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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x[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)[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
o[X] 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
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing feeFiling Fee (Check the appropriate box):
x[X] No fee required.
orequired
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(4) Date Filed:
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Notes:
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 19971998 Annual Meeting of U.S.
Filte significant stockholdingsFilter stockholders. We will meet on Thursday, August 14, 199713, 1998, at
9:0030 a.m., Pacific Daylight Time,local time, at the Inn at
Rancho Santa Fe, 5951 Linea del Cielo, RanchoClara Marriott Hotel, 2700 Mission
College Boulevard, Santa Fe,Clara, California 92067.95052.
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,
/s/ Richard J. Heckmann
Richard J. Heckmann
Chairman of the Board,
Chief Executive Officer and
President
July 7, 19971998
i
Preliminary Copy
UNITED STATES FILTER CORPORATION
40-004 COOK STREET
PALM DESERT, CALIFORNIA 92211
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 14, 199713, 1998
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, RanchoClara Marriott Hotel, 2700 Mission College Boulevard, Santa Fe,Clara,
California 92067,95052 on Thursday, August 14, 199713, 1998, at 9:0030 a.m., Pacific Daylight Time,local time, for
the following purposes, as more fully described in the attached Proxy
Statement:
1. To elect threefour directors, each for a term of three years;
2. To approve the Company's Senior Executive Annual Incentive Plan;
3. To approve the Company's 1998 Stock Incentive Plan;
4. To approve an amendment to the Company's 1991 EmployeeDirectors 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.Plan;
5. To ratify the appointment of KPMG Peat Marwick LLP as independent
certified public accountants for the Company; and
5.6. 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, 19971998 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
/s/ Damian C. Georgino
Damian C. Georgino
Corporate Secretary
July 7, 19971998
ii
Preliminary Copy
UNITED STATES FILTER CORPORATION
40-004 COOK STREET
PALM DESERT, CALIFORNIA 92211
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PROXY STATEMENT
JulyJULY 7, 1997
---------------------------------------1998
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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, 199713, 1998,
at the Inn at Rancho Santa Fe in San Diego,Clara Marriott Hotel, 2700 Mission College Boulevard, Santa
Clara, California, at 9:0030 a.m., Pacific
Daylight Timelocal time, at 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;Senior Executive Annual Incentive Plan;
(iii) the proposal to increase the
number of authorized shares ofapprove the Company's Common1998 Stock from 150,000,000Incentive Plan; (vi)
the proposal to 300,000,000 (the "Authorized Capital Amendment");approve an amendment to the Company's 1991 Directors Stock
Option Plan; and (iv)(v) the ratification of the appointment of KPMG Peat Marwick
LLP as the Company's independent certified public accountants. With respect to
any other item of business that may come before the Annual Meeting, the proxy
holders will vote in accordance with their best judgment.
A stockholder who has returned a proxy may revoke it at any time before it
is voted at the 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 Corporate Secretary of the Company. This notice may be mailed
to the Corporate 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, 1997.1998.
Holders of record of Common Stock at the close of business on June 23, 19971998
are entitled to vote at the Annual Meeting. On that date, 80,239,254112,019,096 shares
of Common Stock were issued and 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
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. In addition, approval of the Company's
Senior Executive Annual Incentive Plan, the Company's 1998 Stock Incentive
Plan and the Company's 1991 Directors Stock Option Plan, as amended, will
require the total votes cast "For" or "Against" each such proposal to
constitute more than 50% of the outstanding shares of Common Stock. With
regard to the election of directors, votes may be cast in favor or withheld.
The threefour 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 teneleven members, divided
into three classes. The terms of office of the three classes of directors
(Class I, Class II and Class III) end in successive years. The terms of the
Class III directors expire this year and their successors are to be elected at
the Annual Meeting for a three-year term expiring in 2000.2001. The terms of the
Class IIIII and Class IIII directors do not expire until 19981999 and 1999,2000,
respectively.
The Board of Directors has nominated John L. Diederich, Nicholas C. MemmoJ. Danforth Quayle, Arthur B. Laffer,
Alfred E. Osborne, Jr. and C. Howard Wilkins, Jr.Andrew D. Seidel for election as Class III
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.Messrs. Quayle and Mr. Memmo.Moore. 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 electionMoore was
elected as a Class I director forby the first
time atBoard of Directors in September 1997 as a
designee of 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.Bass family of Fort Worth, Texas. See "Security Ownership--
Other Beneficial Owners."
CLASS III 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.2001
J. DANFORTH QUAYLE Mr. Quayle was the forty-fourth Vice President of
Age 51 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 of-
fice in January 1993, Mr. Quayle has served as
Chairman of Circle Investors, Inc. (a private finan-
cial services and insurance holding company), and
BTC, Inc. (a private company through which he oper-
ates certain of his personal business interests). He
is a director of Central Newspapers, Inc. and Ameri-
can 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 Of-
Age 57 ficer of Laffer Associates, an economic research and
Director since 1991 financial firm (and its predecessor, A.B. Laffer,
V.A. Canto & Associates), since founding the firm in
Chairman of the Audit Committee 1979. He is also Chairman of Calport Asset Manage-
ment, Inc., a money management firm. Dr. Laffer has
been Chief Executive Officer of Laffer Advisors,
Inc., a registered broker-dealer and investment ad-
visor, since 1981. He was the Charles B. Thornton
Professor of Business Economics at the University of
Southern California from 1976 through 1984, Distin-
guished University Professor at Pepperdine Univer-
sity from October 1984 to September 1987, and was a
member of President Reagan's economic policy advi-
sory board. He is a director of Coinmach Laundry
Corporation, MasTec, Inc., Oxigene Inc., Nicholas
Applegate Mutual and Growth Equity Funds and several
privately-held companies.
2
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
ALFRED E. OSBORNE, JR. Dr. Osborne is Director of the Harold Price Center
Age 53 for Entrepreneurial Studies and Associate Professor
Director since 1991 of Business Economics at the John E. Anderson Gradu-
ate School of Management at UCLA. He has been on the
Chairman of the Compensation Com- UCLA faculty since 1972. He is a director of Grey-
mittee and Member of the Audit hound Lines, Inc., Nordstrom, Inc.,
and Member of the SEDA Specialty Packaging Corporation and The Times
Audit
Committee Mirror Company.
ANDREW D. SEIDEL Mr. Seidel was appointed President and Chief Operat-
Age 36 ing Officer--North American Wastewater Group of the
Company in February 1998, having previously served
as Executive Vice President--Wastewater Group since
July 1995, and as Senior Vice President--Wastewater
Group and General Manager of U.S. Filter, Inc.,
Warrendale, Pennsylvania, from September 1993 to
July 1995. He had previously served as Vice Presi-
dent--Membralox Group since December 8, 1992. Mr.
Seidel is a member of the Board of Directors of
Treated Water Outsourcing ("TWO"), a joint venture
between the Company and Nalco Chemical Company.
3
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
JAMES E. CLARK Mr. Clark was President of Western Operations for
Age 69 Prudential Insurance from 1978 to June 1990. Since
Director since 1990 Since June 1990, he has been a consultant and a private
investor. Mr. Clark is also Chairman of Asian-Ameri-
Member of the Audit Committee and can Communication Company, Inc., and a director of
the Compensation Committee Asian American Association, Inc., a 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 54 Directors, Chief Executive Officer and President of
Director and Chairman since 1990 the Company on July 16, 1990. Mr. Heckmann was a Se-
nior Vice President at Prudential-Bache Securities
Chairman of the Nominating Commit- in Rancho Mirage, California from January 1982 to
tee August 1990. He joined the U.S. Small Business Ad-
ministration in 1977 and served as Associate Admin-
istrator for Finance and Investment from 1978 to
1979. Prior thereto he was founder and Chairman of
the Board of Tower Scientific Corporation, a manu-
facturer of custom prosthetic devices, which was
sold to Hexcel Corporation in 1977. He is also a di-
rector of USA Waste Services, Inc., United Rentals,
Inc. and K2, Inc.
