SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
x Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
UNITED STATES FILTER CORPORATION
------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
x No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously
Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
Preliminary Copy
[LOGO OF U.S. FILTER]
To U.S. Filter Stockholders:
In the past, the Company conducted stockholder meetings in Boston, Los
Angeles and Palm Desert in an effort to improve the stockholders' access to
corporate management. This year, we will meet in San Diego, where we have
significant stockholdings. You are cordially invited to attend the 1997 Annual
Meeting of U.S. Filte significant stockholdings stockholders. We will meet on
Thursday, August 14, 1997 at 9:00 a.m., Pacific Daylight Time, at the Inn at
Rancho Santa Fe, 5951 Linea del Cielo, Rancho Santa Fe, California 92067.
I urge you to vote your shares by proxy, even if you plan to attend the
meeting. After you read this proxy statement, indicate on the proxy card the way
you want to have your shares voted. Then date, sign and mail the proxy card in
the postage-paid envelope that is provided.
We hope to see you at the meeting.
Sincerely,
Richard J. Heckmann
Chairman of the Board,
Chief Executive Officer and
President
July 7, 1997
<PAGE>
Preliminary Copy
UNITED STATES FILTER CORPORATION
40-004 COOK STREET
PALM DESERT, CALIFORNIA 92211
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 14, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of United States Filter Corporation (the "Company") will be held at
the Inn at Rancho Santa Fe, 5951 Linea del Cielo, Rancho Santa Fe, California
92067, on Thursday, August 14, 1997 at 9:00 a.m., Pacific Daylight Time, for the
following purposes, as more fully described in the attached Proxy Statement:
1. To elect three directors, each for a term of three years;
2. To approve the Company's 1991 Employee Stock Option Plan, as
amended and restated;
3. To increase the number of authorized shares of the Company's
Common Stock from 150,000,000 to 300,000,000;
4. To ratify the appointment of KPMG Peat Marwick LLP as
independent certified public accountants for the Company; and
5. To consider any other matters that may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on June 23, 1997 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting or at any adjournment thereof. A complete list of the
stockholders entitled to vote at the Annual Meeting will be open to the
examination of any stockholder during ordinary business hours for a period of at
least ten days prior to the Annual Meeting at the executive offices of the
Company, 40-004 Cook Street, Palm Desert, California 92211.
You are cordially invited to attend the Annual Meeting in person. In order
to ensure your representation at the meeting, however, please promptly complete,
date, sign and return the enclosed proxy in the accompanying envelope. If you
should decide to attend the Annual Meeting and vote your shares in person, you
may revoke your proxy at that time.
By Order of the Board of Directors
Damian C. Georgino
Secretary
July 7, 1997
<PAGE>
Preliminary Copy
UNITED STATES FILTER CORPORATION
40-004 COOK STREET
PALM DESERT, CALIFORNIA 92211
--------------------------------------
PROXY STATEMENT
July 7, 1997
---------------------------------------
PROXY SOLICITATION AND VOTING INFORMATION
The accompanying proxy is solicited by the Board of Directors of United
States Filter Corporation (the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Thursday, August 14, 1997 at
the Inn at Rancho Santa Fe in San Diego, California at 9:00 a.m., Pacific
Daylight Time and at any adjournment thereof. The proxies will be voted if
properly signed, received by the Secretary of the Company prior to the close of
voting at the Annual Meeting and not revoked. If no direction is given in the
proxy, it will be voted "FOR" (i) the election of the directors nominated by the
Board of Directors; (ii) the proposal to approve the Company's 1991 Employee
Stock Option Plan, as amended and restated; (iii) the proposal to increase the
number of authorized shares of the Company's Common Stock from 150,000,000 to
300,000,000 (the "Authorized Capital Amendment"); and (iv) the ratification of
the appointment of KPMG Peat Marwick LLP as the Company's independent certified
public accountants. With respect to any other item of business that may come
before the Annual Meeting, the proxy holders will vote in accordance with their
best judgment.
A stockholder who has returned a proxy may revoke it at any time before it
is voted at the Annual Meeting by delivering a revised proxy, by voting by
ballot at the Annual Meeting, or by delivering a written notice withdrawing the
proxy to the Secretary of the Company. This notice may be mailed to the
Secretary at the address set forth above or may be given to the judge of
election at the Annual Meeting.
This Proxy Statement, together with the accompanying proxy, is first being
mailed to stockholders on or about July 7, 1997.
Holders of record of Common Stock at the close of business on June 23, 1997
are entitled to vote at the Annual Meeting. On that date, 80,239,254 shares of
Common Stock were outstanding. The presence, in person or by proxy, of
stockholders entitled to cast at least a majority of the votes entitled to be
cast by all stockholders will constitute a quorum for the transaction of
business at the Annual Meeting. Stockholders are entitled to cast one vote per
share on each matter presented for consideration and action at the Annual
Meeting.
Abstentions may be specified as to all proposals to be brought before the
Annual Meeting, other than the election of directors. Under the rules of the New
York Stock Exchange, Inc. (the "NYSE"), brokers holding shares for customers
have authority to vote on certain matters when they have not received
instructions from the beneficial owners, and do not have such authority as to
certain other matters (so-called "broker non-votes"). The NYSE has advised the
Company that member firms of the NYSE may vote without specific instruction from
beneficial owners on the election of directors and on each of the proposals to
be brought before the Annual Meeting.
Approval of the Authorized Capital Amendment will require the affirmative
vote of the holders of at least a majority of the outstanding shares of Common
Stock. Accordingly, both abstentions and broker non-votes would have the effect
of a negative vote with respect to the Authorized Capital Amendment. Approval of
the other
<PAGE>
proposals to be brought before the Annual Meeting (not including the election of
directors) will require the affirmative vote of at least a majority in voting
interest of the stockholders present in person or by proxy at the Annual Meeting
and entitled to vote thereon. As to those proposals, if a stockholder abstains
from voting certain shares it will have the effect of a negative vote, but if a
broker indicates that it does not have authority to vote certain shares, those
shares will not be considered present and entitled to vote with respect to that
proposal and therefore will have no effect on the outcome of the vote. With
regard to the election of directors, votes may be cast in favor or withheld. The
three persons receiving the highest number of favorable votes will be elected as
directors of the Company.
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of ten members, divided into
three classes. The terms of office of the three classes of directors (Class I,
Class II and Class III) end in successive years. The terms of the Class I
directors expire this year and their successors are to be elected at the Annual
Meeting for a three-year term expiring in 2000. The terms of the Class II and
Class III directors do not expire until 1998 and 1999, respectively.
The Board of Directors has nominated John L. Diederich, Nicholas C. Memmo
and C. Howard Wilkins, Jr. for election as Class I directors. The accompanying
proxy will be voted for the election of these nominees, unless authority to vote
for one or more nominees is withheld. In the event that any of the nominees is
unable or unwilling to serve as a director for any reason (which is not
anticipated), the proxy will be voted for the election of any substitute nominee
designated by the Board of Directors.
All directors were previously elected by the Company's stockholders,
except for Mr. Quayle and Mr. Memmo. Mr. Quayle was elected as a Class II
director by the Board of Directors in February 1996 to fill a vacancy. Mr.
Memmo has been nominated to stand for election as a director for the first
time at the Annual Meeting to fill the seat currently held by Tim L. Traff.
Mr. Traff is not standing for re-election at the Annual Meeting.
CLASS I DIRECTORS--NOMINEES FOR TERMS TO EXPIRE IN 2000
JOHN L. DIEDERICH Mr. Diederich was Executive Vice
Age 60 President--Chairman's Counsel for Aluminum Company
Director since 1993 of America ("Alcoa") from August 1991 until
January 1997. Prior to assuming that position, he
Member of the had been Group Vice President--Alcoa Metals and
Compensation Committee Chemicals since 1986 and a Vice President of Alcoa
since 1982. Mr. Diederich received a B.S. degree
in engineering from the University of Illinois and
later received an M.B.A. from the University of
Southern California and an M.S. degree from the
Massachusetts Institute of Technology. Mr.
Diederich is a director of Continental Mills, Inc.
and a trustee of Shadyside Hospital.
NICHOLAS C. MEMMO Mr. Memmo was appointed Executive Vice
Age 35 President-Process Water of the Company on July 1,
1995, having previously served as Senior Vice
President and General Manager of U.S.
Filter/Ionpure Inc. since March 7, 1994. He had
previously been Senior Vice President-Sales &
Marketing since December 8, 1992. Mr. Memmo was
employed from July 1984 to September 1988 with
Hercules Incorporated ("Hercules"), a New York
Stock Exchange specialty chemical and aerospace
company, in sales, marketing and distribution
positions. Mr. Memmo received a B.S. degree in
chemical engineering from Drexel University.
Between his employment with Hercules and the
Company, he completed an M.B.A. program at the
John E. Anderson Graduate School of Management at
UCLA.
2
<PAGE>
C. HOWARD WILKINS, JR. Mr. Wilkins served as the United States Ambassador
Age 59 to the Netherlands from June 1989 to July 1992.
Director since 1992 Prior to being Ambassador and thereafter, Mr.
Wilkins has been Chairman of the Board of Maverick
Member of the Restaurant Corporation, which owns and operates
Compensation Committee restaurants under franchise agreements, and
Maverick Development Corporation. He was Vice
Chairman of Pizza Hut, Inc. until 1975. From 1981
to 1983 Mr. Wilkins served as a director of U.S.
Synthetic Fuels Corporation.
