<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
WESTERN WASTE INDUSTRIES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
WESTERN WASTE INDUSTRIES
21061 S. WESTERN AVENUE
TORRANCE, CALIFORNIA 90501
April 2, 1996
Dear Shareholder of Western Waste Industries:
You are invited to attend a Special Meeting of Shareholders of Western
Waste Industries ("Western") to be held May 7, 1996 at 10:00 a.m., Dallas, Texas
time. The Special Meeting will be held at The Grand Kempinski-Dallas Hotel,
15201 Dallas Parkway, in Dallas, Texas.
At the Special Meeting you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger dated as of
December 18, 1995 (the "Merger Agreement"), by and among USA Waste Services,
Inc. ("USA Waste"), Riviera Acquisition Corporation ("Acquisition"), a wholly
owned subsidiary of USA Waste, and Western.
The Merger Agreement provides, among other things, for the merger of
Acquisition with and into Western (the "Merger"), pursuant to which Western
would become a wholly owned subsidiary of USA Waste and each outstanding share
of common stock of Western would be converted into 1.50 shares of common stock
of USA Waste (the "Exchange Ratio"). Upon consummation of the Merger, USA Waste
would issue approximately 21.7 million shares of its common stock to the
shareholders of Western. These shares would represent approximately 24.8% of the
total shares of USA Waste's common stock outstanding immediately after the
Merger. The Merger is subject to a number of conditions, including obtaining the
approval of the stockholders of USA Waste and the shareholders of Western and
obtaining any necessary regulatory waivers or approvals. A summary of the basic
terms and conditions of the Merger, certain financial and other information
relating to USA Waste and Western and a copy of the Merger Agreement are set
forth in the accompanying Joint Proxy Statement and Prospectus. Please review
and consider the enclosed materials carefully.
Your Board of Directors has approved the Merger Agreement. In addition, the
Board of Directors has received an opinion dated December 17, 1995 from Merrill
Lynch, Pierce, Fenner & Smith Incorporated (a copy of which is included in the
accompanying Joint Proxy Statement and Prospectus) that, as of such date, the
Exchange Ratio is fair to the shareholders of Western (other than USA Waste and
its affiliates) from a financial point of view. THE BOARD OF DIRECTORS OF
WESTERN BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST INTERESTS OF WESTERN
AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
Regardless of the number of shares you hold or whether you plan to attend
the Special Meeting, we urge you to complete, sign, date, and return the
enclosed proxy card immediately. If you attend the Special Meeting, you may vote
in person if you wish, even if you have previously returned your proxy card.
Sincerely,
/s/ KOSTI SHIRVANIAN
Kosti Shirvanian
Chairman of the Board
<PAGE> 3
WESTERN WASTE INDUSTRIES
21061 S. WESTERN AVENUE
TORRANCE, CALIFORNIA 90501
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 7, 1996
To the Shareholders of Western Waste Industries:
Notice is hereby given that a Special Meeting of Shareholders of Western
Waste Industries ("Western") will be held at The Grand Kempinski-Dallas Hotel,
15201 Dallas Parkway, Dallas, Texas 75248, on May 7, 1996, at 10:00 a.m.,
Dallas, Texas time, to consider and act upon the following proposal:
To approve and adopt the Agreement and Plan of Merger dated as of December
18, 1995 (the "Merger Agreement"), by and among Western, USA Waste Services,
Inc. ("USA Waste") and Riviera Acquisition Corporation ("Acquisition"), a wholly
owned subsidiary of USA Waste, providing for, among other things, the merger of
Acquisition with and into Western (the "Merger") and the conversion of each
outstanding share of Western common stock, no par value, (other than shares
owned by USA Waste) into 1.50 shares of USA Waste common stock, par value $.01
per share.
The meeting may be recessed from time to time, and at any reconvened
meeting actions with respect to the matters specified in this notice may be
taken without further notice to shareholders unless required by the Bylaws of
Western.
Only shareholders of record at the close of business on March 22, 1996, are
entitled to notice of and to vote on the Merger Proposal at the Special Meeting
and any adjournments thereof. A list of all shareholders will be available at
the Special Meeting and, during the 10-day period prior to the Special Meeting,
at the offices of Western, 21061 S. Western Avenue, Torrance, California, during
ordinary business hours.
By Order of the Board of Directors,
/s/ SAVEY TUFENKIAN
Savey Tufenkian
Corporate Secretary
Torrance, California
April 2, 1996
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND
THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE> 4
USA WASTE SERVICES, INC. WESTERN WASTE INDUSTRIES
JOINT PROXY STATEMENT AND PROSPECTUS
This Joint Proxy Statement and Prospectus is being furnished to the
stockholders of USA Waste Services, Inc., a Delaware corporation ("USA Waste"),
in connection with the solicitation of proxies by its Board of Directors to be
voted at the Annual Meeting of Stockholders of USA Waste (the "USA Waste Annual
Meeting") scheduled to be held on May 7, 1996, at 2:00 p.m., Dallas, Texas time,
at The Grand Kempinski -- Dallas Hotel, 15201 Dallas Parkway, Dallas, Texas
75248, and at any adjournment or postponement thereof, and to the shareholders
of Western Waste Industries, a California corporation ("Western"), in connection
with the solicitation of proxies by its Board of Directors to be voted at the
Special Meeting of Stockholders of Western (the "Western Special Meeting")
scheduled to be held on May 7, 1996, at 10:00 a.m., Dallas, Texas time, at The
Grand Kempinski -- Dallas Hotel, 15201 Dallas Parkway, Dallas, Texas 75248, and
at any adjournment or postponement thereof.
At the USA Waste Annual Meeting and the Western Special Meeting, the
holders of common stock, par value $.01 per share ("USA Waste Common Stock"), of
USA Waste, and the holders of common stock, no par value ("Western Common
Stock"), of Western, will be asked to consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Merger dated as of December 18, 1995
(the "Merger Agreement"), among USA Waste, Riviera Acquisition Corporation, a
wholly owned subsidiary of USA Waste ("Acquisition"), and Western providing for
the merger of Acquisition with and into Western (the "Merger"). Such approvals
are a condition to consummating the Merger. Upon consummation of the Merger,
Western will become a wholly owned subsidiary of USA Waste and the holders of
the issued and outstanding shares of Western Common Stock (other than shares
owned by USA Waste) will receive, at the effective time of the Merger, 1.50
shares of USA Waste Common Stock for each share of Western Common Stock held by
them. See "The Plan of Merger and Terms of the Merger." A copy of the Merger
Agreement is attached hereto as Appendix A and incorporated herein by reference.
On April 1, 1996, the closing sale price of USA Waste Common Stock on the
New York Stock Exchange was $25.88 per share. Based on such closing price, the
consideration to be received by shareholders of Western pursuant to the Merger
would be approximately $38.82 per share of Western Common Stock. Approximately
87.6 million shares of USA Waste Common Stock will be outstanding after the
Merger is consummated, of which approximately 24.8% will be owned by former
shareholders of Western and approximately 75.2% will be owned by current
stockholders of USA Waste.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE SECURITIES REFERRED TO HEREIN.
This Joint Proxy Statement and Prospectus also constitutes the prospectus
of USA Waste that is a part of the Registration Statement of USA Waste filed
with the Securities and Exchange Commission with respect to the issuance and
exchange of up to approximately 26.9 million shares of USA Waste Common Stock to
be issued pursuant to the Merger (which includes shares underlying options to
purchase Western Common Stock currently held by Western employees). This Joint
Proxy Statement and Prospectus is first being mailed to the stockholders of USA
Waste and the shareholders of Western on or about April 5, 1996.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS JOINT PROXY STATEMENT
AND PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement and Prospectus is April 2, 1996.
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT AND PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY USA WASTE OR WESTERN. THIS JOINT PROXY STATEMENT AND
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, USA WASTE COMMON STOCK, OR A SOLICITATION OF A PROXY, IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT AND
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF USA WASTE OR WESTERN SINCE THE DATE HEREOF OR THAT THE INFORMATION IN
THIS JOINT PROXY STATEMENT AND PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF. ALL INFORMATION HEREIN WITH RESPECT TO USA WASTE AND
ACQUISITION HAS BEEN FURNISHED BY USA WASTE, AND ALL INFORMATION HEREIN WITH
RESPECT TO WESTERN HAS BEEN FURNISHED BY WESTERN.
AVAILABLE INFORMATION
USA Waste and Western are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information may be inspected and copied at the offices of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and the Regional Offices of the Commission in Chicago, Illinois at
Citicorp Center, 500 W. Madison, Suite 1400, Chicago, Illinois 60661-2511 and in
New York, New York at 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such materials may be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Furthermore, USA Waste's and
Western's securities are listed on the New York Stock Exchange (the "NYSE") and
the reports, proxy statements, and other information of USA Waste and Western
described above may also be inspected at the NYSE at 20 Broad Street, New York,
New York 10005. Upon consummation of the Merger, listing of Western's securities
on the NYSE will be terminated.
USA Waste has filed with the Commission a registration statement (the
"Registration Statement") on Form S-4 under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Joint Proxy Statement and Prospectus also constitutes the Prospectus of USA
Waste filed as part of the Registration Statement and does not contain all of
the information set forth in the Registration Statement and the exhibits
thereto, certain parts of which are omitted in accordance with the rules of the
Commission. Statements made in this Joint Proxy Statement and Prospectus as to
the contents of any contract, agreement, or other document referred to are not
necessarily complete; with respect to each such contract, agreement, or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be qualified in its entirety by such reference. The
Registration Statement and any amendments thereto, including exhibits filed as
part thereof, are available for inspection and copying at the Commission's
offices as described above. After the Merger, registration of the Western Common
Stock under the Exchange Act will be terminated.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
USA Waste incorporates herein by reference the following documents filed by
it with the Commission (File No. 1-12154) pursuant to the Exchange Act: (i) its
Annual Report on Form 10-K for the year ended December 31, 1995 and (ii) the
description of USA Waste Common Stock contained in its Registration Statement on
Form 8-A dated July 1, 1993, as amended by Form 8-B dated July 13, 1995.
Western incorporates herein by reference (i) its Annual Report on Form 10-K
for the year ended June 30, 1995, as amended by Form 10-K/A, Amendment No. 1
filed October 26, 1995, (ii) its Quarterly Reports on Form 10-Q for the quarters
ended September 30, 1995 and December 31, 1995, (iii) its Current Report on Form
8-K dated December 18, 1995 and (iv) its proxy statement for its 1995 Annual
Meeting of Shareholders.
i
<PAGE> 6
All documents filed by USA Waste and Western pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement and Prospectus and prior to the date of the USA Waste Annual
Meeting and the Western Special Meeting shall be deemed to be incorporated by
reference in this Joint Proxy Statement and Prospectus and to be part hereof
from the date of filing of such documents. All information appearing in this
Joint Proxy Statement and Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated by reference herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded, for purposes
of this Joint Proxy Statement and Prospectus, to the extent that a statement
contained herein or in any subsequently filed document that is deemed to be
incorporated herein modifies or supersedes any such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Joint Proxy Statement and Prospectus.
THIS JOINT PROXY STATEMENT AND PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. USA WASTE AND
WESTERN HEREBY UNDERTAKE TO PROVIDE, BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT
MEANS WITHIN ONE BUSINESS DAY OF RECEIPT OF A REQUEST, WITHOUT CHARGE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS JOINT PROXY
STATEMENT AND PROSPECTUS HAS BEEN DELIVERED, ON WRITTEN OR ORAL REQUEST OF ANY
SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED TO ABOVE THAT HAVE
BEEN OR MAY BE INCORPORATED INTO THIS JOINT PROXY STATEMENT AND PROSPECTUS BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). DOCUMENTS RELATING
TO USA WASTE ARE AVAILABLE UPON REQUEST FROM USA WASTE SERVICES, INC., 5400 LBJ
FREEWAY, SUITE 300 -- TOWER ONE, DALLAS, TEXAS 75240, ATTENTION: CORPORATE
SECRETARY, TELEPHONE NUMBER 214-383-7900. DOCUMENTS RELATING TO WESTERN ARE
AVAILABLE UPON REQUEST FROM WESTERN WASTE INDUSTRIES, 21061 S. WESTERN AVENUE,
TORRANCE, CALIFORNIA, ATTENTION: CORPORATE SECRETARY, TELEPHONE NUMBER
310-328-0900. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY APRIL 30, 1996.
ii
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION............................. i
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE....................................... i
SUMMARY........................................... 1
The Companies................................... 1
The Meetings.................................... 1
The Merger...................................... 2
Stockholders' Comparative Rights................ 7
Market Price Data............................... 7
Summary Financial Information................... 8
Other Proposals to be Presented at the USA Waste
Annual Meeting................................ 11
RISK FACTORS...................................... 13
Forward-Looking Statements May Not Prove
Accurate...................................... 13
Expected Benefits of Combined Business May Not
be Achieved................................... 13
Stock Prices May Vary in Response to Changes in
Business and Economic Conditions.............. 13
No Assurance of Successful Management and
Maintenance of Growth......................... 13
Need for Capital; Debt Financing................ 14
Profitability May be Affected by Competition.... 14
Potential Adverse Effect of Government
Regulation.................................... 14
Potential Environmental Liability............... 14
Potential Loss or Material Change in Franchise
Agreements.................................... 15
Shares Eligible for Future Sale May Adversely
Affect Market Price of Stock.................. 15
Delaware Corporation Laws May Provide Less
Protection to Shareholders.................... 15
THE MEETINGS...................................... 16
Date, Time and Place of the Meetings............ 16
Purpose of the Meetings......................... 16
Record Date and Outstanding Shares.............. 16
Voting and Revocation of Proxies................ 17
Vote Required for Approval...................... 17
Solicitation of Proxies......................... 18
Other Matters................................... 19
THE MERGER AND RELATED
TRANSACTIONS.................................... 19
General Description of the Merger............... 19
Background of the Merger........................ 19
USA Waste's Reasons for the Merger.............. 22
Recommendation of the Board of Directors of
USA Waste..................................... 23
Western's Reasons for the Merger................ 23
Recommendation of the Board of Directors of
Western....................................... 24
Opinion of Financial Advisor to USA Waste....... 24
Opinion of Financial Advisor to Western......... 29
Conflicts of Interest........................... 33
Certain Federal Income Tax Consequences......... 34
Rights of Dissenting Shareholders............... 35
Accounting Treatment............................ 37
Government and Regulatory Approvals............. 38
Restrictions on Resales by Affiliates........... 38
ELECTION OF USA WASTE DIRECTORS................... 38
Nominees for Election as Directors.............. 38
Board of Directors After the Merger............. 41
Meetings, Committees and Compensation........... 41
Beneficial Ownership of USA Waste
Common Stock.................................. 42
Chambers Merger................................. 43
Executive Compensation.......................... 44
Compensation Committee Interlocks and Insider
Participation in Compensation Decisions....... 48
Certain Relationships and Related
Transactions.................................. 49
Filing of Reports of Stock Ownership............ 49
APPROVAL OF THE USA WASTE DIRECTOR PLAN........... 49
APPROVAL OF THE USA WASTE COMPENSATION PLAN....... 51
AMENDMENT OF THE USA WASTE 1993 STOCK INCENTIVE
PLAN............................................ 52
<CAPTION>
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<S> <C>
AMENDMENT TO USA WASTE RESTATED CERTIFICATE OF
INCORPORATION................................... 54
RATIFICATION OF APPOINTMENT OF AUDITORS........... 55
THE PLAN OF MERGER AND TERMS OF THE MERGER........ 55
Effective Time of the Merger.................... 55
Manner and Basis for Converting Shares.......... 55
Western Options................................. 56
Conditions to the Merger........................ 56
Representations and Warranties of USA Waste and
Western....................................... 58
Conduct of the Business of USA Waste and Western
Prior to the Merger........................... 58
No Solicitation of Acquisition Transactions..... 60
Conduct of the Business of the Combined
Companies Following the Merger................ 60
Termination or Amendment........................ 60
Termination Fees................................ 61
Expenses........................................ 61
Indemnification................................. 61
Other Agreements................................ 61
Voting Agreements............................... 62
COMPARATIVE RIGHTS OF STOCKHOLDERS OF USA WASTE
AND WESTERN..................................... 63
Comparison of Certain Provisions of the Charters
and Bylaws of USA Waste and Western........... 63
Significant Differences Between the Corporation
Laws of California and Delaware............... 68
USA WASTE AND WESTERN COMBINED HISTORICAL
UNAUDITED PRO FORMA CONDENSED FINANCIAL
STATEMENTS...................................... 73
USA WASTE AND WESTERN NOTES TO COMBINED HISTORICAL
UNAUDITED PRO FORMA CONDENSED FINANCIAL
STATEMENTS...................................... 78
Basis of Presentation........................... 78
Pro Forma Adjustments........................... 78
SUPPLEMENTAL INFORMATION RELATING TO THE COMBINED
HISTORICAL UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS............................ 80
BENEFICIAL OWNERSHIP OF WESTERN COMMON STOCK...... 83
MARKET PRICE DATA................................. 85
Market Information.............................. 85
Dividend Information............................ 85
DESCRIPTION OF USA WASTE CAPITAL
STOCK........................................... 86
Common Stock.................................... 86
Preferred Stock................................. 86
Authorized But Unissued Shares.................. 86
Transfer Agent and Registrar.................... 86
Limited Liability and Indemnification of
Officers and Directors........................ 86
INDEPENDENT AUDITORS.............................. 87
LEGAL MATTERS..................................... 88
EXPERTS........................................... 88
PROPOSALS OF STOCKHOLDERS FOR ANNUAL MEETING...... 88
OTHER MATTERS..................................... 88
APPENDIX A -- Agreement and Plan of Merger........ A-1
APPENDIX B -- Opinion of Donaldson, Lufkin &
Jenrette Securities Corporation................. B-1
APPENDIX C -- Opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated..................... C-1
APPENDIX D -- Chapter 13 of General Corporation
Law of the State of California.................. D-1
APPENDIX E -- USA Waste Services, Inc. 1996 Stock
Option Plan for Non-Employee Directors.......... E-1
APPENDIX F -- USA Waste Services, Inc. Corporate
Performance-Based Compensation Plan............. F-1
</TABLE>
iii
<PAGE> 8
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Joint Proxy Statement and Prospectus. The
information contained in this summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information appearing
elsewhere in this Joint Proxy Statement and Prospectus and the documents
incorporated herein by reference.
THE COMPANIES
USA WASTE SERVICES, INC. AND ACQUISITION
USA Waste Services, Inc. ("USA Waste") is the fourth largest integrated
solid waste management company in North America and serves municipal,
commercial, industrial and residential customers in 21 states. USA Waste's solid
waste management services include collection, transfer and disposal operations
and, to a lesser extent, recycling and certain other waste management services.
USA Waste owns or operates 29 landfills, 22 transfer stations and 44 collection
operations and serves more than 500,000 customers. Riviera Acquisition
Corporation ("Acquisition") is a wholly owned subsidiary of USA Waste organized
for the purpose of effecting the Merger pursuant to the Merger Agreement.
Acquisition has no material assets and has not engaged in any activities except
in connection with the Merger. The principal executive offices of USA Waste and
Acquisition are located at 5400 LBJ Freeway, Suite 300 -- Tower One, Dallas,
Texas 75240, and the telephone number is (214) 383-7900.
Additional information concerning USA Waste is included in USA Waste's
reports filed under the Exchange Act that are incorporated by reference in this
Joint Proxy Statement and Prospectus. See "Available Information" and
"Incorporation of Certain Information by Reference."
WESTERN WASTE INDUSTRIES
Western Waste Industries ("Western") is a provider of integrated waste
services to commercial, industrial and residential customers. These services
consist of the collection, transfer and disposal of solid waste in California,
Texas, Louisiana, Florida, Colorado and Arkansas. Western has 91 municipal and
regional authority contracts and serves over 785,000 customers. As part of its
business, Western operates six landfills, three transfer stations and five
recycling facilities. The principal executive offices of Western are located at
21061 S. Western Avenue, Torrance, California 90501, and the telephone number is
(310) 328-0900.
Additional information concerning Western is included in Western's reports
filed under the Exchange Act that are incorporated by reference in this Joint
Proxy Statement and Prospectus. See "Available Information" and "Incorporation
of Certain Information by Reference."
THE MEETINGS
The USA Waste Annual Meeting will be held at 2:00 p.m., Dallas, Texas time
on May 7, 1996, at The Grand Kempinski -- Dallas Hotel, 15201 Dallas Parkway,
Dallas, Texas, for the purpose of considering and acting upon proposals to (i)
approve and adopt the Merger Agreement, (ii) elect three members of the USA
Waste Board of Directors for the ensuing year, (iii) approve the USA Waste
Services, Inc. 1996 Stock Option Plan for Non-Employee Directors (the "Director
Plan"), (iv) approve the USA Waste Services, Inc. Corporate Performance-Based
Compensation Plan (the "Compensation Plan"), (v) approve an amendment to the USA
Waste Services, Inc. 1993 Stock Incentive Plan (the "1993 Plan") to provide an
annual limit on awards to a participant in the 1993 Plan of up to 1,500,000
shares and to increase the number of shares that may be issued under the 1993
Plan by 2,500,000 shares, (vi) approve an amendment to the USA Waste Restated
Certificate of Incorporation to delete a provision relating to stockholders' and
creditors' rights and (vii) to ratify the appointment of Coopers & Lybrand
L.L.P., as independent auditors for the ensuing year. The Western Special
Meeting will be held at 10:00 a.m., Dallas, Texas time on May 7, 1996, at The
Grand Kempinski -- Dallas Hotel, 15201 Dallas Parkway, Dallas, Texas for the
sole purpose of approving and adopting the Merger Agreement. The USA Waste
Annual Meeting and the Western Special Meeting, together, are sometimes referred
to hereinafter as the "Meetings."
1
<PAGE> 9
Only those stockholders of USA Waste of record at the close of business on
March 14, 1996 (the "USA Waste Record Date"), are entitled to notice of, and to
vote at, the USA Waste Annual Meeting. Only those stockholders of Western of
record at the close of business on March 22, 1996 (the "Western Record Date"),
are entitled to notice of, and to vote at, the Western Special Meeting.
Pursuant to the rules of the NYSE, approval and adoption of the Merger
Agreement require the affirmative vote of the holders of a majority of the
shares of USA Waste Common Stock voted, in person or by proxy, at the USA Waste
Annual Meeting, provided that the total vote cast on the proposal represents a
majority of the shares entitled to vote thereon. At the close of business on the
USA Waste Record Date, there were approximately 65.9 million shares of USA Waste
Common Stock outstanding and entitled to vote at the USA Waste Annual Meeting.
In connection with the execution of the Merger Agreement, John E. Drury, Donald
F. Moorehead, Jr. and Alexander W. Rangos each executed a voting agreement
pursuant to which such persons have agreed to vote shares of USA Waste Common
Stock held by them for approval of the Merger. In connection with such voting
agreements, Messrs. Drury, Moorehead and Rangos each executed an irrevocable
proxy with respect to an aggregate of 3,456,473 shares of USA Waste Common Stock
(or approximately 5.2% of shares outstanding on the USA Waste Record Date) held
by them which proxy permits certain officers of Western to vote such shares in
favor of the Merger. See "The Merger and Related Transactions -- Voting
Agreements." All executive officers and directors of USA Waste who are
stockholders of USA Waste, who collectively have the right to vote approximately
13 million shares of USA Common Stock, representing approximately 19.7% of the
shares outstanding as of the USA Waste Record Date, have indicated to USA Waste
that they intend to vote the shares of USA Waste Common Stock over which they
have voting control in favor of the Merger Agreement. See "The Meetings -- Vote
Required for Approval."
Pursuant to California law, approval and adoption of the Merger Agreement
require the affirmative vote of a majority of the votes to which holders of
shares of Western Common Stock outstanding on the Western Record Date are
entitled. At the close of business on the Western Record Date, there were
approximately 14.8 million shares of Western Common Stock outstanding and
entitled to vote at the Western Special Meeting. In connection with the
execution of the Merger Agreement, Kosti Shirvanian executed a voting agreement
pursuant to which he agreed to vote shares of Western Common Stock held by him
for approval of the Merger. In connection with such voting agreement, Mr.
Shirvanian executed an irrevocable proxy with respect to 4,476,041 shares of
Western Common Stock (or approximately 30.3% of shares outstanding on the
Western Record Date) held by him which proxy permits certain officers of USA
Waste to vote such shares in favor of the Merger. See "The Merger and Related
Transactions -- Voting Agreements." The officers and directors of Western who
are shareholders of Western and certain principal shareholders of Western, who
collectively have the right to vote approximately 5.0 million shares of Western
Common Stock, representing approximately 34.0% of the shares outstanding as of
the Western Record Date, have indicated to Western that they intend to vote such
shares in favor of the Merger Agreement. In addition, USA Waste intends to vote
the 634,900 shares of Western Common Stock owned by it, representing
approximately 4.3% of the shares outstanding as of the Western Record Date, in
favor of the Merger. See "The Meetings -- Vote Required for Approval."
THE MERGER
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Board of Directors of USA Waste has approved the Merger Agreement and
has directed that it be submitted to the stockholders of USA Waste. The Board of
Directors of USA Waste recommends that the stockholders of USA Waste approve and
adopt the Merger Agreement. See "The Merger and Related
Transactions -- Background of the Merger," "-- USA Waste's Reasons for the
Merger," "-- Recommendation of the Board of Directors of USA Waste" and
"-- Conflicts of Interest."
The Board of Directors of Western has approved the Merger Agreement and has
directed that it be submitted to the shareholders of Western. The Board of
Directors of Western recommends that the
2
<PAGE> 10
shareholders of Western approve and adopt the Merger Agreement. See "The Merger
and Related Transactions -- Background of the Merger," "-- Western's Reasons for
the Merger" and "-- Recommendation of the Board of Directors of Western." In
considering the recommendation of the Western's Board of Directors with respect
to the Merger, Western shareholders should be aware that certain officers and
directors of Western have direct or indirect interests in recommending the
Merger, apart from their interests as shareholders of Western, which are
separate from those of unaffiliated shareholders of Western. See "The Merger and
Related Transactions -- Conflicts of Interest."
CONFLICTS OF INTEREST
Certain members of the Board of Directors and management of Western have
certain interests separate from their interests as stockholders. Such interests
include: (i) certain officers of Western will become officers of USA Waste upon
consummation of the Merger, including Mr. Kosti Shirvanian, who has executed an
employment agreement with USA Waste to be effective at the Effective Time (as
hereinafter defined), (ii) Mr. Kosti Shirvanian and Ms. Savey Tufenkian,
directors and officers of Western will be elected to the USA Waste Board of
Directors, (iii) as a non-employee director of USA Waste, Ms. Tufenkian will
receive an annual grant of options to purchase 10,000 shares of USA Waste Common
Stock pursuant to the Director Plan, if approved by the USA Waste stockholders
at the USA Waste Annual Meeting, and Ms. Tufenkian will receive consulting
payments aggregating $600,000 (iv) certain officers of Western may receive
severance payments (in an aggregate amount of approximately $1.2 million), (v)
certain officers and directors of Western hold options to acquire Western Common
Stock, which will become fully vested and exercisable immediately into shares of
USA Waste Common Stock upon consummation of the Merger, (vi) certain officers of
Western who will not continue as employees of USA Waste will receive retirement
benefits under Western's retirement plan (in an aggregate present value amount
of approximately $4.8 million) and (vii) officers, directors and employees of
Western will be indemnified by USA Waste against certain liabilities. For more
information on such conflicts of interest, see "The Merger and Related
Transactions -- Conflicts of Interest."
OPINIONS OF FINANCIAL ADVISORS
On December 17, 1995, the Board of Directors of USA Waste received a
written opinion from Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
to the effect that as of such date the Exchange Ratio (as hereinafter defined)
is fair to USA Waste from a financial point of view. On December 17, 1995, the
Board of Directors of Western received an oral opinion (that was confirmed in a
written opinion dated such date) from Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") that, as of such date, the Exchange Ratio (as
hereinafter defined) is fair to the shareholders of Western (other than USA
Waste and its affiliates) from a financial point of view. The full text of the
written opinions of DLJ and Merrill Lynch are attached to this Joint Proxy
Statement and Prospectus as Appendices B and C, respectively. See "The Merger
and Related Transactions -- Opinion of Financial Advisor to USA Waste" and
"-- Opinion of Financial Advisor to Western."
CERTAIN TERMS OF THE MERGER
Exchange Ratio. At the Effective Time (as hereinafter defined), Acquisition
will merge with and into Western, and Western will become a wholly owned
subsidiary of USA Waste. In the Merger, each outstanding share of Western Common
Stock (other than shares of Western Common Stock held by USA Waste) will be
converted into 1.50 shares of USA Waste Common Stock (the "Exchange Ratio").
Based upon the number of shares of common stock of USA Waste and Western
outstanding as of the USA Waste Record Date and Western Record Date,
respectively, approximately 87.6 million shares of USA Waste Common Stock will
be outstanding immediately after the Effective Time, of which approximately 21.7
million shares, representing 24.8% of the total, will be held by former holders
of Western Common Stock.
Fractional Shares. No fractional shares of USA Waste Common Stock will be
issued pursuant to the Merger. In lieu of such fractional shares, each holder
who would otherwise receive a fractional share will receive cash (without
interest) in an amount equal to the product of such fractional part of a share
of USA
3
<PAGE> 11
Waste Common Stock multiplied by the average closing price per share of USA
Waste Common Stock on the NYSE during the 10 trading days immediately preceding
the Effective Time.
Effective Time of the Merger. The Merger will become effective at the time
(the "Effective Time") of the filing of a certified copy of the Merger Agreement
with the Secretary of State of the State of California. Assuming the requisite
stockholder approval of the Merger Agreement is obtained, it is anticipated that
the Effective Time of the Merger will occur as soon as practicable following the
Meetings. If all other conditions to the Merger have not been satisfied prior to
the Meetings, however, it is expected that the Merger will occur as soon as
practicable after such conditions have been satisfied or waived.
Exchange of Western Common Stock Certificates. Promptly after consummation
of the Merger, Boston EquiServe (the "Exchange Agent") will mail a letter of
transmittal with instructions to each holder of record of Western Common Stock
for use in exchanging certificates representing shares of Western Common Stock
for certificates representing shares of USA Waste Common Stock and cash in lieu
of any fractional shares. Certificates should not be surrendered by the holders
of Western Common Stock until they have received the letter of transmittal from
the Exchange Agent. See "The Plan of Merger and Terms of the Merger -- Manner
and Basis for Converting Shares."
Assumption of Western Option Plans. Pursuant to the Merger Agreement and at
the Effective Time, USA Waste will assume the obligations under each outstanding
option to purchase Western Common Stock (a "Western Option") that remains
unexpired and unexercised in whole or in part. Accordingly, each Western Option
will remain outstanding as an option to purchase, in place of the shares of
Western Common Stock previously subject to such Western Option, that number of
shares of USA Waste Common Stock equal to the product of the number of shares of
Western Common Stock subject to the Western Option multiplied by the Exchange
Ratio. The exercise price per share of USA Waste Common Stock will be equal to
the previous exercise price per share under the Western Option divided by the
Exchange Ratio. See "The Plan of Merger and Terms of the Merger -- Western
Options." As of the Western Record Date, 22 individuals, representing all
officers and directors of Western, hold options to acquire 3,049,116 shares of
Western Common Stock pursuant to the terms of certain stock option agreements,
at exercise prices ranging from $8 to $22 per share. See "The Merger and Related
Transactions -- Conflicts of Interest."
Indemnification. The Merger Agreement provides that the officers,
directors, employees and agents of Western will be indemnified by USA Waste
against certain liabilities and costs, including those arising out of, relating
to or in connection with any action or omission occurring prior to the Effective
Time or arising out of or pertaining to the transactions contemplated by the
Merger Agreement. See "The Plan of Merger and Terms of the
Merger -- Indemnification."
CONDITIONS TO THE MERGER
Certain Federal Income Tax Consequences. USA Waste has received an opinion
of its counsel to the effect that no gain or loss will be recognized by USA
Waste or Acquisition for federal income tax purposes as a result of consummation
of the Merger. Western has received an opinion of its counsel to the effect that
no gain or loss will be recognized for federal income tax purposes by Western or
holders of Western Common Stock as a result of consummation of the Merger,
except for gain or loss attributable to cash received in lieu of fractional
shares. Receipt of these opinions is a condition precedent to the consummation
of the Merger. See "The Merger and Related Transactions -- Certain Federal
Income Tax Consequences."
Accounting Treatment. It is a condition precedent to the closing of the
Merger that USA Waste and Western will receive letters from Coopers & Lybrand
L.L.P. and Ernst & Young LLP, respectively, dated as of the Effective Time,
regarding the appropriateness of "pooling of interests" accounting for the
Merger under Accounting Principles Board Opinion No. 16 if closed and
consummated in accordance with the Merger Agreement. See "The Merger and Related
Transactions -- Accounting Treatment."
Governmental and Regulatory Approvals. Consummation of the Merger is
conditioned upon the expiration or termination of the waiting period applicable
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). On January 19, 1996, USA Waste, Western, Kosti
4
<PAGE> 12
Shirvanian and Savey Tufenkian filed notification reports under the HSR Act with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice. The waiting period expired on February 18, 1996. See "The Merger and
Related Transactions -- Government and Regulatory Approvals." USA Waste and
Western are aware of no other governmental or regulatory approvals required for
consummation of the Merger, other than as required to comply with applicable
federal and state securities laws.
No Injunction Preventing Merger. Consummation of the Merger is subject to
the condition that no injunction or decree by any federal or state court that
prevents the consummation of the Merger shall have been issued and remain in
effect.
Other Conditions to the Merger. In addition to the approval and adoption of
the Merger Agreement by the requisite votes of USA Waste stockholders and
Western shareholders and the satisfaction of the conditions described above, the
respective obligations of USA Waste and Western to effect the Merger are subject
to the satisfaction or waiver, where permissible, of certain other conditions,
including, without limitation, (i) the shares of USA Waste Common Stock issuable
in the Merger shall have been authorized for listing on the NYSE, subject to
official notice of issuance and (ii) USA Waste shall have received letters from
affiliates of USA Waste and Western to the effect that such persons will not
dispose of USA Waste Common Stock in any manner that would adversely affect the
accounting treatment of the Merger. See "The Plan of Merger and Terms of the
Merger -- Conditions to the Merger."
NO SOLICITATION
The Merger Agreement provides that Western will not initiate, solicit,
negotiate, encourage, or provide confidential information to facilitate, and
Western will cause any officer, director, or employee of, or any attorney,
accountant, investment banker, financial advisor or other agent retained by it
not to initiate, solicit, negotiate, encourage, or provide non-public or
confidential information to facilitate, any proposal or offer to acquire all or
any substantial part of the business and properties or any capital stock of
Western. Notwithstanding the foregoing, Western may, under certain
circumstances, furnish confidential or non-public information concerning its
business, properties, or assets in response to an unsolicited request therefor.
Western may negotiate with a potential acquiror if (i) the board of directors of
Western, after consulting with one or more of its independent financial
advisors, concludes that such acquisition proposal (if consummated pursuant to
its terms) would result in a transaction more favorable to Western's
shareholders than the Merger and (ii) based upon advice of its outside legal
counsel, its board of directors determines in good faith that the failure to
provide such confidential or non-public information to such potential acquiror
would constitute a breach of its fiduciary duty to its shareholders (any such
acquisition proposal meeting the conditions of clauses (i) and (ii) being
referred to as a "Superior Proposal"). See "The Merger Agreement and Terms of
the Merger -- No Solicitation of Acquisition Transactions."
TERMINATION OR AMENDMENT OF MERGER AGREEMENT
Termination. The Merger Agreement may be terminated under certain
circumstances, including (a) with the mutual consent of USA Waste and Western or
(b) either by USA Waste or Western at any time prior to the consummation of the
Merger (i) if the Merger is not completed by June 30, 1996, for reasons other
than delay on the part of the party requesting termination (the "Terminating
Party") or any of its affiliates or associates; (ii) if the Merger is enjoined
by a final, unappealable court order; (iii) if (x) Western receives a Superior
Proposal and resolves to accept such a Superior Proposal and (y) Western shall
have given USA Waste two (2) days' prior written notice of its intention to
terminate; and (iv) if the non-Terminating Party (x) fails to perform in any
material respect any of its material covenants in the Merger Agreement and (y)
does not cure such default in all material respects within 30 days after notice
of such default is given to the non-Terminating Party by the Terminating Party.
Additionally, Western may terminate the Merger Agreement if (i) a tender or
exchange offer is commenced by a third party (excluding any affiliate of USA
Waste or any group of which any affiliate of USA Waste is a member) for all
outstanding shares of Western Common Stock; (ii) Western's Board of Directors
determines, in good faith and after consultation with an independent financial
advisor, that such offer constitutes a Superior Proposal and resolves to accept
such Superior Proposal
5
<PAGE> 13
or recommend to the stockholders that they tender their shares in such tender or
exchange offer and (iii) Western shall have given USA Waste two (2) days' prior
written notice of its intention to terminate. Similarly, USA Waste may terminate
the Merger Agreement if Western shall have resolved to accept a Superior
Proposal or shall have recommended to Western's shareholders that they tender
their shares in a tender or an exchange offer commenced by a third party
(excluding any affiliate of USA Waste or any group of which any affiliate of USA
Waste is a member).
Amendment. The Merger Agreement may be amended or supplemented by an
instrument in writing signed on behalf of each party and in compliance with
applicable law. Such amendment may occur at any time, including after the Merger
Agreement has been approved by the shareholders of USA Waste and the
stockholders of Western at the Meetings. See "The Plan of Merger and Terms of
the Merger -- Termination or Amendment."
Termination Fees; Expenses. Under certain circumstances, USA Waste or
Western may be required to pay the other a fee of $18 million upon termination
of the Merger Agreement. Certain expenses incurred in connection with this Joint
Proxy Statement and Prospectus will be shared equally by USA Waste and Western.
All other costs and expenses incurred in connection with the Merger Agreement
and the transactions contemplated thereby shall be paid by the party incurring
such expenses, whether or not the Merger is consummated. See "The Plan of Merger
and Terms of the Merger -- Termination Fees" and "-- Expenses."
DISSENTERS' RIGHTS
Delaware law does not require that holders of USA Waste Common Stock who
object to the Merger and who vote against or abstain from voting in favor of the
Merger be afforded any appraisal or dissenters' rights or the right to receive
cash for their shares. USA Waste does not intend to make available any such
rights to its stockholders.
Pursuant to Chapter 13 of the General Corporation Law of the State of
California (the "CGCL"), shareholders of Western may be entitled to require
Western to purchase their shares of Western Common Stock for cash at their fair
market value as of the day before the first announcement of the terms of the
Merger, excluding any appreciation or depreciation in consequence of the Merger
("Dissenters' Rights") if demands for payment are filed with respect to 5% or
more of the outstanding shares of Western Common Stock ("Dissenting Shares").
A dissenting shareholder who wishes to require Western to purchase his or
her shares of Western Common Stock must:
(i) make written demand upon Western or its transfer agent, which is
received not later than the date of the Western Special Meeting, setting
forth the number of shares of Western Common Stock demanded to be purchased
by Western and a statement as to claimed fair market value of such shares
at December 17, 1995;
(ii) vote against the Merger any or all of the shares of Western
Common Stock entitled to be voted (shares not voted are not considered to
be voted against the Merger for purposes of this requirement and will not
be counted toward the 5% minimum for Dissenters' Rights to exist); provided
that if a shareholder of Western votes part of the shares entitled to be
voted in favor of the Merger, and fails to specify the number of shares
voted, it is conclusively presumed under California law that such
shareholder's approving vote is with respect to all shares entitled to be
voted; and
(iii) submit for endorsement, within 30 days after the date on which
the notice of approval of the Merger by shareholders of Western is mailed
to such shareholders, to Western or its transfer agent the certificates
representing any shares in regard to which demand for purchase is being
made, or to be exchanged for certificates of appropriate denominations so
endorsed, with a statement that the shares are Dissenting Shares.
The provisions of the CGCL are technical in nature and complex.
Shareholders of Western desiring to exercise appraisal rights and to obtain
appraisal of the fair value of their shares should consult counsel since
6
<PAGE> 14
the failure to comply strictly with the provisions of Chapter 13 of the CGCL may
result in a waiver or forfeiture of their appraisal rights. A copy of Chapter 13
of the CGCL is attached hereto as Appendix D. See "The Merger and Related
Transactions -- Rights of Dissenting Shareholders."
If Dissenters' Rights are exercised with respect to more than 5.7% of
Western's outstanding shares entitled to vote on the Merger, the Merger will not
qualify as a pooling of interests for accounting purposes. USA Waste and Western
would not consummate the Merger under such conditions.
STOCKHOLDERS' COMPARATIVE RIGHTS
The rights of shareholders of Western are currently governed by California
law, Western's Articles of Incorporation and Western's Bylaws. The rights of
stockholders of USA Waste are governed by Delaware law and the Certificate of
Incorporation and Bylaws of USA Waste. See "Risk Factors -- Delaware Corporation
Laws May Provide Less Protection to Shareholders" and "Comparative Rights of
Stockholders of USA Waste and Western."
MARKET PRICE DATA
USA Waste Common Stock is traded on the NYSE under the symbol "UW." Western
Common Stock is traded on the NYSE under the symbol "WW." The following table
sets forth the range of high and low sale prices for USA Waste Common Stock and
the Western Common Stock as reported on the NYSE for the calendar quarters
indicated.
<TABLE>
<CAPTION>
USA WASTE WESTERN
COMMON STOCK COMMON STOCK
----------------- -----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1994
First Quarter................................. $15.00 $11.13 $16.50 $13.38
Second Quarter................................ 13.38 10.38 20.50 13.63
Third Quarter................................. 15.13 11.50 20.63 17.38
Fourth Quarter................................ 15.13 11.00 18.63 13.38
1995
First Quarter................................. $12.38 $10.00 $17.00 $14.88
Second Quarter................................ 16.63 11.50 20.63 15.38
Third Quarter................................. 21.88 14.63 24.50 19.00
Fourth Quarter................................ 22.50 17.00 27.50 18.00
1996
First Quarter................................. $25.63 $17.25 $38.13 $25.25
</TABLE>
On December 18, 1995, the last trading day prior to announcement by USA
Waste and Western that they had reached an agreement concerning the Merger, the
closing sale price of USA Waste Common Stock as reported on the NYSE was $18.88
per share, and the closing sale price of Western Common Stock as reported on the
NYSE was $24.38 per share. The equivalent per share price of Western Common
Stock on December 18, 1995, calculated by multiplying the closing sale price of
USA Waste Common Stock on the same date by the Exchange Ratio, was $28.31.
On April 1, 1996, the closing sale price of USA Waste Common Stock as
reported on the NYSE was $25.88 per share, and the closing sale price of Western
Common on the NYSE was $38.75 per share. Following the Merger, USA Waste Common
Stock will continue to be traded on the NYSE under the symbol "UW", and the
listing of Western Common Stock on the NYSE will be terminated.
7
<PAGE> 15
SUMMARY FINANCIAL INFORMATION
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following summary historical consolidated financial data of USA Waste
for each of the three years in the period ended December 31, 1995 have been
derived from USA Waste's historical audited consolidated financial statements.
The following summary historical consolidated financial data of Western for each
of the three years in the period ended June 30, 1995 have been derived from
Western's historical audited financial statements and for the six months ended
December 31, 1994 and 1995 have been derived from Western's historical unaudited
consolidated financial statements. Such unaudited data for Western include all
adjustments, consisting of normal recurring accruals, which Western's management
considers necessary to present fairly the information for such periods. The
historical financial data is not necessarily indicative of results to be
expected after the Merger is consummated. The financial data should be read in
conjunction with the separate audited and unaudited consolidated financial
statements and the notes thereto incorporated by reference herein.
USA WASTE SERVICES, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
-------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................................... $382,234 $ 434,224 $457,099
-------- --------- --------
Costs and expenses:
Operating................................................. 217,345 257,370 253,884
General and administrative................................ 66,968 71,500 62,178
Unusual items............................................. 2,672 8,863 4,733
Merger costs.............................................. -- 3,782 25,073
Depreciation and amortization............................. 52,222 56,139 56,378
-------- --------- --------
339,207 397,654 402,246
-------- --------- --------
Income from operations...................................... 43,027 36,570 54,853
-------- --------- --------
Other income (expense):
Shareholder litigation settlement and other litigation
related costs.......................................... (5,500) (79,400) --
Interest expense:
Nonrecurring interest.................................. -- (1,254) (10,994)
Other.................................................. (35,975) (32,804) (30,354)
Interest income........................................... 3,539 2,641 2,666
Other income, net......................................... 1,915 1,877 2,699
-------- --------- --------
(36,021) (108,940) (35,983)
-------- --------- --------
Income (loss) before income taxes........................... 7,006 (72,370) 18,870
Provision for (benefit from) income taxes................... 6,018 3,908 (11,393)
-------- --------- --------
Income (loss) from continuing operations.................... 988 (76,278) 30,263
Preferred dividends......................................... 582 565 --
-------- --------- --------
Income (loss) from continuing operations available to common
shareholders.............................................. $ 406 $ (76,843) $ 30,263
======== ========= ========
Income (loss) from continuing operations available to common
shareholders per common share............................. $ 0.01 $ (1.55) $ 0.55
======== ========= ========
Weighted average shares outstanding......................... 45,885 49,671 55,270
======== ========= ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)................................... $ 26,932 $ (4,601) $ 14,879
Intangible assets, net...................................... 70,566 93,416 118,778
Total assets................................................ 748,932 785,616 908,037
Long-term debt, including current maturities................ 402,800 410,714 373,785
Stockholders' equity........................................ 224,550 164,349 402,849
</TABLE>
8
<PAGE> 16
WESTERN WASTE INDUSTRIES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
-------------------------------- --------------------
1993 1994 1995 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues...................... $231,205 $257,005 $270,941 $134,818 $137,778
-------- -------- -------- -------- --------
Costs and expenses:
Operating............................. 187,648 192,099 196,235 97,370 101,493
General and administrative............ 37,076 38,483 39,480 19,546 20,445
Unusual items......................... 21,043 -- -- -- --
-------- -------- -------- -------- --------
245,767 230,582 235,715 116,916 121,938
-------- -------- -------- -------- --------
Income (loss) from operations........... (14,562) 26,423 35,226 17,902 15,840
-------- -------- -------- -------- --------
Other income (expense):
Interest expense...................... (3,480) (3,834) (5,349) (2,539) (2,273)
Interest income....................... 841 799 1,542 540 554
Other income (expense), net........... 2,735 (767) (628) (1,084) 65
-------- -------- -------- -------- --------
96 (3,802) (4,435) (3,083) (1,654)
-------- -------- -------- -------- --------
Income (loss) before income taxes....... (14,466) 22,621 30,791 14,819 14,186
Provision for (benefit from) income
taxes................................. (4,350) 10,094 13,702 6,594 6,029
-------- -------- -------- -------- --------
Income (loss) from continuing
operations............................ $(10,116) $ 12,527 $ 17,089 $ 8,225 $ 8,157
======== ======== ======== ======== ========
Income (loss) from continuing operations
per common share...................... $ (0.73) $ 0.83 $ 1.10 $ 0.53 $ 0.51
======== ======== ======== ======== ========
Weighted average shares outstanding..... 13,818 15,048 15,531 15,546 15,928
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital......................... $ 13,261 $ 20,660 $ 15,288 $ 21,002 $ 18,646
Intangible assets, net.................. 33,980 31,228 27,334 29,799 26,235
Total assets............................ 268,386 284,681 293,373 303,407 297,118
Long-term debt, including current
maturities............................ 91,618 93,390 80,190 102,664 77,055
Stockholders' equity.................... 122,421 139,177 160,221 149,366 169,329
</TABLE>
9
<PAGE> 17
SUMMARY COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following summary combined historical unaudited pro forma condensed
financial information of USA Waste and Western gives effect to the Merger under
the "pooling of interests" method of accounting as if the Merger had been
consummated as of the beginning of the years presented. The pro forma
information for the years ended December 31, 1993 and 1994 was prepared based on
the historical financial information of USA Waste for such years and the
historical financial information of Western for the years ended June 30, 1994
and 1995, respectively. The pro forma information for the year ended December
31, 1995 was prepared based on the historical statement of operations for USA
Waste for such years and the historical statement of operations for Western for
the twelve months ended December 31, 1995 after giving effect to the Merger
using the "pooling of interests" method of accounting and the pro forma
adjustments described in the notes to the combined historical unaudited pro
forma condensed financial statements. Western's operating results for the six
months ended June 30, 1995 were included in both the combined historical
unaudited pro forma condensed statement of operations for the year ended June
30, 1995 and for the twelve months ended December 31, 1995. Western's operating
revenues and income from continuing operations for the six months ended June 30,
1995 were $136,123,000 and $8,864,000, respectively. In addition to the pro
forma adjustments in the combined historical unaudited pro forma condensed
financial statements (which in effect are a restatement of the historical
financial statements as if the Merger was consummated), the impact of certain
transactions occurring in 1995 and 1996 is presented supplementally. These
supplemental adjustments do not include the impact of certain cost and expense
savings and other economic benefits that are expected to be realized as a result
of the Merger or additional cost reductions relating to landfill and collection
operations or additional revenues that may result from volume or price
increases. See "Supplemental Information Relating to the Combined Historical
Unaudited Pro Forma Condensed Financial Statements."
USA WASTE AND WESTERN COMBINED
<TABLE>
<CAPTION>
COMBINED HISTORICAL UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
-----------------------------------------------------------
YEAR ENDED YEAR ENDED SUPPLEMENTAL
DECEMBER 31, 1993 DECEMBER 31, 1994 INFORMATION FOR
(USA WASTE) (USA WASTE) TWELVE MONTHS
AND JUNE 30, 1994 AND JUNE 30, 1995 TWELVE MONTHS ENDED ENDED DECEMBER
(WESTERN) (WESTERN) DECEMBER 31, 1995 31, 1995
----------------- ----------------- ------------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues..................... $639,239 $705,165 $731,000 $780,034
-------- -------- -------- --------
Costs and expenses:
Operating............................ 388,727 428,701 428,331 456,299
General and administrative........... 104,121 108,885 101,268 108,061
Unusual items........................ 2,672 8,863 4,733 4,733
Merger costs......................... -- 3,782 25,073 25,073
Depreciation and amortization........ 74,223 83,044 83,519 88,730
-------- -------- -------- --------
569,743 633,275 642,924 682,896
-------- -------- -------- --------
Income from operations................. 69,496 71,890 88,076 97,138
-------- -------- -------- --------
Other income (expense):
Shareholder litigation settlement and
other litigation related costs..... (5,500) (79,400) -- --
Interest expense:
Nonrecurring interest.............. -- (1,254) (10,994) (10,994)
Other.............................. (39,809) (38,153) (35,437) (31,864)
Interest income...................... 4,338 4,183 4,222 5,010
Other income, net.................... 1,148 1,249 3,220 3,850
-------- -------- -------- --------
(39,823) (113,375) (38,989) (33,998)
-------- -------- -------- --------
Income (loss) before income taxes...... 29,673 (41,485) 49,087 63,140
Provision for income taxes............. 16,112 17,610 1,744 4,819
-------- -------- -------- --------
Income (loss) from continuing
operations........................... 13,561 (59,095) 47,343 58,321
Preferred dividends.................... 582 565 -- --
-------- -------- -------- --------
Income (loss) from continuing
operations available to common
shareholders......................... $ 12,979 $(59,660) $ 47,343 $ 58,321
======== ======== ======== ========
Income (loss) from continuing
operations available to common
shareholders per common share........ $ 0.19 $ (0.82) $ 0.60 $ 0.66
======== ======== ======== ========
Weighted average shares outstanding.... 68,457 72,968 78,946 88,193
======== ======== ======== ========
</TABLE>
10
<PAGE> 18
<TABLE>
<CAPTION>
HISTORICAL PRO
FORMA INFORMATION SUPPLEMENTAL
AS OF INFORMATION AS OF
DECEMBER 31, 1995 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................... $ 33,525 $ 13,523
Intangible assets, net............................................. 142,791 167,896
Total assets....................................................... 1,190,364 1,203,496
Long-term debt, including current maturities....................... 450,840 493,216
Stockholders' equity............................................... 557,387 525,847
</TABLE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth (a) the income (loss) from continuing
operations available to common shareholders per common share and the book value
per share of USA Waste Common Stock; (b) the income from continuing operations
per common share and the book value per share of Western Common Stock; (c) the
combined historical unaudited pro forma income (loss) from continuing operations
available to common shareholders per common share and the unaudited pro forma
book value per share data of USA Waste Common Stock after giving effect to the
Merger on a pooling of interests basis with Western; and (d) the Western
equivalent combined historical unaudited pro forma income (loss) from continuing
operations per common share and the unaudited pro forma book value per share
attributable to 1.50 shares of USA Waste Common Stock that will be received by
Western shareholders for each share of Western Common Stock. The information
presented in the table should be read in conjunction with the combined
historical unaudited pro forma financial statements and the separate historical
consolidated financial statements of USA Waste and Western and the notes thereto
appearing elsewhere herein or incorporated by reference in this Prospectus. In
addition to the pro forma adjustments in the combined historical unaudited pro
forma condensed financial statements (which in effect are a restatement of the
historical financial statements as if the Merger was consummated), the impact of
certain transactions occurring in 1995 and 1996 is presented supplementally. See
"USA Waste and Western Combined Historical Unaudited Pro Forma Condensed
Financial Statements."
