<PAGE>
                                                                   EXHIBIT 10.07
 
                             EMPLOYMENT AGREEMENT


          THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of August 26, 1998, by and between UNITED STATES FILTER CORPORATION, a
Delaware corporation (the "Company"), and KEVIN L. SPENCE ("Executive").

                             W I T N E S S E T H :
                                        
          WHEREAS, the Company and Executive desire to enter into this Agreement
to assure the Company of the continuing and exclusive service of Executive and
to set forth the terms and conditions of Executive's employment with the
Company;

          NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties agree as follows:

    1.  Employment.
        ---------- 

        1.1  Title and Duties.  The Company hereby employs Executive as
             ----------------     
Executive Vice President and Chief Financial Officer of the Company. Executive's
duties, responsibilities and authority shall be consistent with Executive's
position and shall include such other duties, responsibilities and authority as
may be assigned to Executive by the Board of Directors of the Company (the
"Board") or the Chief Executive Officer of the Company (the "CEO").

        1.2  Services and Exclusivity of Services.  The Company and Executive
             ------------------------------------                            
recognize that the services to be rendered by Executive are of such a nature as
to be peculiarly rendered by Executive, encompass the individual ability,
managerial skills and business experience of Executive and cannot be measured
exclusively in terms of hours or services rendered in any particular period.
Executive agrees to devote Executive's full business time and to use Executive's
best efforts, energy and ability exclusively toward advancing the business,
affairs and interests of the Company, and matters related thereto.

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        1.3  Noncompetition and Nonsolicitation.  Executive agrees that during
             ----------------------------------
the Term (as defined in Section 2 below) of this Agreement (and in the case of
termination pursuant to Section 5 below for a period of one year thereafter),
Executive will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries
or affiliates, nor without the prior written consent of the Board directly or
indirectly have any interest in, own, manage, operate, control, be connected
with as a stockholder, joint venturer, officer, employee, partner or consultant,
or otherwise engage, invest or participate in any business that is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 1.3 shall prevent Executive from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
Executive's own account and benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and are consistent with the conflict of interest
policies maintained by the Company from time to time. Executive further agrees
that during the Term of this Agreement (and in the case of termination pursuant
to Section 5 below for a period of one year thereafter) Executive will not, in
any manner, directly or indirectly induce or attempt to induce any employee of
the Company to terminate or abandon his or her employment for any purpose
whatsoever (other than for poor performance of an employee employed by the
Company at such time).

    2.  Term.  The period of employment under this Agreement (the "Term")
        ----                                                             
shall commence as of the date first set forth above, (the "Effective Date") and
shall continue for a period of thirty-six (36) full calendar months thereafter,
as herein provided. Unless the Company or the Executive gives written notice to
the other party to the contrary at least 60 days prior to the end of the Term
(including any extension), on the first day of the month following the Effective
Date, and on the first day of each month thereafter, the Term shall be
automatically extended by one full calendar month. The Term shall continue until
the expiration of all automatic extensions affected as aforesaid unless and
until it ceases or is terminated sooner as provided in this Agreement.

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    3.  Compensation.
        ------------ 

        3.1  Base Salary.  During the Term, the Company will pay to Executive a
             -----------  
base salary at the rate of US$325,000 per year, payable in accordance with the
Company practices in effect from time to time ("Base Salary"). Amounts payable
shall be reduced by standard withholding and other authorized deductions. Such
Base Salary shall be reviewed for increase (but not decrease) in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company not less frequently than annually during the Term. In conducting any
such review, the Compensation Committee shall consider and take into account,
among other things, any change in Executive's responsibilities, performance of
Executive, and compensation of other similarly situated executives of the
Company and other comparable companies and other pertinent factors. Executive's
Base Salary shall not be decreased except upon mutual agreement between the
parties.

        3.2  Bonuses, Incentive, Savings and Retirement Plans, Welfare Benefit 
             -----------------------------------------------------------------
Plans.  Executive shall be entitled to participate in all annual and long-term
-----
bonuses and incentive, savings and retirement plans generally available to other
similarly situated executive employees of the Company. Executive, and
Executive's family as the case may be, shall be eligible to participate in and
receive all benefits under welfare benefit plans, practices, programs and
policies provided to other similarly situated executive employees of the
Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other similarly situated peer executives and
does not single out Executive.

