UNITED STATES FILTER CORP, S-4/A, 1997-11-25

UNITED STATES FILTER CORP
S-4/A, 1997-11-25
REFRIGERATION & SERVICE INDUSTRY MACHINERY

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1997

REGISTRATION NO. 333-39711
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1

TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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UNITED STATES FILTER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 3589 33-0266015
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)

40-004 COOK STREET
PALM DESERT, CALIFORNIA 92211
(760) 340-0098
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

---------------

DAMIAN C. GEORGINO
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY
UNITED STATES FILTER CORPORATION
40-004 COOK STREET
PALM DESERT, CALIFORNIA 92211
(760) 340-0098
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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COPY TO:
JANICE C. HARTMAN
KIRKPATRICK & LOCKHART LLP
1500 OLIVER BUILDING
PITTSBURGH, PENNSYLVANIA 15222
(412) 355-6500

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: The effective
date of the merger of a wholly owned subsidiary of the registrant with and
into Puro Water Group, Inc. ("Puro") as described in the Proxy
Statement/Prospectus.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]

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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF MAXIMUM AMOUNT MAXIMUM OFFERING AGGREGATE
SECURITIES TO BE REGISTERED TO BE REGISTERED(1) PRICE PER SHARE OFFERING PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
Common stock, par value
$.01 per share........ 973,273 shares $6.9375 $27,488,955.75 $8,330
</TABLE>
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(1) Represents the number of shares issuable to holders of Common Stock, par
value $.0063 per share, of Puro pursuant to the Agreement and Plan of
Merger described in this registration statement (the "Merger Agreement"),
assuming the "U.S. Filter Average Market Price" of a share of Common Stock
of the registrant as defined in the Proxy Statement/Prospectus is
$29.3125, which is the average of the high and low sales prices of the
registrant's Common Stock on November 13, 1997.

(2) Estimated solely for the purpose of calculating the registration fee;
computed in accordance with Rule 457(f)(1) by multiplying the average of
the high and low sales prices for the Common Stock of Puro on the American
Stock Exchange Composite Transactions Tape on November 21, 1997 ($6.9375)
by the number of shares of Puro Common Stock outstanding on October 31,
1997 and issuable pursuant to outstanding options and other rights to
acquire such Common Stock as of such date (3,962,372 shares).

(3) Of such amount, $8,030 was previously paid.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

[PURO WATER GROUP, INC. LETTERHEAD]

DECEMBER 2, 1997

Dear Stockholder:

You are cordially invited to attend a Special Meeting of Stockholders of
Puro Water Group, Inc. to be held on Tuesday, December 30, 1997 at Puro's
headquarters at 56-24, 58th Street, Maspeth, New York, commencing at 10:00
a.m., local time.

At the Special Meeting, you will be asked to approve and adopt an Agreement
and Plan of Merger and the transactions contemplated thereby providing for the
acquisition of Puro Water Group, Inc. by United States Filter Corporation. As
a result of the merger, each outstanding share of Puro Common Stock will be
converted into the right to receive a fraction of a share of United States
Filter Common Stock determined by dividing $7.20 by the average market price
of the United States Filter Common Stock during the 10 consecutive trading
days beginning on the 16th trading day prior to the Puro Special Meeting of
Stockholders. Cash will be paid in lieu of fractional shares. United States
Filter Corporation's Common Stock is listed on the New York Stock Exchange and
traded under the symbol "USF."

The Board of Directors has unanimously determined that the transaction is in
the best interests of Puro and its stockholders and recommends that you vote
FOR the proposal to approve and adopt the Agreement and Plan of Merger and the
transactions contemplated thereby.

If the Puro stockholders approve the Agreement and Plan of Merger, your
investment in Puro will become an investment in United States Filter
Corporation, a leading global provider of industrial and municipal water and
wastewater treatment systems, products and services, with an installed base it
believes is the largest worldwide. The Board of Directors of Puro believes
that the proposed transaction is an opportunity for Puro's stockholders to
participate in a combined company that has greater business and financial
resources and long-term growth potential than Puro has absent the transaction.

The accompanying Proxy Statement/Prospectus describes the proposed
transaction more fully, and you are urged to give it your careful attention.

It is important that your shares be represented at the Special Meeting
whether or not you are personally able to attend. In order to insure that you
will be represented, we ask you to complete and return the enclosed proxy card
promptly. A postage-paid return envelope is enclosed for your convenience.

Sincerely,
Scott Levy
Chief Executive Officer
<PAGE>

[LOGO]

PURO WATER GROUP, INC.
56-24 58TH STREET
MASPETH, NEW YORK 11378

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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON DECEMBER 30, 1997

NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Puro Water
Group, Inc., a Delaware corporation ("Puro"), will be held on Tuesday,
December 30, 1997, at Puro's headquarters at 56-24 58th Street, Maspeth, New
York, commencing at 10:00 a.m., local time, to consider and vote upon the
following matter described in the accompanying Proxy Statement/Prospectus:

Approval and adoption of the Agreement and Plan of Merger, dated as
of October 8, 1997, (the "Merger Agreement"), among United States
Filter Corporation, a Delaware corporation ("U.S. Filter"), USF/PW
Acquisition Corporation, a newly formed Delaware corporation and a
wholly owned subsidiary of U.S. Filter ("Sub"), and Puro, and the
transactions contemplated thereby, including the merger of Sub with
and into Puro, pursuant to which, among other things, Puro will become
a wholly owned subsidiary of U.S. Filter, and each outstanding share
of Common Stock of Puro will be converted into the right to receive a
fraction of a share of U.S. Filter Common Stock determined by dividing
$7.20 by the average market price of the U.S. Filter Common Stock
during the 10 consecutive trading days beginning on the 16th trading
day prior to the Puro Special Meeting of Stockholders. A copy of the
Merger Agreement is attached as Annex A to the accompanying Proxy
Statement/Prospectus.

Only holders of record of Puro Common Stock at the close of business on
November 5, 1997 will be entitled to notice of, and to vote at, the Special
Meeting and any adjournment or postponement thereof. A list of such
stockholders will be open to examination by any stockholder at the Special
Meeting and for a period of ten days prior to the date of the Special Meeting
during ordinary business hours at the principal executive offices of Puro, 56-
24 58th Street, Maspeth, New York.

Whether or not you plan to attend the Special Meeting, please complete,
date, sign and return the enclosed proxy card promptly. A return envelope is
enclosed for your convenience and requires no postage for mailing in the
United States.

By Order of the Board of Directors,

Jack C. West
Secretary

Maspeth, New York

December 2, 1997

YOUR VOTE IS IMPORTANT

TO VOTE YOUR SHARES PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>

PROXY STATEMENT
OF
PURO WATER GROUP, INC.

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PROSPECTUS
OF
UNITED STATES FILTER CORPORATION

This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of USF/PW Acquisition Corporation, a Delaware corporation ("Sub")
and a wholly owned subsidiary of United States Filter Corporation, a Delaware
corporation ("U.S. Filter"), with and into Puro Water Group, Inc., a Delaware
corporation ("Puro"), pursuant to which Puro will become a wholly owned
subsidiary of U.S. Filter. As a result of the Merger, each issued and
outstanding share of Common Stock of Puro, par value $.0063 per share (the
"Puro Common Stock") (other than any such shares issued and held in the
treasury of Puro), will be converted into the right to receive a fraction of a
share of Common Stock of U.S. Filter, par value $.01 per share (the "U.S.
Filter Common Stock") determined by dividing $7.20 (the "Puro Per Share
Purchase Price") by the average market price (calculated as indicated below)
of the U.S. Filter Common Stock during the 10 consecutive trading days
beginning on the 16th trading day prior to the Puro Special Meeting (as
defined) (the "U.S. Filter Average Market Price"). Upon consummation of the
Merger, Puro will become a wholly owned subsidiary of U.S. Filter. The "U.S.
Filter Average Market Price" will be calculated by (i) averaging the high and
low per share sale prices on the New York Stock Exchange Composite
Transactions Tape for each trading day during such period on which there were
any trades in USF Common Stock, (ii) adding such daily averages together, and
(iii) dividing the sum by 10 (reduced by the number of such trading days
during which there were no such trades).

U.S. Filter Common Stock is listed on the New York Stock Exchange and traded
under the symbol "USF," and Puro Common Stock is listed on the American Stock
Exchange and traded under the symbol "HHO." The last reported sale prices of
the U.S. Filter Common Stock and Puro Common Stock on November 24, 1997 were
$32.0625 per share and $7.00 per share, respectively. There can be no
assurance as to the market prices of U.S. Filter Common Stock or Puro Common
Stock. Puro stockholders are urged to obtain current market prices.

This document constitutes both a prospectus of U.S. Filter and a proxy
statement of Puro relating to the solicitation of proxies for use at a Special
Meeting of Stockholders of Puro (the "Puro Special Meeting") scheduled to be
held at 10:00 a.m. on Tuesday, December 30, 1997.

REFERENCE IS MADE TO "RISK FACTORS" BEGINNING ON PAGE 12, WHICH CONTAINS
MATERIAL INFORMATION THAT PURO STOCKHOLDERS SHOULD CONSIDER IN CONNECTION WITH
THE PROPOSED TRANSACTIONS DISCUSSED HEREIN AND THE SECURITIES BEING OFFERED
HEREBY.

THIS PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS
WITH RESPECT TO, AMONG OTHER THINGS, THE FINANCIAL CONDITION, RESULTS OF
OPERATIONS, BUSINESS AND PROSPECTS OF U.S. FILTER FOLLOWING CONSUMMATION OF
THE MERGER, INCLUDING STATEMENTS RELATING TO ANTICIPATED BENEFITS OF THE
MERGER. THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS,
THOSE DESCRIBED IN "RISK FACTORS."
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THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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This Proxy Statement/Prospectus and the accompanying proxy cards are first
being mailed to stockholders of Puro on or about December 2, 1997.

THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS NOVEMBER , 1997.
<PAGE>

Except as otherwise specified, all information in this Proxy
Statement/Prospectus has been adjusted to reflect 3-for-2 splits of the U.S.
Filter Common Stock effected on each of December 5, 1994 and July 15, 1996.

All information contained in this Proxy Statement/Prospectus relating to U.S.
Filter has been supplied by U.S. Filter, and all information contained in this
Proxy Statement/Prospectus relating to Puro has been supplied by Puro.

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY U.S. FILTER, PURO OR ANY OTHER
PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY
OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF U.S. FILTER OR PURO SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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AVAILABLE INFORMATION

U.S. Filter and Puro are each subject to the informational requirements of
the United States Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith each files periodic reports, proxy
solicitation materials and other information with the United States Securities
and Exchange Commission (the "Commission"). Such reports, proxy solicitation
materials and other information filed by U.S. Filter and by Puro with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material also can be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants, such as U.S. Filter and
Puro, that file electronically with the Commission. Such reports, proxy and
information statements and other information may be found on the Commission's
site address, http://www.sec.gov. The periodic reports, proxy statements and
other information filed by U.S. Filter and Puro with the Commission may also be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005 and the American Stock Exchange, 86 Trinity Place, New
York, New York 10006-1881, respectively.

This Proxy Statement/Prospectus is part of a Registration Statement on Form
S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") that has been filed by U.S. Filter under the United States
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities to be issued pursuant to the Merger. As permitted by the rules and
regulations of the Commission, this Proxy Statement/Prospectus does not contain
all of the information set forth in the Registration Statement. Such additional
information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Proxy Statement/Prospectus or in
any document incorporated by reference in this Proxy Statement/Prospectus as to
the contents of any contract or other document referred to herein or therein
are not necessarily complete. In each instance, reference is hereby made to the
copy of such contract or other document

2
<PAGE>

filed as an exhibit to the Registration Statement or such other document, and
each such statement is qualified in all respects by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission by U.S. Filter (File No.
1-10728) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus: U.S. Filter's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997; U.S. Filter's Quarterly Report on Form 10-Q
for the quarters ended June 30, 1997 (as amended on Form 10-Q/A dated August
22, 1997) and September 30, 1997; U.S. Filter's Current Reports on Form 8-K
dated August 4, 1997, September 17, 1997 and September 19, 1997; and a
description of U.S. Filter Common Stock contained in U.S. Filter's
Registration Statement on Form 8-A, as the same may be amended.

All documents and reports subsequently filed by U.S. Filter pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus and prior to the date of the Puro Special Meeting
shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be part hereof from the dates of filing of such
documents and reports. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Proxy Statement/Prospectus
to the extent that a statement contained herein or in any subsequently filed
document which is or is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Proxy Statement/Prospectus.

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE FILED
WITH THE COMMISSION THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED,
UPON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, DIRECTED TO SENIOR VICE
PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY, UNITED STATES FILTER
CORPORATION, 40-004 COOK STREET, PALM DESERT, CALIFORNIA 92211 (TELEPHONE
(760) 340-0098). IN ORDER TO ENSURE TIMELY DELIVERY OF ANY DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY DECEMBER 22, 1997.

3
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
AVAILABLE INFORMATION...................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 3
TABLE OF CONTENTS.......................................................... 4
SUMMARY.................................................................... 5
RISK FACTORS............................................................... 12
THE PURO SPECIAL MEETING................................................... 16
MARKET PRICE AND DIVIDEND DATA............................................. 18
THE MERGER................................................................. 19
Background of the Merger.................................................. 19
U.S. Filter Reasons for the Merger........................................ 19
Puro Reasons for the Merger; Recommendation of the Puro Board of
Directors................................................................ 19
Interests of Certain Persons in the Merger................................ 21
Accounting Treatment...................................................... 22
Certain Federal Income Tax Consequences................................... 22
Regulatory Approvals...................................................... 23
Resale Restrictions....................................................... 24
No Appraisal Rights....................................................... 24
U.S. FILTER SELECTED CONSOLIDATED FINANCIAL DATA........................... 25
PURO SUMMARY FINANCIAL DATA................................................ 28
PURO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................................. 30
THE MERGER AGREEMENT....................................................... 36
The Merger................................................................ 36
Conversion of Puro Common Stock........................................... 36
Employee and Director Stock Options....................................... 37
Other Options............................................................. 37
Underwriters' Warrants.................................................... 37
Convertible Notes......................................................... 37
Representations and Warranties............................................ 38
Certain Covenants......................................................... 38
No Solicitation........................................................... 39
Conditions................................................................ 40
Termination; Termination Fees and Expenses................................ 40
Amendment and Waiver...................................................... 41
The Stockholder Agreements................................................ 42
INFORMATION CONCERNING PURO................................................ 43
SECURITY OWNERSHIP......................................................... 52
DESCRIPTION OF CAPITAL STOCK............................................... 53
LEGAL MATTERS.............................................................. 55
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS................................... 55
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
ANNEX A--Agreement and Plan of Merger dated as of October 8, 1997 among
United States Filter Corporation, USF/PW Acquisition Corporation
and Puro Water Group, Inc......................................... A-1
ANNEX B--Form of Stockholder Agreement..................................... B-1
</TABLE>

4
<PAGE>

SUMMARY

Following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. Reference is made to, and this summary is qualified
in its entirety by, the more detailed information contained or incorporated by
reference in this Proxy Statement/Prospectus and the Annexes hereto.
Stockholders are urged to read this Proxy Statement/Prospectus and the Annexes
hereto in their entirety. Except as otherwise specified, all information in
this Proxy Statement/Prospectus has been adjusted to reflect the 3-for-2 splits
of the U.S. Filter Common Stock effected on each of December 5, 1994 and July
15, 1996.

THE COMPANIES

U.S. Filter U.S. Filter is a leading global provider of
industrial and municipal water and wastewater
treatment systems, products and services, with an
installed base of systems that U.S. Filter believes
is one of the largest worldwide. U.S. Filter is also
a leading provider of service deionization and
outsourced water services, including the operation of
water and wastewater treatment systems at customer
sites. It is actively involved in the development of
privatization initiatives for municipal wastewater
treatment facilities in the United States, Mexico and
Canada. U.S. Filter sells equipment and provides
services to its customers through more than 450
locations throughout the world. U.S. Filter also
markets a broad line of water distribution and sewer
and stormwater equipment and supplies through a
network of over 110 distribution centers in the
United States. In addition, U.S. Filter sells,
installs and services a wide range of water treatment
and water-related products for the residential and
consumer markets. U.S. Filter's principal executive
offices are located at 40-004 Cook Street, Palm
Desert, California 92211, and its telephone number is
(760) 340-0098. References herein to U.S. Filter
refer to United States Filter Corporation and its
subsidiaries, unless the context requires otherwise.

Puro Puro is a leading bottler and distributor of spring
and purified drinking water, serving commercial and
residential users in the metropolitan New York area.
Puro markets its drinking water under the brand names
Puro, American Eagle Spring Water, Nature's Best
Spring Water and Lectro-Still. Puro also rents and
services water coolers, filtration systems, and
plumbed-in fountains numbering in excess of 25,000
located in businesses, factories, and homes in the
metropolitan New York area. Puro's facilities consist
of NSF (National Sanitation Foundation) certified
bottling plants in East Orange, New Jersey and
Commack, Long Island, New York. In addition, Puro is
an authorized factory service center for all major
water cooler manufacturers and provides warranty
repair coverage to many of its competitors. Puro's
principal executive offices are located at 56-24 58th
Street, Maspeth, New York 11378 and its telephone
number is (718) 326-7000.

THE PURO SPECIAL
MEETING

Time, Date and Place
The Puro Special Meeting is scheduled to be held on
Tuesday, December 30, 1997, at Puro's headquarters at
56-24 58th Street, Maspeth, New York, commencing at
10:00 a.m., local time.

5
<PAGE>

Record Date; Shares
Entitled to Vote
Only holders of record of shares of Puro Common Stock
at the close of business on November 5, 1997 are
entitled to notice of and to vote at the Puro Special
Meeting. As of October 31, 1997, there were 3,476,789
shares of Puro Common Stock outstanding, held by
approximately 22 holders of record. Each holder of
record of shares of Puro Common Stock on the record
date is entitled to cast one vote per share on each
matter to be acted upon or which may properly come
before the Puro Special Meeting.

Purpose of the Meeting
The purpose of the Puro Special Meeting is to
consider and vote upon a proposal to approve and
adopt the Agreement and Plan of Merger dated as of
October 8, 1997 (the "Merger Agreement"), among U.S.
Filter, Sub and Puro, and the transactions
contemplated thereby (including the Merger).

Vote Required
The approval and adoption of the Merger Agreement and
the transactions contemplated thereby (including the
Merger) by Puro stockholders will require the
affirmative vote of the holders of a majority of all
shares of Puro Common Stock entitled to vote thereon.
In connection with the Merger Agreement, each of
Peter T. Dixon, the Trusts Under Article 16 of the
Will of W. Palmer Dixon for the Benefit of Peter T.
and Palmer Dixon (the "Dixon Trusts"), Beth Levy,
Scott Levy, Jack C. West and Edberg Associates
Limited Partnership, entered into an agreement
(together, the "Stockholder Agreements") with U.S.
Filter pursuant to which each such Puro stockholder
agreed, among other things, to vote, and at U.S.
Filter's request to grant U.S. Filter an irrevocable
proxy to vote, all shares of Puro Common Stock owned
by such stockholder (or as to which such stockholder
has the exclusive right to vote) in favor of approval
and adoption of the Merger Agreement and the
transactions contemplated thereby. As of October 31,
1997, such stockholders owned or had the sole power
to vote an aggregate of 2,139,256 shares, or
approximately 62%, of the outstanding Puro Common
Stock. See "The Stockholder Agreements." Jack C.
West, President and Secretary of Puro, has pledged
the 359,505 shares of Puro Common Stock owned
beneficially by him to European American Bank ("EAB")
in connection with certain indebtedness (the "Pledged
Shares"). No other votes (assuming EAB does not
exercise any rights of disposition in connection with
the Pledged Shares) are needed to approve the Merger
Agreement and the transactions contemplated
thereunder; however, the Puro Amended and Restated
By-Laws ("Puro By-Laws") require the presence of the
holders of at least two-thirds of the shares entitled
to vote to constitute a quorum for the transaction of
business at any meeting of stockholders. Accordingly,
the presence of at least 178,604 additional shares of
Puro Common Stock is required in order to convene the
Special Meeting and permit a vote to be taken with
respect to the Merger Agreement.

THE MERGER

Effects of the Merger
In accordance with the terms and conditions set forth
in the Merger Agreement, Sub will merge into Puro and
Puro will become a wholly

6
<PAGE>

owned subsidiary of U.S. Filter (the time at which
the Merger shall occur in accordance with such terms
is hereinafter referred to as the "Effective Time").
As a result of the Merger, each issued and
outstanding share of Puro Common Stock (other than
shares issued and held in the treasury of Puro) will
be converted into the right to receive a fraction of
a share of U.S. Filter Common Stock determined by
dividing the Puro Per Share Purchase Price by the
U.S. Filter Average Market Price (the "Exchange
Ratio"). Fractional shares of U.S. Filter Common
Stock will not be issuable in connection with the
Merger. Puro stockholders otherwise entitled to a
fractional share will be paid the value of such
fraction in cash. See "The Merger Agreement--
Conversion of Puro Common Stock" and "--Termination;
Termination Fees and Expenses."

At the Effective Time, each outstanding and
unexercised option, warrant or other right to acquire
Puro Common Stock, including each option outstanding
pursuant to the 1996 Stock Option Plan (the "Employee
Stock Option Plan") and the 1997 Directors Stock
Option Plan (the "Director Stock Option Plan") will
be converted into rights to acquire shares of U.S.
Filter Common Stock on the basis of the Exchange
Ratio.

On October 9, 1997, the last full trading day prior
to the date on which the Merger was publicly
announced, the closing sales prices per share of U.S.
Filter Common Stock and Puro Common Stock as reported
by the New York Stock Exchange and American Stock
Exchange were $42.125 and $5.375, respectively. On
November , 1997, the most recent practicable date
prior to the printing of this Proxy
Statement/Prospectus, the closing sales prices per
share of U.S. Filter Common Stock and Puro Common
Stock as reported by the New York Stock Exchange and
American Stock Exchange Composite Transactions Tapes
were $ and $ , respectively. See "Market Price
and Dividend Data."

Reasons for the Merger U.S. Filter. U.S. Filter believes that the Merger
will enable it to enter one of the largest bottled
water markets in the United States through one of the
leading providers of five-gallon bottled water in
that market.

Puro. Puro believes that the combined company will
have greater business and financial resources and
long-term growth potential than Puro would have on
its own.

Recommendation of the The Board of Directors of Puro has unanimously
Puro Board of approved the Merger Agreement and recommends a vote
Directors FOR approval and adoption of the Merger Agreement and
the transactions contemplated thereby by the
stockholders of Puro.

For a discussion of the factors considered by the
Puro Board of Directors in reaching its decision, see
"The Merger--Background of the Merger" and "--Puro
Reasons for the Merger; Recommendation of the Puro
Board of Directors."

Interests of Certain In considering the recommendation of Puro's Board of
Persons in the Merger Directors, Puro stockholders should be aware that
certain members of Puro's management and of the Puro
Board of Directors have certain interests in the
Merger

7
<PAGE>

that are in addition to the interests they may have
as stockholders of Puro generally.

In connection with the Merger, new employment
agreements will be entered into with Scott Levy,
Chief Executive Officer of Puro, and Jack C. West,
President and Secretary of Puro (the "Employment
Agreements"). Pursuant to the Employment Agreements,
Mr. Levy would be employed for a four-year term as
Regional Manager of Operations, Northeast of the U.S.
Filter Consumer Products Group and Mr. West would be
employed for a two-year term as Regional Manager for
Acquisitions of the U.S. Filter Consumer Products
Group. Mr. Levy's and Mr. West's employment would be
at annual salaries of $187,000 and $100,000,
respectively, plus expenses and benefits consistent
with their positions. Both agreements contain
confidentiality undertakings respecting proprietary
information of U.S. Filter, and Mr. West's agreement
contains a non-competition undertaking. If, during
the term of the Employment Agreement, either of
Messrs. Levy or West is terminated without cause, he
will receive the remaining payments due to him
pursuant to his Employment Agreement. Additionally,
if Mr. West is terminated without cause during his
initial two-year term, he will receive a severance
payment equivalent to two times his annual base
salary as of the last day of his employment with U.S.
Filter. If, following expiration of the second year
of his four-year term, Mr. Levy terminates his
Employment Agreement, he will receive a payment
equivalent to his annual base salary as of the last
day of his employment with U.S. Filter, payable in
shares of U.S. Filter Common Stock. If, upon
expiration of his two-year term, Mr. West is not
offered an employment arrangement at the same annual
base salary that he received as of the last day of
his two-year term and that is otherwise on terms
substantially similar to the terms of the Employment
Agreement (except with respect to severance
payments), he will receive a payment equivalent to
two times his annual base salary as of the last day
of his employment with U.S. Filter.

Pursuant to the Merger Agreement, each stock option
currently outstanding pursuant to the Employee Stock
Option Plan or Director Stock Option Plan, whether or
not then exercisable in accordance with its terms,
will be converted into an option to purchase shares
of U.S. Filter Common Stock on the basis of the
Exchange Ratio. In addition, each of Peter T. Dixon
and Stephen Edberg, directors of Puro, beneficially
own separate options to purchase 73,926 shares and
49,284 shares, respectively, of Puro Common Stock,
which will be converted into options to purchase U.S.
Filter Common Stock on the basis of the Exchange
Ratio.

See "The Merger--Interests of Certain Persons in the
Merger" and "The Merger Agreement--Employee and
Director Stock Options" and "--Other Options."

8
<PAGE>

The obligations of U.S. Filter and Puro to consummate
Conditions to the the Merger are subject to the satisfaction of certain
Merger; Termination of conditions, including obtaining requisite approval of
the Merger Agreement the Puro stockholders; expiration or termination of
all waiting periods applicable to the Merger under
the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act");
the absence of any temporary restraining order,
injunction or other order or legal or regulatory
restraint or prohibition preventing, or the enactment
of any law making illegal, the consummation of the
Merger, or limiting or restricting U.S. Filter's or
Puro's conduct or operation of Puro's business after
the Merger; receipt of any material third party
consents; the receipt of certain legal opinions; the
qualification of the Merger as a pooling of interests
for accounting purposes; consents of the holders to
the conversion of each Employee and Director Stock
Option and certain other rights to acquire Puro
Common Stock into rights to acquire U.S. Filter
Common Stock; and the execution of employment
agreements with certain officers and employees of
Puro. See "The Merger--Accounting Treatment," "--
Certain Federal Income Tax Consequences" and "--
Regulatory Approvals" and "The Merger Agreement--
Conditions."

U.S. Filter and Puro filed notification and report
forms under the HSR Act with the United States
Federal Trade Commission ("FTC") and the Antitrust
Division of the United States Department of Justice
("Antitrust Division") on October 28, 1997. U.S.
Filter and Puro received notices on November 7, 1997
of early termination of the waiting periods under the
HSR Act.

The Merger Agreement is subject to termination (i) at
the option of either U.S. Filter or Puro if the
Merger is not consummated before March 31, 1998,
provided no party may terminate the Merger Agreement
on such basis whose failure to fulfill any material
obligation has been a cause of the failure of the
Merger to occur or (ii) otherwise upon the occurrence
of certain specified events. See "The Merger
Agreement--Termination; Termination Fees and
Expenses."

Under certain circumstances, Puro may be required to
reimburse U.S. Filter for its expenses and to pay
U.S. Filter a termination fee of $1,250,000 or
$750,000, depending on the basis for the termination,
if the Merger Agreement is terminated. See "The
Merger Agreement-- Termination; Termination Fees and
Expenses."

Exchange of Stock Upon consummation of the Merger, each holder of a
Certificates certificate or certificates representing shares of
Puro Common Stock outstanding immediately prior to
the Effective Time will, upon the surrender thereof
(duly endorsed, if required) to American Stock
Transfer and Trust Company (the "Exchange Agent"), be
entitled to receive a certificate or certificates
representing the number of shares of U.S. Filter
Common Stock into which such shares of Puro Common
Stock will have been automatically converted as a
result of the Merger, together with cash in

9
<PAGE>

lieu of fractional shares. The Exchange Agent will
mail a letter of transmittal with instructions to all
holders of record of Puro Common Stock as of the
Effective Time for use in surrendering their stock
certificates in exchange for certificates
representing shares of U.S. Filter Common Stock.
CERTIFICATES SHOULD NOT BE SURRENDERED UNTIL THE
LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED.
See "The Merger Agreement--Conversion of Puro Common
Stock."

No Appraisal Rights
Holders of Puro Common Stock will not be entitled to
dissenters' appraisal rights under applicable
Delaware corporate law in connection with the Merger.

Certain U.S. Income Tax It is intended that the Merger will constitute a
Consequences reorganization within the meaning of Section 368(a)
of the United States Internal Revenue Code of 1986,
as amended (the "Code") and that no gain or loss will
be recognized by U.S. Filter or Puro and no gain or
loss would be recognized by Puro stockholders on the
exchange of shares of Puro Common Stock for U.S.
Filter Common Stock pursuant to the Merger, except
with respect to fractional shares. Consummation of
the Merger is conditioned upon the receipt of an
opinion of counsel to U.S. Filter to such effect. For
a further discussion of certain federal income tax
consequences of the Merger, see "The Merger--Certain
Federal Income Tax Consequences" and "The Merger
Agreement--Conditions."

Accounting Treatment
Consummation of the Merger is conditioned upon the
qualification of the Merger as a pooling of interests
for accounting and financial reporting purposes. See
"The Merger--Accounting Treatment" and "The Merger
Agreement--Conditions."

10
<PAGE>

COMPARATIVE PER SHARE DATA

Set forth below are net income, cash dividends declared and book value per
common share data of U.S. Filter and Puro on both historical and unaudited pro
forma combined bases and on a per share equivalent unaudited pro forma basis.
The information set forth below should be read in conjunction with the
respective financial statements of U.S. Filter and Puro that are incorporated
by reference or included in this Proxy Statement/Prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------- SIX MONTHS ENDED
1995 1996 1997 SEPTEMBER 30, 1997
------------------- --------- ----------------------
<S> <C> <C> <C> <C>
U.S. FILTER--HISTORICAL
Net income per common
share.................. 0.49 0.49 0.77 0.55
Cash dividends de-
clared................. -- -- -- --
Book value (end of peri-
od).................... 13.80 15.76
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------- SIX MONTHS ENDED
1994(1) 1995 1996 SEPTEMBER 30, 1997 (2)
------------------- --------- ----------------------
<S> <C> <C> <C> <C>
PURO--HISTORICAL
Net income per common
share.................. 0.14 0.21 0.28 0.14
Cash dividends de-
clared................. -- -- -- --
Book value (end of peri-
od).................... 2.18 3.26
<CAPTION>
FISCAL YEAR (3)
----------------------------- SIX MONTHS ENDED
1995(1) 1996 1997 SEPTEMBER 30, 1997 (4)
------------------- --------- ----------------------
<S> <C> <C> <C> <C>
PRO FORMA COMBINED
Net income per common
share(5)(6)............ 0.49 0.49 0.77 0.55
Cash dividends de-
clared(7).............. -- -- -- --
Book value(6) (end of
period)................ 13.75 15.74
EQUIVALENT PRO FORMA
COMBINED
PER PURO COMMON
SHARE(8)
Net income per common
share(5)(6)............ 0.12 0.12 0.18 0.13
Cash dividends de-
clared(7).............. -- -- -- --
Book value(6) (end of
period)................ 3.26 3.73
</TABLE>
- --------

(1) Puro's fiscal year ended December 31, 1994 includes the period from
inception (February 1, 1994) through December 31, 1994.

(2) Represents the last six months of Puro's nine months ended September 30,
1997.

(3) Combines U.S. Filter's fiscal years ended March 31, 1995, 1996 and 1997
with Puro's years ended December 31, 1994, 1995 and 1996, respectively.

(4) Combines U.S. Filter's six months ended September 30, 1997 with the last
six months of Puro's nine months ended September 30, 1997.

(5) Reflects the combination of U.S. Filter net income per common share with
Puro net income per common share.

(6) Does not give effect to anticipated expenses related to the Merger and does
not reflect cost savings that U.S. Filter management believes may be
realized following the Merger. See "The Merger--U.S. Filter Reasons for the
Merger."

(7) U.S. Filter does not anticipate paying cash dividends on the U.S. Filter
Common Stock in the foreseeable future. As a result of the foregoing and
the fact that U.S. Filter has not historically paid a dividend on the U.S.
Filter Common Stock, pro forma cash dividends is not meaningful. See
"Market Price and Dividend Data."

(8) The equivalent pro forma combined data for Puro represent the pro forma
combined data multiplied by an Exchange Ratio of approximately .2373 based
on an assumed U.S. Filter Average Market Price of $30.34375, which is the
average of the high and low sales prices of the U.S. Filter Common Stock on
November 19, 1997.

11
<PAGE>

RISK FACTORS

The following factors should be taken into account by holders of Puro Common
Stock in evaluating whether to approve and adopt the Merger Agreement and the
transactions contemplated thereby, which approval and adoption will, if the
other conditions to the Merger are satisfied or waived, result in their
becoming holders of U.S. Filter Common Stock. These considerations should be
taken into account in conjunction with the other information included or
incorporated by reference in this Proxy Statement/Prospectus.

ACQUISITION STRATEGY

In pursuit of its strategic objective of becoming the leading global single-
source provider of water and wastewater treatment systems and services, U.S.
Filter has, since 1991, successfully acquired and integrated more than 100
United States based and international businesses with strong market positions
and substantial water and wastewater treatment expertise. U.S. Filter plans to
continue to pursue acquisitions that expand the segments of the water and
wastewater treatment and water-related industries in which it participates,
complement its technologies, products or services, broaden its customer base
and geographic areas served and/or expand its global distribution network, as
well as acquisitions which provide other opportunities to further and
implement U.S. Filter's one-stop-shop approach in terms of technology,
distribution or service. U.S. Filter's acquisition strategy entails the
potential risks inherent in assessing the value, strengths, weaknesses,
contingent or other liabilities and potential profitability of acquisition
candidates and in integrating the operations of acquired companies. Although
U.S. Filter generally has been successful in pursuing these acquisitions,
there can be no assurance that acquisition opportunities will continue to be
available, that U.S. Filter will have access to the capital required to
finance potential acquisitions, that U.S. Filter will continue to acquire
businesses or that any business acquired will be integrated successfully or
prove profitable.

INTERNATIONAL TRANSACTIONS

U.S. Filter has made and expects it will continue to make acquisitions and
obtain contracts in markets outside the United States. While these activities
may provide important opportunities for U.S. Filter to offer its products and
services internationally, they also entail the risks associated with
conducting business internationally, including the risk of currency
fluctuations, slower payment of invoices, nationalization and possible social,
political and economic instability.

RELIANCE ON KEY PERSONNEL

U.S. Filter's operations are dependent on the continued efforts of senior
management, in particular Richard J. Heckmann, U.S. Filter's Chairman of the
Board, President and Chief Executive Officer. U.S. Filter does not have
employment agreements with most members of senior management, including Mr.
Heckmann. Should any of the senior managers with whom U.S. Filter does not
have a contract be unable or choose not to continue in their present roles,
U.S. Filter's prospects could be adversely affected.

PROFITABILITY OF FIXED PRICE CONTRACTS

A significant portion of U.S. Filter's revenues are generated under fixed
price contracts. To the extent that original cost estimates are inaccurate,
costs to complete increase, delivery schedules are delayed or progress under a
contract is otherwise impeded, revenue recognition and profitability from a
particular contract may be adversely affected. U.S. Filter routinely records
upward or downward adjustments with respect to fixed price contracts due to
changes in estimates of costs to complete such contracts. There can be no
assurance that future downward adjustments will not be material.

CYCLICALITY AND SEASONALITY

The sale of capital equipment within the water treatment industry is
cyclical and influenced by various economic factors including interest rates
and general fluctuations of the business cycle. A significant portion of

12
<PAGE>

U.S. Filter's revenues is derived from capital equipment sales. While U.S.
Filter sells capital equipment to customers in diverse industries and in
global markets, cyclicality of capital equipment sales and instability of
general economic conditions could have an adverse effect on U.S. Filter's
revenues and profitability.

The sale of water and wastewater distribution equipment and supplies is also
cyclical and influenced by various economic factors including interest rates,
land development and housing construction industry cycles. Sales of such
equipment and supplies are also subject to seasonal fluctuation in northern
climates. The sale of water and wastewater distribution equipment and supplies
is a significant component of U.S. Filter's business. Cyclicality and
seasonality of water and wastewater distribution equipment and supplies sales
could have an adverse effect on U.S. Filter's revenues and profitability.

POTENTIAL ENVIRONMENTAL RISKS

U.S. Filter's business and products may be significantly influenced by the
constantly changing body of environmental laws and regulations, which require
that certain environmental standards be met and impose liability for the
failure to comply with such standards. U.S. Filter is also subject to inherent
risks associated with environmental conditions at facilities owned, and the
state of compliance with environmental laws, by businesses acquired by U.S.
Filter. While U.S. Filter endeavors at each of its facilities to assure
compliance with environmental laws and regulations, there can be no assurance
that U.S. Filter's operations or activities, or historical operations by
others at U.S. Filter's locations, will not result in cleanup obligations,
civil or criminal enforcement actions or private actions that could have a
material adverse effect on U.S. Filter. In that regard, United States federal
and state environmental regulatory authorities have issued certain notices of
violation related to alleged multiple violations of applicable wastewater
pretreatment standards by a wholly owned subsidiary of U.S. Filter at a
Connecticut ion exchange resin regeneration facility acquired by U.S. Filter
in October 1995 from Anjou International Company ("Anjou"). A grand jury
investigation is pending which is believed to relate to the same conditions
that were the subject of the notices of violation. U.S. Filter has certain
rights of indemnification from Anjou which may be available with respect to
these matters. In addition, U.S. Filter's activities as owner and operator of
certain hazardous waste treatment and recovery facilities are subject to
stringent laws and regulations and compliance reviews. Failure of one of these
facilities to comply with those regulations could result in substantial fines
and the suspension or revocation of the facility's hazardous waste permit. In
other matters, U.S. Filter has been notified by the United States
Environmental Protection Agency that it is a potentially responsible party
under the Comprehensive Environmental Response, Compensation, and Liability
Act ("CERCLA") at certain sites to which U.S. Filter or its predecessors
allegedly sent waste in the past. It is possible that U.S. Filter could
receive other such notices under CERCLA or analogous state laws in the future.
U.S. Filter does not believe that its liability, if any, relating to such
matters will be material. However, there can be no assurance that such matters
will not be material. In addition, to some extent, the liabilities and risks
imposed by environmental laws on U.S. Filter's customers may adversely impact
demand for certain of U.S. Filter's products or services or impose greater
liabilities and risks on U.S. Filter, which could also have an adverse effect
on U.S. Filter's competitive or financial position.

COMPETITION

All of the markets in which U.S. Filter competes are highly competitive. Due
to the nature of these markets, many of which are fragmented and include an
array of different sources of competition, U.S. Filter knows of no reliable
statistics that provide a basis from which to estimate U.S. Filter's relative
competitive position. There are competitors of U.S. Filter in certain markets
that are divisions or subsidiaries of large companies that have significantly
greater resources than U.S. Filter. In connection with the marketing of water
distribution equipment and supplies, U.S. Filter competes not only with a
large number of independent wholesalers and with other distribution chains
similar to U.S. Filter, but also with manufacturers who sell directly to
customers. In the residential water market, U.S. Filter competes with
companies with national distribution networks, businesses with regional scope
and local product assemblers or service companies, as well as retail outlets.
U.S. Filter believes that there are thousands of participants in the household
water market.

