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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
---------------
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-14246
WHEELABRATOR TECHNOLOGIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-2678047
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03842
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 603/929-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K . [X]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY
STOCKHOLDERS WHO WERE NOT AFFILIATES (AS DEFINED BY REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION) OF THE REGISTRANT WAS APPROXIMATELY
$1,593,000,000 AT FEBRUARY 1, 1994 (BASED ON THE CLOSING SALE PRICE ON THE NEW
YORK STOCK EXCHANGE COMPOSITE TAPE ON JANUARY 31, 1994, AS REPORTED BY THE WALL
STREET JOURNAL (MIDWEST EDITION)). AT MARCH 1, 1994, THE REGISTRANT HAD ISSUED
AND OUTSTANDING AN AGGREGATE OF 188,897,599 SHARES OF ITS COMMON STOCK.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1993 ARE INCORPORATED BY REFERENCE INTO PARTS II AND IV.
PORTIONS OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 5, 1994 ARE INCORPORATED BY REFERENCE INTO PART
III.
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PART I
ITEM 1 -- BUSINESS
GENERAL
Wheelabrator Technologies Inc. provides a wide array of environmental
products and services in North America and abroad through three principal
business lines. The Company's energy group ("Wheelabrator Clean Energy") is a
leading developer of facilities and systems for, and provider of services to,
the trash-to-energy, energy and independent power markets. Through the
subsidiaries comprising Wheelabrator Clean Energy, the Company develops,
arranges financing for, operates and owns facilities that dispose of trash and
other waste materials in an environmentally acceptable manner by recycling it
into energy in the form of electricity and steam.
The Company's water group ("Wheelabrator Clean Water") is comprised of
several subsidiaries principally involved in the design, manufacture and
operation of facilities and systems used to purify water, to treat municipal and
industrial wastewater, to treat and manage biosolids resulting from the
treatment of wastewater by converting them into useful fertilizers, and to
recycle organic wastes into compost material useable for horticultural and
agricultural purposes. Wheelabrator Clean Water also designs and manufactures
various products and systems used in water and wastewater treatment facilities
and industrial facilities, precision profile wire screens for use in groundwater
wells and other industrial applications, and certain other industrial equipment.
The Company's air group ("Wheelabrator Clean Air") designs, fabricates and
installs technologically-advanced air pollution emission control and measurement
systems and equipment, including systems which remove pollutants from the
emissions of the Company's trash-to-energy facilities as well as power plants
and other industrial facilities. Through its subsidiaries, Wheelabrator Clean
Air also provides technologies and systems designed to treat air streams which
contain nitrogen oxide ("NOx") and volatile organic compounds ("VOCs"), the
major contributors to the creation of smog.
The majority of the businesses of the Company have been managed together as
a group since the early 1980s. The Company's predecessor companies and
subsidiaries have been active in project development for approximately 20 years,
and in related activities since the turn of the century. Unless the context
indicates to the contrary, as used in this report, the terms "Company" and "WTI"
refer to Wheelabrator Technologies Inc. and its subsidiaries. Unless otherwise
indicated, all statistical and financial information under Item 1 and Item 2 of
this report is given as of December 31, 1993.
The Company (then known as The Henley Group, Inc.) was incorporated in
Delaware in December 1985. The name of the Company was changed in December 1988
to The Wheelabrator Group Inc. and again in August 1989 to Wheelabrator
Technologies Inc.
Approximately 55% of the Company's common stock, par value $0.01 per share
(the "Common Stock"), outstanding as of March 1, 1994 was owned by WMX
Technologies, Inc. ("WMX") or its affiliates. All Common Stock share and per
share figures have been adjusted to reflect the two-for-one stock split in the
form of a 100% stock dividend distributed in January 1993.
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ORGANIZATION OF RUST INTERNATIONAL INC.
On December 31, 1992, WTI entered into an Organizational Agreement (the
"Organizational Agreement") with Chemical Waste Management, Inc., an
approximately 79%-owned subsidiary of WMX ("CWM"), and The Brand Companies,
Inc., which as of that date was an approximately 56%-owned subsidiary of CWM
("Brand"), pursuant to which WTI and CWM agreed to organize Rust International
Inc. ("Rust") and to acquire newly issued shares of Rust in exchange for
contributing certain of their respective businesses and assets to Rust. Pursuant
to the Organizational Agreement, on January 1, 1993 WTI contributed 100% of the
stock of its engineering, design, construction and environmental consulting
subsidiaries, 100% of the stock of its international engineering unit based in
London, certain disposal credits for use at facilities owned or operated by
subsidiaries of WMX (see "Patents, Trademarks, Licenses and Other Agreements"),
and cash, prefunded acquisition costs and promissory notes having an aggregate
value of approximately $68 million. CWM contributed its hazardous substances
remediation services business and all of its shares of Brand, as well as its 12%
interest in the ordinary shares of Waste Management International plc ("WM
International") and approximately $141 million in indebtedness due to CWM from
Brand. On May 7, 1993, Brand merged into a subsidiary of Rust. Pursuant to such
merger, Brand stockholders (other than Rust) received one share of common stock
of Rust or, at the option of each Brand stockholder, $18.75 in cash for each
share of Brand common stock. As a result of such merger, Rust is owned
approximately 40% by WTI, 56% by CWM, and 4% by public stockholders. Through its
equity ownership of Rust, the Company will continue to have an interest in that
company's engineering, construction and environmental and infrastructure
consulting businesses, as well as the hazardous substance remediation and other
on-site industrial and related businesses operated by Rust. The business of Rust
is discussed below under "Equity Investments--Rust International Inc."
The organization of Rust had no effect on the Company's 1992 and prior
historical financial statements. The Company accounts for its investment in Rust
using the equity method, which results in a reduction of revenue, operating
expenses and selling and administrative costs for 1993 compared to prior years.
SERVICES AND PRODUCTS
Prior to January 1, 1993, the Company's operations were categorized into
two business segments -environmental operations and environmental and
infrastructure engineering services. Environmental operations accounted for 66%
of the Company's total consolidated revenue in 1991, 63% in 1992 and 100% in
1993. Environmental and infrastructure engineering services accounted for 34% of
the Company's total consolidated revenue in 1991 and 37% in 1992. The operations
which comprised the environmental and infrastructure engineering services were
contributed to Rust on January 1, 1993. Thus, the Company did not realize any
revenue from such operations in 1993. See "Equity Investments--Rust
International Inc." For information relating to revenues, operating profit and
identifiable assets attributable to the Company's segments, see Note 9 to the
Company's Consolidated Financial Statements incorporated by reference into this
part. For 1993, the Company reports in a single segment with three lines of
business: Wheelabrator Clean Energy, Wheelabrator Clean Water and Wheelabrator
Clean Air.
Wheelabrator Clean Energy
The Company, through Wheelabrator Environmental Systems Inc. and its
subsidiaries, is a leading developer, operator and owner of trash-to-energy and
independent power facilities in the United States. These facilities, either
owned, operated or under construction, give WTI approximately 854 megawatts of
electric generating capacity, which ranks it among the nation's largest
independent power producers. WTI's
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trash-to-energy projects utilize proven boiler and grate technology capable of
processing up to 3,000 tons of trash per day per facility. The heat from this
combustion process is converted into high-pressure steam, which typically is
used to generate electricity for sale to public utility companies under long-
term contracts.
WTI's trash-to-energy development activities involve a number of
contractual arrangements with a variety of private and public entities,
including municipalities (which supply trash for combustion), utilities or other
power users (which purchase the energy produced by the facility), lenders,
public debtholders, joint venture partners and equity investors (which provide
financing for the project) and the contractors or subcontractors responsible for
building the facility. In addition, the Company often identifies and acquires
sites for the facility and for the disposal of residual ash produced by the
facility and obtains necessary permits and licenses from local, state and
federal regulatory authorities.
The Company also develops, operates and, in some cases, owns independent
power projects, which either cogenerate electricity and thermal energy or
generate electricity alone for sale to utilities. Cogeneration is a technology
which allows the consecutive use of two or more useful forms of energy from a
single primary fuel source, thus providing a more efficient use of a fuel's
total energy content. These power systems use waste wood, waste tires, waste
coal or natural gas as fuel, and employ state-of-the-art technology, such as
fluidized-bed combustion, to insure the efficient burning of fuel with reduced
emission levels.
One of the most significant costs of developing and operating the Company's
energy and biosolids projects may be debt service or lease rentals payable in
connection with financing for the project. See "Wheelabrator Clean Water."
Financing structures vary substantially from transaction to transaction. The
amount of annual financing cost is directly related to the capital cost of the
facility, which may vary greatly from plant to plant, even with regard to
similarly sized plants, due to a number of factors. These include the type of
technology utilized, the amount of site preparation required and, where
applicable, the form of energy generated and the proximity to the energy
delivery point. For a description of some of the methods used to finance WTI's
facilities, see "Financing Capabilities and Funding Support Agreements."
A description of Wheelabrator Clean Energy projects in operation or under
construction which are owned, leased or operated under long-term operating
agreements by the Company's subsidiaries or affiliates is contained in Item 2 --
Properties. In addition to the projects described in Item 2, the Company has a
number of projects in development that, in most cases, are subject to
contingencies, many of which are beyond WTI's control. Such contingencies
include, without limitation, obtaining required permits or approvals, obtaining
equity and/or debt financing and consummating required project agreements.
Wheelabrator Clean Water
Through Wheelabrator Clean Water, the Company develops projects that purify
water, treat wastewater, treat and manage biosolids, and compost organic wastes.
The Company also provides technologies and services used to treat drinking water
as well as industrial and municipal process and wastewater.
The Company offers generators of biosolids, consisting of the non-hazardous
sludges resulting from treatment of industrial and municipal wastewater,
alternatives to landfilling or ocean dumping. Wheelabrator Clean Water provides
a range of biosolids management services to over 400 communities, including land
application, drying, pelletizing, stabilization and composting of non-hazardous
biosolids. See "Regulations--Environmental Regulations." Wheelabrator Clean
Water typically enters into multi-year contracts with biosolids generators under
which the Company is paid by the generator to beneficially use the biosolids.
Regulations
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governing sludge management were issued by the Environmental Protection Agency
("EPA") in December 1992 under the Clean Water Act. The regulations encourage
the beneficial use of municipal sewage sludge by recognizing the resource value
of biosolids as a fertilizer and soil conditioner, and establish requirements
for land application designed to protect health and the environment. These new
regulations are expected to expand opportunities available to the Company.