ROBERT S. HILLAS Mr. Hillas was appointed Chairman, President and
Age 49 Chief Executive Officer of Envirogen, Inc., an envi-
Director since 1996 ronmental systems and services company, in April
1998. Mr. Hillas has served as a member of
Envirogen's Board of Directors since April 1997.
From 1993 to April 1998, Mr. Hillas served as a Man-
aging Director of E.M. Warburg, Pincus & Co., LLC,
or its predecessor. Mr. Hillas is also a director of
Advanced Technology Materials, Inc., Transition Sys-
tems, Inc. and several privately held companies.
3
CLASS I DIRECTORS--PRESENT TERM EXPIRES IN 2000
JOHN L. DIEDERICH Mr. Diederich was Executive Vice President--Chair-
Age 61 man's Counsel for Aluminum Company of America
Director since 1993 ("Alcoa") from August 1991 until January 1997, when
he retired. Mr. Diederich is a director of Continen-
Member of the Compensation tal Mills, Inc. and a trustee of Shadyside Hospital.
Committee
NICHOLAS C. MEMMO Mr. Memmo was appointed President/Chief Operating
Age 36 Officer of the North American Process Water Group of
Director since 1997 the Company in February 1998. From July 1995 to Feb-
ruary 1998, Mr. Memmo served as Executive Vice Pres-
ident--Process Water of the Company and from March
1994 to July 1995, Mr. Memmo served as Senior Vice
President and General Manager of U.S. Filter/Ionpure
Inc. From December 1992 to March 1994 Mr. Memmo
served as Senior Vice President--Sales & Marketing
of the Company.
ARDON E. MOORE Mr. Moore, an investment advisor to the Bass family
Age 40 of Fort Worth, Texas, has been a Vice President of
Director since 1997 Lee M. Bass, Inc., a corporation with operations in
ranching, oil and gas exploration and production and
real estate and investments in corporate securities,
for more than ten years. Mr. Moore currently serves
as President of the Fort Worth Zoological Associa-
tion and is a director of Texas Water Foundation,
Inc.
C. HOWARD WILKINS, JR. Mr. Wilkins served as the United States Ambassador
Age 60 to the Netherlands from June 1989 to July 1992.
Director since 1992 Prior to being Ambassador and thereafter, Mr. Wil-
kins has been Chairman of the Board of Maverick Res-
Member of the Compensation taurant Corporation, which owns and operates restau-
Committee rants under franchise agreements, and Maverick De-
velopment Corporation.
Meetings and a
private investor. Mr. Clark is also Chairman of
MemberCommittees 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.Board. During the fiscal year ended March 31,
19971998 ("Fiscal 1997"fiscal 1998"), the Board of Directors met on six occasions.four occasions and also
took action four times by unanimous written consent and three times by
telephonic conference call. 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 and
took part in all telephonic conference calls among Board members during Fiscal 1997.fiscal
1998.
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
auditors and the independent accountants, and
reviews the Company's systems of internal control. Additionally, the Audit
Committee is responsible for overseeing the Company's corporate compliance
program. 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.fiscal 1998.
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
4
"Directors Plan"). and the Company's Executive Severance Pay 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 twothree meetings and took action by
written consent on two occasionsone occasion in Fiscal 1997.fiscal 1998.
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 Corporate 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.fiscal 1998.
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,fiscal 1998, options to purchase
18,00012,000 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,1997 at an exercise price of
$18.6666$30.875 per share (as adjusted to reflect the 3-for-2 stock split).share.
5
SECURITY OWNERSHIP
ManagementMANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of June 23, 19971998 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.
Options Percent of
Name Held(1) Shares Owned Class(2)
- ----------------------------------- ------------- -------------- -----------SHARES BENEFICIALLY PERCENT OF
NAME OWNED/1/ CLASS/2/
---- ------------------- ----------
Richard J. Heckmann................ 461,649 689,057(3) 1.4%
Michael J. Reardon................. 196,881 37,386(4) *
Tim L. Traff....................... 14,620 208,279Heckmann........................... 1,299,456/3/ 1.2%
Harry K. Hornish, Jr. ........................ 64,811 *
Nicholas C. Memmo.................. 109,749 2,518(5)Memmo............................. 131,081 *
Harry K. Hornish, Jr............... 42,111 30,200Andrew D. Seidel.............................. 112,912 *
Kevin L. Spence.................... 95,749 10,000Spence............................... 125,124 *
James E. Clark..................... 66,000 72,000Clark................................ 150,000 *
John L. Diederich.................. 66,000 11,250Diederich............................. 89,250 *
Robert S. Hillas................... 12,000(6) 2,719,618(7) 3.4%Hillas.............................. 27,000 *
Arthur B. Laffer................... 66,000 52,875(8)Laffer.............................. 130,875/4/ *
Ardon E. Moore................................ 172,480 *
Alfred E. Osborne, Jr.............. 66,000 63,025(9)Jr. ....................... 149,125/5/ *
J. Danforth Quayle................. 39,000 0Quayle............................ 51,000 *
Michael J. Reardon............................ 251,142
C. Howard Wilkins, Jr.............. 66,000 76,500Jr. ....................... 158,000 *
All Directors and Executive
Officers as a Group (18(23 persons).. 1,319,759 3,972,708 6.5%
- ---------------------
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
9 Includes 8,500 shares held by Mr. Osborne's wife.
............. 5,974,098 5.2%
- --------
/1/ Includes stock options exercisable within 60 days of June 23, 1998 as
follows: Mr. Heckmann, 639,774 shares; Mr. Hornish, 34,611 shares; Mr.
Memmo, 126,563 shares; Mr. Seidel, 112,624 shares; Mr. Spence, 105,124
shares; Mr. Clark, 60,000 shares; Mr. Diederich, 60,000 shares; Mr. Hillas,
24,000 shares; Dr. Laffer, 60,000 shares; Mr. Moore, 24,000 shares; Mr.
Osborne, 60,000 shares; Mr. Quayle, 51,000 shares; Mr. Reardon, 213,756
shares; Mr. Wilkins, 60,000 shares; and All Directors and Executive Officers
as a Group, 2,168,034 shares. All options were granted pursuant to the
Company's 1991 Employee Stock Option Plan or the Directors Plan.
/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 48,000 shares held by Laffer Associates, a company controlled by
Dr. Laffer and 4,875 held in Dr. Laffer's retirement account.
/5/ Includes 8,500 shares held by Mr. Osborne's wife.
OTHER PRINCIPAL BENEFICIAL OWNERS
Putnam Investments, Inc., One Post Office Square, Boston, Massachusetts,
02109,The Equitable Companies Incorporated, a parent holding company located at
1290 Avenue of the Americas, New York, New York 10104, reported to the United
States Securities and Exchange Commission ("SEC") that it beneficially owned
5,314,6136,495,193 shares, or approximately 7.6%6.2% of the Company's Common Stock as of
December 31, 1996. Putnam
Investments, Inc.1997. AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle, Alpha Assurances Vie Mutuelle, AXA Courtage Assurance Mutuelle and
AXA-UAP each reported sole power to vote 2,293,783 of these shares, shared
voting power over 250,600to vote 4,046,600 of these shares, sole power to dispose of 6,468,563 of
these shares and shared power to dispose of all26,629 of these shares; Putnam Investment Management,
Inc.shares. The
Equitable Companies Incorporated reported sole power to vote 2,193,783 of
these shares, shared power to vote 4,046,000 of these shares, sole power to
dispose of 4,712,563 of these shares; and The
Putnam Advisory Company, Inc. reported shared voting power over 250,6006,368,563 of these shares and shared power to dispose of 602,05026,629 of
these shares.
