing Date, unless Buyer shall otherwise consent in writing, the Company shall, and Sellers shall cause the Company to, conduct its affairs as follows: (a) Ordinary Course; Compliance. The Business shall be conducted only in the ordinary course and consistent with past practice. The Company shall maintain its property, equipment and other assets consistent with past practice and shall comply in a timely fashion with the provisions of all Contacts and Permits and its other agreements and commitments. The Company shall use its best effort to keep its business organization intact, keep available the services of its present employees and preserve the goodwill of its suppliers, customers and others having business relations with it. The Company shall maintain in full force and effect the policies of insurance disclosed on Schedule 3.19, subject only to variations required by the ordinary operations of the Business, or else shall obtain, prior to the lapse of any such policy, substantially similar coverage with insurers of recognized standing. (b) Transactions. The Company shall not: (i) amend its Governing Documents; (ii) change its authorized or issued capital stock or issue any Security Rights with respect to shares of its capital stock (other than pursuant to Section 2.5); (iii) enter into any contract or commitment the performance of which may extend beyond the Closing, except those made in the ordinary course of business, the terms of which are consistent with past practice; (iv) enter into any employment or consulting contract or arrangement that is not terminable at will and without penalty or continuing obligation; (v) fail to pay any Tax or any other liability or charge when due, other than charges contested in good faith by appropriate proceedings; (vi) make, change or revoke any Tax election or make any agreement or settlement with any taxing authority; (vii) take any action or omit to take any action that will cause a breach or termination of any Contract, other than termination by fulfillment of the terms thereunder; or (viii) increase any employee's salary, wage, benefits or bonus or increase the number of employees of Company other than consistent with business conditions and past practices. 5.2 Access, Information and Documents. Sellers and the Company shall give to Buyer and to Buyer's employees and representatives (including accountants, actuaries, attorneys, environmental consultants and engineers) access during the normal business hours to all of the properties, books, Tax Returns, - 23 - contracts, commitments, records, officers, personnel and accountants (including independent public accountants and their audit workpapers concerning the Company) of the Company and shall furnish to Buyer all such documents and copies of documents and all information with respect to the properties, liabilities and affairs of the Company and the Subsidiaries as Buyer may reasonably request. All information provided to Buyer and/or USF pursuant to this Section 5.2 shall be subject to the terms of the letter agreement concerning confidentiality executed by USF dated July 22, 1996, and both USF and Buyer shall be bound thereby. 5.3 Certain Tax Matters. (a) Tax on Company Income. All federal, state or local income tax of the Company for all taxable periods whether prior to or after the Closing Date shall be paid by the Company when due. (b) Mutual Cooperation. Buyer and Sellers shall each provide the other, and Buyer shall cause the Company to provide Sellers, with such assistance as may reasonably be requested by any of them in connection with the preparation of any Tax Return, any Tax audit, or any judicial or administrative proceedings relating to any Tax, and each will retain and provide the other with any records or information that may be relevant to such Tax Return, Tax audit, proceeding or determination. The party requesting assistance hereunder shall reimburse the other for direct expenses incurred in providing such assistance. 5.4 Covenant Not to Compete. (a) Restriction. For a period of one (1) year from and after the Closing Date, Goulet shall not, except as an officer or employee of USF, Buyer, the Company or their Affiliates, or with the prior written consent of USF, directly or indirectly, own, manage, operate, join, control or participate in the ownership, managements, operation or control of, or be employed or otherwise connected as an officer, employer, stockholder, partner or otherwise with, any business that at any relevant time during such period directly or indirectly competes with the Business in the United States. Ownership of not more than 2% of the outstanding stock of any publicly traded company shall not be a violation of this Section 5.4. (b) Enforcement. The restrictive covenant contained in this Section is a covenant independent of any other provisions of this Agreement and the existence of any claim that Seller may allege against any other party to this agreement, whether based on this Agreement or otherwise, shall not prevent the enforcement of this covenant. Sellers agree that Buyer's remedies at law for any breach or threat of breach by Goulet of the provisions of this Section will be inadequate, and the Buyer shall be entitled - 24 - to any injunction or injunctions to prevent breached of the provision of this Section and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which Buyer may be entitled at law or equity. In the event of litigation regarding this covenant not to compete, the prevailing party in such litigation shall, in addition to any other remedies the prevailing party may obtain in such litigation, be entitled to recover from the other party its reasonable legal fees and out of pocket costs incurred by such party in enforcing or defending its rights hereunder. The length of time for which this covenant not to compete shall be in force shall not include any period of violation or any other period required for litigation during which Buyer seeks to enforce this covenant. Should any provision of this Section be adjudged to any extent invalid by any competent tribunal, such provision will be deemed modified to the extent necessary to make it enforceable. 5.5 Publicity. The parties will not issue any press release or otherwise make any announcements to the public or the employees or the Company with respect to this Agreement without the prior written consent of the other party except as required by Law. This Section shall expire on the 30th day after the Closing Date. 5.6 Fulfillment of Agreements. Each party hereto shall use its best efforts to cause all of those conditions to the obligations of the other under Article VI that are not beyond its reasonable control to be satisfied on or prior to the Closing and shall use its best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. ARTICLE VI. CONDITIONS TO CLOSING; TERMINATION 6.1 Conditions Precedent to Obligation of Buyer. The obligation of Buyer to proceed with the Closing under this Agreement is subject to the fulfillment prior to or at Closing of the following conditions, any one or more of which may be waived in whole or in part by Buyer at Buyer's sole option: (a) Bringdown of Representations and Warranties; Covenants. Each of the representations and warranties of Sellers and the Company contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on, as of and with reference to the Closing Date. Each of Sellers and the Company shall have performed in all respects all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by it at or before the Closing. - 25 - (b) Litigation. No statute, regulation or order of any Governmental Body shall be in effect that restrains or prohibits the transactions contemplated hereby or that would limit or adversely affect Buyer's ownership of the Company Shares or control of the Company, and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any Governmental Body challenging the lawfulness of or seeking to prevent or delay any of the transactions contemplated by this Agreement or any of the Other Agreements or seeking monetary or other relief by reason of the consummation of any of such transactions. (c) No Material Adverse Change. Between the date hereof and the Closing Date, there shall have been no material adverse change, regardless of insurance coverage therefor, in the Business or any of the assets, results of operations, liabilities, prospects or condition, financial or otherwise, of the Company. (d) Private Placement. Buyer shall be satisfied that there shall be a valid private placement of the USF Shares to be delivered pursuant hereto under the Securities Act and under any applicable state securities laws, including representations or questionnaires or both from each Seller to the effect that each has such knowledge and experience in financial and business matters