<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[_] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
UNITED STATES FILTER CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[USF Logo]
UNITED STATES FILTER CORPORATION
40-004 Cook Street
Palm Desert, California 92211
______________________________________________________________________________
To U.S. Filter Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of U.S. Filter
stockholders. We will meet on Tuesday, August 6, 1996 at 9:30 a.m., Pacific
Daylight Time, in the Indian Wells Resort Hotel in Indian Wells, California.
I urge you to vote your shares by proxy, even if you plan to attend the
meeting. After you read this proxy statement, indicate on the proxy card the
way you want to have your shares voted. Then date, sign and mail the proxy card
in the postage-paid envelope that is provided.
Let us know if you plan to attend the meeting by marking the appropriate
space on the proxy card. We will then send you an admission card about a week
before the meeting.
Sincerely,
[Signature]
Richard J. Heckmann
Chairman of the Board,
Chief Executive Officer and
President
June 28, 1996
<PAGE>
UNITED STATES FILTER CORPORATION
-----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 6, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of United States Filter Corporation (the "Company") will be held at
the Indian Wells Resort Hotel, 76661 Highway 111, Indian Wells, California 92210
on Tuesday, August 6, 1996 at 9:30 a.m., Pacific Daylight Time, for the
following purposes, as more fully described in the attached Proxy Statement:
1. to elect three directors, each for a term of three years;
2. to approve the Company's 1991 Employee Stock Option Plan, as amended and
restated;
3. to approve the Company's 1991 Directors Stock Option Plan, as amended and
restated;
4. to increase the number of authorized shares of the Company's Common Stock
from 75,000,000 to 150,000,000;
5. to ratify the appointment of KPMG Peat Marwick LLP as independent certified
public accountants of the Company;
and to consider any other matters that may properly come before the meeting or
any adjournment of the Annual Meeting.
The Board of Directors has fixed the close of business on June 25, 1996 as the
record date for determining the stockholders entitled to notice of and to vote
at the Annual Meeting or at any adjournment thereof. A complete list of the
stockholders entitled to vote at the Annual Meeting will be open to the
examination of any stockholder during ordinary business hours for a period of at
least ten days prior to the Annual Meeting at the executive offices of the
Company, 40-004 Cook Street, Palm Desert, California 92211.
You are cordially invited to attend the Annual Meeting in person. In order to
ensure your representation at the meeting, however, please promptly complete,
date, sign and return the enclosed proxy in the accompanying envelope. If you
should decide to attend the Annual Meeting and vote your shares in person, you
may revoke your proxy at that time.
By Order of the Board of Directors
Damian C. Georgino
Secretary
June 28, 1996
<PAGE>
UNITED STATES FILTER CORPORATION
40-004 Cook Street
Palm Desert, California 92211
-----------------------------
PROXY STATEMENT
June 28, 1996
-----------------------------
PROXY SOLICITATION AND VOTING INFORMATION
The accompanying proxy is solicited by the Board of Directors of United States
Filter Corporation (the "Company") for use at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held on Tuesday, August 6, 1996 at the Indian Wells
Resort Hotel, 76661 Highway 111, Indian Wells, California 92210 at 9:30 a.m.,
Pacific Daylight Time and at any adjournment of the Annual Meeting. These
proxies will be voted if properly signed, received by the Secretary of the
Company prior to the close of voting at the meeting and not revoked. If no
direction is given in the proxy, it will be voted "FOR" (i) the election of the
directors nominated; (ii) the proposal to approve the Company's 1991 Employee
Stock Option Plan, as amended and restated (the "Amended Employee Plan
Proposal"); (iii) the proposal to approve the Company's 1991 Directors Stock
Option Plan, as amended and restated (the "Amended Directors Plan Proposal");
(iv) the proposal to increase the number of authorized shares of the Company's
Common Stock from 75,000,000 to 150,000,000 (the "Authorized Capital
Amendment"); and (v) the ratification of the appointment of KPMG Peat Marwick
LLP as the Company's independent certified public accountants. With respect to
any other item of business that may come before the Annual Meeting, the proxy
holders will vote in accordance with their best judgment.
A stockholder who has returned a proxy may revoke it at any time before it is
voted at the meeting by delivering a revised proxy, by voting by ballot at the
Annual Meeting, or by delivering a written notice withdrawing the proxy to the
Company's Secretary. This notice may be mailed to the Secretary at the address
set forth above or may be given to the judge of election at the Annual Meeting.
This Proxy Statement, together with the accompanying proxy, is first being
mailed to stockholders on or about June 28, 1996.
Holders of record of Common Stock at the close of business on June 25, 1996
are entitled to vote at the Annual Meeting. On that date 2_,___,___ shares of
Common Stock were outstanding. The presence, in person or by proxy, of
stockholders entitled to cast at least a majority of the votes entitled to be
cast by all stockholders will constitute a quorum for the transaction of
business at the Annual Meeting. Stockholders are entitled to cast one vote per
share on each matter presented for consideration and action at the Annual
Meeting.
On June 4, 1996 the Company announced a three-for-two split of its Common
Stock. The split will be effected in the form of a stock dividend payable on
July 15, 1996 to stockholders of record at the close of business on June 14,
1996 (the "Stock Split"). Except as otherwise specified, all share numbers used
herein are stated on a pre-Stock Split basis.
Abstentions may be specified as to all proposals to be brought before the
Annual Meeting, other than the election of directors. Under the rules of the
New York Stock Exchange, Inc. (the "NYSE"), brokers holding shares for customers
have authority to vote on certain matters when they have not received
instructions from the beneficial owners, and do not have such authority as to
certain other matters (so-called "broker non-votes"). The NYSE has advised the
Company that member firms of the NYSE may vote without specific instruction from
beneficial owners on the election of directors and on each of the proposals to
be brought before the Annual Meeting.
<PAGE>
Approval of the Authorized Capital Amendment will require the affirmative vote
of the holders of at least a majority of the outstanding shares of Common Stock.
Approval of the other proposals to be brought before the Annual Meeting (not
including the election of directors) will require the affirmative vote of at
least a majority in voting interest of the stockholders present in person or by
proxy at the Annual Meeting and entitled to vote thereon. As to those proposals,
if a stockholder abstains from voting certain shares it will have the effect of
a negative vote, but if a broker indicates that it does not have authority to
vote certain shares, those shares will not be considered present and entitled to
vote with respect to that proposal and therefore will have no effect on the
outcome of the vote. With regard to the election of directors, votes may be cast
in favor or withheld. The three persons receiving the highest number of
favorable votes will be elected as directors of the Company.
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of ten members, divided into
three classes. The terms of office of the three classes of directors (Class I,
Class II and Class III) end in successive years. The terms of the Class III
directors expire this year and their successors are to be elected at the Annual
Meeting for a three-year term expiring in 1999. The terms of the Class I and
Class II directors do not expire until 1997 and 1998, respectively.
The accompanying proxy will be voted for the election of these nominees,
unless authority to vote for one or more nominees is withheld. In the event
that any of the nominees is unable or unwilling to serve as a director for any
reason (which is not anticipated), the proxy will be voted for the election of
any substitute nominee designated by the Board of Directors.
All directors were previously elected by the Company's stockholders, except
for Mr. Hillas and Mr. Quayle, who were elected by the Board of Directors in
February 1996 to fill two vacancies resulting from the resignations of Mr. J.
Atwood Ives and Mr. James R. Bullock in November 1995.
<TABLE>
<CAPTION>
Class III Directors--Nominees for Terms to Expire in 1999
<S> <C>
James E. Clark Mr. Clark was President of Western Operations for Prudential Insurance
Age 67 from 1978 to June 1990. Since June 1990, he has been a consultant and
Director since 1990 a private investor. Mr. Clark is also Chairman of Asian-American
Communication Company, Inc. and a director of Asian American Association,
Member of the Audit Committee Inc., a joint venture with Sprint, and Durotest Corporation. He is also a
and the Compensation trustee of the Yul Brynner Foundation.
Committee
Richard J. Heckmann Mr. Heckmann was elected Chairman of the Board of Directors, Chief
Age 52 Executive Officer and President of the Company on July 16, 1990. Mr.
Director since 1990 Heckmann was a Senior Vice President at Prudential-Bache Securities in
Rancho Mirage, California from January 1982 to August 1990. He
Chairman of the Nominating joined the U.S. Small Business Administration in 1977 and served as
Committee Associate Administrator for Finance and Investment from 1978 to 1979.
Prior thereto he was founder and Chairman of the Board of Tower
Scientific Corporation, a manufacturer of custom prosthetic devices,
which was sold to Hexcel Corporation in 1977. Mr. Heckmann is a
member of the management board of Treated Water Outsourcing
("TWO"), a Nalco/U.S. Filter Joint Venture. He is also a director of
USA Waste Services, Inc.
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C>
Robert S. Hillas Mr. Robert S. Hillas was graduated from Dartmouth University in 1970
Age 47 with a Bachelor of Arts degree in Mathematics, summa cum laude, and
Director since 1996 was graduated from Stanford University with a Masters of Business
Administration degree in 1972. Mr. Hillas has served as a Managing
Director of E.M. Warburg, Pincus & Co., Inc., a private investment
firm, since 1993. Previously, Mr. Hillas was a partner of DSV
Management Ltd., a venture capital investment firm, and its affiliated
venture capital partnerships. Mr. Hillas is currently a director of
Advanced Technology Materials, Inc., Continental Recycling, Inc.,
EarthGro, Inc., HealthVISION, Inc., and Transition Systems, Inc. Mr.
Hillas was previously associated with Warburg, Pincus from 1972 until
he joined DSV Management Ltd. in 1981.
<CAPTION>
Class I Directors--Present Term Expires in 1997
<S> <C>
John L. Diederich Mr. Diederich has been Executive Vice President--Chairman's Counsel
Age 59 for Aluminum Company of America ("Alcoa") since August 1991.
Director since 1993 Prior to assuming his present position, he had been Group Vice
President--Alcoa Metals and Chemicals since 1986 and a Vice
Member of the Compensation President of Alcoa since 1982. Mr. Diederich is a trustee of Shadyside
Committee Hospital and a director of Alcoa Foundation.
Tim L. Traff Mr. Traff was first appointed a Senior Vice President of the Company
Age 37 on December 8, 1992, having previously been Vice
Director since 1990 President--Corporate Development since March 1992. He had been
President of Traff Capital Management, a money management
Member of the Nominating company, since 1989. From 1985 to 1988 he was an analyst at SIT
Committee Investment, a money management company. Mr. Traff received a B.S.
degree in business economics from the University of Minnesota.
C. Howard Wilkins, Jr. Mr. Wilkins served as the United States Ambassador to the Netherlands
Age 58 from June 1989 to July 10, 1992. Prior to being Ambassador and
Director since 1992 thereafter, Mr. Wilkins has been Chairman of the Board of Maverick
Restaurant Corp., which owns and operates restaurants under franchise
Member of the Compensation agreements, and Maverick Development Corp. He was Vice Chairman
Committee of Pizza Hut, Inc. until 1975. From 1981 to 1983 Mr. Wilkins served
as a director of U.S. Synthetic Fuels Corporation. Mr. Wilkins
received a B.A. degree from Yale University in 1960.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Class II Directors--Present Term Expires in 1998
<S> <C>
J. Danforth Quayle Mr. Quayle was the forty-fourth Vice President of the United States.
Age 49 He was graduated from DePaul University in 1969 with a B.A. degree
Director since 1996 in political science and from Indiana University in 1974 with a law
degree. In 1976, Mr. Quayle was elected to Congress and in 1980 to
the United States Senate, being reelected in 1986 and serving until
1989. As Vice President, he headed the Competitiveness and Space
Councils for the President. Since leaving office in January 1993, Mr.