Pilgrim Baxter & Associates, Ltd.6
Apollo Investment Fund, L.P., 1255 Drummers Lane, Suite 300, Wayne,
Pennsylvania 19087, an investment advisor,a Delaware limited partnership with its
principal office address c/o CIBC Bank and Trust Company, Grand Cayman, Cayman
Islands, British West Indies and Lion Advisor, L.P, a Delaware limited
partnership with its principal office address at Two Manhattanville Road,
Purchase, New York 10577, reported to the SEC that itthey beneficially owned 3,692,250own an
aggregate of 13,752,860 shares or approximately 5.3 %(the "Shares") of the Company's Common Stock,
or approximately 8.7% of the Company's Common Stock outstanding as of December 31, 1996. It reported shared voting power and sole
power to dispose of all these shares.July 1,
1998.
SECTION 16(A)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.
OsborneThierry Reyners, President/Chief Operating Officer of the European Water and
Memmo eachWastewater Group, reported one option exercisepurchase of the Company's Common Stock 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.4. In making these statements, the Company has relied
on copies of the reports that its officers and directors have filed with the
SEC.
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the three fiscal
years ended March 31, 19971998 for the Company's Chief Executive Officer and for
the four other most highly compensated executive officers of the Company for
Fiscal
1997fiscal 1998 (the "Named Executive Officers").
Long-Term
Annual Compensation Compensation
-----------------------------LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/1/ COMPENSATION/2/
- --------------------------- ------ ------- ------- ------------ ------------ ---------------
Other Securities
Name and Principal Fiscal Annual Underlying All Other
Position Year Salary Bonus Compensation Options(1) Compensation(2)
- ---------------------- -------- --------- -------- ------------- ------------- --------------
Richard J. Heckmann......Heckmann 1998 450,000 450,000 -- 150,000 5,322
Chairman of the Board, 1997 450,000 300,000 -- 187,499 3,320
Chairman of the Board,Chief Executive Officer 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)../3/.................. 1998 251,270 100,000 -- 15,000 2,479
President and Chief
Operating 1997 115,575 100,000 -- --(4) /4/ 3,538
Executive ViceOfficer--Waterworks 1996 -- -- -- -- --
President-- 1995 -- -- -- -- --
Distribution Group
Nicholas C. Memmo........Memmo 1998 215,923 55,000 -- 25,000 4,718
President and Chief
Operating 1997 199,154 37,500 -- 15,000 4,923
Executive ViceOfficer--North American 1996 189,042 37,500 -- 17,500 5,014
President--Process 1995 135,000Process Water Group
Andrew D. Seidel......... 1998 213,462 55,000 -- 25,000 4,536
President and Chief
Operating 1997 181,249 20,000 -- 22,500 4,389
Water15,000 5,322
Officer--North American 1996 153,535 -- -- 15,000 4,980
Wastewater Group
Kevin L. Spence..........Spence 1998 204,654 33,000 -- 20,000 3,647
Executive Vice President 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 20,000Officer................. 1996 164,774 41,500 -- 15,000 4,453
Officer
- ------------------------
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.
44,865
- --------
/1/ Represents options granted pursuant to the Company's 1991 Employee Stock
Option Plan to purchase shares of Common Stock. Option grants during fiscal
1998 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 The Utility Supply Group, Inc.
("USG"), Mr. Hornish became an employee of the Company on October 25, 1996.
See "--Executive Severance Plan and Employment Agreements."
/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.
8
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 1997fiscal 1998 under the Company's 1991
Employee Stock Option Plan. The options listed below are included in the
Summary Compensation Table above.
% 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) YearOF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM/2/
OPTIONS IN FISCAL EXERCISE EXPIRATION -----------------------------
NAME GRANTED/1/ YEAR PRICE ($/Sh) Date for Option Term(2)
- ----------------- ---------- ------------- ----------- ------------- ------------------------------SH) DATE 5% 10%
---------------- ---- ---------- ---------- ------------ ---------- -------------- --------------
Richard J. Heckmann............... 75,000 9.9% $19.5000 07/15/2006Heckmann..... 150,000 6.9% $ 919,75827.25 6/30/07 $ 2,330,848
112,499 14.9% 18.6666 04/01/2006 1,320,662 3,346,817
Michael J.
Reardon................2,570,607 $ 6,514,422
Harry K. Hornish, Jr. .. 15,000 1.98% 19.5000 07/15/2006 183,952 466,170
Harry K.Hornish, Jr.... --(3) -- -- -- -- --
Hornish, Jr............0.9% 27.25 6/30/07 257,061 651,442
Nicholas C. Memmo...... 15,000 1.98% 19.5000 07/15/2006 183,952 466,170Memmo....... 25,000 1.1% 27.25 6/30/07 428,434 1,085,737
Andrew D. Seidel........ 25,000 1.1% 27.25 6/30/07 428,434 1,085,737
Kevin L. Spence........ 15,000 1.98% 19.5000 07/15/2006 183,952 466,170Spence......... 20,000 0.9% 27.25 6/30/07 342,748 868,590
Increase in Value to All
Stockholders(4)... $739,780,070 $1,874,747,943
- --------------------
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.
Stockholders/3/........ $1,643,628,842 $4,165,278,193
9
- --------
/1/ Options granted pursuant to the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock. The exercise price may be paid in cash or
in shares of the Company's Common Stock. Of the options granted to Messrs.
Heckmann, Hornish, Memmo, Seidel and Spence, 25% are vested and the
remaining options will vest in equal increments on July 1, 1998, 1999 and
2000.
/2/ Calculated over a ten-year period representing the life of the options.
/3/ 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 $27.25, the
closing price on June 30, 1997, on the NYSE, which is the exercise price of
substantially all of the options granted in fiscal 1998, and the total
weighted average number of 95,909,000 shares of Common Stock outstanding in
fiscal 1998.
OPTION EXERCISES IN FISCAL 19971998 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 1997fiscal 1998 and the number of
unexercised options held by such persons on March 31, 19971998, on a pre-tax
basis:
Number of Securities
Shares Underlying Value of Unexercised
Acquired Unexercised In-the-Money Options
On Exercise Value Options atNUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON EXERCISE OF OPTIONS AT 3/31/97 at98 AT 3/31/97
of Options(1) Realized Exercisable/Unexercisable Exercisable/Unexercisable(2)98
OPTIONS/1/ VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE/2/
--------------- -------------- ------------- --------------------------- ------------------------------------------------------ ----------------------------
Richard J. Heckmann.... 145,550 $4,244,943 336,025/275,622 $6,716,177/4,516,442
Michael J. Reardon.....Heckmann..... -- $ -- 187,507/ 28,123 4,435,954/ 445,351499,149/262,500 $11,204,836/3,808,601
Harry K. Hornish, Jr... 25,000 744,187 42,111/ 0 1,160,790/ 0Jr.... 15,000 437,378 30,861/11,250 892,068/88,594
Nicholas C. Memmo...... 6,500 113,944 97,562/ 32,813 1,994,475/ 540,201Memmo....... 6,000 97,694 116,563/32,812 2,726,446/404,560
Andrew D. Seidel........ 5,000 115,556 102,624/31,874 2,390,581/384,588
Kevin L. Spence........ 13,000 85,625 86,375/ 28,123 1,773,474/ 445,351
- --------------------------------------
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.
Spence......... 10,000 224,862 96,374/28,124 2,250,523/355,057
- --------
/1/ Represents options under the Company's 1991 Employee Stock Option Plan to
purchase shares of Common Stock.
/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, 1998, of $35.125 per share.
9
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, Seidel 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.
TheAs of August 1997, the following are the benefits payable per year for 15
years under the Retirement Program for Messrs. Heckmann, Reardon, Memmo, Seidel 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;$636,545; Mr. Memmo $322,510;$443,451; Mr. Seidel $443,451; and Mr. Spence
$233,743.$280,371.
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.