Land application involves the application of non-hazardous biosolids as a
natural fertilizer on farmland pursuant to rigorous site-specific permits issued
by applicable state authorities. Biosolids are also used in land-reclamation
projects such as strip mines. Land-applied sludges are often stabilized prior to
application using proprietary technology. Wheelabrator Clean Water also develops
and operates facilities at which biosolids are dried and pelletized. The Company
has three facilities currently in operation, including a recently completed
facility in New York City, and two other facilities, one under construction and
the other in the late stages of development, in Baltimore, Maryland. These
facilities incorporate a variety of biosolids drying and emission control
technologies, some proprietary and some licensed to the Company under exclusive
licensing arrangements. See "Patents, Trademarks, Licenses and Other
Agreements." The Company has approximately 565 dry-tons-per-day of biosolids
drying capacity either in operation, under construction or in advanced stages of
development. Biosolids which have been dried are generally used as fertilizer by
farmers, commercial landscapers and nurseries and as a bulking agent by
fertilizer manufacturers.
Development of dryer facilities generally involves various contractual
arrangements with a variety of private and public entities, including
municipalities (which generate the biosolids), lenders, contractors and
subcontractors which build the facilities, and end-users of the fertilizer
generated from the treatment process. See "Financing Capabilities and Funding
Support Agreements." A description of dryer projects in operation or under
construction which are owned or operated by Wheelabrator Clean Water under long-
term operating agreements is contained in Item 2 -- Properties.
Wheelabrator Clean Water is also a leading provider of a comprehensive
range of water and wastewater treatment services to municipalities throughout
the United States. The Company provides services pursuant to approximately 30
contracts, including water and wastewater treatment plant start-up assistance,
plant operations and maintenance, planning and management, training of plant
supervisors, operators and laboratory and maintenance personnel, refining
process systems, management systems for process control, and plant diagnostic
evaluations and energy audits. During 1993, Wheelabrator Clean Water
geographically expanded its operations by obtaining contracts to operate two
industrial wastewater treatment facilities in Canada. Plant maintenance and
operation agreements generally range in length from 3 to 10 years and often
provide the owner of the facility with renewal options. The majority of the
contracts are fixed price or lump sum contracts. During 1993, the Company
continued negotiations with a municipality towards the privatization of a
publicly-owned water and wastewater treatment system pursuant to an Executive
Order issued in 1992 intended to facilitate the privatization of municipally-
owned facilities. In addition, during 1993 the Company commenced negotiations
with several industrial concerns towards the development, ownership and
operation of wastewater treatment facilities adjacent to existing industrial
facilities. Because development of such facilities will generally involve a
variety of contractual arrangements, as with development of the Company's other
projects, there can be no assurance that such discussions will result in the
development of any such facilities.
Wheelabrator Clean Water also designs and supplies enclosed automated
composting systems which recycle organic wastes into beneficial products which
are used by commercial landscapers, nurseries and fertilizer manufacturers.
These composting systems, which consist of a series of parallel concrete bays
through which organic waste is advanced and agitated during the composting
process, are sold to municipalities and landfill
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operators, among others. The Company has provided its proprietary and automated
in-vessel composting technology to 17 facilities in operation, eight more under
construction, and three additional facilities in development that it will own
and operate.
Through its Wheelabrator Engineered Systems Inc. subsidiary ("WES"),
Wheelabrator Clean Water engineers and manufactures a variety of environmental
products and systems. WES provides single-source, advanced-systems solutions
related to drinking water, industrial process water, wastewater, slurry pumping
and high solids dewatering. WES also provides systems designed to remove solids
from liquid streams through the use of self-cleaning bar/filter screens,
grinders, macerators, conveyors and compactor systems. WES provides high
technology water purification and wastewater treatment systems which utilize a
variety of technologies including demineralizers, reverse osmosis and vacuum
degasification. WES also designs and installs process technology systems
utilizing evaporators, crystallizers, electrodialysis, dialysis, reverse osmosis
and ultrafiltration for treating industrial process wastewater. Through its
Johnson Screen unit, WES produces profile wire screen products for groundwater
production, hydrocarbon processing, food processing and coal/mineral processing.
The Company's engineered products are provided to municipal and industrial
customers. In most situations, the Company will provide assistance to help the
end-user select the appropriate technology for a given application. Turnkey
systems provided by the Company range in value from $250,000 to over $30
million, and are typically designed and installed within 12 months following
acceptance of a customer order. On such projects, the Company typically enters
into lump-sum contracts under which the Company receives payments throughout the
contract term based upon a predetermined schedule.
The Company also manufactures Wheelabrator machines, a line of nonpolluting
materials cleaning equipment for use by a variety of industrial customers,
including foundries, steel processors, automobile producers and rubber and
plastics producers, in cleaning and finishing metal and other materials. The
Company manufactures portable, fully-enclosed Wheelabrator systems for cleaning
surfaces such as ship decks and hulls and other difficult-to-clean surfaces.
These systems capture the emissions particulate generated by such operations,
preventing contamination of the environment. In addition, spare parts for
materials cleaning systems are produced. The Company also manufactures high-
alloy combustion grates used in the high-temperature furnaces of its trash-to-
energy facilities.
Wheelabrator Clean Air
Wheelabrator Clean Air designs, fabricates and installs advanced air
pollution emission control and measurement technologies. The Company offers
electrostatic precipitators, flue-gas desulfurization systems (scrubbers),
fabric-filter systems (baghouses) and Nox control systems, which remove
pollutants from the emissions of WTI's trash-to-energy facilities, as well as
power plants and other industrial facilities. Wheelabrator Clean Air also
designs and constructs tall concrete chimneys and silos to help utilities and
industrial companies meet environmental requirements. The Company's expertise in
air pollution control technologies and chimney design and construction, as well
as the expertise in mechanical construction and process engineering of the
Company's Rust affiliate, are used in the design and construction of the
Company's trash-to-energy and biosolids facilities. These capabilities
strengthen WTI's competitive position, while reducing its exposure to risk in
the management of large-scale projects, by providing greater ability to ensure
quality control and timely completion.
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Wheelabrator Clean Air's activities involve both custom and pre-engineered
systems for emissions control. The custom engineering division licenses a
patented process for the removal of hydrogen sulfide from gaseous and liquid
streams. The process prevents the formation of sulfur dioxide emissions, thereby
controlling acid rain and odor problems. Wheelabrator Clean Air also provides a
full range of technologies and services for destroying or recycling VOCs from
air and liquid sources and Nox from air sources. Both VOCs and Nox are major
contributors to the creation of smog. The Company's VOC and Nox control systems
are utilized by customers in a variety of industries, including oil refineries,
chemical plants and automobile production facilities. Complementing the emission
control divisions is a measurement division which designs and installs
continuous emissions monitoring systems ("CEMs") for the utility, waste-to-
energy, industrial furnace and petrochemical industries, all of which are
affected by regulations requiring the continuous monitoring of stack emissions.
WTI anticipates that the Clean Air Act Amendments of 1990, along with
existing and proposed regulations issued thereunder, will generate additional
business opportunities to apply its expertise in VOC and Nox control systems and
scrubbers, as well as additional applications for CEMs. Pursuant to the Clean
Air Act Amendments, the EPA has issued a list of hazardous chemicals, over half
of which are VOCs requiring the implementation of maximum available control
technology ("MACT") to limit emissions. The existing MACT rules, as well as
those in development for specific industries, will require compliance from both
new and existing VOC emissions sources. The "acid rain" provisions of the Clean
Air Act Amendments require additional controls for Nox emissions from a variety
of sources. See "Regulations--Environmental Regulations."
REGULATIONS
Environmental Regulations
The Company's business has benefitted in general from increased
governmental regulation relating to solid waste, wastewater, air pollution and
other environmental concerns, including increasingly stringent air and water
quality regulations (which in turn benefit its air pollution control and water
and biosolids treatment businesses). WTI's own business activities are also
subject to environmental regulation under the same federal, state and local laws
and regulations which apply to the Company's customers, including the Clean Air
Act, the Clean Water Act, and the Resource Conservation and Recovery Act of
1976, as amended ("RCRA").
WTI believes that it conducts its businesses in an environmentally
responsible manner and believes itself to be in material compliance with
applicable laws and regulations. WTI does not anticipate that maintaining
compliance with current requirements will result in any material decrease in
earnings. There can be no assurance, however, that such requirements will not
change so as to require significant additional expenditures. In particular,
pursuant to the Clean Air Act Amendments it is probable that the air pollution
control systems at certain trash-to-energy projects owned or operated by the
Company's subsidiaries will be required to be modified by the end of the decade
to comply with the more stringent regulations promulgated thereunder. The
Company has already completed a retrofit of the air pollution control systems at
its oldest trash-to-energy facility located in Saugus, Massachusetts. Although
the expenditures related to such modifications, to the extent required, will
likely be significant, they are not expected to have a material adverse effect
on the Company's liquidity or results of operations. WTI frequently obtains the
right to pass on to the long-term contract users of its trash-to-energy
facilities increased capital and operating costs resulting from changes in law.
There can be no assurance, however, that in such event WTI would be able to
recover, for each project, all such increased costs from its customers.
Moreover, it is possible that future developments, such as increasingly strict
requirements of environmental laws and enforcement policies thereunder, could
affect the manner in which WTI operates its projects and conducts its business,
including the handling, processing or disposal of the wastes,
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by-products and residues generated thereby. See Item 3 -- Legal Proceedings -
Regulatory. Regulations issued by the EPA in December 1992 under the Clean Water
Act may affect the Company's ability to market pellets derived from its drying
and pelletizing facilities as fertilizer without first obtaining additional
permits for their use. The Company anticipates that the EPA may suspend
enforcement of certain provisions of such regulations for a period of three
years pending additional study. The Company does not believe, however, that
implementation of these regulations in their original form would have a material
adverse effect on the Company's operations or financial position.
During 1992, the U.S. Court of Appeals for the Seventh Circuit issued a
ruling in a case in which the Company was not a party, finding that the ash
generated by a trash-to-energy facility could be subject to regulation as a
hazardous waste. The Seventh Circuit decision was contrary to an earlier
decision issued by the U.S. Court of Appeals for the Second Circuit, upholding a
District Court determination in a case involving a subsidiary of the Company. In
that case, the Court determined that the residual ash generated at the Company's
facility is not subject to regulation as a hazardous waste within the provisions
of RCRA. In late 1992, the Supreme Court vacated the Seventh Circuit decision
and ordered the Seventh Circuit to reconsider the case in light of an EPA
interpretation of RCRA stating that ash from trash-to-energy facilities is not
subject to regulation as a hazardous waste. Upon reconsideration, the Seventh
Circuit reaffirmed its original decision. The parties each filed a writ of
certiorari with the U.S. Supreme Court. The Court granted the writs and heard
oral arguments in the case in January 1994. A decision is pending. WTI does not
believe that a decision upholding the Seventh Circuit's earlier ruling would
adversely affect the Company in any material manner, primarily because of the
patented Wes-Phix(R) technology utilized by the Company. Wes-Phix(R) immobilizes
certain constituents in the ash which thereby enables it to be disposed of as
non-hazardous waste. Any such development could, however, require significant
additional expenditures to achieve compliance with such requirements or
policies. There can be no assurance that, in such event, the Company would be
able to recover all such costs from its customers.
