SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1995
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-11264
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WESTERN WASTE INDUSTRIES
(Exact name of registrant as specified in its charter)
California 95-1946054
---------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21061 S. WESTERN AVENUE TORRANCE, CALIFORNIA 90501
---------------------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (310) 328-0900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of October 31, 1995
--------------------------- ----------------------------------
Common Stock - No par value 14,658,301
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WESTERN WASTE INDUSTRIES
INDEX
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheets
June 30, 1995 - Audited
September 30, 1995 - Unaudited 3
Consolidated Statements of Income - Unaudited 4
Consolidated Statements of Cash Flows - Unaudited 5
Notes to Consolidated Financial Statements -
Unaudited 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION 12
SIGNATURES 13
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PART 1. FINANCIAL INFORMATION
WESTERN WASTE INDUSTRIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, September 30,
1995 1995
-------- ------------
ASSETS (Unaudited)
Current assets:
Cash and short-term investments $ 6,484 $ 8,374
Receivables, less allowance of $1,738 in
June 1995 and $1,885 in September 1995 29,596 32,373
Supplies 3,320 3,670
Deferred income tax benefit 4,101 4,301
Prepayments and other 3,961 2,810
------- -------
Total current assets 47,462 51,528
Property and equipment, net 196,972 202,795
Purchased routes, net 7,340 6,863
Goodwill, net 19,994 19,811
Other assets 21,605 18,135
-------- --------
$293,373 $299,132
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current instalments of long-term debt $ 1,308 $ 1,296
Accounts payable 9,159 8,331
Accrued payroll and related costs 3,885 3,414
Other current liabilities 17,822 20,916
------- -------
Total current liabilities 32,174 33,957
Long-term debt, excluding current instalments 78,882 78,758
Other liabilities 18,400 18,664
Deferred income taxes 3,696 2,472
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, no par value; 2,000,000
shares authorized; none issued or outstanding - -
Common stock, no par value; 50,000,000
shares authorized; issued and
outstanding 14,612,599 and 14,653,668
shares respectively 79,614 80,249
Retained earnings 80,607 85,032
-------- --------
Total shareholders' equity 160,221 165,281
-------- --------
$293,373 $299,132
======== ========
The accompanying notes are an integral part of these statements.
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WESTERN WASTE INDUSTRIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(dollars in thousands except share data)
Three Months Ended
September 30,
-------------------
1994 1995
-------- --------
Revenue $ 67,147 $ 69,739
-------- --------
Costs and expenses:
Operating 49,144 51,430
Selling, general and
administrative 9,554 9,866
-------- --------
Total costs and expenses 58,698 61,296
-------- --------
Income from operations 8,449 8,443
Nonoperating income (expense):
Interest expense (1,138) ( 1,167)
Other 37 353
-------- --------
(1,101) ( 814)
-------- --------
Income before income taxes 7,348 7,629
Income taxes 3,270 3,204
-------- --------
Net Income $ 4,078 $ 4,425
======== ========
Primary and fully diluted
earnings per common share: $ .26 $ .28
======== ========
The accompanying notes are an integral part of these statements.
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WESTERN WASTE INDUSTRIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(dollars in thousands)
Three Months Ended
September 30,
------- -------
1994 1995
------- -------
Operating Activities:
Net income $ 4,078 $ 4,425
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,353 6,414
Provision for losses on accounts receivables 357 358
Uninsured claims 14 (96)
Employer portion - 401(k) contribution 188 169
Deferred income tax expense (benefit) 1,260 (1,424)
Loss on disposition of assets 196 118
Increase (decrease) in cash resulting
from changes in operating assets and
liabilities, excluding effects of
purchased businesses:
Receivables (2,581) (1,137)
Other assets (1,204) 252
Accounts payable 19 ( 828)
Other liabilities (2,488) 3,118
------ ------
Net cash provided by operating
activities 6,192 11,369
Investing activities:
Purchases of property and equipment ( 7,356) (11,956)
Proceeds from disposition of assets 193 224
------- -------
Net cash used in investing activities ( 7,163) (11,732)
Financing activities:
Proceeds from $24 million tax exempt borrowings - 2,058
Principal payments on borrowings (6,381) ( 136)
Proceeds from issuance of stock 864 331
------- -------
Net cash provided by (used in)
financing activities (5,517) 2,253
------- -------
Increase (decrease) in cash and
short-term investments (6,488) 1,890
Cash and short-term investments
at beginning of period 9,935 6,484
------- -------
Cash and short-term investments
at end of period $ 3,447 $ 8,374
======= =======
The accompanying notes are an integral part of these statements.
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WESTERN WASTE INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Basis of presentation:
------------------------------
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments considered necessary for a
fair presentation have been included. All adjustments made to the
interim financial statements were of a normal recurring nature. For
further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended June 30, 1995.
Certain reclassifications have been made in prior year financial
statements to conform to the current year presentation.
NOTE 2 - Earnings per share:
----------------------------
Primary and fully diluted earnings per share are computed on the
basis of the weighted average number of shares outstanding plus the
common stock equivalents which would arise from the exercise of stock
options using the treasury stock method.