EXECUTIVE SEVERANCE PAY PLAN AND EMPLOYMENT AND EXECUTIVE RETENTION AGREEMENTS
Executive Severance Pay Plan. The United States Filter Corporation Executive
Severance Pay Plan (the "Severance Plan") was adopted by the Board of
Directors on June 9, 1998 effective as of January 1, 1998. It entitles
eligible executives to certain severance benefits only upon termination of
employment by the Company has entered into Executive Retention Agreements with eachwithout cause (as defined) or termination by the
employee for good reason (as defined) provided that, except following a change
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 positionscontrol (as defined below), they do not compete with the Company or as
otherwise determined, providedsolicit
its employees during the duties to be performed are those of a senior
executive or managerremainder of the Company.term of the employment agreement and
for one year thereafter. The Retention Agreements provideSeverance Plan also requires 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 caseconfidential
information not be disclosed. A change of Messrs. Memmo and Spence, one times such individuals'
annual salary, in the case
10
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-Controlcontrol 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 Companygenerally 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.
Initially only the Chief Executive Officer has been designated to
participate in the Severance Plan. It replaces his Executive Retention
Agreement previously in force. Other executive officers may be designated as
participants in the future (which may be in lieu of any Retention Agreement or
other severance arrangement to which any such executive officer is a party).
The benefit provided to the Chief Executive Officer in connection with an
eligible termination is the sum of his base salary plus the minimum annual
incentive (determined without regard to any performance goals) for the balance
of the term of his employment agreement.
The benefit provided to any other eligible executive under the Severance
Plan, should the Company designate any other executive as eligible, would
consist of base salary for the balance of the term of an employment agreement
that the Company would enter into with the executive plus target annual
incentive for the year in which employment terminated times the number of full
and partial years remaining in such employment term (determined without regard
to any performance goals); and a lump sum equal to the greater of the present
value of the health, life insurance, disability and accident insurance plans
or programs for the remaining term of the agreement, and 1.5 times the present
value of one year of such coverage.
Payment of the severance benefit shall be made within 30 days after
termination of employment.
10
Employment Agreement--Chief Executive Officer. On June 9, 1998 the Company
entered into an employment agreement (the "CEO Agreement") with Richard J.
Heckmann, for his employment as Chief Executive Officer and President. The CEO
Agreement is effective as of January 1, 1998 for a term of 63 months, and
shall be automatically extended by one full calendar month on May 1, 1998, and
on the first day of each month thereafter. It provides for an annual base
salary of $750,000, to be reviewed annually for increase by the Compensation
Committee, and for a minimum annual incentive of at least 60% of base salary,
subject to performance goals negotiated in good faith by the Company and Mr.
Heckmann. It also entitles Mr. Heckmann to participate in all senior executive
incentive compensation plans and programs and all employee benefit, vacation,
and fringe benefit plans and programs.
Upon termination of employment for whatever reason, the CEO Agreement
provides for the payment of any unpaid base salary through the date of
termination; a prorated annual incentive based on the minimum annual incentive
determined without regard to any performance goals; any deferred compensation,
accrued vacation or expenses owed; any other compensation or benefits provided
in accordance with any Company plans and programs; and continuation of Company
welfare plans for Mr. Heckmann and/or his family for the balance of the term
of the agreement (24 months when termination is due to death or disability.)
In the event of termination due to death or disability, the CEO Agreement
also provides a lump sum equal to two times the base salary in effect on the
date of termination plus two times the minimum annual incentive determined
without regard to any performance goals; and full and immediate vesting of any
unvested stock options or restricted stock awards.
In the event of termination by the Company without cause or by Mr. Heckmann
for good reason (both as defined in the CEO Agreement), the CEO Agreement
provides for the full and immediate vesting of any unvested stock options or
restricted stock awards and the payment of benefits under the Severance Plan,
described above. If such a termination occurs following a change of control
(as defined in the Severance Plan), Mr. Heckmann is entitled to an additional
payment, if necessary, to make him whole as a result of any excise tax imposed
by the United States Internal Revenue Code of 1986, as amended (the "Code") on
certain change of control payments.
As part of the CEO Agreement and the Severance Plan, Mr. Heckmann is
restricted from engaging in any business then being conducted by the Company
during the term of the CEO Agreement and, except if Mr. Heckmann is terminated
without cause or terminates for good reason following a change of control, for
a period of one year thereafter.
Retention and Employment Arrangements--Named Executive Officers Other than
the Chief Executive Officer. The Company is a party to Executive Retention
Agreements with each of the Named Executive Officers, other than Mr. Heckmann
and Mr. Hornish (the "Other Executive Officers"). Each of those agreements
(the "Retention Agreements") is identical. The Retention Agreements provide
for the employment of the Other 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 one times such
individual's annual salary. Following a change-of-control of the Company, the
Retention Agreements provide for certain benefits if, within one year of the
change-of-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 Other Executive Officers have the right to receive the same
multiple of their annual salary above described, but including their latest
incentive award or target incentive, if greater, and the Company is also
obligated to maintain for one year for the executive the welfare and
retirement plans available to the executive or to provide an equivalent. Under
the Retention Agreements, a change-of-control of the Company generally 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.
11
Mr. Hornish entered into a separate employment agreement with USG (the
"Employment"Hornish 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 EmploymentHornish 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 EmploymentHornish Agreement
provides for maximum bonuses of up to $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 EmploymentHornish Agreement, such bonuses shallwill 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
seveneleven additional individuals. The Compensation Committee also administers the
Company's 1991 Employee Stock Option Plan, the Retirement Program and would
administer the proposed 1998 Stock Incentive Plan, and, with Mr. Heckmann, the
Company'sproposed Senior Executive Annual Incentive Plan.
Compensation Plan.
COMPENSATION POLICY AND PRACTICE.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 19961998 to review the Company's executive compensation levels and programs
and to provide input to the Compensation Committee. To evaluate competitive
compensation practices, the Company relied not only on the peer group in the
performance graph, consisting of direct industry competitors, but also on a
broader group of industrial companies that are more similar in size to the
Company. 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.with general industry
practices.
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 the four other
highest-paid executive officers unless such compensation qualifies as
"performance-based." The Company willwas not
be affected by this limitation for the
19971998 tax year. The Compensation Committee intends to reviewhas reviewed this issue periodically to determine whether further changes
to the Company's compensation policies and, practices are advisable in order to
preserve deductibility.
11
deductibility going forward, has recommended that the Company seek
approval from stockholders to adopt the Senior Executive Annual Incentive Plan
that is designed to meet the requirements of Section 162(m).
Compensation of the Company's executive officers consists of the following
elements: base salary, annual cash bonus payments under the Annual Incentive
Compensation Planincentives and stock option awards under the 1991 Employee Stock Option
Plans.long-term stock-based
incentives. Each of these elements is discussed below.
BASE SALARY.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 or her position with the Company. These factors are then assessed in
the context of competitive market factors, including competitive opportunities
with other industrial 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 and competitive
salary data and the prior year's national percentage increase in the cost of living.
ANNUAL CASH INCENTIVE.data.
Annual Cash Incentives. 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 eligible staff executives, the maximum
award
12
level is 25% 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 beis
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.
After fiscal 1998, annual cash incentives for the Chief Executive Officer
and any other participating executive officers will be determined under the
Senior Executive Annual Incentive Plan described below provided that such plan
is approved by the stockholders.
Fiscal 1998 Annual Cash Incentives. Mr. Hornish's bonus for fiscal 1998 was
paid pursuant to his Employment Agreement.Agreement based on performance objectives
established for USG prior to its acquisition by the Company. Bonuses for
Messrs. Seidel, Memmo and Spence were based on an assessment of each executive
in relation to the above criteria. In particular, the cash bonuses paid
reflect that the Company exceeded its profit plan, and that the businesses
supervised by the executives exceeded their profit plan. Information with
respect to the cash bonuses paid to the Named Executive Officers in Fiscal 1997fiscal
1998 is provided in the Summary Compensation Table above.