CLASS II DIRECTORS--PRESENT TERM EXPIRES IN 1998
J. DANFORTH QUAYLE Mr. Quayle was the forty-fourth Vice President of
Age 50 the United States. In 1976, Mr. Quayle was elected
Director since 1996 to Congress and in 1980 to the United States
Senate, being re-elected in 1986 and serving until
1989. As Vice President, he headed the
Competitiveness and Space Councils for the
President. Since leaving office in January 1993,
Mr. Quayle served as Chairman of Circle Investors,
Inc. (a private financial services and insurance
holding company), and BTC, Inc. (a private company
through which he operates certain of his personal
business interests). He is a director of Central
Newspapers, Inc. and American Standard Companies,
Inc. and is a member of the Board of Trustees of
The Hudson Institute.
ARTHUR B. LAFFER Dr. Laffer has been Chairman and Chief Executive
Age 56 Officer of A.B. Laffer, V.A. Canto & Associates,
Director since 1991 an economic research and financial firm (and its
predecessor, A.B. Laffer Associates), since
Chairman of the Audit founding the firm in 1979. He is also Chairman of
Committee Calport Asset Management, Inc., a money management
firm. Dr. Laffer has been Chief Executive Officer of
Laffer Advisors, Inc., a registered broker-dealer
and investment advisor, since 1981. He was the
Charles B. Thornton Professor of Business Economics
at the University of Southern California from 1976
through 1984, Distinguished University Professor at
Pepperdine University from October 1984 to September
1987, and was a member of President Reagan's
economic policy advisory board. He is a director of
Coinmach Laundry Corporation, Mastec, Inc., Nicholas
Applegate Mutual and Growth Equity Funds and Casmyn
Inc.
ALFRED E. OSBORNE, JR. Dr. Osborne is Director of the Harold Price Center
Age 52 for Entrepreneurial Studies and Associate
Director since 1991 Professor of Business Economics at the John E.
Anderson Graduate School of Management at UCLA.
Chairman of the He has been on the UCLA faculty since 1972. He is a
Compensation Committee director of Greyhound Lines, Inc., Nordstrom, Inc.,
and Member of the SEDA Specialty Packaging Corporation and The Times
Audit Committee Mirror Company.
3
<PAGE>
MICHAEL J. REARDON Mr. Reardon was appointed Executive Vice President
Age 43 of the Company in June 1995, having previously
Director since 1990 served as Executive Vice President and Chief
Operating Officer, and prior to that as the Chief
Member of the Financial Officer and Secretary of the Company.
Nominating Committee From May 1995 to April 1996, Mr. Reardon served as
President of Arrowhead Industrial Water, Inc., a
subsidiary of the Company. He became President
and General Manager of Illinois Water Treatment,
Inc., a subsidiary of the Company, in March 1992.
From 1981 to July 1990 he was Chief Financial
Officer of The C&C Organization, a company engaged
in restaurant ownership, management and
construction. Mr. Reardon is a certified public
accountant and was a senior auditor with Arthur
Andersen & Co. from 1978 to 1981. Mr. Reardon is
a member of the management board of Treated Water
Outsourcing ("TWO"), a Nalco/U.S. Filter joint
venture.
CLASS III DIRECTORS--PRESENT TERM EXPIRES IN 1999
JAMES E. CLARK Mr. Clark was President of Western Operations for
Age 68 Prudential Insurance from 1978 to June 1990.
Director since 1990 Since June 1990, he has been a consultant and a
private investor. Mr. Clark is also Chairman of
Member of the Audit Asian-American Communication Company, Inc., and a
Committee and the director of Asian American Association, Inc., a
Compensation Committee joint venture with Sprint, and Durotest
Corporation. He is also a trustee of the Yul
Brynner Foundation.
RICHARD J. HECKMANN Mr. Heckmann was elected Chairman of the Board of
Age 53 Directors, Chief Executive Officer and President
Director and Chairman of the Company on July 16, 1990. Mr. Heckmann was
since 1990 a Senior Vice President at Prudential-Bache
Securities in Rancho Mirage, California from
Chairman of the January 1982 to August 1990. He joined the U.S.
Nominating Committee Small Business Administration in 1977 and served
as Associate Administrator for Finance and
Investment from 1978 to 1979. Prior thereto he
was founder and Chairman of the Board of Tower
Scientific Corporation, a manufacturer of custom
prosthetic devices, which was sold to Hexcel
Corporation in 1977. Mr. Heckmann is a member of
the management board of TWO. He is also a
director of USA Waste Services, Inc. and K2, Inc.
ROBERT S. HILLAS Mr. Hillas has served as a Managing Director of
Age 48 E.M. Warburg, Pincus & Co., LLC, or its predecessor,
Director since 1996 since 1993. Previously, Mr. Hillas was a partner of
DSV Management Ltd., a venture capital investment
firm, and its affiliated venture capital
partnerships. Mr. Hillas is currently a director of
Advanced Technology Materials, Inc., Transition
Systems, Inc., Envirogen, Inc. and several
privately-held companies. Mr. Hillas was previously
associated with Warburg, Pincus from 1972 until he
joined DSV Management Ltd. in 1981.
MEETINGS AND COMMITTEES OF THE BOARD. During the fiscal year ended March 31,
1997 ("Fiscal 1997"), the Board of Directors met on six occasions. The Board has
three standing committees, the Audit, Compensation and Nominating Committees.
Each director attended all meetings of the Board and committees of the Board of
which he was a member during Fiscal 1997.
The Audit Committee reviews the performance of the Company's independent
public accountants and makes recommendations to the Board concerning the
selection of independent public accountants to audit the Company's financial
statements. The Audit Committee also reviews the audit plans, audit results and
findings of the internal
4
<PAGE>
auditors and the independent accountants, and reviews the Company's systems of
internal control. Members of the Audit Committee meet with the Company's
management and independent public accountants to discuss the adequacy of
internal accounting controls and the financial accounting process. The Company's
independent accountants have free access to the Audit Committee, without
management's presence. The Audit Committee held one meeting in Fiscal 1997.
The Compensation Committee reviews and determines the compensation of the
Company's officers (including salary and bonus), authorizes or approves any
contract for remuneration to be paid after termination of any officer's regular
employment and performs specified functions under the Company's various
compensation plans, including the 1991 Employee Stock Option Plan and the 1991
Directors Stock Option Plan (the "Directors Plan"). The Compensation Committee
reviews, but is not required to approve, the participation of officers in the
Company's other benefit programs for salaried employees. The Compensation
Committee held two meetings and took action by written consent on two occasions
in Fiscal 1997.
The Nominating Committee reviews the performance of incumbent directors and
the qualifications of nominees proposed for election to the Board and makes
recommendations to the Board with respect to nominations for director. In
recommending candidates for the Board of Directors, the Nominating Committee
will seek individuals having experience in fields applicable to the Company's
goals and functions. Stockholders who wish to suggest qualified candidates
should write to the Secretary of the Company, stating the qualifications of such
persons for consideration by the Nominating Committee. The Nominating Committee
held one meeting in Fiscal 1997.
COMPENSATION OF DIRECTORS. Directors receive no cash compensation for their
services as directors, although they are reimbursed for out-of-pocket expenses
incurred in attending meetings. Each director who is not an employee of the
Company participates in the Directors Plan. The Directors Plan provides that
directors of the Company who are neither officers nor employees of the Company
or its subsidiaries are granted in April of each year options to purchase 12,000
shares of the Company's Common Stock at fair market value, as determined on the
date of grant. During Fiscal 1997, options to purchase 18,000 shares of Common
Stock (as adjusted to reflect the Company's 3-for-2 stock split effective July
15, 1996) were granted under the Directors Plan to each of the Company's
non-employee directors on April 1, 1996, except Mr. Hillas, at an exercise price
of $18.6666 per share (as adjusted to reflect the 3-for-2 stock split).
5
<PAGE>
SECURITY OWNERSHIP
Management
The following table sets forth the beneficial ownership of the Company's
Common Stock as of June 23, 1997 by each director, nominee for director and
the executive officers named in the Summary Compensation Table, and by all
directors and executive officers as a group. Unless otherwise indicated, the
holders of all shares shown in the table have sole voting and investment power
with respect to such shares.
<TABLE>
<CAPTION>
Options Percent of
Name Held(1) Shares Owned Class(2)
- ----------------------------------- ------------- -------------- -----------
<S> <C> <C> <C>
Richard J. Heckmann................ 461,649 689,057(3) 1.4%
Michael J. Reardon................. 196,881 37,386(4) *
Tim L. Traff....................... 14,620 208,279 *
Nicholas C. Memmo.................. 109,749 2,518(5) *
Harry K. Hornish, Jr............... 42,111 30,200 *
Kevin L. Spence.................... 95,749 10,000 *
James E. Clark..................... 66,000 72,000 *
John L. Diederich.................. 66,000 11,250 *
Robert S. Hillas................... 12,000(6) 2,719,618(7) 3.4%
Arthur B. Laffer................... 66,000 52,875(8) *
Alfred E. Osborne, Jr.............. 66,000 63,025(9) *
J. Danforth Quayle................. 39,000 0 *
C. Howard Wilkins, Jr.............. 66,000 76,500 *
All Directors and Executive
Officers as a Group (18 persons).. 1,319,759 3,972,708 6.5%
- ---------------------
<FN>
1 Includes presently exercisable options and options exercisable within 60
days of June 20, 1997. All options, except for those held by Mr. Hornish,
were granted pursuant to the Company's 1991 Employee Stock Option Plan or the
Company's 1991 Directors Stock Option Plan. Mr. Hornish's options were
issued in connection with the acquisition of The Utility Supply Group, Inc.
("USG") in exchange for outstanding options to purchase shares of Common
Stock of USG.
2 An asterisk (*) indicates ownership of less than 1% of the Common Stock.
3 Includes 19,249 shares held by Mr. Heckmann's wife and by Mr. Heckmann as
custodian for his children as to which Mr. Heckmann may be deemed to have
indirect beneficial ownership.