Quayle served as Chairman of Circle Investors, Inc. (a private financial
services and insurance holding company), and BTC, Inc. (a private
company through which he operates certain of his personal business
interests). He is a director of Amtran, Inc., Central Newspapers, Inc.
and American Standard Companies, Inc. and is a member of the Board
of Trustees of The Hudson Institute.
Arthur B. Laffer Dr. Laffer has been Chairman and Chief Executive Officer of A.B.
Age 55 Laffer, V.A. Canto & Associates, an economic research and financial
Director since 1991 firm (and its predecessor, A.B. Laffer Associates), since founding the
firm in 1979. He is also Chairman of Calport Asset Management, Inc.,
Chairman of the Audit Committee a money management firm. Dr. Laffer has been Chief Executive
Officer of Laffer Advisors, Inc., a registered broker-dealer and
investment advisor, since 1981. He was the Charles B. Thornton
Professor of Business Economics at the University of Southern
California from 1976 through 1984, Distinguished University Professor
at Pepperdine University from October 1984 to September 1987, and
was a member of President Reagan's economic policy advisory board.
Dr. Laffer received a B.A. degree in economics from Yale University
and later received an M.B.A. degree and a Ph.D. in economics from
Stanford University. He is a director of Mastec, Inc., Nicholas
Applegate Mutual and Growth Equity Funds and Value Vision, Inc.
Alfred E. Osborne, Jr. Dr. Osborne is Director of the Harold Price Center for Entrepreneurial
Age 51 Studies and Associate Professor of Business Economics at the John E.
Director since 1991 Anderson Graduate School of Management at UCLA. He has been on
the UCLA faculty since 1972. Dr. Osborne was educated at Stanford
Member of the Audit Committee University, where he earned a B.S. degree in electrical engineering, an
M.B.A. in finance, a master's degree in economics and a Ph.D. in
business-economics. He is a director of Greyhound Lines, Inc.,
Nordstrom, Inc., ReadiCare, Inc., SEDA Specialty Packaging
Corporation and The Times Mirror Company.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Michael J. Reardon Mr. Reardon was appointed Executive Vice President of the Company
Age 42 in June of 1995, having previously served as Executive Vice President
Director since 1990 and Chief Operating Officer, and prior to that as the Chief Financial
Officer and Secretary of the Company. From May 1995 to April 1996,
Member of the Nominating Mr. Reardon served as president of Arrowhead Industrial Water, Inc.
Committee He became President and General Manager of Illinois Water Treatment,
Inc., a subsidiary of the Company, in March 1992. From 1981 to July
1990 he was Chief Financial Officer of The C&C Organization, a
company engaged in restaurant ownership, management and
construction. Mr. Reardon is a certified public accountant and was a
senior auditor with Arthur Anderson & Co. from 1978 to 1981. Mr.
Reardon is a member of the management board of TWO. In June
1978, Mr. Reardon received a B.S. in Business Administration from
California State Polytechnic University, and in 1995 attended the Kellog
Management Institute, Northwestern University.
</TABLE>
Meetings and Committees of the Board. During the fiscal year ended March 31,
1996 ("Fiscal 1996"), the Board of Directors met on six occasions and also took
action three times by written consent and once by telephonic conference call.
The Board has three standing committees, the Audit, Compensation and Nominating
Committees. Each director attended all the Board and applicable Board Committee
meetings.
The Audit Committee reviews the performance of the Company's independent
public accountants and makes recommendations to the Board concerning the
selection of independent public accountants to audit the Company's financial
statements. The Audit Committee also reviews the audit plans, audit results and
findings of the internal auditors and the independent accountants, and reviews
the Company's systems of internal control. Members of the Audit Committee meet
regularly with the Company's management and independent public accountants to
discuss the adequacy of internal accounting controls and the financial
accounting process. The Company's independent accountants have free access to
the Audit Committee, without management's presence. The Audit Committee held
one meeting in Fiscal 1996.
The Compensation Committee reviews and determines the compensation of the
Company's officers (including salary and bonus), authorizes or approves any
contract for remuneration to be paid after termination of any officer's regular
employment, and performs specified functions under the Company's various
compensation plans, including the 1991 Employee Stock Option Plan and the 1991
Directors Stock Option Plan. The Compensation Committee reviews, but is not
required to approve, the participation of officers in the Company's other
benefit programs for salaried employees. The Compensation Committee held three
meetings and took action by written consent on seven occasions in Fiscal 1996.
The Nominating Committee reviews the performance of incumbent directors and
the qualifications of nominees proposed for election to the Board and makes
recommendations to the Board with respect to nominations for director. In
recommending candidates for the Board of Directors, the Nominating Committee
will seek individuals having experience in fields applicable to the Company's
goals and functions. Stockholders who wish to suggest qualified candidates
should write to the Secretary of the Company, stating the qualifications of such
persons for consideration by the Nominating Committee. The Nominating Committee
held two meetings in Fiscal 1996.
Compensation of Directors. Directors receive no cash compensation for their
services as directors, although they are reimbursed for out-of-pocket expenses
incurred in attending meetings. Each director who is not an employee of the
Company participates in the Company's 1991 Directors Stock Option Plan, other
than Mr. Hillas, who has chosen not to participate. That plan was amended and
restated in February 1996 to provide that directors of the Company who are
neither officers nor employees of the Company or its subsidiaries are granted in
April of each year options to purchase 12,000 shares of the Company's Common
Stock at fair market value, as determined on the date of the grant. This change
was unanimously adopted by the Board in order to more closely align the
directors interests with those of the Company's stockholders. See "Proposal to
Approve the 1991 Directors Stock Option Plan, As Amended and Restated."
-5-
<PAGE>
Prior to the amendment and restatement, the 1991 Directors Stock Option Plan
provided that non-employee directors of the Company were to be granted in April
of each year options to purchase 8,000 shares of the Company's Common Stock at
an exercise price equal to the higher of (i) $2.00 less than the fair market
value of the Common Stock or (ii) 60% of that fair market value, in both
instances determined on the date of grant. During Fiscal 1996, options to
purchase 12,000 shares of Common Stock were granted under this plan to each of
the Company's non-employee directors on April 3, 1995 at an exercise price of
$14.2325 per share, reflecting an adjustment based on the three-for-two split of
the Company's Common Stock paid in December 1994. In addition, Mr. Quayle was
granted an option to purchase 6,000 shares of Common Stock upon his initial
election to the Board of Directors in February 1996, in accordance with the
terms of the plan, as amended and restated.
SECURITY OWNERSHIP
Management
The following table sets forth the beneficial ownership of the Company's
Common Stock as of June 5, 1996 by each director, nominee for director and the
executive officers named in the Summary Compensation Table, and by all directors
and executive officers as a group. Unless otherwise indicated, the holders of
all shares shown in the table have sole voting and investment power with respect
to such shares.
<TABLE>
<CAPTION>
Name Options Held(1) Shares Owned Percent of Class(2)
- ---- --------------- ------------ -------------------
<S> <C> <C> <C>
Richard J. Heckmann(3) 259,800 463,772 2.5%
Michael J. Reardon(4) 109,380 24,924 *
Tim L. Traff 48,750 110,347 *
Nicholas C. Memmo(5) 51,250 12 *
Thierry Reyners 22,500 0 *
Kevin L. Spence 52,500 0 *
James E. Clark 48,000 36,000 *
John L. Diederich 42,000 1,500 *
Robert S. Hillas(6) 0 1,813,079 6.2
Arthur B. Laffer 48,000 23,250 *
Alfred E. Osborne, Jr. 48,000 24,350 *
J. Danforth Quayle 18,000 0 *
C. Howard Wilkins, Jr. 48,000 51,000 *
All Directors and Executive 878,180 2,582,574 11.5
Officers as a Group (18 persons)
- --------
</TABLE>
(1) Includes presently exercisable options and options exercisable within 60
days of June 5, 1996. All options were granted pursuant to the Company's
1991 Employee Stock Option Plan or the Company's 1991 Directors Stock Option
Plan.
(2) An asterisk (*) indicates ownership of less than 1% of the Common Stock.
(3) Includes 12,700 shares held by Mr. Heckmann's wife and by Mr. Heckmann as
custodian for his children as to which Mr. Heckmann may deemed to have
indirect beneficial ownership.
(4) Includes 1,800 shares held in a trust for the benefit of Mr. Reardon's
father-in-law. As trustee, Mr. Reardon has voting and investment power with
respect to the shares held by the trust and may be deemed to have indirect
beneficial ownership of them. Mr. Reardon disclaims beneficial ownership of
such shares.
(5) Constitutes 12 shares held by Mr. Memmo's wife as custodian for his minor
children.
-6-
<PAGE>
(6) Constitutes 1,813,079 shares held by Warburg, Pincus Capital Company, L.P.
of which Mr. Hillas is a General Partner. Mr. Hillas disclaims beneficial
ownership of such shares.
Other Beneficial Owners
Warburg, Pincus Capital Company, L.P., 466 Lexington Avenue, New York, New
York 10017, a parent holding company, reported to the United States Securities
and Exchange Commission (the "SEC") that it and its affiliates (including
Warburg, Pincus & Co., E.M. Warburg, Pincus & Co., Inc. and Warburg, Pincus
Ventures, Inc.) beneficially owned 1,813,079 shares, or approximately 6.2% of
the Company's Common Stock as of June 5, 1996. It reported shared power to
dispose of all of these shares and shared voting power over all of the shares.
Laidlaw, Inc. ("Laidlaw"), 3221 North Service Road, Burlington, Ontario,
Canada L7R 3Y8, a parent holding company, reported to the SEC that Laidlaw One,
Inc., a wholly-owned subsidiary, beneficially owned 2,965,829 shares, or
approximately 10.2%, of the Company's Common Stock as of June 5, 1996. It
reported sole voting power over and sole power to dispose of all of these
shares. For the period ending August 31, 2000, and subject to certain
exceptions, Laidlaw has agreed to vote all of its shares for the Board of
Directors' nominees for election to the Board and on all other matters in the
same proportion as the votes cast by other holders of voting securities. In
November 1995 Laidlaw One, Inc. issued in a public offering 5 3/4% Exchangeable
Notes due 2000 which, pursuant to their terms, may be repaid at maturity in cash
or by delivery, in lieu of cash, of the shares of the Company's Common Stock
owned by Laidlaw.
The TCW Group, Inc., 865 South Figueroa Street, Los Angeles, California
90017, a parent holding company, reported to the SEC that it beneficially owned
1,672,600 shares, or approximately 5.4%, of the Company's Common Stock, which it
has the right to acquire upon conversion of its holdings of the Company's 5%
Convertible Subordinated Debentures due 2000 and 6% Convertible Subordinated
Notes due 2005. It reported sole voting power over and sole power to dispose of
all of these shares.