that would permit him to be capable of evaluating the merits and risks of an investment in the USF Shares. (e) Transfer Agreement. The Transfer Agreement shall have been executed and delivered by Seller. (f) Listing on NYSE. The USF Shares shall have been authorized for listing on the NYSE, subject to official notice of issuance. (g) Environmental Assessment. Buyer shall be satisfied that the environmental condition of the Real Property is acceptable based upon an environmental assessment conducted by Buyer at its sole cost and expense. (h) Closing Certificate; Closing Documents. Seller shall have delivered a certificate, dated the Closing Date, in such detail as Buyer shall reasonably request, certifying to the fulfillment of the conditions set forth in subparagraphs (a), (b), and (c) of this Section 6.1. Such certificate shall constitute a representation and warranty of Seller with regard to the matters therein for purposes of this Agreement. Buyer shall have received the other documents referred to in Section 6.3. All agreements, certificates, opinions and other documents delivered by Sellers or the Company to Buyer hereunder shall be in form and substance satisfactory to counsel for Buyer, in the exercise of such counsel's reasonable professional judgment. - 26 - (i) Interview of Employees of Company. In conducting its due diligence review prior to execution of this Agreement, the Company asked the Buyer to refrain from contacting employees of the Company. As a condition to Closing, Buyer shall be reasonably satisfied that any additional facts arising from such contacts after the execution of this Agreement do not indicate a material adverse change in the condition of the Company or its operations at variance with information otherwise provided by the Company. 6.2 Conditions Precedent to Obligation of Sellers. The obligation of Sellers to proceed with the Closing under this Agreement is subject to the fulfillment prior to or at Closing of the following conditions, any one or more of which may be waived in whole or in part by Sellers acting jointly at their option. (a) Bringdown of Representations and Warranties; Covenants. Each of the representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on, as of and with reference to the Closing Date. Buyer shall have performed all of the covenants and complied in all respects with all of the provisions required by this Agreement to be performed or complied with by it at or before the Closing. (b) Litigation. No statute, regulation or order of any Governmental Body shall be in effect that restrains or prohibits the transactions contemplated hereby, and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any Governmental Body challenging the lawfulness of or seeking to prevent or delay any of the transactions contemplated by this Agreement or the Other Agreements or seeking monetary or other relief by reason of the consummation of such transactions. (c) No Material Adverse Change. Between the date hereof and the Closing Date, there shall have been no material adverse change, regardless of insurance coverage therefor, in the Business or any of the assets, results of operations, liabilities, prospects or condition, financial or otherwise, of the Company. (d) Closing Certificate. Buyer shall have delivered a certificate, dated the Closing Date, in such detail as Sellers shall reasonably request, certifying to the fulfillment of the conditions set forth in subparagraphs (a) and (b) of this Section 6.2. Such certificate shall constitute a representation and warranty of Buyer with regard to the matters therein for purposes of this Agreement. - 27 - (e) Listing on NYSE. the USF Shares shall have been authorized for listing on the NYSE, subject to official notice of issuance. (f) Transfer Agreement. USF shall have executed and delivered the Transfer Agreement. (g) Closing Documents. Sellers shall have received the other documents referred to in Section 6.4. All agreements, certificates, opinions and other documents delivered by Buyer to Seller hereunder shall be in form and substance satisfactory to counsel for Seller, in the exercise of such counsel's reasonable professional judgment. 6.3 Deliveries at the Closing by Sellers. Sellers shall deliver or cause to be delivered to Buyer at the Closing: (a) Certificates or documents of assignment representing the Company Shares duly endorsed in negotiable form or accompanied by stock powers duly executed in blank with all transfer taxes, if any, paid in full. (b) Certificates of the appropriate public officials to the effect that the Company was a validly existing corporation in good standing in its state of incorporation as of a date not more than ten (10) days prior to the Closing Date. (c) Incumbency and specimen signature certificates dated the Closing Date, signed by the officers of the Company and certified by its Secretary. (d) True and correct copies of (A) the Governing Documents (other than the bylaws) of the Company as of a date not more than ten (10) days prior to the Closing Date, certified by the Secretary of State of its state of incorporation and (B) the bylaws of the Company as of the Closing Date, certified by its Secretary. (e) Certificates of the Secretary of the Company (A) setting forth all resolutions of the Board of Directors of the Company and, if necessary, the stockholders, authorizing the execution and delivery of this Agreement and the performance by the Company of the transactions contemplated hereby, and (B) to the effect that the Governing Documents of the Company, as the case may be, delivered pursuant to Section 6.3(d) were in effect at the date of adoption of such resolution, the date of execution of this Agreement and the Closing Date. (f) General releases by all officers and directors of the Company and by each Seller of all liability of the Company or any Subsidiary to them and of any claim that they or any of them may have against the Company (exclusive of pension obligations). - 28 - (g) The minute books, stock ledgers and corporate seal of the Company. (h) The opinion of von Briesen, Purtell & Roper, s.c., legal counsel to Sellers and the Company, in substantially the form of Exhibit 6.3(h). (i) Resignations of the officers and directors of the Company effective at the Closing. (j) The assignment of stock certificate described in Section 7.4(b). (k) Such other agreements and documents as Buyer may reasonably request. 6.4 Deliveries at the Closing by Buyer. Buyer shall deliver or cause to be delivered to Sellers at the Closing: (a) Stock certificates evidencing the USF Shares duly registered in the name of the Sellers and registered at the address of the Sellers identified in Section 8.3 using the respective Sellers' Federal tax identification numbers. (b) A certificate of the appropriate public official to the effect that Buyer is a validly existing corporation and in good standing in the State of Delaware as of a date not more than ten (10) days prior to the Closing Date. (c) Incumbency and specimen signature certificates signed by the officers of Buyer and certified by the Secretary or Assistant Secretary of Buyer. (d) The opinion of Michael E. Hulme, Assistant General Counsel to Buyer, in substantially the form of Exhibit 6.4(d). (e) Subject to Section 7.4(b), the delivery to the Sellers, pro rata, and as set forth on Schedule 6.4(e), of the ________ USF Shares. (f) Such other agreements and documents as Seller may reasonably request. 6.5 Termination. This Agreement may be terminated at any time prior to Closing by: (i) mutual consent of Buyer, Sellers and Company; (ii) Buyer, if any of the conditions specified in Section 6.1 hereof shall not have been fulfilled by October 10, 1996 and shall not have been waived by Buyer; (iii) Sellers, if any of the conditions specified in Section 6.2 hereof shall not have been fulfilled by October 10, 1996 and shall not have been waived by Sellers; or (iv) Sellers, at their sole discretion and - 29 - as a result of information made known to them, at any time prior to October 1, 1996. 6.6 Investment Advisor. In the event that Sellers are not "accredited investors" or "qualified investors" pursuant to the Securities Act, (a) Sellers, or any one or more of them, may select and retain an investment advisor or representative of their choosing to assist them at such Sellers' sole cost and expense or (b) Sellers may select an investment advisor or representative provided by Buyer, the fees and costs associated with the employment of such investment advisor shall be paid by Buyer. ARTICLE VII. