-----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, KtNqKnmp22uelNcpNPPwuqawmmazQ+v7HKzJwZpba6BF4hxzqf55y+LIR6Gnnga7 5gmzZEhpo+Y4tYS0/QMj+w== 0000950132-96-000421.txt : 19960712 0000950132-96-000421.hdr.sgml : 19960712 ACCESSION NUMBER: 0000950132-96-000421 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960711 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: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-63281 FILM NUMBER: 96593254 BUSINESS ADDRESS: STREET 1: 73 710 FRED WARING DR STE 222 CITY: PALM DESERT STATE: CA ZIP: 92260 BUSINESS PHONE: 6193400098 MAIL ADDRESS: STREET 1: 73 710 FRED WARING DRIVE SUITE 222 CITY: PALM DESERT STATE: CA ZIP: 92260 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 424B3 1 6% CONVERTIBLE SUBORDINATED NOTES PROSPECTUS PROSPECTUS RULE 424(B)(3) REGISTRATION NO. 33-63281 $140,000,000 [LOGO of U.S. Filter] UNITED STATES FILTER CORPORATION 6% CONVERTIBLE SUBORDINATED NOTES DUE 2005 AND SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF This Prospectus covers sales from time to time by the holders (the "Selling Securityholders") of up to $140,000,000 aggregate principal amount of 6% Convertible Subordinated Notes due 2005 (the "Notes") of United States Filter Corporation (the "Company"). This Prospectus also covers sales by Selling Securityholders from time to time of shares (the "Conversion Shares") of common stock, par value $.01 per share (the "Common Stock"), of the Company into which Notes have been converted. Any Note is convertible at the option of its holder into shares of Common Stock, at any time at or prior to maturity, unless previously redeemed or repurchased, at a conversion price of $27.50 per share (equivalent to a conversion rate of 36.36 shares per $1,000 principal amount of Notes), subject to adjustment in certain events. Interest on the Notes is payable semi- annually on March 15 and September 15 of each year, commencing on March 15, 1996. The Notes are redeemable, in whole or in part, at the option of the Company, at any time on or after September 23, 1998, at the redemption prices set forth herein, plus accrued and unpaid interest to the date of redemption. The Company is required to offer to purchase the Notes upon a Change of Control (as defined herein) at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The Notes are unsecured general obligations of the Company, subordinated in right of payment to all existing and future Senior Indebtedness (as defined herein) of the Company, and are structurally subordinated to all liabilities (including trade payables) of the Company's subsidiaries. The Indenture for the Notes does not restrict the incurrence of Senior Indebtedness or other indebtedness by the Company or its subsidiaries. At March 31, 1996 the Company had approximately $41,318,000 of Senior Indebtedness, and the Company's subsidiaries had approximately $199,960,000 of trade payables and accrued liabilities. See "Description of the Notes." The Notes were issued by the Company on September 18, 1995 in a private placement and were resold by the initial purchasers thereof to qualified institutional buyers or other accredited institutional investors in transactions exempt from registration under the United States Securities Act of 1933, as amended (the "Securities Act"), or in sales outside the United States within the meaning of Regulation S under the Securities Act. The Selling Securityholders may offer Notes or Conversion Shares from time to time to purchasers directly or through underwriters, dealers or agents. Such Notes or Conversion Shares may be sold at market prices prevailing at the time of sale or at negotiated prices. Each Selling Securityholder will be responsible for payment of any and all commissions to brokers, which will be negotiated on an individual basis. The Notes have been designated for trading in the Same-Day Funds Settlement System of The Depository Trust Company. The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the trading symbol USF. On July 9, 1996, the last reported sale price of the Common Stock as reported on the NYSE was $33 1/4 per share. The Conversion Shares have been listed on the NYSE. The Company will not receive any of the proceeds from the sale of any Notes or Conversion Shares by the Selling Securityholders. Expenses of preparing and filing the registration statement to which this Prospectus relates and all post-effective amendments will be borne by the Company. See "Plan of Distribution" for a description of the indemnification arrangements between the Company and the Selling Securityholders. SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE NOTES OR 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. The date of this Prospectus is July 11, 1996. AVAILABLE INFORMATION The Company is subject to the informational requirements of the United States 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 United States 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 Notes and Conversion Shares offered by this Prospectus. 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 with the Commission (File No. 1-10728) pursuant to the Exchange Act are incorporated herein 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 Form 8-K/A dated June 28, 1996, June 10, 1996 and June 27, 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 modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon the written or oral request of such person, 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 of United States Filter Corporation, 40-004 Cook Street, Palm Desert, California 92211 (telephone (619) 340-0098). 2 THE COMPANY The Company is a leading global provider of industrial and commercial water treatment systems and services, with an installed base of more than 100,000 systems worldwide. The Company offers a single-source solution to its industrial, commercial and municipal customers through what the Company believes to be the industry's broadest range of cost-effective water treatment systems, services and proven technologies. The Company capitalizes on its substantial installed base to sell additional systems and utilizes its global network of more than 125 sales and service facilities, including 21 manufacturing plants, to provide customers with ongoing service and maintenance. In addition, the Company is a leading international provider of service deionization ("SDI") and outsourced water services, including operation of water purification 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 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 purchasers should carefully consider 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 purchasing Notes or Conversion Shares offered hereby. ACQUISITION STRATEGY In pursuit of its strategic objective of becoming the leading global single- source provider of water treatment systems and services the Company has, since 1991, acquired and successfully integrated more than 40 United States based and international businesses with strong market positions and substantial water treatment expertise. 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. INTERNATIONAL TRANSACTIONS The Company has made and expects it will continue to make acquisitions and to obtain contracts in Europe, Asia and Latin America and other areas 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 and possible social, political and economic instability. RELIANCE ON KEY PERSONNEL The Company's operations are dependent on the continued efforts of senior management, in particular Richard J. Heckmann, its Chairman, Chief Executive Officer and President. 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 increase, delivery schedules are delayed or progress 3 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 OF CAPITAL EQUIPMENT SALES 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. The Company's revenues from capital equipment sales were approximately 60% of total revenues for the fiscal year ended March 31, 1995 and 49% for the fiscal year ended March 31, 1996. 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. 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. 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 civil or criminal enforcement actions or private actions that could have a materially adverse effect on the Company. In that regard, allegations have been made by federal and state environmental regulatory authorities of multiple violations by a wholly owned subsidiary of the Company with respect to applicable wastewater pretreatment standards 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 allegations. The Company has rights of indemnification from Anjou which may be available with respect to these matters. The Company's activities as owner and operator of a hazardous waste treatment and recovery facility are subject to stringent laws and regulations and compliance reviews. Failure of this facility to comply with those regulations could result in substantial fines and the suspension or revocation of the facility's hazardous waste permit. 