Compliance With Reporting Requirements
Under the securities laws of the United States, the Company's directors, its
executive officers and any persons beneficially holding more than ten percent of
the Company's Common Stock are required to report their ownership of the
Company's Common Stock and any changes in that ownership to the SEC and the
NYSE. Specific due dates for these reports have been established and the
Company is required to report in this proxy statement any failure to file by
these dates. All of these filing requirements were satisfied, except that the
Form 5's required to be filed for each of the Company's executive officers and
directors, other than Messrs. Heckmann and Hillas, with respect to Fiscal 1996
were filed after the specified due date. Each of these reports related to a
single stock option grant, except that the reports filed by Messrs. Clark,
Laffer, Osborne and Wilkins also related to a stock option exercise. In making
these statements, the Company has relied on copies of the reports that its
officers and directors have filed with the SEC.
-7-
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation information for the three fiscal
years ended March 31, 1996 for the Company's Chief Executive Officer and for the
four other most highly compensated executive officers of the Company for Fiscal
1996 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------- --------------
Securities
Fiscal Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options(1) Compensation (2)
- --------------------------- ---- ------- ------- ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Heckmann 1996 414,731 150,000 -- 150,000 --
Chairman, Chief Executive 1995 300,000 150,000 -- 60,000 5,551
Officer and President 1994 300,000 150,000 -- 60,000 4,432
Michael J. Reardon 1996 184,631 -- -- 15,000 4,714
Executive Vice President 1995 150,000 25,000 -- 15,000 3,983
1994 125,000 30,000 -- 22,500 1,252
Thierry Reyners 1996 190,000 -- -- 15,000 --
Executive Vice President-- 1995 167,236 -- -- 15,000 --
European Group 1994 44,017(3) -- -- 15,000 --
Nicholas C. Memmo 1996 191,585 37,500 -- 17,500 5,014
Executive Vice President-- 1995 135,000 20,000 -- 22,500 4,389
Process Water Group 1994 122,538 20,000 -- 22,500 2,918
Kevin L. Spence 1996 164,774 41,500 -- 15,000 4,865
Vice President and Chief 1995 145,000 20,000 -- 15,000 4,453
Financial Officer 1994 110,000 20,000 -- 15,000 4,421
- --------------
</TABLE>
(1) Options granted pursuant to the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock. Option grants during Fiscal 1996 are
described in greater detail below.
(2) Represents the Company's 50% matching contribution to the Company's 401(k)
Plan.
(3) For the period after first becoming employed by the Company.
-8-
<PAGE>
Option Grants in Last Fiscal Year
The table below sets forth information with respect to stock options granted
to the Named Executive Officers in Fiscal 1996 under the Company's 1991 Employee
Stock Option Plan. The options listed below are included in the Summary
Compensation Table above.
<TABLE>
<CAPTION>
% of Total
Number of Options
Securities Granted to Potential Realizable Value at
Underlying Employees Assumed Rates of Stock
Options in Fiscal Exercise Expiration Price Appreciation for
Name Granted(1) Year Price ($/Sh) Date Option Term(2)
- --------------------- ------------- ----------- ------------ ---------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
5% 10%
------------ ------------
Richard J. Heckmann 150,000 23.0% $15.06 04/25/05 $ 1,420,673 $ 3,600,264
Michael J. Reardon 15,000 2.3 20.75 11/16/05 195,743 496,052
Thierry Reyners 15,000 2.3 20.75 11/16/05 195,743 496,052
Nicholas C. Memmo 17,500 2.7 20.75 11/16/05 228,367 578,728
Kevin L. Spence 15,000 2.3 20.75 11/16/05 195,743 496,052
- -----------------------------------------------------------------------------------------------------------
Increase in Value to All Stockholders (3) $317,221,839 $803,902,423
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options granted pursuant to the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock. The exercise price may be paid in cash or
in shares of the Company's Common Stock. Of the options granted to Messrs.
Reardon, Reyners, Memmo and Spence, 25% are vested and the remaining options
will vest in equal increments on November 17, 1996, 1997 and 1998. Of the
options granted to Mr. Heckmann, 50% are vested and the remaining options
will vest in equal increments on April 3, 1997 and 1998.
(2) Calculated over a ten-year period representing the life of the options.
(3) Represents the increase in value to all stockholders assuming the stock
gains 5% or 10% in value per year, compounded over a ten-year period,
equivalent to the life of the options granted to the Named Executive
Officers. Calculated using a Common Stock price of $20.75, the closing
price on November 17, 1995 on the NYSE, which is the exercise price of
substantially all of the options granted in Fiscal 1996, and the total
weighted average number of shares of Common Stock outstanding in Fiscal
1996.
Option Exercises in Fiscal 1996 and Fiscal Year End Option Value
The table below sets forth information with respect to stock options exercised
by the named Executive Officers in Fiscal 1996 and the number of unexercised
options held by such persons on March 31, 1996 on a pre-tax basis:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Acquired On Underlying Unexercised In-the-Money Options at
Exercise of Options at 3/31/96 3/31/96
Options(1) Value Realized Exercisable/Unexercisable Exercisable/Unexercisable(2)
--------------------- -------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Richard J. Heckmann 32,700 $713,500 222,300/157,500 $3,498,483/2,110,466
Michael J. Reardon 0 0 105,630/28,125 1,963,992/297,342
Thierry Reyners 0 0 18,750/26,250 263,124/272,498
Nicholas C. Memmo 18,750 257,343 46,875/34,375 643,594/372,497
Kevin L. Spence 0 0 48,750/26,250 706,250/272,498
- ------------
</TABLE>
(1) Options granted pursuant to the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock.
-9-
<PAGE>
(2) The dollar value reported is based on the difference between the exercise
price of the outstanding option and the closing price of the Company's
Common Stock on the NYSE on March 29, 1996, $28.00 per share. The closing
price of the Company's Common Stock on June 5, 1996 on the NYSE was $ 34 1/4
per share.
Retirement Program
Effective April 1, 1995, the Company established a non-qualified defined
benefit pension plan for its senior executives, including Messrs. Heckmann,
Reardon, Memmo and Spence. Under this plan (the "Retirement Program"), the
executive becomes entitled to receive from the Company at age 60 an annual
retirement income, payable for 15 years, equal to 50% of the executive's final
five year average compensation. Earnings covered by the Retirement Program
include salaries and incentive compensation. Benefits accrue on a percentage
basis over the number of years of service of the executive from his date of hire
with the Company to the attainment of age 60. The benefit accrued vests
commencing after five years of service, 50% at that time, and 10% each year
thereafter. A reduced benefit is payable at age 55 and if the executive's
employment with the Company terminates before age 55, a deferred benefit, to the
extent vested, is payable at or after age 55 based upon the executive's accrued
benefit prior to termination.
The following are the benefits payable per year for 15 years under the
Retirement Program for Messrs. Heckmann, Reardon, Memmo and Spence, assuming
that their covered compensation increases at a rate of 5% annually and that
their employment with the Company continues until age 60: Mr. Heckmann $379,298;
Mr. Reardon $201,993; Mr. Memmo $370,290 and Mr. Spence $261,242.
All benefits under the Retirement Program are payable out of the general
assets of the Company. Any fund vehicle established by the Company to provide a
source for the payment of Plan benefits would remain subject to the general
creditors of the Company.
Employment and Executive Retention Agreements
The Company has entered into Executive Retention Agreements with each of the
Named Executive Officers, other than Mr. Reyners. Each of those agreements (the
"Retention Agreements") is identical, except as to the severance multiple, below
described. The Retention Agreements provide for the employment of the Named
Executive Officers in their respective positions with the Company or as
otherwise determined, provided the duties to be performed are those of a senior
executive or manager of the Company. The Retention Agreements provide that
under certain conditions, including if the executive's employment is terminated
without cause, the executive has the right to receive from the Company an amount
equal to, in the case of Messrs. Memmo and Spence, one times such individuals'
annual salary, in the case of Mr. Heckmann, approximately three times his annual
salary and, in the case of Mr. Reardon, two times his annual salary. Following
a Change-In-Control of the Company, the Retention Agreements provide for certain
benefits if, within one year of the Change-In-Control, the executive's
employment is terminated without cause, or if certain other conditions of the
executive's employment are altered. In any such event, the Named Executive
Officers have the right to receive the same multiple of their annual salary
above described, but including their latest incentive award or target incentive,
if greater, and the Company is also obligated to maintain for one year for the
executive the welfare and retirement plans available to the executive or to
provide an equivalent. Under the Retention Agreements, and subject to the
language thereof, a Change-In-Control of the Company is defined to occur if (i)
any person or group acquires 50% or more of the Company's voting securities,
(ii) during any two year period there is a change in a majority of the Board of
Directors of the Company, (iii) there is a consolidation or merger of the
Company or if there is a transfer of substantially all of the Company's assets
or (iv) a plan of complete liquidation of the Company is approved by the
stockholders.
Mr. Reyners has a separate employment agreement which provides for a
severance payment in the event his employment is terminated, other than for
cause, equal to his annual base compensation. Mr. Reyners employment agreement
also provides for annual review of and discretionary increases to Mr. Reyners'
base salary, for the opportunity to participate in Company incentive bonus plans
(although he does not participate in any such plan at this time), for the
provision of life and medical insurance benefits and for the use of a Company-
owned automobile. Mr. Reyners participates in a French statutory retirement
program. The aggregate cost of this retirement program and certain tuition
reimbursements for Mr. Reyners' children is limited to approximately 8% of his
base salary.
Report of Compensation Committee on Executive Compensation
-10-
<PAGE>
The Compensation Committee is composed entirely of independent outside
directors and is responsible for determining the compensation of the executive
officers of the Company, presently comprising the Named Executive Officers and
six additional individuals. The Compensation Committee also administers the
Company's 1991 Employee Stock Option Plan, the Retirement Program and, with Mr.
Heckmann, the Company's Annual Incentive Compensation Plan.
Compensation Policy and Practice. The Company's executive compensation policy
is intended (i) to link compensation and stockholder value; (ii) to recognize
and reward individuals for their contributions and commitment to the growth and
profitability of the Company; and (iii) to secure and retain the highest caliber
of executives through competitive levels of total compensation. The
Compensation Committee believes this policy is generally best accomplished by
providing a competitive total compensation package, a significant portion of
which is variable and related to established performance goals. The Company has
retained an independent consulting firm to review the Company's executive
compensation levels and programs and to provide input to the Compensation
Committee. Based on this input, the Compensation Committee believes that the
compensation provided to the Company's executives is competitive, but generally
below the average compensation provided to executives in similar positions at
the "peer group" companies identified in "Comparative Stock Performance" below.
Section 162(m) of the United States Internal Revenue Code of 1986 (the "Code")
limits deductibility of compensation in excess of $1 million paid to a company's
chief executive officer and four other highest-paid executive officers unless
such compensation qualifies as "performance-based." The Company will not be
affected by this limitation for the 1996 tax year. The Compensation Committee
intends to review this issue periodically to determine whether further changes
to the Company's compensation policies and practices are advisable in order to
preserve deductibility.
Compensation of the Company's executive officers consists of the following
elements: base salary, cash bonus payments under the Annual Incentive
Compensation Plan and stock option awards under the 1991 Employee Stock Option
Plans. Each of these elements is discussed below.
Base Salary. In determining base salary for the Company's executive officers,
the Compensation Committee assesses the relative contribution of each executive
to the Company, the background and skills of each individual and the particular
opportunities and problems which the individual confronts in his position with
the Company. These factors are then assessed in the context of competitive
market factors, including competitive opportunities with other companies.
In making changes in base salary for existing executive officers, other than
Mr. Heckmann, the Compensation Committee considers the recommendations of Mr.