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION 7.1 Survival of Representations. All representations, warranties and agreements made by any party in this Agreement or pursuant hereto shall survive the Closing, but all claims for damages made by virtue of such representations, warranties and agreements shall be made under, and subject to the limitations set forth in, this Article VII. Disclosures with respect to any representation and warranty set forth in Articles III and IV are cumulative and shall be deemed disclosure with respect to any other representation and warranty therein, however any limitation or qualification set forth in any one representation and warranty therein shall not limit or qualify any other representation and warranty therein. After the Closing, the Company shall have no liability to Sellers for any breach of any representation or warranty made by Sellers or the Company to Buyer in this Agreement, in any certificate or document furnished pursuant hereto by Sellers or the Company or any Other Agreement to which Sellers or the Company, or any of them, is or is to become a party. 7.2 Indemnification by Sellers. Notwithstanding any term in this Agreement to the contrary, and subject to the limitation provided in the introductory language to Article III and Section 7.4, Sellers shall indemnify, defend, save and hold Buyer and its officers, directors, employees, agents and Affiliates (including, after the Closing, the Company; collectively, "Buyer Indemnitees") harmless from and against all demands, claims, allegations, liabilities, costs and expenses (including reasonable legal fees, interest, penalties, and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing, whether or not the underlying demands, claims, allegations, etc., of third parties are meritorious; collectively, "Buyer Damages") asserted against, imposed upon, resulting to, required to be paid by or incurred by any Buyer Indemnities, directly or indirectly, in connection with, arising out of, which could result in, or which would not have occurred but for, (i) a breach of any representation or warranty made by - 30 - Sellers or the Company in this Agreement, in any certificate or document furnished pursuant hereto by Sellers or the Company or any Other Agreement to which Sellers or the Company, or any of them is or is to become a party, (ii) a breach or nonfulfillment of any covenant or agreement made by Seller or the Company in or pursuant to this Agreement or in any Other Agreement to which Sellers or the Company, or any of them, is or is to become a party, (iii) any and all liabilities of the Company, whether due or to become due, existing on the Closing Date or arising out of any transaction entered prior to the Closing Date, except for liabilities disclosed in writing to Buyer on or before Closing or fully reserved on the Final Closing Balance Sheet (other than the liabilities covered by Section 7.2(vi) hereof), (iv) noncompliance with or a violation of and any Buyer Damages with respect to Environmental Laws and related to events prior to the Closing, (v) any material liability under any warranty or guarantee or other similar promise, or any material contract or agreement, given, issued, made or entered into by Company on or before Closing (except those disclosed in writing to Buyer on or before Closing), and/or (vi) any pending or threatened litigation disclosed as Item 1 on Schedule 3.12 to this Agreement. The foregoing to the contrary notwithstanding the liability of Sellers hereunder shall be several and they shall contribute to such indemnification pro rata based upon their respective equity ________ interests in the Company. 7.3 Indemnification by Buyer. Buyer shall indemnify, defend, save and hold Sellers and their officers, directors, agents, representatives, successors and permitted assigns (collectively, "Seller Indemnitees") harmless from and against any and all demands, claims, actions or causes of action, assessments, losses, damages, deficiencies, liabilities, costs and expenses (including reasonable legal fees, interest, penalties, and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing), whether or not the underlying demands, claims, allegations, etc., of third parties are meritorious, (collectively, "Seller Damages") asserted against, imposed upon, resulting to, required to be paid by or incurred by any Seller Indemnitees, directly or indirectly, in connection with, arising out of, which could result in, or which would not have occurred but for, (i) a breach of any representation or warranty made by Buyer in this Agreement or in any certificate or document furnished pursuant hereto by Buyer or any Other Agreement to which Buyer is or is to become a party, (ii) a breach or nonfulfillment of any covenant or agreement made by Buyer in or pursuant to this Agreement and in any Other Agreement to which Buyer is or is to become a party, and (iii) post-Closing actions and omissions by the Company or its officers or directors. 7.4 Limitation of Liability. Notwithstanding the foregoing, Sellers' obligations to indemnify Buyer Indemnitees - 31 - against any Buyer Damages shall be subject to all of the following limitations: (a) Threshold. No indemnification shall be made under Section 7.2 until the aggregate amount of Buyer Damages thereunder exceeds US $50,000, and then only for claims in excess of such amount (the "Basket"). (b) Ceiling. No indemnification shall be made under Section 7.2 to the extent that Buyer Damages exceed US $500,000 in the aggregate (the "Ceiling Amount") less the Basket; provided, however, that such Ceiling Amount shall not apply in any way to any claim for Buyer Damages sustained by reason of a breach of any representation or warranty relating to those matters governed by Section 3.3. In order to secure Sellers' obligations under Section 7.2 and to provide a fund for payment of the Post-Closing Purchase Price Adjustment under Section 2.5 an escrow shall be established for the benefit of Sellers and Buyer for the time period specified in Section 7.5, and Sellers and Buyer shall deposit in escrow an amount of USF Shares equal to the Ceiling Amount based upon the USF Share Value (the "Escrow Amount"). In connection with the establishment of the escrow, Sellers and Buyer shall enter into an Escrow Agreement in the form attached as Exhibit 7.4(b) which shall provide, amongst other things, that (i) Sellers shall execute and deliver to the Escrow Agent (as defined in the Escrow Agreement) an assignment of stock certificate (with the name of assignee left in blank) in the form attached to the Escrow Agreement and (ii), if the Sellers, pursuant to the Transfer Agreement's provisions, register and sell the USF Shares, the proceeds from the sale of any USF Shares held in escrow shall be deposited in escrow. In the event that the Buyer Indemnitees suffer Buyer Damages in excess of the Basket specified in Section 7.4(a), Buyer shall be entitled to receive payment from the escrow equal to the value of such Buyer Damages and Sellers shall have no further right or claim thereto. (c) Pro Rata Contribution. Sellers shall be required ________ to contribute to the indemnification provided for herein, severally and pro rata, based upon their respective equity ________ interests in the Company (subject to the limitations set forth in this Agreement). 7.5 Time Period. Seller shall be obligated to indemnify Buyer Indemnitees by virtue of Section 7.2 only for those Buyer Damages as to which Buyer has given Seller written notice thereof within six (6) months after the Closing Date; provided, however, that with respect to any claim for Buyer Damages sustained by reason of a breach of any representation or warranty relating to those matters governed by Sections 3.8, 3.21 and 3.22, Seller's liability shall be limited to Buyer Damages as to which such written notice shall have been given within the periods of the - 32 - applicable federal and state statutes of limitations related to such matters; provided further, that, with respect to any claim for Buyer Damages sustained by reason of a breach of any representation and warranty governed by Sections 3.3, 3.4, 3.11(b), and 3.16, Seller's liability hereunder shall not be limited as to time. Six (6) months after the Closing Date, Sellers shall be entitled to the delivery of the remaining amount retained in escrow which exceeds the value of any claim brought in accordance with the Notice of Claim required by Section 7.7. If no Notice of Claim is received within six (6) months after the Closing Date, all amounts held in escrow shall be delivered to Sellers. 7.6 Fraud; Intentional Misrepresentation. The limitations set forth in Sections 7.4(a) and 7.4(b) shall not apply to Buyer Damages arising out of (i) fraud or (ii) the breach of any representation or warranty contained herein or pursuant hereto if such representation or warranty was made with actual knowledge that it contained an untrue statement of a fact or omitted to state a fact necessary to make the statements of fact contained therein not misleading; provided, however, that (a) in no event shall a Seller be liable for any such fraud or breach by the other Seller, and (b) in no event shall a Seller be liable for an amount in excess of such Seller's pro rata share of the Purchase Price. 