13
<PAGE>

POTENTIAL RISKS RELATED TO WATER RIGHTS AND WATER TRANSFERS

U.S. Filter recently acquired more than 47,000 acres of agricultural land
(the "Properties"), situated in the Southwestern United States, the
substantial majority of which are in Imperial County, California (the "IID
Properties") located within the Imperial Irrigation District (the "IID").
Substantially all of the Properties are currently leased to third party
agricultural tenants, including prior owners of the Properties. U.S. Filter
acquired the Properties with appurtenant water rights, and is actively seeking
to acquire additional properties with water rights, primarily in the
Southwestern and Western United States. U.S. Filter may seek in the future to
transfer water attributable to water rights appurtenant to the Properties,
particularly the IID Properties (the "IID Water"). However, since the IID
holds title to all of the water rights within the IID in trust for the
landowners, the IID would control the timing and terms of any transfers of IID
Water by U.S. Filter. The circumstances under which transfers of water can be
made and the profitability of any transfers are subject to significant
uncertainties, including hydrologic risks of variable water supplies, risks
presented by allocations of water under existing and prospective priorities,
and risks of adverse changes to or interpretations of United States federal,
state and local laws, regulations and policies. Transfers of IID Water
attributable to water rights appurtenant to the IID Properties (the "IID Water
Rights") are subject to additional uncertainties. Allocations of Colorado
River water, which is the source of all water deliveries to the IID
Properties, are subject to limitations under complex international treaties,
interstate compacts, United States federal and state laws and regulations, and
contractual arrangements and, in times of drought, water deliveries could be
curtailed by the United States government. Further, any transfers of IID Water
would require the approval of the United States Secretary of the Interior.
Even if a transfer were approved, other California water districts and users
could assert claims adverse to the IID Water Rights, including but not limited
to claims that the IID has failed to satisfy United States federal law and
California constitutional requirements that IID Water must be put to
reasonable and beneficial use. A finding that the IID's water use is
unreasonable or nonbeneficial could adversely impact title to IID Water Rights
and the ability to transfer IID Water. Water transferred by the IID to
metropolitan areas of Southern California, such as San Diego, would be
transported through aqueducts owned or controlled by the Metropolitan Water
District, a quasi-governmental agency (the "MWD"). The transportation cost for
any transfer of IID Water and the volume of water which the MWD can be
required to transport at any time are subject to California laws of uncertain
application, some aspects of which are currently in litigation. The
uncertainties associated with water rights could have a material adverse
effect on U.S. Filter's profitability.

TECHNOLOGICAL AND REGULATORY CHANGE

The water and wastewater treatment business is characterized by changing
technology, competitively imposed process standards and regulatory
requirements, each of which influences the demand for U.S. Filter's products
and services. Changes in regulatory or industrial requirements may render
certain of U.S. Filter's treatment products and processes obsolete. Acceptance
of new products may also be affected by the adoption of new government
regulations requiring stricter standards. U.S. Filter's ability to anticipate
changes in technology and regulatory standards and to develop successfully and
introduce new and enhanced products on a timely basis will be a significant
factor in U.S. Filter's ability to grow and to remain competitive. There can
be no assurance that U.S. Filter will be able to achieve the technological
advances that may be necessary for it to remain competitive or that certain of
its products will not become obsolete. In addition, U.S. Filter is subject to
the risks generally associated with new product introductions and
applications, including lack of market acceptance, delays in development or
failure of products to operate properly.

MUNICIPAL AND WASTEWATER MARKET

A significant percentage of U.S. Filter's revenues is derived from municipal
customers. While municipalities represent an important market in the water and
wastewater treatment industry, contractor selection processes and funding for
projects in the municipal sector entail certain additional risks not typically
encountered with industrial customers. Competition for selection of a
municipal contractor typically occurs through a formal bidding process which
can require the commitment of significant resources and greater lead times
than industrial projects. In addition, demand in the municipal market is
dependent upon the availability of funding at the local

14
<PAGE>

level, which may be the subject of increasing pressure as local governments
are expected to bear a greater share of the cost of public services.

SHARES ELIGIBLE FOR FUTURE SALE

The market price of U.S. Filter Common Stock could be adversely affected by
the availability for public sale of shares held on October 31, 1997 by
security holders of U.S. Filter, including: (i) up to 3,646,783 outstanding
shares which may be delivered by Laidlaw Inc. or its affiliates ("Laidlaw"),
at Laidlaw's option in lieu of cash, at maturity pursuant to the terms of 5
3/4% Exchangeable Notes due 2000 of Laidlaw (the amount of shares or cash
delivered or paid to be dependent within certain limits upon the value of the
Common Stock at maturity), or sold from time to time in accordance with Rule
144(k) under the Securities Act; (ii) 7,636,363 shares issuable upon
conversion of U.S. Filter's 6% Convertible Subordinated Notes due 2005 at a
conversion price of $18.33 per share of Common Stock; (iii) 9,113,924 shares
issuable upon conversion of U.S. Filter's 4 1/2% Convertible Subordinated
Notes due 2001 at a conversion price of $39.50 per share of Common Stock; (iv)
1,200,000 shares issuable upon exercise of warrants, 600,000 at an exercise
price of $50.00 per share and 600,000 at an exercise price of $60.00 per
share, in each case expiring on September 17, 2007 and exercisable at any time
after the first sale of water from water rights appurtenant to the Properties
(the "Warrants"); (v) 2,719,618 outstanding shares that are currently
registered for sale under the Securities Act, pursuant to a shelf registration
statement; and (vi) 8,496,157 outstanding shares which are subject to
agreements pursuant to which the holders have certain rights to request the
Company to register the sale of such holders' Common Stock under the
Securities Act and/or, subject to certain conditions, to include certain
percentages of such shares in other registration statements filed by U.S.
Filter, of which such rights as to 8,000,000 shares are not exercisable until
February 17, 2000. In addition, U.S. Filter has registered for sale under the
Securities Act 3,769,824 shares which may be issuable by U.S. Filter from time
to time in connection with acquisitions of businesses or assets from third
parties.

15
<PAGE>

THE PURO SPECIAL MEETING

GENERAL

This Proxy Statement/Prospectus is being furnished to holders of Puro Common
Stock in connection with the solicitation of proxies by the Board of Directors
of Puro for use at the Puro Special Meeting to be held on Tuesday, December
30, 1997 at Puro's headquarters at 56-24 58th Street, Maspeth, New York,
commencing at 10:00 a.m., local time, and at any adjournment or postponement
thereof. At the Puro Special Meeting, Puro's stockholders will consider and
vote upon a proposal to approve and adopt the Merger Agreement and the
transactions contemplated thereby (including the Merger).

The Board of Directors of Puro has unanimously approved the Merger Agreement
and recommends a vote FOR approval and adoption of the Merger Agreement and
the transactions contemplated thereby by the stockholders of Puro. See "The
Merger--Puro Reasons for the Merger; Recommendation of the Puro Board of
Directors."

VOTING AT THE MEETING; RECORD DATE

The Board of Directors of Puro has fixed November 5, 1997 as the record date
for the determination of Puro stockholders entitled to notice of and to vote
at the Puro Special Meeting. Accordingly, only holders of record of Puro
Common Stock on that record date will be entitled to notice of and to vote at
the Puro Special Meeting. As of November 5, 1997, there were 3,476,789 shares
of Puro Common Stock outstanding, held by 22 holders of record. Each holder of
record of shares of Puro Common Stock on the record date is entitled to cast
one vote per share on the proposal to approve and adopt the Merger Agreement
and the transactions contemplated thereby, exercisable in person or by
properly executed proxy, at the Puro Special Meeting. The presence, in person
or by properly executed proxy, of the holders of two-thirds of the outstanding
shares of Puro Common Stock entitled to vote at the Puro Special Meeting is
necessary to constitute a quorum at the Puro Special Meeting.

Shares represented by duly completed proxies submitted by nominee holders on
behalf of beneficial owners will be counted as present for purposes of
determining the existence of a quorum (except to the extent such proxies
reflect "broker non-votes"). Under the rules of the New York Stock Exchange
that govern most domestic stock brokerage firms, member firms that hold shares
in street name for beneficial owners that have received no instructions from
their clients as to "non-discretionary" proposals do not have discretion to
vote on those proposals. The New York Stock Exchange has advised Puro that the
proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby is "non-discretionary." Accordingly, if a broker
indicates that it does not have authority to vote certain shares with respect
to the proposal ("broker non-votes"), those shares will not be counted for
purposes of determining the existence of a quorum. Abstentions will be counted
as present for purposes of determining the existence of a quorum.

The affirmative vote of the holders of a majority of all shares of Puro
Common Stock entitled to vote on the proposal is required to approve and adopt
the Merger Agreement and the transactions contemplated thereby. Because
abstentions and "broker non-votes" will not be recorded as votes in favor of
the proposal, both abstentions and "broker non-votes" will have the effect of
votes against the proposal.

U.S. Filter has entered into a Stockholder Agreement with each of Peter T.
Dixon, the Dixon Trusts, Beth Levy, Scott Levy, Jack C. West and Edberg
Associates Limited Partnership, pursuant to which each such Puro stockholder
has agreed, among other things, to vote, and at U.S. Filter's request to grant
U.S. Filter an irrevocable proxy to vote, all shares of Puro Common Stock
owned by such stockholder in favor of approval and adoption of the Merger
Agreement and the transactions contemplated thereby. Such stockholder has also
agreed not to sell, transfer or encumber any of the shares of Puro Common
Stock now owned or acquired during the term of the Stockholder Agreement by
such stockholder. As of October 31, 1997, such stockholders owned or had the
sole power to vote an aggregate of 2,139,256 shares, or approximately 62%, of
the outstanding Puro Common Stock. See "The Merger Agreement--The Stockholder
Agreements." No other votes (assuming EAB does not

16
<PAGE>

exercise any rights of disposition in connection with the Pledged Shares) are
needed to approve the Merger Agreement and the transactions contemplated
thereunder; however, the Puro By-Laws require the presence of the holders of
at least two-thirds of the shares entitled to vote to constitute a quorum for
the transaction of business at any meeting of stockholders. Accordingly, the
presence of at least 178,604 additional shares of Puro Common Stock is
required in order to convene the Special Meeting and permit a vote to be taken
with respect to the Merger Agreement.

PROXIES

All properly executed proxy cards delivered by stockholders to Puro in time
to be voted at the Puro Special Meeting and not revoked will be voted at the
Puro Special Meeting in accordance with the directions noted thereon. In the
absence of such instructions, the shares represented by a properly executed
and dated proxy card will be voted "FOR" the proposal to approve and adopt the
Merger Agreement and the transactions contemplated thereby.

Any stockholder delivering a proxy has the power to revoke it at any time
before it is voted by giving written notice to Jack C. West, Secretary of
Puro, at 56-24 58th Street, Maspeth, New York 11378; by executing and
delivering to Mr. West a proxy card bearing a later date; or by voting in
person at the Puro Special Meeting; provided, however, that under the rules of
the New York Stock Exchange, any beneficial owner of Puro Common Stock whose
shares are held in street name by a member brokerage firm may revoke his proxy
and vote his shares in person at the Puro Special Meeting only in accordance
with applicable rules and procedures of the New York Stock Exchange.

Except as described under "The Merger Agreement--Termination; Termination
Fees and Expenses," all expenses of this solicitation, excluding the cost of
printing and mailing this Proxy Statement/Prospectus and the filing fee paid
to the Commission in connection with filing the Registration Statement (which
will be shared equally by Puro and U.S. Filter), will be paid by the party
incurring the expense. In addition to solicitation by use of the mails,
proxies may be solicited by directors, officers and employees of Puro in
person or by telephone, facsimile or other means of communication. Such
directors, officers and employees will not be additionally compensated, but
may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and Puro will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.

PURO STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.

17
<PAGE>

MARKET PRICE AND DIVIDEND DATA

U.S. Filter Common Stock is listed on the New York Stock Exchange and traded
under the symbol "USF." Puro Common Stock is listed on the American Stock
Exchange and traded under the symbol "HHO." The table below sets forth, for
the fiscal quarters indicated, the high and low sales prices of U.S. Filter
Common Stock and Puro Common Stock as reported on the New York Stock Exchange
and American Stock Exchange Composite Transactions Tapes, respectively. Prior
to February 7, 1997, there was no established trading market for the Puro
Common Stock. No cash dividends were declared on U.S. Filter Common Stock or
Puro Common Stock during the periods indicated. Each fiscal year of U.S.
Filter is ended March 31, and each fiscal year of Puro is ended December 31.

<TABLE>
<CAPTION>
U.S. FILTER
COMMON STOCK
-------------
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1996
First Quarter........... $13.08 $ 9.92
Second Quarter.......... 16.08 12.50
Third Quarter........... 18.00 13.42
Fourth Quarter.......... 19.33 16.42
FISCAL 1997
First Quarter........... 23.75 18.42
Second Quarter.......... 34.75 18.50
Third Quarter........... 36.25 30.38
Fourth Quarter.......... 39.00 28.88
FISCAL 1998
First Quarter........... 33.38 25.75
Second Quarter.......... 43.19 26.94
Third Quarter
(through November 21,
1997).................. 44.44 28.63
</TABLE>
<TABLE>
<CAPTION>
PURO
COMMON
STOCK
-----------
HIGH LOW
----- -----
<S> <C> <C>
FISCAL 1997
First Quarter............ $6.63 $5.25
Second Quarter........... 7.38 5.38
Third Quarter............ 6.38 4.13
Fourth Quarter
(through November 21,
1997)................... 7.38 4.88
</TABLE>

On October 9, 1997, the last full trading day prior to the date on which the
Merger Agreement was publicly announced, the last reported sales price on the
New York Stock Exchange Composite Transactions Tape was $42.125 per share of
U.S. Filter Common Stock and the last reported sales price on the American
Stock Exchange Composite Transactions Tape was $5.375 per share of Puro Common
Stock.

On November , 1997, the most recent practicable date prior to the printing
of this Proxy Statement/Prospectus, the last reported sales price on the New
York Stock Exchange Composite Transactions Tape was $ per share of U.S.
Filter Common Stock and the last reported sales price on the American Stock
Exchange Composite Transactions Tape was $ per share of Puro Common Stock.
As of November , 1997, there were approximately record holders of U.S.
Filter Common Stock and approximately record holders of Puro Common
Stock.

U.S. Filter currently intends to retain earnings to provide funds for the
operation and expansion of its business and accordingly does not anticipate
paying cash dividends on the U.S. Filter Common Stock in the foreseeable
future. Any payment of cash dividends on the U.S. Filter Common Stock in the
future will depend upon U.S. Filter's financial condition, earnings, capital
requirements and such other factors as the Board of Directors deems relevant.

PURO STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR U.S.
FILTER COMMON STOCK AND PURO COMMON STOCK PRIOR TO THE PURO SPECIAL MEETING.

18
<PAGE>

THE MERGER

BACKGROUND OF THE MERGER

Early in 1997, U. S. Filter entered the consumer market for water and water
treatment products through the purchase of several businesses, and established
the U. S. Filter Consumer Products Group. In addition to various household and
other consumer businesses, the Consumer Products Group participates in the
five-gallon segment of the bottled water market. In seeking to expand that
business, U. S. Filter identified Puro as a possible acquisition candidate.

In April 1997, Randall C. Easton, Senior Vice President--Consumer Products
Group, contacted Jack C. West, President of Puro, about a possible acquisition
of Puro by U. S. Filter. At a meeting on April 22, 1997, Mr. Easton and another
representative of U. S. Filter exchanged information with Mr. West regarding
their respective companies. On the basis of that discussion, U. S. Filter
concluded that a transaction probably was not feasible, based on the price in
the range of $7.00 per share of Puro Common Stock suggested by Mr. West.

A second meeting was held on June 13, 1997, in which Scott Levy, Chief
Executive Officer of Puro, also participated. At that meeting, U. S. Filter
received additional financial information which supported payment of a higher
purchase price than originally contemplated by U. S. Filter. After signing a
confidentiality agreement and conducting due diligence, U. S. Filter advised
Puro that it might be prepared to pay $6.75 per share of Puro Common Stock in
shares of U. S. Filter Common Stock, subject to additional due diligence and
certain other conditions.

At a meeting on September 12, 1997, the Board of Directors of Puro authorized
the Puro management to negotiate a possible transaction with U. S. Filter on
the basis of $6.85 per share, and a letter was signed in which U. S. Filter and
Puro agreed to consider a merger on that basis, subject to negotiation and
execution of a definitive agreement, due diligence by both parties, Board
approvals and stockholder approval on the part of Puro. Beginning September 15,
1997, both parties conducted due diligence and negotiated the terms of the
Merger Agreement, the Stockholder Agreements and the Employment Agreements.

At a Puro Board of Directors meeting held on October 4, 1997, Peter T. Dixon,
the beneficial owner of 1,290,136 outstanding shares of Puro Common Stock and
Chairman of the Puro Board of Directors, indicated that he would not be in
favor of a transaction at $6.85 per share. Following the meeting, Puro
management advised U. S. Filter that $6.85 per share was inadequate, and
proposed a price of $7.85 per share. After further negotiation, the parties
agreed to a price of $7.20 per share, to be based on the Exchange Ratio, which
was approved by the Puro Board of Directors on October 8, 1997. The Merger
Agreement was executed, and delivered by the parties on October 10, 1997.

U.S. FILTER REASONS FOR THE MERGER

U.S. Filter's strategy for its Consumer Products Group includes expansion of
its participation in the bottled water segment of the consumer market. U.S.
Filter believes that the acquisition of Puro will enable U.S. Filter to enter
one of the largest bottled water markets in the United States through one of
the leading providers of five-gallon bottled water in that market.

19
<PAGE>

PURO REASONS FOR THE MERGER; RECOMMENDATION OF THE PURO BOARD OF DIRECTORS

The terms of the Merger, including the Puro Per Share Purchase Price, were
determined through negotiations between Puro and U.S. Filter following
extensive discussions, financial analysis and preliminary due diligence. The
Board of Directors of Puro believes that the terms of the Merger Agreement and
the transactions contemplated thereby are fair and in the best interests of
Puro and its stockholders and has unanimously approved the Merger Agreement
and recommends the approval and adoption of the Merger Agreement and the
transactions contemplated thereby by the stockholders of Puro.

In reaching its decision to approve the Merger Agreement and the
transactions contemplated thereby, Puro's Board of Directors considered a
number of factors, including:

(i) information concerning the financial performance and condition,
business operations and prospects of each of Puro and U.S. Filter and
Puro's projected future value and prospects as a separate entity and on a
combined basis with U.S. Filter;

(ii) current industry, economic and market conditions which have
encouraged consolidation and business combinations to enable companies to
provide integrated services in the consumer markets for water and water-
related products;

(iii) the enhancement of the strategic and market position of the
combined companies beyond that achievable by Puro alone, and U.S. Filter's
historic growth pattern as well as its interest in the consumer markets for
water and water-related products;

(iv) the structure of the transaction and the terms of the Merger
Agreement, including the Puro Per Share Purchase Price, which were the
result of arms-length negotiations between Puro and U.S. Filter;

(v) the fact that the Merger would provide the stockholders of Puro with
the opportunity to receive a significant premium over the recent market
price for the Puro Common Stock, and to exchange their shares of Puro
Common Stock for more actively traded U.S. Filter Common Stock;

(vi) the terms of the Merger Agreement that permit Puro's Board of
Directors, in the exercise of its fiduciary duties and subject to certain
conditions, to respond to unsolicited inquiries regarding potential
business combination transactions. Puro's Board of Directors noted that, in
specified events, U.S. Filter would have certain rights of termination as a
result of which Puro would be obligated to pay U.S. Filter either $750,000
or $1,250,000, depending on the circumstances of the termination, which, in
the view of the Puro Board, would not unreasonably impede any interested
third party from proposing a superior transaction;

(vii) the financial strength of U.S. Filter and its ability to provide
Puro with the working capital and business resources necessary to allow it
to implement its business plan, including the ability and potential to
exploit Puro's current geographic market and to expand beyond that market;

(viii) the expectation that the Merger will afford Puro's stockholders
the opportunity to receive U.S. Filter Common Stock in a transaction that
is non-taxable for United States federal income tax purposes; and

(ix) the likelihood that the Merger would be consummated.

The Puro Board of Directors determined that a merger with U.S. Filter was
the best alternative for achieving the strategic objectives of Puro because,
among other things, the combined entity would have a significant presence in
the overall consumer market for water and water-related products that would
better enable Puro to compete in the industry. Following the Merger, Puro is
expected to have greater business and economic resources. The Board of
Directors believes that the proposed Merger is an opportunity for Puro's
stockholders to

20
<PAGE>

participate in a combined enterprise which has greater business and financial
resources and long-term growth potential than Puro would have on its own.

The foregoing discussion of the information and factors considered and given
weight by the Puro Board of Directors is not intended to be exhaustive, but
includes the material factors considered by the Puro Board. In addition, in
reaching the determination that the Merger is fair to and in the best interest
of Puro's stockholders, in view of the wide variety of factors considered in
connection with its evaluation of the proposed Merger, Puro's Board considered
the factors above as a whole and did not find it practical to quantify, or
otherwise attempt to assign specific or relative weights to, such factors, and
the individual directors may have given differing weights to different
factors.

THE BOARD OF DIRECTORS OF PURO UNANIMOUSLY RECOMMENDS THAT PURO STOCKHOLDERS
VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

General

In considering the recommendation of Puro's Board of Directors, Puro
stockholders should be aware that certain members of Puro's management and of
the Puro Board of Directors have certain interests in the Merger that are in
addition to any interests they may have as stockholders of Puro generally.
These interests include, among others, employment agreements providing for
certain severance and other employee benefits and the conversion of options
under the Employee Stock Option Plan and the Director Stock Option Plan into
options to acquire shares of U.S. Filter Common Stock on the basis of the
Exchange Ratio.

Puro Employment Agreements

In connection with the Merger, Messrs. Levy and West will enter into
Employment Agreements with U.S. Filter. Pursuant to the Employment Agreements,
Mr. Levy would be employed for a four-year term as Regional Manager of
Operations, Northeast of the U.S. Filter Consumer Products Group and Mr. West
would be employed for a two-year term as Regional Manager for Acquisitions of
the U.S. Filter Consumer Products Group. Mr. Levy's and Mr. West's employment
would be at annual salaries of $187,000 and $100,000, respectively, plus
expenses and benefits consistent with their positions. Both agreements contain
confidentiality undertakings respecting proprietary information of U.S.
Filter, and Mr. West's agreement contains a non-competition undertaking. If,
during the term of the Employment Agreement, either of Messrs. Levy or West is
terminated without cause, he will receive the remaining payments due to him
pursuant to his Employment Agreement. Additionally, if Mr. West is terminated
without cause during his initial two-year term, he will receive a severance
payment equivalent to two times his annual base salary as of the last day of
his employment with U.S. Filter. If, following expiration of the second year
of his four-year term, Mr. Levy terminates his Employment Agreement, he will
receive a payment equivalent to his annual base salary as of the last day of
his employment with U.S. Filter, payable in shares of U.S. Filter Common
Stock. If, upon expiration of his two-year term, Mr. West is not offered an
employment arrangement at the same annual base salary that he received as of
the last day of his two-year term pursuant to the Employment Agreement and
that is otherwise on terms substantially similar to the terms of the
Employment Agreement (except with respect to severance payments), he will
receive a payment equivalent to two times his annual base salary as of the
last day of his employment with U.S. Filter.

Other Options

Peter T. Dixon and the Dixon Trusts hold two options to purchase an
aggregate of 73,926 shares of Puro Common Stock (the "Guarantee Options") at
an exercise price of $5.40 per share. The Guarantee Options were issued in
consideration of the collateralization by the Dixon Trusts of certain debt
obligations of Puro in connection with the business acquisitions of American
Eagle Water/Electrified Companies, Inc. ("Electrified") in January 1996 and
Mountainwood Spring Water Co., Inc. ("Mountainwood") in June 1996. Pursuant to
the Electrified transaction, Puro obtained a letter of credit in the amount of
$3,500,000 from EAB to secure seller financing of a like amount. Similarly,
Puro obtained a letter of credit in the amount of $500,000 from EAB in
connection with the Mountainwood transaction. Mr. Dixon secured both letters
of credit with personal assets. The option held by Mr. Dixon to purchase
24,642 shares will expire in April 2001 and the option held by the Dixon
Trusts to purchase 49,284 shares will expire in August 2001.

21
<PAGE>

Edberg Associates Limited Partnership ("Edberg Associates") holds an option
to purchase 49,284 shares of Puro Common Stock (the "Edberg Option") at an
exercise price of $5.40 per share. This option was issued in November 1996 as
an inducement for an equity investment by Edberg Associates in Puro and to
induce Dr. Stephen C. Edberg, currently a director of Puro, to serve on the
Board of Directors of Puro. Dr. Edberg is the beneficial owner of the Edberg
Option, which will expire in May 2001.

Employee and Director Stock Options

As of the date of this Proxy Statement/Prospectus, options to purchase an
aggregate of 125,000 shares of Puro Common Stock are outstanding pursuant to
the Employee Stock Option Plan and the Director Stock Option Plan. Pursuant to
the Merger Agreement, and subject to adjustment as set forth therein, at the
Effective Time, each such option, whether or not then exercisable in
accordance with its terms, will be converted into options to purchase shares
of U.S. Filter Common Stock on the basis of the Exchange Ratio.

The following table sets forth, with respect to each executive officer of
Puro, all executive officers of Puro as a group and the non-employee directors
of Puro as a group, the number of shares of Puro Common Stock covered by
outstanding options held by such person or group:

<TABLE>
<CAPTION>
NAME OF PERSON OR GROUP OPTIONS HELD
----------------------- ------------
<S> <C>
Peter T. Dixon................................................ 83,926
Scott Levy.................................................... 0
Jack C. West.................................................. 0
Executive Officer Group....................................... 0
Non-Employee Director Group (3 persons)....................... 153,210*
</TABLE>
- --------
* Includes the Guarantee Options and the Edberg Option. Additionally, each of
Peter T. Dixon, Stephen C. Edberg and Leonard D. Rosinski own beneficially
options to purchase 10,000 shares of Puro Common Stock pursuant to the
Director Stock Option Plan.

ACCOUNTING TREATMENT

The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. Under this method of accounting, the assets
and liabilities of U.S. Filter and Puro will be carried forward to the
combined company at their recorded amounts, income of the combined company
will include income of U.S. Filter and Puro for the entire fiscal period in
which the Merger occurs and the reported income of the separate companies for
prior periods will be combined and restated as income of the combined company.

Pursuant to the Merger Agreement, each of U.S. Filter and Puro is required
to exercise its best efforts to cause the Merger to be accounted for as a
pooling of interests, and Puro has agreed to deliver or cause to be delivered
to U.S. Filter from each of its affiliates an executed agreement as of the
Effective Time to the effect that such person has not transferred shares of
Puro Common Stock or U.S. Filter Common Stock within the preceding 30 days and
will not transfer any shares of U.S. Filter Common Stock prior to the date
that U.S. Filter publishes results covering at least 30 days of post-Merger
operations.

Consummation of the Merger is conditioned upon the qualification of the
Merger as a pooling of interests for accounting purposes. See "The Merger
Agreement--Conditions."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Following is a summary of material United States federal income tax
consequences of the Merger based on current United States law. Neither U.S.
Filter nor Puro has requested or will request any ruling from the United
States Internal Revenue Service as to the United States federal income tax
consequences of the Merger. Future legislative, judicial or administrative
changes or interpretations, which may be retroactive, could alter or modify
the statements set forth herein. This summary may not apply to certain classes
of taxpayers, including, without

22
<PAGE>

limitation, insurance companies, tax-exempt organizations, financial
institutions, dealers in securities, non-resident aliens, non-U.S.
corporations, persons who acquired shares of Puro Common Stock pursuant to the
exercise of employee stock options or rights or otherwise as compensation and
persons who hold shares of Puro Common Stock in a hedging transaction or as
part of a straddle or conversion transaction. Also, the summary does not
address state, local or non-United States tax consequences of the Merger.
Consequently, each holder of Puro Common Stock (a "Holder") should consult
such Holder's own tax advisor as to the specific tax consequences of the
Merger to the Holder.

The Merger will be treated as a reorganization within the meaning of Section
368(a) of the Code. Accordingly, for United States federal income tax
purposes, no gain or loss will be recognized by either U.S. Filter or Puro as
a result of the Merger, and Holders who exchange shares of Puro Common Stock
for shares of U.S. Filter Common Stock pursuant to the Merger will be treated
as follows:

(i) no gain or loss will be recognized by a Holder with respect to the
receipt of U.S. Filter Common Stock;

(ii) the aggregate adjusted tax basis of shares of U.S. Filter Common
Stock (including a fractional share interest in U.S. Filter Common Stock
deemed received and redeemed as described below) received by a Holder will
be the same as the aggregate adjusted tax basis of the shares of Puro
Common Stock exchanged therefor;

(iii) the holding period of shares of U.S. Filter Common Stock (including
the holding period of a fractional share interest in U.S. Filter Common
Stock) received by a Holder will include the holding period of the Puro
Common Stock exchanged therefor, provided that such shares of Puro Common
Stock are held as capital assets at the Effective Time; and

(iv) a Holder of Puro Common Stock who receives cash in lieu of a
fractional share interest in U.S. Filter Common Stock will be treated as
having received such fractional share interest and then as having received
the cash in redemption of such fractional share interest. Under Section 302
of the Code, if such deemed distribution is "substantially
disproportionate" with respect to the Holder or is "not essentially
equivalent to a dividend" after giving effect to the constructive ownership
rules of the Code, the Holder generally will recognize capital gain or loss
equal to the difference between the amount of cash received and the
Holder's adjusted tax basis in the fractional share interest. Under these
rules, a minority stockholder of Puro generally should recognize capital
gain or loss on the receipt of cash in lieu of a fractional share interest
in U.S. Filter Common Stock.

The obligation of U.S. Filter and Puro to consummate the Merger is
conditioned on the receipt of an opinion of U.S. Filter's counsel, Kirkpatrick
& Lockhart LLP, dated as of the Effective Time, substantially to the effect
that the Merger will be treated for United States federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code. The
opinion of Kirkpatrick & Lockhart LLP referred to in this paragraph will be
based upon certain facts, assumptions and representations and/or covenants,
including those contained in certificates of officers of U.S. Filter, Puro
and, possibly, others. Subject to the receipt of such representations and/or
covenants, Kirkpatrick & Lockhart LLP anticipates that it will render such
opinion. If such opinion is not received, the Merger will not be consummated
unless the conditions requiring its receipt are waived and the approval of the
Puro stockholders is resolicited by means of an updated Proxy
Statement/Prospectus. U.S. Filter and Puro currently anticipate that such
opinion will be delivered and that neither U.S. Filter nor Puro will waive the
conditions requiring receipt of such opinion.

REGULATORY APPROVALS

Under the HSR Act and the rules promulgated thereunder, the Merger cannot be
consummated until notifications have been given and certain information has
been furnished to the FTC and the Antitrust Division and specified waiting
period requirements have been satisfied. U.S. Filter and Puro filed
notification and report forms under the HSR Act with the FTC and the Antitrust
Division on October 28, 1997. U.S. Filter and Puro received notices on
November 7, 1997 of early termination of the waiting periods under the HSR
Act. At any

23
<PAGE>

time before or after consummation of the Merger, the FTC or the Antitrust
Division could take such action under applicable antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
consummation of the Merger or seeking divestiture of substantial assets of
Puro or U.S. Filter. At any time before or after the Effective Time, and
notwithstanding that the HSR Act waiting period has expired, any state could
take such action under applicable antitrust laws as it deems necessary or
desirable. Such action could include seeking to enjoin consummation of the
Merger or seeking divestiture of businesses of Puro or U.S. Filter by U.S.
Filter. Private parties may also seek to take legal action under applicable
antitrust laws under certain circumstances.

Based on information available to them, Puro and U.S. Filter believe that
the Merger will be effected in compliance with United States federal and state
antitrust laws. However, there can be no assurance that a challenge to the
consummation of the Merger on antitrust grounds will not be made or that, if
such a challenge were made, Puro and U.S. Filter would prevail.

RESALE RESTRICTIONS

All shares of U.S. Filter Common Stock received by Puro stockholders in the
Merger will be freely transferable, except that shares of U.S. Filter Common
Stock received by persons who are deemed to be "affiliates" (as such term is
defined under the Securities Act) of Puro prior to the Merger may be resold by
them only in transactions permitted by the resale provisions of Rule 145
promulgated under the Securities Act or as otherwise permitted under the
Securities Act. The Merger Agreement requires Puro to deliver or cause to be
delivered to U.S. Filter from each of its affiliates an executed agreement to
the effect that such person will not offer, sell, transfer or otherwise
dispose of any of the shares of U.S. Filter Common Stock issued to such person
in or pursuant to the Merger unless (a) such sale, transfer or other
disposition has been registered under the Securities Act, (b) such sale,
transfer or other disposition is made in conformity with Rule 145 under the
Securities Act or (c) in the opinion of counsel, such sale, transfer or other
disposition is exempt from registration under the Securities Act.

This Proxy Statement/Prospectus does not cover any resales of U.S. Filter
Common Stock received by affiliates of Puro upon consummation of the Merger,
and no person is authorized to make use of this Proxy Statement/Prospectus in
connection with any such resale.

NO APPRAISAL RIGHTS

Under applicable Delaware corporate law, holders of Puro Common Stock are
not entitled to dissenters' appraisal rights in connection with the Merger.

24
<PAGE>

U.S. FILTER SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data of U.S. Filter for each of the five
full fiscal years set forth below are derived from audited consolidated
financial statements of U.S. Filter. Each fiscal year of U.S. Filter is ended
March 31. The financial data as of and for the six months ended September 30,
1996 and 1997 are derived from unaudited consolidated financial statements of
U.S. Filter which, in the opinion of U.S. Filter, reflect all adjustments
(consisting principally of normal, recurring amounts) necessary for the fair
statement of the financial position and results of operations for the periods
presented and are not necessarily indicative of the results for any other
interim period or for the full fiscal year. This summary should be read in
conjunction with the financial statements and other financial information
included in documents incorporated herein by reference.

<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED MARCH 31,(1) ENDED SEPTEMBER 30,
---------------------------------------------- --------------------
1993(2) 1994(3) 1995(4) 1996(5) 1997(7) 1996 1997
-------- ------- ------- ------- --------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues................ $416,725 475,236 600,832 812,322 1,376,601 470,813 1,289,722
Cost of sales........... 326,618 376,441 463,959 606,226 1,026,248 345,236 971,117
-------- ------- ------- ------- --------- -------- ----------
Gross Profit......... 90,107 98,795 136,873 206,096 350,353 125,577 318,605
Selling, general and
administrative
expenses............... 84,058 101,153 108,826 160,714 261,859 92,331 234,676
Merger expenses......... -- -- -- -- 5,581 5,581 --
-------- ------- ------- ------- --------- -------- ----------
84,058 101,153 108,826 160,714 267,440 97,912 234,676
-------- ------- ------- ------- --------- -------- ----------
Operating income
(loss).............. 6,049 (2,358) 28,047 45,382 82,913 27,665 83,929
Other income (expenses):
Interest expense..... (4,044) (4,486) (8,058) (15,212) (22,585) (8,286) (18,389)
Other................ 915 (7,335) 1,280 4,979 3,350 971 1,087
-------- ------- ------- ------- --------- -------- ----------
(3,129) (11,821) (6,778) (10,233) (19,235) (7,315) (17,302)
-------- ------- ------- ------- --------- -------- ----------
Income (loss) before
income tax expense
(benefit) and
extraordinary
items............... 2,920 (14,179) 21,269 35,149 63,678 20,350 66,627
Income tax expense
(benefit).............. 1,237 (6,287) 6,002 13,182 17,481 5,686 21,357
-------- ------- ------- ------- --------- -------- ----------
Income (loss) before
extraordinary
items............... 1,683 (7,892) 15,267 21,967 46,197 14,664 45,270
Extraordinary items(2).. 864 -- -- -- -- -- --
-------- ------- ------- ------- --------- -------- ----------
Net income (loss).... $ 2,547 (7,892) 15,267 21,967 46,197 14,664 45,270
======== ======= ======= ======= ========= ======== ==========
Weighted average number
of common shares
outstanding............ 22,367 25,904 29,763 43,688 60,324 52,158 82,968
PER COMMON SHARE
DATA:(6)
Income (loss) before
extraordinary items.... $ 0.02 (0.33) 0.49 0.49 0.77 0.28 0.55
Extraordinary items(2).. 0.04 -- -- -- -- -- --
-------- ------- ------- ------- --------- -------- ----------
Net income (loss)....... $ 0.06 (0.33) 0.49 0.49 0.77 0.28 0.55
======== ======= ======= ======= ========= ======== ==========
CONSOLIDATED BALANCE
SHEET DATA (END OF
PERIOD):
Working capital......... $ 70,258 108,602 126,417 138,652 471,597 176,727 507,134
Total assets............ 241,652 377,893 508,083 904,337 2,228,328 962,383 2,804,966
Notes payable and long-
term debt, including
current portion........ 36,220 33,858 61,916 60,736 31,968 95,659 77,566
Convertible subordinated
debt................... -- 60,000 105,000 200,000 554,000 193,565 554,000
Shareholders' equity.... 121,226 161,004 177,085 379,611 1,028,850 406,979 1,463,736
</TABLE>

25
<PAGE>

The historical consolidated financial data for the fiscal years ended March
31, 1993, 1994, 1995 and 1996 and the six months ended September 30, 1996 have
been restated to include the accounts and operations of Zimpro Environmental,
Inc. ("Zimpro"), Davis Water and Waste Industries, Inc. ("Davis") and Sidener
Supply Company ("Sidener") which were merged with U.S. Filter in May 1996,
August 1996 and March 1997, respectively, and accounted for as poolings of
interests. Separate results of operations of the combined entities for the
years ended March 31, 1993 through March 31, 1997 and the six months ended
September 30, 1996 and 1997 are presented below:
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED MARCH 31,(1) ENDED SEPTEMBER 30,
--------------------------------------------- -------------------
1993(2) 1994(3) 1995(4) 1996(5) 1997(7) 1996 1997
-------- ------- ------- ------- --------- -------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
U.S. Filter (as
previously reported)... $128,376 180,421 272,032 472,537 1,376,601 448,168 1,289,722
Zimpro.................. 38,675 29,470 31,678 28,877 -- -- --
Davis................... 190,990 202,621 215,649 226,489 -- -- --
Sidener................. 58,684 62,724 81,473 84,419 -- 22,645 --
-------- ------- ------- ------- --------- -------- ----------
$416,725 475,236 600,832 812,322 1,376,601 470,813 1,289,722
======== ======= ======= ======= ========= ======== ==========
OPERATING INCOME (LOSS)
U.S. Filter (as
previously reported)... $ 648 (4,874) 14,585 34,955 82,913 26,600 83,929
Zimpro.................. 1,454 (1,687) 1,026 (5,200) -- -- --
Davis................... 1,559 1,506 7,512 10,892 -- -- --
Sidener................. 2,388 2,697 4,924 4,735 -- 1,065 --
-------- ------- ------- ------- --------- -------- ----------
$ 6,049 (2,358) 28,047 45,382 82,913 27,665 83,929
======== ======= ======= ======= ========= ======== ==========
NET INCOME (LOSS)
U.S. Filter (as
previously reported)... $ 67 (2,541) 8,331 20,290 46,197 13,945 45,270
Zimpro.................. 471 (1,513) 460 (6,732) -- -- --
Davis................... 653 (5,340) 3,448 5,749 -- -- --
Sidener................. 1,356 1,502 3,028 2,660 -- 718 --
-------- ------- ------- ------- --------- -------- ----------
$ 2,547 (7,892) 15,267 21,967 46,197 14,664 45,270
======== ======= ======= ======= ========= ======== ==========
NET INCOME (LOSS) PER
COMMON SHARE:(6)
As previously reported.. $ (0.08) (0.17) 0.34 0.54 0.77 0.28 0.55
As restated............. $ 0.06 (0.33) 0.49 0.49 -- 0.28 --
</TABLE>
- --------
(1) The historical consolidated financial data for the fiscal years ended
March 31, 1993 through March 31, 1996 have been restated to include the
accounts and operations of Zimpro, Davis and Sidener, which were merged
with U.S. Filter in May 1996, August 1996, and March 1997, respectively,
and accounted for as poolings of interests.
(2) The fiscal year ended March 31, 1993 includes twelve months of results of
Societe des Ceramiques Techniques, S.A., acquired April 1, 1992 and three
months of The Permutit Company, Inc., a United States company acquired
January 5, 1993, accounted for as purchases. The fiscal year ended March
31, 1993 also includes extraordinary gains of $.4 million resulting from
the forgiveness of debt in connection with the buyout of a capital lease
obligation and $.5 million resulting from U.S. Filter's Davis subsidiary's
adoption of SFAS No, 109, "Accounting for Income Taxes."
(3) The fiscal year ended March 31, 1994 includes four months of results of
Ionpure Technologies Corporation and IP Holding Company ("Ionpure"),
acquired December 1, 1993 and accounted for as a purchase. Selling,
general and administrative expenses for the year ended March 31, 1994
reflect four months of integration of Ionpure, certain charges totaling
$2.4 million related to the rationalization of certain wastewater
operations and write-off certain intangibles in U.S. Filter's Continental
Penfield subsidiary totaling $3.7 million. In addition, the year ended
March 31, 1994 includes a charge of $8.9 million to reflect a plan to
shutdown and reorganize certain operations of Davis.

26
<PAGE>

(4) The fiscal year ended March 31, 1995 includes the results of operations of
Smogless S.p.A., Crouzat S.A., Sation S.A., Seral Erich Alhauser GmbH and
the Cereflo ceramic product line from the dates of their respective
acquisitions, accounted for as purchases.