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 purification 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, service, 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 that are divisions or subsidiaries of larger companies which have significantly greater resources than the Company, which, among other things, could be a competitive disadvantage to the Company in securing certain projects. TECHNOLOGICAL AND REGULATORY CHANGE The water purification and wastewater treatment business is characterized by changing technology, competitively imposed process standards and regulatory requirements, each of which influences the demand for 4 the Company's products and services. Changes in regulatory or industrial requirements may render certain of the Company's purification and treatment products and processes obsolete. Acceptance of new products may also be affected by the adoption of new government regulations requiring stricter standards. The Company's ability to anticipate changes in technology and regulatory standards and to successfully develop 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. SHARES ELIGIBLE FOR FUTURE SALE The market price of the Common Stock could be adversely affected by the availability for sale of shares held on June 21, 1996 by security holders of the Company, including (i) up to 2,702,729 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) 2,925,611 shares issuable upon conversion of convertible debentures of the Company at a conversion price of $20.50 per share of Common Stock that are currently registered for sale under the Securities Act pursuant to a shelf registration statement, (iii) 1,813,079 outstanding shares that are currently registered for sale under the Securities Act pursuant to a shelf registration statement, (iv) 447,030 outstanding shares that are covered by two shelf registration statements filed under the Securities Act, and (v) 1,905,074 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, subject to certain conditions, to include certain percentages of such shares in other registration statements filed by the Company (1,320,000 of which shares also may be sold from time to time by the holders thereof pursuant to Rule 144 under the Securities Act). In addition, the Company has registered for sale under the Securities Act or filed a shelf registration statement with respect to 3,242,772 shares which may be issuable by the Company from time to time in connection with acquisitions of businesses or assets from third parties. SUBORDINATION The Notes are subordinated in right of payment to all existing and future Senior Indebtedness and are structurally subordinated to all liabilities (including trade payables) of the Company's subsidiaries. The Indenture (as defined herein) does not restrict the incurrence of Senior Indebtedness or other indebtedness by the Company or its subsidiaries. At March 31, 1996, the Company had approximately $41 million of Senior Indebtedness outstanding. By reason of such subordination of the Notes, in the event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up of the business of the Company or upon a default in payment with respect to any indebtedness of the Company or an event of default with respect to such indebtedness resulting in the acceleration thereof, the assets of the Company will be available to pay the amounts due on the Notes only after all Senior Indebtedness has been paid in full. The Notes rank pari passu in all respects with other unsecured subordinated obligations of the Company, including the Company's 5% Convertible Subordinated Debentures due 2000 (the "5% Debentures"). See "Description of the Notes--Subordination." The Company conducts its operations through its subsidiaries. Accordingly, the Company's ability to meet its cash obligations is dependent in part upon the ability of its subsidiaries to make cash distributions to the Company. The ability of its subsidiaries to make distributions to the Company is and will continue to be restricted by, among other limitations, applicable provisions of the laws of national or state governments and contractual provisions. The Indenture does not limit the ability of the Company's subsidiaries to become subject to such restrictions in the future. The right of the Company to participate in the assets of any subsidiary (and thus the ability of holders of the Notes to benefit indirectly from such assets) are generally subject to the prior claims of creditors, including trade creditors, of that subsidiary except to the extent that the Company is recognized as a creditor of such subsidiary, in which case the Company's claims would still be subject to any 5 security interests of other creditors of such subsidiary. The Notes, therefore, are structurally subordinated to creditors, including trade creditors, of subsidiaries of the Company with respect to the assets of the subsidiaries against which such creditors have claims. At March 31, 1996, the Company's subsidiaries had approximately $200 million of trade payables and accrued liabilities. ABSENCE OF EXISTING MARKET FOR NOTES There is no established public trading market for the Notes. The Company does not intend to list the Notes on any national securities exchange or to seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Company has been advised by Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and PaineWebber Incorporated ("PaineWebber"), the initial purchasers of the Notes (the "Initial Purchasers"), that DLJ and PaineWebber are making and currently intend to continue making a market in the Notes. However, DLJ and PaineWebber are not obligated to make such a market and any market-making activity may be discontinued at any time without notice. In addition, such market-making activity is subject to the limits imposed by the Securities Act and the Exchange Act. No assurance can be given that an active trading market for the Notes will develop or, if such market develops, as to the liquidity or sustainability of such market. If a trading market does not develop or is not maintained, holders of the Notes may experience difficulty in selling the Notes or may be unable to sell them at all. If a public trading market develops for the Notes, future prices of the Notes will depend on many factors, including, among other things, prevailing interest rates, the Company's results of operations and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other factors, including the financial condition of the Company, the Notes may trade at a discount from their principal amount. RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED MARCH 31, ------------------------ 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges(1)(2)............... -- 1.3x -- 3.3x 2.5x
- -------- (1) The historical consolidated financial data from which the Ratios of Earnings to Fixed Charges were derived for the fiscal years ended March 31, 1992 through March 31, 1994 has been restated to include the accounts and operations of Liquipure, which was merged with the Company in July 1994 and accounted for as a pooling of interests. (2) The ratio of earnings to fixed charges has been computed by dividing earnings available for fixed charges (income before interest expense, interest income and income taxes, plus fixed charges) by fixed charges. Fixed charges consist of interest expense (including amortization of deferred financing costs) and the portion of rental expense that is representative of the interest factor (deemed by the Company to be one- third). Fixed charges exceeded the loss before fixed charges by $6,290,000 and $4,874,000 for the years ended March 31, 1992 and 1994, respectively. USE OF PROCEEDS Selling Securityholders will receive all of the net proceeds from the sale of the Notes and Conversion Shares offered hereby. The Company will not receive any of the proceeds from any such sale. DESCRIPTION OF THE NOTES Set forth below is a summary of certain provisions of the Notes. The Notes were issued pursuant to an indenture (the "Indenture"), dated as of September 18, 1995, by and between the Company and The First National Bank of Boston, as trustee (the "Trustee"). State Street Bank and Trust Company of California, N.A. 6 is the successor to The First National Bank of Boston as the Trustee. The following summary of the Notes and the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by, reference to all of the provisions of the Indenture, including the definitions therein. Capitalized terms used herein without definition have the meanings ascribed to them in the Indenture. As used in this section of this Prospectus, "the Company" refers to United States Filter Corporation exclusive of its subsidiaries. Wherever particular provisions of the Indenture are referred to in this summary, such provisions are incorporated by reference as a part of the statements made and such statements are qualified in their entirety by such reference. GENERAL The Notes are unsecured, subordinated, general obligations of the Company, limited in aggregate principal amount to $140,000,000. The Notes are subordinated in right of payment to all Senior Indebtedness of the Company as described under "Subordination" below. The Notes were issued only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. The Notes mature on September 15, 2005. The Notes bear interest at 6% per annum from the date of issuance or from the most recent Interest Payment Date to which interest has been paid or provided for, payable semi-annually on March 15 and September 15 of each year, commencing March 15, 1996, to the persons in whose names such Notes are registered at the close of business on the March 1 or September 1 immediately preceding such Interest Payment Date. Principal of, and premium, if any, and interest on, the Notes will be payable, the Notes will be convertible and the Notes may be presented for registration of transfer or exchange, at the office or agency of the Company maintained for such purpose, which office or agency will be maintained in the Borough of Manhattan, The City of New York. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months. At the option of the Company, payments of interest may be made by checks mailed to the Holders of the Notes at the addresses set forth upon the registry books of the Company (except with respect to Global Notes (as defined herein)). No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Until otherwise designated by the Company, the Company's office or agency is c/o State Street Bank and Trust Company, N.A., 61 Broadway, New York, New York 10006. CONVERSION RIGHTS The Holder of any Note has the right, at that Holder's option, to convert any portion of the principal amount thereof that is an integral multiple of $1,000 into fully paid and non-assessable shares of Common Stock at any time prior to the close of business on the second Business Day prior to the Stated Maturity of the Note (unless earlier redeemed or repurchased) at the Conversion Price of $27.50 per share (equivalent to a conversion rate of 36.36 shares per $1,000 principal amount of Notes), subject to adjustment as described below. The right to convert a Note called for redemption or delivered for repurchase will terminate at the close of business on the fifth or second Business Day, respectively, prior to the Redemption Date or Repurchase Date for such Note, unless the Company subsequently fails to pay the applicable Redemption Price or Repurchase Price, as the case may be. In the case of any Note that has been converted after any Record Date, but on or before the next Interest Payment Date, the interest which is due thereon on such Interest Payment Date will be payable on such Interest Payment Date notwithstanding such conversion, and such interest will be paid to the Holder of such Note who was the Holder on such Record Date. Any Note so converted must be accompanied by payment of an amount equal to the interest payable on such Interest Payment Date on the principal amount of the Note being surrendered for conversion. No fractional shares will be issued upon conversion but, in lieu thereof, an appropriate amount will be paid in cash by the Company based on the market price of the Common Stock (as determined in accordance with the Indenture) at the close of business on the day of conversion. 7 The Conversion Price is subject to adjustment upon the occurrence of certain events, including: (a) any payment of a dividend (or other distribution) payable in Common Stock on any class of Capital Stock of the Company; (b) any issuance to all holders of Common Stock of rights, options or warrants entitling them to subscribe for or purchase Common Stock at a price less than the then-current market price (as determined in accordance with the Indenture) of the Common Stock; provided, however, that if such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the Conversion Price will not be adjusted until any such triggering event occurs; (c) any subdivision, combination or reclassification of the Common Stock; (d) any distribution to all holders of Common Stock of evidences of indebtedness, shares of Capital Stock other than Common Stock, cash or other assets (including securities, but excluding those dividends, rights, options, warrants and distributions referred to above and excluding dividends and distributions paid exclusively in cash); (e) any distribution consisting exclusively of cash (excluding any cash portion of distributions referred to in (d) above or cash distributed upon a merger or consolidation to which the second succeeding paragraph refers) to all holders of Common Stock in an aggregate amount that, combined together with (i) all other such all- cash distributions made within the then-preceding 12 months in respect of which no adjustment has been made and (ii) any cash and the fair market value of other consideration paid or payable in respect of any tender offer by the Company or any of its subsidiaries for Common Stock concluded within the then- preceding 12 months in respect of which no adjustment has been made, exceeds 15% of the Company's market capitalization (defined as being the product of the then-current market price of the Common Stock times the number of shares of Common Stock then outstanding) on the record date of such distribution; and (f) the completion of a tender offer made by the Company or any of its subsidiaries for Common Stock that involves an aggregate consideration that, together with (i) any cash and other consideration paid in a tender offer by the Company or any of its subsidiaries for Common Stock expiring within the 12 months preceding the expiration of such tender offer in respect of which no adjustment has been made and (ii) the aggregate amount of any such all-cash distributions referred to in (e) above to all holders of Common Stock within the 12 months preceding the expiration of such tender offer in respect of which no adjustment has been made, exceeds 15% of the Company's market capitalization at the expiration of such tender offer. The Company reserves the right to make such other reductions in the Conversion Price as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients thereof. No adjustment of the Conversion Price is required to be made until the cumulative adjustments amount to 1.0% or more of the Conversion Price as last adjusted. In the event that the Company distributes rights or warrants (other than those referred to in (b) in the preceding paragraph) pro rata to holders of Common Stock, so long as any such rights or warrants have not expired or been redeemed by the Company, the Holder of any Note surrendered for conversion is entitled to receive upon such conversion, in addition to the Conversion Shares issuable therefor, a number of rights or warrants to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of rights or warrants of separate certificates evidencing such rights or warrants (the "Distribution Date"), the same number of rights or warrants to which a holder of a number of shares of Common Stock equal to the number of such Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and applicable to the rights or warrants, and (ii) if such conversion occurs after such Distribution Date, the same number of rights or warrants to which a holder of the number of shares of Common Stock into which such Note was convertible immediately prior to such Distribution Date would have been entitled on such Distribution Date in accordance with the terms and provisions of and applicable to the rights or warrants. The Conversion Price is not subject to adjustment on account of any declaration, distribution or exercise of such rights or warrants. In case of any reclassification, consolidation or merger of the Company with or into another Person or any merger of another Person with or into the Company (with certain exceptions), or in case of any sale, transfer or conveyance of all or substantially all of the assets of the Company (computed on a consolidated basis), each Note then outstanding will, without the consent of any Holder of a Note, become convertible only into the kind and amount of securities, cash and other property receivable upon such reclassification, consolidation, merger, sale, transfer or conveyance by a holder of the number of shares of Common Stock into which such Note was 8 convertible immediately prior thereto, after giving effect to any adjustment event, who failed to exercise any rights of election and received per share the kind and amount received per share by a plurality of non-electing shares. The Company will use its best efforts to cause all registrations with, and to obtain any approvals by, any governmental authority under any Federal or state law of the United States that may be required in connection with the conversion of the Notes into shares of Common Stock. SUBORDINATION The Notes are general, unsecured obligations of the Company, subordinated in right of payment to all Senior Indebtedness of the Company. The Notes are structurally subordinated in right of payment to all liabilities (including trade payables and capitalized lease obligations) of the Company's subsidiaries. At March 31, 1996 the Company had approximately $41,318,000 of Senior Indebtedness outstanding. The rights of Holders are subordinated by operation of law to all existing and future indebtedness of the Company's subsidiaries, which as of March 31, 1996 was approximately $199,960,000 of trade payables and accrued liabilities. The Indenture does not restrict the incurrence of Senior Indebtedness or other indebtedness by the Company or its subsidiaries. The Indenture provides that no payment may be made by the Company on account of the principal of, or premium, if any, or interest on, the Notes, or to acquire any of the Notes (including repurchases of Notes at the option of the Holders) for cash or property (other than Junior Securities), or on account of the redemption provisions of the Notes, (i) upon the maturity of any Senior Indebtedness of the Company by lapse of time, acceleration (unless waived) or otherwise, unless and until all principal of and premium, if any, and interest on such Senior Indebtedness are first paid in full (or such payment is duly provided for), or (ii) in the event of any default in the payment of any principal of or premium, if any, or interest on any Senior Indebtedness of the Company when it becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise (a "Payment Default"), unless and until such Payment Default has been cured or waived or otherwise has ceased to exist. Upon (i) the happening of an event of default (other than a Payment Default) that permits the holders of Senior Indebtedness of the Company or their representative immediately to accelerate its maturity and (ii) the giving of written notice of such event of default to the Company and the Trustee by the holders of an aggregate of at least $20,000,000 principal amount outstanding of such Senior Indebtedness or their representative (a "Payment Notice"), then, unless and until such event of default has been cured or waived or otherwise has ceased to exist, no payment (by set-off or otherwise) may be made by or on behalf of the Company on account of the principal of, or premium, if any, or interest on, the Notes, or to acquire or repurchase any of the Notes for cash or property, or on account of the redemption provisions of the Notes, in any such case other than payments made with Junior Securities of the Company. Notwithstanding the foregoing, unless (i) the Senior Indebtedness in respect of which such event of default exists has been declared due and payable in its entirety within 179 days after the Payment Notice is delivered as set forth above (the "Payment Blockage Period"), and (ii) such declaration has not been rescinded or waived, at the end of the Payment Blockage Period, the Company will be required to pay all sums not paid to the Holders of the Notes during the Payment Blockage Period due to the foregoing prohibitions and to resume all other payments as and when due on the Notes. Any number of Payment Notices may be given; provided, however, that (i) not more than one Payment Notice may be given within a period of any 360 consecutive days, and (ii) no default that existed upon the date of a Payment Notice or the commencement of the related Payment Blockage Period (whether or not such event of default is on the same issue of Senior Indebtedness of the Company) may be made the basis for the commencement of any other Payment Blockage Period. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company (other than Junior Securities) is received by the Trustee or the Holders at a time when such payment or distribution is prohibited by the provisions described above, then such payment or distribution will be received and held in trust by the Trustee or such Holders for the benefit of the holders of Senior Indebtedness of the 9 Company, and will be paid or delivered by the Trustee or such Holders, as the case may be, to the holders of the Senior Indebtedness of the Company remaining unpaid or unprovided for or their representative or representatives or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness of the Company may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness of the Company held or represented by each, for application to the payment of all Senior Indebtedness of the Company in full after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. Upon any distribution of assets of the Company upon any dissolution, winding up, total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar proceeding or upon assignment for the benefit of creditors or any marshalling of assets or liabilities: (i) the holders of all Senior Indebtedness of the Company will first be entitled to receive payment in full (or have such payment duly provided for) before the Holders are entitled to receive any payment on account of the principal of, and premium, if any, and interest on, the Notes (other than Junior Securities) and (ii) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than Junior Securities), to which the Holders or the Trustee on behalf of the Holders would be entitled (by setoff or otherwise) except for the subordination provisions contained in the Indenture, will be paid by the liquidating trustee or agent or other person making such payment or distribution directly to the holders of Senior Indebtedness of the Company or their representative to the extent necessary to pay in full all such Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. No provision contained in the Indenture or the Notes affects the obligation of the Company, which is absolute and unconditional, to pay, when due, principal of, and premium, if any, and interest on, the Notes. The subordination provisions of the Indenture and the Notes do not prevent the occurrence of any Default or Event of Default under the Indenture or limit the rights of the Trustee or any Holder, except to the extent set forth in the provisions described in the two preceding previous paragraphs, to pursue any other rights or remedies with respect to the Notes. As a result of these subordination provisions, in the event of the liquidation, bankruptcy, reorganization, insolvency, receivership or similar proceeding or an assignment for the benefit of creditors of the Company or any of its subsidiaries or a marshalling of assets or liabilities of the Company and its subsidiaries, Holders of the Notes may receive ratably less than other creditors. The Company conducts its operations through its subsidiaries. Accordingly, the Company's ability to meet its cash obligations is dependent upon the ability of its subsidiaries to make cash distributions to the Company. The ability of its subsidiaries to make distributions to the Company is and will continue to be restricted by, among other limitations, applicable provisions of the laws of national and state governments and contractual provisions. The Indenture does not limit the ability of the Company's subsidiaries to incur such restrictions in the future. The right of the Company to participate in the assets of any subsidiary (and thus the ability of Holders of the Notes to benefit indirectly from such assets) is generally subject to the prior claims of creditors, including trade creditors, of that subsidiary except to the extent that the Company is recognized as a creditor of such subsidiary, in which case the Company's claims would still be subject to any security interests of other creditors of such subsidiary. The Notes, therefore, are structurally subordinated to creditors, including trade creditors, of subsidiaries of the Company with respect to the assets of the subsidiaries against which such creditors have a claim. REDEMPTION AT THE COMPANY'S OPTION The Notes are not subject to redemption prior to September 23, 1998 and are redeemable on such date and thereafter at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice to each Holder, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the 12-month period commencing September 15 of the years indicated below, in each case 10 (subject to the right of the Holders on a Record Date to receive the interest due on the related Interest Payment Date), together with accrued and unpaid interest, if any, to the Redemption Date:
YEAR PERCENTAGE ---- ---------- 1998.............................................................. 103.75% 1999.............................................................. 103.00% 2000.............................................................. 102.25% 2001.............................................................. 101.50% 2002.............................................................. 100.75% 2003 and thereafter............................................... 100%