7.7 Notice of Claims. If any Buyer Indemnitee or Seller Indemnitee (an "Indemnified Party") believes that it has suffered or incurred or will suffer or incur any Buyer Damages or Seller Damages, as the case may be ("Damages"), for which it is entitled to indemnification under this Article VII, such Indemnified Party shall so notify the party or parties from whom indemnification is being claimed (the "Indemnifying Party") in writing with reasonable promptness and reasonable particularity in light of the circumstances then existing. If any action at law or suit in equity is instituted by or against a third party with respect to which any Indemnified Party intends to claim any Damages, such Indemnified Party shall promptly notify the Indemnifying Party of such action or suit. The failure of an Indemnified Party to give any notice required by this Section shall not affect any of such party's rights under this Article VII or otherwise except and to the extent that such failure is actually prejudicial to the rights or obligations of the Indemnifying Party. 7.8 Third Party Claims. The Indemnified Party shall have the right to conduct and control, through counsel of its choosing, the defense of any third party claim, action or suit, and the Indemnified Party may compromise or settle the same, provided that the Indemnified Party shall give the Indemnifying Party advance notice of any proposed compromise or settlement; provided, however, that if the Indemnified Party compromises or settles the suit listed as Item 1 on Schedule 3.12 for an amount - 33 - in excess of $130,000 the Indemnified Party shall also obtain the Indemnifying Party's consent to such compromise or settlement, which consent shall not be unreasonably withheld. In the event there is disagreement with respect to the reasonableness of such settlement such dispute shall be resolved pursuant to the provisions of Section 7.9. The Indemnified Party shall permit the Indemnifying Party to participate in the defense of any such action or suit through counsel chosen by the Indemnifying Party, provided that the fees and expenses of such counsel shall be borne by the Indemnifying Party. If the Indemnified Party permits the Indemnifying Party to undertake, conduct and control the conduct and settlement of such action or suit, (i) the Indemnifying Party shall not thereby permit to exist any Encumbrance upon any asset of the Indemnified Party; (ii) the Indemnifying Party shall not consent to any settlement that does not include as an unconditional term thereof the giving of a complete release from liability with respect to such action or suit to the Indemnified Party; (iii) the Indemnifying Party shall permit the Indemnified Party to participate in such conduct or settlement through counsel chosen by the Indemnified Party; and (iv) the Indemnifying Party shall agree promptly to reimburse the Indemnified Party for the full amount of any Damages including fees and expenses of counsel for the Indemnified Party incurred after giving the foregoing notice to the Indemnifying Party and prior to the assumption of the conduct and control of such action or suit by the Indemnifying Party. 7.9 Good Faith Effort to Settle Disputes. Buyer and Sellers agree that, prior to commencing any litigation against the other concerning any matter with respect to which such party intends to claim a right of indemnification in such proceeding, the respective chief executive officers (or officers holding such authority) of such parties shall meet in a timely manner and attempt in good faith to negotiate a settlement of such dispute during which time such officers shall disclose to the others all relevant information relating to such dispute. In the event that the parties are unable to amicably resolve the matter or matters in dispute, the parties shall submit all matters still in dispute to arbitration in accordance with the arbitration rules of the American Arbitration Association. Sellers shall select an arbitrator and Buyer shall select an arbitrator and the two arbitrators so selected shall select a third arbitrator. The decision of the arbitrators shall be final and binding on the parties. Such matter shall be submitted to arbitration within thirty (30) days from the date that either Seller or Buyer declares that any matter in dispute cannot be amicably resolved. All costs and expenses of arbitration shall be paid equally by Sellers on one hand and Buyer on the other. Any cash or other monetary award shall be paid within thirty (30) days of the arbitrators final decision. Arbitration shall be held in Chicago, Illinois. - 34 - 7.10 Payment. All indemnification payments to be made by Sellers under this Article VII shall be made by distributions from escrow as provided herein. All indemnification payments to be made by Buyer under this Article VII shall be made within thirty (30) days of the final determination with respect thereto. ARTICLE VIII. MISCELLANEOUS 8.1 Costs and Expenses. Subject to Sections 2.6(c), and 8.10, Buyer and Sellers shall each pay their respective expenses, brokers' fees and commissions, and the parties hereby agree that the pre-Closing expenses of the Company incurred in connection with this Agreement and the transactions contemplated hereby, including all accounting, legal and appraisal fees and settlement charges shall be paid by the Company. 8.2 Further Assurances. Sellers shall, at any time and from time to time on and after the Closing Date, upon request by Buyer and without further consideration, take or cause to be taken such actions and execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments, documents, transfers, conveyances and assurances as may be required or desirable for the better conveying, transferring, assigning, delivering, assuring and confirming the Company Shares to Buyer or any of the assets used in the Business to the Company. 8.3 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given or made (i) the second business day after the date of mailing, if delivered by registered or certified mail, postage prepaid, (ii) upon delivery, if sent by hand delivery, (iii) upon delivery, if sent by prepaid courier, with a record of receipt, or (iv) the next day after the date of dispatch, if sent by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by registered or certified mail, postage prepaid, return receipt requested), to the parties at the following addresses: (a) if to Buyer to: Illinois Water Treatment, Inc. c/o United States Filter Corporation 40-004 Cook Street Palm Desert, CA 92211 Attention: Chief Executive Officer Telecopy: (619) 341-9368 with a required copy to the General Counsel of Buyer at the above address and telecopy number - 35 - (b) if to Sellers, to: Thomas J. Goulet and M&I Ventures Corporation 765 West Jonathan Lane 770 North Water Street Milwaukee, WI 53217 Milwaukee, WI 53202 with a required copy to: Robert J. Loots von Briesen, Purtell & Roper, s.c. 400 East Wisconsin Avenue, Suite 700 Milwaukee, WI 53202-4470 Notices to the Company shall be addressed in care of Sellers before Closing and in care of Buyer after Closing. Any party hereto may change the address to which notice to it, or copies thereof, shall be addressed, by giving notice thereof to the other parties hereto in conformity with the foregoing. 8.4 Currency. All currency references herein are to United States dollars. 8.5 Offset; Assignment; Governing Law. Buyer shall be entitled to offset or recoup from any amounts due to Sellers from Buyer hereunder or under any Other Agreement against any obligation of Sellers to Buyer hereunder or under any Other Agreement. Seller shall be entitled to offset or recoup from any amounts due to Buyer from Sellers hereunder or under any Other Agreement against any obligation of Buyer to Sellers hereunder or under any Other Agreement. This Agreement and all the rights and powers granted hereby shall bind and inure to the benefit of the parties hereto and their respective permitted successors and assigns. This Agreement and the rights, interests and obligations hereunder may not be assigned by any hereto without the prior written consent of the other parties hereto, except that Buyer may make such assignments to any Affiliate or Buyer provided that Buyer remains liable hereunder. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to its conflict of law doctrines. 