Heckmann based on his personal evaluation of individual performance for the
prior year including attainment of personal objectives and goals, attainment of
Company performance goals, the Company's salary structure, competitive salary
data and the prior year's national percentage increase in the cost of living.
Annual Cash Incentive. In April 1995 the Board of Directors adopted, in place
of its former discretionary bonus program, an Annual Incentive Compensation Plan
pursuant to which key executive and operational employees are eligible to earn
incentive case bonuses each year based on the Company's performance. For
eligible executives, the maximum award level is 25% of base salary. For
eligible operational employees, the maximum award level is 35% of base salary.
Of the 25% maximum award level for executives, 8% is earned if the Company
achieves its pre-established profit plan for the fiscal year; up to an
additional 8% may be earned if the Company exceeds its profit plan; and an
additional 9% may be earned based on a subjective assessment of the executive's
performance. Of the 35% maximum award level for operational employees, up to 8%
may be earned if the Company exceeds its profit plan; an additional 8% is earned
if the unit supervised by the employee achieves its profit plan; an additional
10% is earned if the unit supervised by the employee exceeds its profit plan;
and an additional 9% may be earned based on a subjective assessment of the
employee's performance. With respect to the subjective portion of the award,
the Compensation Committee assesses Mr. Heckmann's performance, and Mr. Heckmann
assesses the performance of
-11-
<PAGE>
each of the other executives or employees. The Company exceeded its profit plan
for Fiscal 1996. Information with respect to the cash bonuses paid to the Named
Executive Officers in Fiscal 1996 is provided in the Summary Compensation Table
above. Mr. Reyners does not participate in the bonus program.
Stock Options. The grant of stock options under the Company's 1991 Employee
Stock Option Plan is intended to provide long-term performance-based
compensation to officers and key employees of the Company. Options are granted
with an exercise price equal to the market price of the Company's Common Stock
on the date of grant, generally vest over a period of three years, and expire
after ten years. Options only have value to the recipient if the price of the
Company's stock appreciates after the options are granted. The Company believes
that not less than 10% of the Company's outstanding equity securities should be
available for employee stock options and its policy of option grants by the
Compensation Committee has reflected and can be expected to continue to reflect
this belief.
Chief Executive Officer
In determining Mr. Heckmann's compensation for Fiscal 1996, the Compensation
Committee focused upon the policies described above. The increases in Mr.
Heckmann's salary and in the number of options granted to him as compared to
Fiscal 1995 reflect the overall performance of the Company for Fiscal 1996 under
Mr. Heckmann's strategic direction, his significant involvement in and
responsibility for the overall operations of the Company and his direct
involvement in numerous acquisitions made by the Company during the year. For
purposes of the Annual Cash Incentive Plan, the Compensation Committee
classifies Mr. Heckmann as an operational employee with supervisory
responsibilities for the entire Company, making him eligible for a maximum award
of 35% of base salary. For Fiscal 1996, Mr. Heckmann received a bonus under the
Annual Incentive Compensation Plan equal to 33% of his base salary of $450,000
as a combined result of the Company's exceeding its profit plan and the
Compensation Committee's assessment of Mr. Heckmann's role in that success.
Although Mr. Heckmann's Fiscal 1996 compensation is above the average
compensation paid to chief executive officers at the "peer group" companies
identified in "Comparative Stock Performance" below, the Compensation Committee
believes that this compensation level is warranted by Mr. Heckmann's roles in
both the strategic and operational aspects of the Company's business, the value
he brings to the Company in the identification and realization of acquisition
opportunities and the success of the Company both in its business and in the
financial markets.
Alfred E. Osborne, Jr., Chairman
James E. Clark
John L. Diederich
C. Howard Wilkins, Jr.
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<PAGE>
Comparative Stock Performance
The chart below sets forth line graphs comparing the performance of the
Company's Common Stock as compared with the NYSE Composite Stock Index and an
appropriate "peer group" index for the five-year period commencing March 28,
1991 and ending March 29, 1996. The "peer group" index consists of the Common
Stock of Calgon Carbon Corporation, Ionics, Incorporated, Osmonics, Inc. and
Wheelabrator Technologies Inc. The indices assume that the value of the
investment in United States Filter Corporation Common Stock and each index was
$100 on March 28, 1991 and that dividends were reinvested.
(PERFORMANCE GRAPH APPEARS HERE)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
3/28/91 3/31/92 3/31/93 3/31/94 3/31/95 3/31/96
-------- -------- -------- -------- -------- --------
U.S. Filter Common Stock $ 100.00 $ 263.80 $ 344.83 $ 291.39 $ 320.68 $ 579.28
NYSE Composite Stock Index 100.00 $ 108.75 $ 121.50 $ 120.34 $ 132.03 $ 168.98
Peer Group Index(1) 100.00 $ 109.32 $ 133.46 $ 120.51 $ 95.05 $ 115.89
- --------------
</TABLE>
(1) Peer Group Index includes: Calgon Carbon Corporation, Ionics Incorporated,
Osmonics Inc. and Wheelabrator Technologies Inc.
-13-
<PAGE>
PROPOSAL TO APPROVE THE 1991 EMPLOYEE STOCK OPTION PLAN,
AS AMENDED AND RESTATED
Stockholders are being asked to approve the Company's 1991 Employee Stock
Option Plan, as amended and restated by the Board of Directors on June 14, 1996
(the "Amended Employee Plan"). A vote in favor of the Amended Employee Plan
will also be a vote in favor of all of the amendments to the 1991 Employee Stock
Option Plan, which will, among other things, increase the amount of Common Stock
that is authorized to be issued under the plan by 750,000 shares (post-Stock
Split).
The Company believes that in order to attract, retain and motivate key
employees it is desirable to offer to such employees stock options which provide
an incentive tied to the Company's stock price performance. As the Company has
grown over the past several years, in part through acquisitions that have
involved the issuance of additional shares of Common Stock, the Company has
believed it appropriate to increase the number of shares of Common Stock
available for employee stock options. Accordingly, the Board of Directors on
February 28, 1991 unanimously adopted the 1991 Employee Stock Option Plan under
which plan, as thereafter amended by the Board and approved by the stockholders,
a total of 2,587,500 shares of Common Stock were reserved for issuance. As of
June 5, 1996, of the 2,587,500 shares reserved under the Employee Plan, 577,009
options had been previously exercised and 1,855,944 options remained
outstanding. The Company believes that it is desirable to increase the number
of shares of Common Stock authorized under the 1991 Employee Stock Option Plan
by an additional 750,000 shares (post-Stock Split) and, accordingly, on June 14,
1996, the Board of Directors voted to amend the Employee Plan to increase the
number of shares authorized for issuance under the plan from 2,587,500 shares to
3,337,500 shares (subject to adjustment to reflect the effect of the Stock Split
on the number of shares currently reserved under the plan).
General Provisions. The Amended Employee Plan is administered by the
Compensation Committee. The Committee selects the officers and other key
employees of the Company and its subsidiaries (whether or not members of the
Board) to whom options may be granted, determines the size of grants and the
terms and conditions of options, and determines the meaning and application of
the provisions of the Amended Employee Plan and related option agreements.
Members of the Committee are not eligible to receive grants under the Amended
Employee Plan.
Options granted under the Amended Employee Plan may be either "incentive stock
options," that is, options which meet the requirements of Section 422 of the
Code, or "nonqualified stock options," that is, options which do not meet such
requirements. The aggregate fair market value (determined as of the date of
grant) of the stock for which an optionee's incentive stock options will vest in
any calendar year may not exceed $100,000. No optionee may be granted options
with respect to more than 150,000 shares of Common Stock in one calendar year.
No options may be granted under the Amended Employee Plan after February 27,
2001.
The exercise price per share for each option granted under the Amended
Employee Plan may not be less than the fair market value per share of the
Company's Common Stock on the date of grant. For any option recipient who owns
more than 10% of the Company's voting stock (a "Ten Percent Owner") at the time
of grant, the exercise price must be at least 110% of fair market value. The
Compensation Committee will set the terms and vesting schedule of each option,
provided, however, that no term may exceed ten years from the date of grant, and
the term of an incentive stock option granted to a Ten Percent Owner may not
exceed five years. Payment upon exercise of an option may be made in cash or,
with the consent of the Compensation Committee, in Common Stock of the Company
valued at its then-current fair market value, or by a combination of cash and
Common Stock.
Generally, options may be exercised only by the individual to whom the option
is granted, and are not transferable or assignable, except that in the event of
an optionee's death or legal disability, the optionee's heirs or legal
representatives may exercise the options for a period not to exceed one year.
The Board of Directors may terminate or amend the Amended Employee Plan without
the approval of the Company's stockholders, but stockholder approval is required
in order to amend the Amended Employee Plan to increase the total number of
shares, to change the class of persons eligible to participate in the Amended
Employee Plan, to extend the maximum
-14-
<PAGE>
ten-year exercise period or to permit an option exercise price to be fixed at
less than 100% of the fair market value as of the date of grant.
Termination of Employment. Unless otherwise determined by the Compensation
Committee, options will cease to be exercisable upon termination of the
optionee's service to the Company other than upon termination due to death,
disability or retirement. Options will be exercisable within twelve months of
death or disability and within three months of retirement.
Change in Control. In the event the Company enters into an agreement to
dispose of all or substantially all of the assets or capital stock of the
Company by means of a sale, merger, or other transaction, outstanding options
will, with the approval of the Compensation Committee and the Board of
Directors, and conditioned upon consummation of such agreement, become
immediately exercisable during the period beginning with the date of such
agreement and ending on the date of disposal of the assets or capital stock.
The Amended Employee Plan further provides that, in the event of any merger,
consolidation or other reorganization in which the Company is not the surviving
or continuing corporation, all outstanding options shall be fully exercisable
for a period of 30 days prior to the date of such transaction unless such
options are assumed by the continuing or surviving corporation. Unexercised
options will terminate upon the effective date of such a transaction, unless
they are assumed.
Termination and Amendment of Plan. The Board of Directors may terminate or
amend the Amended Employee Plan without the approval of the Company's
stockholders, but stockholder approval would be required in order to amend the
plan to increase the total number of shares, to change the class of persons
eligible to participate in the plan, to extend the maximum ten-year period or to
permit an option exercise price to be fixed at less than 100% of the fair market
value as of the date of grant.
Antidilution Provisions. The amount of shares reserved for issuance under the
Amended Employee Plan and the terms of outstanding options shall be adjusted by
the Compensation Committee in the event of changes in the outstanding Common
Stock by reason of stock dividends, stock splits, reverse stock splits, split-
ups, consolidations, recapitalizations, reorganizations or like events.
Benefits Under the Amended Employee Plan. Presently, approximately 280
officers and key employees of the Company and its subsidiaries are eligible to
participate in the Amended Employee Plan. However, the identity of future
grantees and the size of any additional grants have not been determined. On
June 5, 1996 the closing price of the Common Stock on the NYSE was $ 34 1/4 per
share.
Certain Federal Income Tax Consequences. The following is a brief summary of
the principal federal income tax consequences of awards under the Amended
Employee Plan based upon current federal income tax laws. The summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign tax consequences. Options designated as incentive stock
options are intended to fall within the provisions of Section 422 of the Code.