<TABLE>
<CAPTION>
PRO FORMA
---------------------
WESTERN
USA WASTE WESTERN COMBINED EQUIVALENT
--------- ------- -------- ----------
<S> <C> <C> <C> <C>
Income (loss) from continuing operations available to
common shareholders per common share:
Historical:
Twelve months ended December 31, 1995.............. $ 0.55 $ 1.08 $ 0.60 $ 0.90
Year ended December 31, 1994 (USA Waste)
and June 30, 1995 (Western)...................... (1.55) 1.10 (0.82) (1.23)
Year ended December 31, 1993 (USA Waste)
and June 30, 1994 (Western)...................... 0.01 0.83 0.19 0.29
Supplemental -- Twelve months ended December 31,
1995............................................... $ 0.66 $ 0.99
Book value per share at December 31, 1995:
Historical............................................ 6.12 11.54 6.41 9.62
Supplemental.......................................... 6.06 9.09
</TABLE>
OTHER PROPOSALS TO BE PRESENTED AT THE USA WASTE ANNUAL MEETING
At the USA Waste Annual Meeting, stockholders of USA Waste will also be
asked to consider and act upon the following proposals:
Proposal No. 2. To elect three members of the Board of Directors of USA
Waste for the ensuing year; provided, however, that if the Merger is approved,
upon consummation of the Merger, the Board of Directors of USA Waste will be
expanded to include three additional members: Mr. Kosti Shirvanian, Ms. Savey
Tufenkian and a third member to be determined at a later date. See "Election of
USA Waste Directors --
11
<PAGE> 19
Nominees for Election as Directors." THE BOARD OF DIRECTORS OF USA WASTE
RECOMMENDS THAT THE STOCKHOLDERS OF USA WASTE VOTE FOR THE NOMINEES FOR
DIRECTORS DESCRIBED HEREIN.
Proposal No. 3. To approve and adopt the Director Plan which provides for
the annual grant to each non-employee director of USA Waste of options to
purchase 10,000 shares of USA Waste Common Stock as of the first business day of
January of each year commencing in January 1997. The exercise price of such
options will be the closing sale price of the USA Waste Common Stock on the date
of grant. See "Approval of USA Waste Director Plan." THE BOARD OF DIRECTORS OF
USA WASTE RECOMMENDS THAT THE STOCKHOLDERS OF USA WASTE VOTE FOR THE DIRECTOR
PLAN.
Proposal No. 4. To approve and adopt the USA Waste Services, Inc. Corporate
Performance-Based Compensation Plan which provides for annual bonuses based on
certain performance criteria for key employees of USA Waste. USA Waste believes
the Compensation Plan will assist in attracting and retaining qualified
individuals and providing such individuals with an incentive to strive to
achieve USA Waste's financial and other business objectives. See "Approval of
the USA Waste Compensation Plan." THE BOARD OF DIRECTORS OF USA WASTE RECOMMENDS
THAT THE STOCKHOLDERS OF USA WASTE VOTE FOR THE COMPENSATION PLAN.
Proposal No. 5. To approve an amendment to the 1993 Plan (i) to provide an
annual limit on awards to a participant in the 1993 Plan of up to 1,500,000
shares and (ii) to increase the aggregate number of shares of USA Waste Common
Stock that may be issued under the 1993 Plan from 4,000,000 to 6,500,000. The
annual limit on grants under the 1993 Plan to an individual will assure that
grants under the 1993 Plan qualify as "performance-based" and will therefore be
deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). The increase in shares of USA Waste Common Stock available under
the 1993 Plan will assure that an adequate number of shares will be available
for future award grants in order to provide appropriate incentives to employees
of USA Waste and will permit and the grant of options pursuant to an employment
agreement with Western's current Chief Executive Officer. See "Amendment of the
USA Waste 1993 Stock Incentive Plan" and "The Plan of Merger and Terms of the
Merger -- Other Agreements." THE BOARD OF DIRECTORS OF USA WASTE RECOMMENDS THAT
THE STOCKHOLDERS OF USA WASTE VOTE FOR THE AMENDMENT TO THE 1993 PLAN.
Proposal No. 6. To approve an amendment to the Restated Certificate of
Incorporation of USA Waste to delete Article Thirteenth in its entirety. Article
Thirteenth provides that if a majority in number representing three quarters in
value of the creditors and/or the stockholders of USA Waste, as the case may be,
agree to any compromise or arrangement and to any reorganization of USA Waste,
such compromise or arrangement shall be binding on all creditors or
stockholders, as the case may be, if sanctioned by the appropriate court.
Certain lenders to USA Waste have requested that this provision be deleted from
the USA Waste Certificate of Incorporation. USA Waste believes deletion of
Article Thirteenth will provide USA Waste with additional flexibility in seeking
and obtaining financing. See "Amendment to the USA Waste Certificate of
Incorporation." THE BOARD OF DIRECTORS OF USA WASTE RECOMMENDS THAT THE
STOCKHOLDERS OF USA WASTE VOTE FOR THE AMENDMENT.
Proposal No. 7. To ratify the appointment of Coopers & Lybrand L.L.P. as
certified public accountants to audit USA Waste's financial statements for
fiscal 1996. See "Ratification of Appointment of Auditors." THE BOARD OF
DIRECTORS OF USA WASTE RECOMMENDS THAT THE STOCKHOLDERS OF USA WASTE VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P.
12
<PAGE> 20
RISK FACTORS
In addition to the other information set forth in this Joint Proxy
Statement and Prospectus, the following factors should be considered by the USA
Waste stockholders and the Western shareholders before voting on the proposals
herein.
FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE
When used or incorporated by reference in this Joint Proxy Statement and
Prospectus, the words "anticipate," "estimate," "project" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated or projected.
Among the key factors that have a direct bearing on USA Waste's ability to
attain its goals are the level and nature of competition from other waste
companies, evaluation of the current regulatory environment and the costs
associated with such regulations, the availability of attractive acquisition
opportunities, successful integration of acquired businesses, improvement of
operating efficiencies, availability of working capital, ability to maintain
margins and the management of costs in a changing regulatory environment. USA
Waste has also made certain assumptions relating to the outcome of various
commercial, legal and regulatory proceedings relating to USA Waste's operations
and the industry generally. These and other risk factors are discussed below.
EXPECTED BENEFITS OF COMBINED BUSINESS MAY NOT BE ACHIEVED
There can be no assurance that the expected benefits of the Merger relative
to the combined business as described under "The Merger and Related
Transactions -- USA Waste's Reasons for the Merger" will be achieved. Whether
the anticipated benefits of the Merger are ultimately achieved will depend on a
number of factors, including the ability of the combined companies to achieve
administrative cost savings, rationalization of collection routes, insurance and
bonding, cost reductions, lower interest expense and general economies of scale,
the ability of the combined companies to retain municipal contracts and
generally to capitalize on the combined asset base and strategic position of the
combined entity.
STOCK PRICES MAY VARY IN RESPONSE TO CHANGES IN BUSINESS AND ECONOMIC CONDITIONS
The relative stock prices of the USA Waste Common Stock and the Western
Common Stock at the Effective Time may vary significantly from the prices as of
the date of execution of the Merger Agreement or the date hereof or the date on
which stockholders vote on the Merger due to, among other factors, changes in
the business, operations and prospects of USA Waste or Western, market
assessments of the likelihood that the Merger will be consummated and the timing
thereof and general market and economic conditions. The Exchange Ratio is fixed
and will not be adjusted based on changes in the relative stock prices of the
USA Waste Common Stock and the Western Common Stock.
NO ASSURANCE OF SUCCESSFUL MANAGEMENT AND MAINTENANCE OF GROWTH
USA Waste has experienced rapid growth, primarily through acquisitions. USA
Waste's financial results and prospects depend in large part on its ability to
successfully manage and improve the operating efficiencies and productivity of
these acquired operations. In particular, there can be no assurance that USA
Waste will be able to successfully integrate the operations of Chambers
Development Company, Inc. ("Chambers"), USA Waste's largest acquisition to date
(the "Chambers Merger"), or that USA Waste will be able to successfully
integrate the operations of Western if the Merger is consummated. Moreover, the
ability of USA Waste to continue to grow will depend on a number of factors,
including competition from other waste management companies, availability of
attractive acquisition opportunities, availability of working capital, ability
to maintain margins and the management of costs in a changing regulatory
environment. USA Waste is continually seeking acquisition opportunities and
believes that there exist a substantial number of potentially attractive
consolidation opportunities in the solid waste management industry. USA Waste
may pursue
13
<PAGE> 21
significant acquisitions if they can be achieved on acceptable terms. There can
be no assurance that USA Waste will be able to continue to expand and
successfully integrate operations.
NEED FOR CAPITAL; DEBT FINANCING
The long-term debt of the combined company, including current maturities,
on a pro forma basis as of December 31, 1995 was approximately $451 million. See
"USA Waste and Western Combined Historical Unaudited Pro Forma Condensed
Financial Statements." USA Waste expects to require additional capital from time
to time to pursue its acquisition strategy and to fund internal growth. A
portion of USA Waste's future capital requirements may be provided through
future debt incurrences or issuances of equity securities. There can be no
assurance that USA Waste will be successful in obtaining additional capital
through such debt incurrences or issuances of additional equity securities.
In addition, substantially all of the Company's existing indebtedness at
December 31, 1995 is priced at variable interest rates that fluctuate as general
interest rates change. As a result an increase in interest rates could adversely
impact the Company's earnings in the future.
PROFITABILITY MAY BE AFFECTED BY COMPETITION
The waste management industry is highly competitive and requires
substantial capital resources. The industry consists of a few large national
waste management companies as well as numerous local and regional companies of
varying sizes and financial resources. The two largest national waste management
companies have significantly greater financial resources than would the combined
company after the Merger. Competition may also be affected by the increasing
national emphasis on recycling, composting, incineration, and other waste
reduction programs that could reduce the volume of solid waste collected or
deposited in landfills.
POTENTIAL ADVERSE EFFECT OF GOVERNMENT REGULATION
USA Waste's operations are, and the combined company's operations will be,
subject to, and substantially affected by, extensive federal, state and local
laws, regulations, orders and permits, which govern environmental protection,
health and safety, zoning and other matters. These regulations may impose
restrictions on operations that could adversely affect the combined company's
results, such as limitations on the expansion of disposal facilities,
limitations on or the banning of disposal of out-of-state waste or certain
categories of waste or mandates regarding the disposal of solid waste. Because
of heightened public concern, companies in the waste management business may
become subject to judicial and administrative proceedings involving federal,
state or local agencies. These governmental agencies may seek to impose fines on
the combined company or to revoke or deny renewal of operating permits or
licenses for violations of environmental laws or regulations or to require
remediation of environmental problems at sites or nearby properties, or
resulting from transportation or predecessors' transportation and collection
operations, all of which could have a material adverse effect on the combined
company. Liability may also arise from actions brought by individuals or
community groups in connection with the permitting or licensing of operations,
any alleged violations of such permits and licenses or other matters.
POTENTIAL ENVIRONMENTAL LIABILITY
USA Waste is, and the combined company will be, subject to liability for
environmental damage that its landfills, transfer stations and collection
operations have caused or may cause nearby landowners, particularly as a result
of the contamination of drinking water sources or soil, including damage
resulting from conditions existing prior to the acquisition of such assets or
operations. Liability may also arise from any off-site environmental
contamination caused by pollutants or hazardous substances the transportation,
treatment or disposal of which was arranged for by USA Waste, Western or their
predecessor owners of operations or assets acquired by such companies. Any
substantial liability for environmental damage could materially adversely affect
operating results and financial condition.
14
<PAGE> 22
POTENTIAL LOSS OR MATERIAL CHANGE IN FRANCHISE AGREEMENTS
In 1995, Western derived approximately 49% of its revenues from municipal
and regional authority contracts. The combined company is expected to generate
approximately 20% of its revenues from municipal and regional authority
contracts. Many municipal franchise agreements are of fixed duration and are
subject to negotiation and renewal, and competitive bidding and may contain
change of control provisions requiring a consent for transactions such as the
Merger. There can be no assurance that such franchise agreements will be renewed
or that necessary consents will be obtained, or that obtaining such renewals or
consents will not result in these agreements containing terms less favorable to
the combined company than Western's existing franchise agreements.
SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT MARKET PRICE OF STOCK
Sales of substantial amounts of USA Waste Common Stock in the public market
could adversely affect the market price of such stock. USA Waste recently filed
a shelf registration statement for the benefit of certain stockholders relating
to 4,000,000 shares of USA Waste Common Stock. Such shares are immediately
saleable in the open market. In addition, USA Waste has a shelf registration
statement covering approximately 5.2 million shares of USA Waste Common Stock
that may be used for acquisitions. In the event that the market price of USA
Waste Common Stock were adversely affected by such sales, USA Waste's access to
equity capital markets could be adversely affected, and issuances of stock by
USA Waste in connection with acquisitions, or otherwise, could dilute earnings
per share.
DELAWARE CORPORATION LAWS MAY PROVIDE LESS PROTECTION TO SHAREHOLDERS
Upon consummation of the Merger, the shareholders of Western will become
stockholders of USA Waste, and their rights will be governed by Delaware law,
which differs in certain material respects from California law, the law
governing current Western shareholders. This change of governing law could
materially affect various rights of current Western shareholders, including
making the removal of directors more difficult, limiting the rights of
stockholders to vote with respect to certain transactions and restricting the
circumstances under which stockholders are entitled to exercise dissent and
appraisal rights, among others, as more fully described in "Comparative Rights
of Stockholders of USA Waste and Western -- Significant Differences Between the
Corporation Laws of California and Delaware."
15
<PAGE> 23
THE MEETINGS
DATE, TIME AND PLACE OF THE MEETINGS
The USA Waste Annual Meeting will be held at 2:00 p.m. Dallas, Texas time,
on May 7, 1996, at The Grand Kempinski -- Dallas Hotel, 15201 Dallas Parkway,
Dallas, Texas 75248. The Western Special Meeting will be held at 10:00 a.m.,
Dallas, Texas time, on May 7, 1996, at The Grand Kempinski -- Dallas Hotel,
15201 Dallas Parkway, Dallas, Texas 75248.
PURPOSE OF THE MEETINGS
The purpose of the USA Waste Annual Meeting is to consider and act upon the
following proposals: (i) to approve and adopt the Merger Agreement, (ii) to
elect three members of USA Waste's Board of Directors for the ensuing year,
(iii) to approve and adopt the Director Plan, (iv) to approve the USA Waste
Services, Inc. Corporate Performance-Based Compensation Plan (the "Compensation
Plan"), (v) to approve an amendment to the USA Waste Services, Inc. 1993 Stock
Incentive Plan (the "1993 Plan") to provide an annual limit on awards to a
participant in the 1993 Plan of up to 1,500,000 shares and to increase the
number of shares that may be issued under the 1993 Plan by 2,500,000 shares,
(vi) to amend the USA Waste Restated Certificate of Incorporation to delete
Article Thirteenth and (vii) to ratify the appointment of Coopers & Lybrand
L.L.P. as USA Waste's independent auditors for the ensuing year. Any other
proper business may be transacted at the USA Waste Annual Meeting or any
adjournments thereof. USA Waste stockholder approval of the Merger is required
in accordance with the rules of the NYSE since the USA Waste Common Stock to be
issued in connection with the Merger will be in excess of 20% of the number of
shares of USA Waste Common Stock outstanding before such issuance.
The sole purpose of the Western Special Meeting is to consider and act upon
a proposal to approve and adopt the Merger Agreement.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of USA Waste Common Stock at the close of business
on the USA Waste Record Date are entitled to notice of, and to vote at, the USA
Waste Annual Meeting, and only holders of record of Western Common Stock at the
close of business on the Western Record Date are entitled to notice of, and to
vote at, the Western Special Meeting.
On the USA Waste Record Date, there were 3,846 holders of record of USA
Waste Common Stock with 65,906,973 shares of USA Waste Common Stock issued and
outstanding. Each share of USA Waste Common Stock entitles the holder thereof to
one vote on each matter submitted for shareholder approval. See "Principal
Stockholders of USA Waste and Western" for information regarding persons known
to management of USA Waste to be the beneficial owners of more than 5% of the
outstanding USA Waste Common Stock.
On the Western Record Date, there were 769 holders of record of Western
Common Stock with 14,782,923 shares issued and outstanding. Each share of
Western Common Stock entitles the holder thereof to one vote on each matter
submitted for stockholder approval. See "Principal Stockholders of USA Waste and
Western" for information regarding persons known to management of Western to be
the beneficial owners of more than 5% of the outstanding Western Common Stock.
If a share is represented for any purpose at a Meeting, it is deemed to be
present for all other matters. Abstentions and shares held of record by a broker
or its nominee ("Broker Shares") that are voted on any matter are included in
determining the number of votes present. Broker Shares that are not voted on any
matter will not be included in determining whether a quorum is present. In all
cases, shares with respect to which authority to vote is withheld, abstentions
and Broker Shares, which are not voted, will not be included in determining the
number of votes cast.
16
<PAGE> 24
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the USA
Waste Annual Meeting and the Western Special Meeting, as applicable, in
accordance with the instructions contained therein. If a holder of USA Waste
Common Stock executes and returns a proxy and does not specify otherwise, the
shares represented by such proxy will be voted FOR (i) approval and adoption of
the Merger Agreement, (ii) election of the USA Waste Board's nominees for
directors, (iii) approval of the USA Waste Director Plan, (iv) approval of the
USA Waste Compensation Plan, (v) approval of the amendment to the 1993 Plan to
provide an annual limit on awards to a participant of up to 1,500,000 shares and
to increase the number of shares of USA Waste Common Stock that may be issued
under the 1993 Plan by 2,500,000 shares, (vi) approval of the amendment to the
USA Waste Restated Certificate of Incorporation and (vii) ratification of the
appointment of Coopers and Lybrand L.L.P. as USA Waste's independent auditors
for the ensuing year. If a holder of Western Common Stock executes and returns a
proxy and does not specify otherwise, the shares represented by such proxy will
be voted FOR approval and adoption of the Merger Agreement. A stockholder of USA
Waste or a shareholder of Western who has executed and returned a proxy may
revoke it at any time before it is voted at the respective meeting by (a)
executing and returning a proxy bearing a later date, (b) filing a written
notice of such revocation with the Secretary of USA Waste or Western, as
appropriate, stating that the proxy is revoked or (c) attending the meeting and
voting in person.
Delaware law does not require that holders of USA Waste Common Stock who
object to the Merger and who vote against or abstain from voting in favor of the
Merger be afforded any appraisal rights or the right to receive cash for their
shares. USA Waste does not intend to make available any such rights to its
stockholders. California law provides that holders of Western Common Stock who
object to the Merger and who vote against the Merger be afforded appraisal
rights provided certain conditions are met. See "The Merger and Related
Transactions -- Rights of Dissenting Shareholders."
VOTE REQUIRED FOR APPROVAL
USA Waste. USA Waste's Bylaws provide that the presence at the USA Waste
Annual Meeting, in person or by proxy, of holders of a majority of the
outstanding shares of USA Waste Common Stock entitled to vote at the meeting
will constitute a quorum for the transaction of business. Under the rules of the
NYSE, approval of the Merger requires the affirmative vote of the holders of a
majority of the shares of USA Waste Common Stock voted, in person or by proxy,
at the USA Waste Annual Meeting provided that the total vote cast on the
proposal represents over 50% in interest of all shares entitled to vote on the
proposal. For purposes of the Merger proposal, abstentions and broker non-votes
will not count as shares voted. At the close of business on the USA Waste Record
Date, there were approximately 65.9 million shares of USA Waste Common Stock
outstanding and entitled to vote at the USA Waste Annual Meeting. On the USA
Waste Record Date, the directors and officers of USA Waste and their affiliates
held approximately 13 million shares of USA Waste Common Stock, representing
approximately 19.7% of the outstanding shares. Such persons have indicated to
USA Waste that they intend to vote their shares in favor of the Merger. For
information relating to certain voting agreements entered into in connection
with the Merger Agreement, see "The Plan of Merger and Terms of the
Merger -- Voting Agreements."
With respect to the election of USA Waste directors, the three Class I
nominees receiving the highest number of affirmative votes will be elected to
the Board of Directors of USA Waste. Proxies given to the persons named in the
USA Waste form of proxy will be voted FOR the election of the nominees listed
under "Election of USA Waste Directors" unless authority to vote is withheld. A
shareholder entitled to vote for the election of directors can withhold
authority to vote for all nominees for director or can withhold authority to
vote for certain nominees for director.
The adoption and approval of the Director Plan and the Compensation Plan
and the amendment of the 1993 Plan each require the affirmative vote of the
holders of a majority of the shares of USA Waste Common Stock present or
represented by proxy and entitled to vote at the USA Waste Annual Meeting.
17
<PAGE> 25
Adoption and approval of the amendment to USA Waste's Restated Certificate
of Incorporation requires the affirmative vote of the holders of a majority of
the outstanding shares of USA Waste Common Stock entitled to vote on such
proposal.
Ratification of the appointment of the independent auditors for the ensuing
year requires the vote of a majority of the shares of USA Waste Common Stock
present or represented by proxy at the USA Waste Annual Meeting. Abstentions and
broker non-votes will have the same effect as voting against such proposal.
Abstentions from the proposal to elect directors, the proposal to approve
and adopt the Director Plan, the proposal to approve the Compensation Plan, the
proposal to amend the 1993 Plan and the proposal to amend USA Waste's Restated
Certificate of Incorporation will be treated as votes against the proposal.
Broker non-votes on any such matters will be treated as shares as to which
voting power has been withheld by the beneficial holders of those shares and
therefore, as shares not entitled to vote on the proposal as to which there is
the broker non-vote. Therefore, broker non-votes on such matters will not have
an effect upon the determination of whether the requisite vote on these matters
has been achieved. With respect to the proposal to amend USA Waste's Restated
Certificate of Incorporation, the failure of USA Waste stockholders to sign and
return their proxy will have the same effect as voting against such proposal.
Western. The presence at the Western Special Meeting, in person or by
proxy, of holders of the issued and outstanding shares of Western Common Stock
entitled to vote and representing a majority of the voting power of Western will
constitute a quorum for the transaction of business. At the close of business on
the Western Record Date, there were approximately 14.8 million shares of Western
Common Stock outstanding and entitled to vote at the Western Special Meeting.
Pursuant to California law and the provisions of the Articles of Incorporation
of Western, approval and adoption of the Merger Agreement requires the
affirmative vote of the holders of a majority of the shares of Western Common
Stock outstanding on the Western Record Date, or approximately 7.4 million
shares. On the Western Record Date, the directors and officers of Western and
their affiliates held approximately 5.0 million shares of Western Common Stock,
representing approximately 34.0% of the outstanding voting power. Such persons
have indicated to Western that they intend to vote their shares in favor of the
Merger Agreement. In addition, USA Waste intends to vote the 634,900 shares of
Western Common Stock owned by it, representing approximately 4.3% of the shares
outstanding as of the Western Record Date in favor of the Merger. See "Principal
Stockholders of USA Waste and Western." For information relating to certain
voting agreements entered into in connection with the Merger Agreement, see "The
Plan of Merger and Terms of the Merger -- Voting Agreements."
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, and employees
of each of USA Waste and Western may solicit proxies from their respective
stockholders by personal interview, telephone, telegram, facsimile, or
otherwise. USA Waste and Western will each bear the costs of the solicitation of
proxies from their respective stockholders, except that USA Waste and Western
will share equally the cost of printing this Joint Proxy Statement and
Prospectus. USA Waste has engaged Corporate Investor Communications, Inc., a
proxy solicitation firm, to assist in the solicitation of proxies of USA Waste
stockholders. USA Waste will pay the fees in connection with the solicitation by
such firm which are anticipated to be $5,000 plus such firm's out-of-pocket
expenses. Western has engaged Chemical Mellon Shareholder Services, LLC, a proxy
solicitation firm, to assist in the solicitation of proxies from Western
shareholders. Western will pay the fees in connection with the solicitation by
such firm which are anticipated to be $4,000 plus such firm's out-of-pocket
expenses. Arrangements will be made with brokerage firms and other custodians,
nominees, and fiduciaries who hold the voting securities of record for the
forwarding of solicitation materials to the beneficial owners thereof. USA Waste
and Western will reimburse brokers, custodians, nominees and fiduciaries for the
reasonable out-of-pocket expenses incurred by them in connection therewith.
18
<PAGE> 26
OTHER MATTERS
At the date of this Joint Proxy Statement and Prospectus, the Boards of
Directors of USA Waste does not know of any business to be presented at its
meeting other than as set forth in the notice accompanying this Joint Proxy
Statement and Prospectus.
THE MERGER AND RELATED TRANSACTIONS
The detailed terms and conditions to the consummation of the Merger are
contained in the Merger Agreement, which is attached hereto as Appendix A and
incorporated herein by reference. The following discussion sets forth a
description of certain material terms and conditions of the Merger Agreement.
The description in this Joint Proxy Statement and Prospectus of the terms and
conditions to the consummation of the Merger is qualified in its entirety by
reference to the Merger Agreement.
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that, at the Effective Time, Acquisition will
merge with and into Western, whereupon Western will become a wholly owned
subsidiary of USA Waste and each outstanding share of Western Common Stock
(other than shares owned by USA Waste) will be converted into 1.50 shares of USA
Waste Common Stock.
Based upon the number of shares of USA Waste Common Stock and Western
Common Stock outstanding as of the USA Waste Record Date and Western Record
Date, respectively, approximately 87.6 million shares of USA Waste Common Stock
will be outstanding immediately following the Effective Time, of which
approximately 21.7 million shares, representing 24.8% of the total, will be held
by former holders of Western Common Stock.
BACKGROUND OF THE MERGER
In February 1993, USA Waste purchased Western's minority interest in Best
Pak Disposal, Inc., a solid waste collection company with operations in Houston,
Texas. At that time, Donald F. Moorehead, Jr., then Chief Executive Officer of
USA Waste, and Kosti Shirvanian, Chairman of the Board and Chief Executive
Officer of Western, discussed the possibility of a strategic alliance between
USA Waste and Western as a part of USA Waste's strategy of expanding its waste
management services through selective acquisitions of waste management
operations that complemented existing operations or otherwise contributed to USA
Waste's participation in the consolidation trend within the solid waste
management industry.
At various times throughout that year, David Sutherland-Yoest, then the
Chief Executive Officer of Envirofil, also met with Kosti Shirvanian to consider
a merger between Envirofil and Western. At these meetings, Mr. Sutherland-Yoest
was represented by John E. Drury, who was then a Managing Director of Sanders
Morris Mundy Inc., a Houston-based investment banking firm. On January 24, 1994,
USA Waste announced that it would be merging with Envirofil, and all discussions
concerning Western's potential merger with either USA Waste or Envirofil ceased.
In May 1994, the merger between USA Waste and Envirofil was consummated. At such
time, Mr. Drury joined USA Waste as its Chief Executive Officer, and Messrs.
Moorehead and Sutherland-Yoest became the Chief Development Officer and Chief
Operating Officer of USA Waste, respectively.
Over the summer and early fall of 1994, Messrs. Drury, Moorehead and
Sutherland-Yoest of USA Waste visited with Mr. Shirvanian on several occasions
in order to maintain their business relationships with Mr. Shirvanian and to
communicate USA Waste's ongoing interest in possibly pursuing a merger between
USA Waste and Western. On November 28, 1994, USA Waste announced its merger with
Chambers, and discussions between USA Waste and Western were once again
discontinued. The Chambers Merger was consummated in June 1995.
In July and August 1995, Messrs. Drury, Moorehead and Sutherland-Yoest once
again approached Mr. Shirvanian to discuss a potential combination of USA Waste
and Western. Earl E. DeFrates, Executive
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Vice President and Chief Financial Officer of USA Waste, participated in these
discussions on a limited basis and also met in Dallas, Texas with Lawrence F.
McQuaide, Western's Executive Vice President and Chief Financial Officer, to
further discuss the possibilities of a business combination, to share publicly
available information about the respective companies and to explore
preliminarily a reasonable range of exchange ratios.
In August 1995, Western engaged Merrill Lynch to provide financial advisory
services to Western in connection with the possible business combination with
USA Waste and other strategic alternatives including proceeding on a stand alone
basis. The Western Board of Directors determined that to remain competitive in
the solid waste industry, Western would have to undertake a strategy of
substantial growth, which the Board concluded could be better achieved through a
combination with an established, national solid waste company.
During meetings conducted from August 15 to August 17, 1995, Messrs. Drury,
Moorehead and DeFrates delivered a corporate presentation to Mr. Shirvanian,
several Western board members and representatives of Merrill Lynch and outside
counsel to Western in Newport Beach, California. This presentation included a
general overview of USA Waste's operations and its business strategies and
objectives.
In mid-August 1995, Western's general counsel delivered to USA Waste's
general counsel a draft of a confidentiality agreement.
On August 29, 1995, Mr. DeFrates met with Mr. McQuaide and a representative
of Merrill Lynch in California for the purpose of further discussing a range of
reasonable exchange ratios that would be mutually beneficial to the stockholders
of USA Waste and Western. After receiving information from the Western
representatives regarding possible exchange ratios, Mr. DeFrates stated he would
report the results of their meeting to the rest of the USA Waste management team
for further consideration. The Western representatives advised Mr. DeFrates that
Western could provide additional information to USA Waste that might assist in
USA Waste's evaluation of exchange ratios if USA Waste executed a
confidentiality agreement, a revised form of which was delivered to USA Waste
around such time. Mr. DeFrates advised the Western representatives that USA
Waste was considering various financing alternatives geared to strengthening USA
Waste's balance sheet, and if an agreement could not be reached with Western in
a timely fashion, USA Waste would more than likely discontinue negotiations with
Western and pursue one or more financing alternatives available to USA Waste at
that time. Shortly thereafter, USA Waste ceased all negotiations with Western.
On September 26, 1995, Western sent USA Waste a revised form of
confidentiality agreement. USA Waste took no action with respect to the
confidentiality agreement at that time.
In October 1995, USA Waste announced and consummated a public offering of
6,483,125 shares of USA Waste Common Stock.
During the period from November 15 to 17, 1995, Messrs. Drury, Moorehead
and DeFrates held a series of meetings with Messrs. Shirvanian, McQuaide, Ramsey
DiLibero, Chief Operating Officer of Western, Mr. Arnold J. Rothlisberger, Vice
President and General Counsel of Western in Newport Beach, California to discuss
further a possible merger and an appropriate exchange ratio. On November 15,
1995, the management teams of USA Waste and Western discussed possible exchange
ratios. USA Waste's management indicated they would not pursue a business
combination that was not accretive to the stockholders of USA Waste. During such
meeting, management of USA Waste indicated they would propose to the USA Waste
Board of Directors an exchange ratio of 1.5 shares of USA Waste Common Stock for
each share of Western Common Stock. The establishment of the exchange ratio
range was not directly tied to the market value of either the USA Waste Common
Stock or the Western Common Stock, but was rather negotiated between the two
management teams. The financial advisors were not present in such negotiations.
On November 16, 1995, USA Waste made an informational presentation at a meeting
of Western's Board of Directors concerning USA Waste's business and strategies.
Merrill Lynch was present at the Western Board Meeting. On November 17, 1995,
the management teams of USA Waste and Western discussed the terms of an
employment agreement to be entered into between USA Waste and Kosti Shirvanian
in connection with any transaction between USA Waste and Western. Mr. Robert
Kopple, Mr. Shirvanian's personal attorney, attended the meetings on November 16
and 17. On November 20, 1995, the Board of Directors of USA Waste
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participated in a conference call at which time the USA Waste management team
informed the Board of the status of the negotiations with Western.
Several weeks later on December 7, 1995, Messrs. Drury and Moorehead once
again met with Messrs. Shirvanian, DiLibero and McQuaide and representatives of
Merrill Lynch, among others, to discuss further a possible merger between USA
Waste and Western, the timing of the transaction and the form of a
confidentiality agreement to be entered into between USA Waste and Western.
Also, on December 7, 1995, separate meetings between Messrs. Drury, Moorehead
and Mr. Kopple were held for the purpose of negotiating the terms of Mr.
Shirvanian's employment agreement in greater detail. An agreement in principle
relating to Mr. Shirvanian's employment was reached at such meeting.
On December 8, 1995, Mr. DeFrates and Gregory T. Sangalis, USA Waste's Vice
President, General Counsel and Secretary, were called to Los Angeles to
participate in negotiations between USA Waste and Western regarding various
terms of a possible merger and to discuss the timing of due diligence reviews of
both companies. Management teams and representatives from financial advisors and
outside counsel for both companies were present during these meetings. The Board
of Directors of Western met on that date and was updated by Western's management
and Merrill Lynch regarding the progress of the discussions with USA Waste and
the status of their exploration of other strategic alternatives, including
business combinations with other companies and the benefits and risks of
proceeding on a stand-alone basis. At the conclusion of this meeting, Western's
management and Merrill Lynch were encouraged to continue their discussions with
USA Waste. Also on December 8, 1995, the USA Waste Board of Directors
participated in a conference call at which time Mr. Drury informed the Board of
the status of the negotiations with Western. On that same date, USA Waste and
DLJ executed an engagement letter whereby DLJ agreed to act as USA Waste's
financial advisor with respect to the possible acquisition of Western. USA Waste
and Western entered into a confidentiality agreement, executed on December 10,
1995, with respect to the exchange of financial and operational information for
purposes of evaluating a potential merger transaction.
Management teams and representatives from financial advisors and outside
counsel for both companies reconvened in Los Angeles, California on December 11,
1995 to negotiate further the terms of a possible merger of USA Waste and
Western. During this time, negotiations involved the exchange of views
concerning the business, operations, financial position, strategic goals and
future prospects of USA Waste and Western, as well as the relative contribution
of each company to the combined entity and the relative ownership of the
combined entity by current USA Waste shareholders and Western stockholders.
During the period from December 11 to December 17, 1995, the management teams
from both companies and their respective financial advisors and outside legal
counsel met to negotiate the terms of a merger agreement and to conduct due
diligence investigations.
On December 17,1995, the respective Boards of Directors of USA Waste and
Western met to consider the proposed Merger. At the USA Waste Board of Directors
meeting, USA Waste's management presented a draft form of the Merger Agreement
and related documents and the terms of the Merger to the Board and reviewed the
results of the due diligence investigations of Western conducted by USA Waste's
management team, counsel and independent auditors. Representatives of DLJ then
reviewed with the USA Waste Board of Directors certain financial and operating
data relating to Western and other publicly held solid waste companies, as well
as certain pro forma financial information reflecting the Merger. After making
this presentation and responding to questions, the DLJ representatives delivered
a written opinion, as of such date, to the effect that the Exchange Ratio was
fair, from a financial point of view, to USA Waste. Following such review and
discussion, the USA Waste Board of Directors approved the Merger Agreement and
related transactions and voted to recommend to USA Waste's shareholders the
approval of the Merger Agreement.
At the December 17, 1995 meeting of Western's Board of Directors, Western's
management presented a draft form of the Merger Agreement and related documents
to the Board and reviewed the results of the due diligence investigations of USA
Waste conducted by Western's management team, financial advisor, outside counsel
and independent auditors. Representatives of Merrill Lynch presented certain
financial and operating data relating to USA Waste and other publicly held solid
waste management companies and its financial analysis of the proposed Merger.
After discussion by the Board of Directors, Merrill Lynch delivered its oral
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opinion that, subject to the satisfactory resolution of the issues noted in the
immediately succeeding sentence, as of December 17, 1995, the Exchange Ratio is
fair to the shareholders of Western (other than USA Waste and its affiliates)
from a financial point of view. Based upon the receipt of Merrill Lynch's
fairness opinion, the review of the proposed Merger Agreement, financial and
operating data and the prospects and projected financial results of the combined
company, and after hearing the results of the due diligence inquiries, the Board
of Directors of Western determined to approve the Merger Agreement subject to
the satisfactory resolution of several issues pertaining to the Merger,
including (i) the finalization of Mr. Shirvanian's employment agreement, (ii)
the resolution of a condition to the Merger relating to the dissent by more than
5% of the outstanding shares of Western Common Stock, (iii) the resolution of a
provision allowing Western to consummate certain acquisitions prior to the
consummation of the Merger without approval of USA Waste, (iv) the finalization
of the terms of the Voting Agreements and (v) the resolution of certain
accounting concerns relating to the pooling of interests accounting treatment of
the Merger.
During the evening of December 17, 1995 and the morning of December 18,
1995, representatives of USA Waste and Western, their respective financial
advisors and outside counsel, and Mr. Kopple worked to resolve the final
provisions of the Merger Agreement and Mr. Shirvanian's employment agreement.
Satisfactory resolution of these issues was achieved late in the afternoon on
December 18, 1995, at which time Merrill Lynch's oral opinion was confirmed in
writing and the Merger Agreement, Mr. Shirvanian's employment agreement and the
Voting Agreements and related irrevocable proxies were signed by the requisite
parties thereto.
USA WASTE'S REASONS FOR THE MERGER
In evaluating the Merger, the management and the Board of Directors of USA
Waste considered a variety of factors in the context of USA Waste's strategic
objectives. A key element of USA Waste's strategy is to expand solid waste
management services through the acquisition of additional solid waste collection
operations, landfills, and collection, transfer and recycling operations, with
the objective of becoming a national integrated solid waste management company
with a broad geographic base of operations. USA Waste anticipates that added
service requirements, increased regulation and heightened public concern over
the environment, all of which have contributed to dramatically higher costs
associated with providing waste management services generally, will cause
continued industry consolidation as well as increased privatization of municipal
services, affording attractive future opportunities for growth. In evaluating
the Merger, USA Waste's Board of Directors considered the desirability of
potential savings from the synergies between USA Waste and Western and the
integration of the companies' operations, including administrative cost savings
through headcount reductions, the rationalization of collection routes,
reductions in insurance and bonding costs and lower interest expenses due to
Western's strong balance sheet and the resulting reduced debt-to-capital ratio
of the combined company after the Merger. USA Waste's Board of Directors also
considered the unique nature of Western's California franchise, given its large
component of municipal/franchise contracts, the high retention rate of such
contracts, Western's significant market share in Southern California and strong
presence in Central and Northern California, as well as Western's disposal
development projects, which strategically position the combined company to
capitalize on future landfill closures in the Los Angeles area. USA Waste's
Board concluded that by combining operations of USA Waste and Western, USA Waste
would further its strategic objectives and that the combined entity could
participate more effectively in the ongoing consolidation of the solid waste
services industry. In addition, the USA Waste Board of Directors and management
concluded that (i) a larger asset and revenue base resulting from the Merger
would provide USA Waste better access to capital to pursue its strategic
objectives and achieve economies of scale associated with a larger base of
operations and (ii) assuming the achievement of certain operating synergies, the
Merger would result in accretion to USA Waste's earnings.
At the December 17, 1995 meeting, the USA Waste Board of Directors received
a written opinion from DLJ that the Exchange Ratio was fair as of such date,
from a financial point of view, to USA Waste. See "-- Opinion of Financial
Advisor to USA Waste."
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RECOMMENDATION OF THE BOARD OF DIRECTORS OF USA WASTE
For the reasons set forth under "USA Waste's Reasons for the Merger," the
Board of Directors of USA Waste believes that the terms of the Merger Agreement
and the Merger are fair to, and in the best interests of, USA Waste and the
holders of USA Waste Common Stock. All members of the Board of Directors
approved the Merger Agreement and the Merger and recommend that the holders of
USA Waste Common Stock vote FOR adoption and approval of the Merger Agreement
and the Merger. In considering the recommendation of the USA Waste Board of
Directors with respect to the Merger, USA Waste stockholders should be aware
that certain members of the Boards of Directors and management have direct and
indirect interests in the consummation of the Merger, apart from their interests
as shareholders. See "-- Conflicts of Interest."
WESTERN'S REASONS FOR THE MERGER
In concluding that pursuing a strategic combination was in the best
interests of Western and its shareholders, the Board of Directors of Western
compared the benefits and risks of proceeding on a stand-alone basis with that
of combining operations with another company. The Board of Directors determined
that to remain competitive in the solid waste industry, Western would have to
undertake a strategy of substantial growth. The Board of Directors concluded
that such growth could be better achieved through a combination with an
established, national solid waste company.
In evaluating the transaction with USA Waste, the Board of Directors
determined that the Merger would enable Western operations to benefit from USA
Waste's experience in marketing, open market operations and landfill
development, while enabling USA Waste operations to benefit from Western's
experience in developing and servicing municipal contracts. The Western Board of
Directors also believes that the increased financial, managerial and operational
strength of the combined company will enable it to take advantage of acquisition
opportunities that may not be available to Western alone, as well as achieve
significant economies of scale and operational efficiencies.
In reaching its conclusion to recommend approval of the Merger Agreement
and the Merger to Western's shareholders, the Western Board of Directors also
considered a number of other factors including, without limitation, the
following:
1. The consideration to be received by Western's shareholders in the
Merger, including the fact that the Exchange Ratio of 1.50 shares of USA
Waste Common Stock represented a substantial premium based on the
then-prevailing market prices (as of December 15, 1995) of Western Common
Stock and USA Waste Common Stock ($24 1/8 and $19 7/8 per share,
respectively).
2. The presentation of Merrill Lynch delivered to the Western Board of
Directors on December 17, 1995, including Merrill Lynch's oral opinion
(which was confirmed in writing) that, as of such date, the Exchange Ratio
was fair to Western's shareholders (other than USA Waste and its
affiliates) from a financial point of view.
3. The terms and conditions of the Merger Agreement, including the
amount and the form of the consideration, the parties' representations,
warranties, covenants and agreements, and the conditions to their
respective obligations set forth in the Merger Agreement.
4. The terms of the Merger Agreement that permit the Western Board of
Directors, in the exercise of its fiduciary duties and subject to certain
conditions, to respond to inquiries and proposals regarding potential
business combination transactions, and to provide information to, and
negotiate with, third parties making bona fide proposals to acquire Western
in such transactions (although Western is not permitted by the Merger
Agreement to actively solicit third-party bids). In this regard, the
Western Board of Directors noted that the Merger Agreement provides that,
under certain circumstances, Western would be obligated to pay USA Waste up
to $18 million. The Western Board of Directors did not view the fee
provisions of the Merger Agreement as unreasonably impeding any interested
third party from proposing a superior transaction.
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5. The review of other strategic alternatives, including possible
business combinations with other companies. Based on its review of other
strategic alternatives, as well as the advantages that could be achieved
from a USA Waste/Western combination, the Western Board of Directors did
not believe that a transaction with any other company could be expected to
offer advantages greater than those presented by a business combination
with USA Waste.
6. The proposed inclusion on the USA Waste Board of Directors after
the Merger of representatives familiar with Western's businesses and
operations.
7. The structure of the Merger, which is intended to permit the
Western shareholders to exchange their Western Common Stock on a tax-free
basis and the Merger to be accounted for as a pooling of interests.
8. Reports from management, financial advisors, legal advisors and
independent auditors as to the results of their due diligence
investigations of USA Waste.
In view of the wide variety of factors considered in connection with their
evaluation of the terms of the Merger, the Western Board of Directors did not
find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
determination.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF WESTERN
For the reasons set forth under "Background of the Merger" and "Western's
Reasons for the Merger," the Board of Directors of Western believes that the
Merger Agreement is fair to, and in the best interests of, Western and the
holders of Western Common Stock. The Board of Directors approved the Merger
Agreement and recommended that the holders of Western Common Stock vote FOR
adoption and approval of the Merger Agreement. In considering the recommendation
of the Western Board of Directors with respect to the Merger, Western
stockholders should be aware that certain officers and directors of Western have
direct and indirect interests in the consummation of the Merger, apart from
their interests as shareholders of Western, which are separate from those of
unaffiliated stockholders of Western. See "-- Conflicts of Interest."
OPINION OF FINANCIAL ADVISOR TO USA WASTE
In its role as financial advisor to USA Waste, DLJ was asked by USA Waste
to render an opinion (the "DLJ Opinion") to the Board of Directors of USA Waste
(the "USA Waste Board") as to the fairness of the Exchange Ratio to USA Waste
from a financial point of view. On December 17, 1995, DLJ delivered a written
opinion to the USA Waste Board that the Exchange Ratio was fair to USA Waste
from a financial point of view as of that date.
THE FULL TEXT OF THE WRITTEN OPINION OF DLJ, DATED DECEMBER 17, 1995, IS
ATTACHED HERETO AS APPENDIX B. THE DLJ OPINION SHOULD BE READ CAREFULLY IN ITS
ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED, SCOPE AND LIMITS OF THE
REVIEW AND PROCEDURES FOLLOWED BY DLJ IN CONNECTION WITH SUCH OPINION.
As more fully described under "The Merger and Related
Transactions -- Background of the Merger," the USA Waste Board selected DLJ as
its financial advisor because it is a nationally recognized investment banking
firm, and the principals of DLJ have substantial experience in the solid waste
industry and are familiar with USA Waste and its businesses. DLJ was not
retained as an advisor or agent to the stockholders of USA Waste or any other
person and rendered its opinion solely for the benefit of the USA Waste Board.
As part of its investment banking business, DLJ is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions.
The DLJ Opinion does not constitute a recommendation to any stockholder as
to how such stockholder should vote at either the USA Waste Annual Meeting or
the Western Special Meeting. DLJ did not, and was not requested by the USA Waste
Board to, make any recommendation as to the form or amount of consideration to
be paid to holders of Western Common Stock in the Merger, which issues were
resolved in
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arm's-length negotiations between USA Waste and Western, in which negotiations
DLJ advised USA Waste. DLJ's opinion does not constitute an opinion as to the
price at which the USA Waste Common Stock will actually trade at any time. See
"Market Price Data." No restrictions or limitations were imposed by USA Waste
upon DLJ with respect to the investigations made or the procedures followed by
DLJ in rendering its opinion. USA Waste did not authorize DLJ to solicit, and
DLJ did not solicit, any third party indications of interest in a purchase of,
or business combination with, USA Waste or Western.
In arriving at its opinion, DLJ reviewed the Merger Agreement. DLJ also
reviewed financial and other information that was publicly available or
furnished to it on behalf of USA Waste and Western including information
provided during discussions with their respective managements, including
consolidated financial statements and other information of USA Waste and Western
for the fiscal years 1993 through 1995 and for compiled interim periods for the
fiscal years 1994 and 1995. Included in the information provided were certain
financial projections for USA Waste and Western, respectively. In addition, DLJ
examined the impact of the Merger on earnings per share (both with a tax rate of
40% and assuming application of USA Waste's net operating loss carryforward
("NOL") to the combined companies' pre-tax income) of USA Waste given a range of
operating synergies contemplated to result from the Merger, based upon its
discussions of such synergies with the respective managements of USA Waste and
Western; compared the relative contribution of both USA Waste's and Western's
revenue, operating cash flow and other measures to USA Waste's and Western's
relative ownership of the combined companies upon giving effect to the Merger;
compared certain financial and securities data of USA Waste and Western with
selected companies whose securities are traded in public markets; reviewed the
historical stock prices and trading volumes of USA Waste Common Stock and
Western Common Stock; and reviewed prices and premiums paid in certain other
selected business combinations and performed a discounted cash flow analysis
with respect to Western. DLJ also discussed the past and current operations,
financial condition and prospects of USA Waste and Western with the respective
managements of USA Waste and Western.
In rendering its opinion, DLJ relied upon and assumed, without independent
verification, the accuracy, completeness and fairness of all of the financial
and other information that was available to it from public sources, that was
provided to it by USA Waste and Western or their representatives or that was
otherwise reviewed by it. DLJ also assumed that the financial projections
supplied to it were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of USA Waste and
Western as to the future operating and financial performance of USA Waste and
Western, respectively. DLJ relied, without independent investigation, upon the
range of operating synergies contemplated to result from the Merger and based
upon its discussion of those synergies with the respective managements of USA
Waste and Western. DLJ did not make any independent evaluation of the assets,
liabilities or operations of USA Waste or Western, nor did DLJ verify the
information reviewed by it. DLJ did not perform any procedures or analyses
regarding potential environmental liabilities of either the USA Waste or
Western, nor did it consider the impact of changes in the regulatory environment
in which USA Waste and Western operate. DLJ made no independent investigation of
any legal matters affecting USA Waste or Western and assumed the correctness of
all legal advice given to the USA Waste Board by its counsel.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to it
as of, the date of its opinion. It should be understood that, although
subsequent developments may affect its opinion, DLJ does not have any obligation
to update, revise or reaffirm the DLJ Opinion.
The following is a summary of the material factors considered and principal
financial analyses performed by DLJ to arrive at its December 17, 1995 fairness
opinion. DLJ performed certain procedures, including each of the financial
analyses described below, and reviewed with the managements of USA Waste and
Western the assumptions on which such analyses were based and other factors,
including the current and projected financial results of such companies.
Pro Forma Merger Analysis. DLJ analyzed certain pro forma effects resulting
from the Merger. DLJ reviewed, without independent verification, the operating
synergies contemplated to result from the Merger in 1996 by combining the
operations of Western and USA Waste based upon its discussions of such synergies
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with the managements of Western and USA Waste. DLJ analyzed the pro forma effect
of such operating synergies on net income and earnings per share (both with a
tax rate of 40% and assuming application of USA Waste's NOL to the combined
companies' pretax income) for USA Waste. The analysis indicated that the pro
forma earnings per share ("EPS") of USA Waste on a fully taxed basis, assuming
the annual operating synergies contemplated to result from the Merger, would be
higher in the fiscal year ending 1996 than comparable projections for USA Waste
as a stand-alone company during the same period. The analysis also indicated
that the pro forma EPS of USA Waste on a reported basis (assuming application of
the USA Waste NOL), assuming the annual operating synergies contemplated to
result from the Merger, would be lower in the fiscal year ending 1996 than
comparable projections for USA Waste as a stand-alone company during the same
period. The results of the pro forma combination analysis are based upon the
assumptions and projections supplied by the managements of Western and USA
Waste, and are not necessarily indicative of future operating results or
financial position.
Contribution Analysis. DLJ analyzed USA Waste's and Western's relative
contribution to the combined companies with respect to revenues; earnings before
interest, taxes, depreciation and amortization ("EBITDA"); earnings before
interest and taxes ("EBIT"); and total assets and total debt. Its analysis was
considered in both absolute dollar terms and on a percentage basis and was made,
for the year ended December 31, 1995, based on actual results for the first
three quarters of 1995 and the projected results (USA Waste and Western
management projections) for the fourth quarter of 1995 ("1995 Estimated Calendar
Year Results"). As a result of the Merger, USA Waste stockholders will own 73%
of the combined companies. This compares with USA Waste's contribution to the
combined companies pro forma results for the period ended December 31, 1995
(prior to taking into account any operating synergies that may result from the
Merger) of 63% of revenues, 71% of EBITDA, 72% of EBIT, 74% of total assets, and
80% of total debt.