8.6 Amendment and Waiver; Cumulative Effect. To be effective, any amendment or waiver under this Agreement must be in writing and be signed by the party against whom enforcement of the same is sought. Neither the failure of any party hereto to exercise any right, power or remedy provided under this Agreement or to insist upon compliance by any other party with its obligations hereunder, nor any custom or practice of the parties at variance with the terms hereof shall constitute a waiver by such party of its right to exercise any such right, power or remedy or to demand such compliance. The rights and remedies of the parties hereto are cumulative and not exclusive of the rights - 36 - and remedies that they otherwise might have now or hereafter, at law, in equity, by statute or otherwise. 8.7 Entire Agreement; No Third Party Beneficiaries. This Agreement and the Schedules and Exhibits set forth all of the promises, covenants, agreements, conditions and undertakings between the parties hereto with respect to the subject matter hereof, and supersede all prior or contemporaneous agreements and understandings, negotiations, inducements or conditions, express or implied, oral or written. This Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder, except the provisions of Sections 7.2 and 7.3 relating to Buyer Indemnitees and Seller Indemnitees. 8.8 Severability. If any term or other provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced under any rule of Law in any particular respect or under any particular circumstances, such term or provision shall nevertheless remain in full force and effect in all other respects and under all other circumstances, and all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. 8.9 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall be deemed to be one and the same instrument. 8.10 Attorneys' Fees. If either party commences or is made a party to an action or proceeding to enforce or interpret this Agreement, the prevailing party in such action or proceeding shall be entitled to recover from the other party all attorneys' fees, costs and expenses incurred in connection with such action or proceeding or any appeal or enforcement of any judgment obtained in any such action or proceeding. - 37 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. _________________________________ Thomas J. Goulet M&I VENTURES CORPORATION: __________________________________ By: Title ILLINOIS WATER TREATMENT, INC. __________________________________ By: Title UNITED STATES FILTER CORPORATION __________________________________ By: Title: KISCO WATER TREATMENT COMPANY __________________________________ By: Title: President - 38 - EX-99 7 Exhibit 99.02 AMENDMENT TO STOCK PURCHASE AGREEMENT The Stock Purchase Agreement dated as of the 20th day of September 1996, by and among Thomas J. Goulet, M&I Ventures Corporation, United States Filter Corporation, Illinois Water Treatment, Inc. and Kisco Water Treatment Company, is hereby amended as follows: For valuable consideration, receipt of which is hereby acknowledged, Section 7.2 is hereby amended by the addition of the following language in the next to last sentence: 7.2 and/or (vii) any liability resulting from a claim by Erica Miles based upon the alleged sexual harassment incident on June 13, 1996, as and to the extent such incident results in a claim being filed against the Company prior to expiration of the time period specified in Section 7.5 and does not reasonably result from any action taken, directly or indirectly, by the Company after Closing. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the 30th day of September, 1996. /s/ Thomas J. Goulet ---------------------------------- Thomas J. Goulet M&I VENTURES CORPORATION By: /s/ William G. Krugler ----------------------------- William G. Krugler Title: Vice President ILLINOIS WATER TREATMENT, INC. By: /s/ Michael E. Hulme, Jr. ----------------------------- Title: Vice President UNITED STATES FILTER CORPORATION By: /s/ Michael E. Hulme, Jr. ---------------------------------- Title: Atty-in-fact for D. Georgino, Vice Pres. KISCO WATER TREATMENT COMPANY By: /s/ Thomas J. Goulet ------------------------------ Title: President EX-99 8 Exhibit 99.03 _________________________________________________________________ Option, Transfer and Registration Agreement among United States Filter Corporation, Thomas J. Goulet and M&I Ventures Corporation dated as of September 30, 1996 _________________________________________________________________ Option, Transfer and Registration Agreement among United States Filter Corporation, Thomas J. Goulet and M&I Ventures Corporation dated as of September 30, 1996 TABLE OF CONTENTS PAGE 1. Certain Definitions . . . . . . . . . . . . . . . . 1 2. Restrictions on Transferability . . . . . . . . . . 2 3. Restrictive Legends . . . . . . . . . . . . . . . . 2 4. Notice of Proposed Transfers . . . . . . . . . . . . 3 5. Company Registration . . . . . . . . . . . . . . . . 4 6. Expenses of Registration . . . . . . . . . . . . . . 5 7. Indemnification . . . . . . . . . . . . . . . . . . 5 8. Obligations of the Company . . . . . . . . . . . . . 7 9. Securities Law Compliance . . . . . . . . . . . . . 7 10. Standoff Agreement . . . . . . . . . . . . . . . . 7 11. Rule 144 Requirements . . . . . . . . . . . . . . . 7 12. Put Right and Call Offer . . . . . . . . . . . . . 8 13. Amendment . . . . . . . . . . . . . . . . . . . . . 9 14. Investment Representation. . . . . . . . . . . . . . 9 15. Notices, etc.. . . . . . . . . . . . . . . . . . . . 9 16. Entire Agreement; Severability . . . . . . . . . . . 10 17. Governing Law . . . . . . . . . . . . . . . . . . . 10 18. Counterparts . . . . . . . . . . . . . . . . . . . . 10 OPTION, TRANSFER AND REGISTRATION AGREEMENT This Option, Transfer and Registration Agreement ("Agreement") is entered into as of September 30, 1996 among United States Filter Corporation, a Delaware corporation (the "Company"), Thomas J. Goulet and M&I Ventures Corporation, a Wisconsin corporation, with reference to certain shares of Common Stock, $.01 par value (the "Common Stock") of the Company. 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Commission" shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Escrow Agent" shall mean Firstar Trust Company of Milwaukee, Wisconsin. "Escrow Agreement" shall mean the escrow agreement provided for in the Stock Purchase Agreement. "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time and any successor thereto. "Holders" shall mean Thomas J. Goulet and M&I Ventures Corporation, a Wisconsin corporation. "Registrable Shares" shall mean the Shares; provided, however, that Shares shall be treated as Registrable Shares only if and so long as they have not been (i) sold in a public distribution or a public securities transaction, or (ii) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act as a result of which all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale. The terms "register", "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. "Registration Expenses" shall mean all registration, qualification and filing fees, fees and disbursements of counsel for the Company, accounting fees incident to any such registration, state securities or blue sky fees and expenses, transfer agent and registrar fees, reasonable fees and expenses of any special experts retained by the Company in connection with any such registration, and any listing fees. "Restricted Shares" shall mean the shares of the Company required to bear the legend set forth in paragraph (a) of Section 3 hereof. "Rule 144" shall mean Rule 144 promulgated under the Securities Act, as such Rule shall be in effect at the time, and any successor thereto. "Securities Act" shall mean the United States Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling and Distribution Expenses" shall mean all underwriting discounts, selling commissions and stock transfer taxes attributable to the sale of Shares by the Holders and any out-of-pocket expenses of the Holders incurred in connection with the registration of Shares, including, without limitation, fees and disbursements of counsel for the Holders if such counsel is not also counsel for the Company, printing expenses and marketing expenses. "Shares" shall mean the 133,333 shares of Common Stock issued to or for the benefit of the Holders on the date hereof, as that number shall be adjusted pursuant to the Stock Purchase Agreement, and any shares of Common Stock issued in respect thereof in connection with stock splits, stock dividends or distributions, or combinations or similar recapitalizations, on or after the date hereof. "Stock Purchase Agreement" shall mean the Stock Purchase Agreement dated as of September 20, 1996 by and among the parties hereto, Kisco Water Treatment Company and Illinois Water Treatment, Inc. 2. Restrictions on Transferability. The Shares may be sold, assigned, transferred or pledged only in accordance with the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. 