STOCK OPTIONS. The grantLong-Term Incentives. Long-term incentive compensation is intended to focus
the efforts of stock options underexecutive officers and key employees on performance that will
increase the equity value of the Company for its stockholders. 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. OptionsCompany may be granted stock options. Under the proposed 1998 Stock Incentive
Plan, subject to the approval of stockholders, officers and key employees of
the Company may be granted stock options, and from time to time, stock
appreciation rights, restricted shares, and performance awards. Stock 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 optionsincentives, and its policy of optionstock
incentive grants by the Compensation Committee hashave reflected and can be
expected to continue to reflect this belief.
CHIEF EXECUTIVE OFFICERFiscal 1998 Long-Term Incentives. Only stock option grants under the
Company's 1991 Employee Stock Option Plan were made in fiscal 1998 to the
Named Executive Officers. Information with respect to these grants is provided
in the Summary Compensation Table above.
Chief Executive Officer Compensation. In determining Mr. Heckmann's
compensation for Fiscal 1997,fiscal 1998, the Compensation Committee focused upon the
policies described above. The increases in Mr. Heckmann's salaryannual incentive 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 1997fiscal 1998 under Mr. Heckmann'shis leadership, including his continued 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,fiscal 1998, Mr. Heckmann received a bonusan annual
incentive under the Annual Incentive Compensation Plan equal to 67% of his base salary of $450,000,
as a
combined result ofbased on the Company's exceeding its profit plan, successful completion of
strategic acquisitions and the Compensation Committee's assessment of Mr.
Heckmann's role in that success.
On June 9, 1998, the Company and Mr. Heckmann entered into a new employment
contract. See "Executive Severance Plan and Employment Agreements--Employment
Agreement--Chief Executive Officer." For fiscal 1999, the Compensation
Committee has determined that Mr. Heckmann's salary be increased to
13
$750,000 based on his contributions to the Company, the complexity of leading
a company that now has seven business groups and annual revenue for fiscal
1998 in excess of $3 billion, his ongoing role in the integration of the
Company's numerous acquisitions, the expectation that the Company will
continue to experience rapid growth, and competitive opportunities with other
publicly-traded industrial companies.
The Compensation Committee believes that Mr. Heckmann's overall compensation level
is warranted by his roles in both the strategic and operational aspects of the
Company's business, the value he bringscontinues to bring 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
Alfred E. Osborne, Jr., Chairman
James E. Clark
John L. Diederich
C. Howard Wilkins, Jr.
14
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" indicesa
peer group index for the five-year period commencing March 31, 19921993 and ending
March 31, 1997.1998. 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
secondIn the future, WTI
will not be included in the peer group index is identical tobecause (i) the one used in Fiscal 1996. WTI is
included in both indices. The Company acquired WTI'sthe
WTI businesses that made it a "peer"--WTI's Water Systems and Manufacturing
Group on December 2, 1996, and its contract operations and privatizationprivitization
business on April 1, 1997. Accordingly,1997, and (ii) WTI will not be included
in future peer group indices.announced on March 30, 1998 that it
has agreed to merge the other businesses with Waste Managment, Inc.
The indices assume that the value of the investment in the Company's Common
Stock and each index was $100 on March 31, 19921993, and that dividends were
reinvested.
[PERFORMANCELOGO
INDEXED TOTAL SHAREHOLDER RETURN
PERFORMANCE GRAPH APPEARS HERE]HERE
3/31/92 3/31/93 3/31/94 3/31/95 3/29/96 3/31/97
--------- --------- --------- -------- --------- ---------Measurement Period U.S. Filter NYSE Composite Peer Group
(Fiscal Year Covered) Common Stock Stock Index Index
- ------------------- ------------ -------------- ----------
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 $81.00Base Period 3/31/93 $100 $100 $100
Years Ending:
3/31/94 $ 97.8384.50 $ 84.99
Peer Group Index II(2)....... $100.00 $120.38 $108.53 $87.40 $106.2999.05 $ 92.36
- ----------------------
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.
89.87
3/31/95 $ 93.00 $108.67 $ 70.83
3/31/96 $168.00 $139.09 $ 86.09
3/31/97 $277.88 $159.79 $ 74.64
3/31/98 $316.13 $229.64 $ 83.26
13Source: Standard and Poor's Compustat Total Return Service
Peer Group
- ------------------------------------
Air & Water Technologies Corporation
Calgon Carbon Corporation
Ionics, Incorporated
Osmonics, Inc.
Wheelabrator Technologies Inc.
15
PROPOSAL TO APPROVE THE 1991 EMPLOYEE STOCK OPTIONSENIOR EXECUTIVE
ANNUAL INCENTIVE PLAN
AS AMENDED AND RESTATED
Stockholders are being asked to approve the Company's 1991 Employee Stock
Option Plan, as amended and restated byOn June 9, 1998, 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 allCompany adopted, subject to
approval by the stockholders of the amendmentsCompany, the United States Filter
Corporation Senior Executive Incentive Plan (the "Executive Incentive Plan")
to provide the 1991 Employee Stock
Optionchief executive officer of the Company and certain other key
employees with a performance-based annual Award (as defined below) for fiscal
years beginning on or after April 1, 1998. The Executive Incentive Plan was
designed by the Company with the assistance of a nationally-recognized
compensation consulting firm.
The Executive Incentive Plan is designed to satisfy the requirements for
deductibility under Section 162(m) of the Code. Section 162(m) of the Code
denies a deduction by a publicly-held company for annual compensation in
excess of $1 million per executive paid to any of the chief executive officer
or the four other most highly compensated executive officers who are employed
at the end of the fiscal year. Certain types of compensation, including
compensation paid based on the achievement of pre-established performance
goals, are excluded from this deduction limit. For compensation to qualify for
this exclusion, the material terms pursuant to which will, among other things, increase the amount of Common Stock
thatcompensation is authorized to be
issued underpaid, including the planperformance goals, must be disclosed to, and approved by,
2,500,000 shares, allow
optioneesthe stockholders in a separate vote prior to tender inthe payment of the option exercise price only shares heldcompensation.
The Executive Incentive Plan is performance-based in that the Awards payable
thereunder are determined with reference to the Company's Net Income (as
defined below). Accordingly, the Executive Incentive Plan is being submitted
to the stockholders for approval so that payments thereunder will be exempt
under Section 162(m) of the Code.
Administration. The Executive Incentive Plan is administered by the
optioneeCompensation Committee, which is currently composed of four members of the
Board of Directors who qualify as "outside directors" under Section 162(m) of
the Code (the "Committee"). The Committee has the authority to designate the
key employees eligible to participate in the Executive Incentive Plan (other
than the Chief Executive Officer), to certify attainment of performance goals
and other material terms, to construe and interpret the Executive Incentive
Plan and make all other determinations deemed necessary or advisable for the
administration of the Executive Incentive Plan.
Eligibility and Participation. The Chief Executive Officer of the Company
will participate automatically in the Executive Incentive Plan during each
fiscal year. In addition, the Committee may, in its sole discretion, select
other key employees of the Company to be eligible to participate in the
Executive Incentive Plan for any fiscal year. It is presently anticipated that
11 executives, including the Named Executive Officers, in addition to the
Chief Executive Officer will participate in the Executive Incentive Plan for
the fiscal year that began April 1, 1998.
Determination of Awards. Subject to the Committee's discretion to pay a
lesser amount, as of the first day of a fiscal year, the Chief Executive
Officer will be entitled to an Award equal to one percent (1.0%) of Net Income
for such fiscal year, not to exceed $3,000,000. Also subject to the
Committee's discretion to pay a lesser amount, each individual who becomes a
participant after the first day of a fiscal year shall be entitled to a
prorated Award based on the number of days of participation during such fiscal
year.