4 Includes 2,700 shares held in a trust for the benefit of Mr. Reardon's
father-in-law. As the trustee, Mr. Reardon has voting and investment power
with respect to the shares held by the trust and may be deemed to have
indirect beneficial ownership of them. Mr. Reardon disclaims beneficial
ownership of such shares.
5 Includes 18 shares held by Mr. Memmo's wife as custodian for his minor
children.
6 Beneficial ownership of such options is held by E.M. Warburg, Pincus &
Co., LLC, pursuant to an agreement with Mr. Hillas dated April 10, 1997.
7 Constitutes shares owned by Warburg, Pincus Capital Company, L.P. ("Warburg").
The sole general partner of Warburg is Warburg, Pincus & Co., a New York general
partnership ("WP"). E.M. Warburg, Pincus & Co., LLC ("EMW") manages Warburg. WP
owns all of the outstanding stock of EMW and, as the sole general partner of
Warburg, has a 20% interest in the profits of Warburg. Lionel I. Pincus is the
managing partner of WP and may be deemed to control it. Mr. Hillas, a director
of the Company, is a Managing Director of EMW and a general partner of WP. As
such, Mr. Hillas may be deemed to have an indirect pecuniary interest in an
indeterminate portion of the shares beneficially owned by Warburg. All of the
shares indicated as owned by Mr. Hillas are owned directly by Warburg and are
included herein because of Mr. Hillas' affiliation with Warburg. Mr. Hillas
disclaims "beneficial ownership" of these shares within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
8 Includes 48,000 shares held by A.B. Laffer, V.A. Canto & Associates, a company
controlled by Mr. Laffer and 4,875 held by Mr. Laffer.
6
<PAGE>
9 Includes 8,500 shares held by Mr. Osborne's wife.
</FN>
</TABLE>
OTHER BENEFICIAL OWNERS
Putnam Investments, Inc., One Post Office Square, Boston, Massachusetts,
02109, a parent holding company, reported to the United States Securities and
Exchange Commission ("SEC") that it beneficially owned 5,314,613 shares, or
approximately 7.6% of the Company's Common Stock as of December 31, 1996. Putnam
Investments, Inc. reported shared voting power over 250,600 of these shares and
shared power to dispose of all of these shares; Putnam Investment Management,
Inc. reported shared power to dispose of 4,712,563 of these shares; and The
Putnam Advisory Company, Inc. reported shared voting power over 250,600 of these
shares and shared power to dispose of 602,050 of these shares.
Pilgrim Baxter & Associates, Ltd., 1255 Drummers Lane, Suite 300, Wayne,
Pennsylvania 19087, an investment advisor, reported to the SEC that it
beneficially owned 3,692,250 shares, or approximately 5.3 % of the Company's
Common Stock as of December 31, 1996. It reported shared voting power and sole
power to dispose of all these shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors, its
executive officers and any persons beneficially holding more than ten percent of
the Company's Common Stock are required to report their ownership of the
Company's Common Stock and any changes in that ownership to the SEC and the
NYSE. Specific due dates for these reports have been established and the Company
is required to report in this proxy statement any failure to file by these
dates. All of these filing requirements were satisfied, except that Messrs.
Osborne and Memmo each reported one option exercise on the next form otherwise
required to be filed under Section 16(a), instead of on a current report on Form
4 as now required by the SEC's rules. In making these statements, the Company
has relied on copies of the reports that its officers and directors have filed
with the SEC.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the three fiscal
years ended March 31, 1997 for the Company's Chief Executive Officer and for the
four other most highly compensated executive officers of the Company for Fiscal
1997 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------- ---------------
Other Securities
Name and Principal Fiscal Annual Underlying All Other
Position Year Salary Bonus Compensation Options(1) Compensation(2)
- ---------------------- -------- --------- -------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Heckmann...... 1997 450,000 300,000 -- 187,499 3,320
Chairman of the Board, 1996 414,731 150,000 -- 150,000 --
Chief Executive Officer 1995 300,000 150,000 -- 60,000 5,551
And President
Michael J. Reardon....... 1997 197,504 20,000 -- 15,000 4,712
Executive Vice 1996 184,631 -- -- 15,000 4,714
President 1995 150,000 25,000 -- 15,000 3,983
Harry K. Hornish, Jr.(3).. 1997 115,575 100,000 -- --(4) 3,538
Executive Vice 1996 -- -- -- -- --
President-- 1995 -- -- -- -- --
Distribution Group
Nicholas C. Memmo........ 1997 199,154 37,500 -- 15,000 4,923
Executive Vice 1996 189,042 37,500 -- 17,500 5,014
President--Process 1995 135,000 20,000 -- 22,500 4,389
Water Group
Kevin L. Spence.......... 1997 180,001 65,000 -- 15,000 6,209
Vice President and 1996 164,774 41,500 -- 15,000 4,865
Chief Financial 1995 145,000 20,000 -- 15,000 4,453
Officer
- ------------------------
<FN>
1 Options granted pursuant to the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock. Option grants during Fiscal 1997 are described
in greater detail below.
2 Represents the Company's 50% matching contribution to the Company's 401(k)
Plan.
3 In connection with the acquisition of USG, Mr. Hornish became an employee of
the Company on October 25, 1996 pursuant to an employment agreement with USG
discussed herein.
4 Mr. Hornish received options to purchase 67,111 shares of Common Stock in
exchange for outstanding options to purchase shares of Common Stock of USG in
connection with the acquisition of USG by the Company.
</FN>
</TABLE>
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information with respect to stock options granted
to the Named Executive Officers in Fiscal 1997 under the Company's 1991 Employee
Stock Option Plan. The options listed below are included in the Summary
Compensation Table above.
<TABLE>
<CAPTION>
% of Total
Number of Options
Securities Granted to Potential Realizable Value at
Underlying Employees Exercise Assumed Rates of Stock
Options in Fiscal Price Expiration Price Appreciation
Name Granted(1) Year ($/Sh) Date for Option Term(2)
- ----------------- ---------- ------------- ----------- ------------- ------------------------------
5% 10%
--------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard J.
Heckmann............... 75,000 9.9% $19.5000 07/15/2006 $ 919,758 $ 2,330,848
112,499 14.9% 18.6666 04/01/2006 1,320,662 3,346,817
Michael J.
Reardon................ 15,000 1.98% 19.5000 07/15/2006 183,952 466,170
Harry K.Hornish, Jr.... --(3) -- -- -- -- --
Hornish, Jr............
Nicholas C. Memmo...... 15,000 1.98% 19.5000 07/15/2006 183,952 466,170
Kevin L. Spence........ 15,000 1.98% 19.5000 07/15/2006 183,952 466,170
Increase in Value to
All Stockholders(4)... $739,780,070 $1,874,747,943
- --------------------
<FN>
1 Options granted pursuant to the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock, except with respect to Mr. Hornish, who
acquired his options in connection with the acquisition of USG in exchange for
outstanding options to purchase shares of Common Stock of USG. The exercise
price may be paid in cash or in shares of the Company's Common Stock. Of the
options granted to Messrs. Reardon, Memmo and Spence and 75,000 of the options
granted to Mr. Heckmann, 25% are vested and the remaining options will vest in
equal increments on July 15, 1997, 1998 and 1999. Of the remaining 112,499
options granted to Mr. Heckmann, 50% are vested and the remaining options will
vest on April 1, 1998 and 1999. All options issued to Mr. Hornish are vested.
2 Calculated over a ten-year period representing the life of the options.
3 Stock options in respect of 67,111 shares of Common Stock, with an exercise
price of $3.31 per share and an expiration date of May 31, 2004, were received
by Mr. Hornish on October 25, 1996, in connection with the Company's acquisition
of USG, in substitution for stock options to acquire Common Stock of USG held by
Mr. Hornish on such date. Such exercise price was fixed in order to ensure that
the substitute Company option was the economic equivalent of the USG option it
replaced.
4 Represents the increase in value to all stockholders assuming the Company's
Common Stock appreciates 5% or 10% in value per year, compounded over a ten-year
period, equivalent to the life of the options granted to the Named Executive
Officers. Calculated using a Common Stock price of $19.500, the closing price on
July 15, 1996, on the NYSE, which is the exercise price of substantially all of
the options granted in Fiscal 1997, and the total weighted average number of
60,324,000 shares of Common Stock outstanding in Fiscal 1997.
</FN>
</TABLE>
9
<PAGE>
OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR END OPTION VALUE
The table below sets forth information with respect to stock options
exercised by the named Executive Officers in Fiscal 1997 and the number of
unexercised options held by such persons on March 31, 1997 on a pre-tax basis:
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Value of Unexercised
Acquired Unexercised In-the-Money Options
On Exercise Value Options at 3/31/97 at 3/31/97
of Options(1) Realized Exercisable/Unexercisable Exercisable/Unexercisable(2)
-------------- ------------- --------------------------- -----------------------------
<S> <C> <C> <C> <C>
Richard J. Heckmann.... 145,550 $4,244,943 336,025/275,622 $6,716,177/4,516,442
Michael J. Reardon..... -- -- 187,507/ 28,123 4,435,954/ 445,351
Harry K. Hornish, Jr... 25,000 744,187 42,111/ 0 1,160,790/ 0
Nicholas C. Memmo...... 6,500 113,944 97,562/ 32,813 1,994,475/ 540,201
Kevin L. Spence........ 13,000 85,625 86,375/ 28,123 1,773,474/ 445,351
- --------------------------------------
<FN>
1 Options granted pursuant to the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock, except with respect to Mr. Hornish, who
acquired his options in connection with the acquisition of USG in exchange for
outstanding options to purchase shares of Common Stock of USG.