3. Restrictive Legends. (a) Each certificate representing Shares shall (unless otherwise permitted by subsection (c) of this Section 3 or Section 4) be stamped with the following legend: - 2 - THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH REGISTRATION IS NOT REQUIRED. (b) Each certificate representing Shares shall also be stamped with the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN AGREEMENT BETWEEN CERTAIN STOCKHOLDERS AND THE CORPORATION WHICH INCLUDES RESTRICTIONS ON CERTAIN SALES OF THE SECURITIES. COPIES OF THE AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION. (c) Each Holder consents to the Company's making a notation on its records and giving instructions to any transfer agent of the Company in order to implement the restrictions on transfer established in this Agreement. The legend placed on any certificate pursuant to Section 3(a) and any notations or instructions with respect to the Restricted Shares represented by such certificate will be promptly removed, and the Company will promptly issue a certificate without such legend to the Holder of such Restricted Shares (i) if such Restricted Shares are registered under the Securities Act (but only in connection with the actual sale of such securities) and a prospectus meeting the requirements of Section 10 of the Securities Act is available or (ii) if the Holder thereof satisfies the requirements of Rule 144(k) and, where reasonably determined necessary by the Company, provides the Company with an opinion of counsel for the Holder of the Shares, both such counsel and such opinion being reasonably satisfactory to the Company, to the effect that (A) the Holder meets the requirements of Rule 144(k) or (B) a public sale, transfer or assignment of the Shares may be made without registration. 4. Notice of Proposed Transfers. The holder of each certificate representing Restricted Shares by acceptance thereof agrees to comply in all respects with the provisions of this Section 4. Prior to any proposed sale, assignment, transfer or pledge of any Restricted Shares, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the Holder thereof shall notify the Company in writing of such Holder's intention to effect such sale, assignment, transfer or pledge and the intended manner and circumstances thereof in reasonable detail. If requested by the - 3 - Company, any such notice shall be accompanied at such Holder's expense by a written opinion of legal counsel who is, and whose legal opinion shall be, reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transfer of Restricted Shares may be effected without registration under the Securities Act, and by such certificates and other information as the Company may reasonably require to confirm such opinion, whereupon the Holder of such Restricted Shares shall be entitled to transfer such Restricted Shares in the manner contemplated by such opinion. Each certificate evidencing the Restricted Shares transferred as above provided shall bear, except if such transfer is made pursuant to Rule 144, the appropriate restrictive legend set forth in Section 3(a) above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for such Holder and the Company such legend is not required in order to establish compliance with any provisions of the Securities Act. So long as such restrictive legend shall be required to remain on any such certificates, the transfer of the Restricted Shares represented thereby shall be conditioned upon the transferee thereof becoming a party hereto (except that such transferee shall have no rights under Sections 5 or 12 hereof unless the transferee is a Holder). 5. Company Registration. (a) Notice of Registration. If, at any time or from time to time, the Company shall determine to register any of its Common Stock, either for its own account or the account of a security holder or holders for distribution pursuant to an underwritten offering, the Company will (i) promptly give to each Holder written notice thereof, and (ii) include in such registration (and any related qualification under blue sky laws or other compliance), subject to Section 5(b), all the Registrable Shares held by such Holder if so requested in writing by the Holder within 30 days after receipt of such written notice from the Company. (b) Underwriting. The right of the Holders to registration pursuant to this Section 5 shall be conditioned upon the Holders' participation in such underwriting and the inclusion of all the Registrable Shares held by such Holders in the underwriting to the extent provided herein. The Holder, proposing to distribute all the Registrable Shares held by such Holder through such underwriting shall (together with the Company and the other holders distributing shares of Common Stock through such underwriting), if required by the managing underwriter of such offering, enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company (or by the holders who have demanded such registration), and shall provide to the Company upon written request such information referenced in Section 5(d) hereof as may be specified in such request. Notwithstanding any other - 4 - provision of this Section 5, if the managing underwriter in its sole discretion determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the Registrable Shares to be included in such registration. The Company shall so advise all Holders and the other holders distributing their securities through such underwriting pursuant to piggyback registration rights similar to this Section 5, and the number of Registrable Shares and other securities that may be included in the registration and underwriting by such Holders and such other holders shall be reduced by the number of shares determined by the managing underwriter not to be included in such registration, such cutback to be allocated among all Holders and such other holders in proportion, as nearly as practicable, to the respective amounts of Registrable Shares held by such Holders and such other securities by such other holders. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter. (c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration under this Section 5 prior to the effectiveness of such registration whether or not the Holders have elected to include securities in such registration. 6. Expenses of Registration. All Registration Expenses incurred in connection with any registration pursuant to Section 5 shall be borne by the Company. All Selling and Distribution Expenses attributable to the Registrable Shares registered on behalf of the Holders shall be borne by the Holders of the Registrable Shares included in such registration pro rata on the basis of the number of Registrable Shares so registered. 7. Indemnification. (a) The Company will indemnify each Holder, each of its officers, directors, employees and agents and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not - 5 - misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act or any other federal, state or common law rule or regulation applicable to the Company in connection with any such registration, qualification or compliance, and the Company will reimburse each such Holder, each of its officers, directors, employees and agents and each person controlling such Holder for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any written information furnished to the Company pursuant to an instrument duly executed by such Holder or controlling person and stated to be specifically for use therein. (b) Each Holder will, if Registrable Shares held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such Holders, such directors, officers, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only if and to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with any written information furnished to the Company pursuant to an instrument duly executed by such Holder and stated to be specifically for use therein. (c) Each party entitled to indemnification under this Section 7 (the "Indemnified Party") shall give written notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and - 6 - shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement unless, but only to the extent that, the failure to give such notice is actually prejudicial to an Indemnifying Party's ability to defend such action. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. (d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which any Holder of Registrable Shares exercising rights under this Agreement, or any controlling person of any such Holder, makes a claim for indemnification pursuant to this Section 7 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 7 provides for indemnification in such case, then, the Company and such Holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such Holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Shares offered by the registration statement bears to the public offering price of all Shares offered by such registration statement; and the Company is responsible for the remaining portion not payable by any other Holder or holder; provided, however, that, in any such case, (A) no such Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by it pursuant to such registration statement; and (B) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 8. Obligations of the Company. Whenever required under this Agreement to effect the registration of any Registrable Shares, the Company shall, as expeditiously as reasonably possible: - 7 - (a) Furnish to the Holders whose Registrable Shares have been included in a registration statement such numbers of copies of the registration statement and all amendments thereto, any prospectus included in such registration statement, including any preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Shares owned by them. (b) Enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. 9. Securities Law Compliance. The Holders of Registrable Shares included in any registration pursuant to this Agreement covenant that they will comply with the Securities Act and with the Exchange Act with respect to any such registration. 10. Standoff Agreement. The Holders agree in connection with any registration of the Company's securities, upon request of the underwriters managing any underwritten offering of the Company's securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Shares (other than those included in such registration), without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 120 days) from the effective date of such registration as may be requested by the Company or such managing underwriters. 11. Rule 144 Requirements. The Company agrees to: (a) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; (b) furnish to any Holder of Registrable Securities upon request (i) a written statement by the Company as to its compliance with the requirements of Rule 144(c), and the reporting requirements of the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company as such Holder may reasonably request to avail itself of any similar rule or regulation of the Commission allowing itself to sell any such securities without registration; and (c) cooperate with any Holder in such manner as such Holder may reasonably request so as to enable sales made in compliance with the requirements of Rule 144 to be made in - 8 - compliance with the requirements of any transfer agent, registrar or the broker through whom any sales are to be executed. 12. Put Right and Call Offer. (a) Subject to Section 12(b) below, each Holder shall have the right to sell (a "Put Right") during the Put Right Exercise Period (as defined below), and upon exercise of that right the Company shall purchase, all the Shares then owned by such Holder at a purchase price per Share equal to 100% of the Specified Price (as defined below) during the Put Right Exercise Period. If the Put Right is not duly exercised during the Put Right Exercise Period, it shall expire at the end of the Put Right Exercise Period. A Put Right may be exercised only once by each Holder. (b) The Company may offer to purchase from each Holder or from all of the Holders (a "Call Offer") during the Call Offer Period (as defined below) all or any portion of the Shares then owned by such Holders at a purchase price equal to 110% of the Specified Price (as defined below). The Holders may, at their option, accept such Call Offer upon written notice delivered to the Company within twenty business days after notice of the Call Offer is given to the Holders. If any Holder does not duly accept the Call Offer in accordance with the terms of the Call Offer and this Agreement, or if any such Holder accepts the Call Offer but subsequently does not sell to the Company the Shares agreed to be sold by such Holder to the Company within the period provided for in this Section 12, then both the Call Offer and all rights of the Holders under Section 12(a) with respect to the Shares subject to such Call Offer shall then immediately expire and be of no further force and effect. (c) The "Specified Price" for each Share subject to a Put Right or a Call Offer shall be $31.875, which is equal to the closing price of the common stock of the Company as reported by the New York Stock Exchange on the fifth to the last trading day preceding the date of this Agreement. The "Put Right Exercise Period" and the "Call Offer Period" shall each be the 10-day period commencing on the 60th day after the date of this Agreement. A Put Right may be exercised and a Call Offer may be made only by written notice to the Company or the Holders, as the case may be, and such notice shall contain the number of Shares to be purchased and the identity of the Holder selling such Shares. The purchase price payable upon purchase and sale of the Shares subject to a Put Right or Call Offer hereunder shall be paid in cash on the Closing Date (as defined below). (d) In the event of an exercise of a Put Right or the making of a Call Offer, the parties to such transaction shall mutually determine a closing date (a "Closing Date") which shall not be more than 10 days, subject to any applicable regulatory - 9 - waiting periods, after the date the Put Right is exercised or Call Offer is made and accepted by one or more Holders, as the case may be, or if any such day is not a business day, then the first business day thereafter; provided, however, that in no event shall such Closing Date be later than December 30, 1996. Such closing ("Closing") shall be held at 11:00 a.m., local time, or at such other time and at such place as the parties may agree. On the Closing Date of a purchase of Shares pursuant to this Section, the Holders shall deliver to the Company certificates, with stock powers duly endorsed in blank, representing the Shares to be purchased. In the event any such Shares are then held in escrow under the Escrow Agreement, such Shares will be delivered by the Escrow Agent and the cash proceeds with respect thereto will be delivered to the Escrow Agent. In addition, if the person selling the Shares is the personal representative of a deceased Holder, the personal representative shall also deliver to the Company (i) copies of letters testamentary or letters of administration evidencing his appointment and qualification, (ii) a certificate issued by the Internal Revenue Service pursuant to Section 6325 of the United States Internal Revenue Code of 1986, as amended (the "Code"), discharging the Shares being sold from liens imposed by the Code (or, if it is not possible to obtain such certificate by the Closing Date, the sale of such Shares may be consummated and the proceeds placed in escrow pending receipt thereof), and (iii) an estate tax waiver issued by the state of the decedent's domicile. 13. Amendment. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by the written consent of the Company and the Holders. Any amendment or waiver effected in accordance with this Section 16 shall be binding upon each Holder of any Registrable Shares then outstanding, each future holder of any Shares who is a party to this Agreement, and the Company. 14. Notices, etc. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, courier service, United States mail (return receipt requested) or by facsimile, addressed as follows: If to the Company to: Illinois Water Treatment, Inc. c/o United States Filter Corporation 40-004 Cook Street Palm Desert, CA 92211 Attention: Chief Executive Officer Telecopy: (619) 341-9368 - 10 - with a copy to the General Counsel of United States Filter Corporation at the above address and telecopy number. If to Holders to: Thomas J. Goulet 765 West Jonathan Lane Milwaukee, WI 53217 and M&I Ventures Corporation 770 North Water Street Milwaukee, WI 53202 with a required copy to: Robert J. Loots von Briesen, Purtell & Roper 400 East Wisconsin Avenue Suite 700 Milwaukee, WI 53202-4470 or to such other address or facsimile number of a party of which such party has given notice to the other parties pursuant to this Section. 15. Entire Agreement; Severability. This Agreement and the Stock Purchase Agreement together with the Schedules and Exhibits thereto set forth all of the provisions, covenants, agreements, conditions and undertakings among the parties hereto with respect to the subject matter hereof. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable, the remaining provisions shall remain in full force and effect. 16. Governing Law. This Agreement shall be governed by and construed in accordance with the laws (other than those with respect to choice of law) of the State of Delaware. Each of the parties hereto agrees that all claims in any action or proceeding arising out of or related to this Agreement may be heard and determined in any Delaware state court or federal court sitting in the State of Delaware. 17. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. - 11 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. UNITED STATES FILTER CORPORATION By: ______________________________ Damian C. Georgino Vice President, General Counsel and Secretary By: ______________________________ Thomas J. Goulet M&I Ventures Corporation By: ______________________________ William G. Krugler Vice President - 12 - EX-99 9 Exhibit 99.04 ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Escrow Agreement") is made and entered into as of the ____ day of September, 1986, between Thomas J. Goulet, an individual ("Goulet") and M&I Ventures Corporation, a Wisconsin corporation ("M&I") (collectively "Seller" or "Sellers") and Illinois Water Treatment, Inc., ("Buyer"), and Firstar Trust Company of Milwaukee, Wisconsin ("Escrow Agent"). WHEREAS, Sellers and Buyer have entered into a Stock Purchase Agreement ("Stock Purchase Agreement") relating to the purchase of all of the outstanding capital stock of Kisco Water Treatment Company, a Missouri corporation (the "Company"), a copy of which is attached hereto as Exhibit A and is by this reference made a part hereof; and WHEREAS, the Stock Purchase Agreement provides in Section 7.4(b) that a portion of the purchase price in the form of common stock of United States Filter Corporation ("USF Shares") be deposited into escrow on the date hereof for the purpose of distributing to Buyer any Post-Closing Purchase Price Adjustment pursuant to Section 2.4 and securing the Sellers' obligation to indemnify Buyer pursuant to the provisions of Article VII of the Stock Purchase Agreement; and WHEREAS, USF, Goulet and M&I have entered into an Option, Transfer and Registration Agreement (the "Transfer Agreement"), a copy of which is attached as Exhibit B and is by this reference made a part hereof, under the terms of which all or a portion of the USF Shares to be held on deposit hereunder may be converted to cash by exercise of the Put Right or Call Offer thereunder. WHEREAS, Seller and Buyer have requested that Escrow Agent act as "Escrow Agent" pursuant to Section 7.4(b) of, and in accordance with the terms and conditions of, the Stock Purchase Agreement, and Escrow Agent has consented and agreed to do so, on the terms and conditions described below. NOW, THEREFORE, for and in consideration of the premises, covenants and agreements hereinafter made, the receipt and sufficiency of which is hereby acknowledged, Sellers, Buyer and Escrow Agent covenant and agree as follows: 1. ESCROW DEPOSIT. Seller hereby deposits with Escrow Agent, and Escrow Agent hereby acknowledges receipt of 15,686 shares of USF common stock. In the event such stock is converted to cash pursuant to the Transfer Agreement, Escrow Agent hereby agrees to deposit such amount into an interest bearing account with a bank, savings and loan institution or other depository reasonably satisfactory to Seller, Buyer and Escrow Agent (the "Depository"), or to invest in interest bearing obligations of the United States or agencies maturing in not more than ninety (90) days, with the income thereon to accrue for the account of Sellers. Subject to the provisions of paragraph 2 of this Agreement, such stock or cash shall be held for a period of six (6) months from the date hereof (the "Escrow Period"). 2. DISBURSEMENT OF ESCROW. (a) Any USF Shares or cash from sale proceeds required to be distributed to Buyer as a Post-Closing Purchase Price Adjustment pursuant to Section 2.4 shall be disbursed to Buyer upon Escrow Agent's receipt of written notice from Sellers and Buyer confirming the amount of such distribution. (b) The Escrow Agent shall disburse from the principal of the escrow account any amounts which become payable to Buyer by way of indemnification pursuant to Article VII of the Stock Purchase Agreement. (c) The Escrow Agent is authorized to disburse escrow assets only as directed jointly by Buyer and Sellers; provided, however, that if Buyer and Sellers disagree as to the amount properly payable from this escrow, such disagreement shall be resolved pursuant to the procedure outlined in Section 7.9 of the Stock Purchase Agreement. 3. PURPOSE OF ESCROW. Seller and Buyer mutually acknowledge that the sole purpose of this Agreement is to hold shares of USF Shares or cash in escrow pursuant to the Stock Purchase Agreement and that their respective rights thereto shall be determined by that Agreement. 4. ESCROW AGENT FEE. The fee of the Escrow Agent for its services hereunder shall be its reasonable, usual and customary charges and shall be paid by Buyer. 5. LIMITATION OF ESCROW AGENT'S LIABILITY. Escrow Agent shall not be liable to Sellers or to Buyer or any of them for any losses, costs, claims, damages, liabilities or expenses which they may suffer or incur by reason of any one or more of the following: (a) the failure of the Depository; or (b) any action taken or omitted to be taken in accordance with the terms hereof; or (c) any action taken or omitted to be taken in reliance upon any document, including any written notice of authorization to disburse as provided for hereinabove, all of which writings Escrow - 2 - Agent can rely upon as to due execution, validity, effectiveness, and also as to truth and accuracy of the information contained therein. Escrow Agent's liability hereunder shall be limited to any actions taken or omitted to be taken which are found by a court of law to be willful misconduct or gross negligence. 6. INDEMNIFICATION. Except for acts or omissions of the Escrow Agent which are found by a court of law to be a breach of this Agreement, or to be in the nature of gross negligence or willful misconduct, Sellers and Buyer hereby jointly and severally indemnify and hold harmless Escrow Agent from and against any and all losses, claims, damages, liabilities, costs or expenses, including, without limitation, attorneys' fees and all trial and/or appellate court costs, which arise out of or are connected with this Agreement, the appointment of Escrow Agent hereunder, or any actions or omissions of Escrow Agent in the performance of its responsibilities hereunder, including, without limitation, any litigation arising out of or involving the subject matter of this Agreement. 7. GENERAL. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and shall be governed by and construed in accordance with the laws of the State of Wisconsin. Escrow Agent shall be bound only by the terms of this Agreement and shall not be bound by or have any responsibility or incur any liability with respect to the Stock Purchase Agreement between Sellers and Buyer. No modification, amendment or waiver of the terms hereof shall be valid or effective unless in writing and signed by all of the parties hereto. This Agreement may be executed in multiple counterpart originals, each of which shall be deemed to be and shall constitute an original. 8. NOTICES. Any notices sent by any of the parties to any other of the parties hereto shall be sent by prepaid certified mail, return receipt requested, to the addresses set forth below, shall include a copy to the party who is not the addressee of such notice, and shall be deemed received on the third (3rd) business day after mailing: (a) If to Sellers, to: Thomas J. Goulet and M&I Ventures Corporation 765 West Jonathan Lane Attention: William G. Krugler Milwaukee, WI 53217 770 North Water Street Milwaukee, WI 53202 - 3 - with a copy to: Robert J. Loots von Briesen, Purtell & Roper, s.c. 400 East Wisconsin Avenue Milwaukee, WI 53202 (b) If to Buyer, to: Illinois Water Treatment, Inc. c/o United States Filter Corporation 40-004 Cook Street Palm Desert, CA 92211 Attention: Chief Executive Officer with a copy to: the General Counsel of Buyer at the above address and telecopy number (c) If to Escrow Agent, to: Firstar Trust Company 615 East Michigan Street, 4th Floor Milwaukee, WI 53202 Attention: William Caruso 9. BENEFIT. This Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. 10. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. - 4 - IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be executed and delivered as of the day and year first above written. Sellers: /s/ Thomas J. Goulet ---------------------------------- Thomas J. Goulet M&I Ventures Corporation /s/ William G. Krugler ---------------------------------- Title: Vice President Buyer: Illinois Water Treatment, Inc. By: /s/ Michael E. Hulme, Jr. ----------------------------- Title: Vice President Escrow Agent: Firstar Trust Company By: /s/ William Caruso ---------------------------- Title: Assistant Vice President Attest: /s/ D. J. Mayer -------------------------- Title: Assistant Secretary - 5 - -----END PRIVACY-ENHANCED MESSAGE-----