For purposes of the Executive Incentive Plan, "Net Income" means the
consolidated net after-tax income of the Company, after adjustment to omit the
effects of any non-recurring or extraordinary items and the cumulative effects
of changes in accounting principles as shown in the Company's audited
consolidated statement of income.
Form and Payment of Awards. Subject to the Committee's written certification
of the Net Income achieved by the Company in connection with any applicable
fiscal year, Awards will be paid in a lump sum cash payment as soon as
practicable after the amount thereof has been determined. Except as otherwise
provided below, no Award will be payable to any participant who is not an
employee of the Company on the last day of such fiscal year. The Committee
may, subject to such terms and conditions and within such limits as it may
from
16
time to time establish, permit one or more participants to defer the receipt
of amounts due under the Executive Incentive Plan.
Termination of Employment. If a participant's employment with the Company
terminates due to death, disability, or retirement, the participant or his or
her beneficiary, as the case may be, will be paid a prorated Award in cash at
the same time that Awards are otherwise paid under the Executive Incentive
Plan based on the number of days of participation during the fiscal year in
which the termination occurs. If a participant's employment with the Company
is terminated for cause (as defined in the Executive Incentive Plan), his
right to the payment of an Award and all other rights under the Executive
Incentive Plan will be forfeited.
If a participant's employment with the Company is terminated involuntarily
by the Company without cause or voluntarily by the Participant for good reason
(as defined in the Executive Incentive Plan), he or she shall be entitled to
an Award to the extent provided in the Severance Plan.
Amendment and Termination. The Board of Directors may at any time and from
time to time amend or terminate the Executive Incentive Plan in whole or in
part; provided, that no amendment may be made after the date on which an
employee is selected as a participant for a fiscal year that would affect
adversely any of the rights of any participant for such fiscal year.
U.S. Federal Income Tax Consequences. All payments under the Executive
Incentive Plan will be taxable ordinary income to the participants under the
Code in the year of receipt and the Company will be entitled to a
corresponding U.S. federal income tax deduction at such time.
VOTE REQUIRED
Approval of the Executive Incentive Plan will require the affirmative vote
of at least six months, permit the tender of such shares without
requiring actual deliverya majority in voting interest of the certificates forstockholders present in
person or by proxy and voting at the Annual Meeting, assuming the presence of
a quorum. In addition, approval of the Executive Incentive Plan will require
the total votes cast "For" or "Against" the Executive Incentive Plan to
constitute more than 50% of the outstanding shares of Common Stock. If the
stockholders do not approve the Executive Incentive Plan, it will not be
implemented, but the Company reserves the right to adopt such shares, confirm that
"cashless" exercises of options through a broker are permittedother
compensation plans and provide for
the full vesting of options granted on or after June 12, 1997programs as it deems appropriate and in the casebest
interests of the Company and its stockholders.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE EXECUTIVE INCENTIVE PLAN
AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" ADOPTION OF THE
EXECUTIVE INCENTIVE PLAN.
PROPOSAL TO APPROVE THE 1998 STOCK INCENTIVE PLAN
The Board of Directors of the Company adopted and approved effective as of
June 9, 1998 a disabled or retiring optionee whose years of agenew compensation plan to be sponsored and continuous service total 65
or more.maintained by the
Company, to be known as the United States Filter Corporation 1998 Stock
Incentive Plan (the "Stock Incentive Plan"). The Stock Incentive Plan is
subject to approval by the Company's stockholders.
The Company believes that in order to attract, retain and motivate key
employees it is desirable to offer to such employees equity-based
compensation. The Stock Incentive Plan is intended to be a flexible vehicle
under which a variety of types of equity-based and cash-based compensation
awards, including stock options, stock appreciation rights, restricted stock
and performance awards, can be made. The closing price of the Company's Common
Stock on June 23, 1998, as reported on the New York Stock Exchange
Consolidated Transactions Reporting System, was $28.3125 per share.
17
Administration. The Stock Incentive Plan would be administered by a
committee of the Board of Directors of the Company (the "Committee") comprised
of at least two persons. The Committee shall have the sole discretion to
interpret the Stock Incentive Plan, establish and modify administrative rules,
impose conditions and restrictions on awards, and take such other actions as
it deems necessary or advisable. With respect to participants who are not
subject to Section 16 of the Exchange Act, the Committee may delegate its
authority under the Stock Incentive Plan to one or more officers or employees
of the Company. In addition, the full Board of Directors of the Company can
perform any of the functions of the Committee under the Stock Incentive Plan.
Amount of Stock. The Stock Incentive Plan provides for awards of up to
3,000,000 shares of Common Stock. The number and kind of shares subject to
outstanding awards, the purchase price for such shares and the number and kind
of shares available for issuance under the Stock Incentive Plan is subject to
adjustments, in the sole discretion of the Committee, in connection with the
occurrence of mergers, recapitalizations and other significant corporate
events involving the Company. The shares to be offered under the Stock
Incentive Plan will be either authorized and unissued shares or issued shares
which have been reacquired by the Company.
Eligibility and Participation. The participants under the Stock Incentive
Plan will be those employees and consultants of the Company or any subsidiary
who are selected by the Committee to receive awards, including officers who
are also directors of the Company or its subsidiaries. Approximately 22,000
persons will initially be eligible to participate. No participant can receive
awards under the Stock Incentive Plan in any calendar year in respect of more
than 300,000 shares of Common Stock.
Amendment or Termination. The Stock Incentive Plan has no fixed expiration
date. The Committee will establish expiration and exercise dates on an award-
by-award basis. However, for the purpose of awarding incentive stock options
under Section 422 of the Code ("incentive stock options"), the Stock Incentive
Plan will expire ten years from its effective date and certain provisions of
the Stock Incentive Plan relating to performance-based awards under Section
162(m) of the Code will expire on the fifth anniversary of the date of
stockholder approval of the Stock Incentive Plan.
Stock Options. The Committee may grant to a participant incentive stock
options, options which do not qualify as incentive stock options ("non-
qualified stock options") or a combination thereof. The terms and conditions
of stock option grants including the quantity, price, vesting periods, and
other conditions on exercise will be determined by the Committee. Incentive
stock option grants shall be made in accordance with Section 422 of the Code.
The exercise price for stock options will be determined by the Committee at
its discretion, provided that the exercise price per share for each stock
option shall be at least equal to 100% of the fair market value of one share
of Common Stock on the date when the stock option is granted.
Upon a participant's termination of employment for any reason, any stock
options which provide
an incentive tiedwere not exercisable on the participant's termination date will
expire, unless otherwise determined by the Committee.
Upon a participant's termination of employment for reasons other than death,
disability or retirement, the participant's stock options will expire on the
date of termination, unless the right to exercise the options is extended by
the Committee at its discretion. In general, upon a participant's termination
by reason of death or disability, stock options which were exercisable on the
participant's termination date (or which are otherwise determined to be
exercisable by the Committee) may continue to be exercised by the participant
(or the participant's beneficiary) for a period of twelve months from the date
of the participant's termination of employment, unless extended by the
Committee. Upon a participant's termination by reason of retirement, stock
options which were exercisable upon the participant's termination date (or
which are otherwise determined to be exercisable by the Committee) may
continue to be exercised by the participant for a period of three months from
the date of the participant's termination of employment, unless extended by
the Committee. If upon the disability or retirement of the participant, the
participant's age plus years of continuous service with the company and its
affiliates and predecessors (as combined and rounded to the Company's stock price performance. Asnearest month)
equals 65 or more, then all of the
Company has
grown over18
participant's options will be exerciseable on the past several years, in part through acquisitions that have
involveddate of such disability or
retirement for the issuanceexercise period stated above. In no event, however, may the
options be exercised after the scheduled expiration date of additionalthe options.