2 The dollar value reported is based on the difference between the exercise
price of the outstanding option and the closing price of the Company's Common
Stock on the NYSE on March 31, 1997, $30.875 per share. The closing price of the
Company's Common Stock on June 23, 1997 on the NYSE was $28.375 per share.
</FN>
</TABLE>
RETIREMENT PROGRAM
Effective April 1, 1995, the Company established a non-qualified defined
benefit pension plan for its senior executives, including Messrs. Heckmann,
Reardon, Memmo and Spence. Under this plan (the "Retirement Program"), the
executive becomes entitled to receive from the Company at age 60 an annual
retirement income, payable for 15 years equal to 50% of the executive's final
five year average compensation. Earnings covered by the Retirement Program
include salaries and incentive compensation. Benefits accrue on a percentage
basis over the number of years of service of the executive from his date of hire
with the Company to the attainment of age 60. The benefit accrued vests
commencing after five years of service, 50% at that time, and 10% each year
thereafter. A reduced benefit is payable at age 55 and if the executive's
employment with the Company terminates before age 55, a deferred benefit, to the
extent vested, is payable at or after age 55 based upon the executive's accrued
benefit prior to termination.
The following are the benefits payable per year for 15 years under the
Retirement Program for Messrs. Heckmann, Reardon, Memmo and Spence, assuming
that their covered compensation increases at a rate of 5% annually and that
their employment with the Company continues until age 60: Mr. Heckmann
$502,536; Mr. Reardon $212,830; Mr. Memmo $322,510; and Mr. Spence $233,743.
All benefits under the Retirement Program are payable out of the general
assets of the Company. Any funding established by the Company to provide a
source for the payment of Retirement Program benefits would remain subject to
the general creditors of the Company.
EMPLOYMENT AND EXECUTIVE RETENTION AGREEMENTS
The Company has entered into Executive Retention Agreements with each of the
Named Executive Officers, other than Mr. Hornish. Each of those agreements (the
"Retention Agreements") is identical, except as to the severance multiple
described below. The Retention Agreements provide for the employment of the
Named Executive Officers in their respective positions with the Company or as
otherwise determined, provided the duties to be performed are those of a senior
executive or manager of the Company. The Retention Agreements provide that under
certain conditions, including if the executive's employment is terminated
without cause, the executive has the right to receive from the Company an amount
equal to, in the case of Messrs. Memmo and Spence, one times such individuals'
annual salary, in the case
10
<PAGE>
of Mr. Heckmann, approximately three times his annual salary and, in the case of
Mr. Reardon, two times his annual salary. Following a Change-In-Control of the
Company, the Retention Agreements provide for certain benefits if, within one
year of the Change-In-Control, the executive's employment is terminated without
cause, or if certain other conditions of the executive's employment are altered.
In any such event, the Named Executive Officers, other than Mr. Hornish, have
the right to receive the same multiple of their annual salary above described,
but including their latest incentive award or target incentive, if greater, and
the Company is also obligated to maintain for one year for the executive the
welfare and retirement plans available to the executive or to provide an
equivalent. Under the Retention Agreements, and in general, a Change-In-Control
of the Company is defined to occur if (i) any person or group acquires 50% or
more of the Company's voting securities, (ii) during any two year period there
is a change in a majority of the Board of Directors of the Company, (iii) there
is a consolidation or merger of the Company or a transfer of substantially all
of the Company's assets or (iv) a plan of complete liquidation of the Company is
approved by the stockholders.
Mr. Hornish entered into a separate employment agreement with USG (the
"Employment Agreement"), which provides for the payment of $250,000 in base
salary per year for the period beginning October 25, 1996 and ending March 31,
1999. The Employment Agreement also provides for cash performance bonuses. For
the period beginning October 25, 1996 and ending December 31, 1996, the
Employment Agreement provided for a maximum bonus of $100,000 if USG attained
the objectives upon which Mr. Hornish's bonus had been based in his former
employment agreement with USG. For the period beginning January 1, 1997 and
ending March 31, 1998 and the period beginning April 1, 1998 and ending March
31, 1999, the Employment Agreement provides for maximum bonuses of $125,000 and
$100,000, respectively, as well as additional annual bonuses of up to 35% of Mr.
Hornish's base salary. Pursuant to the Employment Agreement, such bonuses shall
be awarded if specified performance objectives are met. Mr. Hornish is eligible
to participate in the Company's 1991 Employee Stock Option Plan.
CERTAIN TRANSACTIONS
The Company, through a wholly-owned subsidiary, paid to Larson Companies
$123,164 during the fiscal year ended March 31, 1997, in connection with certain
vehicle leases. Larson Companies is owned by W.D. Larson, the father-in-law of
Tim L. Traff, a current director of the Company. Mr. Traff received no direct
benefit from such arrangement and such arrangement was based on arms-length
transactions.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is composed entirely of independent outside
directors and is responsible for determining the compensation of the executive
officers of the Company, presently comprising the Named Executive Officers and
seven additional individuals. The Compensation Committee also administers the
Company's 1991 Employee Stock Option Plan, the Retirement Program and, with Mr.
Heckmann, the Company's Annual Incentive Compensation Plan.
COMPENSATION POLICY AND PRACTICE. The Company's executive compensation
policy is intended (i) to link compensation and stockholder value; (ii) to
recognize and reward individuals for their contributions and commitment to the
growth and profitability of the Company; and (iii) to secure and retain the
highest caliber of executives through competitive levels of total compensation.
The Compensation Committee believes this policy is generally best accomplished
by providing a competitive total compensation package, a significant portion of
which is variable and related to established performance goals. The Company
retained an independent consulting firm during fiscal 1996 to review the
Company's executive compensation levels and programs and to provide input to the
Compensation Committee. Based on this input, as well as other considerations
deemed appropriate, the Compensation Committee believes that the compensation
provided to the Company's executives is competitive within the industry.
Section 162(m) of the United States Internal Revenue Code of 1986 (the
"Code") limits deductibility of compensation in excess of $1.0 million paid to a
company's chief executive officer and four other highest-paid executive officers
unless such compensation qualifies as "performance-based." The Company will not
be affected by this limitation for the 1997 tax year. The Compensation Committee
intends to review this issue periodically to determine whether further changes
to the Company's compensation policies and practices are advisable in order to
preserve deductibility.
11
<PAGE>
Compensation of the Company's executive officers consists of the following
elements: base salary, cash bonus payments under the Annual Incentive
Compensation Plan and stock option awards under the 1991 Employee Stock Option
Plans. Each of these elements is discussed below.
BASE SALARY. In determining base salary for the Company's executive
officers, the Compensation Committee assesses the relative contribution of each
executive to the Company, the background and skills of each individual and the
particular opportunities and problems which the individual confronts in his
position with the Company. These factors are then assessed in the context of
competitive market factors, including competitive opportunities with other
companies.
In making changes in base salary for existing executive officers, other than
Mr. Heckmann, the Compensation Committee considers the recommendations of Mr.
Heckmann based on his personal evaluation of individual performance for the
prior year including attainment of personal objectives and goals, attainment of
Company performance goals, the Company's salary structure, competitive salary
data and the prior year's national percentage increase in the cost of living.
ANNUAL CASH INCENTIVE. Pursuant to an Annual Incentive Compensation Plan,
key executives are eligible to earn incentive cash bonuses each year based on
the Company's performance. For eligible operational executives, the maximum
award level is 35% of base salary. For Mr. Heckmann, the maximum award level has
been at the discretion of the Compensation Committee. For eligible staff
executives, the maximum award level is 25% of base salary.
Of the 35% maximum award level for operational executives, up to 8% may be
earned if the Company exceeds its profit plan; an additional 8% is earned if the
businesses supervised by the executive achieve their profit plan; an additional
10% is earned if the businesses supervised by the executive exceed their profit
plan; and an additional 9% may be earned based on a subjective assessment of the
executive's performance. Of the 25% maximum award level for staff executives, 8%
is earned if the Company achieves its pre-established profit plan for the fiscal
year; up to an additional 8% may be earned if the Company exceeds its profit
plan; and an additional 9% may be earned based on a subjective assessment of the
executive's performance. With respect to the subjective portion of the award,
Mr. Heckmann assesses the performance of each of the other executives or
employees. Mr. Hornish's bonus was paid pursuant to his Employment Agreement.
Information with respect to the cash bonuses paid to the Named Executive
Officers in Fiscal 1997 is provided in the Summary Compensation Table above.
STOCK OPTIONS. The grant of stock options under the Company's 1991 Employee
Stock Option Plan is intended to provide long-term performance-based
compensation to officers and key employees of the Company. Options are granted
with an exercise price equal to the market price of the Company's Common Stock
on the date of grant, generally vest over a period of three years, and expire
after ten years. Options only have value to the recipient if the price of the
Company's stock appreciates after the options are granted. The Company believes
that not less than 10% of the Company's outstanding equity securities should be
available for employee stock options and its policy of option grants by the
Compensation Committee has reflected and can be expected to continue to reflect
this belief.
CHIEF EXECUTIVE OFFICER
In determining Mr. Heckmann's compensation for Fiscal 1997, the Compensation
Committee focused upon the policies described above. The increases in Mr.
Heckmann's salary and in the number of options granted to him as compared to the
fiscal year ended March 31, 1996 ("Fiscal 1996") reflect the overall performance
of the Company for Fiscal 1997 under Mr. Heckmann's strategic direction, his
significant involvement in and responsibility for the overall operations of the
Company and his direct involvement in numerous acquisitions made by the Company
during the year. For Fiscal 1997, Mr. Heckmann received a bonus under the Annual
Incentive Compensation Plan equal to 67% of his base salary of $450,000 as a
combined result of the Company's exceeding its profit plan and the Compensation
Committee's assessment of Mr. Heckmann's role in that success. The Compensation
Committee believes that Mr. Heckmann's compensation level is warranted by his
roles in both the strategic and operational aspects of the Company's business,
the value he brings to the Company in the identification and realization of
acquisition opportunities and the success of the Company both in its business
and in the financial markets.