Public Utility Regulatory Policies Act
Wheelabrator Clean Energy's business is subject to the provisions of
various energy-related laws and regulations, including the Public Utility
Regulatory Policies Act of 1978 ("PURPA"). The ability of WTI's trash-to-energy
and small power production facilities to sell power to electric utilities on
advantageous terms and conditions and to avoid burdensome public utility
regulation depends, in part, upon the continuance in effect of PURPA, which
generally exempts WTI from state and federal regulatory control over electricity
prices charged by, and the finances of, WTI and its energy producing
subsidiaries. While most of WTI's existing projects sell electricity pursuant to
long-term contracts or rate orders, which management believes would not be
affected by the repeal or modification of PURPA, the future growth of the
Company's trash-to-energy and other small power production facilities business
and the legal status of its existing projects could be materially and adversely
affected if the various benefits of PURPA were repealed or substantially
reduced.
COMPETITION
WTI experiences substantial competition in all aspects of its business. It
competes with a number of firms, both nationally and internationally, some of
which may have greater financial and technical resources than WTI. The principal
competitive factors with respect to its Wheelabrator Clean Water and
Wheelabrator Clean Energy project development activities include technological
performance, service, technical know-how, price and performance guarantees.
Competing for selection as a project developer may require commitment of
substantial resources over a long period of time, without any certainty of being
ultimately selected. Competition for
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attractive development opportunities is intense, as there are a number of
competitors in the trash-to-energy, biosolids management and water and
wastewater treatment industries interested in such opportunities. The Company
believes that its comprehensive project development capabilities, operating
experience, financing capabilities and, through its affiliation with Rust,
engineering and turnkey construction experience, will enable it to continue to
compete effectively.
In the air pollution control business, the Company competes with a
relatively small group of large national and international firms. The primary
competitive factors in the air pollution control industry are price,
technological capabilities and service. In its biosolids handling and treatment
and composting businesses, the Company competes with several large national and
regional firms and numerous competitors who provide service in local markets. In
the biosolids and composting markets, the principal competitive factors are
price, availability of sites for beneficial reuse of biosolids and technical
experience. See "Patents, Trademarks, Licenses and Other Agreements."
At the time of the 1990 merger between WTI and a subsidiary of WMX which
resulted in WMX's acquisition of a controlling interest in the Company (the
"1990 Merger"), the Company was granted an option to acquire an equity interest
in WMX's international waste services operations, now conducted through WM
International. In connection with the acquisition of an equity interest in WM
International in 1991, the Company agreed that it would not conduct waste
management services operations or engage in the operation and maintenance of
water and wastewater treatment facilities outside of North America, other than
through its ownership interest in WM International, until the later of (i) July
1, 2000 and (ii) the date on which WMX ceases to beneficially own a majority of
the outstanding shares of Common Stock or a majority of all outstanding voting
equity interests of WM International.
In connection with the initial public offering of ordinary shares of WM
International, the Company, WM International, CWM and WMX entered into an
International Business Opportunities Agreement, which incorporates certain
previously existing agreements among certain of the parties thereto which were
made in connection with the 1990 Merger. The International Business
Opportunities Agreement was amended and restated in connection with the
organization of Rust, described above under "Organization of Rust International
Inc.," and Rust became a party thereto. Under the Amended and Restated
International Business Opportunities Agreement, the parties agreed that in order
to minimize the potential for conflicts of interest among various subsidiaries
under the common control of WMX, WMX has the right to direct business
opportunities to the WMX controlled subsidiary which, in the reasonable and good
faith judgment of WMX, has the most experience and expertise in the particular
line of business involved. Opportunities in North America relating to (i) the
manufacture or assembly of well screens, materials cleaning equipment, pumps and
packaged water and wastewater treatment facilities; (ii) the operation and
maintenance and, with respect to item (c) below, design, engineering and
construction, of (a) municipal trash-to-energy facilities, (b) water, wastewater
and sewage treatment facilities (excluding facilities designed to treat
hazardous waste streams), (c) chimneys and air pollution control equipment and
facilities, and (d) small power projects and independent power generation
facilities (except for landfill gas recovery facilities which are covered under
the Intellectual Property Licensing Agreement described under "Patents,
Trademarks, Licenses and Other Agreements"); and (iii) facilities which treat or
otherwise stabilize ash residues from trash-to-energy facilities, have been
allocated to the Company. The Agreement allocates certain business
opportunities, some of which were previously allocated to WTI, to Rust in
connection with the transfer (described above) of WTI's engineering,
environmental consulting and construction businesses to Rust.
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RESEARCH AND DEVELOPMENT
The Company undertakes research and development in numerous areas of its
operations, including energy generation, environmental control and the handling
and recovery of waste materials and waste gases, water, wastewater and
industrial process water technologies, and VOC catalyst and control
technologies. WTI spent approximately $3.9 million, $2.6 million and $4.1
million on research and development during 1991, 1992 and 1993, respectively. In
addition, WTI receives significant benefits from technological advances realized
in connection with specific projects undertaken on its own behalf or under
contracts with customers. Significant technological benefits are also realized
through WTI's experience in operating its existing projects.
PATENTS, TRADEMARKS, LICENSES AND OTHER AGREEMENTS
The Company owns or licenses a number of patents and patent applications or
other proprietary technology that are important to various aspects of its
business. While certain of such licenses or patented technology may be material
to the development of a given project, the Company believes that its overall
business depends primarily on such factors as project development capability,
engineering skill, and research and production techniques rather than on patent
protection.
Pursuant to a long-standing arrangement between WTI and von Roll Ltd. ("von
Roll"), WTI has an exclusive license in the United States and Mexico to use
certain combustion-grate technology owned by von Roll. WTI uses this technology
in its trash-to-energy projects. The license agreement runs through December 31,
1995, subject to additional three-year-term renewals unless either party gives
12 months' written notice of termination to the other. Either party to the
license agreement may also terminate the contract upon one year's written notice
and payment of a termination fee.
WTI has an agreement (the "Boiler Purchase Agreement") with Babcock &
Wilcox Company ("B&W"), whereby B&W has agreed to provide, and WTI has agreed to
purchase, certain boilers suitable for use in WTI's trash-to-energy facilities
having a combustion capacity equal to or greater than 250 tons-per-day. In
addition, B&W agrees to maintain the confidentiality of the Company's
proprietary information incorporated in the boiler design, and not to use such
information except for the purpose of manufacturing boilers for sale to WTI or
its affiliates. The confidentiality provisions will survive the termination of
the Boiler Purchase Agreement. The Boiler Purchase Agreement will remain in
effect until June 30, 1994, subject to additional three-year term renewals
unless either party gives 12 months written notice of termination to the other.
Neither party has provided such notice. Accordingly, the Boiler Purchase
Agreement will automatically renew as of July 1, 1994 for a three-year term
ending June 30, 1997.
The Company possesses foreign and domestic patents on various biosolids
treatment processes. The Company has a license agreement with Seghers
Engineering N.V. of Bruges, Belgium, granting Wheelabrator Clean Water the
exclusive right to use and market the Seghers Zerofuel sludge incineration
system, including the Seghodryer indirect multi-stage dryer for sludge, within
the United States and Canada. The license agreement was renegotiated in April
1993 to remain in effect through the year 2011 provided that Wheelabrator Clean
Water meets specified levels of equipment orders or makes certain minimum
payments under the agreement. The new agreement also gives Wheelabrator Clean
Water additional options with respect to pricing and manufacturing, and includes
a future option allowing Wheelabrator Clean Water to acquire the unrestricted
right to use the Seghers technology within the United States and Canada. In
addition, Wheelabrator Clean Water holds several patents relating to the
processing of biosolids through an indirect biosolids dryer system.
9
<PAGE>
In 1988, the Company entered into a Land Option Agreement, amended as of
June 1, 1992, with Waste Management of North America, Inc., now known as Waste
Management, Inc. ("WMI"), a wholly-owned subsidiary of WMX, providing WTI with
the right, subject to certain restrictions and payment of a $10 million option
renewal fee after 10 years, to acquire or lease sites for future trash-to-
energy, biosolids management, organic waste composting or, subject to certain
pre-conditions, medical waste incineration and autoclave facilities at any of
WMI's existing or future landfills in the United States and Canada. In addition,
in 1988 the Company entered into an Airspace Dedication Agreement (the "ADA")
with WMI permitting WTI, for a period ending August 12, 2008, and subject to
certain conditions and restrictions, to reserve capacity at WMI landfills for
the disposal of ash residue ("Ash Residue") from the Company's trash-to-energy
facilities, to dispose of such residues and waste at such landfills for fees
generally on terms at least as favorable as those charged to other customers,
and granting disposal credits aggregating $70 million to be credited against
future Ash Disposal fees (of which $30 million in disposal credits were
transferred to Rust on January 1, 1993). In 1992, the ADA was amended and
restated to expand the types of waste covered by the ADA to include non-
hazardous biosolids, by-pass waste from facilities owned or operated by WTI and
special wastes removed from third-party sites being remediated by WTI or any of
its affiliates (the "Other Waste"). In addition, the definition of Ash Residue
was expanded to include, under certain circumstances, ash residue from medical
waste incineration facilities. As amended and restated, the ADA also provides
for disposal credits to be applied against disposal fees paid by WTI and its
subsidiaries under separately negotiated disposal arrangements with WMI. Under
the ADA, as amended and restated, WTI may reserve not more than a total of 35%
of the airspace available for the disposal of the type of waste proposed for
disposal at any disposal site at a price-per-ton rate that will generally not be
greater than the most favorable per ton price charged by the disposal site to
customers other than WTI.
In connection with the 1990 Merger, the predecessor of WM International,
Waste Management International, Inc. ("WMII"), and WMI entered into an
Intellectual Property Licensing Agreement with WTI. WM International has
succeeded to the rights and obligations of WMII under the Intellectual Property
Licensing Agreement as well as certain other agreements to which WTI and WMII
were parties. Pursuant to the Intellectual Property Licensing Agreement: (i) WM
International granted WTI a 10-year, non-exclusive, royalty-free license, with
two successive 5-year renewal options, to the "BRINI" recycling and composting
technology owned by WM International; (ii) WMI granted WTI a 10-year, non-
exclusive, royalty-free license, with two successive 5-year renewal options, to
the Recycle America(R) and Recycle Canada(R) trademarks and logos and the
related materials separation and processing technology of WMI for use in
conjunction with recycling operations at or adjacent to any WTI facility; (iii)
WMI agreed to use reasonable efforts to enable WTI to sell recyclable materials
to joint ventures or other markets developed by WMI; (iv) WMI agreed, to the
extent consistent with its business plans, to use good faith efforts to develop
its curbside recycling programs and free-standing recyclable materials recovery
facilities to also support WTI facilities; (v) WTI agreed to designate WMI as
the provider of recyclable collection services for WTI facilities to the extent
possible, before offering such opportunity to any third party; (vi) WMI granted
WTI a 10-year, non-exclusive, royalty-free license, with two successive 5-year
renewal options, to all of WMI's proprietary technology and know-how in the area
of landfill gas recovery and the conversion of such gas to energy (such license
does not extend to the use by WTI of technology and know-how at sanitary
landfill sites owned, operated or maintained by WMI or its subsidiaries and
affiliates, other than WTI and its subsidiaries); and (vii) WMI agreed that only
WTI, and not WMI, may develop the business of designing, constructing, operating
and maintaining landfill gas recovery facilities for governmental, industrial
and third party customers. To the extent WTI develops landfill gas recovery
technology and know-how during the period of its license (and renewals) from
WMI, it will share such technology and know-how with WMI on a similar royalty-
free basis. WTI may waive its rights to develop landfill gas recovery systems on
a case-by-case basis in those situations in which financial objectives specified
by the Company's Board of
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Directors can not be achieved by WTI through development of such projects.