(5) The fiscal year ended March 31, 1996 includes the results of operations of
The Permutit Company Limited and The Permutit Company Pty Ltd., Interlake
Water Systems, Arrowhead Industrial Water Inc. and Polymetrics Inc. from
the dates of their respective acquisitions, accounted for as purchases.
Selling, general and administrative expenses for the year ended March 31,
1996 includes charges totaling $3.2 million related to the write-down of
certain patents and equipment of Zimpro.

(6) Net income (loss) per common share amounts are after (i) dividends on U.S.
Filter's Series A Preferred Stock (the "Series A Preferred Stock") of $.7
million for the fiscal year ended March 31, 1993, $.7 million for the
fiscal year ended March 31, 1994, $.7 million for the fiscal year ended
March 1995 and $.5 million for the fiscal year ended March 31, 1996 and
(ii) accretion on the Series A Preferred Stock, a noncash accounting
adjustment required by Securities and Exchange Commission Staff Accounting
Bulletin No. 68 ("SAB 68"), in the amount of $.6 million for the fiscal
year ended March 31, 1993. As of April 1, 1993 the Company and the holder
of the Series A Preferred Stock agreed to a fixed dividend of $.7 million
per year on the Series A Preferred Stock eliminating the increasing rate
and, therefore, the accretion of dividends pursuant to SAB 68. The Series
A Preferred Stock was converted into shares of Common Stock in March 1996.

(7) The fiscal year ended March 31, 1997 includes the results of operations of
The Utility Supply Group, Inc., WaterPro Supplies Corporation, the Water
Systems and Manufacturing Group of Wheelabrator Technologies Inc., and the
Process Equipment Division of United Utilities Plc from the dates of their
respective acquisitions, accounted for as purchases. The year ended March
31, 1997 also includes merger expenses of $5.6 million, related to the
acquisition of Davis, which was accounted for as a pooling of interests.

27
<PAGE>

PURO SUMMARY FINANCIAL DATA

The summary financial information presented below for the period from
inception (February 1, 1994) through December 31, 1994 and as of December 31,
1996 and for the years ended December 31, 1995 and 1996 has been derived from
financial statements which have been audited by Arthur Andersen LLP,
independent public accountants, and are included elsewhere in this Proxy
Statement/Prospectus. The summary financial information as of September 30,
1997 and for the nine months ended September 30, 1996 and 1997 has been
derived from unaudited financial statements which have been prepared on the
same basis as the audited financial statements and, in the opinion of
management, includes all adjustments of a normal recurring nature necessary
for the fair presentation of the information shown therein. The results of
operations for the nine months ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
information set forth below should be read in conjunction with Puro's
financial statements, including the notes thereto, and "Puro Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 1, NINE MONTHS
1994) FISCAL YEAR ENDED ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------- --------------
1994 1995 1996 1996 1997
------------ -------- --------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA:
Revenue:
Bottled water sales and
other revenue............. $2,918 4,175 8,441 6,384 7,605
Rental revenue............. 1,136 1,326 2,186 1,684 1,639
------ -------- --------- ------ ------
Total revenue............. 4,054 5,501 10,628 8,068 9,244
------ -------- --------- ------ ------
Costs and expenses
Costs of goods sold
(excluding depreciation).. 1,147 1,616 3,506 2,293 3,153
Operating expenses
(excluding depreciation
and amortization)......... 1,197 1,306 1,899 1,523 2,712
General and administrative
expenses.................. 948 1,309 2,172 1,892 1,290
------ -------- --------- ------ ------
Total costs and expenses.. 3,292 4,231 7,577 5,708 7,155
------ -------- --------- ------ ------
Depreciation and
amortization:
Cost of goods sold......... 106 237 531 337 444
Operating expenses......... 113 214 461 422 401
------ -------- --------- ------ ------
Total depreciation and
amortization............. 219 451 992 759 845
------ -------- --------- ------ ------
Income from operations..... 543 819 2,059 1,601 1,242
------ -------- --------- ------ ------
Other income (expense):
Interest expense........... (130) (303) (764) (541) (313)
Other income (expense)..... 47 119 28 (5) 73
Plant relocation charges
(1)....................... -- -- (250) (250) --
------ -------- --------- ------ ------
Total other expense....... (83) (184) (985) (796) (240)
------ -------- --------- ------ ------
Income before provision for
income taxes.............. 460 635 1,073 805 1,002
Provision for income
taxes..................... 204 231 446 290 401
------ -------- --------- ------ ------
Net income................. $ 256 404 627 515 601
====== ======== ========= ====== ======
Earnings per share (2)..... $ 0.14 0.21 0.28 0.23 0.17
====== ======== ========= ====== ======
Weighted average common
shares outstanding (2).... 1,843 1,928 2,238 2,238 3,477
====== ======== ========= ====== ======
Pro forma net income (3)... 7
========
Pro forma earnings per
share..................... 0.00
========
Pro forma weighted average
common shares
outstanding............... 1,928
========
</TABLE>

28
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash................................................ $ 217 322
Working capital (deficit)........................... (2,549) 1,383
Total assets........................................ 17,793 17,810
Long-term debt...................................... 5,903 2,436
Total stockholders' equity.......................... 4,643 11,330
</TABLE>
- --------
(1) Represents non-recurring charges of $250,000 related to the closing of two
of Puro's bottling plants and the relocation of such production facilities
to Puro's Commack, Long Island, New York and East Orange, New Jersey
facilities.
(2) See Notes 2 and 14 of Puro Notes to Financial Statements appearing
elsewhere herein.
(3) The pro forma statement of operations data for the year ended December 31,
1995 gives effect to the purchase of Electrified as if it had occurred as
of January 1, 1995. The effects of this transaction are set forth below.

(i) Reflects the increase of intangible assets as a result of the purchase
and an increase in the corresponding amortization expense of $272,000
for the year ended December 31, 1995.
(ii) Reflects the increase in interest expense of $342,000 as a result of
the issuance of notes payable to the sellers of Electrified.
(iii) Income taxes have been decreased by $614,000 to reflect the
adjustments described in (i) and (ii) above.

29
<PAGE>

PURO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

This section contains forward-looking statements that involve risks and
uncertainties. Puro's actual results may differ significantly from the results
discussed in the forward-looking statements. The following discussion and
analysis should be read in conjunction with Puro's Financial Statements and
the Notes thereto included elsewhere in this Proxy Statement/Prospectus.

GENERAL BACKGROUND

Puro is a leading bottler and distributor of spring and purified drinking
water, serving commercial and residential users in the metropolitan New York
area. Puro also rents and services water coolers, filtration systems, and
plumbed-in fountains located in businesses, factories, and homes in the
metropolitan New York area.

Puro was formed in January 1994 and represents the acquisition of LSL Hydro
Corp. and Puro Corporation of America. Subsequently, Puro has acquired 11
additional distributors of high quality drinking water in the New York City,
New Jersey and Long Island markets. Since 1994, Puro has grown from
approximately 5,000 water customers to in excess of 25,000.

Puro's strategy is to capitalize on the growing demand for high quality
drinking water through the expansion of its existing customer base and through
the acquisition of regional water bottlers and distributors in targeted
geographic markets. Puro's acquisition of Electrified's modern high-speed
production facility enables it to absorb new bottling demand without a
commensurate increase in production costs. Similarly, the new bottling
facility in Commack, Long Island, New York can absorb additional volume with
minimum incremental cost. In addition, management continually seeks to grow
revenues by increasing route density through the acquisition and consolidation
of new routes within its existing route structure, thereby minimizing
distribution and administration costs. The continued consolidation of
production and distribution capabilities is a key component of Puro's
operating plans, both within its current markets and any additional markets it
may enter.

RESULTS OF OPERATIONS

Puro derives its revenues from two major sources: bottled water sales and
the rental and service of water coolers, filtration systems and plumbed-in
fountains. While most other bottled water companies sell only pre-packaged
bottled water, Puro also rents water treatment equipment which processes and
dispenses drinking water at the point of use which enables the consumer to
enjoy quality drinking water with reduced contaminants.

Additionally, in contrast to most other water treatment dealers and
distributors that have historically sold their water treatment equipment
outright, Puro creates long-term relationships with its own customers by
renting or placing the equipment under lease/service agreements. These
agreements result in revenue streams which provide Puro with a base of
recurring revenue.

30
<PAGE>

The following table sets forth, for the periods indicated, the percentage
relationship to total revenues of certain items included in Puro's Statement
of Operations:

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 1, NINE MONTHS NINE MONTHS
1994) THROUGH YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996 1997
------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue:
Bottled water sales
and other revenue.... 72.0% 75.9% 79.4% 79.1% 82.3%
Rental Revenue........ 28.0 24.1 20.6 20.9 17.7
----- ----- ----- ----- -----
Total Revenue....... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and Expenses:
Cost of goods sold
(excluding
depreciation)........ 28.3 29.4 33.0 28.4 34.1
Operating expenses
(excluding
depreciation and
amortization)........ 29.5 23.7 17.9 18.9 29.3
General and
administrative
expenses............. 23.4 23.8 20.4 23.5 14.0
----- ----- ----- ----- -----
Total Costs and
Expenses........... 81.2 76.9 71.3 70.8 77.4
----- ----- ----- ----- -----
Depreciation and
Amortization:
Cost of goods sold.... 2.6 4.3 5.0 4.2 4.8
Operating expenses.... 2.8 3.9 4.3 5.2 4.4
----- ----- ----- ----- -----
Total Depreciation
and Amortization... 5.4 8.2 9.3 9.4 9.2
----- ----- ----- ----- -----
Income from
operations........... 13.4 14.9 19.4 19.8 13.4
Other income (expense):
Interest expense...... (3.2) (5.5) (7.2) (6.7) (3.4)
Other income
(expense)............ 1.1 2.2 0.3 (0.1) 0.8
Plant relocation
charges (1).......... 0.0 0.0 (2.4) (3.1) 0.0
----- ----- ----- ----- -----
Total other
expense............ (2.1) (3.3) (9.3) (9.9) (2.6)
----- ----- ----- ----- -----
Income before provision
for income taxes....... 11.3 11.6 10.1 9.9 10.8
Provision for income
taxes.................. 5.0 4.2 4.2 3.6 4.3
----- ----- ----- ----- -----
Net income.............. 6.3% 7.4% 5.9% 6.3% 6.5%
===== ===== ===== ===== =====
</TABLE>
- --------
(1) Represents non-recurring charges of $250,000 related to the closing of two
of Puro's bottling plants and the relocation of such production facilities
to Puro's Commack, Long Island, New York and East Orange, New Jersey
facilities.

Quarter ended September 30, 1996 and Quarter ended September 30, 1997

In the quarter ended September 30, 1997 Puro continued the consolidation of
the routes and related assets of Savoy Refreshment Services, Inc. d/b/a Dial
Refreshment Services ("Dial"), Ozone Water Company of Newark ("Ozone") and
American Water Group, Inc. d/b/a Virgin Springs ("Virgin"). Estimated annual
revenues of these operations are $885,000. Following the sale of its 23,000
square foot facility in Maspeth, New York on June 30, 1997, Puro entered into
a lease and began occupation of its 7,500 square foot premises located

31
<PAGE>

at 56-24 58th Street, Maspeth, New York 11378-0010. Said premises are used for
sales, distribution, cooler repair and Puro's executive offices.

Revenues. Revenues for the quarter ended September 30, 1997 increased by
approximately 11% to $3.3 million from $3.0 million for the quarter ended
September 30, 1996. This increase in revenues reflects increases in both five
gallon and case goods sales from the Commack and East Orange plants as well as
the office refreshment sales of the Dial division acquired in April 1997.
Revenues for the nine months ended September 30, 1997 increased 14.6% to $9.2
million from $8.1 million for the nine months ended September 30, 1996.

Cost of Goods Sold. Cost of goods sold (excluding depreciation) for the
quarter ended September 30, 1997 increased by 9.9% to $1.1 million from $1.0
million for the quarter ended September 30, 1996. This increase results
principally from the increase in total water revenues. Cost of goods sold
(excluding depreciation) as a percentage of revenues for the quarter ended
September 30, 1997 decreased to 32.1% from 32.4% for the same period in 1996.
Cost of goods sold (excluding depreciation) as a percentage of revenues for
the nine months ended September 30, 1997 increased to 35.3% from 24.3% for the
same period in 1996. This reflects an increase in the amount of one gallon
case goods sold from Puro's American Eagle bottling facility.

Operating Expenses. Operating expenses (excluding depreciation and
amortization) for the quarter ended September 30, 1997 increased by 155.4% to
$1.2 million from $0.4 million for the quarter ended September 30, 1996. This
increase reflects the increase in total revenues; additionally, the plant
relocation expenses in 1996 of $0.3 million were reported as a separate line
item. Operating expenses (excluding depreciation and amortization) increased
as a percentage of revenues to 34.7% for the quarter ended September 30, 1997
from 15.0% for the same period in 1996. This increase reflects additional
delivery commissions, temporary help, salary expense and continued rerouting
and consolidation efforts associated with the Dial, Ozone and Virgin
acquisitions. Operating expenses (excluding depreciation and amortization) as
a percentage of revenues for the nine months ended September 30, 1997
increased to 28.6% from 18.2% for the same period in 1996.

General and Administrative Expenses. General and administrative expenses for
the quarter ended September 30, 1997 decreased by 35.9% to $0.3 million from
$0.4 million for the quarter ended September 30, 1996. General and
administrative expenses decreased as a percentage of revenues to 7.6% for the
quarter ended September 30, 1997 from 13.2% for the same period in 1996. This
decrease reflects a portion of the bottling plant relocation charges incurred
in 1996 and efficiencies gained from consolidation of office and clerical
staffing, and was achieved notwithstanding increased expenses incurred in
connection with Puro's status as a public company. General and administrative
expenses as a percentage of revenues for the nine months ended September 30,
1997 decreased to 16.1% from 28.2% for the same period in 1996.

Total Depreciation and Amortization. Total depreciation and amortization for
the quarter ended September 30, 1997 decreased by 8.0% to $0.29 million from
$0.31 million for the quarter ended September 30, 1996. Total depreciation and
amortization decreased as a percentage of revenues to 8.6% for the quarter
ended September 30, 1997 from 10.4% for the same period in 1996. This decrease
results primarily from higher revenues in the quarter ended September 30,
1997. Total depreciation and amortization as a percentage of revenues for the
nine months ended September 30, 1997 increased to 9.0% from 8.7% for the same
period in 1996.

Income from Operations. Decreases in income from operations for all periods
discussed above relate to increases in sales, the cost of consolidation of
routes, the higher cost of goods sold in the office refreshment division, and
the decrease in general and administrative expenses.

Interest Expense. Interest expense for the quarter ended September 30, 1997
decreased by 63.9% to $0.08 million from $0.21 million for the quarter ended
September 30, 1996. Interest expense decreased as a percentage of revenues to
2.3% for the quarter ended September 30, 1997 from 7.0% for the same period in
1996. This reflects the use of proceeds from Puro's initial public offering
available in late February 1997 to reduce $5.2 million of indebtedness
incurred in connection with Puro's acquisitions.

32
<PAGE>

The Period From Inception (February 1, 1994) To December 31, 1994, Year Ended
December 31, 1995 and Year Ended December 31, 1996

Revenues. Revenues for the year ended December 31, 1996 increased by 93% to
$10.6 million from $5.5 million for the year ended December 31, 1995. This
increase in revenues reflects the acquisition of Electrified's operations in
East Orange, New Jersey for eleven of the twelve months ended December 31,
1996 and the acquisition of the five-gallon routes from Mountainwood for the
six months beginning July 1, 1996 through December 31, 1996. Moreover, this
increase occurred notwithstanding an abnormally harsh winter in 1996 evidenced
by a record snow fall and unusually cold spring and summer seasons during the
same year. This factor is even more significant when considering the
significantly higher than normal temperatures experienced in the summer of
1995. Revenues in 1995 increased by 34% to $5.5 million from $4.1 million in
the period from inception (February 1, 1994) to December 31, 1994. The growth
in revenues was attributable to the increase in the number of coolers in
operation as well as the acquisition of smaller distributors in Puro's market
area.

Cost of Goods Sold. Cost of goods sold (excluding depreciation) for the year
ended December 31, 1996 increased to $3.5 million from $1.6 million, or 118%
over that incurred in 1995. This increase results principally from increases
in volume relating to the acquisitions referred to previously. Cost of goods
sold (excluding depreciation) as a percentage of revenues for the year ended
December 31, 1996 increased to 33% from 29% for the same period in 1995. The
increase reflects entry into the case goods product market which is
traditionally a more costly product due to packaging. Cost of goods sold
(excluding depreciation) increased by 45% to $1.6 million in 1995 from $1.1
million in the period from inception (February 1, 1994) to December 31, 1994.
Cost of goods sold (excluding depreciation) increased as a percentage of
revenues to 29% in 1995 from 28% in the period from inception (February 1,
1994) to December 31, 1994. This increase is reflective of the trend to a
higher percentage of natural spring water sold compared to processed drinking
water.

Operating Expenses. Operating expenses (excluding depreciation and
amortization) increased by 46% to $1.9 million for the year ended December 31,
1996 from $1.3 million for the year ended December 31, 1995. The increase
reflects the acquisition of Electrified's operations for eleven of the twelve
months ended December 31, 1996, and the acquisition of Mountainwood's delivery
routes for the six months from July 1, 1996 through December 31, 1996.
However, operating expenses (excluding depreciation and amortization)
decreased as a percentage of revenues to 18% for the year ended December 31,
1996 compared to 24% from the year ended December 31, 1995. This decrease was
also due primarily to the efficiencies achieved in Puro's bottling operations,
route delivery and servicing system. It was also reflective of entry into the
case goods product market, delivery costs of which are less intensive than the
five gallon market. Operating expenses (excluding depreciation and
amortization) increased by 8% to $1.3 million in 1995 from $1.2 million in the
period from inception (February 1, 1994) to December 31, 1994. However,
operating expenses (excluding depreciation and amortization) decreased as a
percentage of revenues to 24% in 1995 from 30% for the period from inception
(February 1, 1994) to December 31, 1994. This decrease was due to efficiencies
achieved in Puro's bottling operations, route delivery and servicing system--
primarily from the addition of new accounts in existing market areas.

General and Administrative Expenses. General and administrative expenses
increased by 69% to $2.2 million in the year ended December 31, 1996 from $1.3
million for the same period in 1995 due to the acquisitions referred to above.
However, such expenses decreased as a percentage of revenues to 20% for the
year ended December 31, 1996 from 24% for the same period in 1995. This
decrease in general and administrative expenses reflects efficiencies gained
from the Electrified and Mountainwood transactions with respect to office and
clerical staffing. General and administrative expenses increased by 44% to
$1.3 million in 1995 from $0.9 million in the period from inception (February
1, 1994) to December 31, 1994. General and administrative expenses increased
as a percentage of revenues to 24% in 1995 from 23% in the period from
inception (February 1, 1994) to December 31, 1994. This increase was the
result of increased insurance costs associated with an increase in the number
of Puro's delivery vehicles.

33
<PAGE>

Total Depreciation and Amortization. Total depreciation and amortization for
the year ended December 31, 1996 increased by 100% to $1.0 million from $0.5
million for the same period in 1995. Total depreciation and amortization
increased as a percentage of revenues to 9% for the year ended December 31,
1996 from 8% for the same period in 1995. This increase resulted primarily
from the Electrified acquisition, which included a modern high-capacity
bottling facility and the opening of a new bottling facility in Commack, Long
Island, New York. Total depreciation and amortization increased by 150% to
$0.5 million in 1995 from $0.2 million in the period from inception (February
1, 1994) to December 31, 1994. Total depreciation and amortization increased
as a percentage of revenues to 8% from 5% in the period from inception
(February 1, 1994) to December 31, 1994. This increase was due primarily to
Puro's continued investment in new coolers and route acquisitions.

Income From Operations. Increases in income from operations for all periods
discussed above relate to increases in sales, the consolidation of production
facilities and an improvement in route densities and scheduling.

Interest Expense. For the year ended December 31, 1996, interest expense
increased by 167% to $0.8 million for the same period in 1995. Interest
expense increased as a percentage of revenues to 7% for the year ended
December 31, 1996 from 6% for the same period in 1995. This increase was due
to additional borrowings in connection with the acquisitions discussed
previously. Approximately $5.3 million of the $10.0 million total debt
outstanding at December 31, 1996 was repaid with proceeds from Puro's initial
public offering as further discussed below. Interest expense increased by 200%
to $0.3 million in 1995 from $0.1 million in the period from inception
(February 1, 1994) to December 31, 1994. Interest expense increased as a
percentage of revenues to 6% in 1995 from 3% in the period from inception
(February 1, 1994) to December 31, 1994. This increase was primarily due to
increased borrowing in order to fund Puro's expansion.

Plant Relocation Charges. During the year ended December 31, 1996, Puro
relocated all bottled water production from its plants in Maspeth, New York,
and Port Jefferson, New York, to the Electrified facility in East Orange, New
Jersey, and the newly opened bottling plant in Commack, Long Island, New York.
The Maspeth and Port Jefferson bottling plants were subsequently closed. Non-
recurring plant relocation charges of $0.3 million or 2% of revenues for the
period ended December 31, 1996 were incurred.

Provision for Income Taxes. The effective income tax rate was 42% for the
year ended December 31, 1996 and 36% for the year ended December 31, 1995. The
increase in the effective rate in 1996 is primarily attributable to non-
recurring write-offs of certain accounts receivable for income tax purposes in
1995.

LIQUIDITY AND CAPITAL RESOURCES

Puro's primary sources of liquidity and capital resources have been cash
flow from operations, proceeds from the sale of equity securities to Puro's
current stockholders, purchase money financing for business acquisitions and
borrowings under Puro's bank agreement described below.

During 1996 and 1995, net cash provided by operating activities was $0.7
million and $0.4 million, respectively. During 1996, Puro made capital
expenditures in the amount of $2.8 million. In addition, Puro acquired the net
assets of two of its competitors whose aggregate purchase price was $5.5
million. The equipment purchases and the acquisitions were funded by
operations as well as seller financing. In 1995, Puro made capital
expenditures for coolers, other equipment and routes aggregating $2.8 million,
which was funded by cash from operations, private equity placement, purchase
money financing of business acquisitions and borrowings under Puro's bank
agreement.

At December 31, 1996, cash totaled $0.2 million and no additional borrowing
was available under Puro's bank agreement. As of December 31, 1995, cash
totaled $0.7 million, and approximately $1.0 million of additional borrowings
were available under Puro's bank agreement.

During the quarter ended September 30, 1997, net cash used by operating
activities was $0.6 million, and net cash provided by operating activities for
the nine months ended September 30, 1997 was $0.3 million. During the quarter
ended September 30, 1997 Puro used $0.5 million to purchase capital equipment,
and for the nine months ended September 30, 1997 cash used to purchase capital
equipment was $1.4 million. The sale of Puro's Maspeth facility generated net
cash of $0.03 million after mortgage retirement and expenses. Cash at the end
of the period was $0.3 million.

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Puro's bank agreement provides for aggregate long-term borrowings of up to
$3.0 million, approximately all of which was currently outstanding as of
December 31, 1996, maturing between May 31, 1997 and December 31, 2001,
bearing interest at prime plus .25%-.50% per annum, secured by substantially
all of the assets of Puro and guaranteed by certain stockholders of Puro. Puro
has also borrowed $0.5 million from the same lender under another agreement.
These borrowings are also secured by certain stockholders of Puro and were
used for the acquisitions referred to above. In addition, the bank agreement
contains covenants that include requirements to maintain certain working
capital, debt coverage and other financial ratios and restrictions and
limitations on the payment of dividends, guaranty payments, additional
borrowings and the amount of compensation paid to employees who are
stockholders.

In February 1997, Puro completed an initial public offering of 1,350,000
shares of Common Stock raising net proceeds of $6.1 million. Puro used
substantially all of the proceeds to retire $5.4 million of debt related
primarily to certain acquisitions. As a result of the offering, Puro is now
able to borrow an additional $1.5 million under its bank agreement.

Puro's continued success is dependent upon the maintenance of its delivery
truck fleet and bottling equipment and its access to water sources. These
activities are currently funded through operations and bank financing. Puro
believes that it has sufficient sources of funding to achieve its business
objectives in the future.

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THE MERGER AGREEMENT

Following is a brief summary of certain provisions of the Merger Agreement,
a copy of which is attached as Annex A to this Proxy Statement/Prospectus and
is incorporated herein by reference. Such summary is qualified in its entirety
by reference to the Merger Agreement. Stockholders of Puro are urged to read
the Merger Agreement in its entirety for a more complete description of the
Merger.

THE MERGER

The Merger Agreement provides that, following the approval and adoption of
the Merger Agreement and the transactions contemplated thereby by the
stockholders of Puro and the satisfaction or waiver of the other conditions to
the Merger, Sub will be merged with and into Puro, whereupon Puro will become
a wholly owned subsidiary of U.S. Filter.

If all such conditions to the Merger are satisfied or waived, the Merger
will become effective upon the filing of a duly executed certificate of merger
with the Secretary of State of the State of Delaware, or at such time
thereafter as is provided in the certificate of merger.

At the Effective Time the Certificate of Incorporation of Puro, the
continuing corporation, as in effect immediately prior to the Effective Time
will be amended and restated in its entirety to read as set forth in an
exhibit to the Merger Agreement. The By-Laws of Puro as in effect immediately
prior to the Effective Time will be the By-Laws of the continuing corporation.
The directors and officers of Sub immediately prior to the Effective Time
will, from and after the Effective Time, be the directors and officers,
respectively, of the continuing corporation until their successors are duly
elected or appointed or until their earlier death, resignation or removal.

CONVERSION OF PURO COMMON STOCK

Upon consummation of the Merger, pursuant to the Merger Agreement, Sub will
be merged with and into Puro and each issued and outstanding share of Puro
Common Stock (other than shares held in Puro's treasury immediately prior to
the Effective Time, all of which will be canceled) will be converted on the
basis of the Exchange Ratio into the right to receive a fraction of a share of
U.S. Filter Common Stock.

Neither certificates nor scrip for fractional shares of U.S. Filter Common
Stock will be issued in the Merger, but in lieu thereof each holder of Puro
Common Stock otherwise entitled to a fraction of a share of U.S. Filter Common
Stock will be entitled to receive a cash payment. The amount of such cash
payment will be equal, in the case of each fractional share, to an amount,
without interest, calculated as the product of (i) such fraction, multiplied
by (ii) the closing per share sale price of U.S. Filter Common Stock on the
New York Stock Exchange Composite Tape for the day of the Effective Time. No
U.S. Filter stock split or dividend will relate to any fractional share
interest, and no such fractional share interest will entitle the owner thereof
to vote or to any rights of a stockholder of U.S. Filter.

Promptly after the Effective Time, the Exchange Agent will mail transmittal
forms and exchange instructions to each holder of record of Puro to be used to
surrender and exchange certificates evidencing shares of Puro Common Stock for
certificates evidencing the shares of U.S. Filter Common Stock to which such
holder has become entitled. After receipt of such transmittal forms, each
holder of certificates formerly representing Puro Common Stock will be able to
surrender such certificates to the Exchange Agent, and each such holder will
receive in exchange therefor certificates evidencing the number of shares of
U.S. Filter Common Stock to which such holder is entitled and cash in lieu of
fractional shares as indicated above. Such transmittal forms will be
accompanied by instructions specifying other details of the exchange. PURO
STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A
TRANSMITTAL FORM.

After the Effective Time, each certificate evidencing Puro Common Stock,
until so surrendered and exchanged, will be deemed, for all purposes, to
evidence only the right to receive the number of shares of U.S.

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Filter Common Stock (and cash in lieu of fractional shares) which the holder
of such certificate is entitled to receive, without interest. The holder of
such unexchanged certificate will not be entitled to receive any dividends or
other distributions payable by U.S. Filter until the certificate has been
exchanged. Following such exchange, such dividends or other distributions will
be paid to the holder entitled thereto, without interest.

EMPLOYEE AND DIRECTOR STOCK OPTIONS

At the Effective Time, each outstanding and unexercised option to purchase
shares of Puro Common Stock pursuant to the Employee Stock Option Plan or
Director Stock Option Plan, whether or not then exercisable in accordance with
its terms, will be converted into options to purchase the same number of
shares of U.S. Filter Common Stock as the holder of such stock option would
have been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time, at a price per
share equal to (y) the aggregate exercise price for the shares of Puro Common
Stock deemed otherwise purchasable pursuant to such stock option divided by
(z) the number of full shares of U.S. Filter Common Stock deemed purchasable
pursuant to such stock option; provided, however, that, in the case of any
employee stock option to which Section 421 of the Code applies by reason of
its qualification under any of Sections 422-424 of the Code ("qualified stock
options"), the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 425(a) of the Code.

OTHER OPTIONS

At the Effective Time, each of the Guarantee Options, the Edberg Option and
an option held by Glenn Downing to purchase 22,500 shares of Puro Common Stock
at an exercise price of $5.40 per share, issued in connection with Puro's
acquisition of Downmorr Water Corporation (the "Downing Option" and together
with the Guarantee Options and the Edberg Option, the "Non-Plan Options"),
whether or not exercisable, shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under each
respective Non-Plan Option, the same number of shares of U.S. Filter Common
Stock as the holder of such Non-Plan Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time, at a price per share equal to (y) the
aggregate exercise price for the shares of Puro Common Stock deemed otherwise
purchasable pursuant to such Non-Plan Option divided by (z) the number of full
shares of U.S. Filter Common Stock deemed purchasable pursuant to such Non-
Plan Option.

UNDERWRITERS' WARRANTS

At the Effective Time, the Underwriters' Common Stock Purchase Warrants
dated as of February 7, 1997 (the "Underwriters' Warrants") shall be deemed to
constitute the right to acquire, on the same terms and conditions as were
applicable under such Underwriters' Warrants, the same number of shares of
U.S. Filter Common Stock as the holders of such Underwriters' Warrants would
have been entitled to receive pursuant to the Merger had such holders
exercised such Underwriters' Warrants in full immediately prior to the
Effective Time, at an exercise price per share equal to (y) the aggregate
exercise price for the shares of Puro Common Stock deemed otherwise
purchasable pursuant to such Underwriters' Warrants divided by (z) the number
of full shares of U.S. Filter Common Stock deemed purchasable pursuant to such
Underwriters' Warrants.

CONVERTIBLE NOTES

At the Effective Time, the Variable Promissory Notes issued in connection
with the acquisitions of Bark Water Co. Ltd. and Downmorr Water Corporation
and convertible into shares of Puro Common Stock (the "Convertible Notes")
will be deemed to be convertible, on the same terms and conditions as were
applicable under each respective Convertible Note, into the same number of
shares of U.S. Filter Common Stock as the holders of such Convertible Notes
would have been entitled to receive pursuant to the Merger had such holders
converted such Convertible Notes in full immediately prior to the Effective
Time, at an aggregate conversion price per share equal to (y) the aggregate
conversion price for the shares of Puro Common Stock deemed

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otherwise purchasable pursuant to such Convertible Notes divided by (z) the
number of full shares of U.S. Filter Common Stock deemed purchasable pursuant
to such Convertible Notes.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains representations and warranties of Puro, on the
one hand, and U.S. Filter and Sub, on the other, which are customary in
transactions of this type, relating to, among other things, (a) the corporate
organization, qualification and capitalization of Puro and of U.S. Filter and
Sub and certain similar corporate matters; (b) the authorization, execution,
delivery and enforceability of the Merger Agreement and the consummation of
the transactions contemplated thereby and related matters; (c) required
governmental filings and absence of violations under charters, bylaws, and
certain instruments and laws; (d) documents and financial statements filed by
each of Puro and U.S. Filter with the Commission and the accuracy of
information contained therein; (e) the absence of certain material adverse
changes or events; (f) litigation and (g) the accuracy of information supplied
by each of Puro and U.S. Filter in connection with the Registration Statement
and this Proxy Statement/Prospectus.

Puro has made representations and warranties with respect to, among other
things, its equity interests in subsidiaries; indebtedness; tax matters;
certain "related party" transactions; compliance with laws; required
authorizations; agreements, contracts and commitments; insurance; real
property; personal property; intellectual property rights; environmental
matters; products liability; insurance; employment and change of control
agreements; labor relations; employee benefit plans; certain accounting
matters and; brokers and finders fees. In addition, U.S. Filter and Sub have
made certain representations and warranties with respect to the interim
operation of Sub.

Each of the representations and warranties of Puro, U.S. Filter and Sub in
the Merger Agreement will terminate upon consummation of the Merger.

CERTAIN COVENANTS

Pursuant to the Merger Agreement, Puro has agreed that, during the period
from the date of the Merger Agreement until the earlier of the termination of
the Merger Agreement in accordance with its terms or the Effective Time,
except as consented to in writing by U.S. Filter, it will, with certain
exceptions: (a) preserve and maintain its corporate existence; (b) not acquire
any stock or other interest in any corporation or similar entity; (c) not
sell, lease, assign, transfer or otherwise dispose of any of its assets, nor
create any mortgage, security interest or other lien thereon, except in the
ordinary course of business and except for any assets which are obsolete; (d)
not incur any indebtedness for borrowed money or any obligation under any
guarantee except for certain indebtedness which may be incurred under Puro's
existing bank loan agreement only for working capital purposes; (e) not (i)
alter, amend or repeal any provision of its certificate of incorporation or
bylaws; (ii) change the number or identity of its directors (other than as a
result of the death, retirement or resignation of a director); (iii) form or
acquire any subsidiaries; (iv) except in the ordinary course of business,
enter into, modify or terminate any material contract or agreement to which it
is a party or agree to do so; (v) modify any employment agreements; or (vi)
incur any obligation for the payment of any bonus, additional salary or
compensation or retirement, termination, welfare or severance benefits payable
or to become payable to any of its employees or other persons, except in any
such case for obligations incurred pursuant to the terms of any existing
employment agreement or benefit plan; (f) maintain its books, accounts and
records in the usual, ordinary and regular manner; (g) pay and discharge all
taxes imposed upon it or upon its income or profits, prior to the date on
which penalties attach thereto, except to the extent that Puro is currently
contesting, in good faith, the payment of such taxes and Puro maintains
appropriate reserves with respect thereto; (h) not settle any tax claim
against it or any litigation (net of applicable insurance proceeds) in excess
of $10,000 in the aggregate; (i) use it best efforts to meet its obligations
under all material contracts, and not become in default thereunder; (j)
maintain its business and assets in working repair, order and condition,
reasonable wear and tear excepted, and maintain insurance upon such business
and assets at least comparable in amount and kind to that in effect as of the
date of the Merger

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Agreement; (k) use its best efforts to maintain its present relationships and
goodwill with suppliers, brokers, manufacturers, representatives,
distributors, customers and others having business relations with it; (l)
carry on its business in the ordinary course in substantially the same manner
as previously conducted; (m) not declare, set aside, make or pay any dividends
or other distributions with respect to its capital stock; (n) not authorize or
make any capital expenditure if the aggregate of the amount of such capital
expenditure together with the amounts of all other capital expenditures since
the date of the Merger Agreement shall exceed $50,000; (o) use its best
efforts not to violate any law or regulation applicable to it nor violate any
order, injunction or decree; and (p) not increase the number of shares
authorized or issued and outstanding of its capital stock, nor grant or make
any pledge, option, warrant, call, commitment, right or agreement of any
character relating to its capital stock, nor issue or sell any shares of its
capital stock.

Puro has also agreed it will, until the earlier of the Effective Time or
termination of the Merger Agreement in accordance with its terms, deliver to
U.S. Filter within 45 days after the end of each calendar month, unaudited
balance sheets, together with unaudited summaries of earnings. In addition,
Puro has agreed that, it will, until the earlier of the Effective Time or
termination of the Merger Agreement in accordance with its terms, deliver to
U.S. Filter within 45 days after the end of each fiscal quarter of Puro,
commencing with September 30, 1997, and within 60 days after the end of the
fiscal year ended December 31, 1997, as the case may be, unaudited balance
sheets, together with the related unaudited statements of income and cash
flows for the fiscal quarters then ended. Puro will also deliver to U.S.
Filter audited financial statements at December 31, 1997 and for the year then
ended, within 10 days of their availability.

In addition, Puro has agreed, subject to fiduciary obligations of the Puro
Board of Directors under applicable law as advised in writing by outside legal
counsel, that the Puro Board will recommend adoption and approval of the
Merger Agreement and shall use its best efforts to solicit and secure from its
stockholders their adoption and approval of the Merger Agreement.

NO SOLICITATION

The Merger Agreement provides that Puro will not, directly or indirectly,
through any officer, director, employee, representative or agent of it: (a)
solicit, initiate or encourage any inquiries or proposals that constitute, or
could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of
shares of capital stock (including without limitation by way of a tender
offer) or similar transactions involving Puro, other than the transactions
contemplated by the Merger Agreement (any of the foregoing inquiries or
proposals being referred to in this Agreement as an "Acquisition Proposal");
(b) engage in negotiations or discussions concerning, or provide any non-
public information to any person or entity relating to, any Acquisition
Proposal; or (c) agree to, approve or recommend any Acquisition Proposal;
provided, however, that nothing contained in the Merger Agreement shall
prevent Puro or its Board of Directors from (x) furnishing non-public
information to, or entering into discussions or negotiations with, any person
or entity in connection with an unsolicited bona fide written Acquisition
Proposal by such person or entity or recommending an unsolicited bona fide
written Acquisition Proposal to the stockholders of Puro, if and only to the
extent that (1) the Puro Board believes in good faith that such Acquisition
Proposal would, if consummated, result in a transaction (an "Acquisition
Transaction") more favorable to Puro's stockholders from a financial point of
view than the transaction contemplated by the Merger Agreement (any such more
favorable Acquisition Transaction being referred to in the Merger Agreement as
a "Superior Proposal") and the Puro Board determines in good faith, based on
written advice of outside legal counsel, that such action is necessary for
Puro to comply with its fiduciary duties to stockholders under applicable law
and (2) prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such person or entity, the Puro Board
receives from such person or entity an executed confidentiality agreement with
terms no more favorable to such party than those contained in the
Confidentiality Agreement dated July 30, 1997 between U.S. Filter and Puro
(the "Confidentiality Agreement"); or (y) taking any position with regard to
an Acquisition Proposal pursuant to Rules 14d-9 and 14e-2 under the Exchange
Act which is consistent with the advice of counsel concerning the Puro Board's
fiduciary duties under applicable law with respect to a tender offer commenced
by a third party (other than by public announcement alone).

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Puro is required to notify U.S. Filter upon receipt of any Acquisition
Proposal or request for non-public information or access to its properties,
books or records in connection with an Acquisition Proposal.

CONDITIONS

The respective obligations of U.S. Filter, Sub and Puro to effect the Merger
are subject to the following conditions, among others: (a) the Merger
Agreement shall have been approved and adopted by the stockholders of Puro;
(b) all Required Authorizations shall have been obtained; (c) the Registration
Statement shall not be the subject of a stop order or proceedings seeking a
stop order; (d) the absence of any temporary restraining order, injunction or
other order or legal or regulatory restraint or prohibition preventing, or the
enactment of any law making illegal, the consummation of the Merger, or
limiting or restricting U.S. Filter's conduct or operation of Puro's business
after the Merger; (e) the approval of the shares of U.S. Filter Common Stock
to be issued in the Merger for listing on the New York Stock Exchange upon
official notice of issuance; (f) the accuracy in all material respects of the
representations and warranties of Puro, in the case of U.S. Filter and Sub,
and of U.S. Filter and Sub, in the case of Puro, set forth in the Merger
Agreement; (g) the performance in all material respects of all obligations of
Puro, in the case of U.S. Filter and Sub, and of U.S. Filter and Sub, in the
case of Puro, required to be performed under the Merger Agreement; and (h) the
receipt of certain legal opinions, including the opinion of Kirkpatrick &
Lockhart LLP, counsel to U.S. Filter, to the effect that the Merger will be
treated for federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Code.