        3.3  Fringe Benefits.  Executive shall be entitled to receive fringe
             ---------------
benefits consistent with Executive's duties and position, and in accordance with
the benefits provided to other similarly situated executive employees of the
Company. Such benefits shall include the full time use of an automobile,
including reimbursement for all operating and maintenance costs, consistent with
the Company's corporate policy on automobiles as in effect from time to time.
The Company reserves the right to modify, suspend or discontinue any and all of
its fringe benefits referred to in this Section 3.3 at any time without recourse
by Executive so long as such

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action is taken generally with respect to other similarly situated peer
executives and does not single out Executive.

        3.4  Expenses.  Executive shall be entitled to reimbursement for
             --------  
expenses incurred in the furtherance of the business of the Company in
accordance with the Company's practices and procedures, as they may exist from
time to time. Executive shall keep complete and accurate records of all
expenditures such that Executive may fully account according to the Company's
practices and procedures.

        3.5  Vacation.  Executive shall be entitled to paid vacations and other
             -------- 
absences from work that are reasonably consistent with the performance of
Executive's duties as provided in this Agreement. Such vacations and absences
shall be in accordance with those generally provided to other similarly situated
executive employees.

        3.6  Additional Benefits Upon a Change of Control.
             -------------------------------------------- 

             (a)  In the event a Change of Control occurs during the Term, the
Executive's benefit in the U. S. Filter Supplemental Executive Retirement Plan
shall immediately become fully vested.

             (b)  In the event a Change of Control occurs during the Term, the
Executive shall be entitled to receive, within thirty (30) days after the Change
of Control, a cash lump sum amount equal to :

                        (i)   Executive's Base Salary for the balance of the
        Term, plus the target annual incentive bonus scheduled for the year in
        which there is a Change of Control and each year thereafter for the
        balance of the Term (determined without regard to any performance
        goals); plus

                        (ii)  the present value (as determined by a nationally
        recognized employee benefits consulting firm agreed to by Executive and
        the Company) of the health, life insurance, disability and accident
        insurance plans or programs covering Executive for the balance of the
        Term.

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             (c)  "Change of Control" shall mean the occurrence of any of the
following:

                        (i)    the acquisition by any person (including any
        syndicate or group deemed to be a "person" under Section 13(d)(3) or
        14(d)(2) of the Securities Exchange Act of 1934, as amended (the
        "Exchange Act"), or any successor provision to either of the foregoing,
        of "beneficial ownership" directly or indirectly, of shares of capital
        stock of the Company entitling such person to exercise 50% or more of
        the total voting power of all "Voting Shares" of the Company;

                        (ii)   during any year or any period of two consecutive
        years (not including any period prior to the execution of this
        Agreement), individuals who at the beginning of such period constitute
        the Board, and any new director (other than a director designated by a
        person who has entered into an agreement with the Company to effect a
        transaction described in clause (i), (iii) or (iv) of this definition)
        whose election by the Board or nomination for election by the Company's
        stockholders was approved by a vote of at least two-thirds of the
        directors then still in office who either were directors at the
        beginning of the period or whose election or nomination for election was
        previously so approved (hereinafter referred to as "Continuing
        Directors"), cease for any reason to constitute at least a majority
        thereof;

                        (iii)  any consolidation of the Company with, or merger
        of the Company into, any other person, any merger of another person into
        the Company, or any sale or transfer of all or substantially all of the
        assets of the Company to another person (other than (x) a consolidation
        or merger which does not result in any reclassification, conversion,
        exchange or cancellation of outstanding shares of capital stock other
        than shares of capital stock owned by any of the parties to the
        consolidation or merger or (y) a merger which is effected solely to
        change the jurisdiction of incorporation of the Company or (z) any
        consolidation with or merger of the Company into a wholly owned
        subsidiary, or any sale or transfer by the Company of all of
        substantially all of its assets to one or more of its wholly owned
        subsidiaries in any one transaction or a series of transactions; or

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                        (iv)   the stockholders of the Company approve a plan of
        complete liquidation of the Company.

        Notwithstanding the foregoing, unless otherwise determined by the Board
        of Directors, no change in control of the Company shall be deemed to
        have occurred if (x) the Executive is a member of a group which first
        announces a proposal which, if successful, would result in a Change of
        Control, which proposal (including any modifications thereof) is
        ultimately successful, or (y) the Executive acquires a two percent or
        more equity interest in the entity which ultimately acquires the Company
        pursuant to the transaction described in (x) of this paragraph.