In the case of a partial redemption, the Trustee will select the Notes or portions thereof for redemption on a pro rata basis, by lot or by such other method it deems appropriate and fair. The Notes may be redeemed in part in multiples of $1,000 only. The Notes will not have the benefit of any sinking fund. Notice of any redemption will be sent, by first-class mail, at least 30 days and not more than 60 days prior to the date fixed for redemption, to the Holder of each Note to be redeemed to such Holder's last address as then shown upon the registry books of the Registrar. The notice of redemption must state the Redemption Date, the Redemption Price and the amount of accrued interest to be paid. Any notice that relates to a Note to be redeemed in part only must state the portion of the principal amount equal to the unredeemed portion thereof and must state that on and after the Redemption Date, upon surrender of such Note, a new Note or Notes in aggregate principal amount equal to the unredeemed portion thereof will be issued. On and after the Redemption Date, interest will cease to accrue on the Notes or portions thereof called for redemption, unless the Company defaults in its obligations with respect thereto. REPURCHASE OF NOTES AT THE OPTION OF THE HOLDERS UPON A CHANGE OF CONTROL The Indenture provides that in the event that a Change of Control (as defined herein) has occurred, each Holder of a Note will have the right, at such Holder's option, pursuant to an irrevocable and unconditional offer by the Company (the "Repurchase Offer"), to require the Company to repurchase all or any part of such Holder's Note (provided, that such part equals $1,000 or an integral multiple thereof) on a date (the "Repurchase Date") that is no later than 40 Business Days after the occurrence of such Change of Control at a cash price (the "Repurchase Price") equal to 101% of the principal amount thereof, together with accrued and unpaid interest to the Repurchase Date. The Repurchase Offer must be made within 15 Business Days following a Change of Control and remain open for 20 Business Days following its commencement (the "Repurchase Offer Period"). Upon expiration of the Repurchase Offer Period, the Company will purchase all Notes tendered in response to the Repurchase Offer. If required by applicable law, the Repurchase Date and the Repurchase Offer Period may be extended; provided, however, that, even if so extended, it will nevertheless constitute an Event of Default if the Repurchase Date does not occur within 60 Business Days of the Change of Control. The Indenture provides that a Change of Control occurs (i) upon any merger or consolidation of the Company with or into any Person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the assets of the Company, on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such transaction or transactions, any person or group is or becomes the beneficial owner (all as defined herein), directly or indirectly, of more than 50% of the total voting power in the aggregate normally entitled to vote in the election of directors, managers, or trustees, as applicable, of the transferee or surviving entity, (ii) when any person or group is or becomes the beneficial owner, directly or indirectly, of more than 50% of the total voting power in the aggregate normally entitled to vote in the election of directors of the Company, or (iii) when, during any period of 12 consecutive months after the Issue Date, individuals who at the beginning of any such 12-month period constituted the Board of Directors of the Company (together with any new directors whose election to such Board or whose nomination for election by the 11 stockholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. On or before the Repurchase Date, the Company will (i) accept for payment Notes or portions thereof properly tendered pursuant to the Repurchase Offer, (ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price (together with accrued and unpaid interest) of all Notes or portions thereof so tendered and (iii) deliver to the Trustee the Notes so accepted, together with an Officers' Certificate listing the Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to the Holders of Notes or portions thereof so accepted payment in an amount equal to the Repurchase Price (together with accrued and unpaid interest) thereof, and the Trustee will promptly authenticate and mail or deliver to such Holders new Notes equal in principal amount to the unpurchased portions of the Notes surrendered. Any Note not so accepted will be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Repurchase Offer on or as soon as practicable after the Repurchase Date. The phrase "all or substantially all of the assets of the Company" is likely to be interpreted by reference to applicable state law at the relevant time, and whether those assets have been conveyed will depend on the facts and circumstances existing at such time. As a result, there may be a degree of uncertainty in ascertaining whether a sale, transfer or other conveyance of "all or substantially all of the assets of the Company" has occurred. For purposes of the definition of a Change of Control, (i) the terms person and group have the meanings used for purposes of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Issue Date, whether or not applicable; and (ii) the term beneficial owner has the meaning used in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Issue Date, whether or not applicable, except that a person will be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time or upon the occurrence of certain events. The Change of Control purchase feature of the Notes may make more difficult or discourage a takeover of the Company, and, thus, the removal of incumbent management. The Change of Control purchase feature resulted from negotiations between the Company and the Initial Purchasers. The provisions of the Indenture relating to a Change of Control may not afford the Holders protection in the event of a highly leveraged transaction, reorganization, restructuring, merger, spin-off or similar transaction that may adversely affect Holders, if such transaction does not constitute a Change of Control. In addition, the Company may not have sufficient financial resources available to fulfill its obligation to repurchase the Notes upon a Change of Control or to repurchase other debt securities of the Company or its subsidiaries providing similar rights to the holders thereof. To the extent applicable and if required by law, the Company will comply with Section 14 of the Exchange Act and the provisions of Regulation 14E and any other tender offer rules under the Exchange Act and any other securities laws, rules and regulations that may then be applicable to any offer by the Company to purchase the Notes at the option of Holders upon a Change of Control. The right to require the Company to repurchase Notes as a result of the occurrence of a Change of Control or its exercise could create an event of default under Senior Indebtedness of the Company as a result of which any repurchase could, absent a waiver, be blocked by the subordination provisions of the Notes. See "Subordination." Failure of the Company to repurchase the Notes when required would result in an Event of Default with respect to the Notes whether or not such repurchase is permitted by those subordination provisions. LIMITATION ON MERGER, SALE OR CONSOLIDATION The Indenture provides that the Company will not, directly or indirectly, consolidate with or merge with or into another Person or sell, lease, convey or transfer all or substantially all of its assets (computed on a 12 consolidated basis), whether in a single transaction or a series of related transactions, to another Person or group of affiliated Persons, unless (i) either (a) in the case of a merger or consolidation the Company is the surviving entity or (b) the resulting, surviving or transferee entity is a corporation organized under the laws of the United States, any state thereof or the District of Columbia and expressly assumes by supplemental indenture all of the obligations of the Company in connection with the Notes and the Indenture; and (ii) no Default or Event of Default exists or will occur immediately before or after giving effect on a pro forma basis to such transaction. Upon any consolidation or merger or any sale, lease, conveyance or transfer of all or substantially all of the assets of the Company in accordance with the foregoing, the successor corporation formed by such consolidation or into which the Company is merged or to which such sale, lease, conveyance or transfer is made, will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture with the same effect as if such successor corporation had been named therein as the Company, and the Company will be released from its obligations under the Indenture and the Notes, except with respect to any obligations that arise from or as a result of such transaction. REPORTS Whether or not the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will deliver to the Trustee and to each Holder, within 15 days after it is or would have been required to file the same with the Commission, annual and quarterly consolidated financial statements substantially equivalent to the financial statements that would have been included in reports filed with the Commission if the Company was subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by the Company's certified independent public accountants as such would be required in such reports to the Commission and, in each case, together with a management's discussion and analysis of financial condition and results of operations which would be so required. EVENTS OF DEFAULT AND REMEDIES The Indenture defines an Event of Default as (i) the failure by the Company to pay any installment of interest on, or Liquidated Damages with respect to, the Notes as