The average number of shares used for primary and fully diluted
calculations for the three months ended September 30, 1994 and 1995
were 15,664,000 and 16,009,000, respectively.
NOTE 3 - Long-term debt:
------------------------------
Long-term debt, which approximates market value, consists of the
following:
June 30, September 30,
1995 1995
----------- ------------
(dollars in thousands)
Notes payable to banks, unsecured $44,000 $44,000
Solid Waste Disposal Revenue Bonds, Series 1994A 24,000 24,000
Solid Waste Disposal Revenue Bonds 8,200 8,200
Pollution Control Revenue Bonds 1,133 1,052
Other notes payable, secured and unsecured 2,857 2,802
----------- -----------
Total long-term debt 80,190 80,054
Less current instalments 1,308 1,296
----------- -----------
Long-term debt, excluding current instalments $78,882 $78,758
=========== ===========
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The Company's revolving line of credit (the "Agreement"),
which currently matures on June 1, 1997, permits borrowings up to
$100,000,000. At the Company's option, borrowings under the Agreement
bear interest at the bank's prime rate and/or at the London Interbank
Offered Rate (LIBOR) plus .75 to 2.0 per cent, depending upon certain
ratios. At September 30, 1995, all borrowings were under the LIBOR
option with rates ranging from 6.63% to 6.69%. The Agreement has a
$16.5 million quarterly commitment reduction commencing March 1, 1996.
On or before the first day of October of each year, the Company has
the option to request an extension of the revolving period and the
termination date with the approval of its banks. The Company is in
the process of negotiating a new agreement and therefore has not filed
the extension request. Under the terms of the Agreement, the Company
is subject to various debt covenants including maintenance of
certain financial ratios, and in addition, it limits the amount of
cash dividends.
NOTE 4 - Restricted Cash:
-----------------------------
As of September 30, 1995, the Company had $5,328,000 in
restricted cash. This cash, which is related to California Pollution
Control Bonds issued in fiscal 1995, is held in custody by a Trustee
and is restricted as to withdrawal or use for qualified fixed asset
expenditures. Of the above amount, $2,360,000 is included in Other
Assets while the remaining $2,968,000 is included in Receivables (See
Liquidity and Capital Resources for more detail).
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATION FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1995 AND 1994
-----------------------------------------
1994 1995
----- -----
Revenue 100.0% 100.0%
Costs and Expenses:
Operating 73.2 73.7
Selling, general &
administrative 14.2 14.2
----- -----
87.4 87.9
----- -----
Income from operations 12.6 12.1
Net nonoperating expense ( 1.6) ( 1.2)
----- -----
Income before income taxes 11.0 10.9
Income taxes 4.9 4.6
----- -----
Net Income 6.1% 6.3%
===== =====
Revenue
-------
Contribution to Revenue For
Three Months Ended September 30,
-------------------------------
1994 1995
------ ------
Collection Services 84% 84%
Landfill Operations 7 7
Recycling and Waste Diversion 5 5
Transfer Stations and Other 4 4
------ -----
100% 100%
====== ======
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Components of the increase in revenue are as follows:
Three Months Ended
September 30,
-------------------------
1994 1995
------- ------
Purchased assets - .1%
Price changes - 2.6
Volume changes - 1.2
Price and volume changes 6.7 -
------- ------
6.7% 3.9%
======= ======
Revenue for the three months ended September 30, 1995, was
$69,739,000, a 3.9% increase over the same period in the prior year.
The increase was due to (i) cleanup after Hurricane Erin in Florida
(2.1%) (ii) higher recycling pricing (1.1%) and (iii) increases from
municipal and open market contracts (.7%).
Recycling prices, although higher than the same period in the
prior year, have recently declined. First quarter recycling revenue
decreased .9%, as compared to the fourth quarter of fiscal 1995.
Recycling prices are subject to changing market conditions and no
assurance can be given as to the future impact on revenue.
Operating Expenses
------------------
As a percentage of revenue, operating expenses increased by .6%
for the first three months of fiscal 1996 as compared to the same
period in fiscal 1995. The increase is primarily attributable to
increased disposal costs partially offset by a decrease in insurance
related costs. Generally, increases in disposal costs can be
recovered through future rate increases. Management is also reviewing
operations to determine if any changes can be made to offset disposal
increases.
Selling, General and Administrative Expenses
--------------------------------------------
As a percentage of revenue, selling, general and administrative
expenses remained constant at 14.2% for the quarter ended September
30, 1995 as compared to the same period in the prior fiscal year.
Legal costs increased $377,000 for the three months ended September
30, 1995 over the same period in the prior year due primarily to costs
related to (i) the G.I. Industries bankruptcy, whereby the Company is
seeking to recover amounts previously written off, and (ii) other
legal matters. Without the increase in legal costs, these expenses
would have been less than 14% of revenue.