Projects waived by WTI may be developed by WMI.
The licenses and related rights and obligations to conduct business granted
under the Intellectual Property Licensing Agreement terminate, as to facilities
not already operational, contractually committed or the subject of, or
contemplated by, a bid or other submission previously made by the Company or
WMI, as the case may be, at the earlier of the termination of the stated license
periods, the expiration of any patent licensed under the agreement, or the date
on which the Company is no longer a majority-owned subsidiary of WMX.
WTI, WMX, CWM, Rust and WM International are also parties to a First
Amended and Restated Master License Agreement which was modified on January 1,
1993 to add Rust as a party to the existing Master License Agreement originally
entered into in connection with the public offering of ordinary shares of WM
International. Under the Master License Agreement, as amended, each of WTI,
WMX, Rust and CWM, on the one hand, and WM International, on the other, is
granted the right to license, on a non-exclusive basis, certain proprietary
rights of the other. The consideration for any such license will be based upon
the fair market value of a license for the licensed technology at the time of
grant, but may not exceed the most favorable price charged an unaffiliated
licensee for a comparable license.
BACKLOG
WTI's backlog was $11.7 billion and $11.4 billion as of December 31, 1992
and 1993, respectively. WTI expects that approximately $912 million, or 8%, of
the December 1993 backlog will be executed during 1994. Approximately $11.0
billion of this backlog relates to long-term contracts associated with trash-to-
energy, cogeneration, biosolids drying and pelletizing and coal-handling
services at facilities operated by WTI, of which approximately $589 million, or
5%, will be executed during 1994. Approximately $358 million of backlog at
December 31, 1992 related to the businesses contributed by WTI to Rust on
January 1, 1993.
RAW MATERIALS
Raw materials used by the Company, including fuel for its projects (such as
trash, waste wood, waste tires, waste coal and natural gas) and construction
materials, are generally readily available from many different suppliers.
Substantially all of the solid waste disposed at the Company's energy projects
is commonly obtained through long-term supply contracts with solid waste
disposal authorities and municipalities under which minimum disposal fees are
fixed and which generally provide for escalation in accordance with various
price indexes. With respect to WTI's manufacturing businesses, the principal
raw materials are carbon steel, steel alloy plate, stainless steel wire and
plate and scrap metals. The raw materials necessary to each of the Company's
businesses are readily available from a variety of sources and the Company does
not anticipate any difficulty in obtaining such materials.
EMPLOYEES
As of December 31, 1993, the Company had approximately 3,800 full-time
employees. WTI considers relations with its employees to be satisfactory.
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<PAGE>
FINANCING CAPABILITIES AND FUNDING SUPPORT AGREEMENTS
Financing Capabilities
Each trash-to-energy, cogeneration, and biosolids drying and pelletizing
project developed by the Company requires substantial amounts of capital that
generally range from $30 million to $400 million. Historically, such capital
requirements have been financed through the issuance of project debt and the
investment of internal funds and outside equity. The debt has primarily
consisted of long-term tax-exempt or taxable bonds secured by a pledge of
project revenues and assets, with certain additional security being provided, in
some cases, directly or indirectly, by WTI, WMX or another project support
entity. WTI has also used partnership, joint venture and sale and leaseback
structures to bring third-party equity into its project financings. The Company
expects to finance its working capital requirements with its available cash. To
the extent required, the Company has additional cash available to it pursuant to
the Restated Funding Agreement described below or through the working capital
program established between the Company and WMX described below under "Master
Intercorporate Agreement." Certain agreements with respect to the Company's
financing capabilities and funding support are described below.
Restated Funding Agreement
Pursuant to a Restated Funding Agreement between WMX and WTI, WMX agreed to
use reasonable efforts to assist WTI, at WTI's request, in obtaining and
maintaining a credit rating of "A" or better from Standard & Poor's Corporation
or Moody's Investors Service for WTI's long-term unsecured debt securities.
WMX's obligations under the Restated Funding Agreement, which terminate on
August 12, 2008, may involve anything from contingent credit support obligations
to and including WMX's purchase from WTI of up to $200 million principal amount
of WTI securities, which may be either debt, equity or a combination thereof
(the "Securities"). WMX's obligations will be deemed satisfied by the purchase
of such Securities, even if the purchase of all of the Securities does not
enable WTI to obtain an "A" rating. In addition, the obligation to purchase any
of the Securities will be suspended if WTI does not reasonably demonstrate its
ability to pay interest or cash dividends, as the case may be, on the
Securities. WMX's obligations will also be suspended during any period in which
WTI obtains and maintains an "A" rating and will be reduced to the extent that
the purchase of a lesser amount of Securities will allow WTI to obtain or
maintain such a rating. Any Securities issued to WMX will be subject to
mandatory repayment or redemption in equal annual installments during the
twenty-five years following their date of issuance, and they may be prepaid or
redeemed by WTI, at its option, if the directors of WTI not otherwise affiliated
with WMX or WTI conclude that such repayment or redemption is in the best
interests of the Company and its stockholders. Any Securities redeemed or
prepaid prior to August 12, 2008 will restore availability under the $200
million purchase obligation referred to above. WTI has an implied "A" credit
rating from Standard & Poor's Corporation and an implied "A3" credit rating from
Moody's Investors Service. The attainment of such ratings did not involve the
sale of any Securities to WMX.
Master Support Agreement
Under a Master Support Agreement between Resco Holdings Inc. ("Resco"), a
wholly-owned subsidiary of WTI, and Allied-Signal Inc. ("Allied Signal"), Resco
is required to reimburse Allied-Signal for any credit support payments Allied-
Signal is required to make under various credit support agreements with respect
to trash-to-energy projects of Resco. In addition, Resco is required to
maintain its Consolidated Tangible Net Worth (as defined in the Master Support
Agreement) at an amount which, as of December 31, 1993, equalled $547.3 million,
and which is automatically increased (but not decreased) to 90% of Resco's
Consolidated
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Tangible Net Worth at the end of each quarter. As of December 31, 1993, Resco
was in compliance with this provision. Resco is prohibited from paying cash
dividends or acquiring any shares of its capital stock if its Consolidated
Tangible Net Worth is, or would as a consequence of such payment or acquisition
be, less than the required amount. The Master Support Agreement also restricts
the ability of Resco to subject its property or the properties of its
subsidiaries to liens securing indebtedness for money borrowed or similar
indebtedness and may require Resco, under certain circumstances, to refinance
indebtedness of trash-to-energy projects for which Allied-Signal's credit
support is provided. Allied-Signal is providing credit support in respect of
two of the Company's trash-to-energy facilities pursuant to the Master Support
Agreement.
Master Intercorporate Agreement
In connection with the 1990 Merger, WTI, WMX and CWM entered into a Master
Intercorporate Agreement. Among other things, WTI and WMX agreed to implement a
cash management and working capital program under the agreement. The agreement
was amended and restated in 1993 to modify certain aspects of the cash
management program established thereunder. Subject to certain restrictions
specified in the agreement, WMX agreed to fund WTI's working capital
requirements at rates equal to or lower than those WTI would otherwise be able
to obtain on the open market. The Company may borrow up to $100 million from
WMX until September 1995 pursuant to the Master Intercorporate Agreement, plus
the amount of cash invested by WTI with WMX. Except for the $100 million
funding commitment which expires in September 1995, the remaining obligations of
WMX under the Master Intercorporate Agreement will terminate at the time that
both (i) WMX does not own a majority of the capital stock of WTI and (ii) WMX
does not exercise, prior to its expiration, the option to maintain majority
ownership of the capital stock of WTI (as provided in the Master Intercorporate
Agreement).
ACQUISITIONS
During 1993, the Company acquired a number of businesses engaged in
providing various environmentally-related services. The amounts and types of
consideration generally have been determined by direct negotiations with the
owners of the businesses acquired. The acquisitions involved several
businesses engaged in providing water and air quality-related environmental
products and services as well as independent power.
EQUITY INVESTMENTS
Rust International Inc.
The Company owns approximately 40% of the outstanding common stock of Rust.
Approximately 56% of Rust's common stock is held by CWM and the remaining 4% is
held by public stockholders.
Rust is a leading provider, through its subsidiaries, of engineering,
construction and environmental and infrastructure consulting services, hazardous
substance remediation services and other on-site industrial and related
services, primarily to clients in government and in the chemical, petrochemical,
nuclear, energy, utility, pulp and paper, manufacturing, environmental services
and other industries. In addition, Rust provides engineering and environmental
and infrastructure consulting services to clients in several countries outside
of North America.
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Rust's engineering, construction and environmental and infrastructure
consulting services business provides process and design engineering,
construction, marine construction, dismantling and demolition services,
architectural, automation, environmental and infrastructure engineering services
and project management services to clients in federal, state and local
governments, to municipalities and utilities and to clients in the chemical,
petrochemical, pulp and paper, automotive, iron and steel, aerospace, food and
beverage, tobacco, mining, utility and industrial power and general
manufacturing industries.
The industrial engineering services provided by Rust are of two general
types -- process engineering and facility design engineering. Process engineers
create the processes by which facilities operate, such as chemical,
petrochemical, energy and pulp and paper plants. Design engineering services
provided by Rust encompass the following disciplines: architectural; electrical;
control systems (which involves developing the logic and instrumentation
necessary to control, for instance, a plant's electrical system); process
piping; mechanical (equipment layout); structural; heating, ventilation and air
conditioning ("HVAC"); and civil (site work, grading and draining).
Rust's construction services include primarily the new construction and
retrofitting of power generation facilities including coal-fired powerplants,
nuclear power plants, gas turbine and cogeneration plants, industrial
facilities, including chemical, petrochemical, pulp and paper, food and
beverage, iron and steel, automotive, utility and industrial power and other
manufacturing facilities. Rust also provides infrastructure and marine
construction services, which include building, maintaining and repairing
infrastructure such as highways, airports, ports, major civil work, piers,
wharves and bridges. In addition, the Company provides dredging and underwater
diving services to its clients. Rust also provides dismantling and demolition
services.