12
<PAGE>
Alfred E. Osborne, Jr., Chairman
James E. Clark
John L. Diederich
C. Howard Wilkins, Jr.
COMPARATIVE STOCK PERFORMANCE
The chart below sets forth line graphs comparing the performance of the
Company's Common Stock as compared with the NYSE Composite Stock Index and two
"peer group" indices for the five-year period commencing March 31, 1992 and
ending March 31, 1997. The first peer group index consists of the Common Stock
of Air & Water Technologies Corporation, Calgon Carbon Corporation, Ionics,
Incorporated, Osmonics, Inc. and Wheelabrator Technologies Inc. ("WTI"). The
second peer group index is identical to the one used in Fiscal 1996. WTI is
included in both indices. The Company acquired WTI's Water Systems and
Manufacturing Group on December 2, 1996, and its contract operations and
privatization business on April 1, 1997. Accordingly, WTI will not be included
in future peer group indices. The indices assume that the value of the
investment in the Company's Common Stock and each index was $100 on March 31,
1992 and that dividends were reinvested.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
3/31/92 3/31/93 3/31/94 3/31/95 3/29/96 3/31/97
--------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. Filter Common Stock..... $100.00 $130.72 $110.46 $121.56 $219.60 $363.20
NYSE Composite Stock Index... $100.00 $111.72 $110.67 $121.41 $155.40 $178.52
Peer Group Index I(1)........ $100.00 $114.31 $102.26 $81.00 $ 97.83 $ 84.99
Peer Group Index II(2)....... $100.00 $120.38 $108.53 $87.40 $106.29 $ 92.36
- ----------------------
<FN>
1 Peer Group Index I includes: Air & Water Technologies Corporation, Calgon
Carbon Corporation, Ionics, Incorporated, Osmonics, Inc. and WTI.
2 Peer Group Index II includes: Calgon Carbon Corporation, Ionics, Incorporated,
Osmonics, Inc. and WTI.
</FN>
</TABLE>
13
<PAGE>
PROPOSAL TO APPROVE THE 1991 EMPLOYEE STOCK OPTION PLAN,
AS AMENDED AND RESTATED
Stockholders are being asked to approve the Company's 1991 Employee Stock
Option Plan, as amended and restated by the Board of Directors on June 12, 1997
(the "Amended Employee Plan"). A vote in favor of the Amended Employee Plan will
also be a vote in favor of all of the amendments to the 1991 Employee Stock
Option Plan, which will, among other things, increase the amount of Common Stock
that is authorized to be issued under the plan by 2,500,000 shares, allow
optionees to tender in payment of the option exercise price only shares held by
the optionee for at least six months, permit the tender of such shares without
requiring actual delivery of the certificates for such shares, confirm that
"cashless" exercises of options through a broker are permitted and provide for
the full vesting of options granted on or after June 12, 1997 in the case of a
disabled or retiring optionee whose years of age and continuous service total 65
or more.
The Company believes that in order to attract, retain and motivate key
employees it is desirable to offer to such employees stock options which provide
an incentive tied to the Company's stock price performance. As the Company has
grown over the past several years, in part through acquisitions that have
involved the issuance of additional shares of Common Stock, the Company has
believed it appropriate to increase the number of shares of Common Stock
available for employee stock options. Accordingly, the Board of Directors on
February 28, 1991 unanimously adopted the 1991 Employee Stock Option Plan under
which plan, as thereafter amended by the Board and approved by the stockholders,
and adjusted for the three-for-two stock split in July, 1996, a total of
4,631,250 shares of Common Stock were reserved for issuance. As of June 4, 1997,
of the 4,631,250 shares reserved under the 1991 Employee Stock Option Plan,
1,435,806 options had been previously exercised and 3,147,541 options remained
outstanding. The Company believes that it is desirable to increase the number of
shares of Common Stock authorized under the 1991 Employee Stock Option Plan by
an additional 2,500,000 shares and, accordingly, on June 12, 1997, the Board of
Directors voted to amend the 1991 Employee Stock Option Plan to increase the
number of shares authorized for issuance under the plan from 4,631,250 shares to
7,131,250 shares.
GENERAL PROVISIONS. The Amended Employee Plan is administered by the
Compensation Committee. The Committee selects the officers and other key
employees of the Company and its subsidiaries (whether or not members of the
Board) to whom options may be granted, determines the size of grants and the
terms and conditions of options, and determines the meaning and application of
the provisions of the Amended Employee Plan and related option agreements.
Members of the Committee are not eligible to receive grants under the Amended
Employee Plan.
Options granted under the Amended Employee Plan may be either "incentive
stock options," that is, options which meet the requirements of Section 422 of
the Code, or "nonqualified stock options," that is, options which do not meet
such requirements. The aggregate fair market value (determined as of the date of
grant) of the stock for which an optionee's incentive stock options will vest in
any calendar year may not exceed $100,000. No optionee may be granted options
with respect to more than 150,000 shares of Common Stock in one calendar year.
No options may be granted under the Amended Employee Plan after February 27,
2001.
The exercise price per share for each option granted under the Amended
Employee Plan may not be less than the fair market value per share of the
Company's Common Stock on the date of grant. For any option recipient who owns
more than 10% of the Company's voting stock (a "Ten Percent Owner") at the time
of grant, the exercise price must be at least 110% of fair market value. The
Compensation Committee will set the terms and vesting schedule of each option,
provided, however, that no term may exceed ten years from the date of grant, and
the term of an incentive stock option granted to a Ten Percent Owner may not
exceed five years.
Payment upon exercise of an option may be made in cash or, with the consent
of the Compensation Committee, in shares of Common Stock of the Company held by
the optionee for at least six months, valued at their then-current fair market
value, or by a combination of cash and such shares of Common Stock. If shares of
Common Stock are used to pay the exercise price of an option, with the consent
of the Compensation Committee, the optionee may utilize an attestation procedure
that avoids the need for physical delivery of the certificates for the shares
being tendered. "Cashless" exercises are also permitted where an irrevocable
option exercise form is delivered together with irrevocable instructions to a
broker-dealer to remit to the Company an appropriate portion of the proceeds
from the sale or margin of the shares.
14
<PAGE>
Generally, options may be exercised only by the individual to whom the
option is granted, and are not transferable or assignable, except that in the
event of an optionee's death or legal disability, the optionee's heirs or legal
representatives may exercise the options for a period not to exceed one year.
TERMINATION OF EMPLOYMENT. Unless otherwise determined by the Compensation
Committee, options will cease to be exercisable upon termination of the
optionee's service to the Company other than upon termination due to death,
disability or retirement. Vested options will be exercisable within twelve
months of death or disability and within three months of retirement. Options
granted on or after June 12, 1997 become fully vested and exercisable if the
optionee is disabled or retires and his or her total years of age and continuous
service equal or exceed 65.
CHANGE IN CONTROL. In the event the Company enters into an agreement to
dispose of all or substantially all of the assets or capital stock of the
Company by means of a sale, merger, or other transaction, outstanding options
will, with the approval of the Compensation Committee and the Board of
Directors, and conditioned upon consummation of such agreement, become
immediately exercisable during the period beginning with the date of such
agreement and ending on the date of disposal of the assets or capital stock. The
Amended Employee Plan further provides that, in the event of any merger,
consolidation or other reorganization in which the Company is not the surviving
or continuing corporation, all outstanding options shall be fully exercisable
for a period of 30 days prior to the date of such transaction unless such
options are assumed by the continuing or surviving corporation. Unexercised
options will terminate upon the effective date of such a transaction, unless
they are assumed.
TERMINATION AND AMENDMENT OF PLAN. The Board of Directors may terminate or
amend the Amended Employee Plan without the approval of the Company's
stockholders, but stockholder approval would be required in order to amend the
plan to increase the total number of shares, to change the class of persons
eligible to participate in the plan, to extend the maximum ten-year period or to
permit an option exercise price to be fixed at less than 100% of the fair market
value as of the date of grant.
ANTIDILUTION PROVISIONS. The amount of shares reserved for issuance under
the Amended Employee Plan and the terms of outstanding options shall be adjusted
by the Compensation Committee in the event of changes in the outstanding Common
Stock by reason of stock dividends, stock splits, reverse stock splits,
split-ups, consolidations, recapitalizations, reorganizations or like events.
BENEFITS UNDER THE AMENDED EMPLOYEE PLAN. Presently, approximately 280
officers and key employees of the Company and its subsidiaries are eligible to
participate in the Amended Employee Plan. However, the identity of future
grantees and the size of any additional grants have not been determined. On June
23, 1997 the closing price of the Common Stock on the NYSE was $28.375 per
share.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary of
the principal federal income tax consequences of awards under the Amended
Employee Plan based upon current federal income tax laws. The summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign tax consequences. Options designated as incentive stock options
are intended to fall within the provisions of Section 422 of the Code.
An optionee recognizes no taxable income as the result of the grant or
exercise of an incentive stock option. If stock acquired upon exercise of an
option is held at least until (i) two years following the date of grant of the
option and (ii) one year following the date of exercise, then any gain on
subsequent sale of the stock will be taxed as a long-term capital gain. In that
case, the Company will not be entitled to any deduction for federal income tax
purposes. In general, if an optionee sells shares within two years after the
date of grant or within one year after the date of exercise, the excess of the
fair market value of the shares on the date of exercise over the option exercise
price (not to exceed the gain realized on the sale) will be taxable as ordinary
income at the time of sale. A gain in excess of that amount will be a long-term
or short-term capital gain, depending on the length of time the stock was held.