An optionee recognizes no taxable income as the result of the grant or
exercise of such an option. If the stock acquired upon exercise of an option is
held at least until (i) two years following the date of grant of the option and
(ii) one year following the date of exercise, then any gain on subsequent sale
of the stock will be taxed as a long-term capital gain. In that case, the
Company will not be entitled to any deduction for federal income tax purposes.
In general, if an optionee sells shares within two years after the date of grant
or within one year after the date of exercise, the excess of the fair market
value of the shares on the date of exercise over the option exercise price (not
to exceed the gain realized on the sale) will be taxable as ordinary income at
the time of sale. A gain in excess of that amount will be a long-term or short-
term capital gain, depending on the length of time the stock was held. If the
optionee sells the stock for less than the option exercise price, the loss will
be a long-term or short-term capital loss and no income will be recognized. The
amount of any ordinary income recognized by the optionee upon the disposition of
stock would be deductible by the Company for federal income tax purposes.
An optionee generally recognizes no taxable income as the result of the grant
of a nonqualified stock option. Upon exercise of such an option, the optionee
normally recognizes ordinary income in the amount of the excess of
-15-
<PAGE>
the fair market value of the shares on the date of exercise over the option
price. Such ordinary income generally is subject to withholding of income and
employment taxes. Upon the sale of stock acquired by the exercise of a
nonqualified stock option, any gain or loss, based on the difference between the
sale price and the fair market value on the date of recognition of income, will
be taxed as short-term or long-term capital gain or loss, depending upon the
length of time the optionee has held the stock from the date of exercise. The
Company would be entitled to a deduction equal to the amount of ordinary income
recognized by the optionee as a result of the exercise of the option.
Special rules will apply to a participant who is an officer or director of the
Company subject to liability under Section 16(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), if such participant exercises an
option within six months of the date of grant.
Vote Required
Approval of the Amended Employee Plan will require the affirmative vote of at
least a majority in voting interest of the stockholders present in person or by
proxy at the Annual Meeting and entitled to vote thereon.
Board Recommendation
The Board of Directors has unanimously approved the Amended Employee Plan and
recommends that the Company's stockholders vote "FOR" adoption of the Amended
Employee Plan Proposal.
PROPOSAL TO APPROVE THE 1991 DIRECTORS STOCK OPTION PLAN,
AS AMENDED AND RESTATED
Stockholders are being asked to approve the 1991 Directors Stock Option Plan,
as amended and restated by the Board of Directors as of June 14 1996 (which
reflects certain amendments approved by the Board on that date and on February
13, 1996) (the "Amended Directors Plan"). A vote in favor of the Amended
Directors Plan Proposal will also be a vote in favor of all of the amendments to
the 1991 Directors Stock Option Plan, which will, among other things, (i)
increase the amount of Common Stock that is authorized to be issued under the
plan by 375,000 shares (post-Stock Split), (ii) provide that the exercise price
for each option issued under the Amended Directors Plan will be the fair market
value of the underlying shares of Common Stock on the date the option is
granted, (iii) adjust the amount of options granted to each participant on a
yearly basis from 8,000 to 12,000 shares and to each participant following his
or her initial election from 8,000 to 12,000 shares or from 4,000 to 6,000
shares, as provided, and (iv) remove from the discretion of the Compensation
Committee certain administrative functions under the plan. A vote in favor of
the Amended Directors Plan Proposal will also constitute approval of the grants
made under the Amended Directors Plan on April 1, 1996 by the Compensation
Committee to each of the six participants under the plan, as further described
below.
The Company currently does not pay any cash compensation to its non-employee
Directors, although they are reimbursed for out-of-pocket expenses incurred in
attending meetings. Directors are compensated for their time and efforts solely
through grants of stock options. The Company believes that the Amended
Directors Plan provides non-employee directors a favorable opportunity to
acquire Common Stock of the Company and creates an incentive for such directors
to serve on the Board of Directors of the Company and contribute to its long-
term growth and profitability objectives. Under the 1991 Stock Option Plan as
originally adopted by the Board of Directors on February 28, 1991 and approved
by the stockholders on October 29, 1991, 375,000 shares of Common Stock were
reserved for issuance. As of June 5, 1996, 134,000 options had been previously
exercised and 252,000 options remained outstanding. Based on the Company's
growth over the past several years, in part through acquisitions that have
involved the issuance of additional shares of Common Stock, the Company believes
it appropriate to increase the number of shares of Common Stock authorized for
issuance pursuant to the plan from 375,000 to 750,000 (subject to adjustment to
reflect the effect of the Stock Split on the number of shares currently reserved
under the plan).
-16-
<PAGE>
Under the original 1991 Directors Stock Option Plan, as amended, options were
granted at an exercise price equal to the greater of (i) $2.00 less than the
fair market value of the underlying shares on the date of grant or (ii) 60% of
the fair market value of such shares on the date of grant. In order to more
directly align the interests of the non-employee directors with those of the
Company's stockholders, this provision has been amended, subject to stockholder
approval, to state that the exercise price of options granted under the Amended
Directors Plan will in all cases be equal to 100% of the fair market value of
the underlying shares on the date of grant.
The original 1991 Directors Stock Option Plan, as amended, provided for yearly
grants of options for the purchase of 8,000 shares of Common Stock and
additional grants upon initial election to the Board of 8,000 shares, or 4,000
shares if such election occurred after September 30 of the year first elected.
If approved by the stockholders, the Amended Directors Plan will adjust these
grant amounts from 8,000 to 12,000 shares and from 4,000 to 6,000 shares,
respectively. The directors believe such changes are appropriate in light of
the 1994 three-for-two split of the Company's Common Stock and the increase in
the exercise price of options granted under the plan as described above. No
additional adjustment to these grant numbers will be made as a result of the
Stock Split payable July 15, 1996.
As originally adopted, the 1991 Directors Stock Option Plan provided the
Compensation Committee with discretion over certain administrative functions
under the plan. For example, the Compensation Committee had discretion to
prescribe installment periods governing the vesting of options granted under the
Directors Plan, although, in fact, the Committee had never exercised such
discretion. If approved by the stockholders of the Company, the Amended
Directors Plan removes this and other discretionary decisions from the
Compensation Committee.
General Provisions. The Amended Directors Plan is administered by the
Compensation Committee. The persons eligible to participate in the Amended
Directors Plan are the duly elected non-employee directors of the Company
(presently 7 individuals). The Compensation Committee determines the meaning
and application of the provisions of the Amended Directors Plan and related
option agreements.
Options granted under the Amended Directors Plan are nonqualified stock
options. The Amended Directors Plan provides that each participant shall
receive a grant of options for the purchase of 12,000 shares of Common Stock on
the first business day of April in each calendar year. In addition, a
participant shall receive a grant of options for the purchase of 12,000 shares
of Common Stock upon his or her initial election to the Board, provided that if
such election occurs after September 30 of the year first elected, such initial
grant shall be for 6,000 shares of Common Stock. The exercise price of each
option granted under the Amended Directors Plan shall be equal to 100% of the
fair market value of the underlying shares on the date of grant. Each option is
fully exercisable on the date of the grant and has a term of four years from the
date of the grant. No options may be granted after February 27, 2001.
Generally, options may be exercised only by the individual to whom the option
is granted, and are not transferable or assignable, except that in the event of
an optionee's death or legal disability, the optionee's heirs or legal
representatives may exercise the options for a period not to exceed one year.
The Board of Directors may terminate or amend the Amended Directors Plan without
the approval of the Company's stockholders, but stockholder approval would be
required in order to amend the Amended Directors Plan to increase the total
number of shares, to lower the exercise price of options to less than 100% of
the fair market value as of the date of the grant, to extend the maximum four-
year exercise period or to change the class of persons eligible to participate
in the Amended Directors Plan.
Termination of Service. Options will cease to be exercisable within 30 days
after termination of the optionee's service to the Company, other than upon
termination due to death, disability or retirement or upon termination for
cause. Options will be exercisable within twelve months of death or disability
and within three months of retirement. Upon termination for cause, a
participant's options shall be rescinded.
Termination and Amendment of Plan. The Board of Directors may terminate or
amend the Amended Directors Plan without the approval of the Company's
stockholders, but stockholder approval would be required in order to
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<PAGE>
amend the plan to increase the number of shares, to change the class of persons
eligible to participate in the plan, to extend the maximum ten-year exercise
period or to permit an option exercise price to be fixed at less than 100% of
the fair market value as of the date of grant.
Antidilution Provisions. The amount of shares reserved for issuance under the
Amended Directors Plan and the terms of outstanding options shall be adjusted in
the event of changes in the outstanding Common Stock by reasons of stock
dividends, stock splits, reverse stock splits, split-ups, consolidations,
recapitalizations, reorganizations or like events.
Benefits Under the Amended Directors Plan. Presently, seven Directors of the
Company and its subsidiaries are eligible to participate in the Amended
Directors Plan, although Mr. Hillas does not participate at this time. On April
1, 1996, a grant was made to each of the non-employee directors, other than Mr.
Hillas, of an option for 12,000 shares of Common Stock of the Company, for an
aggregate grant of options for 72,000 shares of Common Stock. On June 5, 1996
the closing price of the Common Stock on the NYSE was $34 1/4 per share.
Certain Federal Income Tax Consequences. The following is a brief summary
of the principal federal income tax consequences of awards under the Amended
Directors Plan based upon current federal income tax laws. The summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign tax consequences.
An optionee generally recognizes no taxable income as the result of the grant
of a nonqualified stock option. Upon exercise of such an option, the optionee
normally recognizes ordinary income in the amount of the excess of the fair
market value on the date of exercise over the option price. Upon the sale of
stock acquired by the exercise of a nonqualified stock option, any gain or loss,
based on the difference between the sale price and the fair market value on the
date of recognition of income, will be taxed as short-term or long-term capital
gain or loss, depending upon the length of time the optionee has held the stock
from the date of exercise. No tax deduction is available to the Company with
respect to the grant of the option or the sale of stock acquired pursuant
thereto. The Company would be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee as a result of the exercise of the
option. Special rules apply under Section 16(b) of the Exchange Act if a
participant exercises an option within six months of the date of grant.
Vote Required
Approval of the Amended Directors Plan will require the affirmative vote of at
least a majority in voting interest of the stockholders present in person or by
proxy at the Annual Meeting and entitle to vote thereon.
Board Recommendation
The Board of Directors has unanimously approved the Amended Directors Plan and
recommends that the Company's stockholders vote "FOR" adoption of the Amended
Directors Plan Proposal.
PROPOSAL TO INCREASE THE AUTHORIZED CAPITAL OF THE COMPANY
The Board of Directors proposes to increase the Company's authorized share
capital from 78,000,000 to 153,000,000 by amendment to the Company's Restated
Certificate of Incorporation, as amended (the "Authorized Capital Amendment").
If the Authorized Capital Amendment is approved by the stockholders, the number
of the Company's authorized shares of Common Stock would be increased from
75,000,000 shares to 150,000,000 shares. Specifically, if the Authorized
Capital Amendment is approved, Article V, Section 1 of the Company's Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
will be amended and restated to read in its entirety as follows:
"Section 1. Authorized Stock. The Corporation shall be authorized to
issue two classes of shares to be designated, respectively, "Preferred
Stock" and "Common Stock"; the total number of shares which the Corporation
shall have the authority to issue is one hundred fifty three million
(153,000,000)
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<PAGE>
shares; the total number of authorized shares of Preferred Stock shall be
three million (3,000,000) and each share shall have a par value of ten
cents ($.10); and the total number of authorized shares of Common Stock
shall be one hundred fifty million (150,000,000) and each share shall have
a par value of one cent ($.01)."