Analysis of Certain Other Publicly Traded Companies. To provide contextual
data and comparative market information, DLJ compared selected historical share
price, earnings and operating and financial ratios for Western to the
corresponding data and ratios of certain other companies whose securities are
publicly traded (collectively, the "Public Companies"). The Public Companies
were chosen because they possess general business, operating and financial
characteristics representative of companies in the industry in which USA Waste
and Western operate. The Public Companies consisted of: Allied Waste Industries,
Inc., Browning-Ferris Industries, Inc., Continental Waste Industries, Inc.,
Laidlaw, Inc., Mid-American Waste Systems, Inc., Sanifill, Inc., United Waste
Systems, Inc. and WMX Technologies, Inc. Such data and ratios included
Enterprise Value ("Enterprise Value" is defined as the product of the stock
price and total shares outstanding plus Net Debt ("Net Debt" is defined as total
debt plus preferred stock less cash and cash equivalents)) as a multiple of
revenues, EBITDA and EBIT for the latest reported twelve months, growth rates of
each of such items for the three most recent fiscal years and operating margins
for the three most recent fiscal years. To establish a relationship between the
Adjusted Purchase Price (as hereinafter defined) for Western and certain other
publicly traded companies' market multiples, a 40% control premium was applied
to the market multiples for certain other publicly traded companies. A 40%
control premium was derived from an analysis of premiums paid in all merger and
acquisition transactions, including a separate analysis of all stock-for-stock
transactions since January 1, 1994. The average multiple of Enterprise Value to
revenues for the companies reviewed was 1.7. The average multiple of revenues
was then multiplied by Western's estimated calendar 1995 revenues to arrive at
an implied total Enterprise Value for Western of $465.8 million. The implied
Enterprise Value for Western was then adjusted for Net Debt of $81.7 million to
yield an implied equity value, which was then divided by Western's shares and
stock options outstanding on December 11, 1995 to arrive at an implied price of
$24.01 per fully diluted share. The average multiple of Enterprise Value to
EBITDA for the companies reviewed was 7.3. The average EBITDA multiple was then
multiplied by Western estimated calendar 1995 EBITDA to arrive at an implied
total Enterprise Value for Western of $438.0 million. The implied Enterprise
Value for Western was then adjusted for Net Debt of $81.7 million to yield an
implied equity value, which was then divided by Western shares and stock options
outstanding on December 11, 1995 to arrive at an implied price of $22.27 per
fully diluted share. The average multiple of Enterprise Value to EBIT for the
companies reviewed was 12.4. The average EBIT multiple was then multiplied by
Western estimated calendar 1995 EBIT to arrive at an implied total Enterprise
Value for Western of $410.4 million. The implied Enterprise Value of Western was
then adjusted for Net Debt of
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$81.7 million to yield an implied equity value, which was then divided by
Western shares and stock options outstanding on December 11, 1995 to arrive at
an implied price of $20.54 per fully diluted share.
In addition, DLJ examined the ratios of current stock prices to estimated
calendar year 1995 and 1996 EPS (as estimated by First Call Real Time Earnings
Estimates, "First Call") and current stock prices to Book Value for these
companies and compared such ratios with those of Western. To establish a
relationship between the Equity Purchase Price (as hereinafter defined) for
Western and certain other publicly traded companies' market multiples, a 40%
control premium was applied to the market multiples for certain other publicly
traded companies. The average multiple of stock price to estimated calendar year
1995 EPS for the certain other publicly traded companies was 16.6. The average
multiple of estimated calendar year 1995 EPS was then multiplied by Western's
estimated calendar 1995 EPS to arrive at an implied total Equity Value, which
was then divided by Western shares and stock options outstanding on December 11,
1995 to arrive at an implied price of $17.74 per fully diluted share. The
average multiple of stock price to estimated calendar year 1996 EPS for the
certain other publicly traded companies was 14.4. The average multiple of
estimated calendar year 1996 EPS was then multiplied by Western estimated
calendar 1996 EPS to arrive at an implied total Equity Value, which was then
divided by Western shares and stock options outstanding on December 11, 1995 to
arrive at an implied price of $20.25 per fully diluted share. The average
multiple of stock price to latest available Book Value for the certain other
publicly traded companies was 2.0. The average multiple of latest available Book
Value was then multiplied by Western estimated Book Value as of December 31,
1995 to arrive at an implied total Equity Value, which was then divided by
Western shares and stock options outstanding on December 11, 1995 to arrive at
an implied price of $21.04 per fully diluted share.
In order to compare the Transaction Purchase Price per Western share of
$29.81 (the product of USA Waste's Preannouncement Price (as defined herein) and
the Exchange Ratio of the transaction) to the implied value per share for
Western, a 40% control premium was applied to Western's average implied price
per share of $20.98, which was determined by taking the average per share price
of the analyses described in the preceding two paragraphs. By applying the 40%
control premium to the average implied price, DLJ arrived at an implied per
share value for Western of $29.37.
Transaction Analysis. DLJ reviewed publicly available information for four
selected transactions involving the combination of selected solid waste
management companies. The four transactions reviewed (the "Comparative
Transactions") were: (i) Browning-Ferris Industries, Inc./Attwoods Group PLC;
(ii) USA Waste Services, Inc./Envirofil Inc.; (iii) USA Waste Services,
Inc./Chambers Development Company, Inc.; and (iv) WMX Technologies,
Inc./Wheelabrator Technologies, Inc. The four transactions selected are not
intended to represent the complete list of solid waste management transactions
which have occurred during the last five years; rather, they include only
transactions involving combinations of companies with operating characteristics,
size or financial performance characteristics believed to be comparable to those
characteristics of Western and USA Waste (and, indeed included two transactions
involving USA Waste). DLJ reviewed the consideration paid in each of those
transactions in terms of the Equity Purchase Price (as hereinafter defined) plus
total debt less cash and cash equivalents ("Adjusted Purchase Price") as a
multiple of revenues, EBITDA and EBIT for the latest reported twelve months
prior to the announcement of the closing of that transaction. The Adjusted
Purchase Price for the Merger was computed by taking the product of the USA
Waste Common Stock price at December 15, 1995 (the "Preannouncement Price") and
the Exchange Ratio multiplied by Western shares and stock options outstanding at
December 11, 1995 plus total debt less cash and cash equivalents. The ratio of
Adjusted Purchase Price to revenues, computed for the selected transactions
announced since September 1990, had a median of 1.6 compared to 2.1 for the
Merger based on Western's estimated calendar 1995 revenues. The multiple of
Adjusted Purchase Price to EBITDA, computed based on the selected transactions,
had a median of 12.4 compared to 9.4 EBITDA for the Merger based on Western's
estimated calendar 1995 EBITDA. The multiple of Adjusted Purchase Price to EBIT,
computed based on the selected transactions, had a median of 16.6 compared to
17.0 EBIT for the Merger, based on Western's estimated calendar 1995 EBIT.
DLJ also reviewed the consideration paid in each of the transactions in
terms of equity price (offer price per share multiplied by total common shares
outstanding; the "Equity Purchase Price") as a multiple of the book value. The
Equity Purchase Price of the Merger was computed by taking the product of the
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Preannouncement Price and the Exchange Ratio multiplied by Western shares and
stock options outstanding at December 11, 1995. The ratio of Equity Purchase
Price to Book Value, computed for the selected transactions had a median of 2.9.
This compares to the 2.8 Book Value attributable to Western based upon an
Estimated Book Value for Western at December 31, 1995.
DLJ's analysis also determined the percentage increase of the offer prices
(represented by the purchase price per share in cash transactions and the stock
price of the constituent securities multiplied by the exchange ratio in the case
of stock-for-stock mergers) over the trading prices one day, one week and one
month prior to the announcement date of transactions in two general
categories -- (i) all merger and acquisition transactions announced and
completed since January 1, 1994, and (ii) all stock-for-stock transactions
announced and completed since January 1, 1994. The percentage amount by which
offer prices exceeded the closing stock prices one day, one week and one month
prior to the announcement date of all completed merger and acquisition
transactions since January 1, 1994 averaged 37.1%, 42.6% and 47.0%,
respectively. The percentage amount by which offer prices exceeded the closing
stock prices one day, one week and one month prior to the announcement date of
all stock-for-stock transactions completed since January 1, 1994 averaged 27.6%,
31.7% and 38.7%, respectively, compared to a premium of 59.0%, 59.0% and 48.1%
respectively, over the Western Common Stock one day, one week and one month
prior to December 12, 1995 (December 11, 1995 assumed to be last trading day
unaffected by the transaction). As a result of this analysis, it was determined
that 40% would be an appropriate control premium.
Stock Trading History. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and their relative
relationships for both USA Waste Common Stock and Western Common Stock for the
latest 12-month period ended December 15, 1995. DLJ also reviewed the daily
closing prices and high and low prices of USA Waste Common Stock and Western
Common Stock and compared the Western closing stock prices with an index of
selected waste companies. The index of selected waste companies included Allied
Waste Industries, Inc., Browning-Ferris Industries, Inc., Continental Waste
Industries, Inc., Laidlaw, Inc., Mid-American Waste Systems, Inc., Sanifill,
Inc., United Waste Systems Inc., and WMX Technologies, Inc. This information was
presented solely to provide the Board of Directors of USA Waste with background
information regarding the stock prices of Western and USA Waste over the period
indicated. DLJ noted the high and low prices for USA Waste over the twelve-month
period ended December 15, 1995 was $22.50 and $10.00, respectively, and the high
and low prices for Western over the twelve-month period ended December 15, 1995
was $24.25 and $14.50, respectively.
Discounted Cash Flow Analysis. DLJ also performed a discounted cash flow
analysis to evaluate the consideration being paid in the Merger. In conducting
its analysis, DLJ relied on certain assumptions, financial forecasts and other
information provided by Western and USA Waste management. Using the information
set forth in the Western forecast, DLJ calculated the estimated "Free Cash Flow"
based on projected unleveraged operating income adjusted for: (i) taxes; (ii)
certain projected non-cash items (i.e., depreciation and amortization); (iii)
projected changes in non-cash working capital; and (iv) projected capital
expenditures. DLJ analyzed the Western forecast and discounted the stream of
free cash flows from calendar 1996 to calendar 2000 provided in such projections
back to December 31, 1995 using discount rates ranging from 10% to 12%. To
estimate the residual value of Western at the end of the forecast period, DLJ
applied terminal multiples of 7.0 times to 8.0 times to the projected fiscal
2000 EBITDA and discounted such value estimates back to December 31, 1995 using
discount rates ranging from 10% to 12%. DLJ then summed the present values of
the free cash flows and the present values of the residual values to derive a
range of implied enterprise values for Western. The range of implied enterprise
values of Western was then adjusted for Net Debt to yield implied equity values
of Western. The midpoint of implied equity value range of $520.8 million was
then divided by the fully diluted shares outstanding as of December 11, 1995 to
yield an implied equity value of $32.55 per fully diluted share.
The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, notwithstanding the separate factors
summarized above, DLJ believes that its analyses must be considered as a whole
and
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that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinions. In performing its analyses, DLJ
made numerous assumptions with respect to industry performance, business and
economic conditions and other matters. The analyses performed by DLJ are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Pursuant to the terms of an engagement letter dated December 8, 1995, USA
Waste has agreed to pay DLJ a fee of $600,000 upon delivery of the DLJ Opinion
and an additional fee of $800,000 upon consummation of the Merger. USA Waste has
also agreed to reimburse DLJ promptly for all out-of-pocket expenses (including
the reasonable fees and out-of-pocket expenses of counsel) incurred by DLJ in
connection with its engagement, and to indemnify DLJ and certain related persons
against certain liabilities in connection with its engagement, including
liabilities under the federal securities laws. The terms of the fee arrangement
with DLJ, which DLJ and USA Waste believe are customary in transactions of this
nature, were negotiated at arm's length between USA Waste and DLJ and the USA
Waste Board was aware of such arrangement, including the fact that a significant
portion of the aggregate fee payable to DLJ is contingent upon consummation of
the Merger.
In the ordinary course of business, DLJ actively trades the securities of
both USA Waste and Western for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short portion in
either or both securities. DLJ, as part of its investment banking services, is
regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. DLJ has provided financial advisory and investment banking
services to USA Waste in the past, including (i) acting as USA Waste's financial
advisor and rendering a fairness opinion in connection with USA Waste's merger
with Chambers completed in June 1995 (for which it receive $3.37 million plus
reimbursement of its expenses) and (ii) acting as the lead manager in a public
offering of USA Waste Common Stock completed in October 1995 (for which it
received approximately $3.16 million in discounts and commissions).
OPINION OF FINANCIAL ADVISOR TO WESTERN
Merrill Lynch delivered its written opinion dated December 17, 1995 to the
Board of Directors of Western that, as of such date, the Exchange Ratio was fair
to the shareholders of Western (other than USA Waste and its affiliates) from a
financial point of view. A copy of the opinion of Merrill Lynch, which sets
forth the assumptions made, matters considered and limitations on the review
undertaken, is attached as Appendix C to this Joint Proxy Statement and
Prospectus and is incorporated herein by reference. The summary of the opinion
of Merrill Lynch set forth in this Joint Proxy Statement and Prospectus is
qualified in its entirety by reference to the full text of the opinion attached
as Annex C hereto. Western's shareholders are urged to read such opinion in its
entirety.
Merrill Lynch's opinion is directed only to the fairness from a financial
point of view of the Exchange Ratio to the shareholders of Western (other than
USA Waste and its affiliates) and does not constitute a recommendation to any
shareholder as to how such shareholder should vote at the Western Special
Meeting. The Exchange Ratio was determined through negotiations between Western
and USA Waste and was approved by the Board of Directors of Western. Merrill
Lynch provided advice to Western during the course of such negotiations, but did
not make a recommendation with respect to the amount of the Exchange Ratio.
In arriving at its opinion, Merrill Lynch, among other things, (i) reviewed
Western's Annual Reports, Forms 10-K and related financial information for the
three fiscal years ended June 30, 1995, and Western's Form 10-Q and the related
unaudited financial information for the quarterly period ended September 30,
1995; (ii) reviewed USA Waste's Annual Reports, Forms 10-K and related financial
information for the three fiscal years ended December 31, 1994, USA Waste's
Forms 10-Q and the related unaudited financial information for the quarterly
periods ended March 31, 1995, June 30, 1995 and September 30, 1995 and certain
other filings, including registration statements, Form 8-Ks and proxy
statements, with the Commission made by USA Waste during the last three years;
(iii) reviewed certain information, including financial
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forecasts, relating to the business, earnings, cash flow, assets and prospects
of Western and USA Waste, furnished to Merrill Lynch by Western and USA Waste;
(iv) conducted discussions with members of senior management of Western and USA
Waste concerning their respective businesses and prospects; (v) reviewed the
historical market prices and trading activity for Western Common Stock and USA
Waste Common Stock and compared them with that of certain publicly traded
companies which Merrill Lynch deemed to be reasonably similar to Western and USA
Waste, respectively; (vi) compared the results of operations of Western and USA
Waste with that of certain companies which Merrill Lynch deemed to be reasonably
similar to Western and USA Waste, respectively; (vii) compared the proposed
financial terms of the transactions contemplated by the Merger Agreement with
the financial terms of certain other mergers and acquisitions which Merrill
Lynch deemed to be relevant; (viii) reviewed a draft of the Merger Agreement
dated December 15, 1995 and (ix) reviewed a draft of the form of Voting
Agreement dated December 13, 1995.
In preparing its opinion, Merrill Lynch relied on the accuracy and
completeness of all information supplied or otherwise made available to it by
Western and USA Waste, and Merrill Lynch did not independently verify such
information or undertake an independent appraisal of the assets of Western or
USA Waste. No special instructions were given to Merrill Lynch related to its
review, and no limitations were imposed by Western with respect to the
investigations made or procedures followed by Merrill Lynch in rendering its
opinion. With respect to the financial forecasts furnished by Western and USA
Waste, Merrill Lynch assumed that they were reasonably prepared and reflected
the best currently available estimates and judgment of Western's or USA Waste's
management as to the expected future financial performance of Western or USA
Waste, as the case may be.
Merrill Lynch's opinion is necessarily based upon general economic, market,
monetary and other conditions as they existed and could be evaluated, and the
information made available to Merrill Lynch, as of the date of its opinion.
The following is a summary of certain analyses performed by Merrill Lynch
in connection with its opinion dated December 17, 1995, which it presented to
the Board of Directors of Western on such date.
(i) Discounted Cash Flow Analysis. Merrill Lynch calculated ranges of
equity value for Western based upon the value discounted to the present of its
annualized five-year stream of projected unlevered free cash flow and its
projected calendar year 2000 terminal values based upon a range of multiples of
its projected calendar year 2000 earnings before interest, taxes, depreciation
and amortization ("EBITDA") less its debt and plus option proceeds, restricted
cash and cash. In conducting its analysis, Merrill Lynch relied upon two sets of
assumptions and financial projections provided by the management of Western: a
base case (the "Western Base Case") and an acquisitions case (the "Western
Acquisitions Case"), which provided for the consummation of additional
identified and certain unidentified acquisitions by Western and the successful
commencement of the California Rail Fill project in 1998. Merrill Lynch applied
discount rates reflecting a weighted average cost of capital ranging from 10.5%
to 13.5% and multiples of terminal EBITDA ranging from 7.0x to 8.0x. The range
of discount rates was selected based on a theoretical analysis of Western's
weighted average cost of capital, and the range of EBITDA multiples was selected
based on a review of the EBITDA multiples of (A) Allied Waste Industries,
Browning-Ferris Industries, Continental Waste, Mid-American Waste, Sanifill,
United Waste Systems, WMX Technologies (collectively, the "Comparable
Companies"), Western and USA Waste and (B) the Acquisition Comparables (as
defined below). Based on this analysis, Merrill Lynch calculated per share
equity values of Western ranging from $22.23 to $29.05, for the Western Base
Case, and from $23.59 to $31.78, for the Western Acquisitions Case, each on a
fully diluted basis.
Merrill Lynch calculated ranges of equity value for USA Waste based upon
the value discounted to the present of its five year stream of projected
unlevered free cash flow and its projected fiscal year 2000 terminal value based
upon a range of multiples of its projected fiscal year 2000 EBITDA less its debt
and plus options proceeds and cash. In conducting its analysis, Merrill Lynch
relied upon two sets of assumptions and financial projections: an acquisitions
case provided by the management of USA Waste (the "USA Waste Acquisitions
Case"), which provided for the consummation of certain identified and
unidentified acquisitions by USA
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Waste, and a base case derived by Merrill Lynch from the USA Waste Acquisitions
Case (the "USA Waste Base Case"), which did not provide for acquisitions by USA
Waste. Merrill Lynch applied discount rates reflecting a weighted average cost
of capital ranging from 10.5% to 13.5% and multiples of terminal EBITDA ranging
from 7.5x to 8.5x. The range of discount rates was selected based on a
theoretical analysis of USA Waste's weighted average cost of capital, and the
range of multiples of terminal EBITDA was selected based on a review of the
EBITDA multiples of (A) the Comparable Companies, USA Waste and Western and (B)
the Acquisition Comparables. Based on this analysis, Merrill Lynch calculated
per share equity values of USA Waste ranging from $16.54 to $21.24, for the USA
Waste Base Case, and $21.24 to $27.39, for the USA Waste Acquisitions Case.
Merrill Lynch derived ranges of implied exchange ratios by dividing the
high, midpoint and low per share equity values of Western by the low, midpoint
and high per share equity values of USA Waste, respectively. Based on this
analysis, Merrill Lynch calculated ranges of implied exchange ratios of (i) 1.05
to 1.76, with a midpoint of 1.36, in the case of the Western Base Case and the
USA Waste Base Case, (ii) 0.81 to 1.36, with a midpoint of 1.05, in the case of
the Western Base Case and the USA Waste Acquisitions Case, and (iii) 0.85 to
1.49, with a midpoint of 1.13, in the case of the Western Acquisitions Case and
the USA Waste Acquisitions Case.
Merrill Lynch also calculated ranges of equivalent equity value for the
combined company by applying the above methodology to the five year stream of
projected unlevered pro forma free cash flow and projected calendar year 2000
pro forma terminal value of the combined company with and without $15 million in
assumed synergies. Based on this analysis, Merrill Lynch calculated ranges of
implied equivalent equity value for the combined company of (i) $24.25 to $31.50
and $25.75 to $33.00, in the case of the Western Base Case and the USA Waste
Base Case, without and with synergies, respectively, (ii) $29.50 to $38.25 and
$31.00 to $40.00, in the case of the Western Base Case and the USA Waste
Acquisitions Case, without and with synergies, respectively, and (iii) $30.00 to
$39.50 and $31.50 to $41.00, in the case of the Western Acquisitions Case and
the USA Waste Acquisitions Case, without and with synergies, respectively.
(ii) Analysis of Selected Comparable Publicly Traded Companies. Merrill
Lynch compared certain financial information for each of Western and USA Waste
to the corresponding publicly available financial information of the Comparable
Companies. Merrill Lynch calculated multiples for such companies of market value
to latest twelve months' ("LTM") revenue, EBITDA, earnings before interest and
taxes ("EBIT") and current net income, and calendar year 1996 projected EBITDA,
EBIT and net income.
Based on this analysis, Merrill Lynch calculated per share equity values of
Western ranging from $19.50 to $29.05 and per share equity values of USA Waste
ranging from $19.44 to $23.78. Merrill Lynch derived a range of implied exchange
ratios based on this analysis by dividing the high, midpoint and low per share
equity values of Western by the low, midpoint and high per share equity values
of USA Waste, respectively. Based on this analysis, Merrill Lynch calculated a
range of implied exchange ratios of 0.82 to 1.49 with a midpoint of 1.12.
(iii) Analysis of Selected Comparable Acquisition Transactions. Merrill
Lynch also reviewed the financial terms of seven transactions (the "Acquisition
Comparables") in which waste management companies were acquired. The Acquisition
Comparables reviewed, in reverse chronological order of announcement date, were
the following: (a) the acquisition of Southland Environmental Services Inc. by
Republic Waste Industries, (b) the acquisition of Resource Recycling
Technologies Inc. by Waste Management Inc., (c) the acquisition of Chambers
Development Company, Inc. by USA Waste, (d) the acquisition of Attwoods Plc by
Browning-Ferris Industries, (e) the acquisition of Envirofil Inc. by USA Waste,
(f) the acquisition of Environmental Waste of America by Envirofil Inc. and (g)
the acquisition of a controlling interest in Wheelabrator Technologies Inc. by
Waste Management Inc.
Merrill Lynch analyzed offer value and transaction consideration multiples.
In particular, Merrill Lynch calculated transaction value as a multiple of LTM
revenue, EBITDA and EBIT and offer value as a multiple of LTM net income and
book value. Based on this analysis, Merrill Lynch calculated per share equity
values of Western ranging from $26.32 to $34.51 and per share equity values of
USA Waste ranging from $19.44 to $26.67.
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(iv) Premium Analysis. Merrill Lynch compared the premium of the Exchange
Ratio (based on the closing price of USA Waste Common Stock on December 14,
1995) over the closing price of Western Common Stock one day, one week and one
month prior to such date to the comparable average premiums for greater than
$100 million stock for stock transactions since January 31, 1993. This analysis
showed that (a) the Exchange Ratio represented a 31.0% premium over the one day
prior closing price compared to mean and median one day prior premiums of 33.1%
and 26.1%, respectively, (b) the Exchange Ratio represented a 60.0% premium over
the one week prior closing price compared to mean and median one week prior
premiums of 38.4% and 29.9%, respectively, (c) the Exchange Ratio represented a
50.9% premium over the one month prior closing price compared to mean and median
one month prior premiums of 43.4% and 39.0%, respectively.
(v) Pro Forma Analysis. Merrill Lynch analyzed certain pro forma effects
resulting from the Merger, including the effect on 1996 and 1997 earnings per
share ("EPS") of USA Waste and the pre-tax synergies required for breakeven EPS.
The analysis indicated that (a) in the case of the Western Base Case and the USA
Waste Base Case, the Merger would lead to 5.3% and 7.7% dilution and require
$9.0 million and $14.5 million in pre-tax synergies for breakeven EPS in 1996
and 1997, respectively, (b) in the case of the Western Base Case and the USA
Waste Acquisitions Case, the Merger would lead to 5.3% and 8.9% dilution and
require $9.0 million and $17.9 million in pre-tax synergies for breakeven in
1996 and 1997, respectively, and (c) in the case of the Western Acquisitions
Case and the USA Waste Acquisitions Case, the Merger would lead to 5.3% and 7.2%
dilution and require $9.0 million and $14.4 million in pre-tax synergies for
breakeven in 1996 and 1997, respectively.
(vi) Contribution Analysis. Merrill Lynch analyzed and compared the
respective contribution of 1995 and 1996 revenue, EBITDA, EBIT and net income of
Western and USA Waste to the combined company following consummation of the
proposed Merger based upon the Western Base Case and the USA Base Case (which
did not deviate from the USA Acquisitions Case for this financial information in
these years), without taking into account any potential synergies resulting from
the Merger. This analysis showed that Western would contribute to the combined
company 37.4% and 34.7% of revenue, 30.8% and 25.9% of EBITDA, 29.5% and 23.1%
of EBIT and 22.9% and 23.3% of net income, in each case for 1995 and 1996,
respectively, and that Western shareholders would own approximately 28.4% of the
combined company on a fully diluted basis.
(vii) Stock Trading History. Merrill Lynch reviewed and analyzed the
history of the trading prices for Western Common Stock and USA Waste Common
Stock, and the ratio of the former to the latter during the latest twelve
months. This information was presented primarily to give the Board of Directors
of Western background information regarding the stock prices of Western and USA
Waste over the period indicated. In addition, the analysis of the daily closing
price ratio indicated that the mean daily closing price ratio over the period
indicated equaled 1.20, compared to the Exchange Ratio of 1.50.
While the foregoing summary describes all material analyses and factors
presented by Merrill Lynch to the Board of Directors of Western, it does not
purport to be a complete description of the analyses conducted by Merrill Lynch
or Merrill Lynch's presentation to the Board of Directors of Western. Merrill
Lynch believes that its analyses must be considered as a whole and that
selecting portions of its analyses and the factors considered by it, without
considering all factors and analyses, could create an incomplete view of the
process underlying its opinions. Merrill Lynch did not assign relative weights
to its analyses in preparing its opinions. None of the Comparable Companies is
identical to Western or USA Waste, and none of the Acquisition Comparables is
identical to the Merger. Accordingly, an analysis of the results of the
comparable companies and comparable transactions analyses is not purely
mathematical. Rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being compared.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In
performing its analyses, Merrill Lynch made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Western or USA Waste. Any
estimates contained in the analyses performed by
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Merrill Lynch are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. In addition, analyses relating to the value of the businesses do
not purport to be appraisals or to reflect the prices at which businesses may
actually be sold. Because such estimates are inherently subject to uncertainty,
neither Western, Merrill Lynch nor any other person assumes responsibility for
their accuracy.
Western has engaged Merrill Lynch as its financial advisor in connection
with the Merger because it is an internationally recognized investment banking
firm engaged in the valuation of businesses and their securities in connection
with mergers and acquisitions and for other purposes and has substantial
experience in transactions similar to the Merger. For Merrill Lynch's financial
advisory services, Western has agreed to pay Merrill Lynch (i) a fee of $100,000
upon signing its engagement letter dated as of August 15, 1995 (the "Engagement
Letter"), (ii) a fee of $650,000 upon the delivery of Merrill Lynch's fairness
opinion and (iii) a fee of $750,000 at the Effective Time. In addition, the
Engagement Letter provides that Western will reimburse Merrill Lynch for its
reasonable out-of-pocket expenses (including reasonable fees and expenses of its
legal counsel) and will indemnify Merrill Lynch and certain related persons
against certain liabilities, including liabilities under securities laws,
arising out of its engagement.
In the ordinary course of its securities business, Merrill Lynch may
actively trade debt of equity securities of Western and USA Waste for its own
account and the accounts of its customers, and Merrill Lynch therefore may hold
a long or short position in such securities.
CONFLICTS OF INTEREST
In considering the recommendation of the Boards of Directors of USA Waste
and Western with respect to the Merger, holders of USA Waste Common Stock and
Western Common Stock should be aware that certain members of the Boards of
Directors and management have certain interests separate from their interests as
stockholders, including those referred to below.
After the Merger is consummated, Kosti Shirvanian, Chairman, Chief
Executive Officer and President of Western, will become a Director and a Vice
Chairman of USA Waste. In addition, USA Waste and Kosti Shirvanian have entered
into an employment agreement pursuant to which Mr. Shirvanian will serve as
Chairman of the Board of Western, effective as of the Effective Time. The
employment agreement provides for an annual salary of $500,000, plus a
guaranteed bonus of $250,000, a discretionary annual bonus of up to $250,000 and
certain stock option grants as of the Effective Time and annually thereafter.
For more information about such employment agreement, see "The Plan of Merger
and Terms of the Merger -- Other Agreements."
In addition to Mr. Shirvanian, in connection with the Merger, Ms. Savey
Tufenkian and a third person to be determined at a later date will be elected to
the USA Waste Board of Directors. Ms. Tufenkian and the third director will each
be eligible to receive an annual grant of options to purchase 10,000 shares of
USA Waste Common Stock pursuant to the Director Plan, assuming such plan is
approved by the USA Waste stockholders at the USA Waste Annual Meeting. Ms.
Tufenkian will also receive consulting payments in the aggregate amount of
$600,000.
Certain officers of Western may receive severance payments upon
consummation of the Merger, certain of which payments are subject to approval of
the USA Waste Board of Directors. The aggregate amounts of such payments are
expected to be approximately $1.2 million. In addition, certain Western
employees who will not continue as employees of USA Waste will receive payments
under the Western retirement plan. The aggregate present value amounts of such
payments are expected to be approximately $4.8 million.
As of the Western Record Date, twenty-two individuals, representing all
officers and directors of Western, hold options to acquire an aggregate of
approximately 3.1 million shares of Western Common Stock pursuant to the terms
of certain stock option agreements, at exercise prices ranging from $8 to $22
per share. Pursuant to his employment agreement with USA Waste, Mr. Kosti
Shirvanian has agreed to forego acceleration of his unvested options to purchase
approximately 500,000 shares of Western Common Stock; therefore, Mr.
Shirvanian's options will vest in accordance with the vesting schedule pursuant
to which such options were granted. Of the remaining options, approximately 2.2
million are currently exercisable and
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400,000 will become fully vested and exercisable immediately upon a "change in
control" such as the Merger. At the Effective Time, all of these options will be
automatically converted into options to purchase a number of shares of USA Waste
Common Stock equal to the number of Western shares underlying such options
multiplied by the Exchange Ratio, at an exercise price equal to the exercise
price of the Western option divided by the Exchange Ratio. All other terms and
conditions of the options will be the same as before the Effective Time. As a
result, the options exercisable by the officers and directors of Western for
approximately 3.1 million shares of Western Common Stock will be converted into
options to acquire approximately 4.6 million shares of USA Waste Common Stock.
The exercise prices will be converted from a range of $8 to $22 per share of
Western Common Stock to a range of $5.33 to $14.67 per share of USA Waste Common
Stock. Based upon the closing sale price of $25.50 per share of USA Waste Common
Stock on March 29, 1996, the total value based upon the excess of the market
price of the stock over the exercise price of the options that would become
exercisable upon consummation of the Merger by (i) the five most highly paid
executive officers of Western (with respect to an aggregate of approximately
230,000 shares of USA Waste Common Stock and excluding Mr. Shirvanian's options)
would be approximately $3.7 million and (ii) all officers and directors of
Western (with respect to an aggregate of approximately 617,000 shares of USA
Waste Common Stock and excluding Mr. Shirvanian's options) would be
approximately $9.1 million. See "The Plan of Merger and Terms of the
Merger -- Western Options."
The Merger Agreement provides for indemnification by USA Waste of the
officers and directors of Western against all costs or expenses (including
reasonable attorney's fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative, or
investigative, arising out of, relating to, or in connection with any action or
omission occurring prior to the Effective Time (including acts or omissions in
connection with such persons serving as an officer, director, or other fiduciary
in any entity if such service was at the request of Western) or arising out of
or pertaining to the transactions contemplated by the Merger Agreement. See "The
Plan of Merger and Terms of the Merger -- Indemnification."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain material Federal income tax
consequences of the Merger to holders of Western Common Stock under the Code,
but does not deal with all tax consequences of the Merger that may be relevant
to Western shareholders in light of their particular circumstances, such as the
tax consequences to Western shareholders who do not hold their Western Common
Stock as a capital asset, foreign persons or persons who acquired their shares
in compensatory transactions. Furthermore, no foreign, state or local tax
considerations are addressed herein.
THIS SUMMARY SHOULD NOT BE REGARDED AS A SUBSTITUTE FOR AN INDIVIDUAL
ANALYSIS OF THE TAX CONSEQUENCES OF THE MERGER TO A WESTERN SHAREHOLDER. EACH
WESTERN SHAREHOLDER SHOULD CONSULT A TAX ADVISOR REGARDING THE PARTICULAR
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO SUCH
STOCKHOLDER'S OWN SITUATION.
Western has received from its counsel, Sheppard, Mullin, Richter & Hampton
LLP, an opinion (the "Opinion") to the effect that neither Western nor its
shareholders will recognize any gain or loss for federal income tax purposes as
a result of consummation of the Merger, except to the extent that such
shareholders receive cash in lieu of fractional shares of USA Waste Common
Stock. The Opinion is subject to certain qualifications and assumptions as noted
therein and is based on certain representations of USA Waste, Acquisition,
Western and affiliates of Western. Included among these representations is a
representation by Western that following the Merger it will hold at least 90% of
the fair market value of its net assets, at least 70% of the fair market value
of its gross assets, at least 90% of the fair market value of Acquisition's net
assets and at least 70% of the fair market value of Acquisition's gross assets
held immediately prior to the Merger. Western shareholders should be aware that
this discussion and the Opinion is based upon counsel's interpretation of the
Code, applicable Treasury regulations, judicial authority and administrative
rulings and practice, all as of the date hereof. There can be no assurance that
future legislative, judicial or administrative changes or interpretations will
not adversely affect the accuracy of the statements and conclusions set forth
herein. Any such changes or interpretations could be applied retroactively and
could affect the tax consequences of the Merger. Western shareholders should be
aware that the Opinion will not be binding upon
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the Internal Revenue Service (the "Service"), and the Service will not be
precluded from adopting a contrary position.
Assuming the Merger qualifies as a reorganization under Section 368(a) of
the Code, the following Federal income tax consequences will occur:
(a) no gain or loss will be recognized by USA Waste, Acquisition or
Western in connection with the Merger;
(b) no gain or loss will be recognized by a holder of Western Common
Stock who exchanges all of his or her shares of Western Common Stock solely
for shares of USA Waste Common Stock in the Merger;
(c) the aggregate tax basis of the shares of USA Waste Common Stock
received by a Western shareholder in the Merger (including any fractional
share not actually received) will be the same as the aggregate tax basis of
the Western Common Stock surrendered in exchange therefor;
(d) the holding period of the shares of USA Waste Common Stock
received by a Western shareholder in the Merger will include the holding
period of the shares of Western Common Stock surrendered in exchange
therefor, provided that such shares of Western Common Stock are held as
capital assets at the Effective Time;
(e) a Western shareholder receiving cash in lieu of a fractional share
will recognize gain or loss upon such payment equal to the difference, if
any, between such stockholder's basis in the fractional share (as described
in paragraph (c) above) and the amount of cash received. Such gain or loss
will be a capital gain or loss if the Western Common Stock is held as a
capital asset at the Effective Time; and
(f) a holder of Western Common Stock who exercises his dissenter's
appraisal rights will recognize taxable gain or loss measured by the
difference between the amount of the cash received and his aggregate tax
basis in his shares. Such gain or loss will be a capital gain or loss if
the Western Common Stock is held as a capital asset.
Even if the Merger qualifies as a tax-free reorganization, a recipient of
USA Waste Common Stock could recognize gain to the extent that such shares were
considered by the Service to be received in exchange for consideration other
than Western Common Stock. All or a portion of such gain may be taxable as
ordinary income. Gain would be recognized to the extent that a Western
shareholder was treated by the Service as receiving (directly or indirectly)
consideration other than USA Waste Common Stock in exchange for his or her
Western Common Stock.
A successful challenge by the Service to the tax-free reorganization status
of the Merger would result in a Western shareholder recognizing taxable gain or
loss with respect to the difference between the shareholder's basis in his or
her shares and the fair market value, as of the Effective Time, of the USA Waste
Common Stock received in exchange therefor. In such event, a shareholder's basis
in the USA Waste Common Stock so received would equal its fair market value, and
the holding period for such stock would begin at the Effective Time.
The Federal income tax consequences summarized above are for general
information only. Each Western stockholder should consult a tax advisor as to
the particular consequences of the Merger that may apply to such stockholder,
including the application of state inheritance and gift tax laws and of state,
local and foreign laws.
For more information on the tax opinions to be delivered by counsel to USA
Waste and Western as a condition to the closing of the Merger, see "The Plan of
Merger and Terms of the Merger -- Conditions to the Merger."
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to the CGCL, a holder of shares of Western Common Stock may, in
some instances, be entitled to require Western to purchase his or her shares for
cash at their fair market value as of the day before the first announcement of
the terms of the Merger, excluding any appreciation or depreciation in
consequence of the Merger. The general terms of the Merger were first announced
on December 18, 1995. The following is a brief
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<PAGE> 43
summary of the procedures to be followed by a shareholder in order to perfect
his or her right, if any, to payments under Chapter 13 of the CGCL and is
qualified in its entirety by reference to the text of Chapter 13 attached to
this Joint Proxy Statement and Prospectus as Appendix D, to which reference is
hereby made for a definitive statement of the rights of Dissenting Shareholders
and the procedures to be followed. Any reference to "Dissenting Shareholders"
herein means the record holder of Dissenting Shares and includes a transferee of
record.
Shares of Western Common Stock will qualify as Dissenting Shares only if
demands for payment are filed with respect to 5% or more of the outstanding
shares of Western Common Stock. This 5% requirement is applicable because the
Western Common Stock is listed on the NYSE, a national securities exchange
certified by the California Commissioner of Corporations, as provided in Section
1300(b)(2) of Chapter 13.
A Dissenting Shareholder who wishes to require Western to purchase his or
her shares of Western Common Stock must:
(i) make written demand upon Western or its transfer agent, which is
received not later than the date of the Western Special Meeting, setting
forth the number of shares of Western Common Stock demanded to be purchased
by Western and a statement as to claimed fair market value of such shares
at December 17, 1995;
(ii) vote against the Merger any or all of the shares of Western
Common Stock entitled to be voted (shares not voted are not considered to
be voted against the Merger for purposes of this requirement and will not
be counted toward the 5% minimum for Dissenters' Rights to exist); provided
that if a shareholder of Western votes part of the shares entitled to be
voted in favor of the Merger, and fails to specify the number of shares
voted, it is conclusively presumed under California law that such
shareholder's approving vote is with respect to all shares entitled to be
voted; and
(iii) submit for endorsement, within 30 days after the date on which
the notice of approval of the Merger by shareholders of Western is mailed
to such shareholders, to Western or its transfer agent the certificates
representing any shares in regard to which demand for purchase is being
made, or to be exchanged for certificates of appropriate denominations so
endorsed, with a statement that the shares are Dissenting Shares.
If a shareholder fails to vote against the Merger, such shareholder will be
deemed to have waived his dissenting and appraisal rights.
The statement of fair market value described in clause (i) above will
constitute an offer by the Dissenting Shareholder to sell his or her shares at a
price equal to such fair market value. Neither a vote against approval of the
Merger nor the giving of a proxy directing a negative vote will be sufficient to
constitute the demand described in clause (i) above. A proxy which fails to
include instructions with respect to approval of the Merger will be voted in
favor of the Merger. Accordingly, shares covered by such a proxy will not be
Dissenting Shares. In addition, a vote in favor of the Merger, or a failure to
vote at all, will nullify any previously filed written demand for payment.
If the holders of 5% of more of the outstanding shares of Western Common
Stock have made demands for payment on or prior to the date of the Western
Special Meeting and have voted against the Merger at the Western Special
Meeting, within 10 days after the date of the approval of the Merger, Western
will mail to each Dissenting Shareholder who holds Western Common Stock a notice
of such approval together with a statement of the price determined by Western to
represent the fair market value of Dissenting Shares, a copy of certain sections
of Chapter 13, and a brief description of the procedure to be followed if any
such shareholder desires to exercise Dissenter's Rights. The statement of price
will constitute an offer by Western to purchase at the price stated therein any
Dissenting Shares.
If Western and any Dissenting Shareholder agree that any shares of Western
Common Stock are Dissenting Shares and agree upon the price of the shares, such
Dissenting Shareholder will be entitled to the agreed price plus interest
thereon at the legal rate on judgments from the date of such agreement. Subject
to the provisions of the CGCL, payment of the fair market value of the
Dissenting Shares will be made within
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<PAGE> 44
30 days after the amount thereof has been agreed or within 30 days after any
statutory or contractual conditions to the Merger have been satisfied, whichever
is later. If Western denies that the shares are Dissenting Shares or if Western
and the Dissenting Shareholder fail to agree upon the fair market value of the
shares, then such Dissenting Shareholder, within six months after the date on
which notice of approval of the Merger by the shareholders of Western is mailed
to such shareholder, and not thereafter, may file a complaint in the Superior
Court of Los Angeles County, California, requiring the court to determine
whether the shares are Dissenting Shares, or the fair market value of the
Dissenting Shares, or both, or may intervene in any pending action for the
appraisal of any such shares. The court will direct payment of the appraised
value of the shares, together with interest thereon at the legal rate on
judgments from the date on which the judgment was entered, by Western to such
shareholder upon the surrender of the certificates representing such shares to
Western. The costs of such proceedings shall be apportioned as the court
considers equitable, but if the appraisal exceeds the price offered by Western,
Western shall pay the costs, and if the appraisal is more than 125% of the price
offered by Western, Western may be required to pay attorneys' and other fees
together with interest on the appraised value at the legal rate on judgments
from the date the shareholder complied with Sections 1300-1302 of Chapter 13.
A Dissenting Shareholder may not withdraw a demand for purchase of
Dissenting Shares without Western's consent. Written demands for payment and
submissions for endorsement with respect to Western Common Stock must be
addressed to Western at 21061 S. Western Avenue, Torrance, California 90501,
Attention: Investor Relations or to Western's transfer agent, Chemical Mellon
Shareholder Services, at 300 South Grand Avenue, 4th Floor, Los Angeles,
California 90071-3113.
Any shareholder receiving cash upon the exercise of Dissenter's Rights may
recognize gain or loss for income tax purposes. See "Certain Federal Income Tax
Considerations."
The provisions of Chapter 13 of the CGCL are technical in nature and
complex. Shareholders of Western desiring to exercise Dissenter's Rights to
obtain appraisal of the fair market value of their shares should consult
counsel, since the failure to comply strictly with the provisions of Chapter 13
may result in a waiver or forfeiture of their Dissenter's Rights.
Shareholders of Western are entitled, upon written demand, to inspect and
copy the record of shareholders of Western at any time during usual business
hours to communicate with other shareholders of Western with respect to the
Merger.
Delaware law does not require USA Waste to provide appraisal rights to its
stockholders, and USA Waste does not intend to make such rights available to its
stockholders.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for using the "pooling
of interests" method of accounting pursuant to Opinion No. 16 of the Accounting
Principles Board. The pooling of interests method of accounting assumes that the
combining companies have been merged from inception, and the historical
financial statements for periods prior to consummation of the Merger are
restated as though the companies had been combined from inception.
One of the conditions to the Merger is the receipt by USA Waste and
Western, dated as of the Effective Time, of letters from their independent
auditors, Coopers & Lybrand L.L.P. and Ernst & Young LLP, respectively,
regarding such firms' concurrence with USA Waste management's and Western
management's conclusions, respectively, as to the appropriateness of "pooling of
interests" accounting for the Merger under Accounting Principles Board Opinion
No. 16 if closed and consummated in accordance with the Merger Agreement.
If more than 5.7% of the Western shareholders entitled to vote on the
Merger dissent, the Merger will not qualify as a pooling of interests for
accounting purposes. USA Waste and Western would not consummate the Merger under
such conditions.
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GOVERNMENT AND REGULATORY APPROVALS
Transactions such as the Merger are reviewed by the Antitrust Division of
the Department of Justice (the "Department of Justice") and the Federal Trade
Commission (the "FTC") to determine whether they comply with applicable
antitrust laws. Under the provisions of the HSR Act, the Merger may not be
consummated until such time as the specified waiting period requirements of the
HSR Act have been satisfied. USA Waste, Western, Kosti Shirvanian and Savey
Tufenkian filed notification reports with the Department of Justice and FTC
under the HSR Act on January 19, 1996, and the waiting period expired on
February 18, 1996.
At any time before or after the Effective Time, the Department of Justice
and FTC or a private person or entity could seek under the antitrust laws, among
other things, to enjoin the Merger or to cause USA Waste to divest itself, in
whole or in part, of Western or of other businesses conducted by USA Waste.
There can be no assurance that a challenge to the Merger will not be made or
that, if such a challenge is made, USA Waste and Western will prevail.
USA Waste and Western are not aware of any other governmental or regulatory
approvals required for consummation of the Merger, other than compliance with
applicable federal and state securities laws.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of USA Waste Common Stock received by Western shareholders in
connection with the Merger have been registered under the Securities Act and,
except as set forth below, may be traded without restriction. The shares of USA
Waste Common Stock issued in the Merger and received by persons who are deemed
to be "affiliates" (as that term is defined in Rule 144 under the Securities
Act) of Western prior to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 under the Securities Act (or, in
the case of persons who become affiliates of USA Waste, Rule 144 under the
Securities Act) or as otherwise permitted under the Securities Act. The Merger
Agreement provides that Western and USA Waste will use their best efforts to
cause each of their principal executive officers, directors and affiliates to
deliver to USA Waste and/or Western on or prior to the Effective Time a written
agreement to the effect that such persons will not offer to sell, sell or
otherwise dispose of any shares of USA Waste Common Stock issued in the Merger
except, in each case, pursuant to an effective registration statement or in
compliance with Rule 145 or in a transaction which, in the opinion of legal
counsel satisfactory to USA Waste, is exempt from the registration requirements
of the Securities Act and, in any case, until after the results covering 30 days
of post-Merger combined operations of USA Waste and Western have been filed with
the Commission, sent to stockholders of USA Waste or otherwise publicly issued.
Under Commission guidelines interpreting generally accepted accounting
principles, the sale of USA Waste Common Stock or Western Common Stock by an
affiliate of either USA Waste or Western generally within 30 days prior to the
Effective Time or thereafter prior to the publication of financial statements
that include a minimum of at least 30 days of combined operations of USA Waste
and Western after the Effective Time could preclude "pooling of interests"
accounting treatment for the Merger.
ELECTION OF USA WASTE DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
At USA Waste's 1995 annual meeting, the shareholders of USA Waste approved
an amendment to the Certificate of Incorporation of USA Waste whereby the Board
of Directors was divided into three classes, as nearly equal in number as
possible. USA Waste's Board of Directors currently consists of nine members.
Directors are elected for a term of three years. At the USA Waste Annual
Meeting, the term of office of the Class I directors will expire, and the three
directors in that class will be elected to serve until USA Waste's 1999 annual
meeting and until their respective successors are elected. The terms of office
of the Class II and Class III directors will expire at USA Waste's 1997 and 1998
annual meetings, respectively.
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USA Waste's Board intends to cause the nomination of the David
Sutherland-Yoest, Peter J. Gibbons and Richard J. Heckmann for election as
directors. The directors will be elected by the holders of USA Waste Common
Stock.
Pursuant to the Revised Shareholders Agreement (as defined below) entered
into in connection with the Merger Agreement, at the Effective Time, USA Waste's
Board of Directors is to be expanded to include 12 members, and Mr. Kosti
Shirvanian and Ms. Savey Tufenkian, who are currently directors of Western, are
to be elected as directors of USA Waste. In addition, a third director to be
agreed upon by Messrs. John E. Drury and Kosti Shirvanian will be elected to the
Board of Directors at the Effective Time, or as soon thereafter as practicable.
In addition, Mr. Kosti Shirvanian is to be elected as a member of the Executive
Committee of the Board of Directors of USA Waste.
Unless a shareholder requests that voting of his proxy be withheld for any
one or more of the nominees for directors by so directing on the proxy card, the
shares represented by the proxy will be voted FOR election of three nominees
described below. If any nominee becomes unavailable for any reason, then the
shares represented by proxy will be voted FOR the remainder of the listed
nominees and for such other nominees as may be designated by the Board of
Directors of USA Waste as replacements for those who become unavailable.
The following table sets forth as of March 1, 1996 certain information
concerning the nominees for Class I director, the Class II and Class III
directors who will continue in office after the USA Waste Annual Meeting.
<TABLE>
<CAPTION>
DIRECTOR DIRECTOR
NAME DESCRIPTION AGE SINCE CLASS
- ---------------------------------------- -------------------------- --- -------- --------
<S> <C> <C> <C> <C>
John E. Drury(1)........................ Chairman of the Board and 51 1994 III
Chief Executive Officer
Donald F. Moorehead, Jr.(1)............. Vice Chairman of the Board 45 1990 II
David Sutherland-Yoest(1)............... President and Director 39 1994 I
George L. Ball(2)(3).................... Director 57 1991 III
Peter J. Gibbons(2)(3).................. Director 60 1995 I
Richard J. Heckmann(3).................. Director 52 1994 I
William E. Moffett(2)................... Director 65 1995 II
Alexander W. Rangos(1).................. Vice Chairman of the Board 35 1995 III
John G. Rangos, Sr.(1).................. Director 66 1995 II
</TABLE>
- ---------------
(1) Member of the Executive Committee
(2) Member of the Compensation and Stock Incentive Plan Committee
(3) Member of the Audit Committee
John E. Drury (Class III) has been Chief Executive Officer since 1994 and
Chairman of the Board since 1995. From 1992 to May 1994, Mr. Drury served as a
Managing Director of Sanders Morris Mundy Inc. ("SMMI"), a Houston based
investment banking firm. Mr. Drury served as President and Chief Operating
Officer of Browning-Ferris Industries, Inc. ("BFI") from 1982 to 1991, during
which time he had chief responsibility for worldwide operations.
Donald F. Moorehead, Jr. (Class II) has been Vice Chairman since 1995.
Prior to such time Mr. Moorehead served as Chairman of the Board and Chief
Development Officer since 1994. From October 1, 1990 to May 27, 1994, he was
also Chief Executive Officer. Mr. Moorehead was Chairman of the Board and Chief
Executive Officer of Mid-American Waste Systems Inc. ("Mid-American") from the
inception of Mid-American in December 1985 until August 1990 and continued as a
director until February 1991. From 1977 until 1984, Mr. Moorehead served in
various management positions with Waste Management Inc.
David Sutherland-Yoest (Class I) has been President since May 27, 1994.
Prior to joining USA Waste, he was President, Chief Executive Officer and a
director of Envirofil. He joined Envirofil in January 1993 and was elected a
director in March 1993. From September 1989 to June 1992, Mr. Sutherland-Yoest
served as
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President of Browning-Ferris Industries, Ltd. ("BFI Ltd."), the Canadian
subsidiary of BFI. From January through September 1989, Mr. Sutherland-Yoest
served as Vice-President, Corporate Development, for Laidlaw Waste Systems, Inc.
From 1987 to September 1989, Mr. Sutherland-Yoest was Laidlaw's Regional
Vice-President -- Atlantic Region, located in Columbus, Ohio. From 1981 to 1987,
Mr. Sutherland-Yoest served as District Manager -- Vancouver and District
Manager -- Calgary for BFI Ltd.
George L. Ball (Class III) has been nonexecutive Chairman of the Board and
a director of SMMI since May 1992. From September 1992 to January 1994, Mr. Ball
was a Senior Executive Vice President of Smith Barney Shearson Inc. From
September 1991 to September 1992, Mr. Ball was a consultant to J. & W. Seligman
& Co. Incorporated. In 1982, Mr. Ball was elected President and Chief Executive
Officer of Prudential-Bache Securities, Inc. and in 1986 was elected Chairman of
the Board, serving in such position until his resignation in 1991. He also
served as a member of the Executive Office of Prudential Insurance Company of
America. Prior to joining Prudential, Mr. Ball served as President of E.F.
Hutton Group, Inc. Mr. Ball is also a director of Investors Financial Group and
Leviathan Gas Pipeline Company, L.P. Mr. Ball is a trustee emeritus of Brown
University, a director of the National Symphony Orchestra, a trustee of the
Joint Council on Economic Education, and a director of the Jefferson Awards.
Peter J. Gibbons (Class I), has served as a director of USA Waste since
June 1995. He was affiliated in various capacities with the accounting firm of
Price Waterhouse from 1961 until his retirement therefrom as a partner in July
1993.
Richard J. Heckmann (Class I) is Chairman, President, and Chief Executive
Officer of United States Filter Corporation ("U.S. Filter"), a position he
assumed in July 1990. Prior to joining U.S. Filter, Mr. Heckmann was a Senior
Vice President -- Investments and Branch Manager of Prudential-Bache Securities
in Rancho Mirage, California.
William E. Moffett (Class II) retired in 1992 as Chairman of the Board and
Chief Executive Officer of Chatham Enterprises, Inc. (real estate development)
and Hazmed, Inc. (environmental services). In May 1985, he retired as President
of Gulf Oil Foundation and as Vice President -- Public Affairs of Gulf Oil
Corporation, having joined Gulf Oil Corporation in 1969 and served in a number
of managerial assignments for that company and its subsidiaries. Mr. Moffett
also serves as a director of Calvin Exploration Company, Inc.