        "Beneficial Ownership" shall be determined in accordance with Rule 13d-3
        promulgated under the Exchange Act, except that a person shall be deemed
        to be the "beneficial owner" of all securities that such person has the
        right to acquire, whether such right is exercisable immediately or only
        after the passage of time.

        "Voting Share" means all outstanding shares of any class or classes
        (however designated) of capital stock of the Company entitled to vote
        generally in the election of the Board of Directors of the Company.

    4.  Confidential Information.

        4.1  General.  Executive acknowledges that during employment by and as a
             -------                                                            
result of a relationship with the Company, Executive will obtain knowledge of
and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively 

                                       6
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referred to herein as "Confidential Information"). Executive agrees that during
the Term of this Agreement and, to the fullest extent permitted by law,
thereafter, Executive will, in a fiduciary capacity for the benefit of the
Company, hold all Confidential Information strictly in confidence and will not
directly or indirectly reveal, report, disclose, publish or transfer any of such
Confidential Information to any person, firm or other entity, or utilize any of
the Confidential Information for any purpose, except in furtherance of
Executive's employment under this Agreement.

        4.2  Proprietary Interest.  All inventions, designs, improvements,
             --------------------     
patents, copyrights and discoveries conceived by Executive during the Term of
this Agreement that are useful in or directly or indirectly related to the
business of the Company or to any experimental work carried on by the Company,
shall be the property of the Company. Executive will promptly and fully disclose
to the Company all such inventions, designs, improvements, patents, copyrights
and discoveries (whether developed individually or with other persons) and shall
take all steps necessary and reasonably required to assure the Company's
ownership thereof and to assist the Company in protecting or defending the
Company's proprietary rights therein.

        4.3  Return of Materials.  Executive expressly acknowledges that all
             -------------------
lists, books, records and other Confidential Information of the Company obtained
in connection with the Company's business is the exclusive property of the
Company and that upon the expiration or earlier termination of this Agreement,
Executive will immediately surrender and return to the Company all such items
and all other property belonging to the Company then in the possession of
Executive, and Executive shall not make or retain any copies thereof.

    5.  Termination Prior to Expiration of Term.  Executive's employment, and
        ---------------------------------------      
his rights under this Agreement, may be terminated prior to the expiration of
the Term of this Agreement only as provided in this section 5.

                                       7
<PAGE>
 
        5.1  Death or Disability.
             ------------------- 

             (a)  The Company may terminate the Executive's employment hereunder
due to death or Disability (as defined below). If Executive's employment is
terminated as a result of death or Disability, Executive (or Executive's estate
or personal representative in the event of death) shall be entitled to receive
Executive's full Base Salary until the expiration of six months from the date on
which Executive was first unable to substantially perform his duties hereunder
and, as of the last day of such six month period, shall be entitled to receive a
lump sum payment equal to an additional six months of Base Salary. Executive
and/or Executive's dependents shall be entitled to continue to participate in
the Company's welfare benefit plans and programs on the same terms as similarly
situated active employees for a period of twelve months from the date Executive
was first unable to substantially perform Executive's duties hereunder.
Executive and/or Executive's dependents shall thereafter be entitled to any
continuation of such benefits provided under such benefit plans or by applicable
law.

             (b)  "Disability" shall mean a total and permanent physical or
mental impairment that substantially limits a major life activity of Executive
and that renders Executive unable to perform the essential functions of
Executive's position, even with reasonable accommodation that does not impose an
undue hardship on the Company. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and/or
Executive's medical personnel or others selected by the Company or its insurers.

        5.2  Termination by the Company for Cause.
             ------------------------------------ 

             (a)  The Company may terminate the Executive's employment hereunder
for Cause (as hereinafter defined). If the Company terminates the Executive's
employment hereunder for Cause, the Executive shall be entitled to receive (1)
all Base Salary due employee as of the date of termination, (2) any previously
authorized bonus (if any) for the period of Executive's employment prior to the
discharge or resignation, and (3) any previously vested

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benefits, such as previously vested retirement benefits. Furthermore, the
Company shall honor any rights previously vested in Executive under a stock
option or similar plan or program.

             (b)  "Cause" shall mean (1) the Executive's conviction of a felony;
(2) a material breach of this Agreement by the Executive and/or the Executive's
gross neglect of his duties hereunder; or (3) the Executive's addiction to
alcohol or to a drug not prescribed by a physician.