Rust's environmental and infrastructure consulting services provide
alternative solutions for client problems relating to removing and disposing of
hazardous and toxic substances and managing solid waste, water and wastewater,
groundwater and air resources. Rust provides such services primarily to private
industry but also to federal, state and local governments, including the
Department of Defense ("DOD") and Department of Energy ("DOE"). Rust's services
include performing remedial investigations for the purpose of characterizing
hazardous waste sites and preparing feasibility studies setting forth
recommended remedial actions.
Rust also provides services in connection with the siting, permitting,
design and construction oversight (including construction quality assurance) of
solid and hazardous waste landfills and related facilities such as leachate
collection and disposal and gas recovery and electric generation systems.
Study, design and construction oversight services are also provided, primarily
to municipalities and, to some extent, private industry in connection with
wastewater collection and treatment, potable water supply treatment and
distribution, stormwater management and the building of streets, highways,
airports, bridges, waterways and rail services. In addition, Rust designs
systems required to properly and safely store, convey, treat and dispose of
industrial, hazardous and radioactive materials and provides consulting services
to its clients regarding disposal and waste minimization methods and techniques.
Rust performs on-site hazardous chemical and radioactive substance
remediation services for clients in the chemical, petrochemical, automotive and
other manufacturing industries and for federal, state and local government
entities, including the DOD and DOE in connection with such projects as the
remediation of military bases and other government installations, the
Environmental Protection Agency in connection with Superfund projects, and
various state environmental agencies. Rust's hazardous substance remediation
services also include the containment and closure of contaminated sites and the
cleaning, relining and sealing of liquid containment and treatment ponds,
lagoons and other surface impoundments.
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Rust provides scaffolding services primarily to the refinery, chemical,
petrochemical and electric utility industries, and to a lesser extent, pulp and
paper plants, nuclear facilities and general commercial clients. In most cases,
Rust's scaffolding services are provided in conjunction with periodic, routine
cleaning and maintenance of refineries, chemical plants and utilities, although
such services are also performed in connection with new construction projects.
Rust performs four types of industrial cleaning services--water blasting,
chemical cleaning, vacuuming and water filtration--primarily for clients in the
petrochemical, chemical, and pulp and paper industries, utilities, and to a
lesser extent, the government sector. Rust provides additional on site plant
services to the chemical, petrochemical, and pulp and paper industries as well
as to general commercial and industrial clients, including mechanical and
electrical services, equipment installation, welding, HVAC, warehousing and
inventory management. Rust assists clients in the nuclear and utility
industries in solving electrical, mechanical, engineering and related technical
services problems. Rust also provides spent fuel storage (rerack) services to
the nuclear power industry. In addition, Rust also designs and provides to its
clients other nuclear and utility maintenance service-related products,
including fire protection seals, nozzle dams and manway cover elevator systems.
Waste Management International plc
The Company owns approximately 12% of the outstanding ordinary shares of WM
International. Approximately 56% of WM International's outstanding ordinary
shares are held indirectly by WMX, and an additional 12% of such shares are held
by Rust, in which the Company owns a 40% equity interest. The remaining
outstanding ordinary shares of WM International are held by public stockholders.
WM International is a leading international provider of comprehensive waste
management and related services and conducts essentially all of the waste
management operations located outside of North America of WMX and its
affiliates. The operations of WM International are managed on a country by
country basis and are divisible into two broad categories: collection services
and treatment and disposal services.
Collection services provided by WM International include collection and
transportation of solid, hazardous and medical wastes and recyclable material
from residential, commercial and industrial customers. Through its
subsidiaries, WM International provides collection services to governmental and
private customers in nine European countries, Argentina, Australia, Brunei,
Malaysia, New Zealand and Taiwan. Business is obtained through public bids or
tenders, negotiated contracts, and, in the case of commercial and industrial
customers, direct contracts. WM International's collection services encompassed
approximately 1,700 separate municipal contracts (the largest number of which
are in Italy) serving over 6.3 million households and commercial and industrial
collection services to more than 140,000 solid waste customers and approximately
29,600 hazardous waste customers, as well as related services. The size,
specifications, provisions and duration of municipal contracts vary
substantially, with some such contracts also covering landfill disposal or
street-sweeping or other cleaning services. Pricing for municipal contracts is
generally based on volume of waste, number and frequency of collection pick-ups
and disposal arrangements. Longer-term contracts typically have formulae for
periodic price increases or adjustments.
Street, industrial premises, office, parking lot and port cleaning services
are also performed by WM International, along with portable sanitation/toilet
services for such occasions as outdoor concerts and special events.
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Treatment and disposal services include processing of recyclable materials,
operation of both solid waste landfills and hazardous waste landfills, operation
of municipal, trash-to-energy and hazardous waste incinerators, provision of
hazardous waste treatment and site remediation services, and water treatment
services. The operation of solid waste landfills is currently WM
International's most significant treatment and disposal service. Treatment and
disposal services are provided under contracts which may be obtained through
public bid or tender or direct negotiation, and are also provided directly to
other waste service companies. At December 31, 1993, Waste Management
International operated 23 waste treatment facilities, 32 recycling and
recyclables processing facilities, 11 incinerators and 57 landfills. Three of
the 11 incinerators are hazardous waste incinerators.
At present, in most countries in which WM International operates,
landfilling is the predominant disposal method employed. WM International owns
or operates landfills in Italy, Sweden, France, Spain, Australia, the United
Kingdom, Germany, Denmark, Argentina and New Zealand. WM International is also
constructing a solid waste landfill in Hong Kong. Landfill disposal agreements
may be separate contracts or an integrated portion of collection or treatment
contracts. In addition, landfills may accept waste on a reserved space or per
load basis. WM International believes it has access to sufficient solid waste
landfill capacity to meet its current needs.
WM International's trash-to-energy incinerator in Hamm is a German-designed
plant and the only privately operated trash-to-energy facility in Germany. It
is among the first trash-to-energy facilities to fully comply with that
country's stringent new air pollution requirements. The facility serves the
household and commercial solid waste incineration needs of a population of over
550,000 in Hamm and nearby towns. WM International also operates five small
conventional municipal solid waste incinerators in Italy and one small plant in
each of Sweden and New Zealand.
WM International owns or operates hazardous waste treatment facilities in
Finland, Italy, Sweden, Germany, the United Kingdom, The Netherlands, Hong Kong
and New Zealand, has nearly completed construction of a hazardous waste
treatment facility in Indonesia, and has entered into agreements with the
governments of Argentina and Venezuela to develop hazardous waste treatment
facilities in those countries.
While WM International has considerable experience in mobilizing for and
managing foreign projects, its operations continue to be subject generally to
such risks as currency fluctuations and exchange controls, the need to recruit
and retain suitable local labor forces and to control and coordinate operations
in different jurisdictions, changes in foreign laws or governmental policies or
attitudes concerning their enforcement, political changes, local economic
conditions and international tensions.
WM International records and reports its earnings in pounds sterling.
Currency fluctuations affecting the pounds sterling exchange rates will cause
the Company's earnings from WM International to fluctuate. The Company may from
time to time engage in hedging transactions in order to mitigate the effect of
such exchange fluctuations.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages of the Company's executive officers
(as defined by the regulations of the Securities and Exchange Commission), the
principal positions they hold with the Company and with WMX and its affiliates
as of December 31, 1993, and summaries of their business experience. Experience
shown with WTI includes experience with a predecessor of WTI prior to the August
1989 merger of such
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predecessor into Resco. Executive officers are elected by the Board of
Directors and serve at the discretion of the Board of Directors. Phillip B.
Rooney, the Company's Chairman and Chief Executive Officer, is also an executive
officer of WMX and certain of its affiliates. While he will devote less than
all of his working time to WTI's business, the Company anticipates that he will
devote sufficient time to the Company's business as reasonably may be required
to fulfill the duties of his office.
<TABLE>
<CAPTION>
NAME AND TITLE AGE BUSINESS EXPERIENCE
- -------------------------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Phillip B. Rooney..................... 49 A director of WTI since September 1988. Chairman of the
Chairman of the Board and Board and Chief Executive Officer of WTI since November
Chief Executive Officer 1990. President and Chief Operating Officer of WMX since
November 1984. Chairman of the Board of Rust since January
1993. Chairman of the Board and Chief Executive Officer of
WMI since January 1994. Mr. Rooney is also a director of
WMX, CWM, WM International and Rust.
John M. Kehoe, Jr..................... 60 President and Chief Operating Officer of WTI since January
President and 1993. Vice President of WTI from December 1991 to
Chief Operating Officer December 31, 1992. President of Wheelabrator Environmental
Systems Inc. ("WESI"), a subsidiary of WTI, from November
1990. Managing Director of WTI from June 1988 to November
1990.
John T. Dowd.......................... 56 Senior Vice President and General Manager of Wheelabrator
Senior Vice President and Clean Water Systems Inc. and Wheelabrator Clean Air Systems
General Manager Inc. since November 1992. Vice President and General
Wheelabrator Clean Air Systems Manager of Wheelabrator Clean Water Systems Inc. from
Inc. and Wheelabrator Clean Water August 1991 to November 1992. Vice President - Business
Systems Inc. Development of WESI from January 1989 to August 1991.
James F. Wood......................... 51 Senior Vice President and General Manager of WESI since
Senior Vice President November 1992. Vice President-Plant Operations of WESI from
and General Manager September 1990 to November 1992. Managing Director of WTI
Wheelabrator Environmental from April 1989 to September 1990. Vice President-Plant
Systems Inc. Services of WESI from May 1988 to April 1989.
John D. Sanford....................... 40 Vice President, Chief Financial Officer and Treasurer of WTI
Vice President, since May 1993. Staff Vice President-Finance of WTI from
Chief Financial Officer February 1993 to May 1993. Vice President and Chief Financial
and Treasurer Officer of WESI from August 1987 to May 1993.
Mark P. Paul.......................... 44 Vice President and General Counsel of WTI since May 1993.
Vice President and Associate General Counsel and Staff Vice President of WTI
General Counsel from February 1993 to May 1993. Vice President and General
Counsel of WESI from September 1987 to May 1993.
</TABLE>
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<TABLE>
NAME AND TITLE AGE BUSINESS EXPERIENCE
- -------------------------------------- --- -----------------------------------------------------------------------------
<S> <C> <C>
Richard S. Haak, Jr................... 39 Controller of WTI since November 1993. Vice President and
Controller Controller-Operations of WESI from September 1987 until
November 1993.
</TABLE>
ITEM 2 -- PROPERTIES
The Company's principal executive offices are located at Liberty Lane,
Hampton, New Hampshire 03842. These offices also serve as the headquarters of
the Company's Wheelabrator Clean Energy group. The Company believes that its
property and equipment are generally well maintained, in good operating
condition and adequate for its present needs. The inability to renew any short-
term real property lease by the Company or any of its subsidiaries would not
have a material adverse effect on its results of operations. WTI regularly
upgrades and modernizes facilities and equipment and expands its facilities as
necessary.