If the optionee sells the stock for less than the option exercise price, the
loss will be a long-term or short-term capital loss and no income will be
recognized. The amount of any ordinary income recognized by the optionee upon
the disposition of the stock would be deductible by the Company for federal
income tax purposes.
15
<PAGE>
An optionee generally recognizes no taxable income as the result of the
grant of a nonqualified stock option. Upon exercise of such an option, the
optionee normally recognizes ordinary income in the amount of the excess of the
fair market value of the shares on the date of exercise over the option price.
Such ordinary income generally is subject to withholding of income and
employment taxes. Upon the sale of stock acquired upon the exercise of a
nonqualified stock option, any gain or loss, based on the difference between the
sale price and the fair market value on the date of recognition of income, will
be taxed as short-term or long-term capital gain or loss, depending upon the
length of time the optionee has held the stock from the date of exercise. The
Company would be entitled to a deduction equal to the amount of ordinary income
recognized by the optionee as a result of the exercise of the option.
VOTE REQUIRED
Approval of the Amended Employee Plan will require the affirmative vote of
at least a majority in voting interest of the stockholders present in person or
by proxy at the Annual Meeting and entitled to vote thereon.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDED EMPLOYEE PLAN
AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" ADOPTION OF THE
AMENDED EMPLOYEE PLAN.
PROPOSAL TO INCREASE THE AUTHORIZED CAPITAL OF THE COMPANY
The Board of Directors proposes to increase the Company's authorized share
capital from 153,000,000 to 303,000,000 by amendment to the Company's Restated
Certificate of Incorporation, as amended (the "Authorized Capital Amendment").
If the Authorized Capital Amendment is approved by the stockholders, the number
of the Company's authorized shares of Common Stock would be increased from
150,000,000 shares to 300,000,000 shares. Specifically, if the Authorized
Capital Amendment is approved, Article V, Section 1 of the Company's Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
will be amended and restated to read in its entirety as follows:
"Section 1. AUTHORIZED STOCK. The Corporation shall be authorized to
issue two classes of shares to be designated, respectively, "Preferred
Stock" and "Common Stock"; the total number of shares which the Corporation
shall have the authority to issue is three hundred three million
(303,000,000) shares; the total number of authorized shares of Preferred
Stock shall be three million (3,000,000) and each share shall have a par
value of ten cents ($.10); and the total number of authorized shares of
Common Stock shall be three hundred million (300,000,000) and each share
shall have a par value of one cent ($.01)."
As of June 2, 1997, there were issued and outstanding 80,171,546 shares of
Common Stock. Of the unissued shares of Common Stock, 7,636,363 shares were
reserved for issuance upon conversion of the Company's 6% Convertible
Subordinated Notes due 2005, 9,113,924 shares were reserved for issuance upon
conversion of the Company's 4 1/2% Convertible Subordinated Notes due 2001 and
an aggregate of 7,068,750 shares were reserved for issuance pursuant to the
Company's stock option plans for employees and directors. Consequently, the
Company presently has reserved for issuance 23,819,037 shares of Common Stock
and presently has available for issuance 56,352,509 shares of Common Stock and
3,000,000 shares of Preferred Stock.
PURPOSES AND REASONS FOR THE PROPOSED INCREASE IN AUTHORIZED CAPITAL
If the Authorized Capital Amendment is approved, the increased number of
authorized shares of Common Stock will be available for issuance from time to
time, for such purposes and consideration, and on such terms, as the Board of
Directors may approve, and no further vote of the stockholders of the Company
will be required, except as provided under the Delaware General Corporation Law
or the rules of the NYSE.
An increase in authorized shares will enable the Company to meet possible
contingencies and opportunities in which the issuance of shares of Common Stock
in amounts greater than would otherwise remain available for
16
<PAGE>
issuance may be deemed advisable, such as in equity and convertible debt
financings, acquisition transactions, stock dividends and distributions and
employee benefit plans. By adopting the Authorized Capital Amendment at this
time, consummation of issuances of any additional shares of Common Stock would
be facilitated, because the delay and expense incident to the calling of a
special meeting of the Company's stockholders, in cases where such a meeting
would not otherwise be required, would be avoided. The timing of the actual
issuance of additional shares of Common Stock, if any, will depend upon market
conditions, the specific purpose for which the stock is to be issued, and other
similar factors. Any additional issuance of Common Stock could have a dilutive
effect on existing holders of Common Stock. The Company has issued a substantial
number of shares in business acquisitions in the past and is frequently engaged
in preliminary discussions with acquisition candidates. However, the Company
currently has no plans for the issuance of any shares of Common Stock, except as
described above, none of which are shares for which the Company is seeking
authorization pursuant to the Authorized Capital Amendment.
The terms of the additional shares of Common Stock for which authorization
is sought will be identical with the terms of the shares of Common Stock
currently authorized and outstanding, and approval of the Authorized Capital
Amendment proposal will not affect the terms, or the rights of the holders, of
such shares. The Common Stock has no cumulative voting, conversion, preemptive
or subscription rights and is not redeemable. Laidlaw has certain rights to
purchase voting capital stock of the Company or rights to acquire such stock
("Securities") in order to maintain its percentage share of the Company's voting
power, except in the case of Securities issuable in the ordinary course under
any employee or director stock benefit plan or in connection with a merger or
other acquisition. In addition, if the Company proposes to issue Securities at a
price less than the lower of (i) 15% below the current market price or (ii) the
prevailing customary and reasonable price for such Securities, Laidlaw has the
right to purchase on the same terms as the proposed issuance such number of the
offered Securities as it shall specify.
POSSIBLE ANTI-TAKEOVER EFFECTS
Although it did not form a basis for the Board's decision to adopt the
Authorized Capital Amendment, the existence of additional authorized shares of
Common Stock could have the effect of rendering more difficult or discouraging
hostile takeover attempts. The Company is not aware of any existing or planned
effort on the part of any person to acquire the Company by means of a merger,
tender offer, solicitation of proxies in opposition to management or otherwise,
or to change the Company's management, nor is the Company aware of any person
having made any offer to acquire the capital stock or substantially all of the
assets of the Company.
The Certificate of Incorporation and Restated Bylaws (the "Bylaws") of the
Company and the Delaware General Corporation Law contain certain provisions that
could also have an anti-takeover effect. The Certificate of Incorporation places
certain restrictions on the voting rights of a "Related Person," defined therein
as any person who directly or indirectly owns 5% or more of the outstanding
voting stock of the Company. The founders and the original directors of the
Company are excluded from the definition of "Related Persons," as are seven
named individuals including Mr. Heckmann, the Chairman of the Board, Chief
Executive Officer and President of the Company. These voting restrictions apply
in two situations. First, the vote of a director who is also a Related Person is
not counted in the vote of the Board of Directors to call a meeting of
stockholders where that meeting will consider a proposal made by the Related
Person director. Second, any amendments to the Certificate of Incorporation that
relate to specified Articles therein (those dealing with corporate governance,
limitation of director liability or amendments to the Certificate of
Incorporation), in addition to being approved by the Board of Directors and a
majority of the Company's outstanding voting stock, must also be approved by
either (i) a majority of directors who are not Related Persons, or (ii) the
holders of at least 80% of the Company's outstanding voting stock, provided that
if the change was proposed by or on behalf of a Related Person, then approval by
the holders of a majority of the outstanding voting stock not held by Related
Persons is also required. In addition, any amendment to the Company's Bylaws
must be approved by one of the methods specified in clauses (i) and (ii) in the
preceding sentence.
The Certificate of Incorporation provides that the Company is authorized to
issue 3,000,000 shares of Preferred Stock. The Board of Directors is authorized
to issue such shares without stockholder approval in one or more series and to
fix the rights, preferences, privileges, qualifications, limitations and
restrictions thereof, including voting rights.
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<PAGE>
The Certificate of Incorporation and the Company's Bylaws provide that the
Board of Directors shall fix the number of directors and that the Board shall be
divided into three classes, each consisting of one-third of the total number of
directors (or as nearly as may be possible). Stockholders may not take action by
written consent. Meetings of stockholders may be called only by the Board of
Directors (or by a majority of its members) Stockholder proposals, including
director nominations, may be considered at a meeting only if written notice of
that proposal is delivered to the Company from 30 to 60 days in advance of the
meeting, or within ten days after notice of the meeting is first given to
stockholders.
Section 203 of the Delaware General Corporation Law ("Section 203")
provides, in general, that a stockholder acquiring more than 15% of the
outstanding voting shares of a corporation subject to the statute (an
"Interested Stockholder"), but less than 85% of such shares, may not engage in
certain "Business Combinations" with the corporation for a period of three years
subsequent to the date on which the stockholder became an Interested Stockholder
unless (i) prior to such date the corporation's board of directors has approved
either the Business Combination or the transaction in which the stockholder
became an Interested Stockholder or (ii) the Business Combination is approved by
the corporation's board of directors and authorized by a vote of at least
two-thirds of the outstanding voting stock of the corporation not owned by the
Interested Stockholder. Section 203 defines the term "Business Combination" to
encompass a wide variety of transactions with or caused by an Interested
Stockholder in which the Interested Stockholder receives or could receive a
benefit on other than a pro rata basis with other stockholders, including
mergers, certain asset sales, certain issuances of additional shares to the
Interested Stockholder, transactions with the corporation that increase the
proportionate interest of the Interested Stockholder or transactions in which
the Interested Stockholder receives certain other benefits.
VOTE REQUIRED
Approval of the Authorized Capital Amendment will require the affirmative
vote of the holders of at least a majority of the outstanding shares of Common
Stock.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AUTHORIZED CAPITAL
AMENDMENT AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" ADOPTION OF
THE AUTHORIZED CAPITAL AMENDMENT PROPOSAL.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP as independent
certified public accountants of the Company for the fiscal year ending March 31,
1998 and has further directed that the appointment be submitted for ratification
by the stockholders at the Annual Meeting.