        5.3  Termination Without Cause or Termination for Good Reason.
             -------------------------------------------------------- 

             (a)  The Company may terminate the Executive's employment hereunder
without Cause, and the Executive shall be permitted to terminate his employment
hereunder for Good Reason (as hereinafter defined). If the Company terminates
the Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination for Good Reason, the
Executive shall be entitled to receive all the benefits provided for under
Section 3.6 of this Agreement.

             (b)  "Good Reason" means and shall be deemed to exist if, without
the prior written consent of the Executive, (1) the Executive suffers a
reduction in duties, responsibilities or effective authority associated with his
titles and positions as set forth and described in this Agreement or is assigned
any duties or responsibilities inconsistent in any material respect therewith;
(2) the Company fails to substantially perform any material term or provision of
this Agreement; or (3) the Executive's compensation or benefits provided for
hereunder is decreased.

        5.4  Voluntary Termination.
             --------------------- 

             (a)  The Executive may effect a Voluntary Termination (as
hereinafter defined) of his employment hereunder by giving not less than nine
(9) months prior written notice to the Company. If the Executive effects a
Voluntary Termination after such notice (or upon replacement of the Executive if
Executive is replaced during the notice period) without accepting other
employment with a title and/or duties similar to those provided hereunder (a
"Successor Position"), the Executive shall be entitled to receive all the
benefits provided for under Section 3.6 of this Agreement, less the nine (9)
months (or such lesser period upon

                                       9
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replacement) of compensation paid during the notice period. If the Employee
effects a Voluntary Termination without providing the notice required by this
section, or for the purpose of accepting a Successor Position, the Executive
shall be entitled to receive (1) all Base Salary due Executive as of the date of
termination, (2) any previously authorized bonus (if any) for the period of
Executive's employment prior to the discharge or resignation, and (3) any
previously vested benefits, such as previously vested retirement benefits.
Furthermore, the Company shall honor any rights previously vested in Executive
under a stock option or similar plan or program.

             (b)  "Voluntary Termination" shall mean a termination of employment
by the Executive on his own initiative other than (1) a termination due to
Disability or (2) a termination for Good Reason.

        5.5  Gross-up of Parachute Payments.  If any payment or benefit to which
             -------------------------------  
the Executive becomes entitled from the Company will be subject to the tax
imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"),
the Company shall pay to the Executive at the time specified below, an
additional amount (the "Gross-up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income tax and Excise Tax
upon the payment provided for by this subsection, shall be equal to the Total
Payments. For purposes of determining whether any of such payments or benefits
will be subject to the Excise Tax, and the amount of such Excise Tax, (i) any
over payments or benefits received or to be received by the Executive in
connection with a Change of Control or his termination of employment, whether
pursuant to the terms of this Agreement or otherwise (which together with the
payments and benefits pursuant to this Agreement, constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive such other payments or benefits (in
whole or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the Code in excess
of the base amount within the meaning of section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments

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<PAGE>
 
which shall be treated as subject to the Excise Tax shall be equal to the lesser
of (A) the total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of section 280G(b)(l) (after applying
paragraph (i), above), and (iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the sate and locality of his residence, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of his employment, the Executive shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the Gross-Up Payment being repaid by him
if such repayment results in reduction in Excise Tax and/or a federal and state
and local income tax deduction) plus interest on the amount of such repayment at
the rate provided in section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of payment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest payable with respect to such excess) at the time that the amount of
such excess is finally determined. If the amounts of any payments under this
Agreement cannot be finally determined on or before the payment date otherwise
scheduled for payment, the Company shall pay to the Executive on such date an
estimate, as determined in good faith by the Company, of the minimum amount of
such payment and shall pay the reminder of such payments (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive payable on the
fifth day after demand by the Company (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).

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    6.  Arbitration.
        ----------- 

        6.1  General.  Any dispute, controversy or claim arising out of or
             -------
relating to this Agreement, the breach hereof or the coverage or enforceability
of this arbitration provision shall be settled by arbitration in Riverside
County, California (or such other location as the Company and Executive may
mutually agree), conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as such rules are in effect in
Riverside on the date of delivery of demand for arbitration. The arbitration of
any such issue, including the determination of the amount of any damages
suffered by either party hereto by reason of the acts or omissions of the other,
shall be to the exclusion of any court of law. Notwithstanding the foregoing,
either party hereto may seek any provisional remedy in a court, including but
not limited to an action for injunctive relief or attachment, without waiving
the right to arbitration.