The following tables set forth the Company's principal facility locations in
operation or under construction and their use (including those operated by the
Company for others under long-term contracts or similar arrangements) as of
December 31, 1993.
DESCRIPTION OF OWNED, LEASED AND/OR LONG-TERM OPERATED PROJECTS
Set forth below is a description of projects in operation or under
construction which are owned, leased or operated under long-term operating
agreements by WTI subsidiaries, partnerships or joint ventures controlled by WTI
subsidiaries. Unless indicated to the contrary below, each project is owned by
subsidiaries or affiliates of the Company. While WTI exercises, or will
exercise, operating control over each such project, WTI has no ownership
interest in certain of the projects.
Projects in Operation
<TABLE>
<CAPTION>
DESIGN DESIGN
PROJECT OUTPUT CAPACITY COMMENTS
- ----------------------------------------------------- ------ ---------- ---------------------------------------------
<S> <C> <C> <C>
1. Amarillo, Texas N/A 3,500,000 Owned and operated since 1976 by WTI
Coal Handling Facility TPY and its predecessors.
2. Anderson, California 6mW 210 TPD Owned and operated by WTI since mid-
Wood Waste Cogeneration 1993.
Facility
3. Baltimore, Maryland 60mW 2,250 TPD Owned and operated by WTI from 1985
Trash-to-Energy Facility to 1988. Operated by WTI since 1988
Owner: Ford Motor Credit Company ("Ford Credit") under a long-term lease expiring in 2007,
with certain renewal and purchase
options.
4. Bridgeport, Connecticut 70mW 2,250 TPD Operated since 1988 by WTI under a
Trash-to-Energy Facility long-term lease expiring in 2008, with
Owner: Ford Credit certain renewal and purchase options.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
DESIGN DESIGN
PROJECT OUTPUT CAPACITY COMMENTS
------- ------ ---------- -------------------------------------
<S> <C> <C> <C>
5. Broward County, Florida 70mW 2,250 TPD Owned and operated by WTI since mid-
South Site 1991.
Trash-to-Energy Facility
6. Broward County, Florida 70mW 2,250 TPD Owned and operated by WTI since early
North Site 1992.
Trash-to-Energy Facility
7. Claremont, 5mW 200 TPD Owned and operated by WTI since 1987.
New Hampshire
Trash-to-Energy Facility
8. Cobb County, Georgia N/A 35 DTPD Operated by WTI since late 1992 under a
Biosolids Dryer and subcontract expiring in 1996, with a
Pelletizer renewal option.
Owner: Cobb County,
Georgia
9. Concord, New Hampshire 14mW 575 TPD Owned and operated by WTI since 1989.
Trash-to-Energy Facility
10. Earth, Texas N/A 3,500,000 Owned and operated since 1982 by WTI
Coal Handling Facility TPY and its predecessors.
11. Frackville, Pennsylvania 47mW 1,700 TPD Owned and operated by WTI since 1989.
Anthracite Culm
Cogeneration Facility
12. Hagerstown, Maryland N/A 16 DTPD Operated by WTI since late 1992 under a
Biosolids Dryer and lease expiring in 1998, with a renewal
Pelletizer option.
Owner: Hagerstown,
Maryland
13. Gloucester County, 14mW 575 TPD Owned and operated by WTI since 1990.
New Jersey
Trash-to-Energy Facility
14. Millbury, Massachusetts 45mW 1,500 TPD Operated by WTI since 1987 under a
Trash-to-Energy Facility long-term lease expiring in 2007, with
Owner: Ford Credit certain renewal and purchase options.
15. New York, New York N/A 300 DTPD Owned and operated by WTI since mid-
Biosolids Dryer and 1993.
Pelletizer
16. North Andover, Massachusetts 40mW 1,500 TPD Owned and operated by WTI since 1985.
Trash-to-Energy Facility
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DESIGN DESIGN
PROJECT OUTPUT CAPACITY COMMENTS
------- ------ ---------- --------
<S> <C> <C> <C>
17. Norwalk, California 28mW 5,600 MCF Operated by WTI since 1988 under a
Gas Cogeneration Facility per day lease expiring in 2008, with an option to
Owner: Signal Capital buy, subject to prior rights of the State of
Corporation California to purchase the lease and the
facility after 2003.
18. Pinellas County, Florida 75mW 3,000 TPD Operated by WTI since 1983 under a
Trash-to-Energy Facility long-term contract expiring in 2003.
Owner: Pinellas County,
Florida
19. Saugus, Massachusetts 40mW 1,500 TPD Operated by WTI since 1975; wholly-
Trash-to-Energy Facility owned by WTI since 1987.
20. Shasta County, California 49mW 2,400 TPD Operated by WTI since 1988 under a
Wood Waste Small Power long-term lease expiring in 2007, with
Production Facility renewal and purchase options.
Owner: Ford Credit
21. Sherman Station, Maine 18mW 800 TPD Operated by a partnership in which WTI
Wood Waste Cogeneration has a 60% interest since 1986. Leased by
Facility under a long-term contract expiring
Owner: Chrysler Financial in 2006, with renewal and purchase
Corporation options.
22. Spokane, Washington 26mW 800 TPD Operated by WTI since late 1991 under a
Trash-to-Energy Facility long-term contract expiring in 2011.
Owner: City of Spokane,
Washington
23. Tampa, Florida 20mW 1,000 TPD Operated by WTI since 1988 under a
Trash-to-Energy Facility long-term contract expiring in 2005.
Owner: City of Tampa,
Florida
24. Westchester County, 60mW 2,250 TPD Owned and operated since 1984 by
New York Westchester Resco Company L.P.
Trash-to-Energy Facility ("Westchester Resco") (1)
</TABLE>
- ---------------------
(1) Westchester Resco is a limited partnership, 75% held by WTI, and 25% held
indirectly by John Hancock Mutual Life Insurance Co. as a limited partner.
20
<PAGE>
Projects Under Construction
<TABLE>
DESIGN DESIGN
PROJECT OUTPUT CAPACITY COMMENTS
------- ------ ---------- ---------------------------------------
<S> <C> <C> <C>
1. Baltimore County, Maryland N/A 110 DTPD Construction financing provided by WTI
Biosolids Dryer and from available cash; construction
Pelletizer expected to be completed in mid-1994.
2. Falls Township, Pennsylvania 53mW 1,500 TPD Construction financing provided by WTI
Trash-to-Energy Facility from available cash; construction
expected to be completed in mid-1994.
3. Lisbon, Connecticut 13mW 500 TPD Construction expected to be completed
Trash-to-Energy Facility in late 1995. Will be operated by WTI
Owner: Eastern Connecticut under a long-term contract expiring 25
Resource Recovery Authority years from commencement of principal
operations.
4. Polk County, Florida 40mW 1,000 TPD Construction financing provided by WTI
Urban Waste-To-Energy from available cash; construction
Facility expected to be completed in mid-1994.
Owned by a partnership in which WTI
owns an 81% interest.
</TABLE>
KEY: mW--Megawatts DTPD--Dry Tons Per Day TPD--Tons Per Day
TPY--Tons Per Year MCF--Thousands of Cubic Feet
Non-Project Facilities
Set forth below is a list of all of the primary non-project facilities
owned by the Company as of December 31, 1993, and each of the principal plants
and offices leased by the Company as of that date. Such list does not purport
to be a complete list of all of the Company's leased properties.
<TABLE>
<CAPTION>
LOCATION SITE USE NATURE OF INTEREST
-------- -------- ------------------
<S> <C> <C>
Annapolis, Maryland......... Offices Lease
Altrincham, United Kingdom.. Manufacturing facility and office space Own
Commerce, California........ Manufacturing facility and office space Lease
Chatelleurault, France...... Manufacturing facility Own
Dublin, Ireland............. Manufacturing facility Own
Hampton, New Hampshire...... Offices Lease
LaGrange, Georgia........... Manufacturing facility and office space Own
Largo, Florida.............. Manufacturing facility Lease
Moorpark, California........ Manufacturing facility and office space Lease
New Brighton, Minnesota..... Manufacturing facility and office space Own
Naperville, Illinois........ Offices Lease
Parker, Arizona............. Carbon regeneration facility Own building/lease site
Pittsburgh, Pennsylvania.... Offices Lease
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
LOCATION SITE USE NATURE OF INTEREST
-------- -------- ------------------
<S> <C> <C>
Rochester, New Hampshire.... Biosolids compost facility Own building/lease site
Schaumburg, Illinois........ Offices Lease
Sturbridge, Massachusetts... Manufacturing facility Own
Walterboro, South Carolina.. Foundry Own
</TABLE>
ITEM 3 -- LEGAL PROCEEDINGS
Saugus, Massachusetts Trash-to-Energy Facility
On December 4, 1990, a lawsuit was filed against the Company in Essex
County Superior Court in the Commonwealth of Massachusetts ("Essex County
Court") over the estimated cost of retrofitting certain pollution control
equipment at the Company's Saugus, Massachusetts trash-to-energy facility (the
"Saugus Facility"), together with the cost of certain modifications to the ash
disposal site located adjacent to the Saugus Facility, and the costs associated
with operation and maintenance expenses of the Saugus Facility. The lawsuit,
brought by thirteen communities whose municipal waste is disposed at the Saugus
Facility, sought declaratory judgment, monetary damages and other relief based
upon allegations that some of the costs incurred were not properly recoverable
under the terms of their respective service agreements with the Company. The
lawsuit also named as defendants several of the Company's other subsidiaries.
On March 2, 1992, the Company filed a lawsuit in Essex County Court against
the plaintiffs in the foregoing action alleging non-payment of costs billed to
them pursuant to their respective service agreements for amounts expended by the
Company in retrofitting the Saugus Facility. Upon the Company's motion, the
parties were ordered to arbitrate the dispute as provided in the various service
agreements. The Company and the communities commenced the arbitration in early
1993. The "Arbitrator's Final Award," issued on November 9, 1993, provided
that: (i) the Company was not entitled to recover the cost of capital
improvements to the ash landfill or to receive incremental operating costs
related to such capital improvements; (ii) the Company was entitled to charge
the communities their proportionate shares of approximately $54 million of
capital improvements to the Saugus Facility (the Company had sought
approximately $59 million); and (iii) the Company was entitled to charge the
communities their proportionate shares of incremental operating costs resulting
from such capital improvements.
Following the issuance of the Arbitrator's Final Award, the parties
voluntarily dismissed with prejudice the communities' appeal of the order to
arbitrate issued in the Company's 1992 lawsuit. These actions conclusively
ended all disputes arising out of the retrofit of the Saugus Facility and the
adjacent ash disposal site.