As of June 5, 1996, there were issued and outstanding 29,134,298 shares of
Common Stock. Of the unissued shares of Common Stock, 2,926,342 shares were
reserved for issuance upon conversion of the Company's 5% Convertible
Subordinated Debentures due 2000, 5,090,909 shares were reserved for issuance
upon conversion of the Company's 6% Convertible Subordinated Notes due 2005 and
an aggregate of [2,122,467] shares were reserved for issuance upon exercise of
outstanding options under the Company's stock option plans for employees and
directors. Consequently, on a post-Stock Split basis, the Company presently has
reserved for issuance 15,209,577 shares of Common Stock and presently has
available for issuance 16,088,976 shares of Common Stock and 3,000,000 shares of
Preferred Stock. In addition, a maximum of 3,200,000 shares (4,800,000 post-
Stock Split) are issuable pursuant to an Agreement and Plan of Merger dated as
of June 10, 1996 pursuant to which the Company will acquire, upon satisfaction
of various conditions, Davis Water & Waste Industries, Inc. Approval of the
Authorized Capital Amendment is not necessary for, or a condition to, the
consummation of this agreement.
Purposes and Reasons for the Proposed Increase in Authorized Capital
If the Authorized Capital Amendment is approved, the increased number of
authorized shares of Common Stock will be available for issuance from time to
time, for such purposes and consideration, and on such terms, as the Board of
Directors may approve, and no further vote of the stockholders of the Company
will be required, except as provided under the Delaware General Corporation Law
or the rules of the NYSE.
An increase in authorized shares will enable the Company to meet possible
contingencies and opportunities in which the issuance of shares of Common Stock
in amounts greater than would otherwise remain available for issuance may be
deemed advisable, such as in equity financings, acquisition transactions, stock
dividends and distributions and employee benefit plans. By adopting the
Authorized Capital Amendment at this time, consummation of issuances of any
additional shares of Common Stock would be facilitated, because the delay and
expense incident to the calling of a special meeting of the Company's
stockholders, in cases where such a meeting would not otherwise be required,
would be avoided. The timing of the actual issuance of additional shares of
Common Stock, if any, will depend upon market conditions, the specific purpose
for which the stock is to be issued, and other similar factors. Any additional
issuance of Common Stock could have a dilutive effect on existing holders of
Common Stock. The Company has issued a substantial number of shares in business
acquisitions in the past and is frequently engaged in preliminary discussions
with acquisition candidates. However, the Company currently has no plans for
the issuance of any shares of Common Stock, except as described above, none of
which are shares for which the Company is securing authorization pursuant to the
Authorized Capital Amendment.
The terms of the additional shares of Common Stock for which authorization is
sought will be identical with the terms of the shares of Common Stock currently
authorized and outstanding, and approval of the Authorized Capital Amendment
proposal will not affect the terms, or the rights of the holders, of such
shares. The Common Stock has no cumulative voting, conversion, preemptive or
subscription rights and is not redeemable. Laidlaw has certain rights to
purchase voting capital stock of the Company or rights to acquire such stock
("Securities") in order to maintain its percentage share of the Company's voting
power, except in the case of Securities issuable in the ordinary course under
any employee or director stock benefit plan or in connection with a merger or
other acquisition. In addition, if the Company proposes to issue Securities at
a price less than the lower of (i) 15% below the current market price or (ii)
the prevailing customary and reasonable price for such Securities, Laidlaw has
the right to purchase on the same terms as the proposed issuance such number of
the offered Securities as it shall specify.
Possible Anti-Takeover Effects
Although it did not form a basis for the Board's decision to adopt the
Authorized Capital Amendment, the existence of additional authorized shares of
Common Stock could have the effect of rendering more difficult or
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<PAGE>
discouraging hostile takeover attempts. The Company is not aware of any
existing or planned effort on the part of any person to acquire the Company by
means of a merger, tender offer, solicitation of proxies in opposition to
management or otherwise, or to change the Company's management, nor is the
Company aware of any person having made any offer to acquire the capital stock
or substantially all of the assets of the Company.
The Certificate of Incorporation and Restated Bylaws (the "Bylaws") of the
Company and the Delaware General Corporation Law contain certain provisions that
could also have an anti-takeover effect. The Certificate of Incorporation
places certain restrictions on the voting rights of a "Related Person," defined
therein as any person who directly or indirectly owns 5% or more of the
outstanding voting stock of the Company. The founders and the original
directors of the Company are excluded from the definition of "Related Persons,"
as are seven named individuals including Mr. Heckmann, the Chairman of the
Board, Chief Executive Officer and President of the Company. These voting
restrictions apply in two situations. First, the vote of a director who is also
a Related Person is not counted in the vote of the Board of Directors to call a
meeting of stockholders where that meeting will consider a proposal made by the
Related Person director. Second, any amendments to the Certificate of
Incorporation that relate to specified Articles therein (those dealing with
corporate governance, limitation of director liability or amendments to the
Certificate of Incorporation), in addition to being approved by the Board of
Directors and a majority of the Company's outstanding voting stock, must also be
approved by either (i) a majority of directors who are not Related Persons, or
(ii) the holders of at least 80% of the Company's outstanding voting stock,
provided that if the change was proposed by or on behalf of a Related Person,
then approval by the holders of a majority of the outstanding voting stock not
held by Related Persons is also required. In addition, any amendment to the
Company's Bylaws must be approved by one of the methods specified in clauses (i)
and (ii) in the preceding sentence.
The Certificate of Incorporation provides that the Company is authorized to
issue 3,000,000 shares of Preferred Stock. The Board of Directors is authorized
to issue such shares without stockholder approval in one or more series and to
fix the rights, preferences, privileges, qualifications, limitations and
restrictions thereof, including voting rights.
The Certificate of Incorporation and the Company's Bylaws provide that the
Board of Directors shall fix the number of directors and that the Board shall be
divided into three classes, each consisting of one-third of the total number of
directors (or as nearly as may be possible). Stockholders may not take action
by written consent. Meetings of stockholders may be called only by the Board of
Directors (or by a majority of its members). Stockholder proposals, including
director nominations, may be considered at a meeting only if written notice of
that proposal is delivered to the Company from 30 to 60 days in advance of the
meeting, or within ten days after notice of the meeting is first given to
stockholders.
Section 203 of the Delaware General Corporation Law ("Section 203") provides,
in general, that a stockholder acquiring more than 15% of the outstanding voting
shares of a corporation subject to the statute (an "Interested Stockholder"),
but less than 85% of such shares, may not engage in certain "Business
Combinations" with the corporation for a period of three years subsequent to the
date on which the stockholder became an Interested Stockholder unless (i) prior
to such date the corporation's board of directors has approved either the
Business Combination or the transaction in which the stockholder became an
Interested Stockholder or (ii) the Business Combination is approved by the
corporation's board of directors and authorized by a vote of at least two-thirds
of the outstanding voting stock of the corporation not owned by the Interested
Stockholder. Section 203 defines the term "Business Combination" to encompass a
wide variety of transactions with or caused by an Interested Stockholder in
which the Interested Stockholder receives or could receive a benefit on other
than a pro rata basis with other stockholders, including mergers, certain asset
sales, certain issuances of additional shares to the Interested Stockholder,
transactions with the corporation that increase the proportionate interest of
the Interested Stockholder or transactions in which the Interested Stockholder
receives certain other benefits.
Vote Required
Approval of the Authorized Capital Amendment will require the affirmative vote
of the holders of at least a majority of the outstanding shares of Common Stock.
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<PAGE>
Board Recommendation
The Board of Directors has unanimously approved the Authorized Capital
Amendment and recommends that the Company's stockholders vote "FOR" adoption of
the Authorized Capital Amendment proposal.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP as independent
certified public accountants of the Company for the fiscal year ending March 31,
1997 and has further directed that the appointment be submitted for ratification
by the stockholders at the Annual Meeting.
KPMG Peat Marwick LLP is an internationally recognized firm of independent
certified public accountants and has audited the Company's financial statements
since fiscal 1992. A representative of KPMG Peat Marwick LLP will be present at
the Annual Meeting and will be available to make a statement, if he or she so
desires, and to respond to appropriate questions.
OTHER MATTERS
The solicitation of Proxies is made on behalf of the Board of Directors of the
Company and the cost thereof will be borne by the Company. In addition to
soliciting Proxies by mail, directors, officers and employees of the Company,
without receiving additional compensation therefor, may solicit Proxies by
telephone, telegram, in person or by other means. Arrangements also will be
made with brokerage firms and other custodians, nominees and fiduciaries to
forward proxy soliciting material to the beneficial owners of Common Stock held
of record by such persons and the Company will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1997 annual meeting of
stockholders of the Company must be received by March 1, 1997. Any such
proposals should be addressed to the Secretary of the Company, 40-004 Cook
Street, Palm Desert, California 92211.
By Order of the Board of Directors
Damian C. Georgino
Secretary
, 1996
- ------ --
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<PAGE>
ANNEX A
UNITED STATES FILTER CORPORATION
1991 EMPLOYEE STOCK OPTION PLAN/1/
1. Purpose. The United States Filter Corporation 1991 Employee Stock
-------
Option Plan (the "Plan") is hereby established to grant to officers, directors
and key employees of United States Filter Corporation and its Subsidiaries
(individually and collectively, the "Company") a favorable opportunity to
acquire Common Stock of United States Filter Corporation (the "Stock"), and to
create an incentive for such persons to remain in the employ of the Company and
to contribute to its success.
As used in the Plan, the term "Code" shall mean the Internal Revenue Code
of 1986, as amended, and any successor statute, and the terms "Parent" and
"Subsidiary" shall have the meaning set forth in Sections 424(e) and (f) of the
Code.
2. Administration. The Plan shall be administered by the Compensation
--------------
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall determine the meaning and application of the provisions of the
Plan and all option agreements executed pursuant thereto, and its decisions
shall be conclusive and binding upon all interested persons. The Committee may
not grant an option to any member of the Committee. An option may be granted to
a member of the Committee only by action of the Board of Directors of the
Company. Subject to the provisions of the Plan, the Committee shall have the
sole authority to determine:
(a) The persons to whom options to purchase Stock shall be granted;
(b) The number of options to be granted to each person;
(c) The price to be paid for the Stock upon the exercise of each option;
(d) The period within which each option shall be exercised; and
(e) The terms and conditions of each stock option agreement entered into
between the Company and persons to whom the Company has granted an option.
3. Eligibility. Officers, directors and key employees of the Company, as
-----------
determined by the Committee, shall be eligible to
- ---------------------
/1/ As amended by the Board of Directors through June 14, 1996.
<PAGE>
receive grants of options under the Plan. No individual may be granted, in any
calendar year, options under the Plan to purchase more than 150,000 shares of
Common Stock.
4. Stock Subject to Plan. There shall be reserved for issue upon the
---------------------
exercise of options granted under the Plan shares of Common Stock or
-------
the number of shares of Stock, which, in accordance with the provisions of
Section 9 hereof, shall be substituted therefor. Such shares may be authorized
but unissued shares or treasury shares. If an option granted under the Plan
shall expire or terminate for any reason without having been exercised in full,
unpurchased shares subject thereto shall again be available for the purposes of
the Plan.