and when due and payable and the continuance of any such failure for 30 days, (ii) the failure by the Company to pay all or any part of the principal of, or premium, if any, on, the Notes when and as the same becomes due and payable at maturity, upon redemption, by acceleration or otherwise, including, without limitation, pursuant to any Repurchase Offer, (iii) the failure of the Company to perform any conversion of Notes required under the Indenture and the continuance of any such failure for 30 days, (iv) the failure by the Company to observe or perform any other covenant or agreement contained in the Notes or the Indenture and, subject to certain exceptions, the continuance of such failure for a period of 60 days after written notice is given to the Company by the Trustee or to the Company and the Trustee by Holders of at least 25% in aggregate principal amount of the Notes then outstanding, (v) certain events of bankruptcy, insolvency or reorganization in respect of the Company or any of its subsidiaries, (vi) a default in the payment of principal, premium or interest when due that extends beyond any stated period of grace applicable thereto, or an acceleration for any other reason of the maturity, of any Indebtedness of the Company or any of its subsidiaries with an aggregate principal amount in excess of $15 million, or (vii) final unsatisfied judgments not covered by insurance aggregating in excess of $15 million at any one time rendered against the Company or any of its subsidiaries and not stayed, bonded or discharged within 75 days. The Indenture provides that if a Default occurs and is continuing, the Trustee must, within 90 days after the occurrence of such Default, give to the Holders notice of such Default. The Indenture provides that if an Event of Default occurs and is continuing (other than an Event of Default described in (v) of the preceding paragraph), then in every such case, unless the principal of all of the Notes has already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding, by notice in writing to the Company (and to the Trustee if given by 13 Holders) (an "Acceleration Notice"), may declare all principal of the Notes and accrued interest thereon to be due and payable immediately. If an Event of Default described in (v) of the preceding paragraph occurs, all principal of the Notes and accrued interest thereon will be immediately due and payable without any declaration or other act on the part of the Trustee or the Holders. The Holders of not less than a majority in aggregate principal amount of the Notes generally are authorized to rescind such acceleration if all existing Events of Default, other than the non-payment of the principal of, premium, if any, and interest on, and Liquidated Damages with respect to, the Notes that have become due solely because of such acceleration, have been cured or waived. Prior to any declaration of acceleration of the maturity of the Notes, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may waive on behalf of all the Holders any default, except a default in the payment of principal of or interest on any Note not yet cured, or a default with respect to any covenant or provision that cannot be modified or amended without the consent of the Holder of each outstanding Note affected. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable security or indemnity. Subject to all provisions of the Indenture and applicable law, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. AMENDMENTS AND SUPPLEMENTS The Indenture contains provisions permitting the Company and the Trustee to enter into a supplemental indenture for certain limited purposes without the consent of the Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, the Company and the Trustee are permitted to amend or supplement the Indenture or any supplemental indenture or modify the rights of the Holders; provided, that no such modification may, without the consent of each Holder affected thereby: (i) change the Stated Maturity of any Note, reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, extend the time for payment thereof, change the place of payment where, or the coin or currency in which, any Note or any premium or the interest thereon is payable, impair the right to institute suit for the enforcement of any such payment on or after the due date thereof (including, in the case of redemption, on or after the Redemption Date) or the conversion of any Note, reduce the Repurchase Price, or alter the Repurchase Offer or redemption provisions in a manner adverse to the Holders, or (ii) reduce the percentage in principal amount of the outstanding Notes, the consent of whose Holders is required for any such amendment or supplemental indenture provided for in the Indenture, or (iii) adversely affect the right of such Holder to convert Notes, or (iv) modify any of the waiver provisions, except to increase any required percentage or to provide that additional provisions of the Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby. NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICER, DIRECTORS AND EMPLOYEES The Indenture provides that no stockholder, employee, officer or director, as such, past, present or future of the Company or any successor corporation will have any personal liability in respect of the obligations of the Company under the Indenture or the Notes by reason of his, her or its status as such stockholder, employee, officer or director. TRANSFER AND EXCHANGE A Holder may transfer or exchange a Note in accordance with the Indenture. The Company may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Notes selected for redemption. Also, the Company is not required to transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed. 14 The registered holder of a Note may be treated as the owner of it for all purposes. BOOK-ENTRY, DELIVERY AND FORM Except as set forth below, the Notes were initially issued in the form of two registered Notes in global form (together, the "Original Global Note"). The Original Global Note was deposited on the date of the closing of the sale of the Notes by the Company (the "Closing Date") with, or on behalf of, The Depository Trust Company (the "Depositary") and registered in the name of Cede & Co., as nominee of the Depositary. Interests in the Original Global Note are available for purchase only by "qualified institutional buyers," as defined in Rule 144A under the Securities Act. Five Notes that were originally issued to or transferred to institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act were issued in the form of registered definitive securities ("Certificated Notes") at the request of such institutions. In connection with the offering by Selling Securityholders of Notes pursuant to this Prospectus and in accordance with the Securities Act, a registered Note in global form (the "New Global Note") has been deposited on behalf of the Depositary and registered in the name of Cede & Co., as nominee of the Depositary. Upon any sale by a Selling Securityholder of a Note pursuant to this Prospectus and in accordance with the Securities Act and certain procedures of the Depositary, the principal amount of such Note will be included in the New Global Note. The Depositary has advised the Company that it is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. The Company expects that pursuant to procedures established by the Depositary ownership of the Notes evidenced by the Original Global Note or the New Global Note will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interests of Participants), the Participants and the Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own and that security interests in negotiable instruments can only be perfected by delivery of certificates representing the instruments. Consequently, the ability to transfer Notes evidenced by either Global Note will be limited to such extent. So long as the Depositary or its nominee is the registered owner of a Global Note, the Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under the Indenture. Except as provided below, owners of beneficial interests in the New Global Note will not be entitled to have Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Certificated Notes, and will not be considered the owners or holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. As a result, the ability of a person having a beneficial interest in a Note represented by the New Global Note to pledge such interest to persons or entities that do not participate in the Depositary's system, or to otherwise take actions with respect to such interest, may be affected by the lack of a physical certificate evidencing such interest. Neither the Company nor the Trustee has any responsibility or liability for any aspect of the records relating to or payments made on account of the Notes by the Depositary or any Participant or Indirect Participant, or for maintaining, supervising or reviewing any records of the Depositary or any Participant or Indirect Participant relating to such Notes. 