The obligations of U.S. Filter and Sub to consummate the Merger are also
subject to the following conditions among others: (a) all required
governmental and material third party authorizations shall have been obtained;
(b) the qualification of the Merger as a pooling of interests for accounting
purposes; (c) the receipt of an opinion from Lev, Berlin & Dale, P.C., counsel
to Puro; (d) the receipt of letters from the affiliates of Puro, within the
meaning of Rule 145 under the Securities Act, with respect to their
obligations under the Securities Act upon resale of any shares of U.S. Filter
Common Stock issued to them in connection with the Merger and to the effect
that such persons have not transferred shares of Puro Common Stock or U.S.
Filter Common Stock within the 30 days preceding the Effective Time and will
not transfer any shares of U.S. Filter Common Stock prior to the date that
U.S. Filter publishes results covering at least 30 days of post-Merger
operations; (f) the resignation of all directors of Puro; (g) all holders of
outstanding options under the Employee Stock Option Plan and the Director
Stock Option Plan, and all holders of Convertible Notes shall have consented
in writing to the conversion of such options or rights to acquire Puro Common
Stock into options or rights to acquire U.S. Filter Common Stock; (h) the
amendment of the Savoy Asset Purchase Agreement (as defined in the Merger
Agreement) to provide that if the 32,000 shares of Puro Common Stock reserved
for issuance pursuant thereto shall not have been issued prior to the Closing
Date, the right to receive such shares shall be converted into the right to
receive that number of shares of U.S. Filter Common Stock that would otherwise
have been issued in the Merger; (i) satisfaction by U.S. Filter that no rights
are outstanding requiring the issuance to Mr. Lou Betti of options to purchase
or otherwise acquire Puro Common Stock and (j) certain employees of Puro shall
have entered into employment agreements with U.S. Filter.

TERMINATION; TERMINATION FEES AND EXPENSES

The Merger Agreement may be terminated at any time prior to the Effective
Time:

(a) by mutual written consent of U.S. Filter and Puro; or

(b) by either U.S. Filter or Puro if the Merger shall not have been
consummated by March 31, 1998 (provided that the right to terminate the
Merger Agreement on this basis will not be available to any party whose
failure to fulfill any material obligation under the Merger Agreement has
been a cause of or has resulted in the failure of the Merger to occur on or
before such date); or

(c) by U.S. Filter or Puro, if (i) the other party has breached any
representation or warranty contained in the Merger Agreement (except where
such breach would not have a material adverse effect on the party having
made such representation or warranty and its subsidiaries taken as a whole
and would not have a

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material adverse effect upon the transactions contemplated by the Merger
Agreement), or (ii) there has been a breach of a covenant or agreement set
forth in the Merger Agreement on the part of the other party, which shall
not have been cured within ten business days following receipt by the
breaching party of written notice of such breach from the other party
(other than those described under " No Solicitation," as to which there
shall be no cure period); or

(d) by either U.S. Filter or Puro if a court of competent jurisdiction or
other governmental authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect
of permanently restraining, enjoining or otherwise prohibiting the Merger;
or

(e) by either U.S. Filter or Puro, if, at the Puro stockholders' meeting
(including any adjournment or postponement thereof), the requisite vote of
the stockholders of Puro in favor of the Merger Agreement and the Merger
shall not have been obtained; or

(f) by U.S. Filter, if, after the date of the Merger Agreement, (i) Puro
shall provide information to or engage in negotiations regarding any
Acquisition Proposal with any person other than U.S. Filter or its
affiliates, (ii) the Puro Board shall have withdrawn or modified its
recommendation of the Merger Agreement or the Merger or shall have resolved
to do any of the foregoing; (iii) the Puro Board shall have recommended to
the stockholders of Puro an Acquisition Proposal other than one made by
U.S. Filter or an affiliate of U.S. Filter; or (iv) a tender offer or
exchange offer for 50% or more of the outstanding shares of Puro Common
Stock is commenced other than by U.S. Filter or an affiliate of U.S.
Filter.

In the event of any termination of the Merger Agreement by either U.S.
Filter or Puro as provided above, the Merger Agreement will become void and
there will be no liability or obligation on the part of U.S. Filter, Sub or
Puro or their respective officers, directors, stockholders or affiliates,
except to the extent that such termination results from the willful breach by
a party of the Merger Agreement, provided that the provisions relating to fees
and expenses shall survive such termination.

Except as set forth below, whether or not the Merger is consummated, all
fees and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses, except that all fees and expenses, other than attorneys' fees,
incurred in relation to the printing and filing of this Proxy
Statement/Prospectus and the Registration Statement will be shared equally by
U.S. Filter and Puro.

The Merger Agreement provides that Puro will reimburse U.S. Filter for out-
of-pocket expenses incurred by U.S. Filter relating to the transactions
contemplated by the Merger Agreement prior to termination (including, but not
limited to, fees and expenses of counsel, accountants and financial advisors)
upon the termination of the Merger Agreement by U.S. Filter pursuant to
paragraphs (c), (e) or (f) above. The Merger Agreement also provides that U.S.
Filter will reimburse Puro for out-of-pocket expenses incurred by Puro
relating to the transactions contemplated by the Merger Agreement prior to
termination (including, but not limited to, fees and expenses of counsel,
accountants and financial advisors) upon the termination of the Merger
Agreement by Puro pursuant to paragraph (c) above.

Puro will be obligated to pay U.S. Filter a termination fee of $1,250,000
upon the earliest to occur of the following events: (x) the termination of the
Merger Agreement by U.S. Filter or Puro pursuant to paragraph (e) above or (y)
by U.S. Filter pursuant to clauses (ii), (iii) or (iv) of paragraph (f) above.
Puro will be obligated to pay U.S. Filter a termination fee of $750,000 upon
the termination of the Merger Agreement pursuant to clause (i) of paragraph
(f) above.

AMENDMENT AND WAIVER

The Merger Agreement may be amended at any time by action taken or
authorized by the respective Boards of Directors of U.S. Filter, Sub and Puro,
but after approval by the stockholders of Puro of the Merger Agreement and the
transactions contemplated thereby, no amendment shall be made which by law
requires further approval

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by such stockholders, without such further approval. The parties to the Merger
Agreement, by action taken or authorized by their respective Boards of
Directors, may extend the time for performance of the obligations or other
acts of the other parties to the Merger Agreement, may waive inaccuracies in
the representations or warranties contained in the Merger Agreement and may
waive compliance with any agreements or conditions contained in the Merger
Agreement.

THE STOCKHOLDER AGREEMENTS

Following is a summary of the Stockholder Agreements. Such summary is
qualified in its entirety by reference to the full text of the form of
Stockholder Agreement attached to this Proxy Statement/Prospectus as Annex B.

Pursuant to the Stockholder Agreements, the individual parties thereto
(each, a "Stockholder") have each agreed that, until the earlier of (i) the
Effective Time or (ii) the date on which the Merger Agreement is terminated in
accordance with its terms (the earlier of such time and such date being
referred to herein as the "Stockholder Expiration Date"), the Stockholder will
vote, or take action by written consent with respect to, all of his shares of
Puro Common Stock (x) in favor of the adoption and approval of the Merger
Agreement and the transactions contemplated thereby, as such Merger Agreement
may be modified or amended from time to time (but not to reduce the
consideration to be received thereunder), and (y) against any action, omission
or agreement which would or could impede or interfere with, or have the effect
of discouraging, the Merger, including, without limitation, any Acquisition
Proposal other than the Merger.

At the request of U.S. Filter the Stockholder will execute and deliver to
U.S. Filter an irrevocable proxy and irrevocably appoint U.S. Filter or its
designee his or her attorney and proxy to vote or give consent with respect to
all of his or her shares of Puro Common Stock for the purposes set forth
above. Any such proxy will terminate on the Stockholder Expiration Date.

Each Stockholder Agreement contains the agreement of the Stockholder that,
among other things, until the Stockholder Expiration Date, he or she will: (a)
not, and will not agree to, sell, transfer, pledge, hypothecate, encumber,
assign, tender or otherwise dispose of any of his or her shares of Puro Common
Stock (or any interest therein) (other than in connection with certain
transfers for estate planning purposes, provided certain conditions are met);
(b) other than as expressly contemplated by the Stockholder Agreement, not
grant any powers of attorney or proxies or consents in respect of any of his
or her shares of Puro Common Stock, deposit any of his or her shares of Puro
Common Stock into a voting trust, enter into a voting agreement with respect
to any of his or her shares of Puro Common Stock or otherwise restrict the
ability of the holder of any of his or her shares of Puro Common Stock freely
to exercise all voting rights with respect thereto; (c) not initiate, solicit
or encourage, directly or indirectly, any inquiries or the making or
implementation of any Acquisition Proposal or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal,
and will cease any existing activities related to the foregoing; (d) notify
U.S. Filter if any such inquiry or proposal is received by such Stockholder;
and (e) not take any action that, based upon the advice of U.S. Filter's
accountants, would or could prevent the Merger from qualifying for pooling of
interests accounting treatment.

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INFORMATION CONCERNING PURO

BUSINESS

Puro is a leading bottler and distributor of spring and purified drinking
water, serving commercial and residential users in the metropolitan New York
area. Puro markets its drinking water under the brand names Puro, American
Eagle Spring Water, Nature's Best Spring Water and Lectro-Still. Puro also
rents and services water coolers, filtration systems and plumbed-in fountains
numbering in excess of 25,000 located in businesses, factories and homes in
the metropolitan New York area. Puro's facilities consist of NSF (National
Sanitation Foundation) certified bottling plants in East Orange, New Jersey
and Commack, Long Island, New York. In addition, Puro is an authorized factory
service center for all major water cooler manufacturers and provides warranty
repair coverage to many of its competitors.

According to a study prepared by the Beverage Marketing Corporation, bottled
water has been the fastest growing segment of the beverage industry for the
past ten years. This growth has been fueled by increasing public concern about
the taste and safety of municipal water supplies and the desire among today's
increasingly diet and health conscious consumers for an "ideal" beverage.

Puro's strategy is to capitalize on the growing demand for high quality
drinking water through the expansion of its existing customer base and through
the acquisition of regional bottlers and distributors in targeted geographic
markets. The bottled water distribution market is highly fragmented and
composed of many small regional companies, as well as a few larger companies
which own several brands, thus providing Puro with acquisition opportunities.
In addition, Puro continually seeks to grow revenues by increasing route
density through the acquisition and consolidation of new routes within the
existing route structure, thereby minimizing distribution and administration
costs. The continued consolidation of production and distribution capabilities
is a key component of Puro's operating plans, both within its current markets
and in any additional markets that it may enter.

Puro is also the manager of a cooperative buying group, Quality Bottlers
Cooperative, Inc. (the "Cooperative"). Membership consists of the twelve
leading regional bottled water companies located throughout the United States
which are similar in size to Puro. Members are contractually required to
purchase all of their coolers, bottles, closures and other key items on a
group basis. Puro believes that the purchasing power of the Cooperative
permits the group to buy at prices that are no higher than those charged the
largest buyer in the industry, Nestle's Perrier group (whose brands in Puro's
markets include Poland Spring, Great Bear and Deer Park). The By-Laws of the
Cooperative require that each member derive more than 51% of its gross sales
from the sale of bottled water and/or the rental of related products and
materials. If a member fails to continue to satisfy this requirement, such
member may be expelled from the Cooperative upon the affirmative vote of a
majority of the members of the Cooperative. Immediately following the Merger,
U.S. Filter will fail to satisfy this requirement. As a result, Puro has
entered into discussions with the Cooperative in an attempt to obtain a waiver
of the requirement.

Puro was incorporated in January 1994 and represents the acquisition of LSL
Hydro Corp. and Puro Corporation of America. Puro is organized under the laws
of the State of Delaware. Puro's principal executive offices are located at
56-24 58th Street, Maspeth, New York 11378 and its telephone number is (718)
326-7000.

INDUSTRY OVERVIEW

Bottled water has been the fastest growing segment of the beverage industry
for the last ten years. According to "Bottled Water in the United States, May
1996", a study prepared by the Beverage Marketing Corporation of New York (the
"Beverage Market Survey"), total bottled water consumption in the United
States has more than tripled from 1983 to 1995. Annual consumption increased
from 2.8 gallons per capita in 1980 to 11.0 gallons per capita in 1995, and it
is projected to reach 14.2 gallons per capita by the year 2000. Bottled water
volume in the United States has grown significantly, increasing from
approximately 1.1 billion gallons in

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1984 to approximately 2.9 billion gallons in 1995; from approximately $1.3
billion in sales in 1984 to over $3.3 billion in 1995.

1995 U.S. BOTTLED WATER SALES
(AMOUNTS IN MILLIONS)

<TABLE>
<CAPTION>
GALLONS SOLD
------------
<S> <C> <C>
Nonsparkling............................................ 2,430.20 84.30%
Imported................................................ 97.10 3.40%
Sparkling............................................... 356.20 12.40%
---------
Total................................................. 2,883.50
<CAPTION>
DOLLAR SALES
------------
<S> <C> <C>
Nonsparkling............................................ $2,121.20 62.90%
Imported................................................ $ 425.00 12.60%
Sparkling............................................... $ 828.80 24.60%
---------
Total................................................. $3,375.00
</TABLE>
- --------
Source: Beverage Market Survey

The bottled water market is comprised of three segments: non-sparkling
(domestic), sparkling (domestic) and imported water (both sparkling and non-
sparkling). Non-sparkling water, which is consumed as an alternative to tap
water, is the segment in which Puro competes, is the largest of the three
segments and represented 84.3% of the total market in terms of gallons of
water sold in 1995. Sparkling water contains carbonation and is positioned to
compete in the broad "refreshment beverage" category. In 1995, domestic
sparkling water accounted for approximately 12.4% of total bottled water
consumption and the remaining 3.4% consisted of imported bottled water brands.

<TABLE>
<CAPTION>
NON-SPARKLING SPARKLING IMPORTS
------------- --------- -------
(IN MILLIONS OF GALLONS)
<S> <C> <C> <C>
1977..................................... 256.7 85.6 3.2
1978..................................... 352.9 113.5 13.4
1979..................................... 401.2 133.8 28.1
1980..................................... 463.1 155.2 11.4
1981..................................... 537.7 175.9 11.6
1982..................................... 614.0 196.5 12.9
1983..................................... 722.4 210.3 13.6
1984..................................... 843.3 230.3 16.5
1985..................................... 953.1 254.8 29.8
1986..................................... 1070.4 281.6 30.8
1987..................................... 1223.4 300.6 37.2
1988..................................... 1406.9 316.5 49.7
1989..................................... 1623.5 329.5 55.6
1990..................................... 1753.5 371.3 73.9
1991..................................... 1770.5 368.0 71.4
1992..................................... 1839.5 365.9 86.3
1993..................................... 1990.5 366.4 92.5
1994..................................... 2214.6 366.4 104.0
1995..................................... 2430.2 356.2 97.0
</TABLE>
- --------
Source: Beverage Market Survey

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<PAGE>

Puro believes this growth in bottled water consumption is largely a function
of two consumer trends. First, consumers have increasingly turned to
alternative sources of drinking water as a result of growing concerns about
the perceived decline in the quality of the tap water available in their homes
and offices. Second, an increasing diet and health consciousness among
consumers has led many consumers to seek a beverage choice which closely
resembles the "ideal" refreshment beverage. That is, one that has no calories,
no preservatives, no additives or sugar, no sodium and no alcohol. High
quality bottled drinking water meets these demands.

According to the Beverage Market Survey, the bottled water market has grown
at an average annual rate of 5.5% (1990-1995), and the Beverage Marketing
Corporation of New York projects that it will grow at a slightly higher rate
of 6.5% between 1995 and 2000. Bottled water volume in the United States is
projected to grow from approximately 2.9 billion gallons in 1995 to
approximately 3.9 billion gallons by the year 2000. Per capita consumption is
projected to reach 14.2 gallons for every person in the United States by the
year 2000.

PROJECTED U.S. BOTTLED WATER MARKET
1995-2000

<TABLE>
<CAPTION>
MILLIONS OF 5 YEARS' AVERAGE GALLONS
YEAR GALLONS ANNUAL GROWTH PER CAPITA
---- ----------- ---------------- ----------
<S> <C> <C> <C>
1995............................. 2,883.5 5.5% 11.0
2000............................. 3,943.2 6.5% 14.2
</TABLE>
- --------
Source: Beverage Market Survey

Bottled water channels of distribution consist of drinking water purchased
in pre-filled containers from retail locations (primarily supermarkets), water
delivered in pre-filled containers to residential or commercial establishments
and water sold through a self-service or "vended" format to retail consumers
who fill their own containers. The market share of each of these distribution
channels varies considerably by geographical area. According to the Beverage
Market Survey, the total share of the national bottled water of these
distribution channels for 1995 was: retail (53.0%), home delivery (20.6%),
commercial delivery (18.4%) and vended (8.0%).

Further impetus for consumers' tap water concern took place on August 6,
1996 when President Clinton signed into law the Safe Drinking Water
Reauthorization Act of 1996. For the first time, federal law requires all
local water utilities to issue annual reports disclosing the chemicals and
bacteria that the tap water contains. The language must be simple and sent
directly to customers with their water utility bills. Especially important is
a 24-hour notification requirement when any contaminant poses a significant
risk. Puro believes that this change in the nation's law will increase the
public's concern over the quality and safety of public water supplies. Usage
of high quality bottled water and drinking water filtration systems can be
expected to benefit from this increased awareness.

BUSINESS STRATEGY

The bottled water distribution market is highly fragmented and composed of
many small regional companies as well as a few larger companies which own
several brands. Puro's strategy is to capitalize on the growing demand for
high quality drinking water resulting from the increasing public concern about
the taste and safety of municipal water supplies and the desire among today's
increasingly diet and health conscious consumers for an "ideal" beverage
through the expansion of its existing customer base and through the
acquisition of regional water bottlers and distributors in targeted geographic
markets. In addition, management continually seeks to grow revenues by
increasing route density through the acquisition and consolidation of new
routes within its existing route structure, thereby minimizing distribution
and administration costs. The continued consolidation of production and
distribution capabilities is a key component of Puro's operating plans, both
within its current markets and any additional markets it may enter.

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<PAGE>

In support of its growth strategy Puro is continuing to pursue the
acquisition of regional water bottlers and distributors, as well as mergers
with certain members of the Cooperative. As of the date of this Proxy
Statement/Prospectus, Puro has ten companies under active review as candidates
for acquisition or merger, although Puro has no agreements, commitments or
arrangements with respect to any material proposed mergers or acquisitions.

BOTTLED WATER PROCESSING

Puro employs a broad spectrum of treatment technologies for its various
bottled waters, ranging from minimum treatment of its natural spring waters to
extensive treatment of public water sources for its distilled and drinking
waters. Manufacturing practices, quality standards and labeling of Puro's
bottled water products are regulated by the Federal Food and Drug
Administration ("FDA") as well as the states and some localities in which the
water is distributed. In addition, Puro participates in the International
Bottled Water Association's inspection program which incorporates quality
standards stricter than those prescribed by law.

Natural Spring Water. As "natural" waters, Puro's state-certified spring
sources may not be subjected to any treatment which alters the mineral
composition of the product. Spring water, by law, may not be derived from a
municipal system or public water supply, and must be derived from an
underground source, free of surface water influence, which flows continuously
to the surface under its own pressure. A hydrogeological report must validate
the integrity of the source and safety of the water-collection operations
before any groundwater source can be certified as a spring. Regular
bacteriological and chemical compliance monitoring of Puro's springs assures
that these sources remain uncontaminated.

Puro's water sources, at Mountainwood Spring and Indian Camp Spring, are
located in remote, pristine environments where each spring's recharge areas
have not been encroached by industry, agriculture or housing development.
Consequently, the spring water must be transported to Puro's plants by
stainless steel tanker trucks used solely for its water. At the spring source
the water is filtered and ozonated (see below) prior to loading. This
disinfects the spring water, and the residual ozone in the water disinfects
the inside of the tanker, thereby insuring that bacteria are not transferred
from the spring or the tanker to Puro's bottling plants. Samples for each
tanker load are tested for bacterial safety, consistency and ozone residual.

Sanitary bulk, stainless tanks at Puro's bottling plants protect the spring
water while it is again ozonated and finally filtered through one-micron
absolute filters immediately before being bottled in sanitized containers.
Puro employs this "multiple barrier" approach to protect its natural spring
water from contaminants, including dangerous protozoan cysts such as
Cryptosporidium which can survive municipal tap water disinfection with
chlorine.

Distilled Water. Puro uses more extensive treatment techniques for its
processed waters. For example, Puro's distilled water is produced by the
recapture of condensed steam, one of the oldest water purification mechanisms
known. Automated distillation units at Puro's East Orange bottling plant
vaporize the local municipal water through heating, leaving behind impurities
of minerals and other compounds. The condensed water vapor produces a water of
extremely high purity and very low mineral content (typically less than
10mg/liter of total dissolved solids). This level of purity enables distilled
water to be used for pharmaceutical purposes, photographic processes,
humidifiers and similar applications as well as for drinking.

Drinking Water. The processes involved in producing Puro's drinking waters
include particle filtration, carbon adsorption (molecular adhesion),
ultraviolet disinfection, deionization, one-micron absolute filtration and
ozonation. Public water is initially filtered using a five-micron filter to
remove sedimentation. The water is then processed through an activated carbon
bed to remove organic compounds and associated tastes and odors. This step
also removes chlorine which is added as a disinfectant to public supplies. The
by-products of chlorine disinfection, such as trihalomethanes, are also
removed by activated carbon adsorption. Ultraviolet treatment is a precaution
against any microbial contamination which might be transported further along
in the production line. Deionization is used at Puro's East Orange plant to
reduce dissolved minerals in the final drinking water. As is

46
<PAGE>

the case with all of Puro's waters, a one-micron absolute filter is the final
filtration stage prior to ozonation and bottling.

Ozonation involves a special form of oxygen, ozone (O/3/), which is the
strongest disinfectant and oxidizing agent available for water treatment. It
is the standard disinfectant for bottled water processing. A highly unstable
gas, ozone must be generated on site, prior to transport at the spring
locations, and at Puro's bottling plants. Because it is only partially soluble
in water, sufficient ozone contact with the water is established by special
contact tanks and mixing vessels. These extended contact times and the closely
monitored ozone concentrations are the reason that properly ozonated bottled
water can be assured to be free of chlorine-resistant organisms such as the
recently publicized parasitic cyst, Cryptosporidium. A special "hyperozonator"
provides a final disinfecting rinse of ozonated water in the bottle washing
and sanitizing machines at both of Puro's plants.

After the appropriate treatments, the product water is piped to the Clean
Room, which houses the automatic filling and capping equipment. Its design
mandated by the FDA, the Clean Room is totally enclosed with a positive-
pressure ventilation system which feeds filtered, sterilized air into the
room. This room and its equipment are sanitized every day. The final product,
whether natural spring water, distilled or drinking water, is a high quality,
clean bottled water that is one of the most strictly regulated and reliable
pure food products available to the American consumer.

WATER SUPPLY AGREEMENTS

Spring Water Suppliers. On June 13, 1996, Puro entered into a long-term
spring water supply contract for its Commack, Long Island, New York bottling
facility with Shawangunk Bulk Spring Water. This agreement provides for "most-
favored-customer" treatment with respect to pricing and priority water rights
for the next forty-five years to the Indian Camp Spring source which is owned
by Shawangunk Bulk Spring Water and located in the foothills of the Catskill
Mountains in New York.

On June 27, 1996, Puro entered into a long-term spring water supply contract
for its East Orange, New Jersey bottling facility with its primary bulk spring
water supplier, Mountainwood. The agreement provides for "most-favored-
customer" treatment with respect to priority water rights over a forty-three
year period. Management believes that Mountainwood's spring source, in the
foothills of the Kittatinny Mountains near the Delaware Water Gap, is
considered the highest volume, free flowing certified natural spring water
source in the northeastern United States. Effective July 1, 1996, Puro also
acquired Mountainwood's five-gallon bottled water direct delivery and bottled
water cooler rental routes.

Purified Water Suppliers. Puro obtains the water for distilled and purified
drinking water from public water sources. The public water source for Puro's
East Orange, New Jersey facility is the East Orange public water supply and
the public water source for Puro's Commack Long Island, New York facility is
the Suffolk County Water Authority.

DRINKING WATER SYSTEMS

In addition to the rapid growth in bottled water consumption, the past
decade has also seen the emergence of water treatment technologies which can
produce high quality water economically at the point of use (rather than
delivered in bottles). These technologies, including micron filtration, have
had a major impact on the growth and development of water processed at the
point of use. Puro's non-bottled water dispensing systems are equipped with
filtration systems which remove substantial amounts of the chlorine, dirt
particles, rust, lead and other objectionable materials from the source tap
water.

Puro believes that it is the only full-service provider in its market to
provide its customers with a "one-stop" solution to drinking water needs. If a
customer has neither the space nor the budget for bottled water, Puro can
provide a wide variety of filtration and treatment units to meet any drinking
water needs. A staff of installers and plumbers will assume responsibility for
survey, equipment selection, installation, contract

47
<PAGE>

maintenance and rental/service. As a factory authorized sales and service
center for all of the major types of drinking fountains and coolers, Puro can
offer the customer a complete choice of models: wall-hung, recessed, stand-
alone, handicapped, under the sink, drainless, counter-top, etc. A
computerized follow-up system insures that cartridge changes and routine
service are performed on a timely basis by Puro's field staff. This reliance
upon Puro for installation, equipment and maintenance is a firm basis for the
long-term relationship that Puro enjoys with its point of use customers.

Most of Puro's equipment is placed in the customer's home or office under a
standard two-year rental contract which is renewable thereafter on a month to
month basis and is terminable by either party upon 30 days notice. The
attachment of its point of use equipment to the plumbing makes it less likely
that a customer will request that the equipment be removed.

EQUIPMENT SUPPLY, ASSEMBLY AND RENTAL SERVICES

Puro purchases the various water treatment systems and bottled water
dispensers used in its home and office equipment from major suppliers such as
EBCO Manufacturing Company and Sunroc Corp. through the Cooperative. Once a
customer has chosen a water treatment system and a dispenser, the two
components are connected as a unit, tested and installed by Puro's service
personnel. Puro is not dependent on any single supplier for any of these
components.

Puro rents a broad range of water treatment and dispensing units to
commercial and residential customers. Puro generally rents such units to
customers at prices ranging from $6.00 to $45.00 per month depending on the
components selected. As of December 31, 1996, Puro had in excess of 25,000
water treatment and dispensing units in service, located in the metropolitan
New York area, which accounted for approximately 20.6% of Puro's revenues. In
addition, from time to time Puro has sold water treatment and dispensing units
to customers upon request; such outright sales accounted for less than 8% of
revenues during the twelve months ended December 31, 1996.

Puro uses its factory authorized warranty and repair facilities to
recondition most of the rental water coolers which have been returned from the
field. The cost associated with this refurbishment of returned rental units is
expensed on a current basis. The reconditioned units are available for rental
placement in the field at a cost lower than that of newly purchased coolers.

SALES AND MARKETING

Puro markets its commercial and residential water treatment and dispensing
units to commercial customers that are using or have used bottled water
coolers as an alternative to providing tap water to their employees and to
residential customers who have been introduced to Puro's water treatment and
bottled water units through Puro's commercial customers. Puro markets its
products principally through the effort of salaried and independent sales
personnel as well as through print advertising, telemarketing, trade shows,
its Internet Website, sponsored community events, field delivery/service
personnel and customer referrals. To date, Puro has concentrated its marketing
efforts on targeting commercial customers in the metropolitan New York markets
where demographic, economic and water consumption trends, as well as the
overall quality of municipal water supplies, indicate a growing demand for
affordable, high quality drinking water. Puro expects to increase its
marketing efforts, principally through increased print and broadcast media
advertising, additional sales personnel and attendance at additional trade-
shows.

CUSTOMERS

Since 1994, Puro has grown from approximately 5,000 water customers to in
excess of 25,000 currently served. Puro's customer base for its bottled water
and water treatment and dispensing units is currently comprised of
approximately 90% commercial accounts and 10% residential accounts. Through
its American Eagle Spring and Lectro-Still retail brands Puro markets one-
gallon natural spring and distilled waters in supermarkets and pharmacies in
the northeastern United States.

48
<PAGE>

In addition, Puro has been selected by several distributors to bottle under
their own label on a contract basis. Given Puro's ability to absorb such
additional volume at its plants with little marginal cost and no disruption to
existing business, management will continue to do such private label bottling
for selected accounts. In the past two years, such five-gallon private label
bottling relationships have resulted in Puro's ability to acquire a number of
the distributors' routes and blend them into Puro's route structure. The East
Orange, New Jersey facility will also continue to provide one-gallon private
label water bottling on a select basis for local supermarket chains and health
care stores so long as there is no adverse impact on Puro's production of its
own brands.

COMPETITION

Puro competes with numerous well-established companies, including Nestle's
Perrier group (whose brands in Puro's market include Poland Spring, Great Bear
and Deer Park), which distribute drinking water sold off the shelf at retail
(primarily supermarket) locations. Many of Puro's competitors have achieved
significant national, regional and local brand name and product recognition
and additional competitors have sought to enter the drinking water market.

In recent years, several companies have introduced drinking water products
positioned to capitalize on the growing consumer preference for purified and
aesthetically pleasing water. It can be expected that Puro will be subject to
increasing competition from companies whose products or marketing strategies
address these consumer preferences. Some of Puro's competitors and potential
competitors possess substantially greater financial, personnel, marketing and
other resources than Puro and have established reputations for success in the
sale of purified water products. Puro believes that it competes on the basis
of quality of service, convenience and price.

SEASONALITY

The revenues of Puro have been subject to seasonal variations with decreased
revenues during cold weather months and increased revenues during the hot
weather months.

PATENTS AND TRADEMARKS

Puro holds two patents related to bacteriostatic carbon formulation and
production.

Puro has registered the Puro trademark and service mark in the United States
Patent and Trademark Office. Puro acquired the American Eagle Spring Water
trademark among others in its acquisition of the assets of Electrified. Puro
has no reason to believe that there are any conflicting rights which might
impair Puro's use of its marks outside the United States; however, there can
be no assurance that such conflicting rights do not exist. Puro believes that
the trademarks and service mark are valuable to the operation of its business.
Puro's policy is to pursue registration of its marks whenever possible and to
oppose vigorously any infringement of its marks.

As is typically the case with drinking water treatment components, Puro does
not believe its business is materially dependent upon obtaining patent
protection for its various systems.

REGULATION

Puro's business is subject to various federal, state and local laws and
regulations which require Puro, among other things, to obtain licenses for its
business and equipment, to pay annual license and inspection fees, to comply
with certain detailed design and quality standards regarding Puro's bottling
plant and equipment and to continuously control the quality and quantity of
the water dispensed. Several states have regulations that require Puro to
obtain certification for its bottled water. Puro believes that it is currently
in compliance with these laws and regulations and has passed all regulatory
inspections. In addition, Puro does not believe that the cost of compliance
with applicable governmental laws and regulations is material to its business.
However, recent media attention has been given to the health and safety
standards and to the degree of governmental oversight in the drinking water
industry. To the extent that additional regulations are imposed as a result of
these or other concerns and such regulations are unreasonably burdensome, such
regulations could significantly increase the costs of compliance and reduce
the ability of Puro to maintain or increase its customer base.

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<PAGE>

PRODUCT LIABILITY AND INSURANCE

Puro is engaged in a business which could expose it to possible claims for
personal injury resulting from contamination of water produced by its bottling
plants or dispensing equipment. While Puro believes that through regular
testing it carefully monitors the quality of water produced by its plants, it
may be subject to exposure in the case of customer misuse of a cooler or
bottle storage. Puro maintains blanket "claims made" product liability
insurance against liability resulting from certain types of injuries in
amounts that it believes to be adequate. Additionally, Puro maintains an
umbrella policy that it believes to be adequate to cover claims above the
limits of the product liability insurance. Although no claims have been made
against Puro or any of its customers to date and Puro believes that its
current level of insurance is adequate for its present business operations,
there can be no assurance that such claims will not arise in the future or
that the proceeds of Puro's policy will be sufficient to pay such claims.

EMPLOYEES

As of October 31, 1997, Puro had 122 full-time employees, of which eight are
in executive positions, 48 in distribution, 20 in maintenance and service,
four in sales, 13 in manufacturing and 29 in administration. Certain of Puro's
employees are represented by Teamsters, Chauffeurs, Warehousemen & Helpers
Local Union No. 560. Puro is a party to a collective bargaining agreement
expiring February 28, 1999. Puro considers its employee relations to be
satisfactory.

LITIGATION

Puro is not a party to any legal proceedings which individually or in the
aggregate are believed to be material to Puro's business.

MATERIAL ACQUISITIONS

Consistent with its strategy of acquiring regional water bottlers and
distributors, on January 31, 1996, Puro purchased the assets and assumed
certain liabilities of Electrified. Electrified was a direct competitor of
Puro in the bottled water distribution and water cooler rental business in the
New York City area. Puro's acquisition of Electrified's modern high-speed
production facility in East Orange, New Jersey, together with its new bottling
facility in Commack, Long Island, New York, permits it to absorb additional
bottling demand without a commensurate increase in production costs.

On June 13, 1996, Puro entered into a long-term spring water supply contract
for its Commack, Long Island, New York, bottling facility with Shawangunk Bulk
Spring Water. The agreement provides for "most-favored-customer" treatment
with respect to pricing and priority water rights for the next forty-five
years to the Indian Camp Spring source which is owned by Shawangunk Bulk
Spring Water and located in the foothills of the Catskill Mountains in New
York.

In addition to the foregoing, during 1994 through 1997, consistent with its
acquisition strategy, Puro acquired 11 other regional water bottlers and
distributors.

RESEARCH AND DEVELOPMENT

Puro has not spent any material amounts during either of the last two fiscal
years on research and development activities.

50
<PAGE>

COMPLIANCE WITH ENVIRONMENTAL LAWS

Puro has not incurred any material costs in connection with compliance with
United States federal, state and local environmental laws.

PROPERTY

Puro's offices and plants are located in East Orange, New Jersey, Commack,
Long Island, New York and Maspeth, New York. The following table sets forth
certain information relating to the leased and owned space for each location.

<TABLE>
<CAPTION>
SQUARE FEET EXPIRATION
LOCATION OF FACILITY (APPROXIMATE) LEASE TERM MONTHLY RENT DATE
-------------------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
East Orange 48,000 10 Years $10,000(1) 2007
101 North Park Street
East Orange, New Jersey
Commack 23,000 5 Years $10,200(2) 2001
76-78 Mall Drive
Commack, New York (Long
Island)
Maspeth 7,500 3 Years $ 5,000(3) 2000
56-24 58th Street
Maspeth, New York
</TABLE>
- --------
(1) Rent is fixed through January 31, 2001 and thereafter adjusts annually
based upon the change in the consumer price index.
(2) Commencing November 1, 1997, and continuing through the lease term, rent
is subject to periodic increases averaging approximately $550 per month.
(3) Commencing July 1, 1999, the annual rent will be increased to $5,250 per
month.

At the East Orange, New Jersey facility, Puro bottles spring, purified and
distilled water in five and one-gallon sizes. This modern production plant
features high-speed sanitizing and filling equipment. Management believes that
this facility contains the only fully automatic five-gallon bottle rack loader
in the metropolitan New York area. Additional bottling volume can be added at
low incremental production cost for both the five-gallon and one-gallon lines.

Puro's most recent 1996 plant inspection at East Orange resulted in a
sanitary compliance rating in excess of 97%, making the facility eligible to
receive the International Bottled Water Association's Excellence in
Manufacturing recognition.

In addition, Puro performs water cooler servicing and refurbishment
activities at this facility including warranty repairs, filtration system
installation and renovation of rental units for placement back in service in
the field. This facility services Puro's bottled water and water cooler
customers in Manhattan, the Bronx, Staten Island and New Jersey.

Puro's Long Island bottling plant in Commack was opened in the summer of
1996 with a modern high-speed five-gallon sanitizing and filling line for
spring and purified drinking water. This facility, which replaced a smaller
plant in Port Jefferson, Long Island, New York, serves Puro's Brooklyn, Queens
and Long Island customers. Additional bottling volume can be added at low
incremental production costs.

Puro currently utilizes its Maspeth, New York facility for servicing of
water coolers, limited water distribution and corporate headquarters. Puro
believes its facilities are adequate for its present needs.

51
<PAGE>

SECURITY OWNERSHIP

The following table sets forth information as of October 31, 1997 with
respect to the beneficial ownership of Puro Common Stock by (i) each person
(including any group) known to Puro to be the beneficial owner of more than 5%
of the outstanding Puro Common Stock, (ii) each director of Puro, (iii) each
executive officer of Puro and (iv) all directors and executive officers of
Puro as a group. Except as may be indicated in the footnotes to the table,
each such person has the sole voting and investment power with respect to the
shares owned, subject to applicable community property laws.

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
BENEFICIAL OWNER(1) SHARES(2) CLASS(3)
------------------- --------- ----------
<S> <C> <C>
Peter T. Dixon..................................... 1,374,062(4) 38.6%
Scott Levy......................................... 391,047(5) 11.2%
Jack C. West....................................... 359,505(6) 10.3%
Stephen C. Edberg.................................. 157,852(7) 4.5%
Leonard D. Rosinski................................ 10,000(8) *
All directors and executive officers as a group (5
persons).......................................... 2,292,466 63.2%
</TABLE>
- --------
* Indicates ownership of less than one percent.
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
Puro, 56-24 58th Street, Maspeth, New York 11378.

(2) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities and includes options exercisable within 60 days of the date
of this filing. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Puro Common
Stock shown as beneficially owned by them.
(3) The percentage of class is calculated in accordance with Rule 13d-3 under
the Exchange Act and assumes that the beneficial owner has exercised any
options or other rights to subscribe which are exercisable within 60 days
and that no other options or rights have been exercised by anyone else.

(4) These shares consist of (i) 357,991 shares of Puro Common Stock held by
Peter T. Dixon, (ii) 932,145 shares of Puro Common Stock held by the Dixon
Trusts, and (iii) 83,926 shares of Puro Common Stock issuable upon the
exercise of outstanding options, of which options to purchase 34,642
shares of Puro Common Stock are held by Peter T. Dixon and options to
purchase 49,284 shares of Puro Common Stock are held by the Dixon Trusts.

(5) These shares are jointly held by Mr. Levy with his spouse.
(6) These shares have been pledged pursuant to a Stock Pledge Agreement dated
as of October 9, 1997 by and between Mr. West and EAB.
(7) Stephen C. Edberg is the general partner of Edberg Associates. These
shares consist of (i) 98,568 shares of Puro Common Stock held by Edberg
Associates, and (ii) 59,284 shares of Puro Common Stock issuable upon the
exercise of outstanding options, of which options to purchase 10,000
shares are held by Mr. Edberg and options to purchase 49,284 shares are
held by Edberg Associates.
(8) These shares of Puro Common Stock are issuable upon the exercise of
outstanding options.

52
<PAGE>

DESCRIPTION OF CAPITAL STOCK

General. As of October 31, 1997, U.S. Filter was authorized to issue
300,000,000 shares of Common Stock, par value $.01 per share, of which
93,802,307 shares were issued and outstanding, and 3,000,000 shares of
preferred stock, par value $.10 per share, of which none were issued and
outstanding. Of the unissued shares of U.S. Filter Common Stock, 7,636,364
shares were reserved for issuance upon conversion of U.S. Filter's 6%
Convertible Subordinated Notes due 2005, 9,113,924 shares were reserved for
issuance upon conversion of U.S. Filter's 4 1/2% Convertible Subordinated
Notes due 2001, 1,200,000 shares were reserved for issuance upon exercise of
the Warrants expiring September 17, 2007 and an aggregate of 2,910,326 shares
were reserved for issuance upon exercise of options either outstanding or
available for grant under the Company's stock option plans for employees and
directors.

Common Stock. The holders of U.S. Filter Common Stock are entitled to one
vote for each share held of record by them on all matters to be voted on by
stockholders. There is no cumulative voting with respect to the election of
directors; thus, the holders of shares having more than 50% of U.S. Filter's
voting power (including both common and voting preferred shares, if any)
voting for the election of directors can elect all of the directors. The
holders of U.S. Filter Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors out of funds legally available
therefor, subject to the prior rights of preferred stockholders. In the event
of liquidation, dissolution or winding up of U.S. Filter's affairs, the
holders of U.S. Filter Common Stock are entitled to share ratably in all
assets remaining available for distribution to them after payment of
liabilities and after provision has been made for each class of stock,
including any preferred stock, that has preference over the U.S. Filter Common
Stock. Except as described below under "Stock Purchase Rights," holders of
shares of U.S. Filter Common Stock, as such, have no conversion, preemptive or
other subscription rights, and there are no redemption or sinking fund
provisions applicable to the U.S. Filter Common Stock.

Preferred Stock. Shares of preferred stock may be issued without stockholder
approval. The Board of Directors is authorized to issue such shares in one or
more series and to fix the rights, preference, privileges, qualifications,
limitations and restrictions thereof, including dividend rights and rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or
the designation of such series, without any vote or action by the
stockholders. U.S. Filter has no current plans for the issuance of any shares
of preferred stock. Any preferred stock to be issued could rank prior to the
U.S. Filter Common Stock with respect to dividend rights and rights of
liquidation. The Board of Directors, without stockholder approval, may issue
preferred stock with voting and conversion rights that could adversely affect
the voting power of holders of U.S. Filter Common Stock or create impediments
to persons seeking to gain control of U.S. Filter.