5. Terms of Options.
----------------
(a) Incentive Stock Options. It is intended that options granted
-----------------------
pursuant to this Section 5(a) qualify as incentive stock options as defined in
Section 422 of the Code. Incentive stock options shall be granted only to
employees of the Company. Each stock option agreement evidencing an incentive
stock option shall provide that the option is subject to the following terms and
conditions and to such other terms and conditions not inconsistent therewith as
the Committee may deem appropriate in each case:
(1) Option Price. The price to be paid for each share of Stock
------------
upon the exercise of each incentive stock option shall be determined by the
Committee at the time the option is granted, but shall in no event be less than
100% of the fair market value of the shares on the date the option is granted,
or not less than 110% of the fair market value of such shares on the date such
option is granted in the case of an individual then owning (within the meaning
of Section 424(d) of the Code) more than 10% of the total combined voting power
of all classes of stock of the Company or of its Parent or Subsidiaries. As used
in this Plan the term "date the option is granted" means the date on which the
Committee authorizes the grant of an option hereunder or any later date
specified by the Committee. Fair market value of the shares shall be (i) the
mean of the high and low prices of shares of Stock sold on a national stock
exchange on the date the option is granted (or if there was no sale on such
date, the highest asked price for the Stock on such date), or (ii) if the Stock
is not listed on any national stock exchange on the date the option is granted,
the mean between the "bid" and "asked" prices of the Stock in the National Over-
The-Counter Market on the date the option is granted, or (iii) if the Stock is
not traded in any market, that price determined by the Committee to be fair
market value, based upon such evidence as it may think necessary or desirable.
(2) Period of Option. The period or periods within which an
----------------
option may be exercised shall be determined by the Committee at the time the
option is granted, but in no event shall
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<PAGE>
any option granted hereunder be exercised more than ten years from the date the
option was granted, nor more than five years from the date the option was
granted in the case of an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or of its Parent or Subsidiaries.
(3) Payment for Stock. The option exercise price for each
-----------------
share of Stock purchased under an option shall be paid in full at the time of
purchase. The Committee may provide that the option price be payable, at the
election of the holder of the option and with the consent of the Committee, in
whole or in part either in cash or by delivery of Stock in transferable form,
such Stock to be valued for such purpose at its fair market value on the date on
which the option is exercised. No share of Stock shall be issued until full
payment therefor has been made, and no employee shall have any rights as an
owner of Stock until the date of issuance to him of the stock certificate
evidencing such Stock.
(4) Limitation on Amount. Subject to the overall limitations
--------------------
of Section 4 hereof (relating to the aggregate shares subject to the Plan), the
aggregate fair market value (determined as of the time the option is granted) of
the Common Stock with respect to which incentive stock options are exercisable
for the first time by the Optionee during any calendar year (under the Plan and
all other incentive stock option plans of the Company, any Parent or
Subsidiaries) shall not exceed $100,000.
(b) Nonqualified Stock Options. Each nonqualified stock option
--------------------------
granted under the Plan shall be evidenced by a stock option agreement between
the person to whom such option is granted and the Company. Such stock option
agreement shall provide that the option is subject to the following terms and
conditions and to such other terms and conditions not inconsistent therewith as
the Committee may deem appropriate in each case:
(1) Option Exercise Price. The exercise price to be paid for
---------------------
each share of Stock upon the exercise of an option shall be determined by the
Committee at the time the option is granted, but shall in no event be less than
100% of the fair market value of the shares on the date the option is granted.
As used in this Plan, the term "date the option is granted" means the date on
which the Committee authorizes the grant of an option hereunder or any later
date specified by the Committee. Fair market value of the shares shall be (i)
the mean of the high and the low prices of shares of Stock sold on a national
stock exchange on the date the option is granted (or if there was no sale on
such date, the highest asked price for the Stock on such date), or (ii) if the
Stock is not listed on a national stock exchange on the date the option is
granted the mean between the "bid" and "asked" prices of the Stock in the
National Over-The-Counter market on the date the option is granted, or (iii) if
the Stock is not traded in any
-3-
<PAGE>
market, that price determined by the Committee to be fair market value, based
upon such evidence as it may think necessary or desirable.
(2) Period of Option. The period or periods within which an
----------------
option may be exercised shall be determined by the Committee at the time the
option is granted, but shall in no event exceed ten years from the date the
option is granted.
(3) Payment for Stock. The option exercise price for Stock
-----------------
purchased under an option shall be paid in full at the time of purchase. The
Committee may provide that the option exercise price be payable, at the election
of the holder of the option, with the consent of the Committee, in whole or in
part either in cash or by delivery of Stock in transferable form, such Stock to
be valued for such purpose at its fair market value on the date on which the
option is exercised. No share of Stock shall be issued until full payment
therefor has been made, and no employee shall have any rights as an owner of
shares of Stock until the date of issuance to him of the stock certificate
evidencing such Stock.
6. Nontransferability. The options granted pursuant to the Plan shall be
------------------
nontransferable except by will or the laws of descent and distribution, and
shall be exercisable during the optionee's lifetime only by him and after his
death, by his personal representative or by the person entitled thereto under
his will or the laws of intestate succession.
7. Termination of Employment. Upon termination of the optionee's
-------------------------
employment, except as the Committee shall otherwise authorize at the time of
grant and any time thereafter, his rights to exercise options then held by him
shall be only as follows:
(a) Death or Disability. Upon the death of any person holding options
-------------------
granted under this Plan, his options shall be exercisable, by the holder's
representative or by the person entitled thereto under his will or the laws of
intestate succession, only if and to the extent they are exercisable on the date
of his death, and such options shall terminate twelve months after the date of
his death (or such shorter period as the Committee may prescribe in his option
agreement). Upon the disability of an optionee his options shall be exercisable
only if and to the extent they are exercisable on the date of his disability,
and such options shall terminate twelve months after the date of his disability
(or such shorter period as the Committee may prescribe in his option agreement).
However, in no event shall any option be exercised more than ten years from the
date the option was granted. For purposes of this Section 7(a), an individual
is disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or
-4-
<PAGE>
which has lasted or can be expected to last for a continuous period of not less
than 12 months.
(b) Retirement. Upon the retirement of an officer, director or
----------
employee or the cessation of services provided by a nonemployee (either pursuant
to a Company retirement plan, if any, or pursuant to the approval of the
Committee) or if any officer, director, employee or non-employee optionee leaves
the Company, a Parent or a Subsidiary, for any reason other than as set forth in
Section 7(a), 7(c) or 7(d) hereof, his options shall be exercisable only if and
to the extent they are exercisable on the date of his retirement or cessation of
services and such options shall terminate three months after the date of his
retirement or cessation of services as the case may be (or such shorter period
as the Committee may prescribe in his option agreement). The optionee's option
shall terminate upon the expiration of such period unless the holder of the
options dies prior thereto, in which event he shall be deemed to have died on
the date of his retirement or cessation of services; provided, however, in no
event shall such options be exercised more than ten years from the date they are
granted.
(c) Transfer to Related Corporation. In the event that an officer,
-------------------------------
director or employee leaves the employ of the Company to become an officer,
director or employee of any Subsidiary, or an officer, director or employee
ceases to serve as an officer or director or leaves the employ of a Subsidiary
to become an officer, director or employee of the Company or another Subsidiary,
such officer, director or employee shall be deemed to continue as an officer,
director or employee for all purposes of this Plan.
(d) Other Termination. In the event an officer, director or employee
-----------------
ceases to serve as an officer or director or leaves the employ of the Company, a
Parent or a Subsidiary, or a nonemployee ceases to provide services to the
Company, of his own volition, or if his relationship with the Company, a Parent
or a Subsidiary is terminated by the Company for cause, his options shall
terminate at the earlier of the date his employment terminates or he ceases
providing services to the Company, a Parent or a Subsidiary, or the date he
receives written notice that his employment or rendering of services is or will
be terminated.
8. Acceleration upon Termination or Sale of Company. The Committee may
------------------------------------------------
determine to accelerate the exercisability of any or all options after
termination of employment. In the event the Parent or its stockholders enter
into an agreement to dispose of all or substantially all of the assets or
capital stock of the Parent by means of a sale, merger, consolidation,
reorganization, liquidation or otherwise, an option granted under the Plan will,
in the discretion of the Committee, if so authorized by the Board of Directors
and conditioned upon consummation of such disposition of assets or stock, become
immediately exercisable during the period
-5-
<PAGE>
commencing as of the date of the execution of such agreement and ending as of
the earlier of the stated termination date of the option or the date on which
the disposition of assets or stock contemplated by the agreement is consummated.
9. Adjustment of Shares.
--------------------
(a) In the event of changes in the outstanding Stock by reason of stock
dividends, stock splits, reverse stock splits, split-ups, consolidations,
recapitalizations, reorganizations or like events (as determined by the
Committee), an appropriate adjustment shall be made by the Committee in the
number of shares reserved under the Plan, in the number of shares set forth in
Section 4 hereof, and in the number of shares and the option price per share
specified in any stock option agreement with respect to any unpurchased shares.
The determination of the Committee as to what adjustments shall be made shall be
conclusive. Adjustments for any options to purchase fractional shares shall
also be determined by the Committee. The Committee shall give prompt notice to
all optionees of any adjustment pursuant to this Section.
(b) Section 9(a) above to the contrary notwithstanding, in the event of
any merger, consolidation or other reorganization of United States Filter
Corporation in which United States Filter Corporation is not the surviving or
continuing corporation (as determined by the Committee) or in the event of the
liquidation or dissolution of United States Filter Corporation, all options
granted hereunder shall terminate on the effective date of the merger,
consolidation, reorganization, liquidation, or dissolution unless the agreement
with respect thereto provides for the assumption of such options by the
continuing or surviving corporation. Any other provision of this Plan to the
contrary notwithstanding, all outstanding options granted hereunder shall be
fully exercisable for a period of 30 days prior to the effective date of any
such merger, consolidation, reorganization, liquidation, or dissolution unless
such options are assumed by the continuing or surviving corporation.
10. Securities Law Requirements. The Committee may require prospective
---------------------------
optionees, as a condition of either the grant or the exercise of an option, to
represent and establish to the satisfaction of the Committee that all shares of
Stock acquired upon the exercise of such option will be acquired for investment
and not for resale. The Company may refuse to permit the sale or other
disposition of any shares acquired pursuant to any such representation until it
is satisfied that such sale or other disposition would not be in contravention
of applicable state or federal securities law.
11. Tax Withholding. The Company may require an optionee to pay to the
---------------
Company all applicable federal, state and local taxes
-6-
<PAGE>
which the Company is required to withhold with respect to the exercise of an
option granted hereunder.
12. Amendment. The Board of Directors may amend the Plan at any time,
---------
except that without shareholder approval:
(a) The number of shares of Stock which may be reserved for issuance
under the Plan shall not be increased except as provided in Section 9 hereof;
(b) The option price per share of Stock may not be fixed at less
than 100% of the fair market value of a share of Stock on the date the option
was granted;
(c) The maximum period of ten years during which the options may be
exercised may not be extended;
(d) The class of persons eligible to receive options under the Plan
as set forth in Section 3 shall not be changed; and
(e) This Section 12 may not be amended in a manner that limits or
reduces the amendments which require shareholder approval.
13. Termination. The Plan shall terminate automatically on February 27,
-----------
2001. The Board of Directors may terminate the Plan at any earlier time. The
termination of the Plan shall not affect the validity of any option agreement
outstanding at the date of such termination, but no option shall be granted
after such date.