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Income Taxes
------------
In September 1995, the Company reached a tentative settlement
agreement with the IRS for fiscal years 1989 and 1990 and resolved
certain other open issues for other years. As part of the settlement,
the deductibility and amortization period of certain intangibles were
changed, which resulted in the deductibility of certain previously
undeductible goodwill, producing a $480,000 benefit in the first
quarter. The Company has recorded additional income taxes in the same
amount for potential exposure items in the remaining open years.
The effective tax rate for fiscal 1996 is estimated to be 42.0%
as compared to 44.5% for fiscal 1995. The decrease results primarily
from the deductibility of previously nondeductible goodwill and a
decrease in other nondeductible items.
Liquidity and Capital Resources
-------------------------------
Working capital -
---------------
At September 30, 1995, working capital amounted to $17,571,000
compared to $15,288,000 at June 30, 1995. The current ratio was 1.5
at June 30, 1995 and September 30, 1995.
The Company has an unsecured revolving credit agreement, which
provides for borrowings up to $100 million. At the Company's option,
borrowings under the agreement bear interest at the bank's prime rate
and/or at the London Interbank Offered Rate (LIBOR) plus .75% to 2.0%,
(.75% at September 30, 1995), depending upon certain ratios.
Outstanding borrowings under the Company's revolving credit agreement
were $44 million at September 30, 1995.
The Company has an interest rate swap agreement to modify the
interest characteristics of certain debt with a current floating rate
of 4% to a fixed rate of 6.29%. The Company's objective with this
swap agreement is to minimize the impact of increases in interest-
rates over the term of the swap agreement. This represents
approximately 31% of outstanding floating rate debt.
As of September 30, 1995, the Company had $5,328,000 in restricted
cash. This cash, which is related to California Pollution Control
Bonds issued in fiscal 1995, is held in custody by a Trustee and is
restricted as to withdrawal or use for qualified fixed asset
expenditures. As of September 30, 1995, $2,968,000 of the total
restricted cash is included in Receivables, as expenditures related
to this amount were incurred prior to September 30, 1995 and
reimbursement has been requested. The remaining $2,360,000, which is
expected to be received over the balance of fiscal 1996, is included
with Other Assets. Based upon current cash flow from operations and
estimated capital expenditures, the Company intends to use the receipt
of the reimbursement proceeds to reduce revolving credit agreement
borrowings.
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The Company's debt to equity ratio was .48 to 1.0 at September 30,
1995 and .50 to 1.0 at June 30, 1995.
Capital resources -
-----------------
During the quarter ended September 30, 1995, the Company made
expenditures of approximately $12 million for property and equipment.
The capital expenditure budget for fiscal year 1996 was established at
$50 million, in anticipation of development opportunities to provide
new assets to support planned revenue growth within all consolidated
businesses and to provide for normal replacement capital needs in the
Company's core business and acquisitions. The Company believes that
cash provided by operations, remaining restricted cash to be received,
and cash available under its revolving credit agreement will be
sufficient for its capital expenditure requirements.
Inflation -
---------
Generally, inflation has had a minor impact on the Company's
operations for the periods referred to above as most of the Company's
collection operations are under contracts that provide for rate
adjustments based upon increases in the consumer price index. These
contracts reduce the Company's vulnerability to inflation. However,
in the case of rapid changes in costs such as fuel and disposal costs,
rate increases may lag behind cost increases.
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PART II. OTHER INFORMATION
Items 1 through 5
-----------------
Items 1,2,4 and 5 are not applicable.
Item 3 - Legal Proceedings
--------------------------
On October 6, 1995, a petition and complaint was filed in
Imperial County Superior Court by Desert Citizens Against Pollution,
etc., et al. v. The County of Imperial, etc., et al., Imperial County
Superior Court Case No. 87141, seeking a writ of mandate and for
injunctive and declaratory relief. The petition and complaint, filed
by the Sierra Club and others, seeks to set aside the unanimous
decision by the Imperial County California Board of Superiors
certifying an environmental impact report ("EIR") approving various
ordinances, resolutions, agreements and permits (the "Approvals")
related to the proposed Mesquite Regional Landfill (the "Landfill").
The Landfill is proposed to be constructed in Imperial County and
operated by the Company and other real parties-in-interest in
connection with California RailFill Systems. The petition and
complaint alleges various failures with regard to the certification
process, including failure to provide notices of hearings and
documents in Spanish, and various significant and adverse
environmental impacts not properly covered by the EIR. Plaintiffs
also seek reasonable attorneys' fees and reimbursement of costs.
The Company believes that the EIR and the Approvals were processed
in accordance with CEQA and other applicable laws and regulations
and that the Company and the other real parties-in-interest have
valid defenses to the allegations and intend to vigorously
defend the suit.
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Item 6 - Exhibits and Report on Form 8-K
-----------------------------------------
a. Exhibits -
Exhibit 10.14 Split dollar insurance
agreement between Western Waste
Industries and (i) Kosti and
Marian Shirvanian and (ii)
Linda Shirvanian as trustee of
the Kosti and Marian Shirvanian
Family 1995 Irrevocable Trust.