Subject to the Committee's discretion, payment for shares of Common Stock on
the Companyexercise of stock options may be made in cash, by the delivery (actually
or by attestation) of shares of Common Stock held by the participant for at
least six months prior to the date of exercise, a combination of cash and
shares of Common Stock, or in any other form of consideration acceptable to
the Committee (including one or more "cashless" exercise forms).
Reload options ("Reloads") can be awarded in conjunction with stock options
which are granted under the Stock Incentive Plan. Reloads are stock options
granted to participants who tender shares to pay the exercise price of other
options or tender shares or elect to have shares withheld to pay withholding
taxes on the exercise of other options. Each Reload covers a number of shares
equal to the number of shares tendered or withheld, has believed it appropriatean exercise price
equal to increasethe fair market value of the underlying shares of Common Stock on the
date of grant of such Reload and expires on the stated expiration date of the
original option. The Committee may specify other terms and conditions
applicable to Reloads.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be granted
by the Committee to a participant either separate from or in tandem with non-
qualified stock options or incentive stock options. SARs may be granted at the
time of the stock option grant or, with respect to non-qualified stock
options, at any time prior to the exercise of the stock option. A SAR entitles
the participant to receive, upon its exercise, a payment equal to (i) the
excess of the fair market value of a share of Common Stock on the exercise
date over the SAR exercise price, times (ii) the number of shares of Common
Stock availablewith respect to which the SAR is exercised.
The exercise price of a SAR is determined by the Committee, but in the case
of SARs granted in tandem with stock options, may not be less than the
exercise price of the related stock option. Upon exercise of a SAR, payment
will be made in cash or shares of Common Stock, or a combination thereof, as
determined at the discretion of the Committee.
Restricted Shares. The Committee may award to a participant shares of Common
Stock subject to specified restrictions ("Restricted Shares"). The Restricted
Shares are subject to forfeiture if the participant does not meet certain
conditions such as continued employment over a specified forfeiture period
(the "Forfeiture Period") and/or the attainment of specified performance
targets over the Forfeiture Period. The terms and conditions of Restricted
Share awards are determined by the Committee. If vesting is based in whole or
in part on performance, the performance targets will also be determined by the
Committee but in the case of awards intended to qualify as "performance-based"
for employeepurposes of Section 162(m) of the Code will include specified levels of
one or more of operating income, return on investment, return on stockholders'
equity, earnings before interest, taxes, depreciation and amortization and/or
earnings per share.
Participants who have been awarded Restricted Shares will have all of the
rights of a holder of outstanding shares of Common Stock, including the right
to vote such shares and to receive dividends. During the Forfeiture Period,
the Restricted Shares are nontransferable and may be held in custody by the
Company or its designated agent, or if the certificate is properly legended,
by the participant.
The Committee, at its sole discretion, may waive all restrictions with
respect to a Restricted Share award under certain circumstances (including the
death, disability, or retirement of a participant, or a material change in
circumstances arising after the date of grant) subject to such terms and
conditions as it deems appropriate.
Performance Awards. The Committee may grant performance awards to
participants under such terms and conditions as the Committee deems
appropriate. A performance award entitles a participant to receive a payment
from the Company, the amount of which is based upon the attainment of
predetermined performance targets over a specified award period. Performance
awards may be paid in cash, shares of Common Stock or a combination thereof,
as determined by the Committee.
19
Award periods will be established at the discretion of the Committee. The
performance targets will also be determined by the Committee but in the case
of awards intended to qualify as "performance-based" for purposes of Section
162(m) of the Code will include specified levels of one or more of operating
income, return on investment, return on stockholders' equity, earnings before
interest, taxes, depreciation and amortization and/or earnings per share. When
circumstances occur which cause predetermined performance targets to be an
inappropriate measure of achievement, the Committee, at its discretion, may
adjust the performance targets.
Change in Control. In the event of a change in control of the Company, all
stock options and SARs will immediately vest and become exercisable , the
restrictions on all Restricted Shares will immediately lapse and all
performance awards will immediately become payable. In general, events which
constitute a change in control include: (i) acquisition by a person of
beneficial ownership of shares representing 50% or more of the voting power of
all classes of stock of the Company; (ii) during any two consecutive years,
the individuals who at the beginning of such period constitute the Board no
longer constitute at least a majority of the Board; (iii) a reorganization,
merger or consolidation; or (iv) approval by the stockholders of the Company
of a plan of complete liquidation of the Company.
Federal Income Tax Consequences. The following is a summary of the principal
U. S. federal income tax consequences of Stock Incentive Plan benefits under
present tax law. The summary is not intended to be exhaustive and, among other
things, does not describe state, local or non-U.S. tax consequences.
Stock Options. No tax is incurred by the participant, and no amount is
deductible by the Company, upon the grant of a nonqualified stock option. At
the time of exercise of such an option, the difference between the exercise
price and the fair market value of the Common Stock will constitute ordinary
income to the participant. The Company will be allowed a deduction equal to
the amount of ordinary income recognized by the participant.
In the case of incentive stock options, although no income is recognized
upon exercise and the Company is not entitled to a deduction, the excess of
the fair market value of the Common Stock on the date of exercise over the
exercise price is counted in determining the participant's alternative minimum
taxable income. If the participant does not dispose of the shares acquired on
the exercise of an incentive stock option within one year after their receipt
and within two years after the grant of the incentive stock option, gain or
loss recognized on the disposition of the shares will be treated as long-term
capital gain or loss. In the event of an earlier disposition of shares
acquired upon the exercise of an incentive stock option, the participant may
recognize ordinary income, and if so, the Company will be entitled to a
deduction in a like amount.
SARs. The participant will not recognize any income at the time of grant of
a SAR. Upon the exercise of a SAR, the cash and the value of any Common Stock
received will constitute ordinary income to the participant. The Company will
be entitled to a deduction in the amount of such income at the time of
exercise.
Restricted Shares. A participant will normally not recognize taxable income
upon an award of Restricted Shares, and the Company will not be entitled to a
deduction until the lapse of the applicable restrictions. Upon the lapse of
the restrictions, the participant will recognize ordinary taxable income in an
amount equal to the fair market value of the Common Stock as to which the
restrictions have lapsed, and the Company will be entitled to a deduction in
the same amount. However, a participant may elect under Section 83(b) of the
Code to recognize taxable ordinary income in the year the Restricted Shares
are awarded in an amount equal to the fair market value of the shares at that
time, determined without regard to the restrictions. In such event, the
Company will then be entitled to a deduction in the same amount. Any gain or
loss subsequently recognized by the participant will be a capital gain or
loss.
Performance Awards. Normally, a participant will not recognize taxable
income upon the award of such grants. Subsequently, when the conditions and
requirements for the grants have been satisfied and the payment determined,
any cash received and the fair market value of any Common Stock received will
constitute ordinary income to the participant. The Company will also then be
entitled to a deduction in the same amount.
20
VOTE REQUIRED
Approval of the Stock Incentive Plan will require the affirmative vote of at
least a majority in voting interest of the stockholders present in person or
by proxy and voting at the Annual Meeting and entitled to vote thereon,
assuming the presence of a quorum. In addition, approval of the Stock
Incentive Plan will require the total votes cast "For" or "Against" the Stock
Incentive Plan to constitute more than 50% of the outstanding shares of Common
Stock. If the stockholders do not approve the Stock Incentive Plan, it will
not be implemented, but the Company reserves the right to adopt such other
compensation plans and programs as it deems appropriate and in the best
interests of the Company and its stockholders.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE STOCK INCENTIVE PLAN AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" ADOPTION OF THE STOCK
INCENTIVE PLAN.
PROPOSAL TO APPROVE AN AMENDMENT TO
THE 1991 DIRECTORS STOCK OPTION PLAN
Stockholders are being asked to approve an amendment (the "Amendment") to
the Directors Plan. A vote in favor of this proposal will also be a vote in
favor of the Directors Plan, as so amended. The Board of Directors approved
the Amendment effective April 1, 1998, subject to the approval of the
Company's stockholders. The sole change effected by the Amendment is to
increase the stated exercise period of stock options granted under the
Directors Plan from four years to ten years.