Alexander W. Rangos (Class III) has been Vice Chairman of the Board of
Directors of USA Waste since December 1995. Prior thereto, he served as
Executive Vice President -- Corporate Development of USA Waste from June 1995
until December 1995. Prior to such time he served as President and Chief
Operating Officer of Chambers since January 1994. Prior thereto, he served with
Chambers as Executive Vice President -- Operations and Corporate Development
from 1990 to 1994, as Executive Vice President -- Corporate Development from
1985 to 1990, and as Manager of the Southern Region from 1984 to 1985. Mr.
Rangos is a son of John G. Rangos, Sr.
John G. Rangos, Sr. (Class II) served as Vice Chairman of the Board of
Directors of USA Waste from June 1995 until December 1995. Prior to such time,
Mr. Rangos served as Chairman and Chief Executive Officer of Chambers from
January 1994 to June 1995. Prior thereto, he served as President and Chief
Executive Officer of Chambers from 1973 to January 1994. Mr. Rangos is the
father of Alexander W. Rangos, a Vice Chairman of USA Waste. In connection with
the settlement of the Commission's investigation with respect to Chambers'
accounting method and the accuracy of its financial statements, on May 9, 1995,
the Commission instituted administrative proceedings against John G. Rangos, Sr.
and three other former officers of Chambers. The Commission found, inter alia,
that Mr. Rangos was a cause of Chambers' violations of the reporting, internal
controls and recordkeeping provisions of the Exchange Act. Mr. Rangos consented
to the issuance of a cease and desist order without admitting or denying the
Commission's findings.
The following persons will be elected to the USA Waste Board of Directors
at the Effective Time:
Kosti Shirvanian (Class I) founded Western in 1955 as a sole
proprietorship. He has served as Western's Chairman of the Board of
Directors, President and Chief Executive Officer since Western's
incorporation in 1964.
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<PAGE> 48
Savey Tufenkian (Class II) helped to establish Western in 1955 and has
served as the Secretary and Treasurer of Western since its incorporation in
1964. In 1988, she was elected as Executive Vice President, Secretary and
Treasurer.
BOARD OF DIRECTORS AFTER THE MERGER
Pursuant to the Merger Agreement, USA Waste has agreed to take such
corporate action as is necessary to cause its Board of Directors immediately
following the Effective Time to be expanded to include Mr. Kosti Shirvanian (who
will also be elected a Vice Chairman), Ms. Savey Tufenkian and a third member to
be determined at a later date. Mr. Shirvanian will become a Class I director
whose term will expire at the 1998 annual meeting; Ms. Tufenkian will become a
Class II director whose term will expire at the 1996 annual meeting; and the
third director will become a Class III director whose term will expire at the
1997 annual meeting. In addition, Mr. Shirvanian will be appointed to the
Executive Committee of the Board of Directors. USA Waste is a party to a
shareholders agreement relating to, among other things, the election of
directors and members of the Executive Committee. See "-- Chambers Merger."
MEETINGS, COMMITTEES AND COMPENSATION
The USA Waste Board of Directors held seven meetings in 1995. Each director
attended all of the Board of Directors' meetings in 1995 held during the period
in which they served. For 1995, directors who were not employed by USA Waste
received (i) an annual fee of $18,000 and (ii) USA Waste Common Stock valued at
$5,000. If the Director Plan is approved at the USA Waste Annual Meeting,
non-employee directors would receive an annual grant of options to purchase
10,000 shares of USA Waste Common Stock. Such directors would not receive any
cash compensation or stock bonus as in prior years. In addition, USA Waste
reimburses directors for their travel and out-of-pocket expenses incurred in
attending Board or committee meetings. See "Approval of the USA Waste Director
Plan."
The USA Waste Board of Directors has an Audit Committee, a Compensation and
Stock Incentive Plan Committee (the "Compensation Committee") and an Executive
Committee. The Audit Committee reviews external and internal audit plans and
activities, annual financial statements, and the system of internal financial
controls, and approves all significant fees for audit, audit-related and
non-audit services provided by independent auditors. The Audit Committee met
once in 1995. The Compensation Committee reviews and recommends compensation for
USA Waste officers and employees and recommends to the Board of Directors
changes in USA Waste's incentive compensation plans. The Compensation Committee
met twice in 1995. The Executive Committee may act for the Board of Directors
when action is required between Board meetings and may act on behalf of the
Board on all but major corporate matters. All actions taken by the Executive
Committee must be reported at the Board's next meeting. The Executive Committee
met three times in 1995. All of the directors attended all committee meetings of
the committees of which they are members.
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BENEFICIAL OWNERSHIP OF USA WASTE COMMON STOCK
The following table sets forth information as of February 1, 1996 with
respect to the beneficial ownership of USA Waste Common Stock by (1) each owner
of more than 5% of USA Waste Common Stock, (2) each director of USA Waste, (3)
certain executive officers of USA Waste, including the Chief Executive Officer
and USA Waste's four most highly compensated officers other than the Chief
Executive Officer who were serving as officers at December 31, 1995, and (4) all
executive officers and directors of USA Waste as a group. Except as otherwise
indicated below, each of the entities and persons named in the table has sole
voting and investment power with respect to all shares of Common Stock
beneficially owned.
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE PERCENTAGE
NAME BENEFICIAL OWNERSHIP BEFORE THE MERGER AFTER THE MERGER(1)
- ----------------------------------------- -------------------- ----------------- -------------------
<S> <C> <C> <C>
The Equitable Companies.................. 3,877,866(1) 6.3% 4.7%
Incorporated
787 Seventh Avenue
New York, New York 10019
John E. Drury............................ 1,282,614(2) 1.9% 1.5%
Donald F. Moorehead, Jr.................. 2,247,953(3) 3.4% 2.6%
David Sutherland-Yoest................... 394,336(4) * *
Earl E. DeFrates......................... 121,754(5) * *
Charles A. Wilcox........................ -- * *
George L. Ball........................... 72,931(6) * *
Peter J. Gibbons......................... 3,666(7) * *
Richard J. Heckmann...................... 10,439 * *
William E. Moffett....................... 5,832(8) * *
John G. Rangos, Sr....................... 7,733,912(9) 11.6% 8.8%
Alexander W. Rangos...................... 2,022,131(10) 3.0% 2.3%
All directors and executive officers as a
group (15 persons)..................... 13,954,084 20.9% 15.9%
</TABLE>
- ---------------
* Less than 1%
(1) According to a Schedule 13G on file with the Commission, includes 440,300
shares of USA Waste Common Stock held by The Equitable Life Assurance
Society of the United States, 3,437,266 shares held by Alliance Capital
Management L.P. and 300 shares which Donaldson, Lufkin & Jenrette
Securities Corporation shares the power to dispose of, according to a
Schedule 13G filed February 9, 1996 with respect to USA Waste Common Stock
by five French mutual insurance companies (AXA Assurances I.A.R.D.
Mutuelle, AXA Assurances Vie Mutuelle, Alpha Assurances I.A.R.D. Mutuelle,
Alpha Assurances Vie Mutuelle and Uni Europe Assurance Mutuelle) as a
group, AXA, The Equitable Companies Incorporated and their subsidiaries.
(2) Includes 222,500 shares issuable pursuant to options exercisable within 60
days and 5,176 shares owned by Mr. Drury's spouse.
(3) Includes 369,000 shares issuable pursuant to options exercisable within 60
days and 228,832 shares owned by Mr. Moorehead's spouse and children.
(4) Includes 121,352 shares issuable pursuant to options exercisable within 60
days and 2,000 shares owned by Mr. Sutherland-Yoest's daughter.
(5) Includes 89,000 shares issuable pursuant to options exercisable within 60
days.
(6) Includes 10,000 shares issuable pursuant to options exercisable within 60
days and 32,135 shares owned by Mr. Ball's spouse and an investment
partnership for her children and 3,600 shares owned by Mr. Ball's
stepdaughter.
(7) Includes 1,666 shares issuable pursuant to options exercisable within 60
days.
(8) Includes 5,832 shares issuable pursuant to options exercisable within 60
days.
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<PAGE> 50
(9) Mr. Rangos' address is 10700 Frankstown Road, Pittsburgh, Pennsylvania
15235.
(10) Includes 60,709 shares issuable pursuant to options exercisable within 60
days and 1,210,008 shares held by John Rangos Development Corporation, Inc.
CHAMBERS MERGER
On June 30, 1995, USA Waste completed the Chambers Merger, pursuant to
which stockholders of Chambers received shares of USA Waste Common Stock. As a
result of the Chambers Merger, former Chambers stockholders acquired
approximately 54.8% of the issued and outstanding USA Waste Common Stock.
Pursuant to the Chambers Merger, USA Waste, Donald F. Moorehead, Jr. and
John E. Drury entered into a shareholders agreement (the "Shareholders
Agreement") with John G. Rangos, Sr., John G. Rangos, Jr., Alexander W. Rangos
and John Rangos Development Corporation, Inc. (the "Rangos Shareholders") that,
among other things, provides certain rights to the Rangos Shareholders to name
or participate in the naming of certain members to the Board of Directors of USA
Waste and to name certain members of the Executive Committee of the Board of
Directors of USA Waste. In addition, the Shareholders Agreement requires the
affirmative vote of at least two-thirds of the members of the USA Waste Board of
Directors to take certain actions. The Shareholders Agreement remains in effect
until the aggregate number of shares of USA Waste Common Stock beneficially held
by the Rangos Shareholders and their affiliates is less than five percent of the
outstanding shares of USA Waste Common Stock. Prior to the execution of the
Merger Agreement, the Rangos Shareholders controlled approximately 21% of the
voting stock of USA Waste, and Donald F. Moorehead, Jr. and John E. Drury
collectively controlled approximately 5% of such stock.
Pursuant to the Shareholders Agreement, John G. Rangos, Sr. and Alexander
W. Rangos were appointed as directors of USA Waste. During the term of the
Shareholders Agreement, USA Waste, Messrs. Moorehead and Drury and the Rangos
Shareholders agree to use their best efforts to cause the Board of Directors to
include at all times (in addition to the two directors designated by the Rangos
Shareholders) four persons who are approved by at least four members of an
Executive Committee of the Board of Directors and none of whom is an officer or
employee of USA Waste. Pursuant to the Shareholders Agreement, an Executive
Committee of the Board of Directors was established consisting of five
directors, including the two directors designated by the Rangos Shareholders.
On December 18, 1995, in connection with the Merger, the Shareholders
Agreement was revised (the "Revised Shareholders Agreement"), effective upon the
Effective Time of the Merger, to provide that Mr. Kosti Shirvanian, Ms. Savey
Tufenkian and a third member to be determined at a later date, are to be elected
as directors of USA Waste, and Mr. Shirvanian is to be elected as a member of
the Executive Committee of the Board of Directors of USA Waste. Pursuant to the
Revised Shareholders Agreement, the Board of Directors of USA Waste is to be
increased to twelve members, including two persons designated by the Rangos
Shareholders, initially John G. Rangos, Sr. and Alexander W. Rangos. The Revised
Shareholders Agreement also provides that USA Waste, Messrs. Moorehead and Drury
and the Rangos Shareholders use their best efforts to cause the Board of
Directors to include at all times (in addition to the two directors designated
by the Rangos Shareholders) four persons who are approved by at least five
members of an Executive Committee of the Board of Directors and none of whom is
an officer or employee of USA Waste. Pursuant to the Shareholders Agreement, an
Executive Committee of the Board of Directors was established consisting of six
directors including the two directors designated by the Rangos Shareholders.
Also, in connection with the Chambers Merger, USA Waste entered into an
employment agreement with Alexander W. Rangos similar to the employment
agreements with Messrs. Moorehead and Drury, and into consulting and non-compete
agreements with each of John G. Rangos, Sr. and John G. Rangos, Jr. The
employment agreement with Alexander Rangos is for a five-year term at a base
salary of $275,000 per year. The consulting and non-compete agreements with each
of John G. Rangos, Sr. and John G. Rangos, Jr. provide for annual compensation
of $450,000 and $250,000, respectively, and are for a term of five years. In
connection with the execution of the Merger Agreement, USA Waste agreed to
accelerate payments under such employment and consulting agreements, and John G.
Rangos, Sr. resigned as Vice Chairman (but
43
<PAGE> 51
remains as a director of the Board), and Alexander W. Rangos became Vice
Chairman of the Board of Directors and resigned as an Executive Vice President
of USA Waste. On December 29, 1994, Chambers made unconditional promises to
contribute $3,000,000 to certain charitable organizations at the direction of
John G. Rangos, Sr. On December 18, 1995, USA Waste agreed that an additional
$2,000,000 would be funded in connection with charitable contributions pursuant
to such arrangements. In addition, USA Waste agreed to file a shelf registration
statement relating to 4,000,000 shares of USA Waste Common Stock held by John G.
Rangos, Sr., Alexander W. Rangos and John G. Rangos, Jr. and one of their
affiliates.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation. The following is a
report from the Compensation Committee of USA Waste describing the policies
pursuant to which compensation was paid to executive officers of USA Waste
during 1995.
Compensation Philosophy. It is USA Waste's mission to continually improve
the Company's position in the solid waste management industry, with a strong
focus on steadily improving earnings and increasing shareholder value. The
Compensation Committee believes USA Waste's compensation policies should support
USA Waste's mission. As outlined below, USA Waste's executive compensation
programs are designed to enable USA Waste to attract, retain and motivate the
high caliber of executives required in order to achieve its objective.
Compensation Policies Applicable to Executive Officers. Each executive
officer's annual compensation includes primarily three elements: (i) base
salary, which is reviewed annually; (ii) bonus; and (iii) incentive compensation
consisting of stock options. Adjustments to base salaries and the granting of
bonuses to USA Waste's executive officers are based on the executive's
individual contribution to the Company performance in that fiscal year. In
evaluating USA Waste's performance, the Compensation Committee considers such
items as return on equity, earnings per share improvements, results compared to
competitors, business acquisitions and new markets entered, the assimilation of
new acquisitions into USA Waste and progress made in projects that will benefit
USA Waste in the future. Stock options are generally granted annually as
additional compensation in an effort to link each executive officer's future
compensation to the long-term financial success of USA Waste, as measured by
stock performance. Options are priced at 100% of the stock market value on the
day of grant and typically vest in equal annual increments, beginning one year
from the date of grant, over the life of the option. The total number of options
awarded each executive is based on a subjective evaluation of the performance of
each executive under consideration without regard to the number of options held
by or previously granted to each executive.
Compensation Policy Applicable to the Chief Executive Officer. The
compensation policies applicable to Mr. Drury, Chief Executive Officer of USA
Waste, are the same as noted for other executive officers. The Compensation
Committee considers Mr. Drury's experience and knowledge of the solid waste
management industry to be important to USA Waste's continued growth and
prosperity. Mr. Drury became associated with USA Waste in May 1994 following the
acquisition of Envirofil. At the time of his employment with USA Waste, Mr.
Drury's annual base salary was set at $500,000 following negotiations between
Mr. Moorehead, on behalf of the USA Waste Board of Directors, and Mr. Drury, and
such salary was approved by the Board. In the fiscal year 1995, Mr. Drury
received a base salary of $500,000, a bonus of $200,000 and was granted options
to purchase 425,000 shares of USA Waste Common Stock. Mr. Drury's bonus and
stock option grant were based on a subjective evaluation which considered, in
part, USA Waste's financial performance for 1995. In setting Mr. Drury's
compensation, the Compensation Committee also made an overall assessment of Mr.
Drury's leadership in achieving the Company's long-term strategic and business
goals.
44
<PAGE> 52
Tax Considerations. Section 162(m) of the Internal Revenue Code imposes a
limitation on the deductibility of nonperformance-based compensation in excess
of $1 million paid to the chief executive officer and the next four highest paid
executive officers. In response to Section 162(m) and in an effort to provide
that compensation to such executive officers will be deductible for federal
income tax purposes, the Compensation Committee approved and recommended to the
Board of Directors of USA Waste the Compensation Plan and the amendment to the
1993 Plan providing for an annual limit on awards to be received by a
participant. The amendment to the 1993 Plan is intended to permit grants under
such plan to be considered "performance-based" for purposes of Section 162(m).
Bonuses under the Compensation Plan are also intended to qualify as
"performance-based compensation." If approved by the stockholders of USA Waste,
the Compensation Committee believes that the Compensation Plan and the amendment
to the 1993 Plan will allow USA Waste to manage its executive compensation
program to preserve federal income tax deductions.
Compensation Committee
George L. Ball
William E. Moffett
Peter J. Gibbons
Performance Graph. The following performance graph compares the performance
of USA Waste Common Stock to the New York Stock Exchange Composite Index and to
the Smith Barney Solid Waste Index ("Peer Group Index") for the period of five
years commencing December 31, 1990, and ending December 31, 1995. The graph
assumes that $100 was invested on December 31, 1990, in USA Waste Common Stock
and in each index and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SB SOLID NYSE
(FISCAL YEAR COVERED) USA WASTE WASTE INDEX COMPOSITE
<S> <C> <C> <C>
12/31/90 100 100 100
12/31/91 304 118 127
12/31/92 252 114 133
12/31/93 198 83 144
12/31/94 198 86 139
12/31/95 328 101 183
</TABLE>
45
<PAGE> 53
Summary Compensation Table. The following table sets forth information with
respect to persons serving as USA Waste's Chief Executive Officer during 1995
and the four most highly compensated executive officers other than the Chief
Executive Officer whose total annual salary and bonus for 1995 exceeded $100,000
("named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION STOCK
------------------------------ OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (SHARES) COMPENSATION(1)
- -------------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
John E. Drury................... 1995 $500,000 $200,000 425,000 $ 5,192
Chairman of the Board and 1994 290,217 -- 850,000 --
Chief Executive Officer(2)
Donald F. Moorehead, Jr. ....... 1995 300,000 130,000 180,000 4,154
Vice Chairman and Chief 1994 260,000 110,000 25,000 --
Development Officer 1993 220,000 100,000 25,000 --
David Sutherland-Yoest.......... 1995 300,000 65,000 180,000 4,154
President and Chief 1994 251,597 125,000 -- --
Operating Officer(3)
Charles A. Wilcox............... 1995 225,000 -- 180,000 3,115
Executive Vice President -- 1994 8,654 -- -- --
Operations(4)
Earl E. DeFrates................ 1995 187,500 75,000 95,000 2,769
Executive Vice President and 1994 155,000 70,000 25,000 --
Chief Financial Officer 1993 135,000 72,500 25,000 --
</TABLE>
- ---------------
(1) Reflects contributions by USA Waste under its 401(k) plan.
(2) Mr. Drury joined USA Waste in May 1994.
(3) Mr. Sutherland-Yoest joined USA Waste in May 1994.
(4) Mr. Wilcox joined USA Waste in December 1994.
46
<PAGE> 54
The following table sets forth information concerning the grant of stock
options during 1995 to the named executive officers:
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATE OF STOCK
SHARES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL 1995 (PER SHARE) DATE 5% 10%
- ------------------------- ---------- ------------ ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
John E. Drury............ 50,000 2.0% $ 10.38 03/15/05 326,260 826,700
375,000 15.2% $ 21.00 09/06/05 4,952,625 12,550,500
Donald F. Moorehead,
Jr. ................... 30,000 1.2% $ 10.38 03/15/05 195,720 496,020
150,000 6.1% $ 21.00 09/06/05 1,981,050 5,020,200
David Sutherland-Yoest... 30,000 1.2% $ 10.38 03/15/05 195,720 496,020
150,000 6.1% $ 21.00 09/06/05 1,981,050 5,020,200
Charles A. Wilcox........ 180,000 7.3% $ 10.38 03/15/05 1,174,320 2,976,120
Earl E. DeFrates......... 20,000 0.8% $ 10.38 03/15/05 130,480 330,680
75,000 3.0% $ 21.00 09/06/05 990,525 2,510,100
</TABLE>
- ---------------
(1) The potential realizable value of each grant of options assuming that the
market price of the underlying security appreciates in value from the date
of grant to the end of the option term at the rates of 5% and 10%
compounded annually.
The following table sets forth information concerning the exercise of stock
options during 1995 by USA Waste's named executive officers:
OPTION EXERCISES AND YEAR-END VALUE TABLE(1)
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
DECEMBER 31, 1995 OPTIONS AT
SHARES (SHARES) DECEMBER 31, 1995(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Drury............... -- -- 212,500 1,062,500 $1,593,750 $5,206,250
Donald F. Moorehead, Jr. ... -- -- 59,000 226,000 348,750 526,250
David Sutherland-Yoest...... 288,381 3,028,001 115,352 353,030 302,799 709,204
Charles A. Wilcox........... -- -- 0 180,000 0 1,530,000
Earl E. DeFrates............ 30,000 481,825 63,000 142,000 387,750 468,500
</TABLE>
- ---------------
(1) Includes exercise of warrants that were granted to such officers as
compensation.
(2) Computed based upon the difference between aggregate fair market value
based on NYSE closing price on December 29, 1995 (of $18.875 per share)
and the aggregate exercise price.
Employment Agreements. Messrs. Drury, Moorehead and Sutherland-Yoest are
each parties to employment agreements with USA Waste, which have continuously
renewing terms of five, five and three years, respectively until age 65 and
which provide for the payment of minimum annual base salaries and for the
participation by the employee in all USA Waste benefit plans and programs.
Messr. Wilcox is also party to an employment agreement with USA Waste which has
a continuously renewing three-year term. In addition,
47
<PAGE> 55
Mr. Drury's employment agreement provided that USA Waste would purchase his
residence in Houston, Texas for $1,375,000, the fair market value of such
residence at June 1, 1994.
The employment agreements include provisions governing compensation and
severance benefits upon termination of employment with USA Waste and upon
certain changes of control of USA Waste (which term specifically excludes the
Chambers Merger consummated in June 1995). The agreements may be terminated by
USA Waste other than for cause (as defined in the agreements) on the date five
years (three years in the case of Messrs. Sutherland-Yoest and Wilcox) after
such notice is given. During that ensuing period, the employee would continue
his employment on a part-time basis and be available to consult with USA Waste.
Generally, the employee's compensation while on part-time status would be 75% of
the average of the employee's compensation (including salary and bonus) for the
two highest of the three years prior to the employee going on part-time status.
In the event of a change of control of USA Waste, the employee may elect to
receive a lump sum payment equal to three times the employee's average
annualized base compensation includable in gross income over the five taxable
years preceding the tax year in which the change of control occurs if, following
such change in control, USA Waste seeks to terminate such officer without cause
or takes any action adverse to such officer without his or her consent with
respect to, among other things, his or her duties, level of compensation or
benefits. The election by the employee to take the change of control payment
would be in lieu of other benefits and rights under such employee's agreement
except, generally, amounts payable under pension, insurance, and similar plans,
reimbursement for legal and other advisory expenses and certain stock option and
indemnification rights.
Mr. DeFrates also currently has an employment agreement with USA Waste.
Pursuant to the terms of his agreement, Mr. DeFrates has agreed to serve as a
full-time employee of USA Waste for a period of three years (until September 26,
1997) with automatic three-year extensions thereafter unless the agreement is
terminated by either party. The agreement provides for a minimum annual salary
and for the participation by Mr. DeFrates in all USA Waste benefit programs. The
employment agreement includes provisions governing termination and changes in
control of USA Waste.
The employment agreement entered into by Mr. DeFrates provides that if Mr.
DeFrates voluntarily terminates his employment with USA Waste, USA Waste will
pay him severance pay equal to 70% of his base salary in effect at termination
for a period of three years. In addition, in the event there is a change in
control of USA Waste after which USA Waste seeks to terminate him without cause
or takes any action adverse to him without his consent with respect to, among
other things, his duties, level of compensation or benefits, USA Waste is
required to pay Mr. DeFrates a lump sum equal to three times the sum of his base
salary in effect at termination and the highest bonus he received in the
three-year period prior to termination.
In connection with the Merger Agreement, USA Waste has also entered into an
employment agreement with Mr. Kosti Shirvanian, Chairman and Chief Executive
Officer of Western, under which Mr. Shirvanian will receive an annual salary of
$500,000, a guaranteed annual bonus of $250,000 and a discretionary annual bonus
of up to $250,000, among other compensation. See "The Plan of Merger and Terms
of the Merger -- Other Agreements."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During 1995, Messrs. Ball, Moffett and Gibbons served on the Compensation
Committee of the Board of Directors. During 1995, no executive officer of USA
Waste served as (i) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served on the Compensation Committee, (ii) a director of
another entity, one of whose executive officers served on the Compensation
Committee or (iii) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served as a director of USA Waste.
48
<PAGE> 56
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1995, the Company exercised an option to purchase real estate
from Mr. John Rangos, Sr. and Mr. Michael J. Peretto, a former director of
Chambers, and certain members of his family. The real estate is adjacent to USA
Waste's Monroeville, Pennsylvania landfill. The option to purchase the real
estate was originally granted to Chambers pursuant to an agreement among the
parties dated July 8, 1993. The total consideration paid by USA Waste for the
real estate was $2,986,118, of which $2,103,585 was paid to Mr. Rangos and
$882,533 was paid to Mr. Peretto and members of his family.
In May 1993, USA Waste exercised an option to acquire 100,000 shares of
Class A Common Stock of Custom Disposal Services, Inc., an Arizona corporation
("Custom") from George O. Moorehead, the brother of Donald F. Moorehead, Jr. and
142,231 shares of Class B Non-Voting Stock of Custom from the former owner of
Cactus Disposal, Inc., an Arizona corporation ("Cactus") in exchange for 262,231
shares of USA Waste Common Stock.
In May 1993, Donald F. Moorehead, Jr. acquired an approximate 3% interest
in Empire Metals, Inc. ("Empire"), another company owned by the former owner of
Cactus. In May 1993, USA Waste entered into a management agreement with Empire
pursuant to which USA Waste agreed to provide certain administrative,
operational and managerial services to Empire and Empire agreed to pay USA Waste
a management fee of $70,000 per month. Such agreement expired on December 31,
1993.
In connection with the acquisition of Envirofil in May 1994, SMMI, in its
capacity as financial advisor to Envirofil received a fee of $850,000. In 1995,
USA Waste called for redemption its 8 1/2% Convertible Subordinated Debentures,
and in connection with such transaction, entered into a standby agreement with
SMMI, pursuant to which SMMI received $200,000 and reimbursement for its legal
fees. Prior to joining USA Waste, Mr. Drury was a Managing Director and
shareholder of SMMI and remains a director. Mr. Ball is Chairman of the Board
and a director of SMMI.
FILING OF REPORTS OF STOCK OWNERSHIP
Under the federal securities laws, USA Waste's directors, executive (and
certain other) officers and any person holding more than ten percent of USA
Waste Common Stock are required to report their ownership to USA Waste and the
Commission. Specific due dates for these reports have been established by
regulation and USA Waste is required to report in this Joint Proxy Statement and
Prospectus any failure to file by these dates during 1995. All of these filings
were satisfied by USA Waste's director's, officers and ten percent holders,
except that Mr. DeFrates and Mr. Heckmann each failed to file on a timely basis
one report concerning one transaction and Mr. Moorehead failed to file on a
timely basis four reports concerning four transactions.
As of March 8, 1996, USA Waste believes that all directors, officers and
ten percent holders are current in their filings. In making these statements,
USA Waste has relied on the written representations of its directors, officers
and ten percent holders and copies of reports that they have filed with the
Commission.
APPROVAL OF THE USA WASTE DIRECTOR PLAN
On March 6, 1996, USA Waste's Board of Directors adopted, subject to
stockholder approval, the Director Plan. The purpose of the Director Plan is to
benefit USA Waste and its subsidiaries through offering its directors who are
not officers, full-time employees or consultants of USA Waste or any of its
subsidiaries an opportunity to become holders of USA Waste Common Stock, thereby
giving them a stake in the growth and prosperity of USA Waste, in order to
enable them to represent the viewpoint of other stockholders of USA Waste more
effectively and to encourage them to continue serving as directors of USA Waste.
The Director Plan provides for the issuance of options to purchase up to an
aggregate of 400,000 shares of USA Waste Common Stock to eligible directors (as
described below).
The following is a brief summary of the proposed Director Plan. The
complete text is attached as Appendix E and reference is made to such Appendix
for a complete statement of the provisions of this plan.
49
<PAGE> 57
On the first business day of January 1996 and the first business day of
January of each year thereafter, an option to purchase a total of 10,000 shares
of USA Waste Common Stock will be automatically granted to each eligible
director who is still serving as a director (whether or not such director's term
has been continuous). Eligible directors are those directors who are not
officers, full-time employees or consultants of USA Waste or any of its
subsidiaries.
The exercise price of options granted under the Director Plan will be the
closing sale price of USA Waste Common Stock on the NYSE on the date on which
the option is granted. Each option shall be for a term of ten years and shall
vest at the rate of 20% on each of the five subsequent anniversaries of the date
of grant. The purchase price for shares to be purchased pursuant to options may
be paid in cash, by check, by promissory note, by shares of USA Waste Common
Stock or by a combination of these methods of payment.
If an optionee ceases to be a director of USA Waste for any reason other
than death, permanent disability, resignation or retirement, such optionee's
option shall expire and all rights to purchase shares pursuant thereto shall
terminate immediately. In the event of death, disability, resignation or
retirement, the option may be exercised in full by the optionee, his heirs,
legatees or legal representatives within three months after the date of such
event.
Upon a change of control (as defined in the Director Plan) of USA Waste,
all options granted under the Director Plan will become immediately exercisable.
The Director Plan is effective as of January 1, 1996, pending approval and
adoption by the USA Waste stockholders and will expire on January 1, 2006.
Federal Income Tax Consequences. All options granted under the Director
Plan are nonstatutory options not entitled to special tax treatment under
Section 422 of the Code.
In general, an optionee will not recognize any taxable income at the time
he is granted a stock option under the Director Plan. Except as described below
under "Election Applicable to Officers and Directors," upon the exercise of an
option, the optionee will be treated as receiving compensation (ordinary) income
in the year of exercise in an amount equal to the excess of the fair market
value of the shares at the time of exercise over the option price paid for those
shares and USA Waste will be entitled to a deduction, provided the applicable
withholding requirements are satisfied, for a corresponding amount to the extent
such amount is an ordinary and necessary expense and satisfies the test of
reasonable compensation. Different rules apply to options which have a "readily
ascertainable fair market value" as that phrase is defined in regulations
promulgated under Section 83 of the Code.
Upon a taxable disposition of the shares acquired by an optionee pursuant
to the exercise of an option, any amount received by the optionee in excess of
the sum of (i) the option price of the shares as of the date of exercise and
(ii) the amount includible in income with respect to such option, if any (such
sum being his "basis" in the shares), will in general be treated as short-term
or long-term capital gain, depending upon the holding period of the shares. If,
upon disposition the optionee receives less than his basis in the shares, the
loss will in general be treated as short-term or long-term capital loss,
depending upon the holding period of the shares. To qualify for long-term
capital gain or loss treatment, the shares must have been held as a capital
asset on the date of disposition and held for more than one year.
Section 162(m) of the Code places a $1 million cap on the deductible
compensation that can be paid to certain executives of publicly traded
corporations. Options which qualify as "performance based" compensation under
Section 162(m)(4)(C) of the Code are exempt from the cap and do not count toward
the $1 million limit.
Election Applicable to USA Waste Insiders. If an optionee who is subject to
liability to USA Waste under Section 16(b) of the Exchange Act (a "Section 16(b)
Person") receives shares of USA Waste Common Stock upon the exercise of an
option the sale of which could subject the optionee to suit under Section 16(b)
of the Exchange Act, recognition of the compensation attributable to such
exercise is postponed until (i) six months after the date of the grant of such
option or (ii) the date the Section 16(b) Person ceases to be subject to Section
16(b), whichever occurs first (the "Section 16(b) Date"). One effect of this
postponement is to measure the amount of the optionee's compensation (ordinary)
income by reference to the fair market value of such shares on the Section 16(b)
Date (rather than at the earlier date of exercise of the option). Similarly,
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the fair market value of such shares at that time will become the optionee's
basis in the shares for purposes of computing gain or loss upon a subsequent
disposition of the shares, and the optionee's holding period for the shares will
start from that time. However, an optionee may elect with respect to such
shares, pursuant to Section 83(b) of the Code, to recognize the compensation
attributable to the exercise of an option at the time of such exercise, in which
case his tax treatment will be as described above. A Section 83(b) election must
be made not later than 30 days after the date such shares are transferred to the
optionee.
Parachute Payment Sanctions. Certain provisions in an option agreement may
afford an optionee special protections or payments which are contingent on a
change in the ownership or effective control of USA Waste or in the ownership of
substantially all of USA Waste's assets. To the extent triggered by the
occurrence of any such event, these special protections or payments may
constitute "parachute payments," which, when aggregated with other parachute
payments received by the optionee, could result in the optionee's being treated
as receiving "excess parachute payments" within the meaning of Section 280G of
the Code. USA Waste will not be allowed a deduction for any such "excess
parachute payment," and the recipient of the payment will be subject to a
nondeductible 20% excise tax upon such payment in addition to income tax
otherwise owed with respect to such payment.
THE FOREGOING DOES NOT CONSTITUTE A DEFINITIVE STATEMENT OF THE FEDERAL
INCOME TAX EFFECTS OF OPTIONS UNDER THE USA WASTE DIRECTOR PLAN, AND EACH
PARTICIPANT IN THE DIRECTOR PLAN SHOULD CONSULT WITH HIS OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX EFFECTS OF THE PROVISIONS DISCUSSED HEREIN.
Recommendation of the Board of Directors. The USA Waste Board of Directors
recommends a vote FOR approval of the Director Plan.
Vote Required for Approval. Approval of the Director Plan requires the
affirmative vote of a majority of the shares of USA Waste Common Stock present,
in person or by proxy, at the USA Waste Annual Meeting and entitled to vote.
APPROVAL OF THE USA WASTE COMPENSATION PLAN
The purpose of the USA Waste Services, Inc. Compensation Plan is to advance
the interests of USA Waste and its subsidiaries by providing for annual bonuses,
payable in cash, for key employees who are designated as participants in the
plan so as to attract and retain such individuals, make their compensation
competitive with other opportunities and provide them with an incentive to
strive to achieve USA Waste's financial and other business objectives. Every
employee of USA Waste or any of its subsidiaries is eligible to be considered
for the grant of awards under the Compensation Plan.
The following is a brief summary of the proposed Compensation Plan. The
complete text is attached as Appendix F and reference is made to such Appendix
for a complete statement of the provisions of this plan.
The Compensation Plan will be administered by USA Waste's Compensation and
Stock Incentive Plan Committee of the Board of Directors with respect to
participation by executive officers ("Key Participants") of USA Waste. With
respect to those individuals who participate in the plan and who are not
executive officers ("non-Key Participants") of USA Waste, a committee appointed
by USA Waste's Chief Executive Officer shall administer the plan. USA Waste's
Compensation and Stock Incentive Plan Committee and the appointed committee
(either or both being referred to herein as the "Committee"), as the case may
be, will have full and final authority to select at the beginning of the
calendar year (the "Plan Year") the participants to whom awards will be granted
thereunder, to grant such awards, and to determine the terms, conditions and
amounts of such awards.
Each Plan Year, the Committee will establish a "target bonus" for each
participant equal to a percentage of such participant's annual base salary as of
the last day of such Plan Year, and the maximum amount of a target bonus that
may be awarded to a participant for a Plan Year shall be 200% thereof.
Participants' bonuses will be determined on the basis of the degree of
achievement of performance goals, which goals will be established by the
Committee in writing, based on corporate objectives determined by the Board, and
which will be stated in terms of the attainment of specified levels of or
percentage changes in any one or more of
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various quantitative financial and/or business measurements identified in the
Compensation Plan. In addition to determining the performance goals applicable
to each participant during each Plan Year, the Committee will also establish a
formula or matrix prescribing the extent to which such participant's target
bonus shall be earned based upon the degree of achievement of such performance
goal or goals. With respect to non-Key Participants, the Committee may also
designate any other factor or factors to serve as performance goals. The
Committee may, in its sole discretion, award or increase the amount of bonuses
payable to one or more non-Key Participants even though not earned in accordance
with the applicable performance goals or may decrease the amount of bonuses
payable to one or more participants even though earned in accordance with
applicable performance goals.
With respect to participants whose total compensation for any Plan Year
exceeds the amount specified by Section 162(m) of the Code, if any portion of
such participant's compensation would otherwise be non-deductible by USA Waste
pursuant to such section, the maximum bonus award payable to such participant
for any Plan Year will be $2,500,000. In addition, such participant's target
bonus will be based solely upon achievement of one or more of the performance
goals specified by the plan, and no bonus will be payable to such participant
except upon written certification by the Committee that the performance goals
have been satisfied to a particular extent and that any other terms and
conditions precedent to payment of a bonus have been satisfied.
Upon a change in control (as defined in the Director Plan) of USA Waste,
the Plan Year shall end as of the date of such change in control, and the
Committee will calculate and pay any bonus awards payable to participants as
promptly as practicable. In calculating the bonuses due, the Committee may take
into consideration such factors as the shortened Plan Year and any other
equitable adjustments to the formulae or matrices established by the Committee.
The Compensation Plan became effective upon its adoption by USA Waste's
Board of Directors in March 1996, but no bonuses will be awarded under the plan
until it has been approved by USA Waste's stockholders. The Compensation Plan is
of perpetual duration, but the Board of Directors may, in its sole discretion,
terminate or amend the plan from time to time. However, no such termination or
amendment may alter a participant's right to receive a distribution as awarded
but unpaid to such participant, as to which the plan will remain in effect
following its termination until all such amounts have been paid.
The amounts that will be awarded to each participant under the Compensation
Plan depend upon the performance goals set for each participant and the
participant's achievement of those goals. Accordingly, it is not possible to
determine at the present time the amounts that will be awarded to each
participant pursuant to the Compensation Plan, nor is it possible to determine
the amounts that would have been awarded to each participant had the
Compensation Plan been in effect during the past year.
Recommendation of the Board of Directors. The USA Waste Board of Directors
recommends a vote FOR approval of the Compensation Plan.
Vote Required for Approval. Approval of the Compensation Plan requires the
affirmative vote of a majority of the shares of USA Waste Common Stock present,
in person or by proxy, at the USA Waste Annual Meeting and entitled to vote.
AMENDMENT OF THE USA WASTE 1993 STOCK INCENTIVE PLAN
USA Waste has for many years utilized stock incentives as part of its
overall compensation program. The Board of Directors of USA Waste believes stock
options and stock-based incentives play an important role in attracting and
retaining the services of outstanding personnel and in encouraging such
employees to have a greater personal financial investment in USA Waste.
The USA Waste shareholders approved the 1993 Plan at the 1993 annual
meeting. In 1995, in connection with the Chambers Merger the stockholders of USA
Waste approved an amendment to the 1993 Plan to increase shares available for
issuance under the 1993 Plan from 1,000,000 to 4,000,000. Such amendment was
necessary to assure that an adequate number of shares of USA Waste Common Stock
were available for
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former option holders of Chambers whose options converted into options to
purchase USA Waste Common Stock at the effective time of the Chambers Merger.
The 1993 Plan permits the granting, either alone or in combination, of
"nonqualified" stock options that do not qualify for beneficial treatment under
the Code, incentive stock options under Section 422A of the Code, reload
options, alternate appreciation rights, limited rights and stock bonuses. Grants
may be made to non-employee directors, officers and other employees of USA Waste
who are responsible for or contribute to the management, growth, success and
profitability of USA Waste and who are designated by the committee that
administers the 1993 Plan. If the Director Plan is approved, the provisions in
the 1993 Plan relating to stock grants to non-employee directors of USA Waste
will be deleted.
Stock options permit the recipient to purchase shares of USA Waste Common
Stock at a fixed price, determined on the date of grant, regardless of the fair
market value on the date of exercise. The holder of an alternative appreciation
right is entitled to receive the excess of the fair market value on the date of
exercise over the grant price of the right. Stock bonuses may provide the
recipient all of the rights of a USA Waste shareholder, including the right to
vote the shares and receive dividends; however, the stock may not be transferred
by the recipient until certain restrictions (as determined by the committee)
lapse.
The Board of Directors of USA Waste desires to amend the 1993 Plan to (i)
provide an annual limit on the number of shares of USA Waste Common Stock
underlying awards that may be received by a participant in the 1993 Plan of
1,500,000 shares and (ii) increase the number of shares of USA Waste Common
Stock authorized for granting of awards under the 1993 Plan from 4,000,000 to
6,500,000. The annual limit is intended to provide that grants under the 1993
Plan qualify as "performance-based" and will therefore be deductible under
Section 162(m) of the Code. The Board of Directors of USA Waste believes the
increase in shares available under the Plan is necessary to assure that an
adequate number of shares of USA Waste Common Stock will be available for future
award grants in order to provide appropriate incentives to employees of USA
Waste and in order to permit the grant of options pursuant to an employment
agreement with Western's current Chief Executive Officer. As of December 31,
1995, options to acquire and stock bonuses covering 2,452,500 shares of USA
Waste Common Stock had been granted under the 1993 Plan, and 1,574,500 shares
remained available for future awards. As of the USA Waste Record Date, USA Waste
had approximately 65.9 million shares outstanding and if the Merger is approved,
will have approximately 87.6 million shares outstanding.
Recommendation of the Board of Directors. The USA Waste Board of Directors
recommends that USA Waste stockholders vote FOR the amendment to the 1993 Plan
to (i) provide an annual limit on awards that may be received by a participant
in the 1993 Plan of 1,500,000 shares and (ii) increase the number of shares of
USA Waste Common Stock that may be issued under the 1993 Plan from 4,000,000 to
6,500,000.
Vote Required for Approval. The affirmative vote of the holders of a
majority of the shares of USA Waste Common Stock present or represented by proxy
and entitled to vote at the USA Waste Annual Meeting is required for approval of
the proposed amendment to the 1993 Plan.
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AMENDMENT TO USA WASTE RESTATED CERTIFICATE OF INCORPORATION
The USA Waste Board of Directors proposes that the USA Waste Restated
Certificate of Incorporation be amended to delete Article Thirteenth in its
entirety.
Article Thirteenth provides as follows:
"Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this
Corporation under the provision of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case
may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of
this Corporation, as the case may be, and also on this Corporation."
This provision, authorized and implemented by Sections 102(b)(2) and 302 of
the DGCL, provides that any creditor or stockholder of USA Waste, or its
receiver, may apply to the Court of Chancery of Delaware for an order directing
a meeting of the creditors or stockholders of USA Waste to consider any proposed
compromise between such creditors and/or stockholders and USA Waste. At any such
meeting, if a majority of creditors representing three-fourths in value of the
creditors or class of creditors and/or three-fourths of the stockholders or
class of stockholders agree to any compromise or arrangement or reorganization,
such will be binding on all the creditors or class of creditors and/or on all
the stockholders of USA Waste.
Section 302(b) of the DGCL provides the Court of Chancery of Delaware with
the power to enforce or administer any compromise or arrangement made pursuant
to the optional charter provision contained in Section 102(b)(2). The Court may
restrain all actions and proceedings against any corporation which is attempting
to comply with the compromise provisions and may appoint a temporary receiver
and grant such receiver those powers which it deems proper.
Certain lenders to USA Waste have requested that this provision be deleted
from the Restated Certificate of Incorporation. The potential effects of
deleting Article Thirteenth of USA Waste's Certificate of Incorporation are
uncertain. While the ability of USA Waste's stockholders and creditors to bind
one another to compromises or arrangements by means of this particular mechanism
will be eliminated, USA Waste believes that deletion of Article Thirteenth will
provide USA Waste with additional flexibility in seeking and obtaining
financing.
Recommendation of the Board of Directors. The Board of Directors of USA
Waste recommends that the stockholders of USA Waste vote FOR the amendment.
Vote Required for Approval. Approval of the amendment to the USA Waste
Restated Certificate of Incorporation requires the affirmative vote of a
majority of the outstanding shares of USA Waste Common Stock. If approved by the
stockholders of USA Waste, it is anticipated that this amendment to the
Certificate of Incorporation will become effective as soon as practicable after
the USA Waste Annual Meeting.
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RATIFICATION OF APPOINTMENT OF AUDITORS
The firm of Coopers & Lybrand L.L.P. was engaged to audit USA Waste's 1995
financial statements. The Board of Directors of USA Waste proposes to continue
the services of this firm as certified public accountants to audit USA Waste's
financial statements for 1996. If the appointment of Coopers & Lybrand L.L.P. is
ratified by the stockholders, the firm will audit the financial statements of
USA Waste and its subsidiaries for the current fiscal year and perform other
appropriate accounting services as requested. Coopers & Lybrand L.L.P. has
advised USA Waste that no member of the firm has any financial interest, direct
or indirect, in USA Waste or any of its subsidiaries in any capacity other than
that of auditors. Representatives of Coopers & Lybrand L.L.P. will be present at
the USA Waste Annual Meeting and available to answer appropriate questions from
stockholders.
Recommendation of the Board of Directors. The USA Waste Board of Directors
recommends that USA Waste stockholders vote FOR ratification of the appointment
of Coopers & Lybrand L.L.P. as certified public accountants to audit USA Waste's
financial statements for fiscal 1996.
Vote Required for Approval. The affirmative vote of a majority of the
outstanding shares of USA Waste Common Stock present or represented by proxy and
entitled to vote at the USA Waste Annual Meeting is required for the
ratification of the appointment of Coopers & Lybrand L.L.P. as certified public
accountants to audit USA Waste's financial statements for fiscal 1996.
THE PLAN OF MERGER AND TERMS OF THE MERGER
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at the time of the filing of a certified
copy of the Merger Agreement with the Secretary of State of California. It is
anticipated that if the Merger Agreement is approved at the USA Waste Annual
Meeting and the Western Special Meeting and all other conditions to the Merger
have been satisfied or waived, the Effective Time will occur within five
business days after the date on which the last of the conditions to closing
contained in the Merger Agreement is fulfilled or waived or at such other time
as USA Waste and Western shall agree. See "-- Conditions to the Merger."
MANNER AND BASIS FOR CONVERTING SHARES
At the Effective Time, each outstanding share of Western Common Stock
(other than shares owned by USA Waste) will be converted into 1.50 shares of USA
Waste Common Stock.
Promptly after the Effective Time, USA Waste will cause the Exchange Agent
to mail to each record holder of Western Common Stock immediately prior to the
Effective Time, a letter of transmittal and other information advising such
holder of the consummation of the Merger and instructions for use in effecting
the surrender of Western Common Stock certificates in exchange for USA Waste
Common Stock certificates and cash in lieu of fractional shares. Letters of
transmittal will also be available following the Effective Time at the offices
of the Exchange Agent. After the Effective Time, there will be no further
registration of transfers on the stock transfer books of Western of shares of
Western Common Stock that were outstanding immediately prior to the Effective
Time. SHARE CERTIFICATES SHOULD NOT BE SURRENDERED FOR EXCHANGE BY SHAREHOLDERS
OF WESTERN PRIOR TO APPROVAL OF THE MERGER AND THE RECEIPT OF A LETTER OF
TRANSMITTAL.
No fractional shares of USA Waste Common Stock will be issued in the
Merger. Each shareholder of Western otherwise entitled to a fractional share
will receive an amount in cash equal to the value of such fractional share based
upon the average closing sale price of USA Waste Common Stock on the NYSE during
the 10 trading days preceding the Effective Time. No interest will be paid on
such amount, and all shares of Western Common Stock held by a record holder will
be aggregated for purposes of computing the number of shares of USA Waste Common
Stock to be issued in the Merger.
Until such time as a holder of Western Common Stock surrenders his
outstanding stock certificate to the Exchange Agent, together with the letter of
transmittal, the shares of Western Common Stock represented thereby will be
deemed from and after the Effective Time, for all corporate purposes, to
evidence the
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ownership of the number of full shares of USA Waste Common Stock into which such
shares shall have been converted. Unless and until such outstanding certificates
are surrendered, no dividends payable to the holders of USA Waste Common Stock,
as of any time on and after the Effective Time, will be paid to the holders of
such outstanding certificates. Upon surrender of the certificates previously
representing shares of Western Common Stock, the holder thereof will receive
certificates representing the whole number of shares of USA Waste Common Stock
to which he or she is entitled, cash in lieu of fractional shares and the amount
of any dividends payable which theretofore became payable to holders of USA
Waste Common Stock on or after the Effective Time with respect to such shares,
without interest thereon.
WESTERN OPTIONS
The Merger Agreement provides that USA Waste and Western will take such
actions as may be necessary to cause each unexpired and unexercised Western
Option to be automatically exchanged at the Effective Time into an option to
purchase a number of shares of USA Waste Common Stock equal to the number of
shares of Western Common Stock that could have been purchased under the Western
Option multiplied by the Exchange Ratio, at a price per share of USA Waste
Common Stock equal to the option exercise price determined pursuant to the
Western Option divided by the Exchange Ratio, and subject to the same terms and
conditions as the Western Option. USA Waste will assume all of Western's
obligations with respect to the Western Options as so amended and shall, from
and after the Effective Time, make available for issuance upon exercise of any
such options all shares of USA Waste Common Stock covered thereby.
CONDITIONS TO THE MERGER
The respective obligations of USA Waste and Western to consummate the
Merger are subject to the satisfaction of the following conditions: (a) the
Merger Agreement and the Merger shall have been approved and adopted by the
requisite vote of the shareholders of USA Waste and the stockholders of Western
under applicable law and applicable listing requirements; (b) the USA Waste
Common Stock issuable in the Merger shall have been authorized for listing on
the NYSE subject to official notice of issuance; (c) the waiting period
applicable to consummation of the Merger under the HSR Act shall have expired or
been terminated; (d) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect and no
proceeding for that purpose shall have been instituted by the Commission or any
state regulatory authorities; (e) no preliminary or permanent injunction or
other order or decree by any federal or state court which prevents the
consummation of the Merger shall have been issued and remain in effect (each
party agreeing to use its reasonable efforts to have any injunction, order or
decree lifted); (f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the consummation of
the Merger or make the consummation of the Merger illegal; (g) all governmental
waivers, consents, orders and approvals legally required for the consummation of
the Merger and the transactions contemplated hereby, and all consents from
lenders required to consummate the Merger, shall have been obtained and be in
effect at the Effective Time; (h) Coopers & Lybrand L.L.P., certified public
accountants for USA Waste, shall have delivered a letter, dated the Closing Date
(as hereinafter defined), addressed to USA Waste, in form and substance
satisfactory to USA Waste, as to certain matters relating to "pooling of
interests" accounting treatment of the Merger; and (i) Ernst & Young LLP,
certified public accountants for Western, shall have delivered a letter, dated
the Closing Date addressed to Western, in form and substance reasonably
satisfactory to Western, as to certain matters relating to "pooling of
interests" accounting treatment of the Merger.
The obligation of Western to effect the Merger is further subject to the
fulfillment of the following additional conditions: (a) USA Waste and
Acquisition shall have performed in all material respects their agreements in
the Merger Agreement required to be performed on or prior to the date on which
the transactions contemplated by the Merger Agreement are consummated (the
"Closing Date"), and the representations and warranties of USA Waste and
Acquisition contained in the Merger Agreement shall be true and correct in all
material respects on and as of the date made and on and as of the Closing Date
as if made at and as of such date, and Western shall have received a certificate
of the Chairman of the Board and
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Chief Executive Officer, the President or a Vice President of USA Waste and of
the President and Chief Executive Officer or a Vice President of Acquisition to
that effect; (b) Western shall have received an opinion of its legal counsel,
Sheppard, Mullin, Richter & Hampton LLP, in form and substance reasonably
satisfactory to Western, dated the Closing Date, to the effect that Western and
the holders of Western Common Stock (except to the extent any shareholders
receive cash in lieu of fractional shares) will recognize no gain or loss for
federal income tax purposes as a result of consummation of the Merger; (c) since
December 18, 1995, there shall have been no changes that constitute, and no
event or events shall have occurred which have resulted in or constitute, a
material adverse change in the business, operations, properties, assets,
condition (financial or other) or results of operations of USA Waste and its
subsidiaries, taken as a whole; and (d) all governmental waivers, consents,
orders and approvals legally required for the consummation of the Merger and the
transactions contemplated by the Merger Agreement shall have been obtained and
be in effect at the Closing Date, and no governmental authority shall have
promulgated any statute, rule or regulation which, when taken together with all
promulgations, would materially impair the value to USA Waste of the Merger.