Exhibit 27 Financial Data Schedule
b. Report on Form 8-K - There was no report on Form
8-K filed during the quarter ended September 30,
1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned as both a duly authorized officer and as the
Chief Financial Officer of the registrant.
WESTERN WASTE INDUSTRIES
By: /s/ Lawrence F. McQuaide
---------------------------
LAWRENCE F. MCQUAIDE
EXECUTIVE VICE PRESIDENT,
FINANCE
Date: NOVEMBER 14, 1995
----------------------------
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EXHIBIT INDEX
-------------
Exhibit Page
No. Description No.
- ------------------------------------------------------------------------
10.14 Split Dollar Agreement 15
27 Financial Data Schedule 29
-14- <PAGE>
<PAGE>
EXHIBIT 10.14
SPLIT DOLLAR AGREEMENT
THIS SPLIT DOLLAR AGREEMENT ("Agreement") is made by
and between WESTERN WASTE INDUSTRIES, a California corporation
("Western"), KOSTI SHIRVANIAN and MARIAN SHIRVANIAN (each an
"Insured" and collectively the "Insureds"), and LINDA
SHIRVANIAN, as trustee of the KOSTI AND MARIAN SHIRVANIAN
FAMILY 1995 IRREVOCABLE TRUST dated June 19, 1995 ("Owner"),
with respect to the following:
A. Kosti Shirvanian is employed by Western as its
chief executive officer. It is in the best interests of Western
and its shareholders to assist the Insureds and the family of
the Insureds to arrange for insurance on the joint lives of the
Insureds.
B. Owner wishes to obtain assistance with respect
to financing of certain policies of insurance on the joint
lives of the Insureds issued by the carriers (collectively the
"Insurers") described in Exhibit "A," attached hereto and
incorporated by this reference as if set forth in full, and any
supplementary contracts issued by the Insurers in conjunction
therewith (collectively the "Policies").
C. In exchange for such assistance, Owner is
willing to grant to Western an interest in the Policies, which
shall be, as of any given date, the sum of the premium payments
made by Western hereunder with respect to the Policies, less
any amounts returned to Western by Owner or from the Policies
(Western's "Policy Interest").
E. The parties intend to evidence Western's Policy
Interest by filing with the Insurer an assignment in
substantially the form of Exhibit "B," attached hereto and
incorporated by this reference as if set forth in full (the
"Collateral Assignment Agreement").
ACCORDINGLY, the parties have agreed as follows:
1. Premium Payments.
----------------
1.1 Split of Premiums. Each annual premium on the
Policies shall be split between Owner and Western as follows:
1.1.1 Western shall pay directly to the
Insurers (or, at its election, deliver to Owner on or before
each premium due date) an amount of the premiums payable to the
Insurers equal to the least of (a) two-thirds (2/3) of the
entire amount of the premium, (b) the sum of Five Hundred
Thousand Dollars ($500,000), or (c) the largest amount which
will not result in a charge to the earnings of Western for the
Page 1 of 14
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fiscal year in which payment is made of more than One Hundred
Fifty Thousand Dollars ($150,000), determined under that
accounting method which results in the least annual charges
over the longest appropriate period of time and conforms with
generally accepted accounting principles.
1.1.2 Owner shall pay the balance of the
premiums directly to the Insurers.
1.2 Remittance by Owner. If Western delivers its
portion of the premiums to Owner, Owner shall, upon receipt of
Western's premium contribution, remit to the Insurers Western's
portion of the premiums and Owner's contribution for the
balance of the full premiums due.
1.3 Policy Dividends. Dividends on the Policy shall
be applied to purchase fully paid-up additions to the Policies
or to reduce the premiums, at Owner's discretion. If the
premiums are reduced, the split of premiums set forth in
Sections 1.1.1 and 1.1.2 hereof shall be reduced
proportionally.
1.4 Waiver of Premiums. The Policies may, at
Owner's discretion, provide for the waiver of premiums on the
disability of the Insured. If they do so provide, the cost
thereof shall be borne by Owner, in addition to amounts due
under Section 1.1.2 hereof.
2. Policy Ownership.
----------------
Subject only to Western's Policy Interest, Owner
shall be sole and exclusive owner of the Policies. This
includes all rights of "Owner" under the terms of any of the
Policies, including but not limited to the right to designate
beneficiaries, select settlement options, borrow on the
security of a Policy, and surrender a Policy. With respect to
the exercise of the right to borrow on the security of a
Policy, however, at no time shall the balance of any amounts
borrowed by Owner exceed the lesser of (a) the amount of (i)
the cash surrender value of such Policy less (ii) the amount of
Western s Policy Interest in such Policy at such time (but not
less than zero) or (b) one-third (1/3) of the cash surrender
value of such Policy. The foregoing limitation shall not apply
to any borrowing of which the proceeds are used immediately to
pay Western its entire Policy Interest pursuant to Section
6.2.3 hereof; provided, however, that in such event Western's
obligation to make premium payments with respect to such Policy
as provided in Section 1.1 hereof shall thereupon cease.