The Company currently does not pay any cash compensation to its non-employee
Directors, although they are reimbursed for out-of-pocket expenses incurred in
attending meetings. Directors are compensated for their time and efforts
solely through grants of stock options. Accordingly,The Company believes that the
Amendment will provides non-employee directors a more meaningful opportunity
to acquire Common Stock of the Company and create a greater incentive for such
directors to serve on the Board of Directors on
February 28, 1991 unanimously adoptedof the 1991 Employee Stock OptionCompany and contribute to
its long-term growth and profitability objectives.
The following is a summary of the terms of the Directors 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.Amendment.
General Provisions. 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 selectspersons eligible to participate in the officers and other key
employeesDirectors Plan are the
duly elected non-employee directors 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(presently eight
individuals). The Compensation Committee determines the meaning and
application of the provisions of the Amended EmployeeDirectors 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 EmployeeDirectors Plan may be either "incentiveare non-qualified stock options,"options.
The Directors Plan provides that is,each participant shall receive a grant of
options which meetfor the requirementspurchase 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 150,00012,000 shares of Common Stock on the first
business day of April in oneeach calendar year. NoIn addition, a participant shall
receive a grant of options mayfor the purchase of 12,000 shares of Common Stock
upon his or her initial election to the Board, provided that if such election
occurs after September 30 of the year first elected, such initial grant shall
be granted under the Amended Employee Plan after February 27,
2001.for 6,000 shares of Common Stock. The exercise price per share forof each option granted
under the Amended
EmployeeDirectors Plan may notshall be less thanequal to 100% of the fair market value per share of
the Company's Common Stockunderlying shares on the date of grant. For anyEach option recipient who owns
more than 10%is fully exercisable
on the date of the Company's voting stock (a "Ten Percent Owner") at the timegrant and has a term 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 optiongrant. No options 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
granted after February 27, 2001.
Generally, options may be exercised only by the individual to whom the
option is granted, and are not transferable or assignable, except that in the
event of an optionee's death or legal disability, the optionee's heirs or
legal representatives may exercise the options for a period not to exceed one
year.
TERMINATION OF EMPLOYMENT. Unless otherwise determined by the Compensation
Committee, options21
Termination of Service. Options will cease to be exercisable uponwithin 30 days
after termination of the optionee's service to the Company, other than upon
termination due to death, disability or retirement. Vested optionsretirement or upon termination for
cause. 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 ofUpon termination for cause, 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 outstandingparticipant's options shall be fully exercisable
for a periodrescinded.
Termination and Amendment 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.Plan. The Board of Directors may terminate or
amend the Amended EmployeeDirectors 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 exercise period or to
permit an option exercise price to be fixed at less than 100% of the fair
market value as of the date of grant.
ANTIDILUTION PROVISIONS.Antidilution Provisions. The amount of shares reserved for issuance under
the Amended EmployeeDirectors 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 reasonreasons of stock
dividends, stock splits, reverse stock splits, split-ups, consolidations,
recapitalizations, reorganizations or like events.
BENEFITS UNDER THE AMENDED EMPLOYEE PLAN.Benefits Under the Directors Plan. Presently, approximately 280
officers and key employeeseight Directors of the Company
and its subsidiaries are eligible to participate in the Amended EmployeeDirectors Plan. However,As of
April 1, 1998, a grant was made to each of the identitynon-employee directors of future
grantees andan
option for 12,000 shares of Common Stock of the sizeCompany, for an aggregate
grant of any additional grants have not been determined.options for 84,000 shares of Common Stock at an exercise price of
$36.00 per share. On June 23, 19971998 the closing price of the Common Stock on
the NYSE was $28.375$28.3125 per share.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.Certain Federal Income Tax Consequences. The following is a brief summary of
the principal federalU.S. Federal income tax consequences of awards under the
Amended
EmployeeDirectors Plan based upon current federalU.S Federal income tax laws. The summary is
not intended to be exhaustive and, among other things, does not describe
state, local or foreignnon-U.S. 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
An optionee generally recognizes no taxable income as the result of the
grant of a nonqualifiednon-qualified 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 uponby the exercise of a nonqualifiednon-qualified stock option, any
gain or loss, based on the difference between the sale price and the fair
market value on the date of recognition of income, will be taxed as short-term
or long-term capital gain or loss, depending upon the length of time the
optionee has held the stock from the date of exercise. No tax deduction is
available to the Company with respect to the grant of the option or the sale
of stock acquired pursuant thereto. The Company would be entitled to a
deduction equal to the amount of ordinary income recognized by the optionee as
a result of the exercise of the option.
VOTE REQUIRED
Approval of the Amended EmployeeDirectors Plan, as amended, 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 increasethereon,
assuming 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
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 callingpresence 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, andquorum. In addition, 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 termsDirectors
Plan, 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.
17
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 Amendmentamended, will require the affirmative
vote oftotal votes cast "For" or "Against" the
holders of at least a majorityDirectors Plan, as amended, to constitute more than 50% of the outstanding
shares of Common Stock.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AUTHORIZED CAPITAL
AMENDMENTDIRECTORS PLAN, AS
AMENDED, AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" ADOPTION OF
THE AUTHORIZED CAPITAL AMENDMENT PROPOSAL.DIRECTORS PLAN, AS SO AMENDED.
22
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP as independent
certified public accountants offor the Company for the fiscal year endingended March
31, 19981999 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 the 1992 fiscal 1992.year. 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.
18
STOCKHOLDER PROPOSALS FOR 19981999 ANNUAL MEETING
Stockholder proposals intended to be presented at the 19981999 Annual Meeting of
Stockholders of the Company must be received by March 9, 1998.1999. 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
/s/ Damian C. Georgino
Damian C. Georgino
Corporate Secretary
July 7, 1997
191998
23
Preliminary Copy
UNITED STATES FILTER CORPORATION
40-004 Cook Street, Palm Desert, California 92211
P Proxy for Annual Meeting of Stockholders on August 14, 199713, 1998
R
O This Proxy is Solicited on Behalf of the Board of Directors
X
Y 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, 1997,13, 1998, commencing at 9:0030 A.M.,
Pacific Daylight Time,local time, at the Inn
at Rancho Santa Fe, 5951 Linea del Cielo, RanchoClara Marriott Hotel, 2700 Mission College
Boulevard, Santa Fe,Clara, California 92067,95052, or any adjournment or
postponement thereof as follows on the reverse side of this proxy card.
PLEASE DATE AND SIGN ON REVERSE SIDE
[x] Please mark your
[X] votes as in this
example
- --------------------------------------------------------------------------------
1. The election of threefour 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,
FOR all nominees listed at right Nominees: Arthur B. Laffer
(except as marked to the contrary [ ] Alfred E. Osborne, Jr.
below). J. Danforth Quayle
Andrew D. Seidel
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
2. The proposal to approve the United States Filter
Corporation Senior Executive Incentive Plan; [ ] [ ] [ ]
3. The proposal to approve the United States Filter
Corporation 1998 Stock Incentive Plan; [ ] [ ] [ ]
4. The proposal to approve an amendment to the
United States Filter Corporation 1991 Directors Stock [ ] [ ] [ ]
Option Plan; and
5. The proposal to ratify the appointment of KPMG
Peat Marwick LLP as independent public accountants for [ ] [ ] [ ]
the Company.
In their discretion, the proxy holders are authorized to vote upon such other
business as may properly come before the meeting.
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 4.5.
SIGNATURE _______________________________________ DATED , 1997
------------------- -------------------__________________, 1998
SIGNATURE _______________________________________ DATED , 1997
------------------- -------------------__________________, 1998
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.
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
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1 As amended by the Board of Directors through June 12, 1997.
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.
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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
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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
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
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.
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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;
7
(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.
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