15 Payments with respect to the principal of, and premium, if any, or interest on, any Note represented by the New Global Note registered in the name of the Depositary or its nominee on the applicable record date are payable by the Trustee to or at the direction of the Depositary or its nominee in its capacity as the Holder of the New Global Note. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes or any responsibility to immediately credit the accounts of the relevant Participants with any such payment in amounts proportionate to their respective holdings in principal amount of beneficial interests in the New Global Note as shown on the records of the Depositary. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes are governed by standing instructions and customary practice and are the responsibility of the Participants or the Indirect Participants, as the case may be. CERTIFICATED NOTES If (i) the Company notifies the Trustee in writing that the Depositary is no longer willing or able to act as a depositary and the Company is unable to locate a qualified successor within 90 days, or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in definitive form under the Indenture, then, upon surrender by the Depositary of the Global Notes, a Certificated Note will be issued to each person that the Depositary identifies as a beneficial owner of a Note represented by a Global Note. In addition, subject to certain conditions, any person having a beneficial interest in the New Global Note may, upon request to the Trustee, exchange such beneficial interest for Notes in the form of Certificated Notes. Upon any such issuance, the Trustee is required to register such Certificated Notes in the name of such person (or the nominee thereof) and cause the same to be delivered thereto. Neither the Company nor the Trustee will be liable for any delay by the Depositary or any Participant or Indirect Participant in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Depositary for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Notes to be issued). SAME-DAY FUNDS SETTLEMENT AND PAYMENT The Indenture requires that payments in respect of the Notes represented by the New Global Note (including the principal thereof, and premium, if any, or interest thereon) be made by wire transfer of immediately available funds to the accounts specified by the Depositary. With respect to Notes represented by Certificated Notes, the Company will make all payments of principal thereof and premium, if any, or interest thereon by mailing a check to the relevant Holder's registered address. Secondary trading in long-term notes and debentures of corporate issuers is generally settled in clearing-house or next-day funds. In contrast, the Notes represented by the New Global Note will trade in the Depositary's Same-Day Funds Settlement System, and any secondary market trading activity in such Notes will, therefore, be required by the Depositary to be settled in immediately available funds. CERTAIN DEFINITIONS "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. "Capital Stock" means, with respect to any corporation, any and all shares, interests, rights to purchase (other than convertible or exchangeable Indebtedness), warrants, options, participations or other equivalents of or interests (however designated) in stock issued by that corporation. "Indebtedness" of any person means, without duplication, (a) all liabilities and obligations, contingent or otherwise, of any such person, (i) in respect of borrowed money (whether or not the recourse of the lender is to 16 the whole of the assets of such person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures or similar instruments, (iii) representing the balance deferred and unpaid of the purchase price of any property or services, except such as would constitute trade payables to trade creditors in the ordinary course of business that are not more than 90 days past their original due date, (iv) evidenced by bankers' acceptances or similar instruments issued or accepted by banks, (v) for the payment of money relating to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a reimbursement obligation of such person with respect to any letter of credit; (b) all net obligations of such person under Interest Swap and Hedging Obligations; (c) all liabilities of others of the kind described in the preceding clause (a) or (b) that such person has guaranteed or that is otherwise its legal liability and all obligations to purchase, redeem or acquire any Capital Stock; and (d) any and all deferrals, renewals, extensions, refinancings and refundings (whether direct or indirect) of any liability of the kind described in any of the preceding clauses (a), (b) or (c), or this clause (d), whether or not between or among the same parties. "Issue Date" or "Closing Date" means the date of first issuance of the Notes under the Indenture. "Junior Securities" of any person means any Qualified Capital Stock and any Indebtedness of such person that is subordinated in right of payment to the Notes and has no scheduled installment of principal due, by redemption, sinking fund payment or otherwise, on or prior to the Stated Maturity of the Notes. "Senior Indebtedness" of the Company means Indebtedness of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the Company, unless the instrument creating or evidencing such Indebtedness provides that such Indebtedness is not senior or superior in right of payment to the Notes or to other Indebtedness which is pari passu with, or subordinated to, the Notes; provided, that in no event will Senior Indebtedness include (a) Indebtedness of the Company owed or owing to any subsidiary of the Company or any officer, director or employee of the Company or any subsidiary of the Company, (b) Indebtedness to trade creditors, (c) the 5% Debentures, or (d) any liability for taxes owed or owing by the Company. "Stated Maturity" when used with respect to any Note, means September 15, 2005. SELLING SECURITYHOLDERS The following table sets forth information with respect to the Selling Securityholders and the principal amount of Notes owned, all of which may be sold hereunder, and the percentage of all outstanding Notes held by the Selling Securityholders, all as of September 22, 1995:
PRINCIPAL AMOUNT OF NAME OF SELLING NOTES PERCENT OF TOTAL SECURITYHOLDER OWNED OUTSTANDING NOTES --------------- ----------- ----------------- Investors Diversified Services $20,000,000 14.3% Trust Company of the West 12,000,000 8.6 Fidelity Management 10,000,000 7.1 Lynch & Mayer 3,000,000 2.1 Oppenheimer Mgmt-Funds 3,000,000 2.1 Phoenix Insurance 3,000,000 2.1 General Motors Corp. 2,500,000 1.7 Keystone Funds Inc. 2,500,000 1.7 Oak Tree Capital 2,500,000 1.7 Peck Associates 2,500,000 1.7 Aim Investment Mgmt 2,000,000 1.4 Janus Fund 2,000,000 1.4 Massachusetts Investors Trust 2,000,000 1.4
17
PRINCIPAL AMOUNT OF NAME OF SELLING NOTES PERCENT OF TOTAL SECURITYHOLDER OWNED OUTSTANDING NOTES --------------- --------- ----------------- Morgan Guaranty Tr. Co. 2,000,000 1.4 Putnam Management 2,000,000 1.4 Strong Associates 2,000,000 1.4 Allstate Insurance Co. 1,500,000 1.1 Franklin Asset Management 1,500,000 1.1 Vance Sanders 1,500,000 1.1 American Capital Mgmt 1,000,000 0.7 AON Corporation 1,000,000 0.7 Sea Associates 1,000,000 0.7 Delaware Management 1,000,000 0.7 Fiduciary Trust Co Of New York 1,000,000 0.7 Merrill Lynch Asset Management 1,000,000 0.7 New York Life Insurance 1,000,000 0.7 Pacific Mutual--L.A. 1,000,000 0.7 Tennessee State Ret 1,000,000 0.7 Dean Witter Intercapital 1,000,000 0.7 Fred Alger Mgmt-N.Y. 500,000 0.4 Bass Brothers Enterprises Inc. 500,000 0.7 Bank of America Capital Mgmt. 500,000 0.4 Harris Trust & Savings Bank 500,000 0.4 Neuberger Berman 500,000 0.4 Pallisade 500,000 0.4 Rochester Funds 500,000 0.4 Stein Roe & Farnham 500,000 0.4 Value Line 500,000 0.4 B.A.I.I. 3,000,000 2.1 Kuwait Financial Trading Contracting 1,000,000 0.7 Aveco Berne 750,000 0.5 Gulf Investment Partners 500,000 0.4 Vereinsbk Hamburg 500,000 0.4 Maap 400,000 0.3 Abn Amro Bank Zurich 350,000 0.3 Lloyds Geneve 350,000 0.3 Barclays Biarritz 300,000 0.2 Barque Lazard Freres 300,000 0.2 Kantonale Bank Zurich 300,000 0.2 Atag Berne 250,000 0.1 Banque Indosuez 200,000 0.1 B.S.I. (Intl.) 200,000 0.1 Capital Trust 200,000 0.1 Paribas Lugano 200,000 0.1 Rominvest 200,000 0.1 Unione Banche Svizzera 200,000 0.1 United Gulf 200,000 0.1 Banca Commerciale Lugano 100,000 0.1 Clayvard 100,000 0.1 Daiwa Inv. Trust Mgmt 100,000 0.1 Gen De Banque Brux 100,000 0.1 Paribas-Bruxelles (Intl) 100,000 0.1
18
PRINCIPAL AMOUNT OF NAME OF SELLING NOTES PERCENT OF TOTAL SECURITYHOLDER OWNED OUTSTANDING NOTES --------------- ------------ ----------------- Sempione 100,000 0.1 Cincinnati Financial 1,500,000 1.1 Everglades Partners 100,000 0.1 Pacific Capital 100,000 0.1 Mass Mutual Life Insurance Co. 3,000,000 2.1 Gen Capital 1,500,000 1.1 Royal Trust 1,300,000 0.9 Templeton Investment Counsel 1,000,000 0.7 Sahuaro Comm. 100,000 0.1 Calamos 1,500,000 1.1 State of Montana 1,500,000 1.1 Koch Industries 500,000 0.4 Camden Asset 1,500,000 1.1 Sage Capital 1,000,000 0.7 Hermes Capital 250,000 0.2 Froley Revx Investments 3,000,000 2.1 Nicholas Applegate Capital Mgmt 3,000,000 2.1 Desai Capital Mgmt 1,500,000 1.1 Orion 1,500,000 1.1 Solomon 1,500,000 1.1 Bass Brothers 1,000,000 0.7 Hull 1,000,000 0.7 Society Nat'l. Bk. 1,000,000 0.7 Baker Nye 500,000 0.4 Highbridge 500,000 0.4 Latterman 500,000 0.4 Paloma 500,000 0.4 Simon 500,000 0.4 Lipco Partners 350,000 0.3 Firebird 250,000 0.2 Forest Hills 250,000 0.2 Gabelli Asset Management 250,000 0.2 Q Investments 250,000 0.2 Carret & Co. 100,000 0.1 Gordon Mgt 100,000 0.1 Lindner Dividend Fund Inc. 5,200,000 3.6 Willougby Houn Harris & Rentner 300,000 0.2 Mctash & Hill 100,000 0.1 ------------ Total $140,000,000 ============