If requested by Western, from time to time, Owner shall produce
information, verified by the Insurer, showing the cash surrender
value and the amount of indebtedness then secured by each Policy.
Page 2 of 14
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3. Right to Assign.
---------------
With the consent of Western, which shall not be
unreasonably withheld, Owner shall have the right to assign all
or any part of Owner's retained interest in the Policies or any
of them and this Agreement to any person, entity, or trust by
execution of a written assignment delivered to Western and the
applicable Insurer.
4. Collateral Assignment.
---------------------
Owner assigns the Policies to Western as collateral
to secure the repayment to Western of its Policy Interest and
shall execute simultaneously herewith an assignment in the form
of the Collateral Assignment Agreement. Such collateral
assignment of the Policies shall not be terminated, altered, or
amended by Owner without the express written consent of
Western. The parties hereto shall take all action necessary to
cause such collateral assignment to conform to the provisions
of this Agreement.
5. Death Proceeds.
--------------
5.1 Collection. Upon the death of the survivor of
the Insureds, Western and Owner shall cooperate to take
whatever action is necessary to collect the death benefits
provided under the Policies; when such benefits have been
collected and paid as provided herein, this Agreement shall
terminate.
5.2 Division of Proceeds. Upon the death of the
survivor of the Insureds, Western shall have the unqualified
right to receive a portion of the death benefits of the
Policies equal to the Policy Interest of Western. The balance
of the death benefits provided under the Policies, if any,
shall be paid directly to Owner in the manner and in the amount
or amounts provided in the beneficiary designation provision of
the Policies. In no event shall the amount payable to Western
hereunder exceed the proceeds of the Policies payable as a
result of the maturity of the Policies as a death claim. No
amount shall be paid from the death benefits of the Policies to
Owner until the full amount due Western under this Section 5.2
has been paid. All beneficiary designation provisions of the
Policies shall conform to the provisions of this Section 5.2.
5.3 Limitation. Notwithstanding any other provision
of this Agreement, if no death benefit is payable under the
Policies upon the death of the survivor of the Insureds and in
lieu thereof the Insurers refund all or any part of the
premiums paid for the Policies, Western and Owner shall share
such refund in the ratio of their respective contributions
under Sections 1.1.1 and 1.1.2 hereof.
Page 3 of 14
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6. Termination of Agreement.
------------------------
6.1 Time of Termination. This Agreement shall
terminate on the first to occur of the following:
6.1.1 Delivery of ninety (90) days' written
notice by Owner to Western;
6.1.2 Failure of Owner to make a premium
contribution as required by Section 1.1.2 hereof;
6.1.3 Surrender of all of the Policies by
Owner, which shall have the sole and exclusive right of
surrender without Western's consent;
6.1.4 Bankruptcy, or receivership of Western.
6.2 Effect of Termination. On any termination of
this Agreement, Owner shall:
6.2.1 Surrender one or more of the Policies;
and
6.2.2 Execute a promissory note in favor of
Western for the amount of Western s Policy Interest as of the
effective date of termination of this Agreement with respect to
any Policies which are not so surrendered. Such note shall bear
interest at the applicable federal long-term interest rate
published by the Internal Revenue Service pursuant to Section
1274(d) of the Internal Revenue Code of 1986, as amended, or
any corresponding or successor statute, for the month in which
Owner executes such promissory note and shall provide for
payment upon the soonest of (a) the death of the survivor of
the Insured or (b) the lapse or termination of the applicable
Policies. However, in such event, the Collateral Assignment
Agreement shall not terminate as to such Policies; or
6.2.3 Direct Western to assign its Policy
Interest and this Agreement to Owner or Owner's nominee, in
which event Owner or Owner's nominee shall pay to Western an
amount equal to its Policy Interest.
7. The Insurers.
------------
Subject to taking notice of any Collateral Assignment
Agreement filed at its home office, no Insurer shall have any
liability except as set forth in the applicable Policy. No
Insurer shall be bound to inquire into or take notice of any of
the covenants herein contained. Rights under the Policies may
be exercised during the life of the survivor of the Insureds
pursuant to the provisions of the Policies and subject to the
terms of the Collateral Assignment Agreement. Upon the death of
the survivor of the Insureds, on payment of the proceeds of the
Page 4 of 14
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Policies in accordance with the provisions of the Policies and
the Collateral Assignment Agreement (and without regard to this
Agreement), the Insurers shall be discharged from all
liability.
8. Miscellaneous.
-------------
8.1 Claims Procedures.
8.1.1 A claim is a request for a benefit under
this Agreement by Owner. A claim is filed when the requirements
of this Section 8.1 have been met. A claim may be filed by
delivering a written communication to the Secretary of Western.
8.1.2 The following procedures shall apply to
notification of claimants:
8.1.2.1 If a claim is wholly or partially
denied, notice of the decision, meeting the requirements of
Section 8.1.3 hereof, shall be furnished to the claimant within
ninety (90) days after receipt of the claim, unless special
circumstances require an extension of time for processing of
the claim. If such an extension of time for processing is
required, written notice of the extension shall be furnished to
the claimant prior to the termination of the initial ninety-day
period. In no event shall such extension exceed a period of
ninety (90) days from the end of such initial period. The
extension notice shall indicate the special circumstances
requiring extension of time and the date by which the Secretary
of Western expects to render the final decision.