Regulatory
The business in which the Company is engaged is intrinsically connected
with the protection of the environment and involves the potential for the
discharge of materials into the environment. In the ordinary course of
conducting its business activities, the Company becomes involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local level including, in certain instances, proceedings instituted by
citizens or local governmental authorities seeking to overturn governmental
action in which governmental officials or agencies are named as defendants
together with the Company or one or more of its subsidiaries, or both. In the
majority of the situations where proceedings are commenced by governmental
authorities, the matters involved relate to alleged technical violations of
licenses or permits pursuant to which
22
<PAGE>
the Company operates or is seeking to operate or laws or regulations to which
its operations are subject or are the result of different interpretations of the
applicable requirements. At December 31, 1993, the Company was involved in one
such proceeding relating to activities at its Westchester, New York trash-to-
energy facility. The EPA has alleged that the facility exceeded its emission
limits of sulphur dioxide ("SO\\2\\"). The EPA and the Company are negotiating
a consent order which is expected to include the installation of a sorbent
injection system (to reduce the SO\\2\\ emissions) and sanctions in an amount
which may exceed $100,000.
Other
In January 1993, the Internal Revenue Service ("IRS") completed an
examination of the Company's consolidated federal income tax returns for the
period 1986-1988. The IRS proposed a significant adjustment related to the 1988
sale of a former subsidiary, which the Company disputed. In March 1994, WTI and
the IRS filed a Stipulation of Settlement with the U.S. Tax Court which resolved
the treatment of the disputed matter. Although the Company is primarily liable
for the amount of the tax due as a result of the settlement (plus interest),
under a Tax Sharing Agreement between the Company and a predecessor of the
Company now known as Koll Real Estate Group, Inc. ("KREG"), the Company is
indemnified by KREG and a former subsidiary of KREG, Abex, Inc. ("Abex"), for
the full amount of any liability assessed with regard to this issue by the IRS
(subject to the remaining availability of any portion of the Company's $50
million obligation referred to in Note 3 of Notes to Consolidated Financial
Statements included elsewhere in this report). Management believes that KREG
and Abex will be able to satisfy their indemnification obligations in respect of
the agreed tax liability.
In addition, there are other routine lawsuits and claims pending against
WTI and its subsidiaries incidental to their businesses. In the opinion of the
Company's management, the ultimate liability, if any, with respect to the above
proceedings and such other lawsuits and claims will not have a material adverse
effect on the business and properties of the Company, taken as a whole, or its
financial position or results of operations.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is traded on The New York Stock Exchange under the symbol
"WTI." The table below sets forth by quarter, for the last two years, the high
and low sales prices of the Common Stock on The New York Stock Exchange
Composite Tape as reported by The Wall Street Journal (Midwest Edition) and also
shows the cash dividends declared per share during such periods:
<TABLE>
<CAPTION>
Market Price (1)
---------------------- Cash Dividends
1992 High Low Declared Per Share
---- --------- --------- ------------------
<S> <C> <C> <C>
First Quarter $ 18-5/16 $14-15/16 $0.01
Second Quarter $15-15/16 $ 13 $0.01
Third Quarter $ 17-1/8 $ 13 $0.01
Fourth Quarter $ 19-1/2 $ 15-5/16 $0.01
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
1993
----
<S> <C> <C> <C>
First Quarter $23-1/2 $18-1/8 $0.02
Second Quarter $21-1/4 $17-5/8 $0.06
Third Quarter $20 $14-3/4 --
Fourth Quarter $18-1/8 $14-5/8 --
</TABLE>
- ------------------
(1) All per share prices and dividends have been adjusted to reflect the two-
for-one stock split in the form of a 100% stock dividend distributed in
January 1993.
----------------------------------------
The approximate number of holders of record of Common Stock as of March 1,
1994 was 22,600. In January 1993, the Company effected a two-for-one stock
split paid in the form of a 100% stock dividend. During 1993, the Board of
Directors declared, and the Company paid, total dividends in the amount of $0.08
per share. In May 1993, the Board of Directors announced its intention to
thereafter consider the payment of an annual dividend in lieu of quarterly
dividends. Future cash dividends will be considered by the Board of Directors
based upon the Company's earnings and financial position and such other business
considerations as the Board of Directors considers relevant.
On March 15, 1994, WTI announced that the Board of Directors had authorized
the repurchase of up to 3,800,000 shares of Common Stock from time to time over
the following 24-month period in the open market or in privately negotiated
transactions. Under a similar program initiated in 1992, WTI repurchased a
total of approximately 4,160,000 shares of Common Stock over a period of two
years.
24
<PAGE>
ITEM 6 -- SELECTED FINANCIAL DATA
The following selected consolidated financial information for each of the
five years in the period ended December 31, 1993 is derived from the Company's
Consolidated Financial Statements, which have been audited by Arthur Andersen &
Co., independent public accountants, whose report thereon is incorporated by
reference in this report. The information below should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Company's Consolidated Financial Statements, and the related
Notes, and the other financial information which are filed as exhibits to this
report and incorporated herein by reference.
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED SELECTED FINANCIAL DATA
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------------------------
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Revenue $1,006,964 $1,151,873 $1,173,449 $1,483,054 $1,142,219
Income before extraordinary
item and accounting changes 58,481 47,406 126,059 176,382 163,102
Net income (loss) 58,481 (70,190) 126,059 134,152 163,102
Earnings (loss) per common share:
Before extraordinary item and
accounting changes 0.37 0.30 0.73 0.94 0.86
Net income (loss) 0.37 (0.44) 0.73 0.71 0.86
Weighted average common shares
outstanding 156,400 158,400 172,400 188,200 188,900
Dividends declared per share -- -- -- .04 .08
FINANCIAL CONDITION (at year end)
Total assets $2,249,652 $2,325,818 $2,743,830 $2,997,073 $3,090,278
Working capital 197,804 265,363 516,084 251,464 5,570
Long-term project debt 945,282 987,949 987,058 857,625 776,858
Stockholders' equity 577,487 545,978 891,351 1,039,343 1,286,838
</TABLE>
- ----------------------------
. The 1990 loss of $70.2 million, or $0.44 per share, reflects a
restructuring charge, an unrealized loss on investments in common stock and
the cumulative effect of a change in accounting method.
. 1991 net income includes a $47.1 million pretax gain on the sale of certain
foreign equity investments.
. 1992 income before extraordinary item and accounting changes includes a
$47.0 million nontaxable gain relating to the initial public offering of
shares by Waste Management International plc. See Note 2 of Notes to
Consolidated Financial Statements.
. 1992 net income includes one-time charges of $42.2 million relating to the
adoption of two new financial accounting standards. See Note 1 of Notes to
Consolidated Financial Statements.
25
<PAGE>
. Beginning in 1993, the Company no longer consolidates the financial results
of certain businesses contributed to form, in part, Rust International Inc.
("Rust"). Revenues from the contributed businesses amounted to
approximately $380.4 million, $423.8 million, $397.8 million and $554.7
million in 1989, 1990, 1991 and 1992, respectively. Beginning in 1993, the
Company's share of Rust's net income is included in equity in earnings of
affiliates. See Note 2 of Notes to Consolidated Financial Statements.
. 1993 income includes a $7.7 million nontaxable gain related to issuance of
stock by Rust and a $6.5 million increase in the tax provision due to the
revaluing of deferred taxes as a result of the August enactment of the
Omnibus Budget Reconciliation Act of 1993. See Notes 2 and 3 of Notes to
Consolidated Financial Statements.
. Share and per share data for all periods reflect the two-for-one stock
split effected on January 7, 1993. See Note 1 of Notes to Consolidated
Financial Statements.
. The increases in weighted average shares outstanding in 1991 and 1992 are
primarily due to shares issued in connection with acquisitions. See Note 2
of Notes to Consolidated Financial Statements.
. The increases in stockholders' equity at December 31, 1991 and 1992
primarily reflect income for each year and the effect of acquisitions. The
increase in stockholders' equity at December 31, 1993 primarily reflects
income for the year, the effects of acquisitions and the January 1, 1993
formation of Rust. See Note 2 of Notes to Consolidated Financial
Statements.
----------------------------------------------
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations set forth on pages 25 through 31 of the
Company's 1993 Annual Report to Stockholders (the "Annual Report") which
discussion is filed as an exhibit to this report and incorporated herein by
reference.
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) The Consolidated Balance Sheets as of December 31, 1992 and 1993,
Consolidated Statements of Income, Cash Flows and Changes in Stockholders'
Equity for each of the years in the three-year period ended December 31, 1993
and Notes to Consolidated Financial Statements set forth on pages 32 through 53
of the Annual Report are filed as an exhibit to this report and incorporated
herein by reference.
(b) Selected Quarterly Financial Data (Unaudited) is set forth in Note 10 of
the Notes to Consolidated Financial Statements referred to in Item 8(a) above
and incorporated herein by reference.
(c) Rust International Inc.'s Consolidated Balance Sheets as of December 31,
1992 and 1993, Consolidated Statements of Income, Cash Flows and Changes in
Stockholders' Equity for each of the years in the three-year period ended
December 31, 1993 and Notes to Consolidated Financial Statements are
incorporated herein by reference to pages F-1 through F-17 of Rust's 1993 annual
report on Form 10-K. Rust's file number under the Securities Exchange Act of
1934 is 1-11896.
26
<PAGE>
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors. The information appearing under the caption "Election of
Directors" on pages 2 through 4 of the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held May 5, 1994 (the "Proxy Statement"), is
incorporated herein by reference.
Executive Officers. Information with respect to executive officers of WTI is
set forth under the caption "Executive Officers of the Registrant" in Item 1 of
this report.
ITEM 11 -- EXECUTIVE COMPENSATION
Information appearing under the caption "Compensation" on pages 7 through 11
of the Proxy Statement is incorporated herein by reference.
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information appearing under the caption "Principal Stockholder" on page 2 of
the Proxy Statement and under the caption "Securities Ownership of Management"
on pages 4 through 6 of the Proxy Statement is incorporated herein by reference.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information appearing under the caption "Certain Transactions and Other
Matters" on pages 18 through 25 of the Proxy Statement, under the second full
paragraph on page 3 of the Proxy Statement and under the first full paragraph on
page 4 of the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS:
The following financial statements and supplementary data of the Company are
filed as an exhibit hereto and incorporated herein by reference:
(i) Consolidated Statements of Income for the years ended December 31,
1991, 1992 and 1993.
(ii) Consolidated Balance Sheets as of December 31, 1992 and 1993.
(iii) Consolidated Statements of Cash Flows for the years ended
December 31, 1991, 1992 and 1993.
(iv) Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1991, 1992 and 1993.
27
<PAGE>
(v) Notes to Consolidated Financial Statements.
(vi) Report of Independent Public Accountants -- Arthur Andersen & Co.
Rust International Inc.'s Consolidated Balance Sheets as of December 31,
1992 and 1993, Consolidated Statements of Income, Cash Flows and Changes in
Stockholders' Equity for each of the years in the three-year period ended
December 31, 1993 and Notes to Consolidated Financial Statements are
incorporated herein by reference to pages F-1 through F-17 of Rust's 1993 annual
report on Form 10-K. Rust's file number under the Securities Exchange Act of
1934 is 1-11896.