Stock Purchase Rights. Laidlaw, which, as of October 31, 1997, held
3,646,783 shares of U.S. Filter Common Stock, has certain rights to purchase
voting securities of U.S. Filter in order to maintain its percentage voting
interest. Except in connection with mergers or other acquisitions or in the
ordinary course under an employee stock option or stock bonus plan, in the
event U.S. Filter proposes to sell or issue shares of voting securities,
Laidlaw has the right to purchase, on the same terms as the proposed sale or
issuance, that number of shares or rights as will maintain its percentage
interest in the voting securities of U.S. Filter, assuming the conversion of
all convertible securities and the exercise of all options and warrants then
outstanding. In addition, Laidlaw has other purchase rights with respect to
sales or issuances of securities by U.S. Filter at prices below 85% of current
market price at the time of sale or issuance or the prevailing customary price
for such securities or their equivalent.

53
<PAGE>

Certain Voting Arrangements. Pursuant to the agreements whereby U.S. Filter
acquired Smogless S.p.A. in September 1994, Laidlaw has agreed to vote all
shares owned by it for the nominees of U.S. Filter's Board for election to the
Board, and on all other matters in the same proportion as the votes cast by
other holders of voting securities, other than those that relate to any
business combination or similar transaction involving U.S. Filter or any
amendment to U.S. Filter's Certificate of Incorporation (the "U.S. Filter
Certificate") or By-laws.

Pursuant to the agreement whereby U.S. Filter acquired the Properties in
exchange for 8,000,000 shares of U.S. Filter Common Stock and the Warrants in
September 1997, U.S. Filter has agreed, so long as the parties from whom the
Properties were acquired (the "Parties") own at least 5% of the outstanding
U.S. Filter Common Stock, to nominate a person designated by the Parties for
election to the U.S. Filter Board. In addition, the Parties have agreed to
vote all shares owned by them as recommended by a majority of the members of
the U.S. Filter's Board of Directors, except with respect to certain
fundamental transactions, transactions involving the issuance by U.S. Filter
of U.S. Filter Common Stock representing 20% or more of the outstanding U.S.
Filter Common Stock (or equivalents) or amendment of the U.S. Filter
Certificate or By-laws.

Certain Charter and By-law Provisions. The U.S. Filter Certificate 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 U.S. Filter. The founders and the original
directors of U.S. Filter are excluded from the definition of "Related
Persons," as are seven named individuals including Richard J. Heckmann, the
Chairman of the Board, President and Chief Executive Officer of U.S. Filter.
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 U.S. Filter Certificate that relate to specified Articles
therein (those dealing with corporate governance, limitation of director
liability or amendments to the U.S. Filter Certificate), in addition to being
approved by the Board of Directors and a majority of U.S. Filter'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 U.S. Filter'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 U.S. Filter's By-laws must be approved by one of
the methods specified in clauses (i) and (ii) in the preceding sentence.

The U.S. Filter Certificate and U.S. Filter's By-laws 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 U.S. Filter from 30 to 60 days in
advance of the meeting, or within ten days after notice of the meeting is
first given to stockholders.

Delaware Anti-Takeover Law. 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 receive 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.

54
<PAGE>

These provisions could have the effect of delaying, deferring or preventing
a change of control of U.S. Filter. U.S. Filter's stockholders, by adopting an
amendment to the U.S. Filter Certificate or By-laws of U.S. Filter, may elect
not to be governed by Section 203, effective twelve months after adoption.
Neither the Certificate nor the By-laws of U.S. Filter currently excludes U.S.
Filter from the restrictions imposed by Section 203.

LEGAL MATTERS

The validity of the shares of U.S. Filter Common Stock to be issued in
connection with the Merger and certain other legal matters in connection with
the Merger will be passed upon for U.S. Filter by Kirkpatrick & Lockhart LLP,
Pittsburgh, Pennsylvania. Certain legal matters in connection with the Merger
will be passed upon for Puro by Lev, Berlin & Dale, P.C., Norwalk,
Connecticut.

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The consolidated financial statements of United States Filter Corporation
and its subsidiaries as of March 31, 1996 and 1997 and for each of the three
years in the period ended March 31, 1997 have been incorporated herein by
reference in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, which report is incorporated herein by
reference, and upon the authority of said firm as experts in accounting and
auditing.

The financial statements of the Puro Water Group, Inc. as of December 31,
1996 and 1995 and for each of the two years ended December 31, 1996 included
in this Proxy Statement/Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports.

55
<PAGE>

INDEX TO FINANCIAL STATEMENTS

PURO WATER GROUP, INC.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders' Equity......................................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Puro Water Group, Inc.:

We have audited the accompanying balance sheet of Puro Water Group, Inc. (a
Delaware corporation) as of December 31, 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the two years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Puro Water Group, Inc. as
of December 31, 1996, and the results of its operations and its cash flows for
each of the two years then ended, in conformity with generally accepted
accounting principles.

Arthur Andersen LLP

New York, New York
April 11, 1997

F-2
<PAGE>

PURO WATER GROUP, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................................. $ 216,960 $ 322,295
Accounts receivable, less allowance for doubtful
accounts of $201,205............................. 2,527,915 2,767,210
Inventory......................................... 550,243 571,528
Prepaid expenses.................................. 211,282 710,987
----------- -----------
Total current assets............................ 3,506,400 4,372,020
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $940,969 and $1,370,542,
respectively (Note 4).............................. 5,781,005 5,502,044
INTANGIBLE ASSETS, net of accumulated amortization
of $712,734 and $1,052,660, respectively (Note 5).. 7,638,884 7,817,230
DEFERRED REGISTRATION COSTS......................... 729,934 --
OTHER ASSETS........................................ 136,491 118,761
----------- -----------
TOTAL ASSETS.................................. $17,792,714 $17,810,055
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................. $ 619,985 $ 774,326
Accrued expenses and other current liabilities.... 223,290 76,351
Accrued registration costs........................ 454,647 --
Income taxes payable.............................. 179,422 191,991
Deferred income................................... 236,184 144,087
Short-term borrowings (Note 6).................... 2,100,000 580,000
Current portion of long-term debt (Note 7)........ 2,040,361 982,972
Current portion of capital lease obligations (Note
10).............................................. 201,649 239,402
----------- -----------
Total current liabilities....................... 6,055,538 2,989,129
LONG-TERM LIABILITIES:
Long-term debt (Note 7)........................... 5,903,120 2,436,468
Capital lease obligations (Note 10)............... 217,081 265,280
Deferred tax liability............................ 765,000 765,000
Other liabilities................................. 208,970 24,128
----------- -----------
Total Long-term Liabilities..................... 7,094,171 3,490,896
COMMITMENTS (Note 13)
STOCKHOLDERS' EQUITY:
Common stock, $.0063 par value; 10,000,000 shares
authorized; 2,126,789 and 3,476,789 shares issued
and outstanding, respectively.................... 13,399 21,904
Additional paid-in capital........................ 3,342,715 9,420,019
Retained earnings................................. 1,286,891 1,888,107
----------- -----------
Total stockholders' equity...................... 4,643,005 11,330,030
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.... $17,792,714 $17,810,055
=========== ===========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-3
<PAGE>

PURO WATER GROUP, INC.

STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

PURO WATER GROUP, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
----------------- ADDITIONAL
NUMBER OF PAR PAID-IN RETAINED
SHARES VALUE CAPITAL EARNINGS TOTAL
--------- ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31,
1994..................... 1,577,089 $ 9,936 $ 845,178 $ 255,825 $ 1,110,939
Issuance of common
stock.................. 394,272 2,484 1,997,516 -- 2,000,000
Net income.............. -- -- -- 403,903 403,903
--------- ------- ---------- ---------- -----------
BALANCE, December 31,
1995..................... 1,971,361 12,420 2,842,694 659,728 3,514,842
Issuance of common stock
(Note 9)............... 98,568 621 499,379 -- 500,000
Exercise of stock
warrants
(Note 9)............... 56,860 358 642 -- 1,000
Net income.............. -- -- -- 627,163 627,163
--------- ------- ---------- ---------- -----------
BALANCE, December 31,
1996..................... 2,126,789 13,399 3,342,715 1,286,891 4,643,005
Issuance of common stock
(unaudited)............ 1,350,000 8,505 6,077,304 -- 6,085,809
Net income (unaudited).. -- -- -- 601,216 601,216
--------- ------- ---------- ---------- -----------
BALANCE, September 30,
1997 (unaudited)......... 3,476,789 $21,904 $9,420,019 $1,888,107 $11,330,030
========= ======= ========== ========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

PURO WATER GROUP, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS NINE MONTHS
-------------------------- ENDED ENDED
1995 1996 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------ ------------ ------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............ $ 403,903 $ 627,163 $ 514,789 $ 601,216
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization......... 451,373 991,932 758,717 872,742
Deferred income
taxes................ 187,000 393,000 231,655 --
Provision for
allowance for
doubtful accounts.... (11,026) 5,300 (38,585) --
Changes In Assets And
Liabilities--
Increase in accounts
receivable........... (535,069) (1,384,028) (1,307,384) (239,295)
Increase in
inventory............ (91,960) (201,283) (93,632) (21,285)
Increase in prepaid
expenses and other
assets............... (36,516) (205,394) (341,944) (506,959)
Increase in deferred
registration costs... -- -- (198,800) --
Increase (decrease) in
accounts payable,
accrued expenses and
other liabilities.... (1,363) 337,199 414,328 (357,377)
Increase (decrease) in
deferred income...... 26,386 119,718 132,408 (92,097)
------------ ------------ ----------- -----------
Net cash provided by
operating
activities......... 392,728 683,607 71,552 256,945
------------ ------------ ----------- -----------
CASH FLOWS FROM INVEST-
ING ACTIVITIES:
Purchase of property,
plant and equipment.. (1,143,105) (2,802,887) (2,517,503) (1,369,861)
Net assets acquired
(Note 3)............. (1,683,135) (5,458,663) (5,446,052) (167,780)
Sale of building...... -- -- -- 989,550
------------ ------------ ----------- -----------
Net cash (used in)
investing
activities......... (2,826,240) (8,261,550) (7,963,555) (548,091)
------------ ------------ ----------- -----------
CASH FLOWS FROM FINANC-
ING ACTIVITIES:
Proceeds from
/(repayment of)
short-term
borrowings, net...... (100,000) 2,050,000 1,000,000 530,000
Repayment of capital
lease obligations.... (149,623) (192,758) (118,494) (16,644)
Repayment short-term
debt................. -- -- (280,138) (2,050,000)
Repayment long-term
debt................. (373,517) (727,384) 6,427,588 (4,622,927)
Proceeds from long-
term debt............ 1,686,386 5,750,000 -- --
Proceeds from exercise
of stock warrants.... -- 1,000 -- --
Proceeds from sale of
common stock......... 2,000,000 500,000 500,000 6,556,052
Increase in deferred
offering costs....... -- (275,287) -- --
------------ ------------ ----------- -----------
Net cash provided by
financing
activities......... 3,063,246 7,105,571 7,528,956 396,481
------------ ------------ ----------- -----------
NET INCREASE (DECREASE)
IN CASH................ 629,734 (472,372) (363,047) 105,335
CASH, beginning of peri-
od..................... 59,598 689,332 689,332 216,960
------------ ------------ ----------- -----------
CASH, end of period..... $ 689,332 $ 216,960 $ 326,285 $ 322,295
------------ ------------ ----------- -----------
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid for:
Interest............ $ 302,973 $ 719,410 $ 521,019 $ 539,384
------------ ------------ ----------- -----------
Income taxes........ $ 121,039 $ 56,520 $ -- $ 584,987
------------ ------------ ----------- -----------
SUPPLEMENTAL DISCLOSURE
OF NONCASH IN VESTING
AND FINANCING ACTIVI-
TIES:
Capital lease
obligations
incurred............. $ 113,041 $ 127,803 $ 80,405 $ 219,600
------------ ------------ ----------- -----------
Deferred offering
costs not yet paid... $ -- $ 454,647 $ -- $ --
------------ ------------ ----------- -----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996

1. ORGANIZATION AND BUSINESS:

Puro Water Group, Inc. (the "Company"), a Delaware corporation, is a bottler
and distributor of spring and purified drinking water, serving commercial and
residential users in the metropolitan New York area. The Company markets its
drinking water under the brand names Puro, American Eagle Spring Water,
Nature's Best Spring Water and Lectro-Still. The Company also rents and
services water coolers, filtration systems, and plumbed-in fountains located
in businesses, factories and homes in the metropolitan New York area.

On February 1, 1994, the Company, a holding company, completed the
acquisition of all of the outstanding common stock of Puro Corporation of
America, a New York Corporation ("Puro NY"), and LSL Hydro Systems, Inc.
("Hydro"). Immediately, prior to the acquisition, Puro NY and Hydro purchased
stock owned by certain stockholders which represented ownership of 50% of each
of the companies for cash of $1,000,000 and the issuance of $100,000 in notes
payable. The transaction was accounted for under the purchase method with the
purchase price deemed to be $1,500,000 based on the ultimate ownership and
management's estimate of fair value at the time of the acquisition. Because
Hydro and Puro NY had a common control group, that portion of the assets of
the Company attributable to the control group (approximately 26%), were
accounted for as having been acquired at a carryover historical basis of
$31,000. The purchase price has been allocated to the fair market value of the
assets acquired and liabilities assumed which resulted in goodwill of
approximately $1,200,000. This amount is being amortized over fifteen years.

2. SIGNIFICANT ACCOUNTING POLICIES:

Management Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Inventory

Inventory is stated at the lower of cost or market and cost is determined
using the first-in, first-out method. Inventory is comprised of water coolers
and parts, office refreshment supplies and water.

Property, Plant and Equipment

Property, plant and equipment is stated at historical cost. The Company's
building is depreciated utilizing the straight-line method over 40 years and
equipment is depreciated utilizing the straight-line method over the estimated
useful lives of 8 to 25 years. Equipment held under capital leases is
amortized utilizing the straight-line method over the lesser of the term of
the lease or estimated useful life of the asset in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 13 "Accounting for Leases".

Intangible Assets

Intangible assets are recorded based on the value of certain assets obtained
in the acquisition of other companies and are amortized on the straight-line
method over the following periods:

<TABLE>
<S> <C>
Goodwill......................................................... 15-30 years
Customer lists................................................... 6 years
Covenants-not-to-compete......................................... 3-7 years
</TABLE>

F-7
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
Subsequent to its acquisitions, the Company continually evaluates whether
later events and circumstances have occurred that indicate the remaining
estimated useful life of the intangible assets may warrant revision or that
the remaining balance may not be recoverable. The Company has completed its
first year of operations with Electrified Companies, Inc. and Mountain Spring
Water Co., Inc. and White Mountain Company, Inc. (Note 3). Based on customer
activity, including retention rate, management believes that the useful life
on the goodwill related to these acquisitions should be 30 years. When factors
indicate that intangible assets should be evaluated for possible impairment,
the Company uses an estimate of the undiscounted cash flows over the remaining
life of the intangible assets in measuring whether it is recoverable.

Revenue Recognition

Revenue on sales of bottled water and coolers is recognized upon delivery.
Leases of water coolers and filters are accounted for under the operating
method and, accordingly, rental income is reported over the terms of the
leases.

Income Taxes

The Company accounts for its income taxes under SFAS No. 109, "Accounting
for Income Taxes", which requires recognition of deferred tax liabilities and
assets for the estimated future tax effects of events that have been
recognized in the financial statements or income tax returns. Under this
method, deferred tax liabilities and assets are determined based on
differences between the financial accounting and income tax bases of assets
and liabilities, and the use of carryforwards, if any, using enacted tax rates
in effect for the years in which the differences and carryforwards are
expected to reverse and be utilized.

Earnings Per Share

Earnings per share ("EPS") was computed by dividing net income by the
weighted average number of common share equivalents outstanding during the
respective periods, which includes for all periods, (i) the retroactive effect
of the April 1996 stock split (Note 9) and the reverse stock split, which
occurred upon the consummation of the Company's initial public offering (Note
14), (ii) the sale of 98,568 shares of common stock in May 1996 (Note 9),
(iii) the impact of options held by two stockholders, to purchase 123,210
shares of Common Stock at $5.40 per share (Note 12) and (iv) the impact of the
exercise of 56,860 warrants (Note 9).

New Accounting Pronouncements

During March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long Lived Assets", which is
effective for fiscal years beginning after December 15, 1995. The adoption of
this standard did not have an effect on the Company's financial position or
results of operations.

During October 1995, the FASB issued SFAS No. 123, "Accounting for Stock
Based Compensation". This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS No. 123
encourages entities to adopt a fair value based method of accounting for stock
compensation plans. However, SFAS No. 123 also permits the Company to continue
to measure compensation costs under pre-existing accounting pronouncements. If
the fair value based method of accounting is not adopted, SFAS No. 123
requires pro forma disclosures of net income and net income per common share
in the notes to financial statements. The accounting requirements of SFAS No.
123 are effective for transactions entered into in fiscal years that begin
after December 15, 1995. The disclosure requirements of SFAS No. 123 are
effective for financial statements for fiscal years beginning after December
15, 1995, or for an earlier fiscal year for which SFAS No. 123 is initially
adopted for recognizing compensation cost.

F-8
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
Subsequent to December 31, 1996, the FASB issued SFAS No. 128, "Earnings Per
Share." This statement establishes standards for computing and presenting EPS,
replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of operations. Under this new standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any
potential dilution; Diluted EPS reflects potential dilution from the exercise
or conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently-required fully diluted EPS. SFAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, and earlier application is not
permitted. When adopted, the Company will be required to restate its EPS data
for all prior periods presented. If this statement had been adopted, the
Company's basic earnings per share, as defined in the statement, would have
been $0.30 and $0.23, respectively, for the years ended December 31, 1996 and
1995.

3. ACQUISITIONS:

During 1995, the Company acquired certain assets and assumed certain
liabilities of several companies operating in the bottled water industry. The
acquisitions were paid for with cash and the issuance of notes (Note 7). All
acquisitions have been accounted for under the purchase method and therefore
operations of the companies acquired have been included in the statement of
operations from their respective dates of acquisition. Although the individual
acquisitions were not material to the Company's financial position or results
of operations, the total purchase price for all of the Company's 1995
acquisitions was approximately $2,200,000. Pro forma results of operations
have not been provided as the information was neither readily available nor
material to the Company's overall results of operations. Additionally, the
Company incurred certain non-recurring expenses resulting from the integration
of these acquisitions into the Company's operations which have been reflected
in the Company's statement of operations for the year ended December 31, 1995.

On January 31, 1996, the Company acquired the net assets of Electrified
Companies, Inc., a company operating in the bottled water industry. The
purchase agreement called for total payments to be made to the seller in the
aggregate amount of $5,000,000, payments totaling $437,801 to satisfy two bank
loans of the seller and certain consideration for other outstanding
liabilities. The $5,000,000 was paid through a cash payment of $1,000,000 at
the closing and the issuance of three note payables for $2,900,000, $600,000
and $500,000, respectively, bearing interest at the prime rate (8.25% at
December 31, 1996). Interest payments, only, are due through February 1997,
and then equal monthly principal installments will be made from March 1997
through February 2000. Subsequent to December 31, 1996, and in connection with
the initial public offering of the Company's common stock (Note 14), the
Company paid the $2,900,000 note payable.

Summarized below is the unaudited pro forma results of operations of the
Company for the year ended December 31, 1995 as though this acquisition had
occurred on January 1, 1995. Adjustments have been made for pro forma income
taxes, amortization of intangible assets related to this acquisition and
interest expense as a result of this acquisition. Pro forma results of
operations of the Company, for the year ended December 31, 1996, are not
provided as the information was not material to the Company's overall results
of operations.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
------------------
(UNAUDITED)
<S> <C>
Pro Forma:
Revenues............................................... $10,659,418
Net income............................................. 91,000
Earnings per share..................................... $ 0.05
</TABLE>

F-9
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
These pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition been
made at the beginning of 1995, or of results which may occur in the future.

On June 27, 1996, the Company entered into an agreement to acquire certain
assets of Mountainwood Spring Water Co., Inc., and White Mountain Company,
Inc., (collectively "Mountainwood") both operating in the bottled water
industry. Under the terms of the agreement, the acquisition was effective as
of July 1, 1996. The purchase agreement called for total payments to be made
to the seller in the aggregate amount of $1,250,000 which was comprised of a
cash payment of $500,000 at the closing, and two separate notes payable for
$500,000 and $250,000 bearing interest at 8%. The $500,000 note will have
interest payments through July 1, 1999, at which time a $125,000 principal
payment will be made. Thereafter, and through July 1, 2003, monthly principal
payments of $10,000 will be paid. The principal and interest on the $250,000
note shall be paid through monthly payments of interest only through June 30,
1999, at which time the entire unpaid principal and interest is due (Note 7).
The $500,000 cash payment was borrowed from a bank, and secured by the
Company's majority shareholder, and is included in long-term debt (Note 7) on
the accompanying balance sheet as of December 31, 1996.

4. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Land and building.................................... $ 946,088 $ --
Building improvements................................ 192,818 221,444
Rental equipment..................................... 2,324,508 2,550,627
Vehicles held under capital leases................... 805,917 921,802
Vehicles............................................. 396,826 622,427
Bottles and crates................................... 483,634 739,632
Machinery and equipment.............................. 1,378,176 1,555,150
Furniture and fixtures............................... 194,007 261,504
---------- ----------
6,721,974 6,872,586
Less: Accumulated depreciation....................... 940,969 1,370,542
---------- ----------
Property, plant and equipment, net................. $5,781,005 $5,502,044
========== ==========
</TABLE>

Depreciation aggregated $555,925 and $262,074, respectively, for the years
ended December 31, 1996 and 1995.

F-10
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
5. INTANGIBLE ASSETS:

Intangible assets are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Goodwill............................................. $7,749,071 $8,267,343
Covenants-not-to-compete............................. 338,333 338,333
Customer lists....................................... 264,214 264,214
---------- ----------
8,351,618 8,869,890
Less: Accumulated amortization....................... 712,734 1,052,660
---------- ----------
Intangible assets, net............................. $7,638,884 $7,817,230
========== ==========
</TABLE>

Amortization expense on intangible assets aggregated $427,115 and $189,299,
respectively, for the years ended December 31, 1996 and 1995.

6. SHORT-TERM BORROWINGS:

The Company has a line of credit available with a bank for $3,000,000 as of
December 31, 1996. No amounts were available under the $3,000,000 line of
credit, as the Company converted the outstanding amounts into a $1,550,000
short-term note, described below, and a $1,450,000 note payable which is
included in long-term debt in the accompanying balance sheet (Note 7).

The outstanding amounts on short-term borrowings are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Note payable with bank, bearing interest at prime
plus .25%, due in full on May 31, 1997, secured by
a letter of credit of $1,500,000 issued by the
bank, which is guaranteed by the Company's
principal stockholder.............................. $1,550,000 $ --
Outstanding amount on line of credit with bank...... -- 580,000
Promissory note payable to bank, bearing interest at
prime plus .50%, due in full in June 1997, secured
by a letter of credit which is guaranteed by the
Company's principal stockholder.................... 500,000 --
Demand note with stockholder with interest at prime
plus .75%.......................................... 50,000 --
---------- --------
Total short-term debt............................. $2,100,000 $580,000
========== ========
</TABLE>

The prime rate was 8.25% as of December 31, 1996.

F-11
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
7. LONG-TERM DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
BANK FINANCING
Mortgage payable, due in monthly installments of
$9,941 including interest at 10.75%, balloon
payment of $886,873 due June 1, 1998, secured by
the land and building, with a net book value of
$897,613.......................................... $ 921,611 $ --
Promissory note payable to bank, bearing interest
at prime plus .50%, due in monthly installments
through September 2001, secured by certain fixed
assets of the Company............................. 1,446,429 1,284,073
ACQUISITION FINANCING (NOTE 3)
Note payable to bank of $500,000, related to
Mountainwood acquisition, bearing interest at 8%,
monthly interest payments only through July 1,
1999, principal payment of $125,000 on July 1,
1999 and then equal monthly installments through
July 1, 2003...................................... 500,000 500,000
Note payable to seller of $250,000, related to
Mountainwood acquisition, bearing interest at 8%,
monthly interest payments only through June 30,
1999 and then balloon payment of full principal
due on June 30, 1999.............................. 250,000 250,000
Notes payable to seller of $2,900,000 and $600,000,
related to Electrified Companies, Inc. bearing
interest at prime rate, interest payments only due
through February 1997, and then equal monthly
installments from March 1997 through
February 2000..................................... 3,500,000 450,000
Notes payable associated with 1997, 1996 and 1995
acquisition financing, bearing interest at rates
ranging from 8-9% (certain non-interest bearing
notes include interest at rates reflecting the
Company's incremental borrowing rate), due in
monthly installments through January 2001......... 1,036,786 935,367
STOCKHOLDER NOTES PAYABLE
Loan from stockholder, bearing interest at prime
plus .75%, due in equal monthly installments
commencing April 1997 through January 2001........ 250,000 --
Other notes payable................................ 38,655 --
---------- ----------
Total.............................................. 7,943,481 3,419,440
Less: current portion.............................. 2,040,361 982,972
---------- ----------
Long-term debt..................................... $5,903,120 $2,436,468
========== ==========
</TABLE>

Maturities of long-term debt over the next five years are as follows:

<TABLE>
<S> <C>
Year Ended December 31,
1997............................................................ $2,040,361
1998............................................................ 2,924,691
1999............................................................ 1,886,680
2000............................................................ 587,487
2001 and thereafter............................................. 1,004,262
----------
$8,443,481
==========
</TABLE>

F-12
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
8. INCOME TAXES:

Components of the income tax provision for the year ended December 31, 1996
and 1995 are as follows:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
1996:
Federal......................................... $106,220 $207,000 $313,220
State and local................................. 45,000 88,000 133,000
-------- -------- --------
$151,220 $295,000 $446,220
======== ======== ========
1995:
Federal......................................... $ 20,000 $152,000 $172,000
State and local................................. 24,000 35,000 59,000
-------- -------- --------
$ 44,000 $187,000 $231,000
======== ======== ========
</TABLE>

The actual tax expense differed from the "expected" amounts by applying the
U.S. Federal income tax rate of 34% as follows:

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Federal income tax at statutory rate............................. 34% 34%
Non-deductible goodwill amortization............................. 2% --
Purchase accounting reversal..................................... -- (3%)
State income taxes net of federal income tax benefit............. 9% 6%
Other............................................................ (3%) (1%)
--- ---
Actual income tax provision.................................... 42% 36%
=== ===
</TABLE>

The net deferred tax liability at December 31, 1996 and 1995 primarily
consists of the differences between depreciation recorded for tax and book
purposes and the allowance for doubtful accounts.

9. STOCKHOLDERS' EQUITY:

In October 1995, the Company entered into a Stock Purchase Agreement with
certain stockholders of the Company to purchase 394,272 shares of the
Company's stock for an aggregate purchase price of $2,000,000.

Stock Split

In April 1996, the Company approved an increase in the amount of authorized
common stock from 2,000,000 to 10,000,000 shares and a change in the common
stock par value from $.01 to $.003125. Immediately thereafter, the Company
authorized a 3.2 for 1 stock split on all common stock outstanding. All
information in the accompanying financial statements has been retroactively
restated to give effect to the stock split.

Sale of Common Stock

On May 1, 1996, a third party investor purchased 98,568 shares of common
stock for an aggregate purchase price of $500,000. In November 1996, the
investor was also granted options to purchase 49,284 shares of the Company's
common stock at $5.40 per share. These options are still outstanding.

F-13
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
Exercise of Stock Warrants

In October 1996, certain entities, under the control of the Company's
principal stockholder, exercised stock warrants for an aggregate 2.5% of the
outstanding common stock and stock options of the Company, immediately after
said exercise, for a total of $1,000. Said warrants were issued on January 28,
1994, in connection with the initial capitalization of the Company and the
investment in the Company by the holder. The fair market value of the stock
underlying the warrants was $31,000 at the time of issuance. The warrants were
not subject to any restrictions. Pursuant to the exercise of the
aforementioned warrants, the stockholders received a total of 56,860 shares of
common stock.

10. CAPITAL LEASE OBLIGATIONS:

The Company is the lessee of certain fixed assets under capital leases
expiring through 2000. The assets and liabilities under capital leases are
recorded at the lower of the present value of minimum lease payments or the
fair market value of the asset. The assets are depreciated over their
estimated useful lives. Interest rates on capital leases vary from 3.5% to
7.00%.

Future minimum payments under these lease agreements are as follows:

<TABLE>
<S> <C>
Year Ended December 31,
1997............................................................. $220,318
1998............................................................. 176,192
1999............................................................. 42,823
2000............................................................. 7,671
--------
Total minimum lease payments................................... 447,004
Less: Amount representing interest................................. 28,274
--------
Present value of net minimum lease payments........................ $418,730
========
</TABLE>

11. BENEFIT PLANS:

The Company's noncontributory pension plan provides benefits upon the death
or retirement of eligible employees. The Company's policy is to fund the
annual amount deductible for Federal income tax purposes. During 1995, the
Company elected to freeze the plan and accordingly, no further voluntary
contributions will be made on behalf of the Company, however, the Company is
required to make certain payments in order to fund the plan. Such payments
totalled approximately $10,000 and $12,000, respectively, for the years ended
December 31, 1996 and 1995.

The Company maintains a defined contribution savings plan for eligible
employees pursuant to Section 401(k) of the Internal Revenue Code ("IRC").
Pursuant to the plan, employees can contribute a maximum established by the
IRC. Although the Company is not obligated to contribute to the plan, the
Company contributed approximately $10,000 and $2,500 for the years ended
December 31, 1996 and 1995, respectively.

12. STOCK-BASED COMPENSATION:

During 1996, the Company adopted the 1996 Stock Option Plan (the "Stock
Option Plan") for the purpose of granting incentive stock options to employees
of the Company. The Company reserved 400,000 shares of common stock for
issuance under the Stock Option Plan.

F-14
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
In November 1996, the Company granted options to purchase 49,284 shares of
common stock and 24,642 shares of common stock, respectively, to a principal
stockholder of the Company, who is also a member of the Board of Directors,
and certain entities controlled by him. These options may be exercised 120
days after the closing of the Company's initial public offering over fifty-
four and fifty-seven month periods and are exercisable at $5.40 per share.
Additionally, in November 1996, the Company granted options to purchase 49,284
shares of the Company's common stock at $5.40 per share to another
stockholder, who is also a member of the Board of Directors. These options may
be exercised 120 days after the closing of the Company's initial public
offering over fifty-four month period. All of these options are still
outstanding. No stock options were granted during 1995.

The Company accounts for this plan under APB Opinion No. 25, under which no
compensation cost has been recognized.

Had compensation cost for this plan been determined consistent with SFAS No.
123, the Company's net income and net income per share would have been changed
to the following pro forma amounts:

<TABLE>
<CAPTION>
1996
--------
<S> <C>
Net income:
As Reported....................................................... $627,163
Pro Forma......................................................... 444,884
Earnings per share:
As Reported....................................................... $ 0.28
Pro Forma......................................................... 0.20
</TABLE>

Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.

A summary of the status of the Stock Option Plan at December 31, 1996, and
changes during the year then ended, is presented in the table and narrative
below:

<TABLE>
<CAPTION>
1996
------------------------
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------- ----------------
<S> <C> <C>
Outstanding at beginning of year................... -- n/a
Granted............................................ 123,210 $5.40
Exercised.......................................... -- --
Forfeited.......................................... -- --
Outstanding at end of year......................... 123,210 5.40
Exercisable at end of year......................... -- n/a
Weighted average fair value of options granted..... $ 1.48 n/a
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996: risk-free interest rates of 5.61%;
expected dividend yields of 0%; expected lives of 1 year; expected stock price
volatility of 64%.

F-15
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
13. COMMITMENTS:

Leases

As of December 31, 1996, the Company had leased certain office and warehouse
space. Leases for this space expire through March 2001, and call for annual
rent with immaterial escalations through the end of the leases. The Company
has also entered into several operating leases for office equipment.

Future minimum payments for operating leases at December 31, 1996 are as
follows:

<TABLE>
<S> <C>
Year ended December 31,
1997.............................................................. $282,407
1998.............................................................. 261,764
1999.............................................................. 253,843
2000.............................................................. 259,310
2001 and thereafter............................................... 765,669
</TABLE>

Rental expense for the years ended December 31, 1996 and 1995 was $295,659
and $139,660, respectively.

Employment Agreements

The Company has entered into employment agreements with its President and
Chief Executive Officer. The President's agreement provides for an annual base
salary of $100,000 for a term of five years. The agreement may be extended at
the sole discretion of the Board of Directors upon the same terms and
conditions. In the event that the Board of Directors does not extend the term
of the agreement and a mutually acceptable alternative agreement cannot be
negotiated with the Board of Directors upon the expiration of this agreement,
the President will be entitled to a severance payment equal to two times his
annual base salary. The Chief Executive Officer's agreement will provide for
an annual base salary of $187,000 for a term of five years. The agreement may
be extended at the sole discretion of the Board of Directors upon the same
terms and conditions. In the event that the Board of Directors does not extend
the term of the agreement and a mutually acceptable alternative agreement
cannot be negotiated with the Board of Directors upon the expiration of this
agreement, the Chief Executive Officer will be entitled to a severance payment
equal to three times his annual base salary.

14. SUBSEQUENT EVENTS:

Initial Public Offering

On February 7, 1997, the Company completed an initial public offering of its
common stock. The offering resulted in the sale of 1,350,000 shares of common
stock at $6.00 per share, less underwriters discounts and commissions, for
total net proceeds of approximately $6,086,000. The Company used a portion of
the proceeds of the offering to repay approximately $5,300,000 of the
acquisition and bank financing, described in Note 7, outstanding at December
31, 1996. The supplementary earnings per share for the year ended December 31,
1996, which follows, gives supplemental effect to the issuance of 749,226
shares of common stock for the entire period during which the acquisition and
bank financing was outstanding, which is the number of shares issued in the
initial public offering, the proceeds of which were used to repay
approximately $5,300,000 of debt outstanding at December 31, 1996, as well as
to effect the reduction of related interest expense for the year then ended.
These shares are presumed outstanding for supplementary purposes only, and
were neither issued nor outstanding for any purpose during the year ended
December 31, 1996.

F-16
<PAGE>

PURO WATER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
------------------
<S> <C>
Supplementary earnings per share........................ $ 0.29
Supplementary weighted average common shares
outstanding............................................ 2,986,905
</TABLE>

Reverse Stock Split and Recapitalization

In connection with the initial public offering described above, the Company
effected a recapitalization whereby the presently outstanding common stock was
converted to shares of common stock on a .4928 to 1 share basis and the common
stock par value was converted from $.003125 to $.0063. All information
contained in the accompanying financial statements and footnotes has been
retroactively restated to give effect to these transactions.

15. UNAUDITED INTERIM FINANCIAL INFORMATION:

The unaudited financial information included herein for the nine months
ended September 30, 1996 and 1997 has been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of the Company, these unaudited financial statements reflect all
adjustments necessary, consisting of normal recurring adjustments, for a fair
presentation of such data on a basis consistent with that of the audited data
presented herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for a full year.

16. EVENTS (UNAUDITED) OCCURRING SUBSEQUENT TO THE DATE OF REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS:

On October 8, 1997, the Company entered into an agreement and plan of merger
with USF/PW Acquisition Corporation ("Sub"), a wholly owned subsidiary of
United States Filter Corporation ("US Filter"). Pursuant to the agreement, the
Sub would merge with and into the Company and the Company will become a wholly
owned subsidiary of US Filter. Under the terms of the agreement, each existing
holder of the Company's common stock, will have the right to convert each
share into a fraction of US Filter common stock determined by dividing $7.20
by the average market price of the US Filter common stock during the 10
consecutive trading days beginning on the 16th trading day prior to a special
meeting of the Company's shareholders.

F-17
<PAGE>

ANNEX A

AGREEMENT AND PLAN OF MERGER

DATED AS OF OCTOBER 8, 1997

AMONG

UNITED STATES FILTER CORPORATION,

USF/PW ACQUISITION CORPORATION

AND

PURO WATER GROUP, INC.

A-1
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER

Section 1.01 Effective Time of the Merger........................... A-5
Section 1.02 Closing................................................ A-5
Section 1.03 Effects of the Merger.................................. A-5

ARTICLE II CONVERSION OF SECURITIES

Section 2.01 Conversion of Capital Stock............................ A-6
Section 2.02 Exchange of Certificates............................... A-6
Section 2.03 No Further Transfers................................... A-7
Section 2.04 No Fractional Shares................................... A-7
Section 2.05 Anti-Dilution Provisions............................... A-8
Section 2.06 Stock Legends; Agreements by Certain Stockholders...... A-8
Section 2.07 Company Stock Option Plans............................. A-8
Section 2.08 Options................................................ A-8
Section 2.09 Underwriter's Warrant.................................. A-9
Section 2.10 Convertible Notes...................................... A-9

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 3.01 Organization........................................... A-9
Section 3.02 Capitalization......................................... A-9
Section 3.03 Charter Documents...................................... A-10
Section 3.04 Subsidiaries........................................... A-10
Section 3.05 Authority; No Conflict; Required Filings and Consents.. A-10
Section 3.06 SEC Filings; Financial Statements...................... A-11
Section 3.07 Indebtedness; Absence of Undisclosed Liabilities....... A-11
Section 3.08 Absence of Certain Changes or Events................... A-12
Section 3.09 Tax Matters............................................ A-12
Section 3.10 Certain Transactions................................... A-13
Section 3.11 Required Authorizations................................ A-13
Section 3.12 Litigation............................................. A-13
Section 3.13 Compliance with Law; Regulatory Compliance............. A-13
Section 3.14 Contracts.............................................. A-14
Section 3.15 Real Property.......................................... A-14
Section 3.16 Personal Property...................................... A-14
Section 3.17 Intellectual Property Rights........................... A-15
Section 3.18 Environmental Matters.................................. A-15
Section 3.19 Products Liability..................................... A-16
Section 3.20 Insurance.............................................. A-16
Section 3.21 Employment and Change in Control Agreements............ A-16
Section 3.22 Labor Relations........................................ A-16
Section 3.23 Employee Benefit Plans................................. A-16
Section 3.24 Pooling of Interests................................... A-18
Section 3.25 Registration Statement; Proxy Statement/Prospectus..... A-18
Section 3.26 Certain Fees........................................... A-18
Section 3.27 Section 203 of the DGCL Not Applicable................. A-18
Section 3.28 Disclosure............................................. A-18
</TABLE>

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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF USF AND SUB

Section 4.01 Organization of USF and Sub................................. A-18
Section 4.02 Capitalization of USF and Sub............................... A-19
Section 4.03 Authority; No Conflict; Required Filings and Consents....... A-19
Section 4.04 SEC Filings; Financial Statements........................... A-20
Section 4.05 Absence of Certain Changes or Events........................ A-20
Section 4.06 Litigation.................................................. A-20
Section 4.07 Registration Statement; Proxy Statement/Prospectus.......... A-20
Section 4.08 Interim Operations of Sub................................... A-21

ARTICLE V COVENANTS

Section 5.01 No Solicitation............................................. A-21
Section 5.02 Stockholder Approval........................................ A-21
Section 5.03 Conduct of the Business of the Company...................... A-22
Section 5.04 Access to Information....................................... A-23
Section 5.05 Required Authorizations..................................... A-24
Section 5.06 Financial Statements of the Company......................... A-24
Section 5.07 Public Announcements........................................ A-25
Section 5.08 Benefit Plans............................................... A-25
Section 5.09 Tax-Free Reorganization..................................... A-25
Section 5.10 Pooling Accounting.......................................... A-25
Section 5.11 Affiliate Agreements........................................ A-25
Section 5.12 Representations, Covenants and Conditions;
Further Assurances.......................................... A-26

ARTICLE VI CONDITIONS TO MERGER

Section 6.01 Conditions to Each Party's Obligation To Effect the Merger.. A-26
Section 6.02 Additional Conditions to Obligations of USF and Sub......... A-26
Section 6.03 Additional Conditions to Obligations of the Company......... A-27

ARTICLE VII TERMINATION AND AMENDMENT

Section 7.01 Termination................................................. A-28
Section 7.02 Effect of Termination....................................... A-29
Section 7.03 Fees and Expenses........................................... A-29
Section 7.04 Amendment................................................... A-29
Section 7.05 Extension; Waiver........................................... A-29

ARTICLE VIII MISCELLANEOUS

Section 8.01 Nonsurvival of Representations, Warranties and Agreement.... A-30
Section 8.02 Notices..................................................... A-30
Section 8.03 Interpretation.............................................. A-31
Section 8.04 Knowledge................................................... A-31
Section 8.05 Counterparts................................................ A-31
Section 8.06 Entire Agreement; No Third Party Beneficiaries.............. A-31
Section 8.07 Governing Law............................................... A-31
Section 8.08 Assignment.................................................. A-31
</TABLE>

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ANNEX 1 DEFINITIONS

EXHIBIT A Amended and Restated Certificate of Incorporation of Puro Water Group, Inc... A-37
EXHIBIT B Form of Puro Water Group, Inc. Affiliate Agreement........................... A-38
</TABLE>
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AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger ("Agreement"), dated as of October 8, 1997, by
and among United States Filter Corporation, a Delaware corporation ("USF"),
USF/PW Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of USF ("Sub"), and Puro Water Group, Inc., a Delaware corporation
(the "Company"). The Company and Sub are the only parties to the merger hereby
contemplated and are sometimes referred to herein as the "Constituent
Corporations", and the Company is sometimes referred to herein as the
"Continuing Corporation".