8.1.2.2 If notice of the denial of a claim
is not furnished in accordance with Section 8.1.2.1 hereof, the
claim shall be deemed denied, and the claimant shall be
permitted to proceed to the review stage described in Section
8.1.4 hereof.
8.1.3 The Secretary of Western shall provide to
every claimant who was denied a claim for benefits written
notice setting forth in a manner calculated to be understood by
the claimant:
8.1.3.1 The specific reason or reasons for
the denial;
8.1.3.2 Specific reference to pertinent
provisions of this Agreement on which the denial is based;
8.1.3.3 A description of any additional
material or information necessary for the claimant to perfect a
claim and an explanation of why such material or information is
necessary; and
Page 5 of 14
-19- <PAGE>
8.1.3.4 Appropriate information as to the
steps to be taken if the claimant wishes to submit his, her, or
its claim for review.
8.1.4 The following review procedures shall
apply to each claim:
8.1.4.1 Upon denial of a claim, a claimant
or his, her, or its duly authorized representative may appeal
the denied claim to the Board of Directors of Western (the
"Board"). The claimant, or his, her, or its duly authorized
representative may request a review upon written application to
the Board; review pertinent documents; and submit issues and
comments in writing.
8.1.4.2 A claimant must file any request
for review of a denied claim within sixty (60) days after
receipt by the claimant of written notification of denial of
the claim.
8.1.5 The following procedures shall apply to
decisions on review:
8.1.5.1 A decision by the Board shall be
made promptly and shall not ordinarily be made later than sixty
(60) days after the Board's receipt of a request for a review,
unless special circumstances (such as the need to hold a
hearing if the Board so determines) require an extension of
time for processing, in which case a decision shall be rendered
as soon as possible, but not later than one hundred twenty
(120) days after receipt of a request for a review.
8.1.5.2 If such an extension of time for
review is required because of special circumstances, written
notice of the extension shall be furnished to the claimant
prior to the commencement of the extension.
8.1.5.3 The decision on review shall be in
writing and shall include specific reasons for the decision,
written in a manner calculated to be understood by the
claimant, as well as specific reference to the pertinent
provisions of this Agreement on which the decision is based.
8.1.5.4 The decision on review shall be
furnished to the claimant within the appropriate time described
in Section 8.1.5.1 hereof. If the decision on review is not
furnished within such time, the claim shall be deemed denied on
review.
8.2 ERISA Provisions. The named fiduciary of the
employee benefit plan created under this Agreement shall be
Western. The funding policy of said plan shall be the timely
remittance by Western of the amounts due pursuant to
Page 6 of 14
-20- <PAGE>
Section 1.1.1 hereof. Benefits under said plan shall be
provided by the payment of benefits under the Policies, which
shall be based on the payment of premiums as provided in this
Agreement.
8.3 Additional Policies. Additional policies of
insurance on the life of the Insured may be covered under this
Agreement by amendment.
8.4 Notices. Any notice, request, demand or other
communication required or permitted hereunder shall be deemed
to be properly given when personally served in writing, when
mailed, certified mail, return receipt requested, or when
communicated to a public telegraph company for transmittal,
addressed to the party at the address set forth below:
Western: Western Waste Industries
21061 So. Western Ave.
Torrance, California 90501
Att'n: Madhu Chanani, Vice-President and
Corporate Controller
Insureds: Kosti and Marian Shirvanian
c/o Western Waste Industries
21061 So. Western Ave.
Torrance, California 90501
Owner: Linda Shirvanian, Trustee of the
Kosti and Marian Shirvanian Family 1995
Irrevocable Trust
c/o Western Waste Industries
21061 So. Western Ave.
Torrance, California 90501
Any party may change his, her, or its address by written notice
in accordance with this Section 8.4.
8.5 Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the parties hereto
and their respective executors, administrators, successors and
assigns.
8.6 Applicable Law. This Agreement shall be
construed, administered and governed under the laws of the
United States, and to the extent any of the provisions of this
Agreement are inconsistent with said laws, the provisions of
said laws shall control. This Agreement shall also be
construed, administered and governed by the laws of the State
of California, but only to the extent the laws of such State
have not been superseded by, or are not inconsistent with, the
applicable laws of the United States.
Page 7 of 14
-21- <PAGE>
8.7 Captions and Section Headings. Captions and
section headings used herein are for convenience only and are
not a part of this Agreement and shall not be used in
construing it.
8.8 Invalid Provisions. Should any provisions of
this Agreement for any reason be declared invalid, void, or
unenforceable by a court of competent jurisdiction, the
validity and binding effect of any remaining portion shall not
be affected, and the remaining portions of this Agreement shall
remain in full force and effect as if this Agreement had been
executed with said provision eliminated.