The obligation of USA Waste and Acquisition to effect the Merger is further
subject to the fulfillment of the following additional conditions: (a) Western
shall have performed in all material respects its agreements in the Merger
Agreement required to be performed on or prior to the Closing Date, and the
representations and warranties of Western contained in the Merger Agreement
shall be true and correct in all material respects on and as of the date made
and on and as of the Closing Date as if made at and as of such date, and USA
Waste shall have received a certificate of the President and Chief Executive
Officer or of a Vice President of Western to that effect; (b) USA Waste shall
have received an opinion of its counsel, Andrews & Kurth L.L.P., in form and
substance satisfactory to USA Waste, dated the Closing Date, to the effect that
USA Waste and Acquisition will recognize no gain or loss for federal income tax
purposes as a result of consummation of the Merger; (c) USA Waste shall have
received from each principal executive officer, each director, and each other
person who is an "affiliate," as that term is defined in paragraphs (c) and (d)
of Rule 145 under the Securities Act, of USA Waste or Western, as the case may
be, written agreements to the effect that such person will not offer to sell,
sell or otherwise dispose of any shares of USA Waste Common Stock issued in the
Merger, except, in each case, pursuant to an effective registration statement or
in compliance with Rule 145 or in a transaction which, in the opinion of legal
counsel satisfactory to USA Waste, is exempt from the registration requirements
of the Securities Act and, in any case, until after the results covering 30 days
of post-Merger combined operations of USA Waste and Western have been filed with
the Commission, sent to stockholders of USA Waste or otherwise publicly issued;
(d) since December 18, 1995, there shall have been no changes that constitute,
and no event or events shall have occurred which have resulted in or constitute,
a material adverse change in the business, operations, properties, assets,
condition (financial or other) or results of operations of Western and its
subsidiaries, taken as a whole; and (e) all governmental waivers, consents,
orders and approvals legally required for the consummation of the Merger and the
transactions contemplated by the Merger Agreement shall have been obtained and
be in effect at the Closing Date, and no governmental authority shall have
promulgated any statute, rule or regulation which, when taken together with all
promulgations, would materially impair the value to USA Waste of the Merger.
Neither USA Waste nor Acquisition has any obligation to consummate the
Merger if any condition to its obligation to consummate the Merger is not
satisfied on or prior to the Closing Date of the Merger, and Western has no
obligation to consummate the Merger if any condition to its obligation to
consummate the Merger is not satisfied on or prior to the Closing Date of the
Merger. However, termination of the Merger Agreement will not relieve either
party from liability for any willful or intentional breach of the Merger
Agreement. At any time prior to the Effective Time, USA Waste, Acquisition or
Western may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained in the Merger Agreement.
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REPRESENTATIONS AND WARRANTIES OF USA WASTE AND WESTERN
In the Merger Agreement, USA Waste and Western have made various
representations and warranties relating to, among other things, their respective
businesses and financial condition, the accuracy of their various filings with
the Commission, the satisfaction of certain legal requirements for the Merger
and the absence of undisclosed liabilities or material litigation matters. The
representations and warranties of each of the parties to the Merger Agreement
will expire upon consummation of the Merger.
CONDUCT OF THE BUSINESS OF USA WASTE AND WESTERN PRIOR TO THE MERGER
Pursuant to the Merger Agreement, Western has agreed that, prior to the
Effective Time, and except as otherwise agreed to in writing by USA Waste and
except as set forth in the Merger Agreement, it shall, and shall cause each of
its subsidiaries to: (a) conduct their respective businesses in the ordinary and
usual course of business and consistent with past practice; (b) not (i) amend or
propose to amend their respective charter or bylaws, (ii) split, combine or
reclassify their outstanding capital stock or (iii) declare, set aside or pay
any dividend or distribution payable in cash, stock, property or otherwise,
except for the payment of dividends or distributions by a wholly owned
subsidiary of Western; (c) not issue, sell, pledge or dispose of, or agree to
issue, sell, pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of, their capital stock of
any class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that (i) Western may issue shares upon conversion of
convertible securities and exercise of options outstanding on the date of the
Merger Agreement and (ii) Western may issue shares and warrants to acquire
shares pursuant to (j) below; (d) not (i) incur or become contingently liable
with respect to any indebtedness for borrowed money other than (A) borrowings in
the ordinary course of business, (B) borrowings to refinance existing
indebtedness on terms which are reasonably acceptable to USA Waste or (C) except
as set forth in (j) below, (ii) redeem, purchase, acquire or offer to purchase
or acquire any shares of their capital stock, or any options, warrants or rights
to acquire any of their capital stock, or any security convertible into or
exchangeable for their capital stock, (iii) take any action which would
jeopardize the treatment of the Merger as a pooling of interests under
Accounting Principles Board Opinion No. 16, (iv) take or fail to take any action
which action or failure to take action would cause Western or its stockholders
(except to the extent that any stockholders receive cash in lieu of fractional
shares) to recognize any gain or loss for federal income tax purposes as a
result of the consummation of the Merger, (v) make any acquisition of any assets
or businesses other than expenditures for fixed or capital assets in the
ordinary course of business, (vi) sell, pledge, dispose of or encumber any
assets or businesses other than sales in the ordinary course of business or
(vii) enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing; (e) use all reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services of
their respective present officers and key employees, preserve the goodwill and
business relationships with customers and others having business relationships
with them and not engage in any action, directly or indirectly, with the intent
to adversely impact the transaction contemplated by the Merger Agreement; (f)
subject to restrictions imposed by applicable law, confer on a regular and
frequent basis with one or more representatives of USA Waste to report material
operational matters and the general status of ongoing operations; (g) not enter
into or amend any employment, severance, special pay arrangement with respect to
termination of employment or other similar arrangements or agreements with any
directors, officers or key employees, except in the ordinary course and
consistent with past practice; provided, however, that Western and its
subsidiaries shall in no event enter into any written employment agreement; (h)
not adopt, enter into or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, health care, employment or
other employee benefit plan, agreement, trust, fund or arrangement for the
benefit or welfare of any employee or retiree, except as required to comply with
changes in applicable law; (i) use commercially reasonable efforts to maintain
with financially responsible insurance companies insurance on their tangible
assets and their businesses in such amounts and against such risks and losses as
are consistent with past practice; and (j) notwithstanding the foregoing,
Western shall not be prohibited from acquiring any assets or businesses or
issuing capital stock (or warrants or options to acquire capital stock) or
incurring or assuming indebtedness in connection with such acquisitions so long
as (x) the aggregate value of consideration paid or payable in connection with
all such acquisitions, including any funded indebtedness assumed and any Western
Common Stock issued or issuable, does not exceed $40 million, (y) the aggregate
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value of consideration paid or payable for any one such acquisition does not
exceed $10 million, including any indebtedness assumed and any Western Common
Stock issued or issuable and (z) Western will not acquire or agree to acquire
any assets or business if such acquisition or agreement may reasonably be
expected to delay the consummation of the Merger.
Pursuant to the Merger Agreement, USA Waste has agreed that, prior to the
Effective Time, and except as otherwise agreed to in writing by Western, it
shall, and shall cause each of its subsidiaries to: (a) conduct their respective
businesses in the ordinary and usual course of business and consistent with past
practice; (b) not (i) amend or propose to amend their respective charters or
bylaws, (ii) split, combine or reclassify (whether by stock dividend or
otherwise) their outstanding capital stock, (iii) declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise, except
for the payment of dividends or distributions by a wholly owned subsidiary of
USA Waste; (c) not issue, sell, pledge, or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of, their capital stock of any class or
any debt or equity securities convertible into or exchangeable for such capital
stock, except that (i) USA Waste may issue shares upon conversion of convertible
securities and exercise of options outstanding on the date hereof, (ii) USA
Waste may issue options (and shares upon exercise of such options) pursuant to
its employee stock option plans in effect on the date hereof in the ordinary
course of business and consistent with past practices and (iii) USA Waste may
issue shares and warrants to acquire shares pursuant to the proviso of (h)
below; (d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary course
of business, (B) borrowings to refinance existing indebtedness on terms which
are reasonably acceptable to Western or (C) as set forth in (h) below, (ii)
redeem, purchase, acquire or offer to purchase or acquire any shares of their
capital stock, or any options, warrants or rights to acquire any of their
capital stock, or any security convertible into or exchangeable for their
capital stock, (iii) (A) take any action which would jeopardize the treatment of
the Merger as a pooling of interests under Accounting Principles Board Opinion
No. 16 or (B) take or fail to take any action which action or failure to take
action would cause USA Waste or its shareholders (except to the extent that any
shareholders receive cash in lieu of fractional shares) to recognize gain or
loss for federal income tax purposes as a result of the consummation of the
Merger, (iv) make any acquisition of any assets or businesses other than as set
forth in the proviso of (h) below, (v) sell, pledge, dispose of or encumber any
assets or businesses other than sales in the ordinary course of business or (vi)
enter into any contract, agreement, commitment or arrangement with respect to
any of the foregoing; (e) use all reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services of
their respective present officers and key employees, preserve the goodwill and
business relationships with customers and others having business relationships
with them and not engage in any action, directly or indirectly, with the intent
to adversely impact the transactions contemplated by the Merger Agreement; (f)
subject to restrictions imposed by applicable law, confer on a regular and
frequent basis with one or more representatives of Western to report material
operational matters and the general status of ongoing operations; (g) use
commercially reasonable efforts to maintain with financially responsible
insurance companies insurance on their tangible assets and their businesses in
such amounts and against such risks and losses as are consistent with past
practice and (h) notwithstanding the foregoing, USA Waste shall not be
prohibited from acquiring any assets or businesses or issuing capital stock (or
warrants or options to acquire capital stock) or incurring or assuming
indebtedness in connection with such acquisitions so long as (i) the number of
shares of USA Waste Common Stock issued or issuable in connection with such
transactions does not exceed 6.0 million shares, (ii) the aggregate value of
consideration paid or payable in connection with all such acquisitions,
including any funded indebtedness assumed and any USA Waste Common Stock (valued
for purposes of this limitation at $20 per share) does not exceed $120 million,
(iii) the aggregate value of consideration paid or payable for any one such
acquisition does not exceed $25 million, including any indebtedness assumed and
any USA Waste Common Stock issued or issuable (valued for purposes of this
limitation at $20 per share) and (iv) USA Waste will not acquire or agree to
acquire any assets or business if such acquisition or agreement may reasonably
be expected to delay the consummation of the Merger.
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NO SOLICITATION OF ACQUISITION TRANSACTIONS
The Merger Agreement further provides that Western shall not, and shall not
permit any of its subsidiaries to, initiate, solicit, negotiate, encourage or
provide confidential information to facilitate, and Western shall, and shall
cause each of its subsidiaries to, cause any officer, director or employee of,
or any attorney, accountant, investment banker, financial advisor or other agent
retained by it, not to initiate, solicit, negotiate, encourage or provide
non-public or confidential information to facilitate, any proposal or offer to
acquire all or any substantial part of the business and properties of Western or
any capital stock of Western, whether by merger, purchase of assets, tender
offer or otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transactions being referred to herein as
"Acquisition Transactions"); provided, however, that Western may, in response to
an unsolicited written proposal with respect to an Acquisition Transaction
("Acquisition Proposal"), furnish (subject to the execution of a confidentiality
agreement and standstill agreement containing provisions substantially similar
to the confidentiality and standstill provisions of the confidentiality
agreement executed by USA Waste and Western) confidential or non-public
information concerning its business, properties or assets to a financially
capable corporation, partnership, person or other entity or group (a "Potential
Acquiror") and negotiate with such Potential Acquisition if (i) its board of
directors, after consulting with one or more of its independent financial
advisors, concludes that such Acquisition Proposal (if consummated pursuant to
its terms) would result in a transaction more favorable to Western's
stockholders than the Merger and (ii) based upon advice of its outside legal
counsel, its board of directors determines in good faith that the failure to
provide such confidential or non-public information to such Potential Acquiror
would constitute a breach of its fiduciary duty to its stockholders. Western
shall immediately notify USA Waste after receipt of any Acquisition Proposal or
any request for non-public information relating to Western or its subsidiaries
in connection with an Acquisition Proposal or for access to the properties,
books or records of Western or any subsidiary by any person or entity that
informs the board of directors of Western or such subsidiary that it is
considering making, or has made, an Acquisition Proposal. Such notice to USA
Waste shall be made orally and in writing and shall indicate in reasonable
detail the identity of the Potential Acquiror and the terms and conditions of
such proposal, inquiry or contact.
CONDUCT OF THE BUSINESS OF THE COMBINED COMPANIES FOLLOWING THE MERGER
Following the Merger, Western will be a wholly owned subsidiary of USA
Waste. Pursuant to the Merger Agreement, the Articles of Incorporation and the
Bylaws of Acquisition, as in effect immediately prior to the Effective Time,
will be the Articles of Incorporation and Bylaws of the surviving corporation
until amended as provided therein and under the CGCL.
TERMINATION OR AMENDMENT
The Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after approval by the stockholders of USA Waste and the
shareholders of Western, as follows: (a) by either USA Waste or Western if (i)
the Merger is not completed by June 30, 1996 (provided that the right to
terminate the Merger Agreement under this provision shall not be available to a
party if the failure of such party to fulfill any obligation to the other party
under or in connection with the Merger Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date), (ii) if
the Merger is enjoined by a final unappealable court order or (iii) if the party
other than the Terminating Party (X) fails to perform in any material respect
any material covenant in the Merger Agreement and (Y) does not cure such default
in all material respects within 30 days after written notice of such default is
given by the Terminating Party, (b) by Western if (i) Western receives a
Superior Proposal and resolves to accept such Superior Proposal, and Western
shall have given USA Waste two days' prior written notice of its intention to
terminate pursuant to such provision or (ii) if (A) a tender or exchange offer
is commenced by a third party (excluding any affiliate of Western or any group
of which any affiliate of Western is a member) for all outstanding shares of
Western, (B) the board of directors of Western determines, in good faith and
after consultation with an independent financial advisor, that such offer
constitutes a Superior Proposal and resolves to accept such Superior Proposal or
recommend to the stockholders that they tender their shares in such tender or
exchange offer and
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(C) Western shall have given USA Waste two days' prior written notice of its
intention to terminate pursuant to this provision and (c) by USA Waste if the
board of directors of Western shall have resolved to accept a Superior Proposal
or shall have recommended to the shareholders of Western that they tender their
shares in a tender or exchange offer commenced by a third party (excluding any
affiliate of USA Waste or any group of which any affiliate of USA Waste is a
member). However, termination of the Merger Agreement will not relieve either
party from liability for any breach of the Merger Agreement.
The Merger Agreement may not be amended except by action taken by the
respective boards of directors of the parties or duly authorized committees
thereof and then only by an instrument in writing signed on behalf of each party
and in compliance with applicable law.
TERMINATION FEES
Western and USA Waste have each agreed to pay a termination fee to the
other party should certain of the termination rights described in
"-- Termination or Amendment" above be exercised under certain circumstances.
Western has agreed to pay USA Waste a fee of $18,000,000 if (a) Western
terminates the Merger Agreement as described in clauses (b)(i) or (b)(ii) of
"-- Termination or Amendment" above or (b) USA Waste terminates the Merger
Agreement as described in clause (a)(iii) of "-- Termination or Amendment"
above. USA Waste has agreed to pay Western a fee of $18,000,000 if Western
terminates the Merger Agreement as described in clause (a)(iii) of
"-- Termination or Amendment" above.
EXPENSES
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such expenses, except that those expenses
incurred in connection with printing this Joint Proxy Statement and Prospectus
shall be shared equally by USA Waste and Western.
INDEMNIFICATION
The Merger Agreement provides for the indemnification by USA Waste, to the
fullest extent permitted under applicable law, of the present and former
directors, officers, employees and agents of Western or any of its subsidiaries
against any costs or expenses (including attorneys fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding, investigation, whether
civil or criminal, administrative, or investigative, arising out of, relating
to, or in connection with any action or omission occurring prior to the
Effective Time (including, without limitation, acts or omissions in connection
with such persons serving as an officer, director or other fiduciary in any
entity if such service was at the request or for the benefit of Western) or
arising out of or pertaining to the transactions contemplated by the Merger
Agreement.
OTHER AGREEMENTS
After the consummation of the Merger, Kosti Shirvanian, Chairman, Chief
Executive Officer and President of Western, will become a director and a Vice
Chairman of USA Waste and a member of the Executive Committee of the USA Waste
Board of Directors. USA Waste and Mr. Shirvanian have entered into an employment
agreement effective as of the Effective Time pursuant to which Mr. Shirvanian
will serve as Chairman of the Board of Western and receive an annual salary of
$500,000 (to be increased by a minimum of 10% per year), a guaranteed annual
bonus of $250,000 and a discretionary annual bonus of up to $250,000 and shall
be entitled to receive additional compensation from USA Waste as its
compensation committee may determine.
In addition, USA Waste will assume, pursuant to the employment agreement
with Mr. Shirvanian, certain obligations with respect to a split dollar life
insurance agreement (the "Insurance Agreement") entered into in 1995 by Western
and Mr. and Mrs. Kosti Shirvanian and Ms. Linda Shirvanian, as trustee for the
Kosti and Marian Shirvanian Family 1995 Irrevocable Trust (the "Trust"). The
Insurance Agreement provides for life insurance on the life of Mr. Shirvanian or
the lives of Mr. and Mrs. Shirvanian. The beneficiary of the policy is the
Trust. The beneficiaries of the Trust are the descendants of Mr. and
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Mrs. Shirvanian. Under the Insurance Agreement, the premium payment obligations
are split between Western and the Trust. The estimated discounted single premium
payment required to pay in full the obligations under the Insurance Agreement
would be approximately $7 million, of which approximately $2.35 million
represents the Trust's share of such premium. Upon consummation of the Merger,
USA Waste will assume the payment obligations of both Western and the Trust. All
premium payments made by USA Waste or Western are recoupable out of the death
benefits of such policy.
As of the Effective Time of the Merger, Mr. Shirvanian will be granted
options to purchase 900,000 shares of USA Waste Common Stock under the 1993 Plan
at an exercise price equal to the closing trading price on the NYSE for USA
Waste Common Stock on the day of the Effective Time. On each of the first four
anniversary dates of the Effective Time, Mr. Shirvanian will be entitled to
additional grants of options to purchase 162,500 shares of USA Waste Common
Stock at an exercise price equal to the fair market value of the USA Waste
Common Stock at the date of grant. The options will expire 10 years from the
date of grant and will vest at a rate of 20% annually.
The agreement provides that upon a change of control of USA Waste while Mr.
Shirvanian is still an employee or within 12 months after Mr. Shirvanian is
placed on part-time status, Mr. Shirvanian will be entitled, at his election, to
receive a lump sum amount equal to three times the sum of his then base salary
and guaranteed bonus, less $1.00.
Mr. Shirvanian's employment agreement is for a continually renewing term of
five years, commencing as of the Effective Time. If Mr. Shirvanian's employment
extends beyond the fifth anniversary of the date of the employment agreement,
the agreement will automatically be extended so that the term of the agreement
will continually be five years until the occurrence of either (i) a change of
control of USA Waste or (ii) USA Waste's termination of Mr. Shirvanian's
employment. Mr. Shirvanian's employment may be terminated by USA Waste's Board
of Directors (x) for cause in the event of Mr. Shirvanian's final conviction of
a felony crime involving moral turpitude, Mr. Shirvanian's deliberate and
intentional continuing refusal to substantially perform his duties and
obligations under the employment agreement or a final judgment of a court of
competent jurisdiction that Mr. Shirvanian has engaged in willful fraud or
defalcation involving material funds or other assets of USA Waste or (y) for any
reason in the sole discretion of USA Waste's Board of Directors by giving Mr.
Shirvanian five years' notice no earlier than the fifth anniversary date of the
employment agreement.
At all times during the term of the employment agreement, and for a period
of two years after the termination of his employment, Mr. Shirvanian has agreed
not to compete with the business of USA Waste.
In January 1996, Western's Board of Directors approved the payment of a
$750,000 bonus to Mr. Shirvanian prior to the Merger which payment was made to
Mr. Shirvanian in January 1996.
In addition, Western and the Shirvanian Family Investment Partnership (the
"Partnership"), of which Mr. Kosti Shirvanian is a general partner, have agreed
to the transfer to Western of the interests of the Partnership in the land and
improvements constituting a portion of a transfer station in Carson, California
in exchange for the issuance by Western of up to 225,000 shares of Western
Common Stock. The Western Board of Directors approved such transfer subject to
the receipt of an independent appraisal of the land and improvements supporting
such consideration. Such transfer is to be effective immediately prior to the
consummation of the Merger.
VOTING AGREEMENTS
In connection with the execution of the Merger Agreement, John E. Drury,
Donald F. Moorehead, Jr. and Alexander W. Rangos each executed a voting
agreement, dated December 18, 1995, pursuant to which such persons agreed to
vote shares of USA Waste Common Stock held by them currently, and at any time
prior to the termination of their respective voting agreements, for approval of
the Merger and against any proposal made in opposition to the Merger. In
connection with such voting agreements, Messrs. Drury, Moorehead and Rangos each
executed an irrevocable proxy, dated December 18, 1995, with respect to an
aggregate of 3,456,473 shares of USA Waste Common Stock (or 5.2% of shares
outstanding as of the USA
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Waste Record Date) held by them, which proxy permits certain officers of Western
to vote such shares in favor of the Merger. The voting agreements terminate on
the earlier of (i) the Effective Time, (ii) receipt of written termination
notice by Western or (iii) the later of June 30, 1996 and 30 calendar days after
the date on which the Merger Agreement is terminated.
In connection with the execution of the Merger Agreement, Mr. Kosti
Shirvanian executed a voting agreement, dated December 18, 1995, pursuant to
which he agreed to vote shares of Western Common Stock held by him currently,
and at any time prior to the termination of his voting agreement, for approval
of the Merger and against any proposal made in opposition to the Merger. In
addition, Mr. Shirvanian agreed not to vote such shares in favor of any
extraordinary business transaction with any party other than USA Waste or its
affiliates and to vote such shares against any liquidation of Western or
amendment to Western's charter or bylaws which is intended to frustrate the
consummation of the Merger. In connection with such voting agreement, Mr.
Shirvanian executed an irrevocable proxy, dated December 18, 1995, with respect
to 4,476,041 shares of Western Common Stock (or 30.3% of shares outstanding as
of the Western Record Date) held by him, which proxy permits certain officers of
USA Waste to vote such shares in favor of the Merger. The voting agreement
terminates on the earlier of (i) the Effective Time, (ii) receipt of written
termination notice by USA Waste or (iii) the later of June 30, 1996 and 30
calendar days after the date on which the Merger Agreement is terminated. In
January 1996, Mr. Shirvanian sold 40,500 shares of Western Common Stock.
Mr. Shirvanian's voting agreement contains covenants that prohibit Mr.
Shirvanian, in his capacity as a shareholder, from directly or indirectly
encouraging, initiating or engaging in discussions or negotiations with, or
providing any information to, any entity other than USA Waste and its affiliates
concerning the sale of his shares of Western Common Stock, the issuance and sale
of Western Common Stock by Western or, with respect to any merger or other
business combination, any disposition or grant of interest on a substantial
asset or any similar transaction involving Western.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF USA WASTE AND WESTERN
Upon consummation of the Merger, the shareholders of Western will become
stockholders of USA Waste, and their rights will be governed by USA Waste's
Restated Certificate of Incorporation and Bylaws, which differ in certain
material respects from Western's Articles of Incorporation and Bylaws. As
stockholders of USA Waste, the rights of former Western shareholders will be
governed by Delaware law, which differs in certain material respects from
California law, the law governing current Western shareholders. The following
discussion of (i) the differences between the charter documents and bylaws of
USA Waste and Western and (ii) the differences between the Delaware and
California corporation laws is a summary. Reference is made to the full text of
the charter documents and bylaws incorporated by reference in the Registration
Statement of which this Joint Proxy Statement and Prospectus is a part.
COMPARISON OF CERTAIN PROVISIONS OF THE CHARTERS AND BYLAWS OF USA WASTE AND
WESTERN
The Restated Certificate of Incorporation of USA Waste differs from the
Articles of Incorporation of Western in the principal respects described below.
Classified Board of Directors, Removal of Directors and Related Matters. At
present, the board of directors of Western is classified, and directors are
elected essentially on the same basis as directors of USA Waste. The Restated
Certificate of Incorporation of USA Waste provides that its board of directors
("USA Waste's Board") is divided into three classes, each class to consist as
nearly as possible of one-third of the directors. The term of office of the
Class I directors will expire at the 1996 annual meeting of stockholders, the
term of the Class II directors will expire at the 1997 annual meeting, and the
term of the Class III directors will expire at the 1998 annual meeting. This
classification of USA Waste's Board commenced at the 1995 annual meeting. Except
as described in the previous sentence, only one class of directors will be
elected at each future annual meeting who will serve for a three-year term and
until their successors are elected. Thus, the regular term of only one class of
directors will expire each year, and each director will stand for election only
once in each three-year period.
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The USA Waste Restated Certificate of Incorporation also provides that
directors may be removed with or without cause only by the affirmative vote at a
regular or special meeting (as the case may be) of two-thirds of the total
number of votes of the then outstanding shares of capital stock of USA Waste
entitled to vote generally in the election of directors, voting together as a
single class, or of not less than two-thirds of the incumbent directors (not
counting directors to be removed), as the case may be, and in either case only
if notice of such proposal is contained in the notice of such meeting. Thus, a
third party seeking to gain control of USA Waste's Board may be forced to await
the expiration of the respective terms of incumbent directors, unless there were
sufficient voting strength to remove a particular director or directors.
In contrast, the entire board of directors of Western can be removed
without cause by a vote of shareholders holding a majority of shares entitled to
vote at an election of directors, but a single director may be so removed only
if the number of shares voted against removal (or not voted at all) would be
insufficient to elect the director with cumulative voting. In addition, voting
to elect or remove directors of Western has been by class of shares. Directors
of Western may be removed for cause only (i) under California law, by order of a
court sought by shareholders holding at least 10% of the outstanding shares of
any class, if the court finds that the director engaged in fraudulent or
dishonest acts or gross abuse of authority or discretion or (ii) under
California law and the Bylaws of Western, by Western's Board, upon declaration
of the vacancy of the office of a director declared of unsound mind by an order
of court or convicted of a felony.
USA Waste's Restated Certificate of Incorporation provides the USA Waste
Board with a greater likelihood of continuity and experience, since, except in
the case of vacancies filled by the vote of directors, at any one time
approximately one-third of the directors will have served for at least two
years, approximately one-third will have served for at least one year and
removal of a director will be more difficult than under the Bylaws of Western.
Although USA Waste's Board is not aware of any problems experienced by Western
in the past with respect to continuity and stability, USA Waste's Board believes
that the coupling of a super-majority voting requirement for removal of
directors with a classified board of directors will decrease the likelihood that
problems of continuity and stability might arise in the future. The Board is
aware that in recent years there have been a number of disruptive attempts to
obtain control of corporations through the acquisition of a significant minority
position and the election of a new slate of directors. The coupling of a
super-majority voting requirement with a classified board of directors will
serve as an obstacle to any such attempts and, at a minimum, two successive
annual meetings of stockholders will normally be required in order to elect a
majority of the Board. These features may, however, deter certain mergers,
tender offers, proxy contests or other future attempts to acquire control of USA
Waste that some or a majority of stockholders may deem to be in their best
interests. In addition, stockholders who do not approve of the policies of USA
Waste's Board will be unable to elect a majority of the members of USA Waste's
Board for a minimum period encompassing two annual meetings of stockholders,
unless such stockholders are able to obtain a consensus representing two-thirds
of all voting shares at one or more special meetings. The three-year term for
incumbent directors may also make directors less responsive to desires of
individual stockholders than would annual election procedures, although the
Board does not believe that it has or will do so and it does not represent a
departure from the current procedures of Western.
Western's Bylaws provide that the number of directors will be nine, until a
majority of shareholders of Western amend the Articles of Incorporation or the
Bylaws of Western. Under California law, the range of authorized directors of
Western can only be changed with shareholder approval. The Certificate of
Incorporation and Section 3.2 of the Bylaws of USA Waste provide that the number
of directors that shall constitute the whole Board shall be not less than three
and not more than nine unless otherwise approved by at least two-thirds of the
incumbent directors. The Bylaws authorize USA Waste's Board to amend the number
of directors that constitute the Board.
Section 3.3 of the Bylaws of USA Waste provides that a vacancy on USA
Waste's Board, whether resulting from death, resignation, disqualification, an
increase in the number of directors or any other cause, may be filled by vote of
the majority of the remaining directors, even though less than a quorum. Under
both California and Delaware law, vacancies may also be filled by the
shareholders or stockholders, as the case may be. California law applicable to
Western and Section 5 of the Bylaws of Western also provide that any vacancy may
be filled by a vote of the majority of the remaining directors (or by the sole
remaining director) even if
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less than a quorum; provided, however, that any vacancy created by the removal
of a director by vote or written consent of the shareholders or by court order
may be filled only by the vote or written consent of a majority of the
outstanding shares entitled to vote.
Increased Shareholder Vote Required in Certain Transactions. Under both
Delaware and California law, mergers, certain reorganizations, sales of all or
substantially all of the assets of a corporation, the adoption of a plan of
voluntary liquidation of a corporation and recapitalizations of a corporation
involving amendments to its Articles of Incorporation or Certificate of
Incorporation, as the case may be, must be approved by the affirmative vote of
the holders of a majority of the outstanding capital stock entitled to vote.
Certain other transactions, including sales of less than substantially all of
the corporation's assets, do not require shareholder approval under Delaware or
California law. In contrast, the Restated Certificate of Incorporation of USA
Waste provides only that a vote of three-fourths of the stockholders or any
class of stockholders is required to bind such stockholders or class of
stockholders to any compromise or arrangement and to any consequent
reorganization of USA Waste proposed between the corporation and such
stockholders in the context of a voluntary liquidation of USA Waste, including
the sale of substantially all of its assets (the "Supermajority Vote
Requirement").
Although the purpose of the Supermajority Vote Requirement is to protect
USA Waste, its stockholders, its employees and others from certain unfavorable
reorganizations, asset sales or dispositions in the voluntary liquidation
context, the Supermajority Vote Requirement could, under certain circumstances,
permit the minority stockholders to frustrate consummation of a reorganization,
sale or disposition that the holders of a majority of the stockholders of USA
Waste may believe to be in their best interests. The Supermajority Vote
Requirement will neither discourage nor prevent the initiation of hostile tender
offers of the capital stock of USA Waste or the initiation of other
reorganizations or business combinations outside of the context of a voluntary
liquidation.
Since the Supermajority Vote Requirement effectively gives management more
bargaining power in negotiations in the voluntary liquidation context, it could
result in management using such bargaining power not only to try to negotiate a
favorable price for an acquisition or reorganization of USA Waste or its assets,
but also to retain their positions and negotiate more favorable terms for
management.
Elimination of Stockholders' Power to Call Special Stockholders Meetings
and Right to Act Without a Meeting. Under California law, a special meeting of
shareholders of Western may be called by the holders of 10% or more of the
capital stock of Western entitled to vote, and this right may not be removed by
the Articles of Incorporation or the Bylaws. Under Delaware law, a special
meeting of stockholders of any corporation may be called only by the board of
directors or by any other person authorized to do so in the certificate of
incorporation or bylaws. The Restated Certificate of Incorporation and Bylaws of
USA Waste do not provide for any action to be taken by the stockholders other
than at an annual or special meeting of stockholders. Section 2.4 of the Bylaws
of USA Waste provides that a special meeting of stockholders may be called only
by written order of a majority of the members of USA Waste's Board or by the
Chairman of the Board or Chief Executive Officer. The principal effect of
Section 2.4 would be to prevent stockholders, including majority stockholders,
from forcing a special meeting to consider a proposal opposed by USA Waste's
Board or a proposal by an interested stockholder opposed by independent
directors.
Thus, proposals that currently could be brought before Western's
shareholders at a special meeting called by the holders of 10% or more of the
capital stock of Western, or that currently could be acted upon by the written
consent of shareholders, could only be considered by the stockholders of USA
Waste at the next annual stockholders' meeting (or at a special meeting of
stockholders called by USA Waste's Board) and then only if certain procedural
requirements mandated by law and by the Restated Certificate of Incorporation of
USA Waste are fulfilled. See "-- Procedures for Stockholder Nominations and
Proposals." It is possible that such restrictions could delay stockholder action
or acquisition attempts favored by the holders of a majority of the outstanding
shares. USA Waste's Board supports the limitation of stockholder action by
written consent, however, because it believes that all stockholders of a
publicly-owned company should have an opportunity to participate in any action
requiring stockholder approval. USA Waste's Board also believes that it is
inappropriate for a majority stockholder to take significant action affecting
USA Waste without giving advance
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notice of such action to the minority stockholders, even where such a procedure
is permissible under applicable law.
Procedures for Stockholder Nominations and Proposals. Sections 2.12 and
2.13 of the Bylaws of USA Waste set forth the procedures that a stockholder must
follow in order to nominate any person for election to USA Waste's Board or to
bring any business before an annual meeting of stockholders. No such procedural
requirements, other than a requirement that a shareholder intending to cumulate
votes give advance notice of such intent, exist for shareholders of Western.
Section 2.12 of the Bylaws of USA Waste provides that, for business to be
properly brought before any meeting of the stockholders by a stockholder, the
stockholder must have given notice thereof in writing to the Secretary of USA
Waste not less than 120 and not more than 150 days in advance of the anniversary
of the date on which the proxy statement of the prior year's annual meeting was
released to stockholders of USA Waste or, if no annual meeting was held in the
prior year or the date of the impending annual meeting has changed from the
anniversary of the prior year's annual meeting by more than 30 days, then at
least 80 days prior to the date on which USA Waste intends to distribute the
proxy statement for the current year. Nominations for the election of directors
may be made by USA Waste's Board or by any stockholder entitled to vote in the
election of directors if written notice of such stockholder's intent to make
such nominations has been given to the Secretary of USA Waste as set forth in
the preceding sentence.
The procedures set forth in Section 2.12 of the Bylaws prohibit last-minute
attempts by any stockholder to nominate a director or present a business
proposal at an annual stockholders' meeting, even if such a nomination or
proposal might be desired by a majority of the stockholders. These procedures
will enable USA Waste's Board to be informed in advance of nominations or
proposals (including any that may be made by a person seeking to acquire USA
Waste) to be presented at meetings of stockholders in order to prepare informed
and reasoned positions with respect to such nominations and proposals. These
procedures would also eliminate the element of surprise that a person seeking to
acquire USA Waste might otherwise use to his or her advantage in making a
stockholder proposal. The Bylaws do not require the inclusion of any information
about any such nominee or proposal in any proxy statement distributed by, at the
direction of, or on behalf of USA Waste's Board, except as required to be
included pursuant to federal securities laws or USA Waste's Board itself.
Elimination of Certain Director Liability. Article Eighth of the Restated
Certificate of Incorporation of USA Waste provides that, to the fullest extent
permitted by Delaware law, a director of USA Waste shall not be liable to USA
Waste or its stockholders for monetary damages for breach of fiduciary duty as a
director. Article Ninth further provides that USA Waste shall indemnify, in the
manner and to the fullest extent permitted by Delaware law, any person (and the
heirs or legal representatives of any person) who is or was a party to, or is
threatened to be made a party to, any threatened, pending or completed action,
suit, proceeding or claim, whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is or was a
director or an officer of USA Waste. Sections 10.1 and 10.2 of the Bylaws of USA
Waste provide a similar indemnification of any person acting in such a capacity
or who is or was serving at the request of USA Waste as a director or officers
of another corporation, partners, joint venture, trust or other enterprise,
provided such person acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interest of USA Waste or, in the case of any
criminal action, had no reason to believe such person's action was unlawful.
These provisions also permit USA Waste to indemnify employees and agents in a
similar manner and, to the fullest extent permitted by Delaware law, to purchase
and maintain insurance on behalf of any such director, officer, employee or
agent against any liability that may be asserted against such person.
Articles V and VI of the Articles of Incorporation of Western provide that
the liability of directors for monetary damages shall be eliminated to the
fullest extent permissible under California law and that Western is authorized
to provide indemnification to its agents, including current and former directors
and officers, for breach of duty to Western and its shareholders. Article IX,
Section 3 of the Bylaws of Western currently provides that Western may indemnify
any director or officer against expenses actually and reasonably incurred in the
successful defense on the merits of any civil, criminal, administrative or
investigative proceeding brought against such person or in any such pending or
threatened proceeding or any such proceeding not
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successfully defended on the merits provided that it is determined that such
person acted in good faith and in a manner reasonably believed to be in the best
interests of Western (and in the case of a criminal proceeding, such person had
no reasonable cause to believe his conduct unlawful) by (a) a majority of a
quorum of directors not party to such proceeding, (b) a majority approval by
shareholders (excluding shares held by such person) or (c) the court before
which such proceeding is or was pending; provided that in the case of any
derivative action: (i) in the event of a judgment of liability, the court shall
determine the appropriateness of any indemnification; (ii) in the event of a
disposition without court approval, no indemnification shall be available; and
(iii) in the event of a court-approved disposition, indemnification for expenses
will be available if it is determined as set forth in clause (a), (b) or (c)
above that such person acted in good faith in a manner he reasonably believed to
be in the best interests of Western and with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use under
similar circumstances. Article IX, Section 5 of the Bylaws of Western provides
that indemnification of such person against fines, settlements and other amounts
actually and reasonably incurred will be available, other than in a derivative
action, on the terms set forth above, but that no such indemnification is
available in a derivative action that is settled or disposed of other than by
judgment on the merits.
The effect of these provisions is to eliminate directors' personal
liability to the stockholders of USA Waste for monetary damages arising out of
the directors' breach of their fiduciary duty of care, but not their duty of
loyalty. The duty of care refers to the fiduciary duty of directors to be
sufficiently diligent and careful in considering a transaction or taking or
refusing to take some corporate action. The duty of loyalty refers to the duty
that directors owe the corporation and its stockholders, requiring that the
directors act in good faith and in the honest belief that a business decision
under consideration is in the best interest of the corporation and that the
directors not engage in self-dealing. Absent these provisions, a breach of the
duty of care by a director could give rise to liability for monetary damage
caused to USA Waste or its stockholders. These provisions do not eliminate the
duty of care, but only eliminate monetary damage awards occasioned by a breach
of that duty. Thus, a breach of the duty of care would remain a valid basis for
a suit seeking to stop a proposed transaction from occurring. After the
transaction has occurred, however, the stockholders would no longer have a claim
for money damages based on a breach of the duty of care, even if that breach
involved gross negligence on the part of the directors in connection with, for
example, acquisition proposals by or for USA Waste. However, the directors' duty
of care itself would remain unaffected, and stockholders of USA Waste would
retain the right to pursue equitable remedies, such as injunctions and
rescissions of contracts. These provisions do not limit liability to persons
other than USA Waste or its stockholders.
These provisions do not limit or eliminate directors' liability for: (1)
breaches of their duty of loyalty to Western, (2) acts and omissions not in good
faith, (3) intentional misconduct in office, (4) knowing violations of law, (5)
improper personal benefit or (6) payment of dividends or stock redemptions or
repurchases, whether negligent or willful, in violation of the Delaware law. In
addition, these provisions may not eliminate directors' liability for violation
of federal securities law.
These limitations of liability will apply to conduct of any director of USA
Waste occurring after the Effective Time of the Merger, and to conduct by the
directors of USA Waste that occurred prior to the Merger to the extent that
prior to the Merger such directors are acting in their capacity as directors of
USA Waste rather than of Western. They do not limit liability for conduct
predating the Merger to the extent any directors are acting in their capacity as
directors of Western. These provisions also will protect directors to the extent
provided in any future changes in Delaware law without additional stockholder
approval.
USA Waste believes these provisions are necessary to assist in attracting
and retaining qualified individuals to serve as directors by assuring directors
(and potential directors) that their good faith decisions will not be second
guessed by a court evaluating decisions with the benefit of hindsight. However,
it should be recognized that these provisions will limit the remedies available
to a stockholder dissatisfied with a decision by USA Waste's Board that is
protected thereby. A dissatisfied stockholder's only remedy in such a
circumstance would be to sue for equitable relief, such as stopping the
completion of the contemplated action by USA Waste's Board. In many situations
this remedy may not be effective. Stockholders, for example, may not be aware of
a transaction or an event until it is too late to prevent it. In these cases,
the stockholders and USA Waste could be injured by a decision of USA Waste's
Board and yet have no effective remedy.
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The Board believes that the diligence exercised by directors stems
primarily from their desire to act in the best interests of USA Waste and not
from a fear of monetary damage awards. Consequently, the Board believes that the
level of scrutiny and care exercised by directors will not be lessened by these
provisions limiting their liability.
Amendment of Certain Charter and Bylaw Provisions. The Articles of
Incorporation of Western may be amended if approved by the Board of Directors
and by the affirmative vote of the holders of a majority of Western Common
Stock. However, Article Fourteenth of the Restated Certificate of Incorporation
of USA Waste specifies that, other than with respect to Article Tenth thereof,
Delaware law determines the requirements for any alteration, amendment, repeal
or rescission (any "Change") of any provision contained in the Restated
Certificate of Incorporation. Under Delaware law, any such Change is to be
effected by resolution of the Board of Directors putting the proposed Change
before the holders of capital stock entitled to vote at a regular or special
meeting and by the affirmative vote of the holders of a majority of the
outstanding capital stock entitled to vote. Article Tenth (which sets forth the
classification of the Board of Directors and procedures for election or removal
of directors), specifies that the amendment thereof requires the affirmative
vote of not less than two-thirds of the then outstanding shares of capital stock
entitled to vote in the election of directors generally, voting together as a
single class at a regular or special meeting the notice of which specified that
such proposal would be addressed at such meeting.
The Bylaws of Western may be adopted, amended or repealed either by its
Board of Directors or the holders of a majority of the outstanding shares of
Western, except that a bylaw specifying or changing a fixed number of directors
or the maximum or minimum number or changing from a fixed to a variable board or
vice versa may only be adopted by approval of a majority of the outstanding
shares. Any Change of any provision of the Bylaws of USA Waste may be approved
by a majority of the authorized number of directors other than any bylaw
provision adopted, amended or repealed by the USA Waste stockholders, and the
shareholders may amend, alter or repeal any bylaws provisions adopted or amended
by the Board or any power conferred thereby.
Cumulative Voting Eliminated. The Articles of Incorporation of Western does
not allow cumulative voting in connection with the election of directors.
Cumulative voting rights in the election of directors entitle a shareholder to
give one nominee as many votes as is equal to the number of directors to be
elected multiplied by the number of shares owned by the shareholder, or to
distribute such votes on the same principal among two or more nominees, as the
stockholder sees fit. Unless otherwise provided in a company's articles,
California law requires cumulative voting in the election of directors upon
notice given by a shareholder at a shareholders meeting. The Articles of
Incorporation of Western expressly mandates that cumulative voting does not
apply in connection with the election of directors. Cumulative voting for
directors may enable the holders of a significant number of the outstanding
shares, but less than a majority, to elect one or more directors at any
election.
Delaware law does not mandate cumulative voting. Section 2.8 of the Bylaws
of USA Waste states that, unless otherwise provided in the Restated Certificate
of Incorporation, cumulative voting for the election of directors is prohibited.
Article Fourth of the Restated Certificate of Incorporation provides that
holders of the USA Waste Common Stock shall each have the right to one vote per
share on all questions.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE
The general corporation laws of California and Delaware differ in a number
of respects, some of which are discussed above under "Comparison of Certain
Provisions of the Charters and Bylaws of USA Waste and Western." It is
impractical to summarize all such differences herein, but significant
differences, not elsewhere discussed, between the general corporation laws of
California and Delaware that could materially affect the rights of shareholders
of Western, as compared to such persons as stockholders of USA Waste, are as
follows:
Removal of Directors. Under California law, a director may be removed
without cause by shareholder vote, provided that the shares voted against such
removal would not be sufficient to elect the director under cumulative voting
rules, with abstentions being counted as votes against removal. Under California
law, a director may be removed for cause only (i) by order of a court, sought by
shareholders holding at least 10% of
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the outstanding shares of any class, if a director commits fraudulent or
dishonest acts or gross abuse of authority or discretion or (ii) by the Board,
if a director has been declared of unsound mind by order of court or has been
convicted of a felony. Under Delaware law, a director of a corporation with a
classified board of directors can be removed only for cause unless the
certificate of incorporation otherwise provides. Article Tenth (C) of the
Restated Certificate of Incorporation of USA Waste provides that a director may
be removed with or without cause only at a regular or special meeting of the
Board or of the stockholders of USA Waste at which not less than two-thirds of
the incumbent directors (excluding directors to be removed) or two-thirds of the
then outstanding shares of USA Waste entitled to vote generally in the election
of directors voting together as a single class are represented, and then only if
notice of such proposal was contained in the notice of such meeting.
Stockholder Voting in Certain Transactions. Both California and Delaware
law generally require that a majority of the stockholders of both acquiring and
target corporations approve statutory mergers. Delaware law does not require a
stockholder vote of the surviving corporation in a merger (unless the
corporation provides otherwise in its certificate of incorporation) if (a) the
merger agreement does not amend the existing certificate of incorporation, (b)
each share of the surviving corporation outstanding before the merger is an
identical outstanding or treasury share after the merger and (c) the number of
shares to be issued by the surviving corporation in the merger does not exceed
20% of the shares outstanding immediately prior to the merger. California law
contains a similar exception to its voting requirements for reorganizations
where the surviving corporation, its shareholders prior to merger, or both,
immediately after the reorganization will own equity securities constituting
more than five-sixths of the voting power of the surviving or acquiring
corporation or its parent entity and such securities bear the same rights,
preferences, privileges and restrictions as those surrendered in the merger.
Both California and Delaware law provide for a stockholder vote with
respect to dissolution. See "-- Dissolution" below. Both California and Delaware
law also require that a sale of all or substantially all of the assets of a
corporation be approved by a majority of the voting shares of the corporation
transferring such assets unless such a sale is in the ordinary course of
business. Under California law, a sale of all or substantially all of a
corporation's assets to a buyer in control of or under common control with the
selling corporation requires the approval of at least 90 percent of the voting
power of the selling corporation, unless the sale is to a domestic or foreign
corporation in consideration of the nonredeemable common shares of the buying
corporation, or its parent, or unless the selling corporation obtains the
approval of the Commissioner of Corporations. Under Delaware law, there is no
required supermajority stockholder approval for such a sale to a buyer that
controls the selling corporation.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. In contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than 50% but less than 90% of such common stock or its affiliate
unless all of the holders of such common stock consent to the transaction. This
provision of California law may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish. There being no similar
provision under Delaware law, such limitation will not apply to USA Waste prior
to or following the Merger. Delaware law permits conversion of the shares of the
constituent corporation into shares or other securities of the surviving
corporation, or into cash, property, rights or securities of any other
corporation.
California law also provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally a controlling or managing party of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to shareholders,
unless the target corporation does not have shares held of record by at least
100 persons or unless the transaction has been qualified under California state
securities laws. Furthermore, if a tender of shares or vote is sought pursuant
to an interested party's proposal and a later
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proposal is made by another party at least 10 days prior to the date of
acceptance of the interested party proposal, the shareholders must be informed
of the later offer and be afforded a reasonable opportunity to withdraw any
vote, consent or proxy, or to withdraw any tendered shares. Delaware law has no
comparable provision, and the stockholders of USA Waste might, therefore, be
deprived of an opportunity to consider such other proposal. Delaware law does
not contain provisions to prevent an "Interested Stockholder" (which is defined
generally as any person that, individually or with others, owns 15% or more of
the outstanding voting securities of a corporation), from engaging in a
"Business Combination" (which is defined to include, among other transactions,
any merger or consolidation with, or sale or disposition of a substantial amount
of assets to, an Interested Stockholder) with a Delaware corporation for three
years following the date such person became an Interested Stockholder unless
certain conditions (such as approval by the Board of Directors) are met.
California law has no comparable provision, except as set forth in the preceding
sentences. These provisions of Delaware law may have the effect of deterring an
attempt to take control of USA Waste or significantly delaying a purchaser's
ability to acquire the entire interest in USA Waste if such acquisition is not
approved by the Board.
Dissenters' Rights. Under both California and Delaware law, a shareholder
of a corporation participating in certain major corporate transactions may,
under varying circumstances, be entitled to receive cash equal to the fair
market value of the shares held by such shareholder (as determined by a court of
competent jurisdiction or by agreement of the stockholder and the corporation)
in lieu of the consideration such stockholder would otherwise receive in the
transaction. The laws of California and Delaware differ with respect to the
circumstances under which dissenters' rights of appraisal are available.
Delaware law does not require dissenters' rights with respect to (a) a sale of
less than substantially all of the assets, (b) a merger by a corporation, the
shares of which are either listed on a national securities exchange or
widely-held (by more than 2,000 stockholders of record) or if stockholders
receive shares of the surviving corporation or of a listed or widely-held
corporation or (c) a merger in which the corporation is the surviving
corporation, provided that no vote of its stockholders is required to approve
the merger. Although permitted to do so under Delaware law, USA Waste's Restated
Certificate of Incorporation does not expand the circumstances under which its
stockholders will be afforded dissenters' rights.
California law, in general, affords dissenters' rights in a sale-of-assets
reorganization and contains somewhat different exclusions from dissenters'
rights in mergers than does Delaware law. For example, under California law, in
the case of a corporation whose shares are listed on a national securities
exchange, dissenters' rights would nevertheless be available in certain
transactions for any shares with respect to which there are certain restrictions
on transfer and for any class with respect to which 5% or more of such class
claims dissenters' rights. Also, under California law, shareholders of a
corporation involved in a reorganization are not entitled to dissenters' rights
if the corporation, or its shareholders immediately before the reorganization,
or both, will own more than five-sixths of the voting power of the surviving or
acquiring corporation or its parent entity. Shareholders of Western will not be
entitled to dissenters' rights in connection with the Merger unless more than 5%
of the shares of common stock claim dissenters' rights.
Loans to Officers. Under Delaware law, a corporation may make loans to,
guarantee the obligations of or otherwise assist its officers or other employees
and those of its subsidiaries when such action, in the judgment of the
corporation's board of directors, may reasonably be expected to benefit the
corporation. Under California law, a corporation may only make such a loan to,
or guarantee for the benefit of, officers if such loan or guarantee is approved
by a majority of the corporation's shareholders or, for a corporation with 100
or more shareholders of record, by its board of directors pursuant to a
shareholder-approved bylaw if the board of directors determines that such loan
or guarantee may reasonably be expected to benefit the corporation. Western
currently does not have such a bylaw.
Indemnification of Officers and Directors. Both California and Delaware law
state expressly that the indemnification provided for therein shall not be
deemed exclusive of any other rights under any other bylaw, agreement, vote of
stockholders or disinterested directors or otherwise and provide that expenses
may be advanced to officers and directors in a specific case upon receipt of an
undertaking to repay such amount if it is ultimately determined that such
indemnified party is not entitled to be indemnified. In addition, California and
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Delaware permit the determination as to whether an officer or director has met
the applicable standard of conduct in certain circumstances to be made by
independent legal counsel.
California law was recently amended to permit indemnification of officers
and directors to an extent which is generally coextensive with that permitted
under Delaware law. Prior to the recent amendment, the California law did not
permit indemnification in any manner inconsistent with the statutory
indemnification provisions.
In the event the Merger is approved, USA Waste will be required to
indemnify any director or officer to the full extent authorized or permitted by
the Delaware law (as now or hereafter in effect) and may indemnify any employee
or agent in a similar manner.
Personal Liability of Directors. Delaware law provides that the board of
directors of any corporation has the ultimate responsibility for managing the
business and affairs of a corporation. In discharging this function, the law
holds directors to fiduciary duties of care and loyalty to the corporation and
its stockholders. The Delaware Supreme Court has held that the duty of care
requires the exercise of an informed business judgment. An informed business
judgment means that directors have informed themselves of all material
information reasonably available to them. Having become so informed, they then
must act with requisite care in the discharge of their duties. Liability of
directors of a Delaware corporation to the corporation or its stockholders for
breach of the duty of care in some circumstances requires a finding by a court
that the directors were grossly negligent. As described above, USA Waste's
Restated Certificate of Incorporation does not change the standard of care
required of its directors but, as authorized by Delaware law, it does eliminate
the monetary liability of each director for certain breaches of fiduciary
duties, subject to the exceptions set forth in Delaware law. See "Comparison of
Certain Provisions of the Charters and Bylaws of USA Waste and Western."
Inspection of Stockholders' List. California law provides for an absolute
right of inspection of a shareholders' list for persons holding 5% or more of
the corporation's voting shares or persons holding 1% or more of such shares who
have filed a Schedule 14B with the Commission relating to the election of
directors. Generally, a Schedule 14B must be filed by any shareholder engaged in
the solicitation of proxies, as such terms are defined in the federal securities
laws, in connection with a contested election of directors. Delaware law gives
any stockholder of record the right to inspect the stockholder list for any
purpose reasonably related to such person's interest as a stockholder and,
during the 10 days preceding a stockholders' meeting, for any purpose germane to
that meeting. Delaware law contains no provision comparable to the absolute
right of inspection provided by California law to certain shareholders.