        6.2  Procedure.  There shall be three arbitrators, one to be chosen by
             ---------   
each party at will within 10 days from the date of delivery of demand for
arbitration and the third arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a third arbitrator within 10
days after the last of the two arbitrators is chosen by the parties, the third
arbitrator will be designated, on application by either party, by the American
Arbitration Association. The decision of a majority of the arbitrators shall be
final and binding on both parties and their respective heirs, executors,
administrators, personal representatives, successors and assigns. Judgment upon
any award of the arbitrators may be entered in any court having jurisdiction, or
application may be made to any such court for the judicial acceptance of the
award and for an order of enforcement.

        6.3  Costs and Expenses.  The Company shall pay the fees of all
             ------------------
arbitrators, witnesses and such other expenses as may be generated by the
arbitration, except Executive's attorneys fees, unless a majority of the
arbitrators concludes that such arbitration procedure was not instituted in good
faith by Executive. In such event the arbitrators shall be empowered to allocate
fees and assess costs and other expenses of the arbitration, except attorneys
fees, as they may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.

                                       12
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    7.  Non-Assignment.  This Agreement shall not be assignable nor the duties
        --------------                                                        
hereunder delegable by Executive.  None of the payments hereunder may be
encumbered, transferred or in any way anticipated.  The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.

    8.  Remedies.  Executive acknowledges that the services Executive is to
        --------                                                           
render under this Agreement are of a unique and special nature, the loss of
which cannot reasonably or adequately be compensated for in monetary damages,
and that irreparable injury and damage will result to the Company in the event
of any default or breach of this Agreement by Executive.  Because of the unique
nature of the Confidential Information, Executive further acknowledges and
agrees that the Company will suffer irreparable harm if Executive fails to
comply with the obligations in section 4 hereof and that monetary damages would
be inadequate to compensate the Company for such breach.  Accordingly, Executive
agrees that the Company will, in addition to any other remedies available to it
at law, in equity or, without limitation, otherwise, be entitled to injunctive
relief and/or specific performance to enforce the terms, or prevent or remedy
the violation, of any provisions of this Agreement.  This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.

    9.  Survival.  The provisions of sections 4, 5, 6 and 8 shall survive the
        --------                                                             
expiration or earlier termination of this Agreement.

    10. Notices.  Any notices or other communications relating to this Agreement
        -------                                                                 
shall be in writing and delivered personally or mailed by certified mail, return
receipt requested, to the party concerned at the address set forth below:

          If to Company:        United States Filter Corporation
                                40-004 Cook Street
                                Palm Desert, California  92211
                                Attn: General Counsel

                                       13
<PAGE>
 
          If to Executive:      At Executive's residence address as maintained
                                by the Company in the regular course of its
                                business for payroll purposes.

Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 10.

    11. Entire Agreement.  This Agreement constitutes the entire agreement
        ----------------                                                  
between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. Without limiting the generality of the foregoing
sentence, this Agreement supersedes the Executive Retention Agreement and the
First Amended and Restated United States Filter Corporation Executive Severance
Pay Plan. This Agreement may not be changed orally, but only by an agreement in
writing signed by both parties.

    12. Counterparts.  This Agreement may be executed in counterparts, each of
        ------------                                                          
which shall be an original, but all of which together shall constitute one
agreement.

    13. Construction.  This Agreement shall be governed under and construed in
        ------------                                                          
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or interpretation of this Agreement. It
is intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.

    14. Severability.  If any portion or provision of this Agreement is
        ------------                                                   
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected The covenants in this Agreement are severable and separate, and the
unenforceability of any specific covenant shall not affect the enforceability of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and this
Agreement shall thereby be reformed.

                                       14
<PAGE>
 
    15. Binding Effect.  The rights and obligations of the parties under this
        --------------                                                       
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.

          IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and in the year first written above.


                                UNITED STATES FILTER CORPORATION


                                By:    /s/ Dr. Alfred E. Osborne, Jr.
                                       ---------------------------------------
                                Name:  Dr. Alfred E. Osborne, Jr.
                                       ---------------------------------------
                                Title: Chairman, Compensation Committee of the
                                       ---------------------------------------
                                       Board of Directors
                                       ---------------------------------------


                                EXECUTIVE
                                KEVIN L. SPENCE

                                /s/ Kevin L. Spence
                                -------------------
                                Signature

                                       15