Whereas, the respective Boards of Directors of the Constituent Corporations
have approved this Agreement and deem it advisable and in the best interests
of their respective corporations and stockholders that Sub merge with and into
the Company on the terms and conditions herein set forth, whereby the Company
will become a wholly owned subsidiary of USF and the stockholders of the
Company will become stockholders of USF (the "Merger");

Whereas, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to USF's willingness to enter into this
Agreement, Peter T. Dixon, The Trusts Under Article 16 of the Will of W.
Palmer Dixon for the Benefit of Peter T. and Palmer Dixon (the "Dixon
Trusts"), Beth Levy, Scott Levy, Jack C. West and Edberg Associates Limited
Partnership, each of whom is a stockholder of the Company ("Stockholders"),
have entered into Stockholder Agreements (the "Stockholder Agreements") with
USF pursuant to which the Stockholders have agreed to vote their shares of
Common Stock, $.0063 par value, of the Company ("Company Common Stock") in
favor of the Merger;

Whereas, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and

Whereas, for financial accounting purposes, it is intended that the Merger
shall be accounted for as a pooling of interests.

Now, Therefore, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:

ARTICLE I

THE MERGER

Section 1.01 Effective Time of the Merger. Subject to the provisions of this
Agreement, a certificate of merger (the "Certificate of Merger") in such form
as is required by the relevant provisions of the Delaware General Corporation
Law ("DGCL") shall be duly prepared, executed and acknowledged by the
Continuing Corporation and thereafter delivered to the Secretary of State of
the State of Delaware, for filing, as provided in the DGCL, as soon as
practicable on or after the Closing Date. The Merger shall become effective
upon the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware or at such time thereafter as is provided in the
Certificate of Merger (the "Effective Time").

Section 1.02 Closing The closing of the Merger (the "Closing") will take
place at 10:00 a.m., prevailing time, on a date to be specified by USF and the
Company, which shall be as soon as practicable after all of the conditions to
the Merger set forth in Article VI have been satisfied or waived, subject to
the rights of termination and abandonment hereinafter set forth (the "Closing
Date"), at a place mutually agreed to in writing by USF and the Company.

Section 1.03 Effects of the Merger.

(a) At the Effective Time (i) the separate existence of Sub shall cease and
Sub shall be merged with and into the Company, (ii) the Certificate of
Incorporation of the Continuing Corporation shall be amended to read in

A-5
<PAGE>

its entirety as set forth in Exhibit A, (iii) the Bylaws of the Company as in
effect immediately prior to the Effective Time shall be the Bylaws of the
Continuing Corporation, and (iv) the directors of Sub at the Effective Time
shall be the directors of the Continuing Corporation and hold office as
provided in the Bylaws of the Continuing Corporation.

(b) The Merger will have the effects specified in the DGCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
all of the properties, rights, privileges, powers, franchises, debts,
liabilities, obligations and duties of the Constituent Corporations will
continue in the Surviving Corporation unaffected by the Merger.

ARTICLE II

CONVERSION OF SECURITIES

Section 2.01 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or capital stock of Sub:

(a) Each issued and outstanding share of the capital stock of Sub shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Continuing Corporation.

(b) Subject to Section 2.01(c) hereof, each issued and outstanding share of
Company Common Stock, but other than shares of Company Common Stock issued and
held in the treasury of the Company or owned of record by USF, Sub or any
direct or indirect subsidiary thereof, shall be converted into and shall
become, by virtue of the Merger and without any further action by the holder
thereof that certain fraction of a share of Common Stock of USF, par value
$.01 per share ("USF Common Stock") (subject to adjustment as provided in
Section 2.01(c)) as shall be determined by dividing $7.20 (the "Per Share
Purchase Price") by the "average market price" of the USF Common Stock during
the 10 consecutive trading day period beginning on the 16th trading day prior
to the Stockholders' Meeting (rounding the result to two decimal places). The
"average market price" of a share of USF Common Stock shall be calculated by
(x) averaging the high and low per share sale prices for each trading day
during such period on which there were any trades in USF Common Stock, (y)
adding such daily averages together, and (z) dividing the sum by 10 (reduced
by the number of such trading days during which there were no trades). In such
"average market price" calculations, numbers shall be carried to four decimal
places. The daily high and low per share sale prices shall be those on the New
York Stock Exchange Composite Tape.

(c) Each share of Company Common Stock issued and held in the treasury of
the Company or owned of record by USF, Sub or any direct or indirect
subsidiary thereof immediately prior to the Effective Time shall automatically
be canceled and retired without any conversion thereof, and no cash shall be
exchangeable therefor.

Section 2.02 Exchange of Certificates.

(a) After the Effective Time, each holder of a certificate formerly
evidencing shares of Company Common Stock which have been converted pursuant
to Section 2.01(b), upon surrender of the same to American Stock Transfer &
Trust Company or another exchange agent selected by USF and reasonably
satisfactory to the Company (the "Exchange Agent") as provided in Section
2.02(b) hereof, shall be entitled to receive in exchange therefor (i) a
certificate or certificates representing the number of whole shares of USF
Common Stock into which such shares of Company Common Stock shall have been
converted as provided in this Article II and (ii) as provided in Section 2.04,
cash in lieu of any fractional share of USF Common Stock into which such
shares of Company Common Stock would have otherwise been converted, without
any interest thereon. Until so surrendered, each certificate formerly
evidencing shares of Company Common Stock which have been so converted will be
deemed for all corporate purposes of USF to evidence ownership of the number
of whole shares of USF Common Stock for which the shares of Company Common
Stock formerly represented thereby were exchanged and the right to receive
cash as herein provided, without any interest thereon; provided, however, that
until such certificate is so surrendered, no dividend payable to holders of
record of USF Common Stock as

A-6
<PAGE>

of any date subsequent to the Effective Time shall be paid to the holder of
such certificate in respect of the shares of USF Common Stock evidenced
thereby and such holder shall not be entitled to vote such shares of USF
Common Stock. Upon surrender of a certificate formerly evidencing shares of
Company Common Stock which have been so converted, there shall be paid to the
record holder of the certificates of USF Common Stock issued in exchange
therefor (i) at the time of such surrender, the amount of dividends and any
other distributions with a record date after the Effective Time and
theretofore paid with respect to such shares of USF Common Stock to the extent
the same has not yet been paid to a public official pursuant to abandoned
property, escheat or similar laws and (ii) at the appropriate payment date,
the amount of dividends and any other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such shares of USF Common Stock. No interest
shall be payable with respect to the payment of such dividends or
distributions.

(b) As soon as practicable after the Effective Time, the Exchange Agent
shall send a notice and a transmittal form to each holder of certificates
formerly evidencing shares of Company Common Stock (other than certificates
formerly representing shares of Company Common Stock to be canceled pursuant
to Section 2.01(c)) advising such holder of the effectiveness of the Merger
and the procedure for surrendering to the Exchange Agent (who may appoint
forwarding agents with the approval of USF) such certificates for exchange
into certificates evidencing USF Common Stock (including cash in lieu of any
fractional share). Each holder of certificates theretofore evidencing shares
of Company Common Stock, upon proper surrender thereof to the Exchange Agent
together and in accordance with such transmittal form, shall be entitled to
receive in exchange therefor certificates evidencing USF Common Stock
(including cash in lieu of any fractional share) deliverable in respect of the
shares of Company Common Stock theretofore evidenced by the certificates so
surrendered. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of certificates theretofore
representing shares of Company Common Stock for any amount which may be
required to be paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.

(c) If any certificate evidencing shares of USF Common Stock is to be
delivered to a person other than the person in whose name the certificates
surrendered in exchange therefor are registered, it shall be a condition to
the issuance of such certificate evidencing shares of USF Common Stock that
the certificates so surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the person requesting such transfer pay
to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that such
taxes have been paid or are not required to be paid.

(d) In the event any certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
certificate to be lost, stolen or destroyed, the Continuing Corporation will
issue in exchange for such lost, stolen or destroyed certificate the
certificate evidencing shares of USF Common Stock deliverable in respect
thereof, as determined in accordance with this Article II. When authorizing
such issue of the certificate of shares of USF Common Stock in exchange
therefor, the Board of Directors of the Continuing Corporation may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate to give the Continuing
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Continuing Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.

(e) Adoption of this Agreement by the stockholders of the Company shall
constitute, as an integral part of the Merger, ratification of the appointment
of, and the reappointment of, said Exchange Agent.

Section 2.03 No Further Transfers. After the Effective Time, there shall be
no registration of transfers of shares on the stock transfer books of the
Company of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time.

Section 2.04 No Fractional Shares. Neither certificates nor scrip for
fractional shares of USF Common Stock will be issued, but in lieu thereof each
holder of Company Common Stock otherwise entitled to a fraction of a share of
USF Common Stock shall receive from USF an amount in cash equal to the average
of the high

A-7
<PAGE>

and low per share sale prices of a share of USF Common Stock on the New York
Stock Exchange Composite Tape for the day of the Effective Time, multiplied by
the fraction of a share of USF Common Stock to which such stockholder would be
otherwise entitled. No USF stock split or dividend shall relate to any
fractional share interest, and no such fractional share interest shall entitle
the owner thereof to vote or to any rights of a stockholder of USF.

Section 2.05 Anti-Dilution Provisions. In the event USF changes the number
of shares of USF Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend or similar recapitalization
with respect to such stock and the record date therefor (in the case of a
stock dividend) or the effective date thereof (in the case of a stock split or
similar capitalization for which a record date is not established) shall be
prior to the Effective Time, the Per Share Purchase Price shall be
proportionately adjusted to reflect such stock split, stock dividend or other
recapitalization.

Section 2.06 Stock Legends; Agreements by Certain Stockholders. Certificates
representing shares of USF Common Stock issued to persons deemed to be
affiliates of the Company (as that term is used for purposes of Rule 145 under
the United States Securities Act of 1933, as amended (the "Securities Act"))
on the date of the Stockholders' Meeting shall bear the legend set forth in
paragraph E of Exhibit B hereto.

Section 2.07 Company Stock Option Plans.

(a) At the Effective Time, each outstanding option to purchase shares of
Company Common Stock (an "Employee Stock Option") under the Company 1996 Stock
Option Plan (the "Employee Stock Option Plan"), whether or not exercisable,
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Employee Stock Option, the same
number of shares of USF Common Stock as the holder of such Employee Stock
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such option in full immediately prior to the Effective Time,
at a price per share equal to (y) the aggregate exercise price for the shares
of Company Common Stock deemed otherwise purchasable pursuant to such Employee
Stock Option divided by (z) the number of full shares of USF Common Stock
deemed purchasable pursuant to such Employee Stock Option; provided, however,
that, in the case of any Employee Stock Option to which Section 421 of the
Code applies by reason of its qualification under any of Sections 422-424 of
the Code ("qualified stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise
of such option shall be determined in order to comply with Section 425(a) of
the Code.

(b) At the Effective Time, each outstanding option to purchase shares of
Company Common Stock (a "Director Stock Option") under the Director Stock
Option Plan (the "Director Stock Option Plan"), whether or not exercisable,
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Director Stock Option, the same
number of shares of USF Common Stock as the holder of such Director Stock
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such option in full immediately prior to the Effective Time,
at a price per share equal to (y) the aggregate exercise price for the shares
of Company Common Stock deemed otherwise purchasable pursuant to such Director
Stock Option divided by (z) the number of full shares of USF Common Stock
deemed purchasable pursuant to such Director Stock Option.

Section 2.08 Options. At the Effective Time, each outstanding option to
purchase Company Common Stock listed on Schedule 2.08 ("Non-Employee
Options"), whether or not exercisable, shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under each
respective Non-Employee Option, the same number of shares of USF Common Stock
as the holder of such Non-Employee Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time, at a price per share equal to (y) the
aggregate exercise price for the shares of Company Common Stock deemed
otherwise purchasable pursuant to such Non-Employee Option divided by (z) the
number of full shares of USF Common Stock deemed purchasable pursuant to such
Non-Employee Stock Option.

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<PAGE>

Section 2.09 Underwriter's Warrant. At the Effective Time, the Underwriter's
Common Stock Purchase Warrant dated as of February 7, 1997 (the "Underwriter's
Warrant") shall be deemed to constitute the right to acquire, on the same
terms and conditions as were applicable under such Underwriter's Warrant, the
same number of shares of USF Common Stock as the holder of such Underwriter's
Warrant would have been entitled to receive pursuant to the Merger had such
holder exercised such Underwriter's Warrant in full immediately prior to the
Effective Time, at an exercise price per share equal to (y) the aggregate
exercise price for the shares of Company Common Stock deemed otherwise
purchasable pursuant to such Underwriter's Warrant divided by (z) the number
of full shares of USF Common Stock deemed purchasable pursuant to such
Underwriter's Warrant.

Section 2.10 Convertible Notes. At the Effective Time, the Notes of the
Company listed on Schedule 2.10 (the "Convertible Notes") shall be deemed to
be convertible, on the same terms and conditions as were applicable under each
respective Convertible Note, into the same number of shares of USF Common
Stock as the holders of each such Convertible Note would have been entitled to
receive pursuant to the Merger had such holders converted such Convertible
Notes in full immediately prior to the Effective Time, at a conversion price
per share equal to (y) the conversion price for the shares of Company Common
Stock deemed otherwise purchasable pursuant to each respective Convertible
Note divided by (z) the number of full shares of USF Common Stock deemed
purchasable pursuant to each such Convertible Note.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to USF and Sub as follows:

Section 3.01 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power to own, lease and operate its property and
to carry on its business as now being conducted, and is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would have a material adverse effect
on the business, assets (including intangible assets), condition (financial or
otherwise), results of operations or prospects ("Material Adverse Effect") of
the Company.

Section 3.02 Capitalization.

(a) The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock, $.0063 par value per share. As of August 31, 1997, (i)
3,476,789 shares of Company Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable, (ii) no shares of
Company Common Stock were held in the treasury of the Company, (iii) 400,000
shares of Company Common Stock were reserved for issuance pursuant to stock
options granted and outstanding under the Employee Stock Option Plan, (iv)
30,000 shares of Company Common Stock were reserved for issuance pursuant to
stock options granted and outstanding under the Director Stock Option Plan,
(v) 121,068 shares of Company Common Stock were reserved for issuance pursuant
to the Non-Employee Options, (vi) 135,000 shares of Company Common Stock were
reserved for issuance pursuant to the Underwriter's Warrant, (vii) 80,165
shares of Company Common Stock were reserved for issuance pursuant to the
Convertible Notes and (viii) 32,000 shares of Company Common Stock were
reserved for issuance pursuant to the Savoy Asset Purchase Agreement. All
shares of Company Common Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable.

(b) There are no obligations, contingent or otherwise, of the Company to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity.

(c) Except for restrictions on transfer arising under the Federal securities
laws, included in the Stockholders Agreements or as described in Schedule
3.02, there are no existing restrictions on transfer, voting

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<PAGE>

trusts, stockholder agreements or registration covenants known to the Company
relating to any outstanding shares of capital stock of the Company. None of
the outstanding shares of Company Common Stock was issued in violation of the
preemptive rights of any present or former stockholder and the Company's
stockholders are not entitled to preemptive rights.

(d) Except as set forth in this Section 3.02, there are no equity securities
of any class of the Company, or any security exchangeable into or exercisable
for such equity securities, issued, reserved for issuance or outstanding.
Except as set forth in this Section 3.02 or in Schedule 3.02, there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which the Company is a party or by which it is bound
obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the Company or
obligating the Company to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. Except for the Stockholder Agreements, there are no voting trusts,
proxies or other agreements or understandings with respect to the shares of
capital stock of the Company.

Section 3.03 Charter Documents. The copies of the Certificate of
Incorporation of the Company, as amended, and Amended and Restated Bylaws of
the Company as currently in effect, are complete and correct.

Section 3.04 Subsidiaries. Except as set forth on Schedule 3.04, the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any corporation,
partnership, joint venture or other business association or entity.

Section 3.05 Authority; No Conflict; Required Filings and Consents.

(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company, subject only (in
the case of this Agreement) to the approval of this Agreement and the Merger
by the Company's stockholders under the DGCL. The Board of Directors of the
Company (the "Company Board") has directed that this Agreement and the Merger
be submitted to the stockholders for adoption, in accordance with the law of
the State of Delaware and the Company's Certificate of Incorporation, as
amended, and Amended and Restated Bylaws, and has recommended that the
stockholders of the Company approve and adopt this Agreement and the Merger.
This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by USF and Sub,
constitute the valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors rights generally and (ii) the
availability of injunctive relief and other equitable remedies.

(b) The execution and delivery of this Agreement by the Company does not,
and the consummation of the transactions contemplated hereby and thereby will
not, (i) conflict with, or result in any violation or breach of any provision
of the Certificate of Incorporation, as amended or Amended and Restated Bylaws
of the Company, (ii) result in any violation or breach of, or constitute (with
or without notice or lapse of time, or both) a default (or give rise to a
right of termination, cancellation or acceleration of any obligation or loss
of any material benefit) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which the Company is a party or pursuant to which
it or any of its properties or assets may be bound, or (iii) subject to
obtaining the approval of the Company's stockholders of the Merger and
compliance with the requirements set forth in Section 3.05(c) below, conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company
or any of its properties or assets, except in the case of (ii) and (iii) for
any such conflicts, violations, defaults, terminations, cancellations or
accelerations which would not have a Material Adverse Effect on the Company.

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<PAGE>

(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Authority is required by or with
respect to the Company in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby and
thereby, except for (i) the filing of the Certificate of Merger with the
Delaware Secretary of State, (ii) the filing of the Proxy Statement with the
United States Securities and Exchange Commission ("SEC") in accordance with
the United States Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the laws of any country.

Section 3.06 SEC Filings; Financial Statements.

(a) The Company has filed all forms, reports and documents required to be
filed by the Company with the SEC and has previously furnished to USF a true
and complete copy of each of (i) its Prospectus dated February 7, 1997, (ii)
its Annual Report on Form 10-KSB for the year ended December 31, 1996 (iii)
its Quarterly Reports on Form 10-QSB for the periods ended March 31, 1997 and
June 30, 1997, and (iv) all other reports or other correspondence filed by it
with the SEC pursuant to the Exchange Act, since January 1, 1997, in each case
as filed with the SEC (collectively, together with any forms, reports and
documents filed by the Company with the SEC after the date hereof until the
Closing, the "Company SEC Reports"). Each such report, when filed, complied in
all material respects with the requirements of the Exchange Act and the
applicable rules and regulations thereunder and, as of their respective dates,
none of such reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.

(b) Each of the financial statements (including, in each case, any related
notes) contained in the Company SEC Reports complied as to form in all
material respects with the applicable rules and regulations of the SEC with
respect thereto, was prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes to such financial statements) and
fairly presented the financial position of the Company as at the respective
dates and the results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements (i) were or
are subject to normal year-end adjustments which were not or are not expected
to be material in amount, and (ii) do not contain footnote disclosure. The
unaudited balance sheet of the Company as of June 30, 1997 is referred to
herein as the "Company Balance Sheet."

Section 3.07 Indebtedness; Absence of Undisclosed Liabilities.

(a) Schedule 3.07 sets forth a list of each instrument which evidences
Indebtedness of the Company, and the aggregate principal amount thereof
outstanding as of the date hereof, and indicates each such instrument that
contains a restriction, limitation or encumbrance, of any kind, on the ability
of the Company to pay dividends on its respective capital stock. The total
aggregate principal amount outstanding as of the date hereof of all such
Indebtedness is $3,671,955.22, which includes $850,000 in face amount of
outstanding letters of credit. Except as set forth in Schedule 3.07, all of
such instruments are in full force and effect and the Company is not in
default thereunder, nor, to the knowledge of the Company, is any other party
to any such instrument in default thereunder, nor, to the knowledge of the
Company, does any condition exist that, with the giving of notice or lapse of
time or both, would constitute a default thereunder, which default could
reasonably be expected to give rise to a right on the part of some party
thereto to terminate such instrument, accelerate the obligations thereunder or
claim damages in a material amount thereunder, except such default (i) as to
which requisite waivers or consents have been obtained or (ii) which is
curable and is cured within the applicable period for cure permitted under
such instruments. Schedule 3.07 also sets forth a list of each other
instrument or agreement that contains a restriction, limitation or
encumbrance, of any kind, on the ability of the Company to pay dividends on
its capital stock.

(b) Schedule 3.07 also sets forth all contracts and other agreements and
arrangements pursuant to which the Company has agreed to indemnify or
exonerate any officer, director or employee of the Company with

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<PAGE>

respect to any matter. Except as described on Schedule 3.07, there are no
circumstances which might give rise to any obligation or liability on the part
of the Company so to indemnify any such officer, director or employee.

(c) Except as disclosed in writing by the Company or as disclosed in the
Company SEC Reports, the Company does not have any liabilities as of the date
hereof, either accrued or contingent (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles), and whether due or to become due, other than (i) liabilities
reflected or reserved against in the Company Balance Sheet, (ii) liabilities
specifically described in this Agreement, or in the Schedules to this
Agreement, and (iii) normal or recurring liabilities incurred since June 30,
1997 in the ordinary course of business consistent with past practices and
which are not, individually or in the aggregate, material to the business,
results, operations, financial condition or prospects of the Company, and none
of which is a liability for breach of contract or warranty or has arisen out
of tort, infringement of any intellectual property rights, or violation of law
or is claimed in any pending or threatened legal proceeding.

Section 3.08 Absence of Certain Changes or Events. Since the date of the
Company Balance Sheet, except as disclosed on Schedule 3.08, the Company has
conducted its business only in the ordinary course and in a manner consistent
with past practice and, since such date, there has not been (i) any Material
Adverse Effect with respect to the Company, and no fact or condition exists or
is contemplated or threatened which is reasonably likely to cause a Material
Adverse Effect with respect to the Company in the future, (ii) any material
change by the Company in its accounting methods, principles or practices
except as required by concurrent changes in generally accepted accounting
principles; or (iii) except as disclosed in the Schedules to this Agreement,
any other action or event that would have required the consent of USF pursuant
to Section 5.01 of this Agreement had such action or event occurred after the
date of this Agreement.

Section 3.09 Tax Matters.

(a) The Company has prepared and timely filed, and will file on a timely
basis, all material United States federal, state, local and international
returns, estimates, information statements and reports ("Returns") relating to
any and all Taxes concerning or attributable to the Company or its operations
and required to be filed on or prior to the Effective Time.

(b) Each such Return was true, correct and complete on the respective date
on which it was filed and, to the knowledge of the Company, no event has since
occurred requiring any amendment thereto, which amendment has not been made in
a manner such that each such Return remains true, correct and complete.

(c) The Company as of the Effective Time: (A) will have paid all Taxes it is
required to pay prior to the Effective Time and (B) will have withheld with
respect to its employees all United States federal and state income taxes,
FICA, FUTA and other Taxes required to be withheld.

(d) The accounts shown on the Company Balance Sheet (excluding amounts
classified thereon as deferred) are sufficient for the discharge of all Taxes
attributable or with respect to all periods, or portions thereof, prior to the
date of the Company Balance Sheet remaining unpaid as of such date, except as
set forth in Schedule 3.09. There is no Tax deficiency outstanding or
assessed, or to the Company's knowledge proposed, against the Company that is
not reflected as a liability on the Company Balance Sheet nor has the Company
executed any waiver of any statute of limitations on or extending the period
for the assessment or collection of any Tax. No tax audit or examination is
now pending or currently in progress with respect to the Company.

(e) The Company has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. The Company has not made any payment, nor
is it obligated to make any payment, nor is it a party to any agreement that
under certain circumstances could obligate it to make any payment, that will
not be deductible under Sections 280G or 162(m) of the Code. The Company has
not been (nor does it have any liability for unpaid Taxes because it once was)
a member of an affiliated group during any part of any consolidated return
year within any part of which consolidated return year any other corporation
was also a member of such group.

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The Company is not and has not been during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code a United States real property holding
corporation as defined in Section 897(c)(1) of the Code. The Company does not
have any losses subject to the limitations of Section 382 of the Code.

Section 3.10 Certain Transactions. Except as set forth in Schedule 3.10,
none of the officers or directors of the Company nor any Affiliate of the
Company, and, to the knowledge of the Company, none of the employees of the
Company is currently a party to any transaction with the Company (other than
for services as an employee, officer or director), including, without
limitation, any contract, agreement or other arrangement (a) providing for the
furnishing of services to or by, (b) providing for rental of real or personal
property to or from, or (c) otherwise requiring payments to or from, any such
officer, director, Affiliate or employee, any member of the family of any such
officer, director or employee or any corporation, partnership, trust or other
entity in which any such officer, director or employee has a substantial
interest or which is an Affiliate of such officer, director or employee.

Section 3.11 Required Authorizations. Schedule 3.11 sets forth a true and
complete list of all Required Authorizations which the Company must give or
obtain for the execution and delivery of this Agreement by the Company or the
consummation by the Company of any of the transactions contemplated hereby or
in order to enable all the issued and outstanding capital stock of the Company
to be converted as contemplated by Article II.

Section 3.12 Litigation. Except as set forth in Schedule 3.12 or as
indicated in any of the Company SEC Reports, there are no suits, litigations,
investigations, actions or proceedings of any kind pending or, to the
knowledge of the Company, threatened against the Company, nor, to the
knowledge of the Company, is any such matter pending or threatened against any
other person, which, if adversely determined, would have a Material Adverse
Effect with respect to the Company.

Section 3.13 Compliance with Law; Regulatory Compliance.

(a) Except as set forth in Schedule 3.13, the Company is not and has not
been in violation of any applicable United States federal, state, provincial,
local or international law, regulation, ordinance or other requirement of any
Governmental Authority relating to it or to its securities, property,
operations or business, and no event has occurred or condition or state of
facts exists that could give rise to any such violation, the existence of
which would have a Material Adverse Effect. Except as set forth in Schedule
3.13, as of the date of this Agreement, there is no outstanding order, writ,
judgment, stipulation, injunction, decree, determination, award or other order
of any court or governmental agency or instrumentality, domestic or
international, against or affecting the Company or any of the assets of the
Company.

(b) The Company possesses or has made timely application for, all
Governmental Approvals with and under all United States federal, state,
provincial, local and international laws and Governmental Authorities,
required by the Company to carry on any substantial part of its respective
business as presently conducted and to use and operate any of its property and
assets. Schedule 3.13 sets forth a list of all such Governmental Approvals,
identifying each such Governmental Approval by number and indicating the
holder, the issuer and the nature thereof. All such Governmental Approvals are
in full force and effect and the Company is not in violation of any such
Governmental Approval or any other permit, license, approval, authorization or
registration applicable to it or to the operation of its business, and no
event or condition or state of facts exists (or would exist upon the giving of
notice or lapse of time or both) that could result in such a violation. Except
as disclosed in Schedule 3.13, the Company has no reason to believe that any
pending application for an Governmental Approval will not be timely granted
and no proceeding is pending or, to the knowledge of the Company, threatened
to revoke, suspend or materially modify any Governmental Approval possessed by
the Company or deny any renewal thereof.

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<PAGE>

(c) Except as disclosed in Schedule 3.13, the Company has made all
Governmental Filings required to be made with any Governmental Authority with
respect to the operation of its business and the use and operation of its
property and assets.

Section 3.14 Contracts. Set forth in Schedule 3.14 is a list of (a) all
contracts, agreements, commitments, undertakings or obligations to which the
Company is a party or by which it or its assets or properties are bound or
subject relating to the purchase of raw materials, the sale of finished
products or the furnishing of services which involve the payment by or to the
Company of more than $50,000 under any one of such contracts, and (b) all
other contracts, agreements, commitments, undertakings or obligations to which
the Company is a party or by which it or its assets or properties are bound or
subject (other than Real Property Leases, Personal Property Leases, Employment
Agreements and Benefit Plans) (i) which involve the payment by or to the
Company of more than $50,000 under any one of such contracts (measured by the
remaining portion to be paid thereunder) and which have a remaining term of
more than 120 days (taking into account the effect of any renewal options) and
are not cancelable without penalties by the Company on 30 days' or less
notice, (ii) which if terminated or lost would have a Material Adverse Effect
with respect to the Company, or (iii) was not entered into in the ordinary
course (collectively, the "Contracts"). There have been made available to USF
true and complete copies of all such Contracts that are in writing (including
all amendments thereto, if any). Except as set forth in Schedule 3.14, all of
the Contracts are in full force and effect and the Company is not in default
thereunder, nor, to the knowledge of the Company, is any other party to any
Contract in default thereunder, nor, to the best of the Company's knowledge,
does any condition exist that, with the giving of notice or lapse of time or
both, would constitute a default thereunder, which default would give rise to
a right on the part of some party thereto to terminate such Contract or claim
damages thereunder, except such default (i) as to which requisite waivers or
consents have been obtained or (ii) which is curable and is cured within the
applicable period for cure permitted under such Contract. Except as set forth
in Schedule 3.11, no approval or consent of any person is needed in order for
the Contracts to continue in full force and effect under the same terms and
conditions currently in effect following the consummation of the transactions
contemplated by this Agreement.

Section 3.15 Real Property. Schedule 3.15 sets forth a list (by lessee) and
summary description of all Real Property Leases. The Company has a valid
leasehold interest in each Real Property Lease held by it as of the date of
this Agreement, in each case free and clear of all Liens, except for those
Liens arising under the Credit Facility. The use and operation of the real
property subject to the Real Property Leases conform to all restrictive
covenants and restrictions and conditions. The Company has made available to
USF a true and complete copy of each Real Property Lease which is in writing.
The Company is not a party to nor does it hold property subject to any Real
Property Lease which is not in writing. The Real Property Leases are in full
force and effect and the Company has not received any notice of default
thereunder which has not been remedied or waived nor is it aware of any event
or circumstance which with the giving of notice or passage of time or both
would constitute a default thereunder. Each Real Property Lease was negotiated
on an arm's length basis. The Company has not received any notice nor does it
have any knowledge of any pending, threatened or contemplated condemnation
proceeding or assessment for public improvements affecting any real property
leased pursuant to a Real Property Lease or any part thereof or of any sale or
other disposition thereof in lieu of condemnation.

Section 3.16 Personal Property. The Company owns all Personal Property owned
by it as of the date of this Agreement, whether or not reflected in the
Company Balance Sheet, in each case free and clear of all Liens, except for
those Liens arising under the Credit Facility or under any purchase money
security arrangement with respect to which the monthly rental payments are
less than $1,500 or the aggregate rental payments are less than $10,000.
Schedule 3.16 also sets forth a list (by lessee or licensee) and a summary
description of all Personal Property Leases. The Company has a valid leasehold
interest in each Personal Property Lease held by it as of the date of this
Agreement, in each case free and clear of all Liens except for those Liens
arising under the Credit Facility. All of the Personal Property owned or
leased by, and currently used or necessary for or in the operations of the
Company, is in good operating condition and repair, is suitable for the
purposes in which it is used and includes all personal property necessary for
operation of the businesses conducted by the Company.

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<PAGE>

Section 3.17 Intellectual Property Rights. Schedule 3.17 discloses all of
the trademark and service mark rights, applications and registrations, trade
names, fictitious names, service marks, logos and brand names, copyrights,
copyright applications, letters patent, patent applications and licenses of
any of the foregoing owned or used by or registered in the name of the
Company. The Company has the entire right, title and interest in and to, or
has the exclusive perpetual royalty-free right to use, the intellectual
property rights disclosed on Schedule 3.17 and all other customer lists,
processes, know-how, show-how, formulae, trade secrets, inventions,
discoveries, improvements, blueprints, specifications, drawings, designs, and
other proprietary rights necessary or applicable to or advisable for use in
the businesses conducted by the Company ("Intellectual Property"), free and
clear of all Liens. Schedule 3.17 separately discloses all Intellectual
Property under license or in which the Company otherwise has rights. The
Intellectual Property is valid and not the subject of any interference,
opposition, reexamination or cancellation. To the knowledge of the Company, no
person is infringing upon nor has any person misappropriated any Intellectual
Property, nor is the Company infringing upon the intellectual property rights
of any other person.

Section 3.18 Environmental Matters. (a) The Company has applied for and has
in effect all United States federal, state and local and international
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ("Environmental Permits") under
applicable statutes, laws, ordinances, rules, orders and regulations which are
administered, interpreted or enforced by a Governmental Authority with
jurisdiction over pollution or protection of the environment (collectively,
"Environmental Laws") necessary for it to carry on its business as now
conducted, and there has occurred no default under any such Environmental
Permit, except for the lack of Environmental Permits and for defaults under
Environmental Permits that, individually or in the aggregate, do not
constitute a Material Adverse Effect with respect to the Company.

(b) The Company is, and has been, in compliance with applicable
Environmental Laws except for instances of possible noncompliance which,
individually or in the aggregate, do not constitute a Material Adverse Effect
with respect to the Company.

(c) There is no suit, action, proceeding or inquiry pending or, to the
Company's knowledge, threatened before any Governmental Authority in which the
Company has been or, with respect to threatened suits, actions and
proceedings, may be named as a defendant (i) for alleged noncompliance
(including by any Predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any hazardous material (as hereinafter
defined), asbestos, polychlorinated biphenyls or oil, whether or not occurring
at, on, under or involving a site owned, leased or operated by the Company, or
(iii) any site or location for which it has been designated as a potentially
responsible party under any United States federal, state, local or
international superfund law, or (iv) any claim, potential claim or express
reservation or responsibility for damages to natural resources, except in the
cases of clauses (i) through (iv) above for any such suits, actions,,
proceedings and inquiries that, individually or in the aggregate, do not
constitute a Material Adverse Effect with respect to the Company.

(d) To the best of the Company's knowledge, during the period of ownership
or operation by the Company of any of its respective current or formerly owned
properties, there have been no underground storage tanks (whether currently
active or not) and no polychlorinated biphenyls in transformers or other
electrical equipment and there have been no releases of Hazardous Material or
of asbestos, polychlorinated biphenyls or oil in, on, under or affecting such
properties or, to the Company's knowledge, any surrounding site, except for
those that, individually or in the aggregate do not constitute a Material
Adverse Effect with respect to the Company. Prior to the period of ownership
or operation by the Company of any of its respective current or formerly owned
properties, to the Company's knowledge, there were no releases of Hazardous
Material or asbestos, polychlorinated biphenyls or oil or other petroleum
products in, on, under or affecting any such property or any surrounding site,
except for those that, individually or in the aggregate, do not constitute a
Material Adverse Effect with respect to the Company. "Hazardous Material"
means any pollutant, contaminant, or hazardous

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<PAGE>

substance within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act or other Environmental Laws.

(e) The Company has provided USF with copies of all written information in
its possession or control pertaining to the matters set forth in paragraphs
(a) through (d) of this Section 3.18, including all documents pertaining to
environmental audits or assessments prepared by or for the Company or any
Governmental Authority.

Section 3.19 Products Liability. Schedule 3.19 discloses all claims made
against the Company or its Predecessors during the past five years for
personal injury due to contamination of water.

Section 3.20 Insurance. The Company has in effect valid and effective
policies of insurance, issued by companies believed by the Company to be sound
and reputable, insuring the Company for losses customarily insured against by
others engaged in similar lines of business. Such policies are reasonable, in
both scope and amount, in light of the risks attendant to the businesses
conducted by the Company. The Company will not have any liability after the
Effective Time for retrospective or retroactive premium adjustments. Schedule
3.20 sets forth a list (by holder) of all insurance policies held by the
Company, indicating the type of coverage, the amount of coverage and the
insuring entity with respect to each such policy. Schedule 3.20 also discloses
the manner in which the Company provides coverage for workers' compensation
claims.

Section 3.21 Employment and Change in Control Agreements.

(a) Schedule 3.21 sets forth a true and complete list of all agreements with
any officer, director or employee of the Company to which the Company is a
party, providing for the terms of his or her employment with the Company and
the terms of his or her severance or other payments upon termination of such
employment (the "Employment Agreements"). The Company has previously furnished
to USF true and complete copies of all Employment Agreements, together with
all amendments thereto (if any). Since the date of the Company Balance Sheet,
the Company has not (i) effected any increase in salary, wage or other
compensation of any kind, whether current or deferred, to any officer,
director, employee, agent, broker or consultant or (ii) made any contribution
to any trust or plan for the benefit of employees except as required by the
terms thereof as now in effect.

(b) Except as set forth in Schedule 3.21 or as disclosed in Company SEC
Reports filed prior to the date of this Agreement, and except as provided for
in this Agreement, the Company is not a party to any oral or written (i)
agreement with any officer or other key employee of the Company (A) the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company of the
nature contemplated by this Agreement or (B) providing for compensation
payments that would not be deductible by the Company for United States federal
income tax purposes, (ii) agreement with any officer or other key employee of
the Company providing any compensation guarantee, or (iii) agreement or
Benefit Plan, any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.

Section 3.22 Labor Relations. The relations of the Company with its
employees are good. Except as disclosed on Schedule 3.22, no employee of the
Company is represented by any union or other labor organization. No
representation election, arbitration proceeding, grievance, labor strike,
dispute, slowdown, stoppage or other labor trouble is pending or, to the
knowledge of the Company, threatened, against, involving, affecting or
potentially affecting the Company. No complaint against the Company is pending
or, to the knowledge of the Company, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any similar
state or local agency, by or on behalf of any employee of the Company.

Section 3.23 Employee Benefit Plans.

(a) The Company has set forth on Schedule 3.23 all employee benefit plans
(as defined in Section 3(3) of ERISA) and all bonus, stock option, stock
purchase, fringe benefits, incentive, deferred compensation,

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<PAGE>

supplemental retirement, post-retirement health or welfare plan severance and
other employee benefit plans and arrangements, written or otherwise,
maintained by the Company or any trade or business (whether or not
incorporated) which is a member or which is under common control with the
Company (an "ERISA Affiliate") within the meaning of Section 414 of the Code,
for the benefit of, or relating to, any current or former employee of the
Company or an ERISA Affiliate (together, the "Company Group") or with respect
to which the Company or an ERISA Affiliate may have liability (together, the
"Benefit Plans").

(b) With respect to each Benefit Plan, the Company has made available to USF
a true and correct copy of (i) the most recent annual report (Form 5500) filed
with the Internal Revenue Service ("IRS"), (ii) such Benefit Plan (or in the
case of an unwritten Benefit Plan, a written summary thereof), (iii) each
trust agreement and group annuity contract, if any, relating to such Benefit
Plan and (iv) the most recent actuarial report or valuation relating to a
Benefit Plan subject to Title IV of ERISA.

(c) Each of the Benefit Plans and all related trusts, insurance contracts
and funds have been created, maintained, funded and administered in all
respects in compliance with all applicable laws and in compliance with the
plan document, trust agreement, insurance policy or other writing creating the
same or applicable thereto. No Benefit Plan is or is proposed to be under
audit or investigation, and no completed audit of any Benefit Plan has
resulted in the imposition of any tax, fine or penalty.

(d) No prohibited transaction (within the meaning of Section 406 of ERISA
and Section 4975 of the Code) with respect to any Benefit Plan exists or has
occurred that could subject any member of the Company Group to any liability
or tax under Part 5 of Title I of ERISA or Section 4975 of the Code. No member
of the Company Group, nor any administrator or fiduciary of any Benefit Plan,
nor any agent of any of the foregoing, has engaged in any transaction or acted
or failed to act in a manner that will subject any member of the Company Group
to any liability for a breach of fiduciary or other duty under ERISA or any
other applicable law. With the exception of the requirements of Section 4980B
of the Code, no post-retirement benefits are provided under any Benefit Plan
that is a welfare benefit plan as described in ERISA Section 3(1).

(e) Schedule 3.23 discloses each Benefit Plan that purports to be a
qualified plan under Section 401(a) of the Code and exempt from United States
federal income tax under Section 501(a) of the Code (a "Qualified Plan"). With
respect to each Qualified Plan, a determination letter (or opinion or
notification letter, if applicable) has been received from the IRS that such
plan is qualified under Section 401(a) of the Code and exempt from United
States federal income tax under Section 501(a) of the Code. No Qualified Plan
has been amended since the date of the most recent such letter applicable to
such Qualified Plan. No member of the Company Group, nor any fiduciary of any
Qualified Plan, nor any agent of any of the foregoing, has taken any action
that would adversely affect the qualified status of a Qualified Plan or the
qualified status of any related trust.