Importantly, under California law, California rules with respect to the
inspection of shareholders' lists apply to any corporation that, although
incorporated outside California, has its principal executive offices in
California or customarily holds meetings of its board of directors in
California.
Payment of Dividends. Delaware law permits the payment of dividends out of
surplus or, if there is no surplus, out of net profits for the current and/or
preceding fiscal year (provided that the amount of capital of the corporation is
not less than the aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets). In addition, Delaware law generally provides that a corporation may
redeem or repurchase its shares only if such redemption or repurchase would not
impair the capital of the corporation. The ability of a Delaware corporation to
pay dividends on, or to make repurchases or redemptions of, its shares is
dependent on the financial status of the corporation standing alone and not on a
consolidated basis. In determining the amount of surplus of a Delaware
corporation, the assets of the corporation, including stock of subsidiaries
owned by the corporation, must be valued at their fair market value as
determined by the board of directors, without regard to their historical book
value.
Under California law, any distributions (including dividends and
repurchases of shares) generally are limited either to retained earnings or to
an amount that would leave the corporation with tangible assets in an amount
equal to at least 125% of its tangible liabilities and with current assets in an
amount at least equal to its current liabilities (or 125% of its current
liabilities if the average pre-tax and pre-interest earnings for the preceding
two fiscal years were less than the average interest expenses for such years).
Such limitations are applied on a consolidated basis and are based upon the book
value of assets determined in accordance with generally accepted accounting
principles then applicable.
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For information regarding USA Waste's and Western's dividend policies, see
"Market Price Data -- Dividend Information."
Interested Director Transactions. Under both California and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain exceptions, the conditions are similar under California and Delaware
law. Under California and Delaware law, (a) either the shareholders or the board
of directors must approve any such contract or transaction in good faith after
full disclosure of the material facts, and, in the case of board approval, the
contract or transaction must also be "just and reasonable" (in California) or
"fair" (in Delaware) to the corporation or (b) the contract or transaction must
have been just and reasonable or fair, as the case may be, to the corporation at
the time it was approved. In the latter case, California law explicitly places
the burden of proof on the interested director. Under California law, if
shareholder approval is sought, the interested director is not entitled to vote
his shares at a shareholder meeting with respect to any action regarding such
contract or transaction. If board approval is sought, the contract or
transaction must be approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors (except that interested
directors may be counted for purposes of establishing a quorum). Under Delaware
law, if board approval is sought, the contract or transaction must be approved
by a majority of the disinterested directors (even though less than a majority
of a quorum).
Shareholder Derivative Suits. California law provides that a shareholder
bringing a derivative action on behalf of a corporation need not have been a
shareholder at the time of the transaction in question, provided that a court
determines that certain tests are met (including the presentation of a strong
prima facie case). Under Delaware law, a stockholder may only bring a derivative
action on behalf of the corporation if the stockholder was a stockholder of the
corporation at the time of the transaction in question or his or her stock
thereafter devolved upon him or her by operation of law. California law also
provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to furnish
a security bond. Delaware does not have a similar bonding requirement.
Dissolution. Under California law, shareholders holding 50% or more of the
total voting power may authorize a corporation's dissolution, with or without
the approval of the corporation's board of directors, and this right may not be
modified by the articles of incorporation. Under Delaware law, unless the board
of directors approves the proposal to dissolve, the dissolution must be approved
by stockholders holding 100% of the total voting power of the corporation. Only
if the dissolution is initiated by the board of directors may it be approved by
a simple majority of the corporation's stockholders. In the event of such a
board-initiated dissolution, Delaware law allows a Delaware corporation to
include in its certificate of incorporation a supermajority voting requirement
in connection with dissolutions. USA Waste's Restated Certificate of
Incorporation contains such a supermajority voting requirement, and a
three-fourths majority of shares voting at a meeting at which a quorum is
present or acting by written consent is required to approve a plan of
dissolution of USA Waste that had previously been approved by its Board of
Directors for presentation to a Delaware court.
Application of the General Corporation Law of California to Delaware
Corporations. Under Section 2115 of the CGCL, certain foreign corporations (ie.,
corporations not organized under California law) are placed in a special
category if they have characteristics of ownership and operation which indicate
that they have significant contacts with California. So long as a Delaware or
other foreign corporation is in this special category, and it does not qualify
for one of the statutory exemptions, it is subject to a number of key provisions
of the CGCL applicable to corporations incorporated in California. Among the
more important provisions are those relating to the election and removal of
directors, cumulative voting, classified boards of directors, standards of
liability and indemnification of directors, distributions, dividends and
repurchases of shares, shareholder meetings, approval of certain corporate
transactions, dissenters' and appraisal rights and inspection of corporate
records.
Exemptions from Section 2115 are provided for corporations whose shares are
listed on the New York Stock Exchange. USA Waste will be exempt from Section
2115 following the Merger because the USA Waste Common Stock is now, and will
be, listed on the New York Stock Exchange.
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USA WASTE AND WESTERN
COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following combined historical unaudited pro forma condensed financial
statements are based upon the historical consolidated financial statements of
USA Waste and of Western, each as previously filed with the Commission under the
Exchange Act, are incorporated by reference in this Joint Proxy Statement and
Prospectus and should be read in conjunction with those consolidated financial
statements and related notes. These combined historical unaudited pro forma
condensed financial statements are not necessarily indicative of the operating
results that would have been achieved had the Merger been consummated as of the
beginning of the periods presented and should not be construed as representative
of future operating results. These combined historical unaudited pro forma
condensed financial statements give effect to the Merger by combining the
results of operations of USA Waste and Western using the "pooling of interests"
method of accounting as if the companies had been combined since their
inception.
In connection with the Merger, it is anticipated that Western will change
its fiscal year end from June 30 to December 31 to conform with USA Waste's year
end. In the accompanying combined historical unaudited pro forma condensed
financial statements, Western's operating results for the six months ended June
30, 1995 were included in the statements of operations for its fiscal year ended
June 30, 1995 and the twelve months ended December 31, 1995. Western's operating
revenues and income from continuing operations for the six months ended June 30,
1995 were $136,123,000 and $8,864,000, respectively.
73
<PAGE> 81
USA WASTE AND WESTERN
COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The following combined historical unaudited pro forma condensed balance
sheet presents the combined financial position of USA Waste and Western as of
December 31, 1995. Such unaudited pro forma combined information is based on the
historical consolidated balance sheets of USA Waste and Western as of December
31, 1995 after giving effect to the Merger using the "pooling of interests"
method of accounting and to the pro forma adjustments as described in the notes
to combined historical unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
PRO FORMA
USA WASTE WESTERN ADJUSTMENTS PRO FORMA
--------- -------- ----------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 13,164 $ 5,059 $ -- $ 18,223
Accounts receivable, net............................. 58,333 32,094 -- 90,427
Notes and other receivables.......................... 13,802 -- -- 13,802
Deferred income taxes................................ 15,600 -- -- 15,600
Prepaid expenses and other........................... 19,223 11,388 30,611
--------- -------- -------- ----------
Total current assets.......................... 120,122 48,541 -- 168,663
Notes and other receivables............................ 11,704 -- -- 11,704
Property and equipment, net............................ 593,293 206,219 -- 799,512
Excess of cost over net assets of acquired businesses,
net.................................................. 91,250 19,636 (2,222)(a) 108,664
Other intangible assets, net........................... 27,528 6,599 -- 34,127
Other assets........................................... 64,140 16,123 (12,569)(b) 67,694
--------- -------- -------- ----------
Total assets.................................. $ 908,037 $297,118 $(14,791) $1,190,364
========= ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 32,364 $ 7,969 $ -- $ 40,333
Accrued liabilities.................................. 27,924 20,694 -- 48,618
Deferred revenues.................................... 6,030 -- -- 6,030
Current maturities of long-term debt................. 38,925 1,232 -- 40,157
--------- -------- -------- ----------
Total current liabilities..................... 105,243 29,895 -- 135,138
Long-term debt......................................... 334,860 75,823 -- 410,683
Closure, post-closure and other liabilities............ 65,085 22,071 -- 87,156
--------- -------- -------- ----------
505,188 127,789 -- 632,977
--------- -------- -------- ----------
Commitments and contingencies.......................... -- -- -- --
Stockholders' equity:
Preferred stock:
USA Waste: $1.00 par value; 10,000,000 shares
authorized; none issued.......................... -- -- --
Western: no par value; 2,000,000 shares authorized;
none issued...................................... -- -- --
Common stock:
USA Waste: $.01 par value; 150,000,000 shares
authorized; 65,975,048 historical shares issued
(87,030,697 pro forma shares issued)............. 660 210 (d) 870
Western: no par value; 50,000,000 shares
authorized; 14,671,999 issued and outstanding.... 80,565 (10)(b) --
(80,555)(d)
Additional paid-in capital............................. 727,971 -- 478 (a) )
(12,559)(b) ) 796,235
80,345 (d) )
Retained earnings (accumulated deficit)................ (323,963) 88,764 (2,700)(a) (237,899)
Less treasury stock, at cost, 138,810 shares........... (1,819) -- -- (1,819)
--------- -------- -------- ----------
Total stockholders' equity.................... 402,849 169,329 (14,791) 557,387
--------- -------- -------- ----------
Total liabilities and stockholder equity...... $ 908,037 $297,118 $(14,791) $1,190,364
========= ======== ======== ==========
</TABLE>
See notes to combined historical unaudited pro forma condensed financial
statements.
74
<PAGE> 82
USA WASTE AND WESTERN
COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined historical unaudited pro forma condensed statement
of operations for the year ended December 31, 1995 was prepared based upon the
historical statements of operations for USA Waste for such year and the
historical statement of operations for Western for the twelve months ended
December 31, 1995 after giving effect to the Merger using the "pooling of
interests" method of accounting and to the pro forma adjustments described in
the notes to combined historical unaudited pro forma condensed financial
statements. Western's operating results for the six months ended June 30, 1995
were included in both the combined historical unaudited pro forma condensed
statement of operations for the year ended June 30, 1995 and for the twelve
months ended December 31, 1995. Western's operating revenues and income from
continuing operations for the six months ended June 30, 1995 were $136,123,000
and $8,864,000, respectively.
<TABLE>
<CAPTION>
WESTERN
USA WASTE TWELVE MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA
1995 1995 ADJUSTMENTS PRO FORMA
------------ ------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues.......................... $457,099 $ 273,901 $ -- $ 731,000
-------- --------- --------- ---------
Costs and expenses:
Operating................................. 253,884 200,358 (25,911)(c) 428,331
General and administrative................ 62,178 40,379 (1,289)(c) 101,268
Unusual items............................. 4,733 -- -- 4,733
Merger costs.............................. 25,073 -- -- 25,073
Depreciation and amortization............. 56,378 -- (59)(a)
83,519
27,200(c)
-------- --------- --------- ---------
402,246 240,737 (59) 642,924
-------- --------- --------- ---------
Income from operations...................... 54,853 33,164 59 88,076
-------- --------- --------- ---------
Other income (expense):
Interest expense:
Nonrecurring interest.................. (10,994) -- -- (10,994)
Other.................................. (30,354) (5,083) -- (35,437)
Interest income........................... 2,666 1,556 -- 4,222
Other income, net......................... 2,699 521 -- 3,220
-------- --------- --------- ---------
(35,983) (3,006) -- (38,989)
-------- --------- --------- ---------
Income before income taxes.................. 18,870 30,158 59 49,087
Provision for (benefit from) income taxes... (11,393) 13,137 -- 1,744
-------- --------- --------- ---------
Income from continuing operations available
to common shareholders.................... $ 30,263 $ 17,021 $ 59 $ 47,343
======== ========= ========= =========
Income from continuing operations available
to common shareholders per common share... $ 0.55 $ 1.08 $ 0.60(e)
======== ========= ========= =========
Weighted average shares outstanding......... 55,270 15,784 7,892(e) 78,946
======== ========= ========= =========
</TABLE>
See notes to combined historical unaudited pro forma condensed financial
statements.
75
<PAGE> 83
USA WASTE AND WESTERN
COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined historical unaudited pro forma condensed statement
of operations for the year ended December 31, 1994 was prepared based upon the
historical statements of operations of USA Waste for such year and the
historical statement of operations of Western for its fiscal year ended June 30,
1995 after giving effect to the Merger using the "pooling of interests" method
of accounting and to the pro forma adjustments described in the notes to
combined historical unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
USA WASTE WESTERN
YEAR ENDED YEAR ENDED
DECEMBER 31, JUNE 30, PRO FORMA
1994 1995 ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues........................... $434,224 $270,941 $ -- $ 705,165
-------- -------- -------- --------
Costs and expenses:
Operating.................................. 257,370 196,235 (24,904)(c) 428,701
General and administrative................. 71,500 39,480 (2,095)(c) 108,885
Unusual items.............................. 8,863 -- -- 8,863
Merger costs............................... 3,782 -- -- 3,782
Depreciation and amortization.............. 56,139 -- (94)(a) )
) 83,044
26,999 (c) )
-------- -------- -------- --------
397,654 235,715 (94) 633,275
-------- -------- -------- --------
Income from operations....................... 36,570 35,226 94 71,890
-------- -------- -------- --------
Other income (expense):
Shareholder litigation settlement and other
litigation related costs................ (79,400) -- -- (79,400)
Interest expense:
Nonrecurring interest................... (1,254) -- -- (1,254)
Other................................... (32,804) (5,349) -- (38,153)
Interest income............................ 2,641 1,542 -- 4,183
Other income (expense), net................ 1,877 (628) -- 1,249
-------- -------- -------- --------
(108,940) (4,435) -- (113,375)
-------- -------- -------- --------
Income (loss) before income taxes............ (72,370) 30,791 94 (41,485)
Provision for income taxes................... 3,908 13,702 -- 17,610
-------- -------- -------- --------
Income (loss) from continuing operations..... (76,278) 17,089 94 (59,095)
Preferred dividends.......................... 565 -- -- 565
-------- -------- -------- --------
Income (loss) from continuing operations
available to common shareholders........... $(76,843) $ 17,089 $ 94 $ (59,660)
======== ======== ======== ========
Income (loss) from continuing operations
available to common shareholders per common
share...................................... $ (1.55) $ 1.10 $ (0.82)(e)
======== ======== ========
Weighted average shares outstanding.......... 49,671 15,531 7,766 (e) 72,968
======== ======== ======== ========
</TABLE>
See notes to combined historical unaudited pro forma condensed financial
statements.
76
<PAGE> 84
USA WASTE AND WESTERN
COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined historical unaudited pro forma condensed statement
of operations for the year ended December 31, 1993 was prepared based upon the
historical statements of operations of USA Waste for such year and the
historical statement of operations of Western for its fiscal year ended June 30,
1994, after giving effect to the Merger using the "pooling of interests" method
of accounting and to the pro forma adjustments described in the notes to
combined historical unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
USA WASTE WESTERN
YEAR ENDED YEAR ENDED
DECEMBER 31, JUNE 30, PRO FORMA
1993 1994 ADJUSTMENTS PRO FORMA
------------ ---------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues........................... $382,234 $257,005 $ -- $639,239
-------- -------- -------- --------
Costs and expenses:
Operating.................................. 217,345 192,099 (20,717)(c) 388,727
General and administrative................. 66,968 38,483 (1,330)(c) 104,121
Unusual items.............................. 2,672 -- -- 2,672
Depreciation and amortization.............. 52,222 -- (46)(a) )
) 74,223
22,047 (c) )
-------- -------- -------- --------
339,207 230,582 (46) 569,743
-------- -------- -------- --------
Income from operations....................... 43,027 26,423 46 69,496
-------- -------- -------- --------
Other income (expense):
Shareholder litigation related costs....... (5,500) -- -- (5,500)
Interest expense........................... (35,975) (3,834) -- (39,809)
Interest income............................ 3,539 799 -- 4,338
Other income (expense), net................ 1,915 (767) -- 1,148
-------- -------- -------- --------
(36,021) (3,802) -- (39,823)
-------- -------- -------- --------
Income before income taxes................... 7,006 22,621 46 29,673
Provision for income taxes................... 6,018 10,094 -- 16,112
-------- -------- -------- --------
Income from continuing operations............ 988 12,527 46 13,561
Preferred dividends.......................... 582 -- -- 582
-------- -------- -------- --------
Income from continuing operations available
to common shareholders..................... $ 406 $ 12,527 $ 46 $ 12,979
======== ======== ======== ========
Income from continuing operations available
to common shareholders per common share.... $ 0.01 $ 0.83 $ 0.19 (e)
======== ======== ========
Weighted average shares outstanding.......... 45,885 15,048 7,524 (e) 68,457
======== ======== ======== ========
</TABLE>
See notes to combined historical unaudited pro forma condensed financial
statements.
77
<PAGE> 85
USA WASTE AND WESTERN
NOTES TO COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The combined historical unaudited pro forma condensed financial statements
assume the issuance of USA Waste Common Stock in exchange for all outstanding
Western Common Stock, excluding 634,900 shares of Western Common Stock held by
USA Waste. Such financial statements also assume that the Merger will be
accounted for using the "pooling of interests" method of accounting pursuant to
Opinion No. 16 of the Accounting Principles Board. The pooling of interests
method of accounting assumes that the combining companies have been merged from
their inception, and the historical financial statements for periods prior to
consummation of the Merger are restated as though the companies had been
combined from their inception.
Pursuant to the rules and regulations of the Commission, the combined
historical unaudited pro forma condensed statements of operations exclude the
results of operations associated with discontinued businesses, extraordinary
items and cumulative effects of accounting changes. In addition, the combined
historical unaudited pro forma condensed financial statements do not include any
adjustment for estimated nonrecurring costs directly related to the Merger which
are expected to be included in operations of the Company within the twelve
months succeeding the consummation of the Merger. Such costs (which are
currently estimated for purposes of this presentation to be approximately $27.0
million) include the severance benefits to be paid to certain officers of
Western of approximately $1.2 million and an additional $2.0 million to be
funded by USA Waste in connection with charitable contributions to be made at
the direction of an affiliate of USA Waste. Actual merger costs may vary from
such estimate.
Certain reclassifications have been made to the historical financial
statements of USA Waste and Western to conform to the pro forma presentation.
Such reclassifications are not material to the combined historical unaudited pro
forma condensed financial statements.
PRO FORMA ADJUSTMENTS
(a) All significant intercompany balance sheet and statement of operations
items between USA Waste and Western have been eliminated in the combined
historical unaudited pro forma condensed financial statements. In February 1992,
USA Waste acquired a 55% interest in a hauling company from a third party where
Western owned the remaining 45%. In March 1993, USA Waste acquired the remaining
45% from Western. The combined historical unaudited pro forma condensed
financial statements reflect the combined company's 100% ownership of the
acquired hauling company as of February 1992. Western's earnings in minority
interest from February 1992 through March 1993 and the gain on sale to USA Waste
of $2,829,000 have been eliminated. The excess of cost over net assets of
acquired businesses, net of accumulated amortization, of $2,222,000 reported
historically by USA Waste has also been eliminated.
(b) Common stock, additional paid-in capital, and other assets have been
adjusted to eliminate USA Waste's investment of 634,900 shares of Western Common
Stock at December 31, 1995.
(c) Adjustments have been made to reclassify Western's depreciation and
amortization from operating expenses and general and administrative expenses to
a separate line item to conform to the presentation of USA Waste as if the
companies had been combined since their inception.
(d) The stockholders' equity accounts have been adjusted to reflect the
assumed issuance of 21,055,649 shares of USA Waste Common Stock for all issued
and outstanding shares of Western Common Stock (based on the exchange ratio of
1.50 shares of USA Waste Common Stock for each share of Western Common Stock
outstanding as of December 31, 1995). The actual number of shares of USA Waste
Common Stock to be issued pursuant to the Merger will be based upon the number
of shares of Western issued and outstanding immediately prior to the
consummation of the Merger, excluding USA Waste's 4.3% ownership in Western
consisting of 634,900 shares.
78
<PAGE> 86
(e) Pro forma income (loss) from continuing operations available to common
shareholders per share for each period is based on the combined weighted average
number of shares outstanding, after giving effect to the issuance of 1.50 shares
of USA Waste Common Stock for each share of Western Common Stock outstanding as
of December 31, 1995. Fully diluted earnings (loss) per share are considered
equal to primary earnings (loss) per share for all periods presented because the
addition of potentially dilutive securities that are not common stock
equivalents would have been either antidilutive or not material.
79
<PAGE> 87
SUPPLEMENTAL INFORMATION RELATING
TO THE COMBINED HISTORICAL UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS
The combined historical unaudited pro forma condensed financial information
as of and for the year ended December 31, 1995 included above gives effect to
certain pro forma adjustments as described in the notes to such information. In
addition to the pro forma adjustments in the combined historical unaudited pro
forma condensed financial statements (which in effect are a restatement of the
historical financial statements as if the Merger was consummated), the impact of
certain transactions occurring in 1995 and 1996 is presented supplementally.
These supplemental adjustments do not include the impact of certain cost and
expense savings and other economic benefits that are expected to be realized as
a result of the Merger or additional cost reductions relating to landfill and
collection operations or additional revenues that may result from volume or
price increases.
80
<PAGE> 88
USA WASTE AND WESTERN COMBINED
SUPPLEMENTAL BALANCE SHEET INFORMATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMBINED
HISTORICAL SUPPLEMENTAL SUPPLEMENTAL
PRO FORMA ADJUSTMENTS INFORMATION
--------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 18,223 $(18,223)(c) $ --
Accounts receivable, net............................ 90,427 (7)(c) 90,420
Notes and other receivables......................... 13,802 524(c) 14,326
Deferred income taxes............................... 15,600 -- 15,600
Prepaid expenses and other.......................... 30,611 -- 30,611
---------- -------- ----------
Total current assets........................ 168,663 (17,706) 150,957
Notes and other receivables........................... 11,704 -- 11,704
Property and equipment, net........................... 799,512 5,733(c) 805,245
Excess of cost over net assets of acquired businesses,
net................................................. 108,664 20,549(c) 129,213
Other intangible assets, net.......................... 34,127 4,556(c) 38,683
Other assets.......................................... 67,694 -- 67,694
---------- -------- ----------
Total assets................................ $1,190,364 $ 13,132 $1,203,496
========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................... $ 40,333 $ -- $ 40,333
Accrued liabilities................................. 48,618 2,296(c) 50,914
Deferred revenues................................... 6,030 -- 6,030
Current maturities of long-term debt................ 40,157 -- 40,157
---------- -------- ----------
Total current liabilities................... 135,138 2,296 137,434
Long-term debt........................................ 410,683 8,876(c) 451,359
31,800(d)
Closure, post-closure and other liabilities........... 87,156 -- 87,156
---------- -------- ----------
632,977 42,972 675,949
---------- -------- ----------
Commitments and contingencies......................... -- -- --
Stockholders' equity:
Preferred stock:
USA Waste: $1.00 par value; 10,000,000 shares
authorized; none issued........................ -- -- --
Western: no par value; 2,000,000 shares
authorized; none issued........................ -- -- --
Common stock:
USA Waste: $.01 par value; 150,000,000 shares
authorized; historical 65,975,048 shares
(87,030,697 pro forma shares, 87,142,303
supplemental shares)
issued......................................... 870 1(c) 871
Western: no par value; 50,000,000 shares
authorized; 14,671,999 issued and
outstanding.................................... -- -- --
Additional paid-in capital.......................... 796,235 1,959(c) 798,194
Retained earnings (accumulated deficit)............. (237,899) (31,800)(d) (269,699)
Less treasury stock at cost, 138,810 shares......... (1,819) -- (1,819)
---------- -------- ----------
Total stockholders' equity.................. 557,387 (29,840) 527,547
---------- -------- ----------
Total liabilities and stockholders'
equity.................................... $1,190,364 $ 13,132 $1,203,496
========== ======== ==========
</TABLE>
81
<PAGE> 89
USA WASTE AND WESTERN COMBINED
SUPPLEMENTAL STATEMENT OF OPERATIONS INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMBINED
HISTORICAL SUPPLEMENTAL SUPPLEMENTAL
PRO FORMA ADJUSTMENTS INFORMATION
--------- ------------ ------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Operating revenues...................................... $ 731,000 $ 49,034(c) $780,034
-------- ------- --------
Costs and expenses:
Operating............................................. 428,331 27,968(c) 456,299
General and administrative............................ 101,268 6,793(c) 108,061
Unusual items......................................... 4,733 -- 4,733
Merger costs.......................................... 25,073 -- 25,073
Depreciation and amortization......................... 83,519 5,211(c) 88,730
-------- ------- --------
642,924 39,972 682,896
-------- ------- --------
Income from operations.................................. 88,076 9,062 97,138
-------- ------- --------
Other income (expense):
Interest expense:
Nonrecurring interest.............................. (10,994) -- (10,994)
Other.............................................. (35,437) 6,590(a) (31,864)
3,257(b)
(6,274)(c)
Interest income....................................... 4,222 788(c) 5,010
Other income, net..................................... 3,220 630(c) 3,850
-------- ------- --------
(38,989) 4,991 (33,998)
-------- ------- --------
Income before income taxes.............................. 49,087 14,053 63,140
Provision for income taxes.............................. 1,744 1,845(a) 4,819
912(b)
318(c)
-------- ------- --------
Income from continuing operations available to common
shareholders.......................................... $ 47,343 $ 10,978 $ 58,321
======== ======= ========
Income from continuing operations available to common
shareholders per share................................ $ 0.60 $ 0.66
======== ========
Weighted average shares outstanding..................... 78,946 4,818(a) 88,193
======== ========
3,178(b)
1,251(c)
=======
</TABLE>
SUPPLEMENTAL ADJUSTMENTS
(a) Reduction of interest expense as a result of USA Waste's public offering of
6,345,625 shares of its common stock on October 6, 1995, the net proceeds
of which were used for the repayment of approximately $118,000,000 of debt,
as if the transactions had occurred on January 1, 1995.
(b) Reduction of interest expense as result of USA Waste's conversion of
$42,300,000 of its 8 1/2% convertible subordinated debentures into its
common stock at $13.25 per share between November 3, 1995 and December 1,
1995, as if the conversion had occurred on January 1, 1995.
(c) Increase in results of operations and changes in balance sheet accounts
assuming the 1995 and 1996 business combinations accounted for as purchases
occurred on January 1, 1995.
(d) Reduction in retained earnings and increase in long-term debt related to
estimated nonrecurring costs of $31,800,000, consisting of $27,000,000 of
merger costs and $4,800,000 of retirement benefits to Western employees.
Actual merger costs may vary from such estimate.
82
<PAGE> 90
BENEFICIAL OWNERSHIP OF WESTERN COMMON STOCK
The following table sets forth information as of the Western Record Date
with respect to the beneficial ownership of Western Common Stock by (1) each
owner of more than 5% of Western Common Stock, (2) each director of Western, (3)
certain executive officers of Western, including the Chief Executive Officer and
Western's four most highly compensated officers other than the Chief Executive
Officer who were serving as officers at December 31, 1995, and (4) all executive
officers and directors of Western as a group. Upon the Merger, options to
purchase Western Common Stock will be converted into options to purchase USA
Waste Common Stock. In addition, USA Waste owns 634,900 shares of Western Common
Stock, or approximately 4.3% of the shares outstanding as of the Western Record
Date. Except as otherwise indicated below, each of the entities and persons
named in the table has sole voting and investment power with respect to all
shares of Western Common Stock beneficially owned.
<TABLE>
<CAPTION>
WESTERN USA WASTE
NAME AND ADDRESS COMMON STOCK COMMON STOCK
OF BENEFICIAL OWNER BEFORE THE MERGER PERCENTAGE AFTER THE MERGER(1) PERCENTAGE
- ------------------------------------ ----------------- ---------- ------------------- ----------
<S> <C> <C> <C> <C>
Harry S. Derbyshire................. 68,333(1) * 133,500(9) *
Ramsey DiLibero..................... 22,305(2) * 82,958(10) *
Lawrence F. McQuaide................ 25,447(3) * 77,171(11) *
Dr. A.N. Mosich..................... 37,333(4) * 93,000(12) *
Arnold J. Rothlisberger............. 1,316(5) * 15,099(13) *
Kosti Shirvanian.................... 5,832,372(6) 36.1% 9,086,058(14) 10.1%
John W. Simmons..................... 64,333(7) * 121,499(15) *
Savey Tufenkian..................... 608,986(8) 4.0% 1,074,731(16) 1.2%
All executive officers and directors
as a group (8 persons)............ 6,660,425 39.9% 10,684,016 11.9%
</TABLE>
- ---------------
* Percentage owned does not exceed 1%.
(1) Includes options to acquire 64,333 shares exercisable within 60 days.
(2) Includes options to acquire 21,000 shares exercisable within 60 days.
(3) Includes options to acquire 24,800 shares exercisable within 60 days.
(4) Includes options to acquire 37,333 shares exercisable within 60 days.
(5) Includes options to acquire 1,250 shares exercisable within 60 days.
(6) Includes options to acquire 1,356,331 shares exercisable within 60 days and
shares held by a trust over which Mr. Shirvanian and his wife share voting
and investment power. In addition, in connection with the Merger, Mr.
Shirvanian entered into (i) a voting agreement by which he has agreed,
among other things, to vote shares owned by him currently and at any time
prior to the termination of his voting agreement in favor of the Merger and
(ii) an irrevocable proxy which permits certain officers of USA Waste to
vote 4,476,041 of his shares in favor of the Merger.
(7) Includes options to acquire 57,333 shares exercisable within 60 days.
(8) Includes (i) options held by Mrs. Tufenkian to acquire 292,499 shares
exercisable within 60 days and (ii) 27,251 shares, options to acquire
57,500 shares exercisable within 60 days and 2,836 shares in Western's
401(k) Savings and Investment Plan owned by Mrs. Tufenkian's husband over
which Mrs. Tufenkian has shared voting and investment power.
(9) Includes the acceleration of options to acquire 20,667 shares of Western
Common Stock, in the event that Mr. Derbyshire resigns from the Board of
Directors of Western, which will be converted into the right to acquire
31,000 shares of USA Waste Common Stock.
(10) Includes the acceleration of options to acquire 33,000 shares of Western
Common Stock, which will be converted into the right to acquire 49,500
shares of USA Waste Common Stock.
(11) Includes the acceleration of options to acquire 26,000 shares of Western
Common Stock, which will be converted into the right to acquire 39,000
shares of USA Waste Common Stock.
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(12) Includes the acceleration of options to acquire 24,667 shares of Western
Common Stock, in the event that Dr. Mosich resigns as a director of
Western, which will be converted into the right to acquire 37,000 shares of
USA Waste Common Stock.
(13) Includes the acceleration of options to acquire 8,750 shares of Western
Common Stock, which will be converted into the right to acquire 13,125
shares of USA Waste Common Stock.
(14) Includes options to acquire 2,034,496 shares of USA Waste Common Stock
exercisable within 60 days and 337,500 shares of USA Waste Common Stock,
representing 225,000 shares of Western Common Stock to be issued by Western
to the Shirvanian Family Investment Partnership, of which Mr. Shirvanian is
a general partner in exchange for all of the partnership's right, title and
interest in the Carson, California transfer station. See "Merger and
Related Transactions -- Other Agreements."
(15) Includes the acceleration of options to acquire 16,667 shares of Western
Common Stock, in the event that Mr. Simmons resigns as a director of
Western, which will be converted into the right to acquire 25,000 shares of
USA Waste Common Stock.
(16) Includes the acceleration of Mrs. Tufenkian's option to acquire 85,000
shares of Western Common Stock, in the event that Mrs. Tufenkian resigns as
a director of Western, plus the acceleration of Mr. Tufenkian's options to
acquire 22,500 shares of Western Common Stock, both of which will be
converted into the right to acquire 161,251 shares of USA Waste Common
Stock.
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MARKET PRICE DATA
MARKET INFORMATION
USA Waste Common Stock is traded on the NYSE under the symbol "UW." Western
Common Stock is traded on the NYSE under the symbols "WW." The following table
sets forth the range of high and low trading prices for the USA Waste Common
Stock and the Western Common Stock, as reported on the NYSE.
<TABLE>
<CAPTION>
USA WASTE WESTERN
COMMON STOCK COMMON STOCK
----------------- -----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1994
First Quarter................................. $15.00 $11.13 $16.50 $13.38
Second Quarter................................ 13.38 10.38 20.50 13.63
Third Quarter................................. 15.13 11.50 20.63 17.38
Fourth Quarter................................ 15.13 11.00 18.63 13.38
1995
First Quarter................................. $12.38 $10.00 $17.00 $14.88
Second Quarter................................ 16.63 11.50 20.63 15.38
Third Quarter................................. 21.88 14.63 24.50 19.00
Fourth Quarter................................ 22.50 17.00 27.50 18.00
1996
First Quarter................................. $25.63 $17.25 $38.13 $25.25
</TABLE>
On December 18, 1995, the last trading day prior to announcement by USA
Waste and Western that they had reached an agreement concerning the Merger, the
closing sale price of USA Waste Common Stock as reported on the NYSE was $18.88
per share and the closing sale price of Western Common Stock as reported on the
NYSE was $24.38 per share. The equivalent per share price of Western Common
Stock on December 18, 1995, calculated by multiplying the closing sale price of
USA Waste Common Stock on the same date by the Exchange Ratio, was $28.31.
On April 1, 1996, the closing sale price of USA Waste Common Stock as
reported on the NYSE was $25.88 per share; and the closing sale price of Western
Common on the NYSE was $38.75. Following the Merger, USA Waste Common Stock will
continue to be traded on the NYSE under the symbol "UW", and the listing of
Western Common Stock on the NYSE will be terminated.
DIVIDEND INFORMATION
USA Waste has never paid cash dividends on its Common Stock. Envirofil paid
stock dividends on its preferred stock prior to its acquisition by USA Waste;
the holders of such preferred stock received USA Waste Common Stock in that
acquisition, and no dividends have been paid by USA Waste. In addition, Chambers
paid a dividend on its Class A common stock in November 1990; the holders of
Chamber's Class A common stock received USA Waste Common Stock in the Chambers
Merger, and no dividends have been paid by USA Waste. The Board of Directors of
USA Waste presently intends to retain any earnings in the foreseeable future for
USA Waste's business. In addition, payment of dividends on the USA Waste Common
Stock is restricted by the terms of USA Waste's bank credit agreement.
Western has never paid cash dividends on its Common Stock. In addition,
payment of dividends on the Western Common Stock is restricted by the terms of
Western's bank credit agreement.
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<PAGE> 93
DESCRIPTION OF USA WASTE CAPITAL STOCK
USA Waste is currently authorized to issue 150,000,000 shares of its Common
Stock, par value $.01 per share, of which 65,906,973 shares were outstanding on
the USA Waste Record Date, and 10,000,000 shares of Preferred Stock, none of
which are outstanding.
COMMON STOCK
Each holder of USA Waste Common Stock is entitled to one vote per share
held of record on each matter submitted to stockholders. Cumulative voting for
the election of directors is not permitted, and the holders of a majority of
shares voting for the election of directors can elect all members of the USA
Waste Board of Directors.
Subject to the rights of any holders of Preferred Stock, holders of record
of shares of USA Waste Common Stock are entitled to receive ratably dividends
when and if declared by the USA Waste Board of Directors out of funds of USA
Waste legally available therefor. In the event of a voluntary or involuntary
winding up or dissolution, liquidation or partial liquidation of USA Waste,
holders of USA Waste Common Stock are entitled to participate ratably in any
distribution of the assets of USA Waste, subject to any prior rights of holders
of any outstanding Preferred Stock.
Holders of USA Waste Common Stock have no conversion, redemption or
preemptive rights. All outstanding shares of USA Waste Common Stock are validly
issued, fully paid and nonassessable.
PREFERRED STOCK
The USA Waste Board of Directors is authorized, without further approval of
the stockholders, to issue the Preferred Stock in series and with respect to
each series, to fix its designations, relative rights (including voting,
dividend, conversion, sinking fund and redemption rights), preferences
(including with respect to dividends and upon liquidation), privileges and
limitations. The Board of Directors of USA Waste, without stockholder approval,
may issue Preferred Stock with voting and conversion rights, both of which could
adversely affect the voting power of the holders of USA Waste Common Stock, and
dividend or liquidation preferences that would restrict Common Stock dividends
or adversely affect the assets available for distribution to holders of shares
of Common Stock upon USA Waste's dissolution.
AUTHORIZED BUT UNISSUED SHARES
Authorized but unissued shares of USA Waste Common Stock or Preferred Stock
can be reserved for issuance by the Board of Directors of USA Waste from time to
time without further shareholder action for proper corporate purposes, including
stock dividends or stock splits, raising equity capital and structuring future
corporate transactions, including acquisitions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the USA Waste Common Stock is Boston
EquiServe, Boston, Massachusetts.
LIMITED LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Restated Certificate of Incorporation of USA Waste provides that the
directors of USA Waste shall not be liable to USA Waste or its shareholders for
monetary damages for breach of fiduciary duty as a director to the fullest
extent permitted by the DGCL. The foregoing limitation does not eliminate or
limit the liability of a director for any breach of a director's duty of loyalty
to USA Waste or its shareholders, for acts or omissions not in good faith or
which involved intentional misconduct or a knowing violation of law, for any
transaction from which the director derived an improper personal benefit, or for
approval of the unlawful payment of a dividend or an unlawful stock purchase or
redemption. The Restated Certificate of Incorporation of USA Waste also provides
that USA Waste shall indemnify, and advance litigation expenses to, its
officers, directors,
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<PAGE> 94
employees, and agents to the fullest extent permitted by the DGCL and all other
laws of the State of Delaware.
The DGCL provides that USA Waste has the power to indemnify any person who
is sued or threatened to be made a named party in a proceeding, other than an
action by or in the right of USA Waste, because such person is or was a
director, officer, employee, or agent of USA Waste or is or was serving at the
request of USA Waste as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses actually and reasonably incurred by such person in connection with such
proceeding. In order to be indemnified, the person must have (1) acted in good
faith; (2) acted in a manner he reasonably believed to be in or not opposed to
the best interests of USA Waste; and (3) with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The indemnification includes attorneys' fees, judgments, fines and
amounts paid in settlement.
The DGCL also provides that USA Waste may indemnify any person who is sued
or threatened to be made a named party in a proceeding by or in the right of USA
Waste to procure a judgment in its favor because such person is or was a
director, officer, employee or agent of USA Waste, or is or was serving at the
request of USA Waste as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. In order to
be indemnified, the person must have conducted himself or herself in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of USA Waste. No indemnification may be made, however, with
respect to any claim, issue or matter as to which such person shall have been
judged to be liable to USA Waste unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnification for
such expenses which the court shall deem proper.
Indemnification by USA Waste is subject to a determination that the
director, officer, employee or agent has met the applicable standard of conduct.
The determination must be made (1) by a majority vote of a quorum of the USA
Waste Board of Directors, consisting only of directors who were not parties to
such action, suit or proceeding; (2) if such a quorum cannot be obtained, or
even if obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or (3) by the shareholders of
USA Waste.
USA Waste maintains an officers and directors liability insurance policy
insuring officers and directors of USA Waste and its subsidiaries against
certain liabilities, including liabilities under the Securities Act. The effect
of such policy is to indemnify the officers and directors of USA Waste against
losses incurred by them while acting in such capacities.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers, or persons controlling USA Waste pursuant to
the foregoing provisions, USA Waste had been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in such
Act and is therefore unenforceable.
INDEPENDENT AUDITORS
Representatives of Coopers & Lybrand L.L.P., USA Waste's independent
auditors, are expected to be present at the USA Waste Annual Meeting and will
have the opportunity to make a statement if they so desire. Such representatives
are also expected to be available to respond to appropriate questions.
Representatives of Ernst & Young LLP, Western's independent auditors, are
expected to be present at the Western Special Meeting and will have the
opportunity to make a statement if they so desire. Such representatives are also
expected to be available to respond to appropriate questions.
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<PAGE> 95
LEGAL MATTERS
The validity of the USA Waste Common Stock to be issued in connection with
the Merger and certain legal issues and tax consequences of the Merger will be
passed upon by Andrews & Kurth L.L.P., Houston, Texas. Certain legal issues and
tax consequences of the Merger will be passed upon for Western by Sheppard,
Mullin, Richter & Hampton LLP, Los Angeles, California.
EXPERTS
The consolidated balance sheets of USA Waste as of December 31, 1994 and
1995 and the consolidated statements of operations, retained earnings, and cash
flows for each of the three years in the period ended December 31, 1995, of USA
Waste, incorporated by reference in this Joint Proxy Statement and Prospectus,
have been incorporated herein in reliance on the report, which makes reference
to the reliance on the report of other auditors, of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of Western appearing in Western Waste
Industries' Annual Report (Form 10-K) for the year ended June 30, 1995 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such financial
statements referred to above are incorporated herein by reference in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
PROPOSALS OF STOCKHOLDERS FOR ANNUAL MEETING
The Board of Directors of USA Waste will consider proposals of stockholders
intended to be presented for action at the 1997 Annual Meeting of Stockholders.
A stockholder proposal must be submitted in writing and be received at USA
Waste's principal executive offices, 5400 LBJ Freeway, Suite 300 -- Tower One,
Dallas, Texas 75240, no later than December 3, 1996, to be considered for
inclusion in USA Waste's proxy statement and form of proxy relating to the 1997
Annual Meeting of Stockholders. Submission of a stockholder proposal does not
assure inclusion in the proxy statement or form of proxy because proposals must
meet certain Commission rules.
OTHER MATTERS
The Board of Directors of USA Waste does not know of any other matters to
be presented for action at the USA Waste Annual Meeting other than those listed
in the Notice of Meeting and referred to herein. Under California law, no other
matters may come before the Western Special Meeting. If any other matter should
properly come before the USA Waste Annual Meeting or any adjournment thereof, it
is intended that the proxies solicited hereby be voted with respect to such
matters in accordance with the judgment of the persons voting such proxies.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 18, 1995
BY AND AMONG
USA WASTE SERVICES, INC.,
RIVIERA ACQUISITION CORPORATION
AND
WESTERN WASTE INDUSTRIES
<PAGE> 97
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 18, 1995 (the
"Agreement"), by and among USA Waste Services, Inc., a Delaware corporation
("Parent"), Riviera Acquisition Corporation, a California corporation and a
wholly owned subsidiary of Parent ("Subsidiary"), and Western Waste Industries,
a California corporation (the "Company");
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Subsidiary and the Company have
approved the merger of Subsidiary with and into the Company on the terms set
forth in the Agreement (the "Merger"); and
WHEREAS, Parent, Subsidiary and the Company intend the Merger to qualify as
a tax-free reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder;
WHEREAS, in connection with the Merger and as an inducement to the Company
to enter into this Agreement, the Company, Parent and certain shareholders of
Parent have executed as of the date hereof a voting agreement in favor of the
Company with respect to, among other things, the voting of shares of capital
stock of Parent held or to be held by them in favor of the Merger; and
WHEREAS, in connection with the Merger and as an inducement to Parent to
enter into this Agreement, Parent, the Company and a principal shareholder of
the Company have executed as of the date hereof a voting agreement in favor of
Parent with respect to, among other things, the voting of shares of capital
stock of the Company held or to be held by such shareholder in favor of the
Merger.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the California Corporations Code (the "CCC"), Subsidiary shall be merged
with and into the Company and the separate existence of Subsidiary shall
thereupon cease. The Company shall be the surviving corporation in the Merger
and is hereinafter sometimes referred to as the "Surviving Corporation."
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "Effective Time") as shall be stated in a certified
copy of the Agreement, in a form mutually acceptable to Parent and the Company,
to be filed with the Secretary of State of the State of California in accordance
with the CCC (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the closing of the
transactions contemplated by this Agreement in accordance with Section 3.5. The
parties acknowledge that it is their mutual desire and intent to consummate the
Merger as soon as practicable after the date hereof. Accordingly, the parties
shall use all reasonable efforts to consummate, as soon as practicable, the
transactions contemplated by this Agreement in accordance with Section 3.5.
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ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1. ARTICLES OF INCORPORATION. The Articles of Incorporation of
Subsidiary as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation after the Effective Time,
and thereafter may be amended in accordance with its terms and as provided in
the CCC.
SECTION 2.2. BY-LAWS. The By-laws of Subsidiary as in effect immediately
prior to the Effective Time shall be the By-laws of the Surviving Corporation
after the Effective Time, and thereafter may be amended in accordance with their
terms and as provided by the Articles of Incorporation of the Surviving
Corporation and the CCC.
SECTION 2.3. DIRECTORS. The Board of Directors of Parent shall take such
corporate action as may be necessary to cause Parent's Board of Directors
immediately following the Effective Time to be expanded to include three (3)
members designated by the Board of Directors of the Company, one of whom shall
be appointed by the Board of Directors of Parent to the Executive Committee of
the Board of Directors of Parent. The directors of the Surviving Corporation
shall be as designated in Schedule 2.3, and such directors shall serve in
accordance with the By-laws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
SECTION 2.4. OFFICERS. The officers of the Surviving Corporation shall be
as designated in Schedule 2.4, and such officers shall serve in accordance with
the By-laws of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. CONVERSION OF COMPANY SHARES IN THE MERGER. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of the Company:
(a) each share of the Company's Common Stock, no par value (the
"Company Common Stock"), shall, subject to Sections 3.3 and 3.4, be
converted into the right to receive, without interest, 1.50 (the "Exchange
Ratio") shares of the common stock, par value $.01 per share, of Parent
("Parent Common Stock");
(b) each share of capital stock of the Company, if any, owned by
Parent or any subsidiary of Parent or held in treasury by the Company or
any subsidiary of the Company immediately prior to the Effective Time shall
be cancelled and shall cease to exist from and after the Effective Time;
and
(c) subject to and as more fully provided in Section 7.9, each
unexpired option to purchase Company Common Stock that is outstanding at
the Effective Time, whether or not exercisable, shall automatically and
without any action on the part of the holder thereof be converted into an
option to purchase a number of shares of Parent Common Stock equal to the
number of shares of Company Common Stock that could be purchased under such
option multiplied by the Exchange Ratio, at a price per share of Parent
Common Stock equal to the per share exercise price of such option divided
by the Exchange Ratio.
SECTION 3.2. CONVERSION OF SUBSIDIARY SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent as the sole
stockholder of Subsidiary, each issued and outstanding share of common stock,
par value $.01 per share, of Subsidiary ("Subsidiary Common Stock") shall be
converted into one share of common stock, no par value, of the Surviving
Corporation.
SECTION 3.3. EXCHANGE OF CERTIFICATES. (a) From and after the Effective
Time, each holder of an outstanding certificate which immediately prior to the
Effective Time represented shares of Company Common Stock shall be entitled to
receive in exchange therefor, upon surrender thereof to an exchange agent
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reasonably satisfactory to Parent and the Company (the "Exchange Agent"), a
certificate or certificates representing the number of whole shares of Parent
Common Stock to which such holder is entitled pursuant to Section 3.1(a).
Notwithstanding any other provision of this Agreement, (i) until holders or
transferees of certificates theretofore representing shares of Company Common
Stock have surrendered them for exchange as provided herein, no dividends shall
be paid with respect to any shares represented by such certificates and no
payment for fractional shares shall be made and (ii) without regard to when such
certificates representing shares of Company Common Stock are surrendered for
exchange as provided herein, no interest shall be paid on any dividends or any
payment for fractional shares. Upon surrender of a certificate which immediately
prior to the Effective Time represented shares of Company Common Stock, there
shall be paid to the holder of such certificate the amount of any dividends
which theretofore became payable, but which were not paid by reason of the
foregoing, with respect to the number of whole shares of Parent Common Stock
represented by the certificate or certificates issued upon such surrender.
(b) If any certificate for shares of Parent Common Stock is to be issued in
a name other than that in which the certificate for shares of Company Common
Stock surrendered in exchange therefor is registered, it shall be a condition of
such exchange that the person requesting such exchange shall pay any applicable
transfer or other taxes required by reason of such issuance.
(c) Promptly after the Effective Time, Parent shall make available to the
Exchange Agent the certificates representing shares of Parent Common Stock
required to effect the exchanges referred to in paragraph (a) above and cash for
payment of any fractional shares referred to in Section 3.4.
(d) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates that immediately prior to
the Effective Time represented outstanding shares of Company Common Stock (the
"Company Certificates") (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon actual delivery of the Company Certificates
to the Exchange Agent) and (ii) instructions for use in effecting the surrender
of the Company Certificates in exchange for certificates representing shares of
Parent Common Stock. Upon surrender of Company Certificates for cancellation to
the Exchange Agent, together with a duly executed letter of transmittal and such
other documents as the Exchange Agent shall reasonably require, the holder of
such Company Certificates shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares of Company Common Stock theretofore represented by the Company
Certificates so surrendered shall have been converted pursuant to the provisions
of Section 3.1(a), and the Company Certificates so surrendered shall be
cancelled. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of Company Common Stock for
any shares of Parent Common Stock or dividends or distributions thereon
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(e) Promptly following the date which is nine (9) months after the
Effective Date, the Exchange Agent shall deliver to Parent all cash,
certificates (including any Parent Common Stock) and other documents in its
possession relating to the transactions described in this Agreement, and the
Exchange Agent's duties shall terminate. Thereafter, each holder of a Company
Certificate may surrender such Company Certificate to the Surviving Corporation
and (subject to applicable abandoned property, escheat and similar laws) receive
in exchange therefor the Parent Common Stock, without any interest thereon.
Notwithstanding the foregoing, none of the Exchange Agent, Parent, Subsidiary,
the Company or the Surviving Corporation shall be liable to a holder of Company
Common Stock for any Parent Common Stock delivered to a public official pursuant
to applicable abandoned property, escheat and similar laws.
(f) In the event any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed Company
Certificate the Parent Common Stock deliverable in respect thereof determined in
accordance with this Article III. When authorizing such payment in exchange
therefor, the Board of Directors of the Surviving Corporation may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Company Certificate to give the
Surviving Corporation such indemnity as it may reasonably direct
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<PAGE> 100
as protection against any claim that may be made against the Surviving
Corporation with respect to the Company Certificate alleged to have been lost,
stolen or destroyed.
SECTION 3.4. NO FRACTIONAL SECURITIES. Notwithstanding any other provision
of this Agreement, no certificates or scrip for fractional shares of Parent
Common Stock shall be issued in the Merger and no Parent Common Stock dividend,
stock split or interest shall relate to any fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any other
rights of a security holder. In lieu of any such fractional shares, each holder
of Company Common Stock who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock upon surrender of Company
Certificates for exchange pursuant to this Article III shall be entitled to
receive from the Exchange Agent a cash payment equal to such fraction multiplied
by the average closing price per share of Parent Common Stock on the New York
Stock Exchange, as reported by the Wall Street Journal, during the 10 trading
days immediately preceding the Effective Time.
SECTION 3.5. CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at a location mutually agreeable
to Parent and the Company on the fifth business day immediately following the
date on which the last of the conditions set forth in Article VIII is fulfilled
or waived, or at such other time and place as Parent and the Company shall agree
(the date on which the Closing occurs is referred to in this Agreement as the
"Closing Date").
SECTION 3.6. CLOSING OF THE COMPANY'S TRANSFER BOOKS. At and after the
Effective Time, holders of Company Certificates shall cease to have any rights
as stockholders of the Company, except for the right to receive shares of Parent
Common Stock pursuant to Section 3.1 and the right to receive cash for payment
of fractional shares pursuant to Section 3.4. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time shall thereafter be made. If, after the Effective Time, subject to the
terms and conditions of this Agreement, Company Certificates formerly
representing Company Common Stock are presented to the Surviving Corporation,
they shall be cancelled and exchanged for Parent Common Stock in accordance with
this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant to the Company that,
except as set forth in the Disclosure Schedule dated as of the date hereof and
signed by an authorized officer of Parent (the "Disclosure Schedule"), each of
which exceptions shall specifically identify the relevant Section hereof to
which it relates:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Each of Parent and Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted. Each of Parent and Subsidiary is qualified to do
business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole. True, accurate and complete copies of each of
Parent's and Subsidiary's charters and By-laws, in each case as in effect on the
date hereof, including all amendments thereto, have heretofore been delivered to
the Company.