KPMG Peat Marwick LLP is an internationally recognized firm of independent
certified public accountants and has audited the Company's financial statements
since fiscal 1992. A representative of KPMG Peat Marwick LLP will be present at
the Annual Meeting and will be available to make a statement, if he or she so
desires, and to respond to appropriate questions.
OTHER MATTERS
The solicitation of proxies is made on behalf of the Board of Directors of
the Company and the cost thereof will be borne by the Company. In addition to
soliciting proxies by mail, directors, officers and employees of the Company,
without receiving additional compensation therefor, may solicit proxies by
telephone, telegram, in person or by other means. Arrangements also will be made
with brokerage firms and other custodians, nominees and fiduciaries to forward
proxy soliciting material to the beneficial owners of Common Stock held of
record by such persons and the Company will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith.
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<PAGE>
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1998 Annual Meeting of
Stockholders of the Company must be received by March 9, 1998. Any such
proposals should be addressed to the Secretary of the Company, 40-004 Cook
Street, Palm Desert, California 92211.
By Order of the Board of Directors
Damian C. Georgino
Secretary
July 7, 1997
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<PAGE>
Preliminary Copy
UNITED STATES FILTER CORPORATION
40-004 Cook Street, Palm Desert, California 92211
Proxy for Annual Meeting of Stockholders on August 14, 1997
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Richard J. Heckmann and Damian C. Georgino,
and each or either of them as proxies, each with power to appoint his
substitute, and hereby authorizes any of them to represent and to vote, as
designated on the reverse side of this proxy card, all shares of the Common
Stock, par value $.01 per share (the "Common Stock"), of United States Filter
Corporation (the "Company"), which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
on August 14, 1997, commencing at 9:00 A.M., Pacific Daylight Time, at the Inn
at Rancho Santa Fe, 5951 Linea del Cielo, Rancho Santa Fe, California 92067, or
any adjournment or postponement thereof as follows on the reverse side of this
proxy card.
PLEASE DATE AND SIGN ON REVERSE SIDE
<PAGE>
[x] Please mark your votes as in this example
1. The election of three directors, each for a term of three years;
FOR all nominees listed at right Nominees: John L. Diederich
(except as marked to the contrary Nicholas C. Memmo
below). C. Howard Wilkins, Jr.
WITHHOLD AUTHORITY to vote for
all nominees listed at right.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
draw a line through such nominee's name.)
2. The proposal to approve the Company's 1991 Employee Stock Option Plan, as
amended and restated;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. The proposal to increase the number of authorized shares of the Company's
Common Stock from 150,000,000 to 300,000,000;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. The proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent public accountants for the Company;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxy holders are authorized to vote upon such other
business as may properly come before the meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1 THROUGH 4.
SIGNATURE DATED , 1997
------------------- -------------------
SIGNATURE DATED , 1997
------------------- -------------------
Note: Please sign exactly as name or names appear hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized partner.
<PAGE>
APPENDIX A
UNITED STATES FILTER CORPORATION
1991 EMPLOYEE STOCK OPTION PLAN1
1. PURPOSE. The United States Filter Corporation 1991 Employee Stock
Option Plan (the "Plan") is hereby established to grant to officers, directors
and key employees of United States Filter Corporation and its Subsidiaries
(individually and collectively, the "Company") a favorable opportunity to
acquire Common Stock of United States Filter Corporation (the "Stock"), and to
create an incentive for such persons to remain in the employ of the Company and
to contribute to its success.
As used in the Plan, the term "Code" shall mean the Internal Revenue Code
of 1986, as amended, and any successor statute, and the terms "Parent" and
"Subsidiary" shall have the meaning set forth in Sections 424(e) and (f) of the
Code.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall determine the meaning and application of the provisions of the
Plan and all option agreements executed pursuant thereto, and its decisions
shall be conclusive and binding upon all interested persons. The Committee may
not grant an option to any member of the Committee. An option may be granted to
a member of the Committee only by action of the Board of Directors of the
Company. Subject to the provisions of the Plan, the Committee shall have the
sole authority to determine:
(a) The persons to whom options to purchase Stock shall be granted;
(b) The number of options to be granted to each person;
(c) The price to be paid for the Stock upon the exercise of each
option;
(d) The period within which each option shall be exercised; and
(e) The terms and conditions of each stock option agreement entered
into between the Company and persons to whom the Company has granted an option.
3. ELIGIBILITY. Officers, directors and key employees of the Company, as
determined by the Committee, shall be eligible to receive grants of options
under the Plan. No individual may be granted, in any calendar year, options
under the Plan to purchase more than 150,000 shares of Common Stock.
4. STOCK SUBJECT TO PLAN. There shall be reserved for issue upon the
exercise of options granted under the Plan 7,131,250 shares of Common Stock or
the number of shares of Stock, which, in accordance with the provisions of
Section 9 hereof, shall be substituted therefor. Such shares may be authorized
but unissued shares or treasury shares. If an option granted under the Plan
- -----------------------
1 As amended by the Board of Directors through June 12, 1997.
<PAGE>
shall expire or terminate for any reason without having been exercised in full,
unpurchased shares subject thereto shall again be available for the purposes of
the Plan.
2
<PAGE>
5. TERMS OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. It is intended that options granted
pursuant to this Section 5(a) qualify as incentive stock options as defined in
Section 422 of the Code. Incentive stock options shall be granted only to
employees of the Company. Each stock option agreement evidencing an incentive
stock option shall provide that the option is subject to the following terms and
conditions and to such other terms and conditions not inconsistent therewith as
the Committee may deem appropriate in each case:
(1) OPTION PRICE. The price to be paid for each share of Stock
upon the exercise of each incentive stock option shall be determined by the
Committee at the time the option is granted, but shall in no event be less than
100% of the fair market value of the shares on the date the option is granted,
or not less than 110% of the fair market value of such shares on the date such
option is granted in the case of an individual then owning (within the meaning
of Section 424(d) of the Code) more than 10% of the total combined voting power
of all classes of stock of the Company or of its Parent or Subsidiaries. As used
in this Plan the term "date the option is granted" means the date on which the
Committee authorizes the grant of an option hereunder or any later date
specified by the Committee. Fair market value of the shares shall be (i) the
mean of the high and low prices of shares of Stock sold on a national stock
exchange on the date the option is granted (or if there was no sale on such
date, the highest asked price for the Stock on such date), or (ii) if the Stock
is not listed on any national stock exchange on the date the option is granted,
the mean between the "bid" and "asked" prices of the Stock in the National
Over-The-Counter Market on the date the option is granted, or (iii) if the Stock
is not traded in any market, that price determined by the Committee to be fair
market value, based upon such evidence as it may think necessary or desirable.
(2) PERIOD OF OPTION. The period or periods within which an
option may be exercised shall be determined by the Committee at the time the
option is granted, but in no event shall any option granted hereunder be
exercised more than ten years from the date the option was granted, nor more
than five years from the date the option was granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or of its Parent or Subsidiaries.
(3) PAYMENT FOR STOCK. The option exercise price for each
share of Stock purchased under an option shall be paid in full at the time of
purchase. The Committee may provide that the option price be payable, at the
election of the holder of the option and with the consent of the Committee, in
whole or in part either in cash or by delivery in transferable form of shares of
Stock which have been held by the Optionee for at least six months prior to the
date of exercise or such shorter period as qualifies as the measurement period
for "mature shares" under applicable generally accepted accounting rules. Such
delivered shares of Stock shall be valued for such purpose at their fair market
value on the date on which the option is exercised. In the discretion of the
Committee, the delivery of shares of Stock in full or partial payment of the
option exercise price may be accomplished without the actual delivery by the
Optionee of stock certificates representing the delivered shares under a
procedure whereby the Optionee attests in writing, on a form acceptable to the
Committee, to ownership of the subject shares and the Company delivers to the
Optionee certificates representing the net shares issuable upon such option
exercise. Payment
3
<PAGE>
may also be made, in the discretion of the Committee, by delivery (including by
fax) to the Company or its designated agent of an executed irrevocable option
exercise form together with irrevocable instructions to a broker-dealer to sell
or margin a sufficient portion of the shares and deliver the sale or margin loan
proceeds directly to the Company to pay for the exercise price. No share of
Stock shall be issued until full payment therefor has been made, and no employee
shall have any rights as an owner of Stock until the date of issuance to him of
the stock certificate evidencing such Stock.
(4) LIMITATION ON AMOUNT. Subject to the overall limitations
of Section 4 hereof (relating to the aggregate shares subject to the Plan), the
aggregate fair market value (determined as of the time the option is granted) of
the Common Stock with respect to which incentive stock options are exercisable
for the first time by the Optionee during any calendar year (under the Plan and
all other incentive stock option plans of the Company, any Parent or
Subsidiaries) shall not exceed $100,000.
(b) NONQUALIFIED STOCK OPTIONS. Each nonqualified stock option
granted under the Plan shall be evidenced by a stock option agreement between
the person to whom such option is granted and the Company. Such stock option
agreement shall provide that the option is subject to the following terms and
conditions and to such other terms and conditions not inconsistent therewith as
the Committee may deem appropriate in each case:
(1) OPTION EXERCISE PRICE. The exercise price to be paid for
each share of Stock upon the exercise of an option shall be determined by the
Committee at the time the option is granted, but shall in no event be less than
100% of the fair market value of the shares on the date the option is granted.