The preceding table has been prepared based upon information furnished to the Company by the Depositary, the Trustee or by or on behalf of Selling Securityholders. Other than as a result of the ownership of Notes, none of the Selling Securityholders listed above had any material relationship with the Company within the three-year period ending on the date of this Prospectus. Because Selling Securityholders may offer all or some of the Notes that they hold and/or Conversion Shares pursuant to the offering contemplated by this Prospectus, and because there are currently no agreements, 19 arrangements or understandings with respect to the sale of any of the Notes or Conversion Shares by the Selling Securityholders, no estimate can be given as to the principal amount of Notes or the number of Conversion Shares that will be held by the Selling Securityholders after completion of this offering. See "Plan of Distribution." PLAN OF DISTRIBUTION The Company will not receive any of the proceeds from this offering. The Notes and Conversion Shares offered hereby may be sold hereunder from time to time by or for the account of any of the Selling Securityholders. The Notes and the Conversion Shares may be sold hereunder directly to purchasers by Selling Securityholders, in negotiated transactions; by or through brokers or dealers in ordinary brokerage transactions or transactions in which a broker solicits purchasers; in block trades in which a broker or dealer will attempt to sell Notes or Conversion Shares as agent but may position and resell a portion of the block as a principal; in transactions in which a broker or dealer purchases as a principal for resale for its own account; or through underwriters or agents. Notes or Conversion Shares may be sold at fixed offering prices, which may be changed, at the prevailing market prices at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Any brokers, dealers, underwriters or agents may arrange for others to participate in any such transaction and may receive compensation in the form of discounts, commissions or concessions from the Selling Securityholders and/or the purchasers of Notes or Conversion Shares. Each Selling Securityholder will be responsible for payment of any and all commissions to brokers. To the extent required, the name of any such broker, dealer, agent or underwriter and any applicable commissions with respect to a particular offer, including required information pertaining to that offer, will be set forth in an accompanying Prospectus Supplement. The aggregate proceeds to the Selling Securityholders from the sale of the Notes and Conversion Shares offered by the Selling Securityholders hereby will be the purchase price of such Notes and Conversion Shares less any commissions. The Company has been advised by DLJ and PaineWebber, the Initial Purchasers, that DLJ and PaineWebber are making and currently intend to continue making a market in the Notes. However, DLJ and PaineWebber are not obligated to make such a market and any market-making activity may be discontinued at any time without notice. There can be no assurance that an active market for the Notes will develop or continue. The Company does not intend to list the Notes on any national securities exchange or to seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Common Stock is listed and principally traded on the NYSE. In order to comply with the securities laws of certain states, if applicable, the Notes and Conversion Shares will be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the Notes and Conversion Shares may not be sold unless they have been registered or qualified for sale in such states or an exemption from the applicable registration or qualification requirement is available and is complied with. The Selling Securityholders and any brokers, dealers, agents or underwriters that participate with the Selling Securityholders in the distribution of the Notes or Conversion Shares may be deemed to be "underwriters" within the meaning of the Securities Act, in which event any commissions received by such brokers, dealers, agents or underwriters and any profit on the resale of the Notes or Conversion Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Notes or the Conversion Shares offered hereby may not simultaneously engage in market-making activities with respect to either the Notes or the Conversion Shares for a period of nine business days (two business days in the case of Conversion Shares) prior to the commencement of such distribution. In addition, and without limiting the foregoing, each Selling Securityholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Rules 10b-2, 10b-5, 10b-6 and 10b-7, 20 which provisions may limit the timing of purchases and sales of Notes or Conversion Shares by the Selling Securityholders. Any securities covered by this Prospectus which qualify for sale pursuant to Rule 144 or Rule 144A under the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this Prospectus. There is no assurance that any Selling Securityholder will sell any or all of the Notes or Conversion Shares described herein, and any Selling Securityholder may transfer, devise or gift such securities by other means not described herein. The Notes were originally sold to DLJ and PaineWebber in September 1995 in a private placement. The Company agreed to indemnify and hold DLJ and PaineWebber harmless against certain liabilities under the Securities Act that could arise in connection with the sale of the Notes by DLJ and PaineWebber. The Company and the Selling Securityholders are obligated to indemnify each other against certain liabilities arising under the Securities Act. The Company will use its best efforts to keep the Registration Statement effective until September 18, 1998, three years after the date of original issue of the Notes, or until the Registration Statement is no longer required for transfers of Notes or Conversion Shares. The Company is permitted to suspend the use of this Prospectus in connection with sales of Notes and Conversion Shares by holders during certain periods of time under certain circumstances relating to pending corporate developments and public filings with the Commission and similar events. Expenses of preparing and filing the Registration Statement and all post-effective amendments will be borne by the Company. LEGAL MATTERS The validity of the securities offered hereby will be passed upon for the Company by Damian C. Georgino, Vice President, General Counsel and Secretary of the Company. Mr. Georgino presently holds 100 shares of Common Stock and options granted under the Company's 1991 Employee Stock Option Plan to purchase an aggregate of 15,000 shares of Common Stock. 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 have been incorporated herein by reference in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, which report is incorporated herein by reference, 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 said firm as experts in accounting and auditing. 21 =============================================================================== NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. --------------- TABLE OF CONTENTS
PAGE ---- Available Information...................................................... 2 Incorporation of Certain Documents by Reference........................... 2 The Company................................................................ 3 Risk Factors............................................................... 3 Ratio of Earnings to Fixed Charges......................................... 6 Use of Proceeds............................................................ 6 Description of the Notes................................................... 6 Selling Securityholders.................................................... 17 Plan of Distribution....................................................... 20 Legal Matters.............................................................. 21 Independent Certified Public Accountants................................... 21
=============================================================================== =============================================================================== $140,000,000 [LOGO OF U.S. FILTER] UNITED STATES FILTER CORPORATION 6% CONVERTIBLE SUBORDINATED NOTES DUE 2005 AND SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF --------------- PROSPECTUS --------------- JULY 11, 1996 =============================================================================== -----END PRIVACY-ENHANCED MESSAGE-----