8.9 Entire Agreement. This Agreement and the
Collateral Assignment Agreement contains the entire agreement
of the parties relating to the Policy. It supersedes any and
all other agreements, either oral or in writing, between the
parties hereto with respect to the Policy. Each party to this
Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are
not embodied herein, and that no other agreement, statement, or
promise not contained in this Agreement shall be valid or
binding. This Agreement may not be modified or amended by oral
agreement, but only by an agreement in writing signed by the
parties.
Page 8 of 14
-22- <PAGE>
8.10 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have signed this
Agreement on June 27 , 1995.
----------------
/s/ Kosti Shirvanian
_____________________________________
KOSTI SHIRVANIAN ("Insured")
/s/ Marian Shirvanian
_____________________________________
MARIAN SHIRVANIAN ("Insured")
KOSTI AND MARIAN SHIRVANIAN
FAMILY 1995 IRREVOCABLE TRUST
dated June 19, 1995 ("Owner")
/s/ Linda Shirvanian
By: _____________________________________
LINDA SHIRVANIAN, Trustee
WESTERN WASTE INDUSTRIES ("Western")
/s/ Arnold Rothlisberger
By: _____________________________________
Arnold Rothlisberger
Its Vice President/General Counsel
Page 9 of 14
-23- <PAGE>
EXHIBIT "A"
THE POLICIES
The following life insurance policies are subject to
the Split Dollar Agreement:
Insurer: Manufacturers Life Insurance Company
Insured: Kosti and Marian Shirvanian
Policy Number: 5,357,114-7
Face Amount: $1,000,000; supplemental insurance rider of $9,000,000
Dividend Option: Par paid-up additions
Policy Date: July 17, 1995
Insurer: Sun Life Assurance Company of Canada
Insured: Kosti and Marian Shirvanian
Policy Number: 010011209
Face Amount: $3,400,000; supplemental insurance rider of $6,600,000
Dividend Option: Paid-up additions
Date of Issue: June 29, 1995
Insurer: Pacific Mutual Life Insurance Company
Insured: Kosti and Marian Shirvanian
Policy Number: 1A2293285-0
Face Amount: $2,059,000; added protection benefits $2,441,000;
added value plus $1,000,000
Dividend Option: Not elected
Policy Date: July 1, 1995
Insurer: John Hancock Mutual Life Insurance Company
Insured: Kosti and Marian Shirvanian
Policy Number: 08011742-7
Face Amount: $1,428,572; additional insurance protection rider of
$8,571,428
Dividend Option: Paid-up insurance
Date of Issue: June 20, 1995
Insurer: Phoenix Home Mutual Insurance Company
Insured: Kosti and Marian Shirvanian
Policy Number: 2 681 160
Face Amount: See schedule of premiums and benefits attached
Dividend Option: Optionterm
Date of Issue: August 16, 1995
Page 10 of 14
-24- <PAGE>
Phoenix Home Life Mutual Insurance Company
Main Administrative Office
One American Row
Hartford, CT 06115
SCHEDULE PAGE
First Insured: Kosti Shirvanian
Age & Sex: 65-Male
Second Insured: Marian Shirvanian
Age & Sex: 61-Male
Policy Number: 2 681 160
Face Amount: $4,750,000
Date of Issue: August 16, 1995
Beneficiary as stated in the application unless later changed.
Owner as stated in the application unless later changed.
PREMIUMS AND BENEFITS
ANNUAL PREMIUM YEARS PAYABLE
Basic Policy $140,635.00 Until Second
Death
R697 Optionterm Rider
$4,750,000.00 Target Face Amount
$4,586,608.94 Initial Term Amount
1,146.65 Initial Year-end Charge From Dividend
(Assuming Both Insureds Alive At Year End)
R681 Four-Year Term Rider $9,999,000 $0.00 4 YEARS
R637 Paid-Up Additions Purchase
Option Rider
The amounts purchased by each
dollar of premium are shown in
the Table of Purchase Rates of
form R637. The amount purchased
at issue is included below in the
"Total Initial Death Benefit"
Total Initial Annual Premium $212,000.00
Total Initial Death Benefit $19,499,000.00
Due dates 16th day of each AUGUST
Basis of Calculations
Mortality Table - Commissioner's 1980 Standard Ordinary Mortality Table
Interest Rate - 4 1/2%
2626V SURVIVOR LEGACY NEVERSMOKE, STANDARD PREMIUM CLASS
NONSMOKER, SPECIAL PREMIUM CLASS
Page 11 of 14
-25- <PAGE>
EXHIBIT "B"
COLLATERAL ASSIGNMENT AGREEMENT
THIS COLLATERAL ASSIGNMENT AGREEMENT (the "Agreement") is made by
and between LINDA SHIRVANIAN, Trustee of the KOSTI AND MARIAN SHIRVANIAN
FAMILY 1995 IRREVOCABLE TRUST dated June 19, 1995 ("Assignor"), and
WESTERN WASTE INDUSTRIES, a California corporation ("Assignee"), with
respect to the following:
A. Assignor is the owner of certain policies of insurance on
the joint lives of KOSTI and MARIAN SHIRVANIAN (collectively the
"Insureds") issued by the carriers (collectively the "Insurers")
described in Exhibit "A," attached hereto and incorporated by this
reference as if set forth in full, and any supplementary contracts issued
by the Insurers in conjunction therewith (collectively the "Policies").