SECTION 4.2. CAPITALIZATION. (a) The authorized capital stock of Parent
consists of (i) 150,000,000 shares of Parent Common Stock, of which 60,659,184
shares were outstanding as of November 10, 1995, and (ii) 10,000,000 shares of
preferred stock, par value $.01 per share, none of which was issued and
outstanding as of November 10, 1995. All of the issued and outstanding shares of
Parent Common Stock are validly issued and are fully paid, nonassessable and
free of preemptive rights.
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(b) The authorized capital stock of Subsidiary consists of 1,000 shares of
Subsidiary Common Stock, of which 100 shares are issued and outstanding, which
shares are owned beneficially and of record by Parent.
(c) Except as disclosed in the Parent SEC Reports (as defined in Section
4.5), as of the date hereof, there are no outstanding subscriptions, options,
calls, contracts, commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement and also including any
rights plan or other anti-takeover agreement, obligating Parent or any
subsidiary of Parent to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of the capital stock of Parent or obligating Parent
or any subsidiary of Parent to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which Parent or any subsidiary of Parent is a party or is
bound with respect to the voting of any shares of capital stock of Parent other
than voting agreements executed in connection with this Agreement. The shares of
Parent Common Stock issued to stockholders of the Company in the Merger will be
at the Effective Time duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights.
SECTION 4.3. SUBSIDIARIES. Each direct and indirect corporate subsidiary of
Parent is duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted. Each subsidiary of Parent is qualified to do
business, and is in good standing, in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing would not, when taken together with all such other
failures, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole. All of the outstanding shares of
capital stock of each corporate subsidiary of Parent are validly issued, fully
paid, nonassessable and free of preemptive rights, and are owned directly or
indirectly by Parent, free and clear of any liens, claims or encumbrances except
that such shares are pledged to secure Parent's credit facilities. There are no
subscriptions, options, warrants, rights, calls, contracts, voting trusts,
proxies or other commitments, understandings, restrictions or arrangements
relating to the issuance, sale, voting, transfer, ownership or other rights with
respect to any shares of capital stock of any corporate subsidiary of Parent,
including any right of conversion or exchange under any outstanding security,
instrument or agreement. As used in this Agreement, the term "subsidiary" shall
mean, when used with reference to any person or entity, any corporation,
partnership, joint venture or other entity of which such person or entity
(either acting alone or together with its other subsidiaries) owns, directly or
indirectly, 50% or more of the stock or other voting interests, the holders of
which are entitled to vote for the election of a majority of the board of
directors or any similar governing body of such corporation, partnership, joint
venture or other entity.
SECTION 4.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) Parent and
Subsidiary each have full corporate power and authority to enter into this
Agreement and, subject to the Parent Stockholders' Approval (as defined in
Section 7.3(b)) and the Parent Required Statutory Approvals (as defined in
Section 4.4(c)), to consummate the transactions contemplated hereby. This
Agreement has been approved by the Boards of Directors of Parent and Subsidiary,
and no other corporate proceedings on the part of Parent or Subsidiary are
necessary to authorize the execution and delivery of this Agreement or, except
for the Parent Stockholders' Approval, the consummation by Parent and Subsidiary
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Parent and Subsidiary, and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a valid
and legally binding agreement of each of Parent and Subsidiary enforceable
against each of them in accordance with its terms, except that such enforcement
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles. Without limitation of the
foregoing, each of the covenants and obligations of Parent set forth in Sections
6.2, 6.5, 7.1, 7.2, 7.3, 7.6, 7.7, 7.8, 7.10 and 7.12 is valid, legally binding
and enforceable notwithstanding the absence of the Parent Stockholders'
Approval.
(b) The execution and delivery of this Agreement by each of Parent and
Subsidiary do not violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or
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lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Parent or any of its subsidiaries under any of the terms, conditions or
provisions of (i) the respective charters or by-laws of Parent or any of its
subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to Parent or any of its subsidiaries or any of their
respective properties or assets or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Parent or any of its
subsidiaries is now a party or by which Parent or any of its subsidiaries or any
of their respective properties or assets may be bound or affected. The
consummation by Parent and Subsidiary of the transactions contemplated hereby
will not result in any violation, conflict, breach, termination, acceleration or
creation of liens under any of the terms, conditions or provisions described in
clauses (i) through (iii) of the preceding sentence, subject (x) in the case of
the terms, conditions or provisions described in clause (ii) above, to obtaining
(prior to the Effective Time) the Parent Required Statutory Approvals and the
Parent Stockholder's Approval and (y) in the case of the terms, conditions or
provisions described in clause (iii) above, to obtaining (prior to the Effective
Time) consents required from commercial lenders, lessors or other third parties.
Excluded from the foregoing sentences of this paragraph (b), insofar as they
apply to the terms, conditions or provisions described in clauses (ii) and (iii)
of the first sentence of this paragraph (b), are such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens, security
interests, charges or encumbrances that would not, in the aggregate, have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) results of operations or prospects of Parent and
its subsidiaries, taken as a whole.
(c) Except for (i) the filings by Parent and the Company required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of the Joint Proxy Statement/Prospectus (as defined in
Section 4.9) with the Securities and Exchange Commission (the "SEC") pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act of 1933, as amended (the "Securities Act"), and the declaration
of the effectiveness thereof by the SEC and filings with various state blue sky
authorities, (iii) the making of the Merger Filing with the Secretary of State
of the State of California in connection with the Merger, and (iv) any required
filings with or approvals from applicable state environmental authorities,
public service commissions and public utility commissions (the filings and
approvals referred to in clauses (i) through (iv) are collectively referred to
as the "Parent Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by Parent or Subsidiary or the consummation by Parent
or Subsidiary of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole.
SECTION 4.5. REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1993,
Parent has filed with the SEC all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied in all material respects with all applicable requirements
of the appropriate act and the rules and regulations thereunder. Parent has
previously delivered to the Company copies of its (a) Annual Reports on Form
10-K for the fiscal year ended December 31, 1994 and for each of the two
immediately preceding fiscal years, as filed with the SEC, (b) proxy and
information statements relating to (i) all meetings of its stockholders (whether
annual or special) and (ii) actions by written consent in lieu of a
stockholders' meeting from January 1, 1993, until the date hereof, and (c) all
other reports, including quarterly reports, or registration statements filed by
Parent with the SEC since January 1, 1993 (other than Registration Statements
filed on Form S-8) (collectively, the "Parent SEC Reports"). As of their
respective dates, the Parent SEC Reports did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited
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consolidated financial statements and unaudited interim consolidated financial
statements of Parent included in such reports (collectively, the "Parent
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
Parent and its subsidiaries as of the dates thereof and the results of their
operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein.
SECTION 4.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
Parent SEC Reports or with respect to acquisitions or potential transactions or
commitments heretofore disclosed to the Company in writing, neither Parent nor
any of its subsidiaries had at September 30, 1995, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except: (a) liabilities, obligations or contingencies
(i) which are accrued or reserved against in the Parent Financial Statements or
reflected in the notes thereto or (ii) which were incurred after September 30,
1995, and were incurred in the ordinary course of business and consistent with
past practices; (b) liabilities, obligations or contingencies which (i) would
not, in the aggregate, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of Parent and its subsidiaries, taken as a whole, or (ii) have been
discharged or paid in full prior to the date hereof; and (c) liabilities and
obligations which are of a nature not required to be reflected in the
consolidated financial statements of Parent and its subsidiaries prepared in
accordance with generally accepted accounting principles consistently applied
and which were incurred in the ordinary course of business.
SECTION 4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
most recent Parent SEC Report, there has not been any material adverse change in
the business, operations, properties, assets, liabilities, condition (financial
or other) or results of operations of Parent and its subsidiaries, taken as a
whole.
SECTION 4.8. LITIGATION. Except as disclosed in the Parent SEC Reports,
there are no claims, suits, actions or proceedings pending or, to the knowledge
of Parent, threatened against, relating to or affecting Parent or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seek to restrain or enjoin
the consummation of the Merger or which could reasonably be expected, either
alone or in the aggregate with all such claims, actions or proceedings, to
materially and adversely affect the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole. Except as set forth in the Parent SEC Reports,
neither Parent nor any of its subsidiaries is subject to any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator which prohibits or
restricts the consummation of the transactions contemplated hereby or would have
any material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole.
SECTION 4.9. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by Parent or its subsidiaries for inclusion in (a)
the Registration Statement on Form S-4 to be filed under the Securities Act with
the SEC by Parent in connection with the Merger for the purpose of registering
the shares of Parent Common Stock to be issued in the Merger (the "Registration
Statement") or (b) the proxy statement to be distributed in connection with the
Company's and Parent's meetings of their respective stockholders to vote upon
this Agreement and the transactions contemplated hereby (the "Proxy Statement"
and, together with the prospectus included in the Registration Statement, the
"Joint Proxy Statement/Prospectus") will, in the case of the Proxy Statement or
any amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
the meetings of stockholders of the Company and Parent to be held in connection
with the transactions contemplated by this Agreement, or, in the case of the
Registration Statement, as amended or supplemented, at the time it becomes
effective and at the time of such meetings of the stockholders of the Company
and Parent, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement/Prospectus will, as of its mailing date,
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comply as to form in all material respects with all applicable laws, including
the provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
Parent or Subsidiary with respect to information supplied by the Company or the
stockholders of the Company for inclusion therein.
SECTION 4.10. NO VIOLATION OF LAW. Except as disclosed in the Parent SEC
Reports, neither Parent nor any of its subsidiaries is in violation of, or has
been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance, or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the aggregate,
could not reasonably be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole. Except
as disclosed in the Parent SEC Reports, as of the date of this Agreement, to the
knowledge of Parent, no investigation or review by any governmental or
regulatory body or authority is pending or threatened, nor has any governmental
or regulatory body or authority indicated an intention to conduct the same,
other than, in each case, those the outcome of which, as far as reasonably can
be foreseen, will not have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Parent and its subsidiaries, taken as a whole. Parent and its
subsidiaries have all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals necessary
to conduct their businesses as presently conducted (collectively, the "Parent
Permits"), except for permits, licenses, franchises, variances, exemptions,
orders, authorizations, consents and approvals the absence of which, alone or in
the aggregate, would not have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Parent and its subsidiaries, taken as a whole. Parent and its
subsidiaries are not in violation of the terms of any Parent Permit, except for
delays in filing reports or violations which, alone or in the aggregate, would
not have a material adverse effect on the business, operations, properties,
assets, condition (financial or other) or results of operations of the Parent
and its subsidiaries, taken as a whole.
SECTION 4.11. COMPLIANCE WITH AGREEMENTS. Except as disclosed in the Parent
SEC Reports, Parent and each of its subsidiaries are not in breach or violation
of or in default in the performance or observance of any term or provision of,
and no event has occurred which, with lapse of time or action by a third party,
could result in a default under (a) the respective charters, by-laws or other
similar organizational instruments of Parent or any of its subsidiaries or (b)
any contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which Parent or any of its
subsidiaries is a party or by which any of them is bound or to which any of
their property is subject, which breaches, violations and defaults, in the case
of clause (b) of this Section 4.11, would have, in the aggregate, a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of Parent and its subsidiaries,
taken as a whole.
SECTION 4.12. TAXES. (a) Parent and its subsidiaries have (i) duly filed
with the appropriate governmental authorities all Tax Returns (as defined in
Section 4.12(c)) required to be filed by them for all periods ending on or prior
to the Effective Time, other than those Tax Returns the failure of which to file
would not have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole, and such Tax Returns are true,
correct and complete in all material respects and (ii) duly paid in full or made
adequate provision for the payment of all Taxes (as defined in Section 4.12(b))
for all periods ending at or prior to the Effective Time. The liabilities and
reserves for Taxes reflected in the Parent balance sheet included in the latest
Parent SEC Report are adequate to cover all Taxes for all periods ending at or
prior to the Effective Time and there are no material liens for Taxes upon any
property or assets of Parent or any subsidiary thereof, except for liens for
Taxes not yet due. There are no unresolved issues of law or fact arising out of
a notice of deficiency, proposed deficiency or assessment from the Internal
Revenue Service (the "IRS") or any other governmental taxing authority with
respect to Taxes of the Parent or any of its subsidiaries which, if decided
adversely, singly or in the aggregate, would have a material adverse effect on
the business, operations, properties, assets, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole. Neither
Parent nor any of its subsidiaries is a party to any agreement providing for the
allocation or sharing of Taxes with any
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entity that is not, directly or indirectly, a wholly-owned corporate subsidiary
of Parent other than agreements the consequences of which are fully and
adequately reserved for in the Parent Financial Statements. Neither Parent nor
any of its corporate subsidiaries has, with regard to any assets or property
held, acquired or to be acquired by any of them, filed a consent to the
application of Section 341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
including, without limitation, income, gross receipts, excise, property, sales,
withholding, social security, occupation, use, service, service use, license,
payroll, franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments imposed by the United States, or any
state, local or foreign government or subdivision or agency thereof, whether
computed on a separate, consolidated, unitary, combined or any other basis, and
such term shall include any interest, fines, penalties or additional amounts and
any interest in respect of any additions, fines or penalties attributable or
imposed or with respect to any such taxes, charges, fees, levies or other
assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall mean any
return, report or other document or information required to be supplied to a
taxing authority in connection with Taxes.
SECTION 4.13. EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as set forth in the
Parent SEC Reports, at the date hereof, Parent and its subsidiaries do not
maintain or contribute to any material employee benefit plans, programs,
arrangements or practices (such plans, programs, arrangements or practices of
Parent and its subsidiaries being referred to as the "Parent Plans"), including
employee benefit plans within the meaning set forth in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or other
similar material arrangements for the provision of benefits (excluding any
"Multi-employer Plan" within the meaning of Section 3(37) of ERISA or a
"Multiple Employer Plan" within the meaning of Section 413(c) of the Code). The
Parent Disclosure Schedule lists all Multi-employer Plans and Multiple Employer
Plans which any of Parent or its subsidiaries maintains or to which any of them
makes contributions. Neither Parent nor its subsidiaries has any obligation to
create any additional such plan or to amend any such plan so as to increase
benefits thereunder, except as required under the terms of the Parent Plans,
under existing collective bargaining agreements or to comply with applicable
law.
(b) Except as disclosed in the Parent SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Parent Plans that could
result in penalties, taxes or liabilities which, singly or in the aggregate,
could have a material adverse effect on the business, operations, properties,
assets, condition (financial or other) or results of operations of Parent and
its subsidiaries, taken as a whole, (ii) except for premiums due, there is no
outstanding material liability, whether measured alone or in the aggregate,
under Title IV of ERISA with respect to any of the Parent Plans, (iii) neither
the Pension Benefit Guaranty Corporation nor any plan administrator has
instituted proceedings to terminate any of the Parent Plans subject to Title IV
of ERISA other than in a "standard termination" described in Section 4041(b) of
ERISA, (iv) none of the Parent Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
of the Parent Plans ended prior to the date of this Agreement, (v) the current
present value of all projected benefit obligations under each of the Parent
Plans which is subject to Title IV of ERISA did not, as of its latest valuation
date, exceed the then current value of the assets of such plan allocable to such
benefit liabilities by more than the amount, if any, disclosed in the Parent SEC
Reports as of June 30, 1995, based upon reasonable actuarial assumptions
currently utilized for such Parent Plan, (vi) each of the Parent Plans has been
operated and administered in all material respects in accordance with applicable
laws during the period of time covered by the applicable statute of limitations,
(vii) each of the Parent Plans which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and such determination has not been modified,
revoked or limited by failure to satisfy any condition thereof or by a
subsequent amendment thereto or a failure to amend, except that it may be
necessary to make additional amendments retroactively to maintain the
"qualified" status of such Parent Plans, and the period for making any such
necessary retroactive amendments has not expired, (viii) with respect to
Multi-employer Plans, neither Parent nor any of its subsidiaries has made or
suffered a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203, 4204 and 4205 of ERISA and, to the
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best knowledge of Parent and its subsidiaries, no event has occurred or is
expected to occur which presents a material risk of a complete or partial
withdrawal under said Sections 4203, 4204 and 4205, (ix) to the best knowledge
of Parent and its subsidiaries, there are no material pending, threatened or
anticipated claims involving any of the Parent Plans other than claims for
benefits in the ordinary course, and (x) Parent and its subsidiaries have no
current material liability for plan termination or withdrawal (complete or
partial) under Title IV of ERISA based on any plan to which any entity that
would be deemed one employer with Parent and its subsidiaries under Section 4001
of ERISA or Section 414 of the Code contributed during the period of time
covered by the applicable statute of limitations (a "Parent Controlled Group
Plan"), and Parent and its subsidiaries do not reasonably anticipate that any
such liability will be asserted against Parent or any of its subsidiaries. None
of the Parent Controlled Group Plans has an "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code).
(c) The Parent SEC Reports contain a true and complete summary or list of
or otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
SECTION 4.14. LABOR CONTROVERSIES. Except as set forth in the Parent SEC
Reports, (a) there are no significant controversies pending or, to the knowledge
of Parent, threatened between Parent or its subsidiaries and any representatives
of any of their employees and (b) to the knowledge of Parent, there are no
material organizational efforts presently being made involving any of the
presently unorganized employees of Parent and its subsidiaries except for such
controversies and organizational efforts which, singly or in the aggregate,
could not reasonably be expected to materially and adversely affect the
business, operations, properties, assets, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole.
SECTION 4.15. ENVIRONMENTAL MATTERS. (a) Except as set forth in the Parent
SEC Reports, (i) Parent and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws, including,
without limitation, having all permits, licenses and other approvals and
authorizations necessary for the operation of their respective businesses as
presently conducted, (ii) none of the properties owned by Parent or any of its
subsidiaries contain any Hazardous Substance as a result of any activity of
Parent or any of its subsidiaries in amounts exceeding the levels permitted by
applicable Environmental Laws, (iii) neither Parent nor any of its subsidiaries
has received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that Parent or any of its subsidiaries may be in violation of, or liable under,
any Environmental Law in connection with the ownership or operation of their
businesses, (iv) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or threatened,
against Parent or any of its subsidiaries relating to any violation, or alleged
violation, of any Environmental Law, (v) no reports have been filed, or are
required to be filed, by Parent or any of its subsidiaries concerning the
release of any Hazardous Substance or the threatened or actual violation of any
Environmental Law, (vi) no Hazardous Substance has been disposed of, released or
transported in violation of any applicable Environmental Law from any properties
owned by Parent or any of its subsidiaries as a result of any activity of parent
or any of its subsidiaries during the time such properties were owned, leased or
operated by Parent or any of its subsidiaries, (vii) there have been no
environmental investigations, studies, audits, tests, reviews or other analyses
regarding compliance or noncompliance with any applicable Environmental Law
conducted by or which are in the possession of Parent or its subsidiaries
relating to the activities of Parent or its subsidiaries which have not been
delivered to Parent prior to the date hereof, (viii) there are no underground
storage tanks on, in or under any properties owned by Parent or any of its
subsidiaries and no underground storage tanks have been closed or removed from
any of such properties during the time such properties were owned, leased or
operated by Parent or any of its subsidiaries, (ix) there is no asbestos or
asbestos containing material present in any of the properties owned by Parent
and its subsidiaries, and no asbestos has been removed from any of such
properties during the time such properties were owned, leased or operated by
Parent or any of its subsidiaries, and (x) neither Parent, its subsidiaries nor
any of their respective properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law, except for violations of the foregoing
clauses (i) through (x) that, singly or in the aggregate, would not reasonably
be expected to have a material
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adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of Parent and its subsidiaries
considered as one enterprise.
(b) As used herein, "Environmental Law" means any Federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, license. permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any governmental entity relating to
(x) the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous Substances, in
each case as amended and as in effect on the Closing Date. The term
"Environmental Law" includes, without limitation, (i) the Federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Occupational Safety and Health Act of 1970,
each as amended and as in effect on the Closing Date, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos, or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
SECTION 4.16. NON-COMPETITION AGREEMENTS. Neither Parent nor any subsidiary
of Parent is a party to any agreement which purports to restrict or prohibit in
any material respect any of them from, directly or indirectly, engaging in any
business involving the collection, interim storage, transfer, recovery,
processing, recycling, marketing or disposal of rubbish, garbage, paper, textile
wastes, chemical or hazardous wastes, liquid and other wastes or any other
material business currently engaged in by the Parent or the Company, or any
corporations affiliated with either of them. None of Parent's officers,
directors or key employees is a party to any agreement which, by virtue of such
person's relationship with Parent, restricts in any material respect Parent or
any subsidiary of Parent from, directly or indirectly, engaging in any of the
businesses described above.
SECTION 4.17. TITLE TO ASSETS. Parent and each of its subsidiaries has good
and marketable title in fee simple to all its real property and good title to
all its leasehold interests and other properties as reflected in the most recent
balance sheet included in the Parent Financial Statements, except for such
properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i) the
lien for current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Parent's business
operations (in the manner presently carried on by the Parent), or (iii) as
disclosed in the Parent SEC Reports, and except for such matters which, singly
or in the aggregate, could not reasonably be expected to materially and
adversely affect the business, operations, properties, assets, condition
(financial or other) or results of operations of Parent and its subsidiaries,
taken as a whole. All leases under which Parent leases any real or personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event which with
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notice or lapse of time or both would become a default other than defaults under
such leases which in the aggregate will not materially and adversely affect the
Parent and its subsidiaries, taken as a whole.
SECTION 4.18. POOLING OF INTERESTS. None of the Parent, Subsidiary or, to
their knowledge, any of their affiliates has taken or agreed to take any action
that would prevent the Merger from (a) constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code or (b) being treated for
financial accounting purposes as a "pooling of interests" in accordance with
generally accepted accounting principles and the rules, regulations and
interpretations of the SEC (a "Pooling Transaction").
SECTION 4.19. PARENT STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of Parent required for approval and adoption of this Agreement and
the Merger is a majority of the shares of Parent Common Stock present in person
or by proxy at a meeting of such stockholders and entitled to vote thereat.
SECTION 4.20. BROKERS AND FINDERS. Except for the fees and expenses payable
to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), which fees are
reflected in its agreement with Parent (a copy of which has been delivered to
the Company), Parent has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
Parent to pay any finder's fees, brokerage or agent commissions or other like
payments in connection with the transactions contemplated hereby. Except for the
fees and expenses paid or payable to DLJ, there is no claim for payment by
Parent of any investment banking fees, finder's fees, brokerage or agent
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
SECTION 4.21. OPINION OF FINANCIAL ADVISOR. The financial advisor of
Parent, DLJ, has rendered a written opinion to Parent to the effect that the
Exchange Ratio is fair from a financial point of view to the Parent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Subsidiary that, except
as set forth in the disclosure schedule dated as of the date hereof and signed
by an authorized officer of the Company (the "Company Disclosure Schedule"),
each of which exceptions shall specifically identify the relevant Section hereof
to which it relates:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. The Company is qualified to do business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing will
not, when taken together with all other such failures, have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other) or results of operations of the Company and its subsidiaries, taken as a
whole. True, accurate and complete copies of the Company's Articles of
Incorporation and By-laws, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Parent.
SECTION 5.2. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 50,000,000 shares of Company Common Stock and 2,000,000
shares of preferred stock. As of October 31, 1995, 14,658,301 shares of Company
Common Stock and no shares of preferred stock were issued and outstanding. All
of such issued and outstanding shares are validly issued and are fully paid,
nonassessable and free of preemptive rights. No subsidiary of the Company holds
any shares of the capital stock of the Company.
(b) Except as disclosed in the Company SEC Reports, as of the date hereof
there were no outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other
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agreement and also including any rights plan or other anti-takeover agreement,
obligating the Company or any subsidiary of the Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the capital
stock of the Company or obligating the Company or any subsidiary of the Company
to grant, extend or enter into any such agreement or commitment. There are no
voting trusts, proxies or other agreements or understandings to which the
Company or any subsidiary of the Company is a party or is bound with respect to
the voting of any shares of capital stock of the Company other than voting
agreements executed in connection with this Agreement.
SECTION 5.3. SUBSIDIARIES. Each direct and indirect corporate subsidiary of
the Company is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each subsidiary of the Company is
qualified to do business, and is in good standing, in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing will not, when taken together with all such
other failures, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole. All of the outstanding
shares of capital stock of each corporate subsidiary of the Company are validly
issued, fully paid, nonassessable and free of preemptive rights and are owned
directly or indirectly by the Company free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever. There are no subscriptions, options, warrants, rights, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting, transfer,
ownership or other rights with respect to any shares of capital stock of any
corporate subsidiary of the Company, including any right of conversion or
exchange under any outstanding security, instrument or agreement.
SECTION 5.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) The Company has
full corporate power and authority to enter into this Agreement and, subject to
the Company Stockholders' Approval (as defined in Section 7.3(a)) and the
Company Required Statutory Approvals (as defined in Section 5.4(c)), to
consummate the transactions contemplated hereby. This Agreement has been
approved by the Board of Directors of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement or, except for the Company Stockholders'
Approval, the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company, and,
assuming the due authorization, execution and delivery hereof by Parent and
Subsidiary, constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that such
enforcement may be subject to (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (b) general equitable principles. Without
limitation of the foregoing, each of the covenants and obligations of the
Company set forth in Sections 6.1, 6.5, 7.1, 7.2, 7.3, 7.6, 7.7, 7.8, 7.10 and
7.12 is valid, legally binding and enforceable notwithstanding the absence of
the Company Stockholders' Approval.
(b) The execution and delivery of this Agreement by the Company do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or by-laws of the Company or any of its subsidiaries, (ii)
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any of
its subsidiaries is now a party or by which the Company or any of its
subsidiaries or any of their respective properties or assets may be bound or
affected. The consummation by the Company of the transactions contemplated
hereby will not result in any violation, conflict, breach, termination,
acceleration or
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creation of liens under any of the terms, conditions or provisions described in
clauses (i) through (iii) of the preceding sentence, subject (x) in the case of
the terms, conditions or provisions described in clause (ii) above, to obtaining
(prior to the Effective Time) the Company Required Statutory Approvals and the
Company Stockholder's Approval and (y) in the case of the terms, conditions or
provisions described in clause (iii) above, to obtaining (prior to the Effective
Time) consents required from commercial lenders, lessors or other third parties.
Excluded from the foregoing sentences of this paragraph (b), insofar as they
apply to the terms, conditions or provisions described in clauses (ii) and (iii)
of the first sentence of this paragraph (b), are such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens, security
interests, charges or encumbrances that would not, in the aggregate, have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole.
(c) Except for (i) the filings by Parent, the Company and the Company's
principal shareholder required by the HSR Act, (ii) the filing of the Joint
Proxy Statement/Prospectus with the SEC pursuant to the Exchange Act and the
Securities Act and the declaration of the effectiveness thereof by the SEC and
filings with various state blue sky authorities, (iii) the making of the Merger
Filing with the Secretary of State of the State of California in connection with
the Merger and (iv) any required filings with or approvals from applicable state
environmental authorities, public service commissions and public utility
commissions (the filings and approvals referred to in clauses (i) through (iv)
are collectively referred to as the "Company Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole.
SECTION 5.5. REPORTS AND FINANCIAL STATEMENTS. Since July 1, 1993, the
Company has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto) required
to be filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied in all material respects with all applicable requirements
of the appropriate act and the rules and regulations thereunder. The Company has
previously delivered to Parent copies of its (a) Annual Reports on Form 10-K for
the fiscal year ended June 30, 1995, and for each of the two immediately
preceding fiscal years, as filed with the SEC, (b) proxy and information
statements relating to (i) all meetings of its stockholders (whether annual or
special) and (ii) actions by written consent in lieu of a stockholders' meeting
from July 1, 1993, until the date hereof, and (c) all other reports, including
quarterly reports, or registration statements filed by the Company with the SEC
since July 1, 1993 (other than Registration Statements filed on Form S-8) (the
documents referred to in clauses (a), (b) and (c) are collectively referred to
as the "Company SEC Reports"). As of their respective dates, the Company SEC
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim consolidated financial statements of the Company included in such
reports (collectively, the "Company Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present the financial position of the Company and its subsidiaries as of the
dates thereof and the results of their operations and changes in financial
position for the periods then ended, subject, in the case of the unaudited
interim financial statements, to normal year-end and audit adjustments and any
other adjustments described therein.
SECTION 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
Company SEC Reports, neither the Company nor any of its subsidiaries had at
September 30, 1995, or has incurred since that date, any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature,
except (a) liabilities, obligations or contingencies (i) which are accrued or
reserved against in the Company
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Financial Statements or reflected in the notes thereto or (ii) which were
incurred after September 30, 1995, and were incurred in the ordinary course of
business and consistent with past practices, (b) liabilities, obligations or
contingencies which (i) would not, in the aggregate, have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other) or results of operations of the Company and its subsidiaries, taken as a
whole, or (ii) have been discharged or paid in full prior to the date hereof,
and (c) liabilities and obligations which are of a nature not required to be
reflected in the consolidated financial statements of the Company and its
subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied and which were incurred in the ordinary course
of business.
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
most recent Company SEC Report, there not been any material adverse change in
the business, operations, properties, assets, liabilities, condition (financial
or other) or results of operations of the Company and its subsidiaries, taken as
a whole.
SECTION 5.8. LITIGATION. Except as referred to in the Company SEC Reports,
there are no claims, suits, actions or proceedings pending or, to the knowledge
of the Company, threatened against, relating to or affecting the Company or any
of its subsidiaries, before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator that seek to restrain
the consummation of the Merger or which could reasonably be expected, either
alone or in the aggregate with all such claims, actions or proceedings, to
materially and adversely affect the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole. Except as referred to in the Company SEC Reports
or in Schedule 5.8, neither the Company nor any of its subsidiaries is subject
to any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
which prohibits or restricts the consummation of the transactions contemplated
hereby or would have any material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole.
SECTION 5.9. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by the Company or its subsidiaries for inclusion in
(a) the Registration Statement or (b) the Proxy Statement will, in the case of
the Proxy Statement or any amendments thereof or supplements thereto, at the
time of the mailing of the Proxy Statement and any amendments or supplements
thereto, and at the time of the meetings of stockholders of the Company and
Parent to be held in connection with the transactions contemplated by this
Agreement or, in the case of the Registration Statement, as amended or
supplemented, at the time it becomes effective and at the time of such meetings
of the stockholders of the Company and Parent, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement/Prospectus will comply, as of its mailing date, as to form in all
material respects with all applicable laws, including the provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by the Company with respect to
information supplied by Parent or Subsidiary for inclusion therein.
SECTION 5.10. NO VIOLATION OF LAW. Except as disclosed in the Company SEC
Reports or in Schedule 5.8, neither the Company nor any of its subsidiaries is
in violation of or has been given notice or been charged with any violation of,
any law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable environmental law, ordinance or regulation)
of any governmental or regulatory body or authority, except for violations
which, in the aggregate, could not reasonably be expected to have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole. Except as disclosed in the Company SEC Reports,
as of the date of this Agreement, to the knowledge of the Company, no
investigation or review by any governmental or regulatory body or authority is
pending or threatened, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same, other than, in each case, those the
outcome of which, as far as reasonably can be foreseen, will not have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of the Company and its
subsidiaries taken as a whole. The Company and its subsidiaries have all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals
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necessary to conduct their businesses as presently conducted (collectively, the
"Company Permits"), except for permits, licenses, franchises, variances,
exemptions, orders, authorizations, consents and approvals the absence of which,
alone or in the aggregate, would not have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole. The
Company and its subsidiaries are not in violation of the terms of any Company
Permit, except for delays in filing reports or violations which, alone or in the
aggregate, would not have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries, taken as a whole.
SECTION 5.11. COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
Company SEC Reports, the Company and each of its subsidiaries are not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under, (a) the respective charters,
by-laws or similar organizational instruments of the Company or any of its
subsidiaries or (b) any contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which the Company or any of its subsidiaries is a party or by which any of them
is bound or to which any of their property is subject, which breaches,
violations and defaults, in the case of clause (b) of this Section 5.11, would
have, in the aggregate, a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole.
SECTION 5.12. TAXES. The Company and its subsidiaries have (i) duly filed
with the appropriate governmental authorities all Tax Returns required to be
filed by them for all periods ending on or prior to the Effective Time, other
than those Tax Returns the failure of which to file would not have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, and such Tax Returns are true, correct and
complete in all material respects, and (ii) duly paid in full or made adequate
provision for the payment of all Taxes for all periods ending at or prior to the
Effective Time. The liabilities and reserves for Taxes reflected in the Company
balance sheet included in the latest Company SEC Report are adequate to cover
all Taxes for all periods ending at or prior to the Effective Time and there are
no material liens for Taxes upon any property or asset of the Company or any
subsidiary thereof, except for liens for Taxes not yet due. There are no
unresolved issues of law or fact arising out of a notice of deficiency, proposed
deficiency or assessment from the IRS or any other governmental taxing authority
with respect to Taxes of the Company or any of its subsidiaries which, if
decided adversely, singly or in the aggregate, would have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other) or results of operations of the Company and its subsidiaries, taken as a
whole. Neither the Company nor any of its subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes with any entity that
is not, directly or indirectly, a wholly-owned corporate subsidiary of Company.
Neither the Company nor any of its corporate subsidiaries has, with regard to
any assets or property held, acquired or to be acquired by any of them, filed a
consent to the application of Section 341(f) of the Code.
SECTION 5.13. EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as set forth in the
Company SEC Reports, at the date hereof, the Company and its subsidiaries do not
maintain or contribute to any material employee benefit plans, programs,
arrangements and practices (such plans, programs, arrangements and practices of
the Company and its subsidiaries being referred to as the "Company Plans"),
including employee benefit plans within the meaning set forth in Section 3(3) of
ERISA, or other similar material arrangements for the provision of benefits
(excluding any "Multi-employer Plan" within the meaning of Section 3(37) of
ERISA or a "Multiple Employer Plan" within the meaning of Section 413(c) of the
Code). The Company Disclosure Schedule lists all Multi-employer Plans and
Multiple Employer Plans which any of the Company or its subsidiaries maintains
or to which any of them makes contributions. Neither the Company nor its
subsidiaries has any obligation to create any additional such plan or to amend
any such plan so as to increase benefits thereunder, except as required under
the terms of the Company Plans, under existing collective bargaining agreements
or to comply with applicable law.
(b) Except as disclosed in the Company SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the
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Company Plans that could result in penalties, taxes or liabilities which, singly
or in the aggregate, could have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Company and its subsidiaries, taken as a whole, (ii) except
for premiums due, there is no outstanding material liability, whether measured
alone or in the aggregate, under Title IV of ERISA with respect to any of the
Company Plans, (iii) neither the Pension Benefit Guaranty Corporation nor any
plan administrator has instituted proceedings to terminate any of the Company
Plans subject to Title IV of ERISA other than in a "standard termination"
described in Section 4041(b) of ERISA, (iv) none of the Company Plans has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each of the Company Plans ended prior to the date
of this Agreement, (v) the current present value of all projected benefit
obligations under each of the Company Plans which is subject to Title IV of
ERISA did not, as of its latest valuation date, exceed the then current value of
the assets of such plan allocable to such benefit liabilities by more than the
amount, if any, disclosed in the Company SEC Reports as of September 30, 1994,
based upon reasonable actuarial assumptions currently utilized for such Company
Plan, (vi) each of the Company Plans has been operated and administered in all
material respects in accordance with applicable laws during the period of time
covered by the applicable statute of limitations, (vii) each of the Company
Plans which is intended to be "qualified" within the meaning of Section 401(a)
of the Code has been determined by the Internal Revenue Service to be so
qualified and such determination has not been modified, revoked or limited by
failure to satisfy any condition thereof or by a subsequent amendment thereto or
a failure to amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status of such Company
Plans, and the period for making any such necessary retroactive amendments has
not expired, (viii) with respect to Multi-employer Plans, neither the Company
nor any of its subsidiaries has, made or suffered a "complete withdrawal" or a
"partial withdrawal," as such terms are respectively defined in Sections 4203,
4204 and 4205 of ERISA and, to the best knowledge of the Company and its
subsidiaries, no event has occurred or is expected to occur which presents a
material risk of a complete or partial withdrawal under said Sections 4203, 4204
and 4205, (ix) to the best knowledge of the Company and its subsidiaries, there
are no material pending, threatened or anticipated claims involving any of the
Company Plans other than claims for benefits in the ordinary course, and (x) the
Company and its subsidiaries have no current material liability, whether
measured alone or in the aggregate, for plan termination or withdrawal (complete
or partial) under Title IV of ERISA based on any plan to which any entity that
would be deemed one employer with the Company and its subsidiaries under Section
4001 of ERISA or Section 414 of the Code contributed during the period of time
covered by the applicable statute of limitations (the "Company Controlled Group
Plans"), and the Company and its subsidiaries do not reasonably anticipate that
any such liability will be asserted against the Company or any of its
subsidiaries. None of the Company Controlled Group Plans has an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and 412 of the Code).
(c) The Company SEC Reports contain a true and complete summary or list of
or otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
(d) There are no agreements which will or may provide payments to any
officer, employee, stockholder, or highly compensated individual which will be
"parachute payments" under Code Section 280G that are nondeductible to the
Company or subject to tax under Code Section 4999 for which the Company or any
ERISA Affiliate would have withholding liability.
SECTION 5.14. LABOR CONTROVERSIES. Except as set forth in the Company SEC
Reports, (a) there are no significant controversies pending or, to the knowledge
of the Company, threatened between the Company or its subsidiaries and any
representatives of any of their employees and (b) to the knowledge of the
Company, there are no material organizational efforts presently being made
involving any of the presently unorganized employees of the Company or its
subsidiaries, except for such controversies and organizational efforts, which,
singly or in the aggregate, could not reasonably be expected to materially and
adversely affect the business, operations, properties, assets, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole.
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SECTION 5.15. ENVIRONMENTAL MATTERS. Except as set forth in the Company SEC
Reports, (i) the Company and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws, including,
without limitation, having all permits, licenses and other approvals and
authorizations necessary for the operation of their respective businesses as
presently conducted, (ii) none of the properties owned by the Company or any of
its subsidiaries contain any Hazardous Substance as a result of any activity of
the Company or any of its subsidiaries in amounts exceeding the levels permitted
by applicable Environmental Laws, (iii) neither the Company nor any of its
subsidiaries has received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity or
third party indicating that the Company or any of its subsidiaries may be in
violation of, or liable under, any Environmental Law in connection with the
ownership or operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to be filed,
by the Company or any of its subsidiaries concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law, (vi) no Hazardous Substance has been disposed of, released or transported
in violation of any applicable Environmental Law from any properties owned by
the Company or any of its subsidiaries as a result of any activity of the
Company or any of its subsidiaries during the time such properties were owned,
leased or operated by the Company or any of its subsidiaries, (vii) there have
been no environmental investigations, studies, audits, tests, reviews or other
analyses regarding compliance or noncompliance with any applicable Environmental
Law conducted by or which are in the possession of the Company or its
subsidiaries relating to the activities of the Company or its subsidiaries which
have not been delivered to Parent prior to the date hereof, (viii) there are no
underground storage tanks on, in or under any properties owned by the Company or
any of its subsidiaries and no underground storage tanks have been closed or
removed from any of such properties during the time such properties were owned,
leased or operated by the Company or any of its subsidiaries, (ix) there is no
asbestos or asbestos containing material present in any of the properties owned
by the Company and its subsidiaries, and no asbestos has been removed from any
of such properties during the time such properties were owned, leased or
operated by the Company or any of its subsidiaries, and (x) neither the Company,
its subsidiaries nor any of their respective properties are subject to any
material liabilities or expenditures (fixed or contingent) relating to any suit,
settlement, court order, administrative order, regulatory requirement, judgment
or claim asserted or arising under any Environmental Law, except for violations
of the foregoing clauses (i) through (x) that, singly or in the aggregate, would
not reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Company and its subsidiaries considered as one enterprise.
SECTION 5.16. NON-COMPETITION AGREEMENTS. Neither the Company nor any
subsidiary of the Company is a party to any agreement which purports to restrict
or prohibit in any material respect any of them from, directly or indirectly,
engaging in any business involving the collection, interim storage, transfer,
recovery, processing, recycling, marketing or disposal of rubbish, garbage,
paper, textile wastes, chemical or hazardous wastes, liquid and other wastes or
any other material business currently engaged in by the Parent or the Company,
or any corporations affiliated with either of them. None of the Company's
officers, directors or key employees is a party to any agreement which, by
virtue of such person's relationship with the Company, restricts in any material
respect the Company or any subsidiary of the Company from, directly or
indirectly, engaging in any of the businesses described above.
SECTION 5.17. TITLE TO ASSETS. The Company and each of its subsidiaries has
good and marketable title in fee simple to all its real property and good title
to all its leasehold interests and other properties, as reflected in the most
recent balance sheet included in the Company Financial Statements, except for
properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i) the
lien of current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value, or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Company's business
operations (in the manner presently carried on by the Company) or (iii) as
disclosed in the Company SEC Reports, and except for such matters which, singly
or in the aggregate,
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could not reasonably be expected to materially and adversely affect the
business, operations, properties, assets, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole. All
leases under which the Company leases any substantial amount of real or personal
property have been delivered to Parent and are in good standing, valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event which with notice or lapse of time
or both would become a default other than defaults under such leases which in
the aggregate will not materially and adversely affect the condition of the
Company.
SECTION 5.18. POOLING OF INTERESTS. Neither the Company nor, to the
knowledge of the Company, any of its affiliates has taken or agreed to take any
action that would prevent the Merger from (a) constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code or (b) being
treated for financial accounting purposes as a Pooling Transaction.
SECTION 5.19. COMPANY STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of the Company required for approval and adoption of this Agreement
and the Merger is (i) a majority of the shares of Company Common Stock present
in person or by proxy at a meeting of such stockholders and entitled to vote
thereat.
SECTION 5.20. BROKERS AND FINDERS. Except for the fees and expenses payable
to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill"), which fees
are reflected in its agreement with the Company (a copy of which has been
delivered to Parent), the Company has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
the Company to pay any finder's fees, brokerage or agent commissions or other
like payments in connection with the transactions contemplated hereby. Except
for the fees and expenses paid or payable to Merrill, there is no claim for
payment by the Company of any investment banking fees, finder's fees, brokerage
or agent commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
SECTION 5.21. OPINION OF FINANCIAL ADVISOR. The financial advisor of the
Company, Merrill, has rendered a written opinion to the Company to the effect
that the Exchange Ratio is fair from a financial point of view to the
shareholders of the Company (other than Parent and its affiliates).
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Except
as otherwise contemplated by this Agreement or disclosed in Section 6.1 of the
Company Disclosure Schedule, after the date hereof and prior to the Closing Date
or earlier termination of this Agreement, unless Parent shall otherwise agree in
writing, the Company shall, and shall cause its subsidiaries, to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charters or
by-laws, (ii) split, combine or reclassify their outstanding capital stock
or (iii) declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise, except for the payment of dividends or
distributions by a wholly-owned subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that (i) Company may issue shares upon
conversion of convertible securities and exercise of options outstanding on
the date hereof and (ii) Company may issue shares and warrants to acquire
shares pursuant to the proviso of Section 6.1(d) below;
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(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business or (B) borrowings to refinance existing indebtedness on
terms which are reasonably acceptable to Parent or (C) except as set forth
in this Section 6.1(d), (ii) redeem, purchase, acquire or offer to purchase
or acquire any shares of its capital stock or any options, warrants or
rights to acquire any of its capital stock or any security convertible into
or exchangeable for its capital stock, (iii) take any action which would
jeopardize the treatment of the Merger as a pooling of interests under
Opinion No. 16 of the Accounting Principles Board ("APB No. 16"), (iv) take
or fail to take any action which action or failure to take action would
cause the Company or its stockholders (except to the extent that any
stockholders receive cash in lieu of fractional shares) to recognize gain
or loss for federal income tax purposes as a result of the consummation of
the Merger, (v) make any acquisition of any assets or businesses other than
expenditures for fixed or capital assets in the ordinary course of business
and consistent with the Company's capital budget disclosed in Section 6.1
of the Company Disclosure Schedule and other than as set forth in the
proviso in this Section 6.1(d), (vi) sell, pledge, dispose of or encumber
any assets or businesses other than sales in the ordinary course of
business or (vii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing; provided, however,
notwithstanding the foregoing, the Company shall not be prohibited from
acquiring any assets or businesses or issuing capital stock (or warrants or
options to acquire capital stock) or incurring or assuming indebtedness in
connection with such acquisitions so long as (x) the aggregate value of
consideration paid or payable in connection with all such acquisitions,
including any funded indebtedness assumed and any Company Common Stock does
not exceed $40 million, (y) the aggregate value of consideration paid or
payable for any one such acquisition does not exceed $10 million, including
any indebtedness assumed and any Common Common Stock issued or issuable and
(z) the Company will not acquire or agree to acquire any assets or business
if such acquisition or agreement may reasonably be expected to delay the
consummation of the Merger;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) subject to restrictions imposed by applicable law, confer on a
regular and frequent basis with one or more representatives of Parent to
report operational matters of materiality and the general status of ongoing
operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice; provided,
however, that the Company and its subsidiaries shall in no event enter into
any written employment agreement;
(h) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in applicable law; and
(i) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are
consistent with past practice.
SECTION 6.2. CONDUCT OF BUSINESS BY PARENT AND SUBSIDIARY PENDING THE
MERGER. Except as otherwise contemplated by this Agreement, after the date
hereof and prior to the Closing Date or earlier termination of this Agreement,
unless the Company shall otherwise agree in writing, Parent shall, and shall
cause its subsidiaries, to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
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(b) not (i) amend or propose to amend their respective charters or
by-laws, (ii) split, combine or reclassify (whether by stock dividend or
otherwise) their outstanding capital stock, or (iii) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise, except for the payment of dividends or distributions by a
wholly-owned subsidiary of Parent;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that (i) Parent may issue shares upon conversion
of convertible securities and exercise of options outstanding on the date
hereof, (ii) Parent may issue options (and shares upon exercise of such
options) pursuant to its employee stock option plans in effect on the date
hereof in the ordinary course of business and consistent with past
practices and (iii) Parent may issue shares and warrants to acquire shares
pursuant to the proviso of Section 6.2(d) below;
(d)(i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business, (B) borrowings to refinance existing indebtedness on
terms which are reasonably acceptable to the Company, or (C) as set forth
in Section 6.2(d) below, (ii) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iii) not (A) take
any action which would jeopardize the treatment of the Merger as a pooling
of interests under APB No. 16, or (B) take or fail to take any action which
action or failure to take action would cause Parent or its stockholders
(except to the extent that any stockholders receive cash in lieu of
fractional shares) to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger, (iv) make any
acquisition of any assets or businesses other than as set forth in the
proviso of this Section 6.2(d), (v) sell, pledge, dispose of or encumber
any assets or businesses other than sales in the ordinary course of
business or (vi) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing; provided, however,
notwithstanding the foregoing, Parent shall not be prohibited from
acquiring any assets or businesses or issuing capital stock (or warrants or
options to acquire capital stock) or incurring or assuming indebtedness in
connection with such acquisitions so long as (w) the number of shares of
Parent Common Stock issued or issuable in connection with such transactions
does not exceed 6.0 million shares, (x) the aggregate value of
consideration paid or payable in connection with all such acquisitions,
including any funded indebtedness assumed and any Parent Common Stock
(valued for purposes of this limitation at $20 per share) does not exceed
$120 million, (y) the aggregate value of consideration paid or payable for
any one such acquisition does not exceed $25 million, including any
indebtedness assumed and any Parent Common Stock issued or issuable (valued
for purposes of this limitation at $20 per share) and (z) the Parent will
not acquire or agree to acquire any assets or business is such acquisition
or agreement may reasonably be expected to delay the consummation of the
Merger;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) subject to restrictions imposed by applicable law, confer on a
regular and frequent basis with one or more representatives of the Company
to report operational matters of materiality and the general status of
ongoing operations; and
(g) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are
consistent with past practice.
SECTION 6.3. CONTROL OF THE COMPANY'S OPERATIONS. Nothing contained in this
Agreement shall give to Parent, directly or indirectly, rights to control or
direct the Company's operations prior to the Effective Time.
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Prior to the Effective Time, the Company shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision of its
operations.
SECTION 6.4. CONTROL OF PARENT'S OPERATIONS. Nothing contained in this
Agreement shall give to the Company, directly or indirectly, rights to control
or direct Parent's operations prior to the Effective Time. Prior to the
Effective Time, Parent shall exercise, consistent with the terms and conditions
of this Agreement, complete control and supervision of its operations.
SECTION 6.5. ACQUISITION TRANSACTIONS. (a) After the date hereof and prior
to the Effective Time or earlier termination of this Agreement, the Company
shall not, and shall not permit any of its subsidiaries to, initiate, solicit,
negotiate, encourage or provide confidential information to facilitate, and the
Company shall, and shall cause each of its subsidiaries to, cause any officer,
director or employee of, or any attorney, accountant, investment banker,
financial advisor or other agent retained by it, not to initiate, solicit,
negotiate, encourage or provide non-public or confidential information to
facilitate, any proposal or offer to acquire all or any substantial part of the
business and properties of the Company or any capital stock of the Company,
whether by merger, purchase of assets, tender offer or otherwise, whether for
cash, securities or any other consideration or combination thereof (any such
transactions being referred to herein as "Acquisition Transactions").
(b) Notwithstanding the provisions of paragraph (a) above, the Company may,
in response to an unsolicited written proposal with respect to an Acquisition
Transaction ("Acquisition Proposal"), furnish (subject to the execution of a
confidentiality agreement and standstill agreement containing provisions
substantially similar to the confidentiality and standstill provisions of the
Confidentiality Agreement, as hereinafter defined) confidential or non-public
information concerning its business, properties or assets to a financially
capable corporation, partnership, person or other entity or group (a "Potential
Acquirer") and negotiate with such Potential Acquirer if (i) the Board of
Directors of the Company after consulting with one or more of its independent
financial advisors, concludes that such Acquisition Proposal (if consummated
pursuant to its terms) would result in a transaction more favorable to the
Company's stockholders than the Merger and (ii) based upon advice of its outside
legal counsel, its board of directors determines in good faith that the failure
to provide such confidential or non-public information to such Potential
Acquirer would constitute a breach of its fiduciary duty to its stockholders
(any such Acquisition Proposal meeting the conditions of clauses (i) and (ii)
being referred to as a "Superior Proposal.")
(c) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal or any request for nonpublic information relating to the
Company or its subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company or any subsidiary by
any person or entity that informs the Board of Directors of the Company or such
subsidiary that it is considering making, or has made, an Acquisition Proposal.
Such notice to Parent shall be made orally and in writing and shall indicate in
reasonable detail the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. ACCESS TO INFORMATION. (a) The Company and its subsidiaries
shall afford to Parent and Subsidiary and their respective accountants, counsel,
financial advisors and other representatives (the "Parent Representatives") and
Parent and its subsidiaries shall afford to the Company and its accountants,
counsel, financial advisors and other representatives (the "Company
Representatives") full access during normal business hours throughout the period
prior to the Effective Time to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, Tax Returns)
and, during such period, shall furnish promptly to one another (i) a copy of
each report, schedule and other document filed or received by any of them
pursuant to the requirements of federal or state securities laws or filed by any
of them with the SEC in connection with the transactions contemplated by this
Agreement or which may have a material effect on their respective businesses,
properties or personnel and (ii) such other information concerning their
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respective businesses, properties and personnel as Parent or Subsidiary or the
Company, as the case may be, shall reasonably request; provided that no
investigation pursuant to this Section 7.1 shall amend or modify any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Parent and its subsidiaries
shall hold and shall use their reasonable best efforts to cause the Parent
Representatives to hold, and the Company and its subsidiaries shall hold and
shall use their reasonable best efforts to cause the Company Representatives to
hold, in strict confidence all non-public documents and information furnished to
Parent and Subsidiary or to the Company, as the case may be, in connection with
the transactions contemplated by this Agreement, except that (i) Parent,
Subsidiary and the Company may disclose such information as may be necessary in
connection with seeking the Parent Required Statutory Approvals and Parent
Stockholders' Approval, the Company Required Statutory Approvals and the Company
Stockholders' Approval and (ii) each of Parent, Subsidiary and the Company may
disclose any information that it is required by law or judicial or
administrative order to disclose.
(b) In the event that this Agreement is terminated in accordance with its
terms, each party shall promptly redeliver to the other all non-public written
material provided pursuant to this Section 7.1 and shall not retain any copies,
extracts or other reproductions in whole or in part of such written material. In
such event, all documents, memoranda, notes and other writings prepared by
Parent or the Company based on the information in such material shall be
destroyed (and Parent and the Company shall use their respective reasonable best
efforts to cause their advisors and representatives to similarly destroy their
documents, memoranda and notes), and such destruction (and reasonable best
efforts) shall be certified in writing by an authorized officer supervising such
destruction.