As used in this Plan, the term "date the option is granted" means the date on
which the Committee authorizes the grant of an option hereunder or any later
date specified by the Committee. Fair market value of the shares shall be (i)
the mean of the high and the low prices of shares of Stock sold on a national
stock exchange on the date the option is granted (or if there was no sale on
such date, the highest asked price for the Stock on such date), or (ii) if the
Stock is not listed on a national stock exchange on the date the option is
granted the mean between the "bid" and "asked" prices of the Stock in the
National Over-The-Counter market on the date the option is granted, or (iii) if
the Stock is not traded in any market, that price determined by the Committee to
be fair market value, based upon such evidence as it may think necessary or
desirable.
(2) PERIOD OF OPTION. The period or periods within which an
option may be exercised shall be determined by the Committee at the time the
option is granted, but shall in no event exceed ten years from the date the
option is granted.
(3) PAYMENT FOR STOCK. The option exercise price for each
share of Stock purchased under an option shall be paid in full at the time of
purchase. The Committee may provide that the option price be payable, at the
election of the holder of the option and with the consent of the Committee, in
whole or in part either in cash or by delivery in transferable form of shares of
Stock which have been held by the Optionee for at least six months prior to the
date of exercise or such shorter period as qualifies as the measurement period
for "mature shares" under applicable generally accepted accounting rules. Such
delivered shares of Stock shall be valued for such purpose at their fair market
value on the date on which the option is exercised. In the
4
<PAGE>
discretion of the Committee, the delivery of shares of Stock in full or partial
payment of the option exercise price may be accomplished without the actual
delivery by the Optionee of stock certificates representing the delivered shares
under a procedure whereby the Optionee attests in writing, on a form acceptable
to the Committee, to ownership of the subject shares and the Company delivers to
the Optionee certificates representing the net shares issuable upon such option
exercise. Payment may also be made, in the discretion of the Committee, by
delivery (including by fax) to the Company or its designated agent of an
executed irrevocable option exercise form together with irrevocable instructions
to a broker-dealer to sell or margin a sufficient portion of the shares and
deliver the sale or margin loan proceeds directly to the Company to pay for the
exercise price. No share of Stock shall be issued until full payment therefor
has been made, and no employee shall have any rights as an owner of Stock until
the date of issuance to him of the stock certificate evidencing such Stock.
6. NONTRANSFERABILITY. The options granted pursuant to the Plan shall be
nontransferable except by will or the laws of descent and distribution, and
shall be exercisable during the optionee's lifetime only by him and after his
death, by his personal representative or by the person entitled thereto under
his will or the laws of intestate succession.
7. TERMINATION OF EMPLOYMENT. Upon termination of the optionee's
employment, except as the Committee shall otherwise authorize at the time of
grant and any time thereafter, his rights to exercise options then held by him
shall be only as follows:
(a) DEATH OR DISABILITY. Upon the death of any person holding
options granted under this Plan, his options shall be exercisable, by the
holder's representative or by the person entitled thereto under his will or the
laws of intestate succession, only if and to the extent they are exercisable on
the date of his death, and such options shall terminate twelve months after the
date of his death (or such shorter period as the Committee may prescribe in his
option agreement). Upon the disability of an optionee his options shall be
exercisable only if and to the extent they are exercisable on the date of his
disability, and such options shall terminate twelve months after the date of his
disability (or such shorter period as the Committee may prescribe in his option
agreement). Notwithstanding the foregoing, with respect to options granted on or
after June 12, 1997 [date of Board approval of Plan amendments], if, upon the
disability of an optionee, the optionee's age plus years of continuous service
with the Company and its affiliates [and predecessors] (as combined and rounded
to the nearest month) equal 65 or more, then all of his options shall be
exercisable, whether or not they were exercisable on the date of such
disability, for the exercise period stated above. However, in no event shall any
option be exercised more than ten years from the date the option was granted.
For purposes of this Section 7(a), an individual is disabled if he is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
(b) RETIREMENT. Upon the retirement of an officer, director or
employee or the cessation of services provided by a nonemployee (either pursuant
to a Company retirement plan, if any, or pursuant to the approval of the
Committee) or if any officer, director, employee or non-employee optionee leaves
the Company, a Parent or a Subsidiary, for any reason other than as set forth in
Section 7(a), 7(c) or 7(d) hereof, his options shall be exercisable only if and
to the extent
5
<PAGE>
they are exercisable on the date of his retirement or cessation of services and
such options shall terminate three months after the date of his retirement or
cessation of services as the case may be (or such shorter period as the
Committee may prescribe in his option agreement). The optionee's option shall
terminate upon the expiration of such period unless the holder of the options
dies prior thereto, in which event he shall be deemed to have died on the date
of his retirement or cessation of services. Notwithstanding the foregoing, with
respect to options granted on or after June 12, 1997 [date of Board approval of
Plan amendments], if, upon the retirement of an optionee, the optionee's age
plus years of continuous service with the Company and its affiliates [and
predecessors] (as combined and rounded to the nearest month) equal 65 or more,
then all of his options shall be exercisable, whether or not they were
exercisable on the date of such retirement, for the exercise period stated
above. However, in no event shall such options be exercised more than ten years
from the date they are granted.
(c) TRANSFER TO RELATED CORPORATION. In the event that an officer,
director or employee leaves the employ of the Company to become an officer,
director or employee of any Subsidiary, or an officer, director or employee
ceases to serve as an officer or director or leaves the employ of a Subsidiary
to become an officer, director or employee of the Company or another Subsidiary,
such officer, director or employee shall be deemed to continue as an officer,
director or employee for all purposes of this Plan.
(d) OTHER TERMINATION. In the event an officer, director or employee
ceases to serve as an officer or director or leaves the employ of the Company, a
Parent or a Subsidiary, or a nonemployee ceases to provide services to the
Company, of his own volition, or if his relationship with the Company, a Parent
or a Subsidiary is terminated by the Company for cause, his options shall
terminate at the earlier of the date his employment terminates or he ceases
providing services to the Company, a Parent or a Subsidiary, or the date he
receives written notice that his employment or rendering of services is or will
be terminated.
8. ACCELERATION UPON TERMINATION OR SALE OF COMPANY. The Committee may
determine to accelerate the exercisability of any or all options after
termination of employment. In the event the Parent or its stockholders enter
into an agreement to dispose of all or substantially all of the assets or
capital stock of the Parent by means of a sale, merger, consolidation,
reorganization, liquidation or otherwise, an option granted under the Plan will,
in the discretion of the Committee, if so authorized by the Board of Directors
and conditioned upon consummation of such disposition of assets or stock, become
immediately exercisable during the period commencing as of the date of the
execution of such agreement and ending as of the earlier of the stated
termination date of the option or the date on which the disposition of assets or
stock contemplated by the agreement is consummated.
6
<PAGE>
9. ADJUSTMENT OF SHARES.
(a) In the event of changes in the outstanding Stock by reason of
stock dividends, stock splits, reverse stock splits, split-ups, consolidations,
recapitalizations, reorganizations or like events (as determined by the
Committee), an appropriate adjustment shall be made by the Committee in the
number of shares reserved under the Plan, in the number of shares set forth in
Section 4 hereof, and in the number of shares and the option price per share
specified in any stock option agreement with respect to any unpurchased shares.
The determination of the Committee as to what adjustments shall be made shall be
conclusive. Adjustments for any options to purchase fractional shares shall also
be determined by the Committee. The Committee shall give prompt notice to all
optionees of any adjustment pursuant to this Section.
(b) Section 9(a) above to the contrary notwithstanding, in the event
of any merger, consolidation or other reorganization of United States Filter
Corporation in which United States Filter Corporation is not the surviving or
continuing corporation (as determined by the Committee) or in the event of the
liquidation or dissolution of United States Filter Corporation, all options
granted hereunder shall terminate on the effective date of the merger,
consolidation, reorganization, liquidation, or dissolution unless the agreement
with respect thereto provides for the assumption of such options by the
continuing or surviving corporation. Any other provision of this Plan to the
contrary notwithstanding, all outstanding options granted hereunder shall be
fully exercisable for a period of 30 days prior to the effective date of any
such merger, consolidation, reorganization, liquidation, or dissolution unless
such options are assumed by the continuing or surviving corporation.
10. SECURITIES LAW REQUIREMENTS. The Committee may require prospective
optionees, as a condition of either the grant or the exercise of an option, to
represent and establish to the satisfaction of the Committee that all shares of
Stock acquired upon the exercise of such option will be acquired for investment
and not for resale. The Company may refuse to permit the sale or other
disposition of any shares acquired pursuant to any such representation until it
is satisfied that such sale or other disposition would not be in contravention
of applicable state or federal securities law.
11. TAX WITHHOLDING. The Company may require an optionee to pay to
the Company all applicable federal, state and local taxes which the Company
is required to withhold with respect to the exercise of an option granted
hereunder.
12. AMENDMENT. The Board of Directors may amend the Plan at any
time, except that without shareholder approval:
(a) The number of shares of Stock which may be reserved for issuance
under the Plan shall not be increased except as provided in Section 9 hereof;
(b) The option price per share of Stock may not be fixed at less
than 100% of the fair market value of a share of Stock on the date the option
was granted;
(c) The maximum period of ten years during which the options
may be exercised may not be extended;
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<PAGE>
(d) The class of persons eligible to receive options under the
Plan as set forth in Section 3 shall not be changed; and
(e) This Section 12 may not be amended in a manner that limits or
reduces the amendments which require shareholder approval.
13. TERMINATION. The Plan shall terminate automatically on February
27, 2001. The Board of Directors may terminate the Plan at any earlier
time. The termination of the Plan shall not affect the validity of any
option agreement outstanding at the date of such termination, but no option
shall be granted after such date.
14. EFFECTIVE DATE. The Plan shall be effective upon its adoption by the
Board of Directors of the Company. Options may be granted but not exercised
prior to stockholder approval of the Plan. If any options are so granted and
stockholder approval shall not have been obtained on or before February 27,
1992, such options shall terminate retroactively as of the date they were
granted.
8