(f) No Benefit Plan is a defined benefit plan within the meaning of Section
3(35) of ERISA (a "Defined Benefit Plan"). No Defined Benefit Plan sponsored
or maintained by any member of the Company Group has been terminated or
partially terminated except as set forth on Schedule 3.23. Each Defined
Benefit Plan identified as terminated on Schedule 3.23 has met the requirement
for standard termination of single-employer plans contained in Section 4041(b)
of ERISA. During the five-year period ending at the Effective Time, no member
of the Company Group has transferred a Defined Benefit Plan to a corporation
that was not, at the time of transfer, related to the transferor as described
in Section 414 of the Code.

(g) No Benefit Plan is a multiemployer plan within the meaning of Section
3(37) or Section 4001(a)(3) of ERISA (a "Multiemployer Plan"). No member of
the Company Group has withdrawn from any Multiemployer Plan or incurred any
withdrawal liability to or under any Multiemployer Plan. No Benefit Plan
covers any employees of any member of the Company Group in any other country
or territory.

(h) With respect to the Benefit Plans, individually and in the aggregate, no
event has occurred, and to the knowledge of the Company, there exists no
condition or set of circumstances in connection with which the

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<PAGE>

Company could be subject to any liability, that is reasonably likely to have a
Material Adverse Effect on the Company, under ERISA, the Code or any other
applicable law.

(i) With respect to the Benefit Plans, individually and in the aggregate,
there are no funded benefit obligations for which contributions have not been
made or properly accrued and there are no unfunded benefit obligations which
have not been accounted for by reserves, or otherwise properly footnoted in
accordance with generally accepted accounting principles, on the financial
statements of the Company.

Section 3.24 Pooling of Interests. To its knowledge, neither the Company nor
any of its Rule 145 Affiliates has taken or agreed to take any action which
would prevent the Merger from being accounted for as a pooling of interests.

Section 3.25 Registration Statement; Proxy Statement/Prospectus. The
information supplied by the Company for inclusion in the registration
statement on Form S-4 pursuant to which shares of USF Common Stock issued in
the Merger will be registered with the SEC (the "Registration Statement"),
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by the Company for inclusion in the proxy statement/prospectus to be
sent to the stockholders of the Company in connection with the meeting of the
Company's stockholders (the "Stockholders' Meeting") to consider this
Agreement and the Merger (the "Proxy Statement") shall not, on the date the
Proxy Statement is first mailed to stockholders of the Company, at the time of
the Stockholders' Meeting and at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made in the
Proxy Statement not false or misleading; or omit to state any material fact
necessary to correct any statement with respect to the Company in any earlier
communication with respect to the solicitation of proxies for the
Stockholders' Meeting which has become false or misleading. If at any time
prior to the Effective Time any event relating to the Company or any of its
Affiliates, officers or directors should become known to the Company which
should be set forth in an amendment or supplement to the Registration
Statement or a supplement to the Proxy Statement, the Company shall promptly
inform USF.

Section 3.26 Certain Fees. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fee, commission or finders' fee in connection with
any of the transactions contemplated hereby.

Section 3.27 Section 203 of the DGCL Not Applicable. Section 203 of the DGCL
applicable to an "interested stockholder" or a "business combination" (as
defined in Section 203) will not apply to the execution, delivery or
performance of this Agreement or the Stockholder Agreements or the
consummation of the Merger or the other transactions contemplated by this
Agreement or by the Stockholder Agreements.

Section 3.28 Disclosure. No representation or warranty of the Company in
this Agreement or any certificate, schedule, statement, document or instrument
furnished or to be furnished to USF pursuant hereto or in connection herewith,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make any statement herein or therein not misleading.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF USF AND SUB

Each of USF and Sub represents and warrants to the Company as follows:

Section 4.01 Organization of USF and Sub.

(a) USF is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite corporate
power to own, lease and operate its property and to carry on its business

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as now being conducted, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect on USF and its
Subsidiaries, taken as a whole.

(b) Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite corporate
power to own, lease and operate its property and to carry on its business as
now being conducted, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect on USF and its
Subsidiaries, taken as a whole.

Section 4.02 Capitalization of USF and Sub.

(a) The authorized capital stock of USF consists of 300,000,000 shares of
Common Stock, $.01 par value, and 3,000,000 shares of Preferred Stock, $.10
par value. As of August 31, 1997, (i) 82,824,608 shares of USF Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable, and (ii) no shares of Preferred Stock were issued and
outstanding. Any share of USF Common Stock, when issued in accordance with
Article II hereof, will be duly authorized and validly issued, and will be
fully paid and nonassessable.

(b) The authorized capital stock of Sub consists of 1,000 shares of common
stock, par value $.01 per share, of which 1,000 shares are issued and
outstanding, all of which are duly authorized and validly issued and are fully
paid and nonassessable, and owned, beneficially and of record, by USF.

Section 4.03 Authority; No Conflict; Required Filings and Consents.

(a) USF and Sub have all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation
of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of USF and Sub. This Agreement
has been duly executed and delivered by USF and Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the valid
and binding obligation of USF and Sub, enforceable in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally and (ii) the availability of
injunctive relief and other equitable remedies.

(b) The execution and delivery of this Agreement by USF and Sub does not,
and the consummation of the transactions contemplated by this Agreement will
not, (i) conflict with, or result in any violation or breach of any provision
of the Certificate of Incorporation, as amended, or the Amended and Restated
Bylaws of USF, or the Certificate of Incorporation or Bylaws of Sub, (ii)
result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material
benefit) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which USF or Sub is a party or by which either of them or either
of their properties or assets may be bound, or (iii) conflict with or violate
any permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to USF or Sub or any of its or
their properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not have a Material Adverse Effect on USF and its Subsidiaries,
taken as a whole.

(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority, is required by or with
respect to USF or any of its Subsidiaries in connection with the

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execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger with the Delaware Secretary of State, (ii) the filing of a Form S-4
Registration Statement with the SEC in accordance with the Securities Act,
(iii) the filing of the Proxy Statement with the SEC in accordance with the
Exchange Act, and (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the laws of any other country.

Section 4.04 SEC Filings; Financial Statements.

(a) USF has filed all forms, reports and documents required to be filed by
USF with the SEC and has previously furnished to the Company a true and
complete copy of (i) its Annual Report on Form 10-K for the year ended March
31, 1997, (ii) its Quarterly Report on Form 10-Q for the quarter ended June
30, 1997, (iii) its definitive proxy statement with respect to its 1997 annual
meeting of stockholders, and (iv) all other reports or other correspondence
filed by it with the SEC pursuant to the Exchange Act since April 1, 1997, in
each case as filed with the SEC (collectively, together with any forms,
reports and documents filed by USF with the SEC after the date hereof until
the Closing, the "USF SEC Reports"). Each such report, when filed, complied in
all material respects with the requirements of the Exchange Act and the
applicable rules and regulations thereunder and, as of their respective dates,
none of such reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.

(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the USF SEC Reports complied as to form in all
material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial
statements) and fairly presented the consolidated financial position of USF
and its Subsidiaries as at the respective dates and the consolidated results
of their operations and cash flows for the periods indicated, except that the
unaudited interim financial statements (i) were or are subject to normal year-
end adjustments which were not or are not expected to be material in amount,
and (ii) do not contain footnote disclosure. The unaudited balance sheet of
USF as of June 30, 1997 is referred to herein as the "USF Balance Sheet."

Section 4.05 Absence of Certain Changes or Events. Since the date of the USF
Balance Sheet, there has not been any Material Adverse Effect with respect to
USF and its Subsidiaries, taken as a whole, and no fact or condition exists or
is contemplated which is reasonably likely to cause a Material Adverse Effect
with respect to USF and its Subsidiaries, taken as a whole, in the future.

Section 4.06 Litigation. Except as set forth in Schedule 4.06 or as
indicated in any of the USF SEC Reports, there are no suits, litigations,
investigations, actions or proceedings of any kind pending or (to the
knowledge of USF) threatened against USF or any Subsidiary, nor (to the
knowledge of USF) is any such matter pending or threatened against any other
person, which, if adversely determined, would have a Material Adverse Effect
with respect to USF.

Section 4.07 Registration Statement; Proxy Statement/Prospectus. The
information supplied by USF for inclusion in the Registration Statement shall
not at the time the Registration Statement is declared effective by the SEC
contain any untrue statement of a material fact or omit to state any material
fact required to be stated in the Registration Statement or necessary in order
to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by USF for inclusion in the Proxy Statement shall not, on the date
the Proxy Statement is first mailed to stockholders of the Company, at the
time of the Stockholders' Meeting and at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
shall be made, is false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements made
in the Proxy Statement not false or misleading; or omit to state any material
fact necessary to correct any statement with respect to USF and its
Subsidiaries in any earlier communication with respect to the solicitation of
proxies for the Stockholders'

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Meeting which has become false or misleading. If at any time prior to the
Effective Time any event relating to USF or any of its Affiliates, officers or
directors should become known to USF which should be set forth in an amendment
or supplement to the Registration Statement or a supplement to the Proxy
Statement, USF shall promptly inform the Company.

Section 4.08 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only
as contemplated by this Agreement.

ARTICLE V

COVENANTS

Section 5.01 No Solicitation From and after the date hereof until the
earlier of the termination of this Agreement in accordance with Article VII
and the Effective Time:

(a) The Company shall not, directly or indirectly, through any officer,
director, employee, representative or agent of the Company, (i) solicit,
initiate, or encourage any inquiries or proposals that constitute, or could
reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of
shares of capital stock (including without limitation by way of a tender
offer) or similar transactions involving the Company, other than the
transactions contemplated by this Agreement (any of the foregoing inquiries or
proposals being referred to in this Agreement as an "Acquisition Proposal"),
(ii) engage in negotiations or discussions concerning, or provide any non-
public information to any person or entity relating to, any Acquisition
Proposal, or (iii) agree to, approve or recommend any Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent the
Company or the Company Board from (A) furnishing non-public information to, or
entering into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written Acquisition Proposal by such
person or entity or recommending an unsolicited bona fide written Acquisition
Proposal to the stockholders of the Company, if and only to the extent that
(1) the Company Board believes in good faith (after consultation with its
financial advisor, and based upon the written opinion of such financial
advisor) that such Acquisition Proposal would, if consummated, result in a
transaction (an "Acquisition Transaction") more favorable to the Company's
stockholders from a financial point of view than the transaction contemplated
by this Agreement (any such more favorable Acquisition Transaction being
referred to in this Agreement as a "Superior Proposal") and the Company Board
determines in good faith, based on written advice of outside legal counsel,
that such action is necessary for the Company to comply with its fiduciary
duties to stockholders under applicable law and (2) prior to furnishing such
non-public information to, or entering into discussions or negotiations with,
such person or entity, the Company Board receives from such person or entity
an executed confidentiality agreement with terms no more favorable to such
party than those contained in the Confidentiality Agreement dated July 30,
1997 between USF and the Company (the "Confidentiality Agreement"); or (B)
taking any position with regard to an Acquisition Proposal pursuant to Rules
14d-9 and 14e-2 under the Exchange Act which is consistent with the advice of
counsel concerning the Company Board's fiduciary duties under applicable law
with respect to a tender offer commenced by a third party (other than by
public announcement alone).

(b) The Company shall notify USF as soon as practicable upon receipt by the
Company (or its advisors) of any Acquisition Proposal or any request for non-
public information in connection with an Acquisition Proposal or for access to
the properties, books or records of the Company by any person or entity. Such
notice shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact.

Section 5.02 Stockholder Approval.

(a) As promptly as practicable following the execution and delivery of this
Agreement, unless this Agreement shall have been previously terminated in
accordance with Article VII, the Company shall submit this

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Agreement and the Merger to its stockholders for approval and adoption at a
meeting of its stockholders called by the Company for such purpose. Unless
this Agreement shall have been previously terminated in accordance with
Article VII and subject to Section 5.01, the Company Board shall recommend
that the stockholders of the Company vote to approve and adopt this Agreement
and the Merger and the other matters to be submitted to the Company's
stockholders in connection therewith and shall use its best efforts to solicit
and secure from its stockholders their approval and adoption of this Agreement
and the Merger.

(b) Unless this Agreement shall have been previously terminated in
accordance with Article VII, USF, as the sole stockholder of Sub, shall, prior
to the Effective Time, consent in writing to the approval and adoption of this
Agreement and the Merger.

Section 5.03 Conduct of the Business of the Company. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement in accordance with Article VII and the Effective Time, the
Company agrees (except to the extent that USF shall otherwise consent in
writing), to carry on its business in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted, to pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform its other obligations when due, in each case consistent with past
practices and policies and, to use all reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, to the end that its
goodwill and ongoing business be substantially unimpaired at the Effective
Time. The Company shall promptly notify USF of any event or occurrence not in
the ordinary course of business of the Company. Except as expressly
contemplated by this Agreement, and not in limitation of the foregoing, during
the aforesaid period the Company shall:

(a) preserve and maintain its corporate existence and all of its rights,
privileges and franchises reasonably necessary or desirable in the normal
conduct of its business, except to the extent contemplated by any transactions
specifically permitted by this Agreement;

(b) except as disclosed on Schedule 3.08, not acquire any stock or other
interest in, nor (except in the ordinary course of business) purchase any
assets of, any corporation, partnership, association or other business
organization or entity or any division thereof (except any stock or assets
distributed to the Company as part of any bankruptcy or other creditor
settlement or pursuant to a plan of reorganization), nor agree to do any of
the foregoing;

(c) not sell, lease, assign, transfer or otherwise dispose of any of its
assets (including, without limitation, patents, trade secrets or licenses),
nor suffer to exist or create any Lien on any of its assets, except as
permitted by this Agreement or in the ordinary course of business and except
that the Company may sell or otherwise dispose of any assets which are
obsolete;

(d) not incur any Indebtedness, other than as a result of borrowings or
drawdowns, the issuance of letters of credit for the account of the Company
and the incurrence of interest, letter of credit reimbursement obligations and
other obligations under the terms of the Credit Facility as currently in
effect, which Indebtedness shall be incurred only for working capital purposes
or acquisitions permitted under subsection (b) above;

(e) not (i) alter, amend or repeal any provision of its Certificate of
Incorporation, as amended, or Amended and Restated Bylaws or its certificate
of incorporation or by-laws (as the case may be), (ii) change the number of
its directors (other than as a result of the death, retirement or resignation
of a director), (iii) form or acquire any subsidiaries not existing as of the
date of this Agreement, (iv) except in the ordinary course conduct of its
business, enter into, modify or terminate any Contracts or agree to do so, (v)
modify or terminate any Employment Agreement, or (vi) declare, pay, commit to
or incur any obligation of any kind for the payment of

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any bonus, additional salary or compensation or retirement, termination,
welfare or severance benefits payable or to become payable to any of its
employees or such other persons, except for such matters as are required
pursuant to the terms of any existing Employment Agreement or Benefit Plan;

(f) maintain its books, accounts and records in the usual, ordinary and
regular manner and in material compliance with all applicable laws;

(g) pay and discharge all Taxes imposed upon it or upon its income or
profits, or upon any property belonging to it, prior to the date on which
penalties attach thereto, except to the extent that the Company is currently
contesting, in good faith and by proper proceedings, the payment of such Taxes
and the Company maintains appropriate reserves with respect thereto;

(h) not settle any tax claim against the Company or any litigation (net of
applicable insurance proceeds) in excess of $10,000 in the aggregate;

(i) use its best efforts to meet its obligations under all Contracts, and
not become in default thereunder;

(j) maintain its business and assets in working repair, order and condition,
reasonable wear and tear excepted, and maintain insurance upon such business
and assets at least comparable in amount and kind to that in effect on the
date hereof;

(k) use its best efforts to maintain its present relationships and goodwill
with suppliers, brokers, manufacturers, representatives, distributors,
customers and others having business relations with it (provided that it may
pursue overdue accounts and otherwise exercise lawful remedies in its
customary fashion);

(l) carry on and operate its business in, and only in, the usual, regular
and ordinary course in substantially the same manner as heretofore conducted
and use its best efforts to cause the representations and warranties of the
Company set forth in this Agreement to be true and correct, in all material
respects, on and as of the Effective Time, subject only to changes in the
ordinary course of business;

(m) not declare, set aside, make or pay any dividends or other distributions
with respect to its capital stock, including, without limitation, the Company
Common Stock, or purchase or redeem any shares of its capital stock,
including, without limitation, the Company Common Stock, or agree to take any
such action;

(n) except as permitted in subsection (b) above, not authorize or make any
capital expenditure if the aggregate of the amount of such capital expenditure
together with the amounts of all other capital expenditures since the date of
this Agreement shall exceed $50,000;

(o) use its best efforts not to violate any law or regulation applicable to
it nor violate any order, injunction or decree applicable to the conduct of
its business; and

(p) not increase the number of shares authorized or issued and outstanding
of its capital stock, including, without limitation, the Company Common Stock,
nor grant or make any pledge, option, warrant, call, commitment, right or
agreement of any character relating to its capital stock, including, without
limitation, the Company Common Stock, nor issue or sell any shares of its
capital stock, including, without limitation, the Company Common Stock, or
securities convertible into such capital stock, or any bonds, promissory
notes, debentures or other corporate securities or become obligated so to sell
or issue any such securities or obligations, except, in any case, issuance of
shares of the Company Common Stock (i) pursuant to the exercise of options,
warrants or other rights outstanding as of the date hereof and referred to in
Section 3.02 and (ii) pursuant to the terms of the Convertible Notes.

Section 5.04 Access to Information. Upon reasonable notice, the Company
shall (i) afford to the officers, employees, accountants, counsel and other
representatives of USF, access, during normal business hours during the period
prior to the earlier of the termination of this Agreement and the Effective
Time, to all its properties,

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books, contracts, commitments, records, officers, employees, accountants,
accountants' work papers, correspondence and affairs, and (ii) cause its
officers and employees to furnish, to USF, Sub and their authorized
representatives, any and all financial, technical and operating data and other
information pertaining to the businesses of the Company as USF or Sub shall
from time to time reasonably request. In addition, without limiting the
generality of the foregoing, the Company will make available to USF and Sub
for examination true and complete copies of all Returns filed by the Company,
together with all available revenue agents' reports, all other reports,
notices and correspondence concerning tax audits or examinations and analyses
of all provisions for reserves or accruals of taxes, including deferred taxes.

Section 5.05 Required Authorizations.

(a) USF, Sub and the Company shall each, as promptly as practicable, take
all reasonable actions necessary to obtain all Required Authorizations (if
any) required to be given or obtained by it, respectively, to permit USF and
Sub, on the one hand, and the Company, on the other, to consummate the
transactions contemplated by this Agreement and to realize the respective
benefits to each party contemplated hereby; provided that USF shall not be
required to take any action to comply with any legal requirement or agree to
the imposition of any order of any Governmental Authority that would (i)
prohibit or restrict the ownership or operation by USF of any portion of the
business or assets of USF (or any of its Subsidiaries) or the Company, (ii)
compel USF (or any of its Subsidiaries) or the Company to dispose of or hold
separate any portion of its or the Company's business or assets, or (iii)
impose any limitation on the ability of USF, the Company or the Surviving
Corporation or any of their respective affiliates or Subsidiaries to own or
operate the business and operations of the Company, and provided further that
the Company shall not incur fees and expenses in excess of $5,000 in the
aggregate in order to obtain any such Required Authorizations described in
clause (ii) of the definition thereof without the prior written consent of
USF.

(b) Without limiting the generality of the foregoing, USF, Sub and the
Company shall each cooperate with the others in filing in a timely manner any
applications, requests, reports, registrations or other documents, including,
without limitation, all reports and documents required to be filed by or under
the Securities Act or the Exchange Act (including, without limitation, the
Registration Statement and the Proxy Statement), with any Governmental
Authority having jurisdiction with respect to the transactions contemplated
hereby and in consulting with and seeking favorable action from any
Governmental Authority.

(c) Without limiting the generality of the foregoing, the Company shall use
its best efforts to obtain all approvals or consents of any person needed in
order that the Contracts continue in full force and effect under the same
terms and conditions currently in effect following the consummation of the
transactions contemplated by the Agreement.

(d) Without limiting the generality of the foregoing, USF shall use its best
efforts to obtain, prior to the Effective Time, the approval for the listing,
subject to official notice of issuance, on the New York Stock Exchange of the
shares of USF Common Stock to be issued pursuant to Article II.

Section 5.06 Financial Statements of the Company.

(a) As soon as practicable but in any event within 45 days after the end of
each calendar month commencing with August 1997, through the Effective Time or
earlier termination of this Agreement in accordance with Article VII, the
Company will deliver to USF unaudited balance sheets of the Company as at the
end of such calendar month and as at the end of the comparative month of the
preceding year, together with unaudited summaries of earnings of the Company
for such calendar month and the comparative calendar month of the preceding
year. As soon as practicable but in any event within 45 days after the end of
each fiscal quarter of the Company, commencing with September 30, 1997, and
within 60 days after the end of the fiscal year ended December 31, 1997, as
the case may be, through the Effective Time or earlier termination of this
Agreement in accordance with Article VII, the Company will deliver to USF
unaudited balance sheets of the Company as at the end of such fiscal quarter
and as at the end of the comparative fiscal quarter of the preceding year,
together

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with the related unaudited statements of income and cash flows for the fiscal
quarters then ended. All such financial statements of the Company shall
present fairly, in all material respects, the financial position, results of
operations and cash flows of the Company, as at or for the periods indicated
(and, in the case of all such financial statements which are interim financial
statements, shall contain all adjustments necessary so to present fairly) and
shall be prepared in accordance with generally accepted accounting principles
(other than to omit certain footnotes which might be required thereby and
subject, in the case of interim financial statements, to normal year-end
adjustments) consistent with past practice, except as otherwise indicated in
such statements. All such financial statements of the Company shall be
certified, on behalf of the Company, by the President and Chief Financial
Officer of the Company.

(b) The Company will deliver to USF financial statements (including related
notes thereto) at December 31, 1997 and for the year then ended, prepared in
accordance with generally accepted accounting principles applied on a
consistent basis with prior periods, together with the report thereon of
Arthur Andersen LLP (the "1997 Financial Statements"), within 10 days of their
availability. USF shall have 10 days to notify the Company in writing of any
disagreement with the 1997 Financial Statements, which notice shall state with
reasonable specificity the reasons for any disagreement and identify the items
and amounts in dispute. If any disagreement concerning the 1997 Financial
Statements is not resolved by USF and the Company within 10 days following the
receipt by USF of the 1997 Financial Statements, USF and the Company shall
promptly engage the New York office of Coopers & Lybrand LLP on standard terms
and conditions for a matter of such nature. The engagement agreement with the
independent accountants shall require the independent accountants to make
their determination with respect to the items in dispute within 10 days
following the receipt by USF of the 1997 Financial Statements. The resolution
by the independent accountants of any dispute concerning the 1997 Financial
Statements shall be final, binding and conclusive upon the parties.

Section 5.07 Public Announcements. Neither USF, Sub nor the Company shall
make any press release or other written public statement concerning the
matters covered by this Agreement without the approval of the other parties
hereto, except as required by law or applicable regulation, and each shall in
all events use its best efforts to permit such other parties an opportunity to
review and comment upon any such release or statement prior to dissemination.

Section 5.08 Benefit Plans. Except as required by law or the terms of any
Benefit Plan, from the date hereof until the Effective Time or the earlier
termination of this Agreement in accordance with Article VII, no award or
grant under the Benefit Plans shall be made without the consent of USF; it
being understood that no options, warrants or other rights to acquire
securities of the Company shall be granted by the Company. Except as required
by law, no amendment to (other than revisions required to comply with the Code
or ERISA), or termination of, any of the Benefit Plans shall be made without
the consent of USF.

Section 5.09 Tax-Free Reorganization. USF and the Company shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code.

Section 5.10 Pooling Accounting. USF and the Company shall each use its best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests. The Company shall use its best
efforts to cause its Rule 145 Affiliates not to take any action that would
adversely affect the ability of USF to account for the business combination to
be effected by the Merger as a pooling of interests.

Section 5.11 Affiliate Agreements. Within two weeks following the date of
this Agreement, the Company will provide USF with a list of those persons who
are, in the Company's reasonable judgment, "affiliates" of it within the
meaning of Rule 145 promulgated under the Securities Act ("Rule 145") (each
such person who is an "affiliate" within the meaning of Rule 145 is referred
to as a "Rule 145 Affiliate"). The Company shall provide USF with such
information and documents as USF shall reasonably request for purposes of
reviewing such list and the Company shall notify USF in writing regarding any
change in the identity of its Rule 145 Affiliates prior to the Closing Date.
The Company shall use its best efforts to deliver or cause to be delivered to
USF prior to the Effective Time from each of its Rule 145 Affiliates, an
executed Affiliate Agreement, in

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substantially the form attached hereto as Exhibit B (each an "Affiliate
Agreement"). USF shall be entitled to place appropriate legends on the
certificates evidencing any USF Common Stock to be received by such Rule 145
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the USF Common Stock,
consistent with the terms of the Affiliate Agreements.

Section 5.12 Representations, Covenants and Conditions; Further
Assurances. Subject to the terms and conditions of this Agreement, each of the
parties agrees to use all reasonable efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement; provided that USF
shall not be required to take any action to comply with any legal requirement
or agree to the imposition of any order of any Governmental Authority that
would (i) prohibit or restrict the ownership or operation by USF of any
portion of the business or assets of USF (or any of its Subsidiaries) or the
Company, (ii) compel USF (or any of its Subsidiaries) or the Company to
dispose of or hold separate any portion of its or the Company's business or
assets, or (iii) impose any limitation on the ability of USF or the Surviving
Corporation or any of their respective affiliates or Subsidiaries to own or
operate the business and operations of the Company, and further provided that
the Company shall not incur fees and expenses in excess of $5,000 in the
aggregate in order to take any such action or do any such thing without the
prior written consent of USF. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of the
Company, the proper officers and directors of each party to this Agreement
shall take all such necessary action to effectuate the same.

ARTICLE VI

CONDITIONS TO MERGER

Section 6.01 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the
following conditions:

(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock.

(b) Required Authorizations. All Required Authorizations shall have been
obtained.

(c) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.

(d) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or limiting or
restricting the Company's or USF's conduct or operation of the business of the
Company after the Merger shall have been issued, nor shall there be any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal.

(e) NYSE. The shares of USF Common Stock to be issued in the Merger shall
have been listed on the New York Stock Exchange.

Section 6.02 Additional Conditions to Obligations of USF and Sub. The
obligations of USF and Sub to effect the Merger are subject to the
satisfaction of each of the following additional conditions, any of which may
be waived in writing exclusively by USF and Sub:

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(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties are made as of an earlier date, which
representations and warranties shall be true and correct in all material
respects at and as of such date) as of the Closing Date as though made on and
as of the Closing Date, in each case except for changes contemplated by this
Agreement, and USF shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer of the
Company to such effect.

(b) Performance of Obligations of The Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and USF shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.

(c) Tax Opinion. USF shall have received a written opinion from Kirkpatrick
& Lockhart LLP, counsel to USF, to the effect that the Merger will be treated
for Federal income tax purposes as a tax-free reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, counsel may
rely upon representations and certificates of USF, Sub and the Company.

(d) Opinion of Counsel to The Company. USF shall have been furnished an
opinion of Lev, Berlin & Dale, P.C., counsel to the Company, dated the date of
the Effective Time, in form satisfactory to USF.

(e) Pooling Letter. USF shall be satisfied that the business combination to
be effected by the Merger will qualify as a pooling of interests transaction
under generally accepted accounting principles.

(f) Affiliate Agreements. USF shall have received from each of the Company's
Rule 145 Affiliates an executed copy of an Affiliate Agreement substantially
in the form of Exhibit B hereto.

(g) Option Holder Agreements. USF shall have received from each holder of an
Employee or Director Stock Option an agreement consenting to the conversion of
such options into options to purchase USF Common Stock as prescribed in
Section 2.07.

(h) Convertible Notes. USF shall have received from each holder of a
Convertible Note an agreement consenting to the amendment thereof to the
effect provided in Section 2.10.

(i) Savoy Asset Purchase Agreement. The Savoy Asset Purchase Agreement shall
have been amended to provide that if the 32,000 shares of Company Common Stock
reserved for issuance pursuant thereto shall not have been issued prior to the
Closing Date, the right to receive such shares shall be converted into the
right to receive that number of shares of USF Common Stock that would have
been issued in the Merger in respect of such shares of Company Common Stock
had such shares been issued prior to the Closing Date.

(j) No Rights to Options. USF shall be satisfied that no rights are
outstanding requiring the issuance to Mr. Lou Betti of options to purchase or
otherwise acquire Company Common Stock.

(k) Employment Agreements. Messrs. Levy and West shall have entered into
employment agreements in a form satisfactory to USF.

(l) Resignation of Directors. USF shall have received letters of
resignation, effective as of the Effective Time, executed and tendered by each
of the existing directors of the Company, or, to the extent such resignations
are not obtained, such other evidence, satisfactory to USF, that such
directors shall have been duly and lawfully removed (without cost or other
liability to the Company other than pursuant to any agreement or other
arrangements with such directors existing and in effect as of the date hereof)
effective as of the Effective Time.

Section 6.03 Additional Conditions to Obligations of The Company. The
obligation of the Company to effect the Merger is subject to the satisfaction
of each of the following additional conditions, any of which may be waived, in
writing, exclusively by the Company:

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(a) Representations and Warranties. The representations and warranties of
USF and Sub set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties are made as of an earlier date, which
representations and warranties shall be true and correct in all material
respects at and as of such date) as of the Closing Date as though made on and
as of the Closing Date, in each case except for changes contemplated by this
Agreement, and the Company shall have received a certificate signed on behalf
of USF by the chief executive officer and the chief financial officer of the
Company to such effect.

(b) Performance Of Obligations of USF and Sub. USF and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of USF by the chief
executive officer and the chief financial officer of USF to such effect.

(c) Tax Opinion. The Company shall have received the opinion of Kirkpatrick
& Lockhart LLP, counsel to USF, to the effect that the Merger will be treated
for Federal income tax purposes as a tax-free reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, counsel may
rely upon representations and certificates of USF, Sub and the Company.

ARTICLE VII

TERMINATION AND AMENDMENT

Section 7.01 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval by the stockholders of the Company, by written notice by the
terminating party to the other party under the circumstances set forth below:

(a) by mutual written consent of USF and the Company; or

(b) by either USF or the Company if the Merger shall not have been
consummated by March 31, 1998 (provided that the right to terminate this
Agreement under this Section 7.01(b) shall not be available to any party whose
failure to fulfill any material obligation under this Agreement has been a
cause of or has resulted in the failure of the Merger to occur on or before
such date); or

(c) by USF or the Company, if (i) the other party has breached any
representation or warranty contained in this Agreement (except where such
breach would not have a Material Adverse Effect on the party having made such
representation or warranty and its Subsidiaries taken as a whole and would not
have a material adverse effect upon the transactions contemplated by this
Agreement), or (ii) there has been a breach of a covenant or agreement set
forth in this Agreement on the part of the other party, which shall not have
been cured within ten business days following receipt by the breaching party
of written notice of such breach from the other party (other than those set
forth in Section 5.01, as to which there shall be no cure period); or

(d) by either USF or the Company if a court of competent jurisdiction or
other Governmental Authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger; or

(e) by either USF or the Company, if, at the Stockholders' Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of the Company in favor of this Agreement and the Merger shall
not have been obtained; or

(f) by USF, if, after the date hereof, (i) the Company shall provide
information to or engage in negotiations regarding any Acquisition Proposal
with any person other than USF or its Affiliates, (ii) the Company Board shall
have withdrawn or modified its recommendation of this Agreement or the Merger
or shall have resolved to

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<PAGE>

do any of the foregoing; (iii) the Company Board shall have recommended to the
stockholders of the Company an Acquisition Transaction other than one made by
USF or an Affiliate of USF; or (iv) a tender offer or exchange offer for 50%
or more of the outstanding shares of Company Common Stock is commenced other
than by USF or an Affiliate of USF.

Section 7.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of USF, the
Company, Sub or their respective officers, directors, stockholders or
Affiliates, except as set forth in Section 7.03 and further except that
nothing herein shall relieve any party from liability for any willful breach
of this Agreement.

Section 7.03 Fees and Expenses.

(a) Except as set forth in this Section 7.03, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the Merger
is consummated; provided, however, that USF and the Company shall share
equally all fees and expenses, other than attorneys' fees, incurred in
relation to the printing and filing of the Proxy Statement (including any
related preliminary materials) and the Registration Statement (including
financial statements and exhibits) and any amendments or supplements.

(b) The Company shall reimburse USF for out-of-pocket expenses incurred by
USF relating to the transactions contemplated by this Agreement prior to
termination (including, but not limited to, fees and expenses of USF's
counsel, accountants and financial advisors), upon the termination of this
Agreement by USF pursuant to Section 7.01(c) or Section 7.01(f), or by USF or
the Company pursuant to Section 7.01(e), and USF shall reimburse the Company
for out-of-pocket expenses incurred by the Company relating to the
transactions contemplated by this Agreement prior to termination (including,
but not limited to, fees and expenses of the Company's counsel, accountants
and financial advisors), upon the termination of this Agreement by the Company
pursuant to Section 7.01(c).

(c) (i) The Company shall pay USF a termination fee of $1,250,000 upon the
earliest to occur of the termination of this Agreement by USF or the Company
pursuant to Section 7.01(e) or by USF pursuant to Section 7.01(f)(ii), (iii)
or (iv).

(ii) The Company shall pay USF a termination fee of $750,000 upon the
termination of this Agreement by USF pursuant to Section 7.01(f)(i).

(d) The expenses and fees, if applicable, payable pursuant to Section
7.03(b) and 7.03(c) shall be paid within one business day after the first to
occur of any of the events described in Section 7.03(b) or 7.03(c).

Section 7.04 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of the Company, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of all of the parties
hereto.

Section 7.05 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto by the other
parties hereto and (iii) waive compliance with any of the agreements or
conditions contained herein for their benefit. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party.

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<PAGE>

ARTICLE VIII

MISCELLANEOUS

Section 8.01 Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Article II, Sections 7.02, 7.03,
the last sentence of Section 7.04 and Article VIII, and the agreements of the
Affiliates of the Company delivered pursuant to Section 5.12. The
Confidentiality Agreement shall survive the execution and delivery of this
Agreement.

Section 8.02 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

(a) if to USF, to:

United States Filter Corporation
40-004 Cook Street
Palm Desert, CA 92211
Attention: Chairman
Fax: (760) 346-4024

with a copy to:

United States Filter Corporation
40-004 Cook Street
Palm Desert, CA 92211
Attention: Damian C. Georgino, Esq.
Fax: (760) 346-4024

(b) if to Sub, to:

U.S. Filter/Consumer Products, Inc.
225 Second Street, S.E.
Cedar Rapids, Iowa 52401
Attention: Randall C. Easton
Fax: (319) 298-1148

with a copy to:

U.S. Filter/Consumer Products, Inc.
225 Second Street, S.E.
Cedar Rapids, Iowa 52401
Attention: Caroline D. Giddings, Esq.
Fax: (319) 298-1148

Puro Water Group, Inc.
56-24 58th Street
Maspeth, New York 11378
Attention: Jack C. West, President
Fax: (718) 894-8357

with a copy to:

Lev, Berlin & Dale, P.C.
535 Connecticut Avenue
Norwalk, CT 06854-1700
Attention: Eric J. Dale, Esq.
Fax: (203) 854-1652

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<PAGE>

Section 8.03 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to
be followed by the words "without limitation." The phrases "the date of this
Agreement", "the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to October 8, 1997.

Section 8.04 Knowledge. All references in this Agreement or any certificate
to knowledge of any person shall mean the knowledge of any officer or officers
of such person (but only the officer executing any such certificate, in the
case of a certificate) and shall reflect due inquiry by such officer or
officers in connection specifically with respect to the statement made to such
knowledge.

Section 8.05 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.

Section 8.06 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) constitutes
the entire agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and are not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.

Section 8.07 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.

Section 8.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.

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<PAGE>

In Witness Whereof, USF, Sub and the Company have caused this Agreement to
be signed by their respective officers thereunto, duly authorized as of the
date first written above.

PURO WATER GROUP, INC.

By: /s/ Jack C. West
-------------------------
Title: President
-------------------------

UNITED STATES FILTER CORPORATION

By: /s/ Randall C. Easton
-------------------------
Title: Sr. Vice President
-------------------------

USF/PW ACQUISITION CORPORATION

By: /s/ Randall C. Easton
-------------------------
Title: President
-------------------------

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<PAGE>

ANNEX 1

DEFINITIONS

For purposes of this Agreement (to which this ANNEX 1 is attached and of
which this ANNEX 1 forms a part), the following terms shall have the meanings
set forth below:

"1997 Financial Statements" shall have the meaning assigned thereto in
Section 5.06(b) of this Agreement.

"Acquisition Proposal" shall have the meaning assigned thereto in Section
5.01(a) of this Agreement.

"Acquisition Transaction" shall have the meaning assigned thereto in Section
5.01(a) of this Agreement.

"Affiliate" of the Company shall mean any "affiliate" of the Company as
defined in Rule 12b-2 under the Exchange Act and, without limiting the
generality of the foregoing, shall include any person that beneficially owns
(within the meaning of Rule 13d-3 under the Exchange Act) 5% or more of the
Company Common Stock, but shall not include USF or Sub.

"Affiliate Agreement" shall have the meaning assigned thereto in Section
5.11 of this Agreement.

"Agreement" shall mean this Agreement and Plan of Merger.

"Benefit Plans" shall have the meaning assigned thereto in Section 3.23(a)
of this Agreement.

"Certificate of Incorporation" shall mean the Amended and Restated
Certificate of Incorporation, substantially in the form of Exhibit A to this
Agreement.

"Certificate of Merger" shall have the meaning assigned thereto in Section
1.01 of this Agreement.

"Closing" shall have the meaning assigned thereto in Section 1.02 of this
Agreement.

"Closing Date" shall have the meaning assigned thereto in Section 1.02 of
this Agreement.

"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.

"Company" shall mean Puro Water Group, Inc., a Delaware corporation.

"Company Balance Sheet" shall have the meaning assigned thereto in Section
3.06(b) of this Agreement.

"Company Board" shall have the meaning assigned thereto in Section 3.05(a)
of this Agreement.

"Company Common Stock" shall have the meaning assigned thereto in the
preamble to this Agreement.

"Company Group" shall have the meaning assigned thereto in Section 3.23(a)
of this Agreement.

"Company SEC Reports" shall have the meaning assigned thereto in Section
3.06(a) of this Agreement.

"Confidentiality Agreement" shall have the meaning assigned thereto in
Section 5.01(a) of this Agreement.

"Constituent Corporations" shall have the meaning assigned thereto in the
preamble to this Agreement.

"Continuing Corporation" shall have the meaning assigned thereto in the
preamble to this Agreement.

"Contracts" shall have the meaning assigned thereto in Section 3.14 of this
Agreement.

"Convertible Notes" shall have the meaning assigned thereto in Section 2.10
of this Agreement.

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<PAGE>

"Credit Facility" shall refer to the Master Note dated September 13, 1996 by
and between the Company and European American Bank, the Commercial Note dated
September 13, 1996 by and between the Company and European American Bank and
the General Security Agreement dated July 31, 1996 by and between the Company
and European American Bank.

"Defined Benefit Plan" shall have the meaning assigned thereto in Section
3.23(f) of this Agreement.

"DGCL" shall mean the Delaware General Corporation Law, as amended.

"Director Stock Option" shall have the meaning assigned thereto in Section
2.07(b) of this Agreement.

"Director Stock Option Plan" shall have the meaning assigned thereto in
Section 2.07(b) of this Agreement.

"Dixon Trusts" shall have the meaning assigned thereto in the Preamble to
this Agreement.

"Employee Stock Option" shall have the meaning assigned thereto in Section
2.07(a) of this Agreement.

"Employee Stock Option Plan" shall have the meaning assigned thereto in
Section 2.07(a) of this Agreement.

"Effective Time" shall have the meaning assigned thereto in Section 1.01 of
this Agreement.

"Employment Agreements" shall have the meaning assigned thereto in Section
3.21(a) of this Agreement.

"Environmental Laws" shall have the meaning assigned thereto in Section
3.18(a) of this Agreement.

"Environmental Permits" shall have the meaning assigned thereto in Section
3.18(a) of this Agreement.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.