(c) The Company shall promptly advise Parent and Parent shall promptly
advise the Company in writing of any change or the occurrence of any event after
the date of this Agreement having, or which, insofar as can reasonably be
foreseen, in the future may have, any material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Company and its subsidiaries or Parent and its subsidiaries,
as the case may be, taken as a whole.
SECTION 7.2. REGISTRATION STATEMENT AND PROXY STATEMENT. Parent and the
Company shall file with the SEC as soon as is reasonably practicable after the
date hereof the Joint Proxy Statement/Prospectus and shall use all reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable. Parent shall also take any action required to be taken
under applicable state blue sky or securities laws in connection with the
issuance of Parent Common Stock pursuant hereto. Parent and the Company shall
promptly furnish to each other all information, and take such other actions, as
may reasonably be requested in connection with any action by any of them in
connection with the preceding sentence. The information provided and to be
provided by Parent and the Company, respectively, for use in the Joint Proxy
Statement/Prospectus shall be true and correct in all material respects without
omission of any material fact which is required to make such information not
false or misleading as of the date thereof and in light of the circumstances
under which given or made.
SECTION 7.3. STOCKHOLDERS' APPROVALS. (a) The Company shall, as promptly as
practicable, submit this Agreement and the transactions contemplated hereby for
the approval of its stockholders at a meeting of stockholders and, subject to
the fiduciary duties of the Board of Directors of the Company under applicable
law, shall use its reasonable best efforts to obtain stockholder approval and
adoption (the "Company Stockholders' Approval") of this Agreement and the
transactions contemplated hereby. Such meeting of stockholders shall be held as
soon as practicable following the date upon which the Registration Statement
becomes effective. Subject to the fiduciary duties of the Board of Directors of
the Company under applicable law, the Company shall, through its Board of
Directors, recommend to its stockholders approval of the transactions
contemplated by this Agreement.
(b) Parent shall, as promptly as practicable, submit this Agreement and the
transactions contemplated hereby for the approval of its stockholders at a
meeting of stockholders and, subject to the fiduciary duties of the Board of
Directors of Parent under applicable law, shall use its reasonable best efforts
to obtain stockholder approval and adoption (the "Parent Stockholders'
Approval") of this Agreement and the transactions contemplated hereby. Such
meeting of stockholders shall be held as soon as practicable following
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the date on which the Registration Statement becomes effective. Parent shall,
through its Board of Directors, but subject to the fiduciary duties of the
members thereof, (i) recommend to its stockholders approval of the transactions
contemplated by this Agreement and (ii) authorize and cause an officer of Parent
to vote Parent's shares of Subsidiary Common Stock for adoption and approval of
this Agreement and the transactions contemplated hereby and shall take all
additional actions as the sole stockholder of Subsidiary necessary to adopt and
approve this Agreement and the transactions contemplated hereby.
SECTION 7.4. COMPLIANCE WITH THE SECURITIES ACT. Parent and the Company
shall each use its reasonable best efforts to cause each principal executive
officer, each director and each other person who is an "affiliate," as that term
is used in paragraphs (c) and (d) of Rule 145 under the Securities Act, of
Parent or the Company, as the case may be, to deliver to Parent and the Company
on or prior to the Effective Time a written agreement (an "Affiliate
Agreement")to the effect that such person will not offer to sell, sell or
otherwise dispose of any shares of Parent Common Stock issued in the Merger,
except, in each case, pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a transaction
which, in the opinion of legal counsel satisfactory to Parent, is exempt from
the registration requirements of the Securities Act and, in any case, until
after the results covering 30 days of post-Merger combined operations of Parent
and the Company have been filed with the SEC, sent to stockholders of Parent or
otherwise publicly issued.
SECTION 7.5. EXCHANGE LISTING. Parent shall use its reasonable best efforts
to effect, at or before the Effective Time, authorization for listing on the New
York Stock Exchange Inc. (the "NYSE"), upon official notice of issuance, of the
shares of Parent Common Stock to be issued pursuant to the Merger.
SECTION 7.6. EXPENSES AND FEES. (a) All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, except that those expenses incurred
in connection with printing and filing the Joint Proxy Statement/Prospectus
shall be shared equally by Parent and the Company.
(b) The Company agrees to pay to Parent a fee equal to Eighteen Million
Dollars ($18,000,000); (i) if the Company terminates this Agreement pursuant to
clause (iii) or (iv) of Section 9.1(a); or (ii) if Parent terminates this
Agreement pursuant to clause (iv) of Section 9.1(b).
(c) Parent agrees to pay to the Company a fee equal to Eighteen Million
Dollars ($18,000,000) if the Company terminates this Agreement pursuant to
clause (v) of Section 9.1(a).
SECTION 7.7. AGREEMENT TO COOPERATE. (a) Subject to the terms and
conditions herein provided, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its reasonable efforts to obtain all necessary
or appropriate waivers, consents or approvals of third parties required in order
to preserve material contractual relationships of the Company and its
subsidiaries, all necessary or appropriate waivers, consents and approvals and
SEC "no-action" letters to effect all necessary registrations, filings and
submissions and to lift any injunction or other legal bar to the Merger (and, in
such case, to proceed with the Merger as expeditiously as possible), subject,
however, to the requisite votes of the stockholders and boards of directors of
the Company and Parent.
(b) Without limitation of the foregoing, each of Parent and the Company
undertakes and agrees to file (and, in the case of the Company, shall use its
best efforts to cause its principal shareholder to file) as soon as practicable
after the date hereof a Notification and Report Form under the HSR Act with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division"). Each of Parent and the Company
shall (and the Company shall use its best efforts to cause its principal
shareholder to) (i) use its reasonable efforts to comply as expeditiously as
possible with all lawful requests of the FTC or the Antitrust Division for
additional information and documents and (ii) not extend any waiting period
under the HSR Act or enter into any agreement with the FTC or the Antitrust
Division not to consummate the transactions contemplated by this Agreement,
except with the prior written consent of the other parties hereto.
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(c) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, including any
Acquisition Transaction, Parent shall have the right, at its own expense, to
participate therein, and the Company will not settle any such litigation without
the consent of Parent, which consent will not be unreasonably withheld.
SECTION 7.8. PUBLIC STATEMENTS. The parties shall consult with each other
prior to issuing any press release or any written public statement with respect
to this Agreement or the transactions contemplated hereby and shall not issue
any such press release or written public statement prior to such consultation.
SECTION 7.9. OPTION PLANS. Prior to the Effective Time, the Company and
Parent shall take such action as may be necessary to cause each unexpired and
unexercised option (each a "Company Option") to be automatically converted at
the Effective Time into an option (each a "Parent Option") to purchase a number
of shares of Parent Common Stock equal to the number of shares of Company Common
Stock that could have been purchased under the Company Option multiplied by the
Exchange Ratio, at a price per share of Parent Common Stock equal to the option
exercise price determined pursuant to the Company Option divided by the Exchange
Ratio. At the Effective Time, all references in the stock option agreements to
the Company shall be deemed to refer to Parent. Parent shall assume all of the
Company's obligations with respect to Company Options as so amended and shall,
from and after the Effective Time, make available for issuance upon exercise of
the Parent Options all shares of Parent Common Stock covered thereby and amend
its Registration Statement on Form S-8 to cover the additional shares of Parent
Common Stock subject to Parent Options granted in replacement of Company
Options.
SECTION 7.10. NOTIFICATION OF CERTAIN MATTERS. Each of the Company, Parent
and Subsidiary agrees to give prompt notice to each other of, and to use their
respective reasonable best efforts to prevent or promptly remedy, (i) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.10 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 7.11. DIRECTORS' AND OFFICERS' INDEMNIFICATION. (a) The
indemnification provisions of the Articles of Incorporation of the Surviving
Corporation as in effect at the Effective Time shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, employees or agents of the Company,
unless such modification is required by law.
(b) After the Effective Time, each of Parent and the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee and agent of the
Company or any of its subsidiaries (each, together with such person's heirs,
executors or administrators, an "indemnified Party" and collectively, the
"indemnified Parties") against any costs or expenses (including attorneys fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of, relating to or in connection with any action or omission occurring prior
to the Effective Time (including, without limitation, acts or omissions in
connection with such persons serving as an officer, director or other fiduciary
in any entity if such service was at the request or for the benefit of the
Company) or arising out of or pertaining to the transactions contemplated by
this Agreement. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Company or Parent and the Surviving Corporation, as the case may be, shall pay
the reasonable fees and expenses of counsel selected by the indemnified Parties,
which counsel shall be reasonably satisfactory to the Parent and the Surviving
Corporation, promptly after statements therefor are received, (ii) the Parent
and the Surviving Corporation will cooperate in the defense of any such matter,
and (iii) any determination required to be made with respect to whether an
indemnified Party's conduct complies with the standards set forth under the CCC
and the Parent's or the Surviving Corporation's respective charters
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or By-Laws shall be made by independent legal counsel acceptable to the Parent
or the Surviving Corporation, as the case may be, and the indemnified Party;
provided, however, that neither Parent nor the Surviving Corporation shall be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld).
(b) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Parent shall assume the obligations set forth in this Section
7.11.
SECTION 7.12. CORRECTIONS TO THE JOINT PROXY STATEMENT/PROSPECTUS AND
REGISTRATION STATEMENT. Prior to the date of approval of the Merger by their
respective stockholders, each of the Company, Parent and Subsidiary shall
correct promptly any information provided by it to be used specifically in the
Joint Proxy Statement/Prospectus and Registration Statement that shall have
become false or misleading in any material respect and shall take all steps
necessary to file with the SEC and have declared effective or cleared by the SEC
any amendment or supplement to the Joint Proxy Statement/Prospectus or the
Registration Statement so as to correct the same and to cause the Joint Proxy
Statement/Prospectus as so corrected to be disseminated to the stockholders of
the Company and Parent, in each case to the extent required by applicable law.
SECTION 7.13. CERTAIN OTHER MATTERS. The Board of Directors of the Company
has approved the implementation of each of the items on Section 7.13 of the
Company Disclosure Schedule (the "Pre-Closing Items"). The Company shall use its
best efforts to accomplish and effectuate each of the Pre-Closing Items as
promptly as practicable after the date hereof and in any event, no later than
the Effective Time. Notwithstanding any other term or provision hereof, the
Company may effectuate and consummate the Pre-Closing Items without Parent's
consent.
SECTION 7.14. EFFECT ON ACCOUNTING TREATMENT. Each of the parties hereto
agrees that, notwithstanding anything to the contrary contained in the
Agreement, nothing contained in or contemplated by this Agreement shall require
any of the parties hereto to take any action which would jeopardize the
treatment of the Merger as a pooling of interests under APB No. 16.
ARTICLE VIII
CONDITIONS
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of the
Company and Parent under applicable law and applicable listing
requirements;
(b) the shares of Parent Common Stock issuable in the Merger shall
have been authorized for listing on the NYSE upon official notice of
issuance;
(c) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated;
(d) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
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(e) no preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect (each party agreeing to use its
reasonable efforts to have any such injunction, order or decree lifted);
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Merger or make the consummation of the Merger illegal;
(g) all governmental waivers, consents, orders and approvals legally
required for the consummation of the Merger and the transactions
contemplated hereby, and all consents from lenders required to consummate
the Merger, shall have been obtained and be in effect at the Effective
Time;
(h) Coopers & Lybrand, certified public accountants for Parent, shall
have delivered a letter, dated the Closing Date, addressed to Parent, in
form and substance reasonably satisfactory to Parent, to the effect that
the Merger will qualify for a pooling of interests accounting treatment if
consummated in accordance with this Agreement; and
(i) Ernst & Young LLP, certified public accountants for the Company,
shall have delivered a letter dated the Closing Date, addressed to the
Company, in form and substance reasonably satisfactory to the Company,
stating that the Merger will qualify for a pooling of interests accounting
treatment if consummated in accordance with this Agreement.
SECTION 8.2. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
Unless waived by the Company, the obligation of the Company to effect the Merger
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
(a) Parent and Subsidiary shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of Parent and Subsidiary contained in this Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and the
Company shall have received a certificate of the Chairman of the Board and
Chief Executive Officer, the President or a Vice President of Parent and of
the President and Chief Executive Officer or a Vice President of Subsidiary
to that effect;
(b) the Company shall have received an opinion of Sheppard, Mullin,
Richter & Hampton, in form and substance reasonably satisfactory to the
Company, dated the Closing Date, to the effect that the Company and holders
of Company Common Stock (except to the extent any stockholders receive cash
in lieu of fractional shares) will recognize no gain or loss for federal
income tax purposes as a result of consummation of the Merger;
(c) since the date hereof, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted
in or constitute, a material adverse change in the business, operations,
properties, assets, condition (financial or other) or results of operations
of Parent and its subsidiaries, taken as a whole; and
(d) all governmental waivers, consents, orders, and approvals legally
required for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and be in effect at the
Closing Date, and no governmental authority shall have promulgated any
statute, rule or regulation which, when taken together with all such
promulgations, would materially impair the value to Parent of the Merger.
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF PARENT AND SUBSIDIARY TO EFFECT
THE MERGER. Unless waived by Parent and Subsidiary, the obligations of Parent
and Subsidiary to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and
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warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the date made and on and as
of the Closing Date as if made at and as of such date, and Parent shall
have received a Certificate of the President and Chief Executive Officer or
of a Vice President of the Company to that effect;
(b) Parent shall have received an opinion of Andrews & Kurth L.L.P.,
in form and substance reasonably satisfactory to Parent, dated the Closing
Date, to the effect that Parent and Subsidiary will recognize no gain or
loss for federal income tax purposes as a result of consummation of the
Merger;
(c) the Affiliate Agreements required to be delivered to Parent
pursuant to Section 7.4 shall have been furnished as required by Section
7.4;
(d) since the date hereof, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted
in or constitute, a material adverse change in the business, operations,
properties, assets, condition (financial or other) or results of operations
of the Company and its subsidiaries, taken as a whole; and
(e) all governmental waivers, consents, orders and approvals legally
required for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and be in effect at the
Closing Date, and no governmental authority shall have promulgated any
statute, rule or regulation which, when taken together with all such
promulgations, would materially impair the value to Parent of the Merger.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the stockholders
of the Company or Parent, as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) if the Merger is not completed by June 30, 1996 (provided that
the right to terminate this Agreement under this Section 9.1(a)(i) shall
not be available to the Company if the failure of the Company to fulfill
any obligation to Parent under or in connection with this Agreement has
been the cause of or resulted in the failure of the Merger to occur on
or before such date);
(ii) if the Merger is enjoined by a final, unappealable court
order;
(iii) if (A) the Company receives an offer from any third party
(excluding any affiliate of the Company or any group of which any
affiliate of the Company is a member) with respect to a merger, sale of
substantial assets or other business combination involving the Company,
and (B) the Company's Board of Directors determines, in good faith and
after consultation with an independent financial advisor, that such
offer constitutes a Superior Proposal and resolves to accept such a
Superior Proposal and (C) the Company shall have given Parent two (2)
days' prior written notice of its intention to terminate pursuant to
this provision, provided that such termination shall not be effective
until such time as the payment required by Section 7.6(b) shall have
been received by Parent;
(iv) if (A) a tender or exchange offer is commenced by a third
party (excluding any affiliate of the Company or any group of which any
affiliate of the Company is a member) for all outstanding shares of
Company Common Stock, (B) the Company's Board of Directors determines,
in good faith and after consultation with an independent financial
advisor, that such offer constitutes a Superior Proposal and resolves to
accept such Superior Proposal or recommend to the stockholders that they
tender their shares in such tender or exchange offer and (C) the Company
shall have given Parent two (2) days' prior written notice of its
intention to terminate pursuant to this provision, provided that such
termination shall not be effective until such time as the payment
required by Section 7.6(b) shall have been received by Parent; or
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(v) if Parent (A) fails to perform in any material respect any of
its material covenants in this Agreement and (B) does not cure such
default in all material respects within 30 days after notice of such
default is given to Parent by the Company.
(b) Parent shall have the right to terminate this Agreement:
(i) if the Merger is not completed by June 30, 1996 (provided that
the right to terminate this Agreement under this Section 9.1(b)(i) shall
not be available to Parent if the failure of Parent to fulfill any
obligation to the Company under or in connection with this Agreement has
been the cause of or resulted in the failure of the Merger to occur on
or before such date);
(ii) if the Merger is enjoined by a final, unappealable court
order;
(iii) if the Board of Directors of the Company shall have resolved
to accept a Superior Proposal or shall have recommended to the
stockholders of the Company that they tender their shares in a tender or
an exchange offer commenced by a third party (excluding any affiliate of
Parent or any group of which any affiliate of Parent is a member); or
(iv) if the Company (A) fails to perform in any material respect
any of its material covenants in this Agreement and (B) does not cure
such default in all material respects within 30 days after notice of
such default is given to the Company by Parent.
(c) As used in this Section 9.1, (i) "affiliate" has the meaning
assigned to it in Section 7.4 and (ii) "group" has the meaning set forth in
Section 13(d) of the Exchange Act and the rules and regulations thereunder.
SECTION 9.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company pursuant to the provisions of Section
9.1, this Agreement shall forthwith become void and there shall be no further
obligation on the part of the Company, Parent, Subsidiary or their respective
officers or directors (except as set forth in this Section 9.2 and in Sections
7.1 and 7.6, all of which shall survive the termination). Nothing in this
Section 9.2 shall relieve any party from liability for any willful or
intentional breach of this Agreement.
SECTION 9.3. AMENDMENT. This Agreement may not be amended except by action
taken by the parties' respective Boards of Directors or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law.
SECTION 9.4. WAIVER. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties in this Agreement shall not survive the Merger,
and after effectiveness of the Merger neither the Company, Parent, Subsidiary or
their respective officers or directors shall have any further obligation with
respect thereto.
SECTION 10.2. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Parent or Subsidiary to:
USA Waste Services, Inc.
5400 LBJ Freeway
Suite 300 -- Tower One
Dallas, Texas 75240
Attention: Chief Executive Officer
Telecopy: 214-383-7919
with a copy to:
Gregory T. Sangalis
5400 LBJ Freeway
Suite 300 -- Tower One
Dallas, Texas 75240
Telecopy: 214-383-7919
(b) If to the Company, to:
Western Waste Industries
21061 South Western Avenue
Torrance, California 90501
Attention: Chief Executive Officer
Telecopy: 310-212-7093
with copies to:
Arnold Rothlisberger
Western Waste Industries
21061 South Western Avenue
Torrance, California 90501
Telecopy: 310-212-7093
James J. Slaby
Sheppard, Mullin, Richter
& Hampton
333 South Hope Street
48th Floor
Los Angeles,California 90071
SECTION 10.3. INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
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shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision.
SECTION 10.4. MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
(including the provisions of that certain Agreement dated December 9, 1995 by
and between the Company and Parent concerning confidentiality and related
matters (the "Confidentiality Agreement"), except that the provisions of
Sections 3 and 4 thereof shall remain in effect), (b) is not intended to confer
upon any other person any rights or remedies hereunder, except for rights of
indemnified Parties under Section 7.11 and (c) shall not be assigned by
operation of law or otherwise, except that Subsidiary may assign this Agreement
to any other wholly-owned subsidiary of Parent. THIS AGREEMENT SHALL BE GOVERNED
IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF
THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED
WHOLLY WITHIN SUCH STATE, EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE OF
CALIFORNIA MANDATORILY APPLY.
SECTION 10.5. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 10.6. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except as set forth in
Section 7.11, nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers and attested to as of the
date first written above.
<TABLE>
<S> <C>
USA WASTE SERVICES, INC.
Attest:
/s/ GREGORY T. SANGALIS By: /s/ JOHN E. DRURY
Secretary Name: John E. Drury
Title: Chief Executive Officer
RIVIERA ACQUISITION CORPORATION
Attest:
/s/ GREGORY T. SANGALIS By: /s/ JOHN E. DRURY
Secretary Name: John E. Drury
Title: Chief Executive Officer
WESTERN WASTE INDUSTRIES
Attest:
/s/ SAVEY TUFENKIAN By: /s/ KOSTI SHIRVANIAN
Secretary Name: Kosti Shirvanian
Title: President and Chief Executive
Officer
</TABLE>
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<PAGE> 128
APPENDIX B
LOGO
December 17, 1995
Board of Directors
USA Waste Services, Inc.
5400 LBJ Freeway
Tower One, Suite 300
Dallas, TX 75240
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to USA Waste Services, Inc. ("USA Waste" or the "Company") of the Exchange
Ratio (as defined below) provided for in the Agreement and Plan of Merger dated
December 18, 1995 (the "Agreement") by and among USA Waste, Riviera Acquisition
Corporation and Western Waste Industries ("Western Waste"). Pursuant to the
Agreement, USA Waste is proposing to issue 1.50 shares of its common stock for
each share of Western Waste (the "Exchange Ratio").
In arriving at our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by the Company and Western Waste including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the respective managements were certain
financial projections of the Company prepared by the management of the Company,
certain financial projections of Western Waste prepared by the management of
Western Waste and certain financial information of the Company and Western Waste
on a combined basis prepared by the Company. In addition, we have compared
certain financial and securities data of the Company and Western Waste with
various other companies whose securities are traded in public markets, reviewed
the historical stock prices and trading volumes of the common stock of the
Company, reviewed prices and premiums paid in other business combinations and
conducted such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy, completeness and fairness of all of the
financial and other information that was available to us from public sources,
that was provided to us by the Company, and Western Waste and their respective
representatives, or that was otherwise reviewed by us. In particular, we have
relied, without independent investigation, upon the estimates of the managements
of the Company and Western Waste of the operating synergies achievable as a
result of the proposed merger and upon our discussion of such synergies with the
managements of the Company and Western Waste. With respect to the financial
projections supplied to us, we have assumed that they have been reasonably
prepared on the basis reflecting the best currently available estimates and
judgments of the management of the Company and Western Waste as to the future
operating and financial performance of the Company and Western Waste.
In rendering our opinion, we have not made any independent evaluation of
assets or liabilities of the Company or Western Waste or for independently
verifying any of the information reviewed by us. In rendering our opinion, we
did not perform any procedures or analysis regarding potential environmental
liabilities of either the Company or Western Waste, nor did we consider the
impact of changes in the regulatory environment in which the Company and Western
Waste operate. We have relied as to all legal matters on advice of counsel to
the Company.
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Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter and does not represent an opinion as to the price at
which shares of the Company will trade following the consummation of the
Agreement. It should be understood that, although subsequent developments may
affect this opinion, we do not have any obligation to update, revise or reaffirm
this opinion. Our opinion addresses only the fairness of the Exchange Ratio
pursuant to the Agreement to the Company from a financial point of view. Our
opinion does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has performed
investment banking and other services for the Company in the past and has
received customary compensation for such services. In addition, in the ordinary
course of our business, we trade the securities of the Company and Western Waste
for our own account and for the accounts of customers, and, accordingly, may at
any time hold a long or short position in such securities. As you are aware, DLJ
has acted as financial advisor to the Company in connection with the merger
proposed to be consummated pursuant to the Agreement (the "Proposed Merger") and
will receive a fee for its services. DLJ will also receive an additional fee if
the Proposed Merger is consummated, or if break-up fees are paid to the Company
by Western Waste pursuant to the Agreement.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio pursuant to the Agreement is fair to the
Company from a financial point of view.
This letter is provided solely for the benefit of the Board of Directors of
the Company in connection with and for the purposes of their consideration of
the fairness of the Exchange Ratio pursuant to the Agreement, and is not on
behalf of, and shall not confer rights or remedies upon, any shareholder of the
Company or Western Waste, or any other person other than the Board of Directors
of the Company or be used for any other purpose. We do not express any views on
any other terms of the Agreement on related agreements or arrangements. This
letter may not be used or relied upon by, or disclosed, referred to or
communicated by you (in whole or in part) to any third party for any purpose
whatsoever except with our prior written consent in each instance. This letter
may be reproduced in full in any proxy or information statement mailed to the
shareholders of the Company but may not otherwise be disclosed publicly in any
manner without our prior written approval and must be treated as confidential.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
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<PAGE> 130
APPENDIX C
Corporate and
Institutional
Client Group
101 California Street
Suite 1420
San Francisco,
California 94111
415 274 7300
LOGO
December 17, 1995
Board of Directors
Western Waste Industries
21061 South Western Avenue
Torrance, California 90501
Western Waste Industries (the "Company"), USA Waste Services, Inc. (the
"Issuer") and Riviera Acquisition Corporation, a wholly owned subsidiary of the
Issuer (the "Acquisition Sub"), propose to enter into an agreement (the
"Agreement") pursuant to which the Company will be merged with the Acquisition
Sub in a transaction (the "Merger") in which each outstanding share of the
Company's common stock, no par value (the "Shares"), will be converted into the
right to receive 1.50 shares (the "Exchange Ratio") of the common stock of the
Issuer (the "Issuer Shares"). In connection with the Merger, the Company and the
Issuer propose to enter into a Voting Agreement with each of certain
shareholders of the Issuer and a principal shareholder of the Company
(collectively, the "Voting Agreements") pursuant to which such shareholders will
agree, among other things, to vote shares held by them in favor of the Merger.
You have asked us whether, in our opinion, the Exchange Ratio is fair to
the shareholders (other than the Issuer and its affiliates) from a financial
point of view.
In arriving at the opinion set forth below, we have, among other things:
(i) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended June 30, 1995 and
the Company's Form 10-Q and the related unaudited financial information for
the quarterly period ending September 30, 1995;
(ii) Reviewed the Issuer's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31, 1994,
the Issuer's Forms 10-Q and the related unaudited financial information for
the quarterly periods ending March 31, 1995, June 30, 1995 and September
30, 1995 and certain other filings, including registration statements,
Forms 8-K and proxy statements, with the Securities and Exchange Commission
made by the Issuer during the last three years;
(iii) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Company and the Issuer, furnished to us by the Company and the Issuer;
(iv) Conducted discussions with members of senior management of the
Company and the Issuer concerning their respective businesses and
prospects;
(v) Reviewed the historical market prices and trading activity for the
Company Shares and the Issuer Shares and compared them with that of certain
publicly traded companies which we deemed to be reasonably similar to the
Company and the Issuer, respectively;
(vi) Compared the results of operations of the Company and the Issuer
with that of certain companies which we deemed to be reasonably similar to
the Company and the Issuer, respectively;
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(vii) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of certain other
mergers and acquisitions which we deemed to be relevant;
(viii) Reviewed a draft of the Agreement dated December 15, 1995;
(ix) Reviewed a draft of the form of Voting Agreement dated December
13, 1995; and
(x) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary.
In preparing our opinion, we have relied on the accuracy and the
completeness of all information supplied or otherwise made available to us by
the Company and the Issuer, and we have not independently verified such
information or undertaken an independent appraisal of the assets of the Company
or the Issuer. With respect to the financial forecasts furnished by the Company
and the Issuer, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the Company's or
the Issuer's management as to the expected future financial performance of the
Company or the Issuer, as the case may be. Our opinion is based upon general
economic, market, monetary and other conditions as they exist and can be
evaluated, and the information made available to us, as of the date hereof.
In the ordinary course of our securities business, we may actively trade
debt or equity securities of the Issuer and the Company for our own account and
the accounts of our customers, and we therefore may from time to time hold a
long or short position in such securities.
On the basis of, and subject to the foregoing, we are of the opinion that
the Exchange Ratio is fair to the shareholders of the Company (other than the
Issuer and its affiliates) from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER
SMITH INCORPORATED
By: /s/ ILLEGIBLE
C-2
<PAGE> 132
APPENDIX D
CHAPTER 13 OF THE GENERAL CORPORATION LAW OF THE STATE OF CALIFORNIA
SECTION 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) of Section 1201, each shareholder of such corporation entitled
to vote on the transaction and each shareholder of a disappearing corporation in
a short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as defined
in subdivision (b). The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in consequence of
the proposed action, but adjusted for any stock split, reverse stock split or
share dividend which become effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (i) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of
Section 25100 or (ii) listed on the list of OTC margin stocks issued by the
Board of Governors of the Federal Reserve System, and the notice of meeting
of shareholders to act upon the reorganization summarizes the provisions of
this section and Sections 1301, 1302, 1303 and 1304; provided, however,
that this provision does not apply to any shares with respect to which
there exists any restriction on transfer imposed by the corporation or by
any law or regulation; and provided, further, that this provision does not
apply to any class of shares described in clause (i) or (ii) if demands for
payment are filed with respect to 5 percent or more of the outstanding
shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (i) were not voted
in favor of the reorganization or, (ii) if described in clause (i) or (ii)
of paragraph (1) (without regard to the provisos in that paragraph), were
voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that clause (i)
rather than clause (ii) of this paragraph applies in any case where the
approval required by Section 1201 is sought by written consent rather than
at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
SECTION 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND
FOR PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any
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dissenting shares as defined in subdivision (b) of Section 1300, unless they
lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
SECTION 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR
MARKET VALUE; FILING; TIME OF PAYMENT.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
SECTION 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF
ISSUES; APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
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praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SECTION 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgement.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
SECTION 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
SECTION 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
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SECTION 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
SECTION 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for
conversion into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of
the shares, and neither files a complaint or intervenes in a pending action
as provided in Section 1304, within six months after the date on which
notice of the approval by the outstanding shares or notice pursuant to
subdivision (i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
SECTION 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
SECTION 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION;
CONDITIONS.
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger, or to
have the reorganization or short-form merger set aside or rescinded, except in
an action to test whether the number of shares required to authorize or approve
the reorganization have been legally voted in favor thereof; but any holder of
shares of a class whose terms and provisions specifically set forth the amount
to be paid in respect to them in the event of a reorganization or short-form
merger is entitled to payment in accordance with those terms and provisions or,
if the principal terms of the reorganization are approved pursuant to
subdivision (b) of Section 1202, is entitled to payment in accordance with the
terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment for cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the
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reorganization or short-form merger or to have the reorganization or short-form
merger set aside or rescinded, the shareholder shall not thereafter have any
right to demand payment of cash for the shareholder's shares pursuant to this
chapter. The court in any action attacking the validity of the reorganization or
short-form merger or to have the reorganization or short-form merger set aside
or rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days' prior notice to the corporation and upon a determination by
the court that clearly no other remedy will adequately protect the complaining
shareholder or the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
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APPENDIX E
USA WASTE SERVICES, INC.
1996 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE. The principal purpose of this 1996 Stock Option Plan for
Non-Employee Directors (the "Plan") is to benefit USA WASTE SERVICES, INC. (the
"Company") and its subsidiaries through offering its directors who are not
officers, full-time employees or consultants of the Company or any of its
subsidiaries an opportunity to become holders of stock in the Company, thereby
giving them a stake in the growth and prosperity of the Company, in order to
enable them to represent the viewpoint of other stockholders of the Company more
effectively and to encourage them to continue serving as directors of the
Company.
2. ADMINISTRATION. The Plan shall be administered by the Compensation and
Stock Incentive Plan Committee of the Board of Directors (the "Committee"),
whose interpretation of the terms and provisions of the Plan and whose
determination of matters pertaining to options granted under the Plan shall be
final and conclusive.
3. ELIGIBILITY. Options shall be granted under this Plan only to members of
the Board of Directors who are not officers, full-time employees or consultants
of the Company or any of its subsidiaries (each such director receiving options
granted under the Plan and each other person entitled to exercise an option
granted under the Plan is referred to herein as an "Optionee").
4. GRANT OF OPTIONS. (a) An option under which a total of 10,000 shares of
the common stock of the Company may be purchased from the Company shall be
automatically granted to each eligible director of the Company on the first
business day of January 1996 and on the first business day of January of each
year thereafter in which such eligible director is still serving as a director
(whether or not such director's term has been continuous). The aggregate number
of shares which shall be available to be so optioned under this Plan shall be
400,000 shares. Such number of shares, and the number of shares subject to
options outstanding under the Plan, shall be subject in all cases to adjustment
as provided in Paragraph 10 hereof. No option shall be granted under the Plan
subsequent to January 1, 2006.
(b) Notwithstanding any of the foregoing to the contrary, in the event an
option expires or is terminated or canceled unexercised as to any shares of
common stock, such released shares may again be the subject of an option granted
under the Plan. Shares subject to options may be made available from unissued or
reacquired shares of common stock.
(c) Nothing contained in the Plan or in any option granted pursuant thereto
shall in itself confer upon any Optionee any right to continue serving as a
director of the Company or interfere in any way with any right of the Board of
Directors or stockholders of the Company to remove such director pursuant to the
restated certificate of incorporation or by-laws of the Company or applicable
law.
5. OPTION PRICE. Subject to adjustment under Paragraph 10 hereof, the
option price shall be the fair market value, on the date as of which the option
is granted, of the stock subject to the option, which shall be, for purposes of
this Paragraph, the closing sales price of the Company's common stock on the New
York Stock Exchange Composite Tape (as reported in The Wall Street Journal,
Southwest Edition) (or, if the Company's common stock is not then traded on the
New York Stock Exchange, on the principal market where such common stock is
actively traded) on the date as of which the option is granted.
6. DURATION OF OPTIONS; VESTING. Subject to the provisions of Paragraph 8
hereof, each option shall be for a term of ten years. Each option shall become
exercisable with respect to 20% of the total number of shares subject to the
option on each of the five subsequent anniversaries of the date of grant.
7. EXERCISE OF OPTION. (a) An option may be exercised by giving written
notice to the Company, attention of the Secretary, specifying the number of
shares to be purchased, accompanied by the full purchase price for the shares to
be purchased either in cash, by check, by a promissory note in the form
specified by the
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Company and payable to the Company 15 business days after the date of exercise
of the option, by shares of the Company's common stock or by a combination of
these methods of payment. For this purpose, the per share value of the Company's
common stock shall be the fair market value on the date of exercise (or if the
date of exercise is not a trading day on the trading day next preceding the date
of exercise), which shall be, for purposes of this Paragraph, the average of the
highest and lowest sales price of the Company's common stock on the New York
Stock Exchange Composite Tape (as reported in The Wall Street Journal, Southwest
Edition) (or, if the Company's common stock is not then traded on the New York
Stock Exchange, on the principal market where such common stock is actively
traded) on such date.
(b) At the time of any exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the Optionee (or his
or her heirs, legatees or legal representatives, as the case may be) as a
condition upon the exercise thereof, to deliver to the Company a written
representation of present intention to purchase the shares for investment and
not for distribution. In the event such representation is required to be
delivered, an appropriate legend may be placed upon each certificate delivered
to the Optionee upon his or her exercise of part or all of the option and a stop
transfer order may be placed with the transfer agent. Each option shall also be
subject to the requirement that, if at any time the Company determines, in its
discretion, that the listing, registration or qualification of the shares
subject to the option upon any securities exchange or under any state, federal
or foreign law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the issue or
purchase of shares thereunder, the option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company.
8. TERMINATION -- EXERCISE THEREAFTER. (a) In the event an Optionee ceases
to be a director of the Company for any reason other than death, permanent
disability, resignation or retirement, such Optionee's option shall expire and
all rights to purchase shares pursuant thereto shall terminate immediately.
(b) In the event of death, permanent disability (as the term is defined in
the Social Security Act, as now in effect or as it shall be subsequently
amended), resignation or retirement, the vesting of any unvested options shall
accelerate and such options may be exercised in full by the Optionee or, if the
Optionee is not living, by the Optionee's heirs, legatees, or legal
representatives, as the case may be, during its specified term prior to three
months after the date of death, permanent disability, resignation or retirement.
9. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the
Optionee otherwise than by will or the laws of descent and distribution and each
option shall be exercisable during an Optionee's lifetime only by the Optionee
or the Optionee's legal representative.
10. ADJUSTMENT. The number of shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that the
Company's outstanding common stock is changed by any stock dividend, stock split
or combination of shares, the number of shares subject to the Plan and to
options granted thereunder shall be proportionately adjusted, (b) in the event
of any merger, consolidation or reorganization of the Company with any other
corporation or corporations, there shall be substituted on an equitable basis as
determined by the Board of Directors, for each share of common stock then
subject to the Plan and for each share of common stock then subject to an option
granted under the Plan, the number and kind of shares of stock, other
securities, cash or other property to which the holders of common stock of the
Company will be entitled pursuant to the transaction, and (c) in the event of
any other relevant change in the capitalization of the Company, the Board of
Directors shall provide for an equitable adjustment in the number of shares of
common stock then subject to the Plan and to each share of common stock then
subject to an option granted under the Plan. In the event of any such
adjustment, the exercise price per share shall be proportionately adjusted.
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11. CHANGE IN CONTROL. (a) Any option granted under the Plan prior to the
date of a "Change in Control" shall be immediately exercisable in full on such
date, without regard to any times of exercise established under the Paragraph 6
hereof. The term "Change in Control" shall mean the occurrence, at any time
during the specified term of an option granted under the Plan, of any of the
following events:
(i) The Company is merged or consolidated or reorganized into or with
another corporation or other legal person (an "Acquiror") and as a result
of such merger, consolidation or reorganization less than 75% of the
outstanding voting securities or other capital interests of the surviving,
resulting or acquiring corporation or other legal person are owned in the
aggregate by the stockholders of the Company, directly or indirectly,
immediately prior to such merger, consolidation or reorganization, other
than the Acquiror or any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(ii) The Company sells all or substantially all of its business and/or
assets to an Acquiror, of which less than 75% of the outstanding voting
securities or other capital interests are owned in the aggregate by the
stockholders of the Company, directly or indirectly, immediately prior to
such sale, other than any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, for or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person or group (as the terms "person" and "group" are
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and the
rules and regulations promulgated thereunder) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of 20% or
more of the issued and outstanding shares of voting securities of the
Company; or
(iv) During any period of two consecutive years, individuals who at
the beginning of any such period constitute the directors of the Company
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's stockholders, of
each new director of the Company was approved by a vote of at least
two-thirds of such directors of the Company then still in office who were
directors of the Company at the beginning of any such period.
(b) Notwithstanding any other provisions in the Plan, prior to the passage
of one year from and after any Change in Control, each Optionee shall have the
right to require the Company (or, if the Company is not the survivor of a
merger, consolidation or reorganization with an Acquiror, the Acquiror) to
purchase from him or her any or all unexercised options granted under the Plan
at a purchase price equal to (i) the excess of the fair market value per share
over the exercise price per share multiplied by (ii) the number of option shares
specified by the Optionee for purchase in a written notice to the Company (or,
if the Company is not the survivor of a merger, consolidation or reorganization
with an Acquiror, the Acquiror), attention of the Secretary.
(c) For purposes of Paragraph 11(b) above, "fair market value per share"
shall mean (i) except in the case of a merger, consolidation or reorganization
with an Acquiror in which the Company is not the survivor (a "Termination
Merger") the higher of (A) the average of the highest sales price per share of
the Company's common stock on the New York Stock Exchange Composite Tape (as
reported in The Wall Street Journal, Southwest Edition) (or, if the Company's
common stock is not then traded on the New York Stock Exchange, on the principal
market where such common stock is actively traded) on each of the five trading
days immediately preceding the date the Optionee so notifies the Company or (B)
the average of the highest sales price per share of the Company's common stock
on the New York Stock Exchange Composite Tape (as reported in The Wall Street
Journal, Southwest Edition)(or if the Company's common stock is not then traded
on the New York Stock Exchange, on the principal market where such common stock
is actively traded) on each of the five trading days immediately preceding the
date of the Change in Control, and (ii) in the case of a Termination Merger, the
higher of (x) the fair market value of the consideration receivable per share by
holders of common stock of the Company in such Termination Merger, which fair
market value as to any securities included in such consideration shall be the
average of the highest sales price per unit of such
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security on the New York Stock Exchange Composite Tape (as reported in The Wall
Street Journal, Southwest Edition)(or if such security is not traded on the New
York Stock Exchange, the principal market where such security is traded) on each
of the five trading days immediately preceding the date of the Termination
Merger or (y) the amount determined pursuant to clause (c)(i)(B) of this
Paragraph 11. The amount payable to each Optionee by the Company or Acquiror, as
the case may be, shall be in cash or by certified check.
12. AMENDMENT OF PLAN. The Board of Directors of the Company or any
authorized committee thereof may amend or discontinue the Plan at any time,
provided, however, that the Plan may not be amended more than once every six
months except to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act of 1976, as amended, or the rules and regulations
under each, and provided further, that no such amendment or discontinuance shall
(a) without the consent of the Optionee change or impair any option previously
granted, or (b) without the approval of the holders of a majority of the shares
of voting common stock of the Company which are present or represented at a duly
held stockholders' meeting, (i) increase the maximum number of shares which may
be purchased by all eligible directors pursuant to the Plan, (ii) change the
purchase price, or (iii) change the option period or increase the time
limitations on the grant of options.
13. EFFECTIVE DATE. The Plan has been adopted and authorized by the Board
of Directors for submission to the stockholders of the Company. If the Plan is
approved by the affirmative vote of the holders of a majority of the shares of
the voting common stock of the Company which are present or represent at a duly
held stockholders' meeting it shall be deemed to have become effective as of
January 1, 1996. Options may be granted under the Plan prior, but subject, to
approval of the Plan by the stockholders of the Company and, in each such case,
the date of grant shall be determined without reference to the date of approval
of the Plan by the stockholders of the Company.
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APPENDIX F
USA WASTE SERVICES, INC.
CORPORATE PERFORMANCE-BASED COMPENSATION PLAN
1. Purpose. The principal purpose of the USA Waste Services, Inc. Corporate
Performance-Based Compensation Plan (the "Plan") is to advance the interests of
USA Waste Services, Inc. (the "Company") by providing for annual bonuses for key
employees of the Company and its subsidiaries who are designated as participants
in the Plan in the manner hereinafter provided, so as to attract and retain such
individuals, make their compensation competitive with other opportunities and
provide them with an incentive to strive to achieve the Company's financial and
other business objectives.
2. Administration. With respect to participation in the Plan by individuals
who are executive officers of the Company ("Key Participants"), the Plan shall
be administered by the Compensation and Stock Incentive Plan Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). With
respect to participation in the Plan by individuals who are not Key
Participants, the Plan shall be administered by a committee appointed by the
Company's Chief Executive Officer, and all references herein to the "Committee"
shall be deemed to mean such committee as to matters involving the participation
in the Plan of such individuals who are not Key Participants.
3. Eligibility.
(a) Participants in the Plan for a calendar year (a "Plan Year") shall be
selected by the Committee at the beginning of such Plan Year from among the key
employees of the Company and its subsidiaries.
(b) Notwithstanding the foregoing, individuals who become eligible to
participate in the Plan after the beginning of a Plan Year shall, subject to
selection and approval by the Committee, be entitled to a bonus prorated to
reflect such participant's number of months of participation during the Plan
Year.
(c) A participant whose employment terminates during the Plan Year shall
not be entitled to the payment of a bonus under the Plan, except, with respect
to a non-Key Participant, as the Committee may otherwise determine in its sole
discretion. The Committee, in its discretion, may also award all or part of a
target bonus to a Key Participant whose employment terminates due to his
disability or death.
4. Bonuses. (a) Each participant in the Plan shall be eligible to receive
such bonus, if any, for each Plan Year as may be payable pursuant to the
performance criteria described below. Except as provided in Section 7 below, the
Committee shall establish each Plan Year a "target bonus" for each participant
equal to a percentage of such participant's annual base salary as of the last
day of such Plan Year, and the maximum amount of a target bonus that may be
awarded to a participant for a Plan Year shall be 200% thereof.
(b) Participants shall have their bonuses, if any, determined on the basis
of the degree of achievement of performance goals which shall be established by
the Committee in writing, based on corporate objectives determined by the Board,
and which goals shall be stated in terms of the attainment of specified levels
of or percentage changes (as compared to a prior measurement period or the
current year's budget) in any one or more of the following measurements: the
Company's revenue, earnings per share of common stock (the "Common Stock"),
pretax income, cash flow from operations, total cash flow, return on equity,
return on capital, return on assets, net operating profits after taxes, economic
value added, total stockholder return, strategic growth or return on sales, or
any individual performance objective which is measured solely in terms of the
attainment of quantitative targets related to the Company's business, or any
combination thereof. The Committee shall for each Plan Year establish the
performance goal or goals from among the foregoing to apply to each participant
and a formula or matrix prescribing the extent to which such participant's
target bonus shall be earned based upon the degree of achievement of such
performance goal or goals. Except as provided in Section 7 below, the Committee
may also designate, with respect to a non-Key Participant, any other factor or
factors to serve as performance goals. The Committee may determine that the
bonus payable to any participant shall be based upon the attainment of the
above-specified performance goals but applied in whole or in part to the results
of a subsidiary, business unit, division or department of the Company for which
such participant has substantial management responsibility.
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<PAGE> 142
(c) Except as provided in Section 7 below, a non-Key Participant whose
target bonus or performance goals are changed by the Committee during the Plan
Year to reflect a change in responsibilities or otherwise shall have his or her
bonus award, if any, based on the amount of base salary earned and the
performance goals applicable while in each target bonus category during the Plan
Year.
(d) The earnings per share of the Company's Common Stock for any year shall
be as determined by the Company's independent public accountants on a primary,
rather than fully-diluted, basis, and all other financial measurements which are
used as the performance goals set forth in this Section 4 (or as a component of
such performance goals) shall be determined in accordance with generally
accepted accounting principles, excluding as to both such earnings and other
measurements the effects of changes in accounting standards or methods and
special, unusual or nonrecurring events.
(e) Except as provided in Section 6 below, the Committee may, in its sole
discretion, (i) award or increase the amount of bonuses payable to one or more
non-Key Participants even though not earned in accordance with the performance
goals established pursuant to this Section 4, or (ii) decrease the amount of
bonuses otherwise payable to one or more participants even though earned in
accordance with the performance goals established pursuant to this Section 4.
5. Payment. Payment of bonuses for any Plan Year shall be made in cash as
soon as reasonably practicable after the end of such Plan Year.
6. Participation by Certain Officers. Notwithstanding any other provisions
of the Plan to the contrary, the following provisions shall be applicable to
participation in the Plan by any individual whose total compensation for any
Plan Year exceeds the amount specified by Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), if any portion of such participant's
compensation would otherwise be non-deductible by the Company pursuant to that
Section.
(a) Each such participant's target bonus under this Plan for such Plan Year
shall be based solely on achievement of one or more of the performance goals as
established by the Committee pursuant to Section 4 above.
(b) With respect to each such participant, no bonus shall be payable
hereunder except upon written certification by the Committee that the
performance goals have been satisfied to a particular extent and that any other
material terms and conditions precedent to payment of a bonus pursuant to the
Plan have been satisfied.
(c) The maximum bonus award payable to any such participant for any Plan
Year shall be $2,500,000.
7. Adjustments for Changes in Stock, Mergers, Etc. In the event of
dividends payable in Common Stock or in the case of the subdivision or
combination of Common Stock, appropriate revision shall be made in any earnings
per share criteria established by the Committee pursuant to Section 4 above. In
the event of a Change in Control (as such term is defined in the Company's 1996
Stock Option Plan for Non-Employee Directors, as may be amended from time to
time) of the Company (i) the Plan Year shall end as of the date of such Change
in Control (or such other date as established by the Committee), (ii) the
Committee shall cause any bonus awards payable to participants for the current
Plan Year to be promptly calculated (without any discretionary decrease pursuant
to Section 4(e)(ii)) and (iii) the Company shall pay such bonus awards to
participants (determined as of the date of the Change in Control without regard
to any subsequent termination of employment) as promptly as practicable
following the Committee's determination, notwithstanding any other Plan
provision to the contrary. In calculating the bonuses payable to participants in
connection with a Change in Control, the Committee is authorized to take into
consideration such factors as the shortened Plan Year, and any other equitable
adjustments to the formulae or matrices established by the Committee pursuant to
Section 4 as it deems appropriate.
8. Participant's Interests. A participant's interest in any bonus awards
hereunder shall at all times be reflected on the Company's books as a general
unsecured and unfunded obligation of the Company subject to the terms and
conditions of the Plan. The Plan shall not give any person any right or security
interest in any asset of the Company or any fund in which any deferred payment
is deemed invested. Neither the Company, the Board nor the Committee shall be
responsible for the adequacy of the general assets of the Company to
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<PAGE> 143
discharge the payment of its obligations hereunder nor shall the Company be
required to reserve or set aside funds therefor.
9. Non-Alienation of Benefits; Beneficiary Designation. All rights and
benefits under the Plan are personal to the participant and neither the Plan nor
any right or interest of a participant or any other person arising under the
Plan is subject to voluntary or involuntary alienation, sale, transfer, or
assignment without the Committee's consent, which may be withheld in its
discretion. Subject to the foregoing, the Company shall establish such
procedures as it deems necessary for a participant to designate one or more
beneficiaries to whom any bonus payment the Committee determines to make and any
deferred amounts would be payable in the event of the participant's death.
Absent such a designation, payment shall be made to the participant's estate.
10. Withholding for Taxes. Notwithstanding any other provisions of this
Plan, the Company may withhold from any payment made by it under the Plan such
amount or amounts as may be required for purposes of complying with the tax
withholding or other provisions of the Code or the Social Security Act or any
state's income tax act or for purposes of paying any estate, inheritance or
other tax attributable to any amounts payable hereunder.
11. No Employment Rights. Nothing contained in the Plan shall confer upon
any participant any right to be continued in the employ of the Company or any of
its subsidiaries or interfere in any way with the right of the Company or any of
its subsidiaries to terminate a participant's employment at any time.
12. Gender and Number. Where the context admits, words denoting men include
women, the plural includes the singular, and the singular includes the plural.
13. Committee or Company Determinations Final. Each determination provided
for in the Plan shall be made by the Committee or the Company, as the case may
be, under such procedures as may from time to time be prescribed by the
Committee or the Company and shall be made in the sole discretion of the
Committee or the Company, as the case may be. Any such determination shall be
conclusive on all parties.
14. Amendment or Termination. The Board may in its sole discretion
terminate or amend the Plan from time to time. No such termination or amendment
shall alter a participant's right to receive a distribution as awarded but
unpaid to such participant, as to which this Plan shall remain in effect
following its termination until all such amounts have been paid.
15. Successors. The Plan is binding on and will inure to the benefit of any
successor to the Company, whether by way of merger, consolidation, purchase or
otherwise.
16. Controlling Law. The Plan shall be construed in accordance with the
laws of the State of Texas.
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<PAGE> 1
PROXY EXHIBIT 99.4 PROXY
WESTERN WASTE INDUSTRIES
21061 S. WESTERN AVENUE
TORRANCE, CALIFORNIA 90501
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF THE SHAREHOLDERS ON MAY 7, 1996.
The undersigned shareholder(s) of WESTERN WASTE INDUSTRIES does hereby
constitute and appoint KOSTI SHIRVANIAN, SAVEY TUFENKIAN and DR. A.N. MOSICH,
and each of them, with full power of substitution and revocation, the true and
lawful attorney or attorneys and proxies of the undersigned, to vote all shares
of the Common Stock of WESTERN WASTE INDUSTRIES owned by or of record in the
name of the undersigned, at the special meeting of its shareholders on May 7,
1996, and at any and all adjournments thereof, in the manner specified below.
(CONTINUED ON REVERSE SIDE)
<PAGE> 2
THIS PROXY WILL BE VOTED AS DIRECTED, Please mark [X]
OR, IF NO DIRECTION IS INDICATED, WILL BE your votes as
VOTED "FOR" THE PROPOSAL DESCRIBED BELOW. indicated in
this example
APPROVAL OF AGREEMENT AND PLAN OF MERGER
To approve and adopt the Agreement and Plan of Merger dated as of December 18,
1995, (the "Merger Agreement"), by and among Western, USA Waste Services, Inc.
("USA Waste") and Riviera Acquisition Corporation ("Acquisition"), a wholly
owned subsidiary of USA Waste, providing for, among other things, the merger of
Acquisition with and into Western (the "Merger") and the conversion of each
outstanding share of Western common stock, no par value (other than shares
owned by USA Waste), into 1.50 shares of USA Waste common stock, par value $.01
per share.
I PLAN TO ATTEND THE MEETING [ ]
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Should any other matters requiring a vote of the shareholders arise, the
attorneys above are authorized to vote the same in accordance with their best
judgment in the best interest of the Company. Management is not aware of any
matter which is to be presented for action at the meeting other than the
matter set forth herein.
- --------------------------------------------
SHAREHOLDER'S SIGNATURE
- --------------------------------------------
SHAREHOLDER'S SIGNATURE
- --------------------------------------------
DATED
(Please sign exactly as name or names appear on notice of meeting addressed to
you. Executors, administrators, trustees or other representatives should so
indicate when signing.)
- --------------------------------------------------------------------------------
(FOLD AND DETACH HERE)