14. Effective Date. The Plan shall be effective upon its adoption by the
--------------
Board of Directors of the Company. Options may be granted but not exercised
prior to stockholder approval of the Plan. If any options are so granted and
stockholder approval shall not have been obtained on or before February 27,
1992, such options shall terminate retroactively as of the date they were
granted.
-7-
<PAGE>
UNITED STATES FILTER CORPORATION
1991 DIRECTORS STOCK OPTION PLAN/1/
1. Purpose. The United States Filter Corporation 1991 Directors Stock
-------
Option Plan (the "Plan") is hereby established to grant to nonemployee directors
of United States Filter Corporation (the "Company") a favorable opportunity to
acquire Common Stock ("Stock") of the Company and to create an incentive for
such persons to serve on the Board of Directors of the Company and to contribute
to its long-term growth and profitability objectives.
As used in the Plan, the term "Code" shall mean the Internal Revenue Code
of 1986, as amended. The term "Participant" shall mean a member of the Board of
Directors of the Company who is not an officer or full-time salaried employee of
the Company. Masculine terms used herein may be read as feminine, singular
terms as plural and plural terms as singular, as necessary to give effect to the
Plan.
2. Administration. The plan shall be administered by the Compensation
--------------
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall determine the meaning and application of the provisions of the
Plan and all option agreements executed pursuant thereto, and its decisions
shall be conclusive and binding upon all interested persons. Subject to the
provisions of the Plan, the Committee shall have the sole authority to grant
options hereunder, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and conditions of each stock option
agreement entered into between the Company and any Participant, and to make all
other determinations necessary or advisable in the implementation and
administration of the Plan.
3. Eligibility. All nonemployee directors of the Company shall
-----------
participate in the Plan.
4. Stock Subject to Plan. There shall be reserved for issue upon the
---------------------
exercise of options granted under the Plan shares of Common Stock or the
-------
number of shares of Stock, which, in accordance with the provisions of Section 8
hereof, shall be substituted therefor. Such shares may be authorized but
unissued shares or treasury shares. If an option granted under the Plan shall
expire or terminate for any reason without having been
- --------------------
/1/ As amended by the Board of Directors through June 14, 1996.
<PAGE>
exercised in full, unpurchased shares subject thereto shall again be available
for the purposes of the plan.
5. Terms of Options. Each option granted under the Plan shall be
----------------
evidenced by a stock option agreement between the person to whom such option is
granted and the Company. Such stock option agreement shall provide that the
option is subject to the following terms and conditions and to such other terms
and conditions not inconsistent therewith as the Committee may deem appropriate
in each case:
(a) Option Exercise Price. The exercise price to be paid for each
---------------------
share of Stock upon the exercise of an option shall be 100% of the fair market
value of the shares on the date the option is granted. As used in this Plan, the
term "date the option is granted" means the first business day in April as of
which the option is granted in accordance with Section 5(b). Fair market value
of the shares shall be (i) the mean of the high and the low prices of shares of
Stock sold on a national stock exchange on the date the option is granted (or if
there was no sale on such date the highest asked price for Stock on such date)
or (ii) if the Stock is not listed on a national stock exchange on the date the
option is granted the mean between the "bid" and "asked" prices of the Stock in
the National Over-The-Counter market on the date the option is granted.
(b) Amount and Date of Grant. Each Participant shall receive a grant
------------------------
of options for shares of Stock as follows: (1) on the first business day (i.e.,
the first day on which Stock of the Company may be traded on a national stock
exchange) of April in each calendar year in which such Participant is serving on
the Board of Directors, 12,000 shares, and (ii) following a Participant's
initial election to the Board of Directors of the Company, provided that if a
Participant's initial election to the Board of Directors occurs after September
30 of the year first elected, such initial grant shall be 6,000 and not 12,000
shares of Stock.
(c) Period of Option. Options granted hereunder shall have a term of
----------------
four years from the date of grant.
(d) Exercisability. Each option granted under the Plan shall be
--------------
exercisable in full at any time and from time to time commencing as of the date
of grant.
(e) Payment for Stock. The option exercise price for Stock purchased
-----------------
under an option shall be paid in full at the time of purchase. The option
exercise price be payable, at the election of the holder of the option, in whole
or in part either in cash or by delivery of Stock in transferable form, such
Stock to be valued for such purpose at its fair market value on the date on
which the option is exercised. No share of Stock shall be issued until full
-2-
<PAGE>
payment therefor has been made, and no Participant shall have any rights as an
owner of shares of Stock until the date of issuance to him of the stock
certificate evidencing such Stock.
6. Nontransferability. Options granted pursuant to the Plan shall be
------------------
nontransferable except by will or the laws of descent and distribution, and
shall be exercisable during the optionee's lifetime only by him, and after his
death, by his personal representative or by the person entitled thereto under
his will or the laws of intestate succession.
7. Termination of Service. Upon termination of the optionee's service on
----------------------
the Board of Directors for any reason ("Termination of Service"), his rights to
exercise options then held by him shall be only as follows:
(a) Death or Disability. Upon the death of any person holding options
-------------------
granted under this Plan, his options shall be exercisable, by the holder's
representative or by the person entitled thereto under his will or the laws of
intestate succession, only if and to the extent they are exercisable on the date
of his death, and such options shall terminate twelve months after the date of
his death.
(b) Termination for Cause. A Participant's right to exercise stock
---------------------
options shall be rescinded if the Participant has been found to be engaged
directly or indirectly in any conduct or activity which is in competition with
the Company or is otherwise adverse to or not in the best interest of the
Company.
(c) Termination of Service. Upon the Termination of Service of a
----------------------
Participant for any reason other than as set forth in Section 7(a) or 7(b)
hereof, his options shall be exercisable only if and to the extent they are
exercisable on the date of his Termination of Service and such options shall
terminate 30 days after the date of his Termination of Service unless the holder
of the options dies prior thereto, in which event he shall be deemed to have
died on the date of his Termination of Service; provided, however, in no event
shall such options be exercised more than five years from the date they are
granted.
8. Adjustment of Shares.
--------------------
(a) In the event of changes in the outstanding Stock by reason of stock
dividends, stock splits, reverse stock splits, split-ups, consolidations,
recapitalizations, reorganizations or like events, an appropriate adjustment
shall be made in the number of shares reserved under the Plan, in the number of
shares set forth in Section 4 hereof, and in the number of shares and the option
price per share specified in any stock option agreement with respect to any
unpurchased shares. The Company shall give prompt notice to all optionees of
any adjustment pursuant to this Section.
-3-
<PAGE>
(b) Section 8(a) above to the contrary notwithstanding, in the event
of any merger, consolidation or other reorganization of the Company in which the
Company is not the surviving or continuing corporation or in the event of the
liquidation or dissolution of the Company, all options granted hereunder shall
terminate on the effective date of the merger, consolidation, reorganization,
liquidation, or dissolution unless the agreement with respect thereto provides
for the assumption of such options by the continuing or surviving corporation.
Any other provision of this Plan to the contrary notwithstanding, all
outstanding options granted hereunder shall be fully exercisable for a period of
30 days prior to the effective date of any such merger, consolidation,
reorganization, liquidation, or dissolution unless such options are assumed by
the continuing or surviving corporation.
9. Securities Law Requirements. The Company may require prospective
---------------------------
optionees, as a condition of either the grant or the exercise of an option, to
represent and establish to the satisfaction of the General Counsel of the
Company that all shares of Stock acquired upon the exercise of such option will
be acquired for investment and not for resale. The Company may refuse to permit
the sale or other disposition of any shares acquired pursuant to any such
representation until it is satisfied that such sale or other disposition would
not be in contravention of applicable state or federal securities law.
10. Tax Withholding. If appropriate, the Company shall require an
---------------
optionee to pay to the Company all applicable federal, state and local taxes
which the Company is required to withhold with respect to the exercise of an
option granted hereunder.
11. Amendment. The Board of Directors may amend the Plan at any time,
---------
except that without shareholder approval:
(a) The number of shares of Stock which may be reserved for issuance
under the Plan shall not be increased except as provided in Section 8 hereof;
(b) The option price per share of Stock may not be fixed at less than
the price specified in Section 5(a) hereof;
(c) The maximum period during which the options may be exercised may
not be extended;
(d) The Class of persons eligible to receive options under the Plan
as set forth in Section 3 shall not be changed;
(e) This Section 11 may not be amended in a manner that limits or
reduces the amendments which require shareholder approval; and
-4-
<PAGE>
(f) The provisions of the Plan shall not be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder.
12. Termination. The Plan shall terminate automatically on February 27,
-----------
2001. The Board of Directors may terminate the Plan at any earlier time. The
termination of the Plan shall not affect the validity of any option agreement
outstanding at the date of such termination, but no option shall be granted
after such date.
13. Effective Date. The Plan shall be effective upon its adoption by the
--------------
Board of Directors of the Company. Options may be granted but not exercised
prior to stockholder approval of the Plan. If any options are so granted and
stockholder approval shall not have been obtained on or before February 27,
1992, such options shall terminate retroactively as of the date they were
granted.
-5-
<PAGE>
UNITED STATES FILTER CORPORATION
40-004 Cook Street, Palm Desert, California 92211
Proxy for Annual Meeting of Stockholders on August 6, 1996
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Richard J. Heckmann and Damian C. Georgino,
and each or either of them as proxies, each with power to appoint his
substitute, and hereby authorizes any of them to represent and to vote, as
designated on the reverse side of this proxy card, all shares of the common
stock, par value $.01 per share (the "Common Stock"), of United States Filter
Corporation (the "Company"), which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
on August 6, 1996, commencing at 9:30 A.M., Pacific Daylight Time, at the Indian
Wells Resort Hotel, 76-661 Highway 111, Indian Wells, California 92210 or any
adjournment or postponement thereof as follows on the reverse side of this proxy
card;
(PLEASE DATE AND SIGN ON REVERSE SIDE)
<PAGE>
A [X] Please mark your
votes as in this
example
<TABLE>
<S> <C> <C> <C>
FOR all nominees listed WITHHOLD AUTHORITY
at right (except as marked to vote for all
to the contrary below) nominees listed at right
(1) The election [ ] [ ] Nominees: James E. Clark
of three Richard J. Heckmann
directors, Robert S. Hillas
each for a
term of three years
</TABLE>
(INSTRUCTION: To withhold authority to vote for
any individual nominee, draw a line through such
nominee's name.)
(2) The proposal to approve the FOR AGAINST ABSTAIN
Company's 1991 Employee Stock Option [ ] [ ] [ ]
Plan, as amended and restated;
(3) The proposal to approve the FOR AGAINST ABSTAIN
Company's 1991 Directors Stock [ ] [ ] [ ]
Option Plan, as amended and
restated;
(4) The proposal to increase the number FOR AGAINST ABSTAIN
of authorized shares of the Company's [ ] [ ] [ ]
Common Stock from 75,000,000 to
150,000,000;
(5) The proposal to ratify the appointment FOR AGAINST ABSTAIN
of KPMG Peat Marwick LLP as independent [ ] [ ] [ ]
public accountants for the Company;
In their discretion, the proxy holders are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no directions are specified, this proxy will be
voted FOR proposals 1 through 5.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.
SIGNATURE Dated , 1996
-------------------- ------------------------- --------
Signature
Note: Please sign exactly as name or names appear hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