B. The parties are parties to a Split Dollar Agreement of even
date herewith relating to financing of premiums due on the Policies (the
"Split Dollar Agreement").
C. Under the terms of the Split Dollar Agreement, the Assignee
has agreed to assist the Assignor in payment of premiums on the Policies.
D. In consideration of such premium financing, the Assignor
intends to grant the Assignee certain limited interests in the Policies
to secure its interest therein under the Split Dollar Agreement (the
"Policy Interest").
ACCORDINGLY, the parties have agreed as follows:
1. Assignment.
----------
The Assignor hereby assigns, transfers, and sets over to the
Assignee, its successors and assigns the following specific rights in
each of the Policies, subject to the following terms and conditions:
1.1 Policy Interest. The right to receive from the proceeds of
such Policy, upon maturity on account of the death of the survivor of the
Insureds or surrender or cancellation of the Policy for any reason or
cancellation of the Split Dollar Agreement, its Policy Interest. The
Assignee's Policy Interest, as of the applicable date, shall be the sum
of the premium payments made by the Assignee with respect to the Policy,
less any amounts returned to the Assignee by the Assignor or from the
Policy (the Assignor's "Policy Interest").
1.2 Release. The right to release this limited assignment by
assigning the Policy back to the Assignor upon the repayment to the
Assignee of its Policy Interest or other satisfaction of Assignor's
obligations to Assignee.
Page 12 of 14
-26- <PAGE>
2. Limited Rights.
--------------
In no event shall the Assignee have any rights in the Policies in
excess of those set forth in Section 1 hereof. Without limitation, with
respect to each of the Policies, the Assignee shall have no right or
power, and the Assignor shall have the sole and exclusive power, subject
to the terms and provisions of the Split Dollar Agreement and this
Agreement, to:
2.1 Change the beneficiary of such Policy;
2.2 Surrender or cancel such Policy;
2.3 Assign its interest in such Policy, except to the Assignor;
2.4 Revoke an assignment (other than this Agreement);
2.5 Pledge such Policy for a loan;
2.6 Borrow from the applicable Insurer against the cash
surrender value of such Policy any amounts permitted under Section 2 of
the Split Dollar Agreement;
2.7 Make a withdrawal from the cash value of such Policy of any
amounts in excess of the Assignee's Policy Interest in such Policy; or
2.8 Possess or exercise any "incident of ownership," as defined
under the Internal Revenue Code of 1986, as amended, or any corresponding
or successor statute thereto.
The reservation of all rights by the Assignor (other than those
specifically granted to the Assignee under Section 1 hereof) shall not
impair the rights of the Assignee under Section 1 hereof.
3. Insurers.
--------
The Insurers are hereby authorized to recognize and are fully
protected in recognizing:
3.1 The claims of the Assignee to rights hereunder, without
investigating the reasons for such action by the Assignee, or the
validity or the amount of such claims; and
3.2 The Assignor's request for surrender of the Policies without
the consent of the Assignee. Upon surrender, the Policies shall be
terminated and of no further force or effect.
4. Release.
-------
Upon full payment of the Assignee's Policy Interest to the
Assignee, the Assignee shall release and reassign to the Assignor all
rights in the Policies.
Page 13 of 14
-27- <PAGE>
5. Counterparts.
------------
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Collateral
Assignment Agreement on June 27, 1995, at Torrance, California.
------- --------------------
KOSTI AND MARIAN SHIRVANIAN
FAMILY 1995 IRREVOCABLE TRUST
dated June 19, 1995 ("Assignor")
/s/ Linda Shirvanian
By: _________________________________
LINDA SHIRVANIAN, Trustee
WESTERN WASTE INDUSTRIES ("Assignee")
/s/ Arnold Rothlisberger
By: __________________________________
Arnold Rothlisberger
Its Vice President/General Counsel
Page 14 of 14
-28- <PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 8,374
<SECURITIES> 0
<RECEIVABLES> 30,062
<ALLOWANCES> 1,885
<INVENTORY> 0
<CURRENT-ASSETS> 51,528
<PP&E> 306,856
<DEPRECIATION> 104,061
<TOTAL-ASSETS> 299,132
<CURRENT-LIABILITIES> 33,957
<BONDS> 78,758
<COMMON> 80,249
0
0
<OTHER-SE> 85,032
<TOTAL-LIABILITY-AND-EQUITY> 299,132
<SALES> 0
<TOTAL-REVENUES> 69,739
<CGS> 0
<TOTAL-COSTS> 51,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 358
<INTEREST-EXPENSE> 1,167
<INCOME-PRETAX> 7,629
<INCOME-TAX> 3,204
<INCOME-CONTINUING> 7,629
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,425
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
/TEXT
<PAGE>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