"ERISA Affiliate" shall have the meaning assigned thereto in Section 3.23(a)
of this Agreement.

"Exchange Act" shall have the meaning assigned thereto in Section 3.05(c) of
this Agreement.

"Exchange Agent" shall have the meaning assigned thereto in Section 2.02 of
this Agreement.

"Governmental Authority" means any nation or government, any state, province
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of a government
with jurisdiction over the matter in question.

"Governmental Approval" means any permit, license, authorization, consent,
approval, waiver, exception, variance, order, or exemption issued by any
Governmental Authority.

"Governmental Filings" means any plans, filings, reports, notifications, or
other submissions required to be made to any Governmental Authority.

"Hazardous Material" shall have the meaning assigned thereto in Section
3.18(d) of this Agreement.

"Indebtedness" shall mean, with respect to the Company, at any date, and
regardless of whether the indebtedness or obligation was created before, on or
after the date hereof (without duplication): (i) all indebtedness for borrowed
money, or other obligations or liabilities for borrowed money (including,
without limitation, letters of credit) of the Company, whether matured or
unmatured, liquidated or unliquidated, direct or contingent, joint or several,
and whether now existing or hereafter created; (ii) all indebtedness for
borrowed money secured by any mortgage, lien, pledge, charge or encumbrance
upon any property or asset of the Company; (iii) all indebtedness, obligations
or liabilities of others of the type described in the preceding clauses

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<PAGE>

(i) and (ii) which the Company has guaranteed, assumed or is in any other way
liable for; and (iv) all amendments, renewals, extensions or refundings of any
such indebtedness, obligation or liability.

"Intellectual Property" shall mean (i) all patents, patent rights, patent
applications, trademarks, trademark applications, trade names and copyrights
used by, owned by or registered in the name of the Company or in which the
Company has any rights and (ii) all processes and formulas that the Company
uses or has the right to use which the Company believes are not within the
general knowledge of the industry and which are material to the conduct of the
business of the Company as it is now being conducted.

"IRS" shall mean the Internal Revenue Service.

"Liens" shall mean all mortgages, deeds of trust, pledges, liens, leases,
security interests, security agreements, conditional sales agreements, notes,
easements, restrictions, encroachments and other charges or encumbrances of
any kind whatsoever.

"Material Adverse Effect" shall have the meaning assigned thereto in Section
3.01 of this Agreement.

"Merger" shall have the meaning assigned thereto in the preamble to this
Agreement.

"Multiemployer Plan" shall have the meaning assigned thereto in Section
3.23(g) of this Agreement.

"Non-Employee Option" shall have the meaning assigned to it in Section 2.08
in this Agreement.

"Per Share Purchase Price" shall have the meaning assigned thereto in
Section 2.01(b) of this Agreement.

"Personal Property" shall mean all assets owned by the Company which are
personal property, other than the Intellectual Property.

"Personal Property Leases" shall mean all leases, subleases, licenses or
other agreements under which the Company is lessee, sublessee or licensee of
any Personal Property and under which (i) the remaining monthly rental
obligations are at least $1,500 or (ii) the remaining rental obligations are
at least $10,000 and the remaining term is at least two years.

"Predecessor" shall mean (i) a predecessor entity which has been merged with
the Company, or (ii) the predecessor owner or operator of any of the property
or assets owned or operated by the Company, where the Company is liable
(whether by reason of the contractual assumption of liabilities,
indemnification obligations or by other operation of law) for the actions or
inactions of such predecessor.

"Proxy Statement" shall mean the definitive proxy statement to be
distributed to the Company's stockholders in connection with the Merger
(including all reports and other information incorporated therein by
reference) and the prospectus of USF included in the Registration Statement.

"Qualified Plan" shall have the meaning assigned thereto in Section 3.23(e)
of this Agreement.

"Qualified Stock Options" shall have the meaning assigned thereto in Section
2.08 of this Agreement.

"Real Property" shall mean all real property owned by the Company,
including, without limitation, any property for which the Company hold any
right to acquire an ownership interest in such real property.

"Real Property Leases" shall mean all leases or subleases under which the
Company is lessee or sublessee of any Real Property, and under which (i) the
remaining rental obligations are at least $15,000 or (ii) the remaining rental
obligations are at least $10,000 per year and the remaining term is at least
five years.

"Registration Statement" shall mean the registration statement to be filed
with the SEC covering the shares of USF Common Stock to be issued pursuant to
this Agreement.

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<PAGE>

"Required Authorizations" shall mean, with respect to any person, (i) all
consents, authorizations, approvals or other orders or actions of, or filings
or registrations with, any Federal, state, local or international governmental
authority or agency and (ii) all notices, permits, approvals, consents,
qualifications, waivers or other actions of third parties under any lease,
note, mortgage, indenture, agreement or other instrument (or, in the case of
the Company, under any Contract, Employment Agreement or any Governmental
Approval) or under any other third-party franchise, license or permit, other
than any such consents, authorizations, approvals, permits, qualifications,
waivers, orders, registrations, filings, applications or other actions, the
absence of which could not have a Material Adverse Effect with respect to such
person.

"Returns" shall have the meaning assigned thereto in Section 3.09(a) of this
Agreement.

"Rule 145" shall have the meaning assigned thereto in Section 5.11 of this
Agreement.

"Rule 145 Affiliate" shall have the meaning assigned thereto in Section 5.11
of this Agreement.

"Savoy Asset Purchase Agreement" shall mean the Asset Purchase Agreement
dated as of April 14, 1997 by and between the Company, Savoy Refreshment
Service, Inc., d/b/a Dial Refreshment Services and Lou Betti.

"SEC" shall have the meaning assigned thereto in Section 3.05(c) of this
Agreement.

"Securities Act" shall have the meaning assigned thereto in Section 2.06 of
this Agreement.

"Stockholder Agreements" shall have the meaning assigned thereto in the
preamble to this Agreement.

"Stockholders" shall have the meaning assigned thereto in the preamble to
this Agreement.

"Stockholders' Meeting" shall have the meaning assigned thereto in Section
3.25 of this Agreement.

"Sub" shall mean USF/PW Acquisition Corporation, a Delaware corporation and
a wholly owned subsidiary of USF.

"Subsidiary" shall mean, with respect to any party, any corporation, other
organization, whether incorporated or unincorporated, of which (i) such party
or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries.

"Superior Proposal" shall have the meaning assigned thereto in Section
5.01(a) of this Agreement.

"Tax" or, collectively, "Taxes," shall mean any and all Federal, state,
local and international taxes, assessments and other governmental charges,
duties, impositions and liabilities including taxes based upon or measured by
gross receipts, income profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements
or arrangements with any other person with respect to such amounts and
including any liability for taxes of a predecessor entity.

"Underwriter's Warrant" shall have the meaning assigned thereto in Section
2.09 of this Agreement.

"USF" shall mean United States Filter Corporation, a Delaware corporation.

"USF Balance Sheet" shall have the meaning assigned thereto in Section
4.04(b) of this Agreement.

"USF Common Stock" shall have the meaning assigned thereto in Section
2.01(b) of this Agreement.

"USF SEC Reports" shall have the meaning assigned thereto in Section 4.04(a)
of this Agreement.

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<PAGE>

EXHIBIT A

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

PURO WATER GROUP, INC.
(a Delaware corporation)

(Duly Adopted in Accordance with Section 245
of the General Corporation Law of Delaware)

First: The name of the Corporation is Puro Water Group, Inc. (the
"Corporation"). The original Certificate of Incorporation for the Corporation
was filed with the Secretary of State on January 7, 1994 under the name Puro
Corporation of America.

Second: The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is Corporation Service
Company.

Third: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

Fourth: The total number of shares of stock which the Corporation shall have
the authority to issue is 1,000 shares of Common Stock, with a par value of
$.01 per share.

Fifth: The board of directors shall have the power to adopt, amend or repeal
the bylaws of the Corporation at any meeting at which a quorum is present by
the affirmative vote of a majority of the whole board of directors. Election
of directors need not be by written ballot. Any director may be removed at any
time with or without cause, and the vacancy resulting from such removal shall
be filled, by vote of a majority of the stockholders at a meeting called for
that purpose or by unanimous consent in writing of the stockholders.

Sixth: No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.

A-37
<PAGE>

EXHIBIT B

[Form of Puro Water Group, Inc. Affiliate Agreement]

, 1997

United States Filter Corporation
40-004 Cook Street
Palm Desert, CA 92211

Ladies and Gentlemen:

The undersigned has been advised that as of the date hereof the undersigned
may be deemed to be an "affiliate" of Puro Water Group, Inc., a Delaware
corporation ("Company"), as the term "affiliate" is (i) defined for purposes
of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the "Rules
and Regulations") of the United States Securities and Exchange Commission (the
"Commission") under the United States Securities Act of 1933, as amended (the
"Act"), and/or (ii) used in and for purposes of Accounting Series Releases 130
and 135, as amended, of the Commission. Pursuant to the terms of the Agreement
and Plan of Merger, dated as of October 8, 1997 (the "Agreement"), among
United States Filter Corporation, a Delaware corporation (the "Company"),
USF/PW Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of the Company ("Sub") and the Company, at the Effective Time (as
defined in the Agreement) the Company will be merged with and into Sub (the
"Merger"), and the Company will become a whole owned subsidiary of the
Company.

As a result of the Merger, the undersigned may receive shares of Common
Stock, par value $.01 per share ("USF Common Stock"), of the Company. The
undersigned would receive such shares in exchange for shares of Common Stock,
par value $.0063 per share, of the Company owned by the undersigned.

The undersigned hereby represents and warrants to, and covenants with, the
Company that in the event the undersigned receives any USF Common Stock in the
Merger:

(A) The undersigned shall not make any sale, transfer or other
disposition of the USF Common Stock in violation of the Act or the Rules
and Regulations.

(B) The undersigned has carefully read this letter and discussed its
requirements and other applicable limitations upon the undersigned's
ability to sell, transfer or otherwise dispose of the USF Common Stock, to
the extent the undersigned has felt it necessary, with the undersigned's
counsel or counsel for the Company.

(C) The undersigned has been advised that the issuance of shares of USF
Common Stock to the undersigned in the Merger has been registered under the
Act by a Registration Statement on Form S-4. However, the undersigned has
also been advised that because (i) at the time of the Merger's submission
for a vote of the stockholders of the Company the undersigned may be deemed
an affiliate of the Company and (ii) the distribution by the undersigned of
the USF Common Stock has not been registered under the Act, the undersigned
may not sell, transfer or otherwise dispose of USF Common Stock issued to
the undersigned in the Merger unless (a) such sale, transfer or other
disposition has been registered under the Act, (b) such sale, transfer or
other disposition is made in conformity with the volume and other
limitations imposed by Rule 145 under the Act, or (c) in the opinion of
counsel reasonably acceptable to the Company, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.

A-38
<PAGE>

(D) The undersigned understands that the Company will be under no
obligation to register the sale, transfer or other disposition of the USF
Common Stock by the undersigned or on the undersigned's behalf under the
Act or to take any other action necessary in order to make compliance with
an exemption from such registration available.

(E) The undersigned understands that stop transfer instructions will be
given to the Company's transfer agent with respect to the USF Common Stock
owned by the undersigned and that there may be placed on the certificates
for the USF Common Stock issued to the undersigned, or any substitutions
therefor, a legend stating in substance:

"The shares represented by this certificate were issued in a
transaction to which Rule 145 under the United States
Securities Act of 1933 applies. The shares represented by this
certificate may only be transferred in accordance with the
terms of a letter agreement dated , 1997, a copy of which
agreement is on file at the principal offices of United States
Filter Corporation."

(F) The undersigned also understands that unless the transfer by the
undersigned of the undersigned's USF Common Stock has been registered under
the Act or is a sale made in conformity with the provisions of Rule 145
under the Act, the Company reserves the right, in its sole discretion, to
place the following legend on the certificates issued to any transferee of
shares from the undersigned:

"The shares represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") and
were acquired from a person who received such shares in a
transaction to which Rule 145 under the Act applies. The
shares have been acquired by the holder not with a view to, or
for resale in connection with, any distribution thereof within
the meaning of the Act and may not be offered, sold, pledged
or otherwise transferred except in accordance with an
exemption from the registration requirements of the Act."

It is understood and agreed that the legend set forth in paragraph E or F
above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to the Company (i) a copy of a
letter from the staff of the Commission, or an opinion of counsel, in form and
substance reasonably satisfactory to the Company to the effect that such
legend is not required for purposes of the Act or (ii) reasonably satisfactory
evidence or representations that the shares represented by such certificates
are being or have been transferred in a transaction made in conformity with
the provisions of Rule 145.

The undersigned further represents and warrants to, and covenants with, the
Company that the undersigned did not, within the 30 days prior to the
Effective Time (as defined in the Agreement), sell, transfer or otherwise
dispose of any shares of the capital stock of either the Company or the
Company held by the undersigned, and that the undersigned will not sell,
transfer or otherwise dispose of the USF Common Stock received by the
undersigned in the Merger or other shares of the capital stock of the Company
until after such time as results covering at least 30 days of combined
operations of the Company and the Company have been published by the Company
within the meaning of Section 201.01 of the Commission's Codification of
Financial Reporting Policies.

Very truly yours,

Acknowledged this day of , 1997.

UNITED STATES FILTER CORPORATION

By:
-----------------------------
Name:
Title:

A-39
<PAGE>

ANNEX B

STOCKHOLDER AGREEMENT

This Stockholder Agreement, dated as of , 1997, by and between UNITED
STATES FILTER CORPORATION, a Delaware corporation ("USF"), and the stockholder
listed on the signature page hereof (the "Stockholder");

WITNESSETH:

Whereas, the Stockholder, as of the date hereof, is the owner of the number
of shares of Common Stock, par value $.0063 per share (the "Common Stock"), of
PURO WATER GROUP, INC., a Delaware corporation (the "Company"), set forth
below the name of the Stockholder on the signature page hereof (the "Shares");

Whereas, in reliance upon the execution and delivery of this Agreement, USF
and a wholly-owned subsidiary of USF ("Sub") will enter into an Agreement and
Plan of Merger, dated as of the date hereof (the "Merger Agreement"), with
Puro which provides, among other things, that upon the terms and subject to
the conditions thereof Sub will be merged with and into Puro, and Puro will
become a wholly-owned subsidiary of USF (the "Merger"); and

Whereas, to induce USF to enter into the Merger Agreement and to incur the
obligations set forth therein, the Stockholder is entering into this Agreement
pursuant to which the Stockholder agrees to vote in favor of the Merger and
certain other matters as set forth herein, and to make certain agreements with
respect to the Shares upon the terms and conditions set forth herein;

Now, Therefore, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:

Section 1. Voting of Shares; Proxy. The Stockholder agrees that until the
earlier of the Effective Time (as defined in the Merger Agreement) and the
date on which the Merger Agreement is terminated in accordance with Article
VII thereof (the earliest thereof being hereinafter referred to as the
"Expiration Date"), the Stockholder shall vote all Shares owned by the
Stockholder at any meeting of Puro's stockholders (whether annual or special
and whether or not an adjourned meeting), or, if applicable, take action by
written consent (i) for adoption and approval of the Merger Agreement and in
favor of the Merger and any other transaction contemplated by the Merger
Agreement as such Merger Agreement may be modified or amended from time to
time and (ii) against any action, omission or agreement which would or could
impede or interfere with, or have the effect of discouraging, the Merger,
including, without limitation, any Acquisition Transaction (as defined in the
Merger Agreement) other than the Merger. Any such vote shall be cast or
consent shall be given in accordance with such procedures relating thereto as
shall ensure that it is duly counted for purposes of determining that a quorum
is present and for purposes of recording the results of such vote or consent.

At the request of USF, the Stockholder, in furtherance of the transactions
contemplated hereby and by the Merger Agreement, and in order to secure the
performance by the Stockholder of his or her duties under this Agreement,
shall promptly execute, in accordance with the provisions of Section 212 of
the Delaware General Corporation Law, and deliver to USF, an irrevocable
proxy, substantially in the form of Annex A hereto, and irrevocably appoint
USF or its designees, with full power of substitution, his attorney and proxy
to vote, or, if applicable, to give consent with respect to, all of the Shares
owned by the Stockholder in respect of any of the matters set forth in, and in
accordance with the provisions of, clauses (i) and (ii) above of Section 1(a).
The Stockholder acknowledges that the proxy executed and delivered by him or
her shall be coupled with an interest, shall constitute, among other things,
an inducement for USF to enter into the Merger Agreement, shall be irrevocable
and shall not be terminated by operation of law upon the occurrence of any
event, including, without

B-1
<PAGE>

limitation, the death or incapacity of the Stockholder. Notwithstanding any
provision contained in such proxy, such proxy shall terminate upon the
Expiration Date.

Section 2. Covenants of the Stockholder. The Stockholder covenants and
agrees for the benefit of USF that, until the Expiration Date, he or she will:

(a) not sell, transfer, pledge, hypothecate, encumber, assign, tender or
otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
hypothecation, encumbrance, assignment, tender or other disposition of, any
of the Shares owned by him or her or any interest therein;

(b) other than as expressly contemplated by this Agreement, not grant any
powers of attorney or proxies or consents in respect of any of the Shares
owned by him or her, deposit any of the Shares owned by him or her into a
voting trust, enter into a voting agreement with respect to any of the
Shares owned by him or her or otherwise restrict the ability of the holder
of any of the Shares owned by him or her freely to exercise all voting
rights with respect thereto;

(c) not, and he or she shall direct and use his best efforts to cause his
or her agents and representatives not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of
any Acquisition Proposal or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions
with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition
Proposal. The Stockholder shall immediately cease and cause to be
terminated any existing activities, including discussions or negotiations
with any parties, conducted heretofore with respect to any of the foregoing
and will take the necessary steps to inform his or her agents and
representatives of the obligations undertaken in this Section 2(c). The
Stockholder shall notify USF immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with,
him or her;

(d) not take any action whatsoever that, based on advice from USF's or
Puro's independent auditors would or could prevent the Merger from
qualifying for "pooling of interests" accounting treatment; and

(e) use his or her best efforts to take, or cause to be taken, all
action, and do, or cause to be done, all things necessary or advisable in
order to consummate and make effective the transactions contemplated by
this Agreement and the Merger Agreement, including, without limitation, to
enter into an affiliate's letter agreement substantially in the form of
Exhibit B to the Merger Agreement.

Section 3. Covenants of USF. USF covenants and agrees for the benefit of the
Stockholder that (a) immediately upon execution of this Agreement, USF shall
enter into the Merger Agreement, and (b) until the Expiration Date, it shall
use all reasonable efforts to take, or cause to be taken, all action, and do,
or cause to be done, all things necessary or advisable in order to consummate
and make effective the transactions contemplated by this Agreement and the
Merger Agreement, consistent with the terms and conditions of each such
agreement; provided, however, that nothing in this Section 3 or any other
provision of this Agreement is intended, nor shall it be construed, to limit
or in any way restrict USF's right or ability to exercise any of its rights
under the Merger Agreement.

Section 4. Representations and Warranties of the Stockholder. The
Stockholder represents and warrants to USF that: (a) the execution, delivery
and performance by the Stockholder of this Agreement will not conflict with,
require a consent, waiver or approval under, or result in a breach of or
default under, any of the terms of any contract, commitment or other
obligation (written or oral) to which the Stockholder is bound; (b) this
Agreement has been duly executed and delivered by the Stockholder and
constitutes a legal, valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms; (c) the
Stockholder is the sole owner of the Shares and the Shares represent all
shares of Common Stock owned by the Stockholder at the date hereof, and the
Stockholder does not have any right to acquire, nor is he or she the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of, any other shares of any class of capital
stock of Puro or any securities convertible into or

B-2
<PAGE>

exchangeable or exercisable for any shares of any class of capital stock of
Puro (other than shares subject to options granted by Puro); (d) the
Stockholder has full right, power and authority to execute and deliver this
Agreement and to perform his or her obligations hereunder, subject only to any
interest which the spouse of the Stockholder may have in the Shares owned by
the Stockholder, such spouse having executed a Stockholder Agreement in his or
her own right; and (e) the Stockholder owns the Shares free and clear of all
liens, claims, pledges, charges, proxies, restrictions, encumbrances, voting
trusts and voting agreements of any nature whatsoever other than as provided
by this Agreement. The representations and warranties contained herein shall
be made as of the date hereof and as of each day from the date hereof through
and including the Effective Time (as defined in the Merger Agreement).

Section 5. Adjustments; Additional Shares. In the event (a) of any stock
dividend, stock split, merger (other than the Merger), recapitalization,
reclassification, combination, exchange of shares or the like of the capital
stock of Puro on, of or affecting the Shares or (b) that the Stockholder shall
become the beneficial owner of any additional shares of Common Stock or other
securities entitling the holder thereof to vote or give consent with respect
to the matters set forth in Section 1, then the terms of this Agreement shall
apply to the shares of capital stock or other instruments or documents held by
the Stockholder immediately following the effectiveness of the events
described in clause (a) or the Stockholder becoming the beneficial owner
thereof as described in clause (b), as though, in either case, they were
Shares hereunder.

Section 6. Legend. Concurrently with the execution of this Agreement, the
Stockholder is surrendering to Puro the certificates representing the Shares,
and is hereby requesting that the following legend be placed on the
certificates representing such Shares and shall request that such legend
remain thereon until the Expiration Date:

"The shares of capital stock represented by this certificate are
subject to a Stockholder Agreement, dated as of , 1997,
between and United States Filter Corporation, which, among
other things, restricts the sale or transfer of such shares
except in accordance therewith and contains certain voting
restrictions to which such shares are subject."

In the event that the Stockholder shall become the beneficial owner of any
additional shares of Common Stock or other securities entitling the holder
thereof to vote or give consent with respect to the matters set forth in
Section 1, the Stockholder shall, upon acquiring such beneficial ownership,
surrender to Puro the certificates representing such shares or securities and
request that the foregoing legend be placed on such certificates and remain
thereon until the Expiration Date. In the event that USF requests that an
irrevocable proxy be executed and delivered by the Stockholder to it pursuant
to Section 1, the Stockholder shall promptly surrender to Puro the
certificates representing the Shares covered by such proxy and cause the
foregoing legend to be revised to replace at the end of such legend the words
"and contains certain voting restrictions to which such shares are subject"
with the following:

", and such shares are also subject to an irrevocable proxy
provided under Section 212 of the Delaware General Corporation
Law"

The Stockholder shall provide USF with satisfactory evidence of his or her
compliance with this Section 6 on or prior to the date five business days
after the execution hereof or of the request relating to the Stockholder's
proxy, as the case may be.

Section 7. Specific Performance. The Stockholder acknowledges that the
agreements contained in this Agreement are an integral part of the
transactions contemplated by the Merger Agreement, and that, without these
agreements, USF would not enter into the Merger Agreement, and acknowledges
that damages would be an inadequate remedy for any breach by him or her of the
provisions of this Agreement. Accordingly, the Stockholder and USF each agree
that the obligations of the parties hereunder shall be specifically
enforceable and neither party shall take any action to impede the other from
seeking to enforce such right of specific performance.

B-3
<PAGE>

Section 8. Notices. All notices, requests, claims, demands and other
communications hereunder shall be effective upon receipt (or refusal of
receipt), shall be in writing and shall be delivered in person, by telecopy or
telefacsimile, by telegram, by next-day courier service, or by mail
(registered or certified mail, postage prepaid, return receipt requested) to
the Stockholder at the address listed on the signature page hereof, and to USF
c/o U.S. Filter/Consumer Products, Inc., 225 Second Street, S.E., Cedar
Rapids, Iowa 52401, Attention: Caroline D. Giddings, (319) 298-1154, or to
such other address or telecopy number as any party may have furnished to the
other in writing in accordance herewith.

Section 9. Binding Effect; Survival. Upon execution and delivery of this
Agreement by USF, this Agreement shall become effective as to the Stockholder
at the time the Stockholder executes and delivers this Agreement. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, personal representatives, successors and assigns.

Section 10. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State.

Section 11. Counterparts. This Agreement may be executed in two
counterparts, both of which shall be an original and both of which together
shall constitute one and the same agreement.

Section 12. Effect of Headings. The section headings herein are for
convenience of reference only and shall not affect the construction hereof.

Section 13. Additional Agreements; Further Assurance. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement. The
Stockholder will provide USF with all documents which may reasonably be
requested by USF and will take reasonable steps to enable USF to obtain all
rights and benefits provided it hereunder.

Section 14. Amendment; Waiver. No amendment or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and signed by USF and the Stockholder, in the case of an amendment, or
by the party which is the beneficiary of any such provision, in the case of a
waiver or a consent to depart therefrom.

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto all as of the day and year first above written.

United States Filter Corporation

/s/ Randall C. Easton
By __________________________________
Name: Randall C. Easton
Title: Senior Vice President

STOCKHOLDER

Name:
Address:
Number of Shares:

B-4
<PAGE>

ANNEX A

[FORM OF PROXY]

IRREVOCABLE PROXY

In order to secure the performance of the duties of the undersigned pursuant
to the Stockholder Agreement, dated as of , 1997 (the "Stockholder
Agreement"), between the undersigned and United States Filter Corporation, a
Delaware corporation, a copy of such agreement being attached hereto and
incorporated by reference herein, the undersigned hereby irrevocably appoints
Damian C. Georgino and Caroline D. Giddings, and each of them, the attorneys,
agents and proxies, with full power of substitution in each of them, for the
undersigned and in the name, place and stead of the undersigned, in respect of
any of the matters set forth in clauses (i) and (ii) of Section 1 of the
Stockholder Agreement, to vote or, if applicable, to give written consent, in
accordance with the provisions of said Section 1 and otherwise act (consistent
with the terms of the Stockholder Agreement) with respect to all shares of
Common Stock, par value $.0063 per share (the "Shares"), of Puro Water Group,
Inc., a Delaware corporation (the "Company"), whether now owned or hereafter
acquired, which the undersigned is or may be entitled to vote at any meeting
of Puro held after the date hereof, whether annual or special and whether or
not an adjourned meeting, or, if applicable, to give written consent with
respect thereto. THIS PROXY IS COUPLED WITH AN INTEREST, SHALL BE IRREVOCABLE
AND BINDING ON ANY SUCCESSOR IN INTEREST OF THE UNDERSIGNED AND SHALL NOT BE
TERMINATED BY OPERATION OF LAW UPON THE OCCURRENCE OF ANY EVENT, INCLUDING,
WITHOUT LIMITATION, THE DEATH OR INCAPACITY OF THE UNDERSIGNED. This Proxy
shall operate to revoke any prior proxy as to the Shares heretofore granted by
the undersigned. This Proxy shall terminate on the Expiration Date (as defined
in the Stockholder Agreement). This Proxy has been executed in accordance with
Section 212 of the Delaware General Corporation Law.

Dated: ______________________________

B-5
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Certificate of Incorporation and the By-laws of Puro provide for the
indemnification of directors and officers to the fullest extent permitted by
the General Corporation Law of the State of Delaware, the state of
incorporation of Puro.

Section 145 of the General Corporation Law of the State of Delaware
authorizes indemnification when a person is made a party or is threatened to
be made a party to any proceeding by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation or is or was
serving as a director, officer, employee or agent of another enterprise, at
the request of the corporation, and if such person acted in good faith and in
a manner reasonably believed by him or her to be in, or not opposed to, the
best interests of the corporation. With respect to any criminal proceeding,
such person must have had no reasonable cause to believe that his or her
conduct was unlawful. If it is determined that the conduct of such person
meets these standards, he or she may be indemnified for expenses incurred
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such
proceeding.

If such a proceeding is brought by or in the right of the corporation (i.e.,
a derivative suit), such person may be indemnified against expenses actually
and reasonably incurred if he or she acted in good faith and in a manner
reasonably believed by him or her to be in, or not opposed to, the best
interests of the corporation. There can be no indemnification with respect to
any matter as to which such person is adjudged to be liable to the
corporation; however, a court may, even in such case, allow such
indemnification to such person for such expenses as the court deems proper.

Where such person is successful in any such proceeding, he or she is
entitled to be indemnified against expenses actually and reasonably incurred
by him or her. In all other cases, indemnification is made by the corporation
upon determination by it that indemnification of such person is proper because
such person has met the applicable standard of conduct.

Puro maintains an errors and omissions liability policy for the benefit of
its officers and directors, which may cover certain liabilities of such
individuals to Puro.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits. The following exhibits are filed as part of this registration
statement:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.01 Agreement and Plan of Merger dated as of October 8, 1997 by and among
United States Filter Corporation, USF/PW Acquisition Corporation and
Puro Water Group, Inc. (previously filed; attached as Annex A to the
Proxy Statement/Prospectus)
2.02 Form of Stockholder Agreement dated as of October 8, 1997 between
United States Filter Corporation and certain stockholders of Puro
Water Group, Inc., together with schedule (previously filed; attached
as Annex B to the Proxy Statement/Prospectus)
3.01 Restated Certificate of Incorporation of United States Filter
Corporation, as amended (incorporated by reference to Exhibit 3.0 to
Form 10-K dated March 31, 1997 and Exhibit 3.01 to Form 10-Q dated
September 30, 1997 (File No. 1-10728)
3.02 Restated Bylaws of United States Filter Corporation (incorporated by
reference to Exhibit 3.1 to Form 10-K dated March 31, 1997 (File No.
1-10728))
4.01 Amended and Restated Multicurrency Credit Agreement dated as of
October 20, 1997 by and among United States Filter Corporation and
various lenders, with BankBoston, N.A. as Managing Agent (previously
filed)
5.01 Opinion of Kirkpatrick & Lockhart LLP as to the legality of the
securities being registered (filed
herewith)
</TABLE>

II-1
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
8.01 Opinion of Kirkpatrick & Lockhart LLP as to certain tax matters (to be
filed by amendment)
21.01 Schedule of Subsidiaries (incorporated by reference to Exhibit 21.0 to
Form 10-K dated March 31, 1997 (File No. 1-10728))
23.01 Consent of Kirkpatrick & Lockhart LLP (included in Exhibit 5.01)
23.02 Consent of KPMG Peat Marwick LLP (filed herewith)
23.03 Consent of Arthur Andersen LLP (filed herewith)
24.01 Powers of Attorney (previously filed)
99.01 Form of Proxy to be distributed to the stockholders of Puro Water
Group, Inc. (filed herewith)
</TABLE>

ITEM 22. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.

Provided, however, that paragraphs (i) and (ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post- effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.

(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering

II-2
<PAGE>

of securities subject to Rule 415, will be filed as a part of an amendment
to the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.

(8) To supply by means of a post-effective amendment all information
concerning a transaction, and Puro being acquired involved therein, that
was not the subject of and included in the registration statement when it
became effective.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.

II-3
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF PALM DESERT, STATE OF CALIFORNIA, ON
NOVEMBER 24, 1997.

United States Filter Corporation

/s/ Richard J. Heckmann
By: _________________________________
RICHARD J. HECKMANN CHAIRMAN OF
THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.

SIGNATURE CAPACITY DATE

Chairman of the
/s/ Richard J. Heckmann Board, President November 24,
- ------------------------------------- and Chief Executive 1997
RICHARD J. HECKMANN Officer (Principal
Executive Officer)
and a Director

Senior Vice
/s/ Kevin L. Spence President and Chief November 24,
- ------------------------------------- Financial Officer 1997
KEVIN L. SPENCE (Principal
Financial and
Accounting Officer)

Executive Vice
* President and a November 24,
- ------------------------------------- Director 1997
MICHAEL J. REARDON

Executive Vice
* President--Process November 24,
- ------------------------------------- Water and a 1997
NICHOLAS C. MEMMO Director

Director
* November 24,
- ------------------------------------- 1997
JAMES E. CLARK

Director
* November 24,
- ------------------------------------- 1997
JOHN L. DIEDERICH

<PAGE>

SIGNATURE CAPACITY DATE

Director
* November 24,
- ------------------------------------- 1997
ROBERT S. HILLAS

Director
* November 24,
- ------------------------------------- 1997
ARTHUR B. LAFFER

Director
* November 24,
- ------------------------------------- 1997
ARDEN E. MOORE

Director
* November 24,
- ------------------------------------- 1997
ALFRED E. OSBORNE, JR.

Director
* November 24,
- ------------------------------------- 1997
J. DANFORTH QUAYLE

Director
* November 24,
- ------------------------------------- 1997
C. HOWARD WILKINS, JR.

*/s/ Damian C. Georgino November 24,
- ------------------------------------- 1997

DAMIAN C. GEORGINO

AS ATTORNEY-IN-FACT
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
5.01 Opinion of Kirkpatrick & Lockhart LLP as to the legality
of the securities being registered (filed herewith)
8.01 Opinion of Kirkpatrick & Lockhart LLP as to certain tax
matters (filed herewith)
23.01 Consent of Kirkpatrick & Lockhart LLP (included in
Exhibit 5.01)
23.02 Consent of KPMG Peat Marwick LLP (filed herewith)
23.03 Consent of Arthur Andersen LLP (filed herewith)
99.01 Form of Proxy to be distributed to the stockholders of
Puro Water Group, Inc. (filed herewith)
</TABLE>

<PAGE>

EXHIBIT 5.01

[KIRKPATRICK & LOCKHART LLP LETTERHEAD]

November 25, 1997

United States Filter Corporation

40-004 Cook Street

Palm Desert, California 92211

Ladies and Gentlemen:

We have acted as counsel to United States Filter Corporation, a Delaware
corporation (the "Company") in connection with the Registration Statement on
Form S-4 (the "Registration Statement"), filed by the Company on November 6,
1997 and amended on November 25, 1997 (No. 333-39711) with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, with
respect to an aggregate of up to 973,273 shares (the "Shares") of the
Company's Common Stock, par value $.01 per share, that may be issued by the
Company pursuant to the Agreement and Plan of Merger dated as of October 8,
1997 among the Company, USF/PW Acquisition Corporation and Puro Water Group,
Inc.

We are familiar with the Registration Statement and have reviewed the
Company's Certificate of Incorporation and By-laws, each as amended and
restated. We have also examined such other public and corporate documents,
certificates, instruments and corporate records, and such questions of law, as
we have deemed necessary for purposes of expressing an opinion on the matters
hereinafter set forth. In all examinations of documents, instruments and other
papers, we have assumed the genuineness of all signatures on original and
certified documents and the conformity to original and certified documents of
all copies submitted to us as conformed, photostatic or other copies.

On the basis of the foregoing, we are of the opinion that the Shares, when
issued as contemplated in the Registration Statement, will be validly issued,
fully paid and non-assessable.

We consent to the filing of this opinion as Exhibit 5.01 to the Registration
Statement and to the use of our name in the Prospectus forming a part thereof
under the caption "Legal Matters."

Yours truly,

/s/ Kirkpatrick & Lockhart LLP

Kirkpatrick & Lockhart LLP

<PAGE>

EXHIBIT 8.01

[KIRKPATRICK & LOCKHART LLP LETTERHEAD]

November 24, 1997

United States Filter Corporation

40-004 Cook Street

Palm Desert, CA 92211

Gentlemen:

We have acted as counsel to United States Filter Corporation, a Delaware
corporation ("USF"), in connection with the proposed merger (the "Merger") of
USF/PW Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of USF ("Merger Sub") with and into Puro Water Group, Inc., a
Delaware corporation ("Puro"). You have requested our opinion regarding the
United States federal income tax consequences of the Merger.

In rendering our opinion, we have reviewed the Agreement and Plan of Merger,
dated as of October 8, 1997, by and among USF, Merger Sub and Puro, relating
to the Merger (the "Merger Agreement"), the Proxy Statement to stockholders of
Puro and the Prospectus of USF relating to the Merger (the "Proxy
Statement/Prospectus"), and such other materials as we have deemed necessary
or appropriate as a basis for our opinion.

In rendering our opinion, we have assumed that the Merger will be
consummated in accordance with the Merger Agreement and that the Proxy
Statement/Prospectus accurately reflects the material facts of the Merger and
those surrounding USF, Merger Sub and Puro. In addition, as to any facts
material to this opinion which we did not independently establish or verify,
we have relied upon the facts contained in the statements and representations
of officers and other representatives of USF, Merger Sub, Puro, certain
stockholders of Puro and others.

In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, pertinent judicial authorities, rulings of the Internal Revenue
Service, and such other authorities as we have considered relevant.

Based upon the foregoing, it is our opinion that, under present law, for
United States federal income tax purposes, the Merger (pursuant to which the
shares of common stock of Puro held by the stockholders of Puro will be
converted into shares of the common stock of USF) will be treated as a
reorganization within the meaning of Section 368(a) of the Code. We further
confirm, based on the foregoing, our opinion as set forth (subject to
qualifications and limitations also set forth) under the heading "Certain
Federal Income Tax Consequences" in the Proxy Statement/Prospectus. Other than
as expressly set forth above, we express no opinion as to the United States
federal, state, local, foreign or other tax consequences of the Merger.

Any material changes in the facts from those set forth or assumed herein or
in the Proxy Statement/Prospectus may affect the conclusions stated herein.

<PAGE>

United States Filter Corporation

November 24, 1997

Page 2

We hereby consent to the filing of this opinion as an exhibit to the Form S-
4 and to the reference to us under the caption "The Merger--Certain Federal
Income Tax Consequences" in the Proxy Statement/Prospectus forming part of the
Form S-4 and any amendments thereto. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.

Yours truly,

Kirkpatrick & Lockhart LLP

<PAGE>

EXHIBIT 23.02

INDEPENDENT AUDITORS' CONSENT

To the Board of Directors and Shareholders
United States Filter Corporation:

We consent to the use of our report incorporated by reference herein and the
reference to our firm under the heading "Independent Certified Public
Accountants" in the Prospectus.

/s/ KPMG PEAT MARWICK LLP
- -------------------------

KPMG PEAT MARWICK LLP

Orange County, California

November 24, 1997

<PAGE>

EXHIBIT 23.03

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report dated April 11, 1997 and to all references to our Firm included in or
made a part of this Form S-4, Registration Statement File No. 333-39711.

/s/ ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

New York, New York

November 24, 1997

<PAGE>

EXHIBIT 99.1

PROXY--PURO WATER GROUP, INC.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PURO WATER GROUP, INC.
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 30, 1997

The undersigned holder of shares of Common Stock, par value $.0063 per share
("Puro Common Stock") of Puro Water Group, Inc., a Delaware corporation
("Puro") hereby appoints Scott Levy and Jack C. West, individually, with full
power of substitution in each of them, as proxy or proxies to represent the
undersigned and vote all shares of Puro Common Stock which the undersigned
would be entitled to vote if personally present and voting at the Special
Meeting of Stockholders of Puro to be held on December 30, 1997 at 10:00 a.m.,
local time, at Puro's principal executive offices at 56-24 58th Street,
Maspeth, New York and at any adjournment or postponement thereof, upon all
matters coming before such meeting. Said proxies are directed to vote as set
forth below and, in their discretion, upon such other matters as may properly
come before the meeting.

Approval and adoption of the Agreement and Plan of Merger, dated as of
October 8, 1997 (the "Merger Agreement"), among United States Filter
Corporation, a Delaware corporation ("U.S. Filter"), USF/PW Acquisition
Corporation, a newly formed Delaware corporation and a wholly owned subsidiary
of U.S. Filter ("Sub"), and Puro, and the transactions contemplated thereby,
including the merger of Sub with and into Puro, pursuant to which, among other
things, Puro will become a wholly owned subsidiary of U.S. Filter and each
outstanding share of Puro Common Stock will be converted into the right to
receive a fraction of a share of the Common Stock of U.S. Filter, par value
$.01 per share ("U.S. Filter Common Stock"), determined by dividing $7.20 by
the average market price of the U.S. Filter Common Stock during the 10
consecutive trading dates beginning on the 16th trading day prior to the Puro
Special Meeting of Stockholders.

The Board of Directors recommends a vote FOR approval and adoption of the
Merger Agreement and the transactions contemplated thereby.
<PAGE>

1. Approval and Adoption of Merger Agreement (see opposite side)

FOR [_] AGAINST [_] ABSTAIN [_]

2. Other Business. The proxies shall be authorized to vote on any other
business properly brought before the meeting and any adjournments or
postponements thereof in accordance with their discretion.

[X] Please mark your votes as in this example

This proxy is solicited on behalf of the Board of Directors of Puro Water
Group, Inc. When properly executed, this proxy will be voted as directed herein
by the undersigned stockholder. If no direction is given, this proxy will be
voted FOR approval and adoption of the Merger Agreement and the transactions
contemplated thereby. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the meeting.

Date: , 1997
--------------------

-------------------------------
Signature(s)

Please sign exactly as your
name appears hereon. When
signing as executor, trustee,
etc., or as officer of a cor-
poration, give full title as
such. For joint accounts,
please obtain both signatures.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PAID ENVELOPE.