(2) SCHEDULES:
The following financial statement schedules of the Company are included in
this report:
(i) Report of Independent Public Accountants on Schedules--Arthur
Andersen & Co.
(ii) Schedule II--Amounts Receivable From Officers, Employees and Related
Parties.
(iii) Schedule V--Property and Equipment.
(iv) Schedule VI--Accumulated Depreciation and Amortization
of Property and Equipment.
Financial statement schedules of Rust International Inc. are incorporated by
reference to pages F-18 through F-23 of Rust's 1993 annual report on Form 10-K.
Rust's file number under the Securities Exchange Act of 1934 is 1-11896.
All other schedules have been omitted since they are not applicable, not
required, or the information is included in the above-referenced financial
statements or notes thereto.
(3) EXHIBITS:
The exhibits to this report are listed in the Exhibit Index contained
elsewhere herein. Included in the exhibits listed therein are the following
exhibits which constitute management contracts or compensatory plans or
arrangements:*
(i) Restricted Unit Plan for Non-Employee Directors of the registrant as
amended through June 10, 1991 (incorporated by reference to Exhibit
19.03 to the registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 1991).
(ii) Amendment, dated as of December 6, 1991, to the Restricted Unit Plan
for Non-Employee Directors of the registrant (incorporated by
reference to Exhibit 19.05 to registrant's 1991 annual report on
Form 10-K).
(iii) Deferred Director's Fee Plan adopted June 10, 1991 (incorporated by
reference to Exhibit 19.02 to the registrant's quarterly report on
Form 10-Q for the quarter ended June 30, 1991).
- ------------------
* In the case of incorporation by reference to documents filed under the
Securities Exchange Act of 1934, the registrant's file number under that Act is
0-14246. Exhibits not incorporated by reference are filed with this report.
28
<PAGE>
(iv) 1988 Stock Plan for Executive Employees of Old WTI and its
subsidiaries ("1988 Stock Plan") (incorporated by reference to
Exhibit 28.1 to Amendment No. 1 to the registrant's registration
statement on Form S-8, Reg. No. 33-31523).
(v) Amendments, dated as of September 7, 1990, to the 1988 Stock Plan
(incorporated by reference to Exhibit 19.02 to the registrant's 1990
annual report on Form 10-K).
(vi) Amendment, dated as of November 1, 1990, to the 1988 Stock Plan
(incorporated by reference to Exhibit 19.04 to the registrant's 1990
annual report on Form 10-K).
(vii) Amendment, dated as of December 6, 1991, to the 1988 Stock Plan
(incorporated by reference to Exhibit 19.02 to the registrant's 1991
annual report on Form 10-K).
(viii) 1986 Stock Plan for Executive Employees of the registrant and its
subsidiaries ("1986 Stock Plan") (incorporated by reference to
Exhibit 28.2 to Amendment No. 1 to the registrant's registration
statement on Form S-8, Reg. No. 33-13720).
(ix) Amendment, dated as of November 1, 1990, to the 1986 Stock Plan
(incorporated by reference to Exhibit 19.03 to the registrant's 1990
annual report on Form 10-K).
(x) Amendment, dated as of December 6, 1991, to the 1986 Stock Plan
(incorporated by reference to Exhibit 19.01 to the registrant's
1991 annual report on Form 10-K).
(xi) 1991 Performance Unit Plan of the registrant (incorporated by
reference to Exhibit 10.48 of the registrant's 1990 annual report on
Form 10-K).
(xii) Wheelabrator Technologies Inc. Corporate Incentive Bonus Plan (as
amended and restated as of March 8, 1993) (incorporated by reference
to Exhibit 10.36 to the registrant's 1992 annual report on Form 10-
K).
(xiii) Wheelabrator Technologies Inc. Corporate Incentive Bonus Plan (as
amended and restated as of March 14, 1994).
(xiv) Wheelabrator Technologies Inc. Long Term Incentive Plan (as amended
and restated as of March 14, 1994).
(xv) Retirement Plan for Non-Employee Directors of the registrant
(incorporated by reference to Exhibit 10.32 to the registrant's 1988
annual report on Form 10-K).
(xvi) Amendment, dated as of September 7, 1990, to the Retirement Plan for
Non-Employee Directors of the registrant (incorporated by reference
to Exhibit 19.01 to the registrant's 1990 annual report on Form 10-
K).
(xvii) Amendment, dated June 10, 1991, to the Retirement Plan for Non-
Employee Directors of the registrant (incorporated by reference to
Exhibit 19.01 to the registrant's quarterly report on Form 10-Q for
the quarter ended June 30, 1991).
29
<PAGE>
(xviii) 1991 Stock Option Plan for Non-Employee Directors ("1991 Directors
Plan") of the registrant adopted June 10, 1991 (incorporated by
reference to Exhibit 19.04 to the registrant's quarterly report on
Form 10-Q for the quarter ended June 30, 1991).
(xix) Amendment to 1991 Directors Plan dated as of December 22, 1993.
(xx) 1992 Stock Option Plan of the registrant (incorporated by reference
to Exhibit 10.45 to the registrant's 1991 annual report on Form 10-
K).
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the fiscal quarter
ended December 31, 1993.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in Oak Brook, Illinois on
the 29th day of March 1994.
WHEELABRATOR TECHNOLOGIES INC.
By /s/ PHILLIP B. ROONEY
---------------------------------------
PHILLIP B. ROONEY,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Signature Date
- --------------------------- ---------------------------- --------------------------- --------------
<S> <C> <C> <C>
Phillip B. Rooney Director, Chairman of the /s/ PHILLIP B. ROONEY March 29, 1994
Board and Chief Executive ---------------------------
Officer Phillip B. Rooney
John D. Sanford Vice President, Treasurer /s/ JOHN D. SANFORD March 29, 1994
and Chief Financial Officer ---------------------------
John D. Sanford
Richard S. Haak, Jr. Controller and Principal /s/ RICHARD S. HAAK, JR. March 29, 1994
Accounting Officer ---------------------------
Richard S. Haak, Jr.
Dean L. Buntrock Director /s/ DEAN L. BUNTROCK March 29, 1994
---------------------------
Dean L. Buntrock
William M. Daley Director /s/ WILLIAM M. DALEY March 29, 1994
---------------------------
William M. Daley
Donald F. Flynn Director /s/ DONALD F. FLYNN March 29, 1994
---------------------------
Donald F. Flynn
Paul M. Montrone Director /s/ PAUL M. MONTRONE March 29, 1994
---------------------------
Paul M. Montrone
James E. Koenig Director /s/ JAMES E. KOENIG March 29, 1994
---------------------------
James E. Koenig
Manuel Sanchez Director /s/ MANUEL SANCHEZ March 29, 1994
---------------------------
Manuel Sanchez
Thomas P. Stafford Director /s/ THOMAS P. STAFFORD March 29, 1994
---------------------------
Thomas P. Stafford
</TABLE>
31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULES
To the Stockholders and the Board of Directors
of Wheelabrator Technologies Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Wheelabrator Technologies
Inc.'s annual report to stockholders incorporated by reference in this Form
10-K, and have issued our report thereon dated March 17, 1994. Our report on the
consolidated financial statements includes an explanatory paragraph with respect
to the change in the method of accounting for income taxes and postretirement
benefits other than pensions as discussed in Note 1 to the financial statements.
Our audit was made for the purpose of forming an opinion on those statements
taken as a whole. The schedules listed in Item 14(a)(2) in this Form 10-K are
the responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
New York, New York,
March 17, 1994
F-1
<PAGE>
SCHEDULE II
WHEELABRATOR TECHNOLOGIES INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
BALANCE BALANCE BALANCE
DECEMBER 31, AMOUNTS DECEMBER 31, AMOUNTS DECEMBER 31,
1990 ADDITIONS COLLECTED 1991 ADDITIONS COLLECTED 1992
------------ --------- ----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Purchase Program Notes (1)
Ronald J. Broglio.............. $ 913,462 $ 17,224 $ (930,686) $ -- $ -- $ -- $ --
Harold W. Buirkle.............. 2,099,986 18,822 (2,118,808) -- -- -- --
Salvatore J. Caltagirone....... 96,681 1,353 (98,034) -- -- -- --
Michael D. Dingman............. 8,315,653 121,347 (8,437,000) -- -- -- --
Clifford T. Dirkes............. 680,245 27,895 (360,550) 347,590 556 (348,146) --
Michael J. Farrell............. 361,034 5,426 (366,460) -- -- -- --
Paul J. Feira.................. 798,304 24,492 (483,946) 338,850 1,857 (340,707) --
Rodney C. Gilbert.............. 1,457,644 35,268 (1,492,912) -- -- -- --
Farid G. Habeishi.............. 456,731 2,998 (459,729) -- -- -- --
Edwin M. Hardin................ 146,388 573 (146,961) -- -- -- --
John J. Heeney................. 195,184 3,554 (198,738) -- -- -- --
John M. Kehoe, Jr.............. 1,711,765 79,033 (1,157,280) 633,518 17,363 (650,881) --
William C. Keightley........... 569,938 13,215 (583,153) -- -- -- --
Bruce W. Keough................ 1,141,828 20,967 (1,162,795) -- -- -- --
Arthur Liebowitz............... 101,219 1,377 (102,596) -- -- -- --
Paul M. Meister................ 3,691,701 145,199 (2,007,036) 1,829,864 51,769 (1,881,633) --
Paul M. Montrone............... 5,543,767 92,229 (5,635,996) -- -- -- --
David S. Neel.................. 456,731 1,907 (458,638) -- -- -- --
Ramanlal L. Patel.............. 433,562 27,633 (299,628) 161,567 5,947 (167,514) --
</TABLE>
<TABLE>
<CAPTION>
BALANCE
AMOUNTS DECEMBER 31,
ADDITIONS COLLECTED 1993
--------- ----------- ------------
<S> <C> <C> <C>
Equity Purchase Program Notes (1) $ -- $ -- $ --
Ronald J. Broglio.............. -- -- --
Harold W. Buirkle.............. -- -- --
Salvatore J. Caltagirone....... -- -- --
Michael D. Dingman............. -- -- --
Clifford T. Dirkes............. -- -- --
Michael J. Farrell............. -- -- --
Paul J. Feira.................. -- -- --
Rodney C. Gilbert.............. -- -- --
Farid G. Habeishi.............. -- -- --
Edwin M. Hardin................ -- -- --
John J. Heeney................. -- -- --
John M. Kehoe, Jr.............. -- -- --
William C. Keightley........... -- -- --
Bruce W. Keough................ -- -- --
Arthur Liebowitz............... -- -- --
Paul M. Meister................ -- -- --
Paul M. Montrone............... -- -- --
David S. Neel.................. -- -- --
Ramanlal L. Patel.............. -- -- --
</TABLE>
(1) Indebtedness indicated was related to purchases of common stock by
participants in the Company's Equity Purchase Program. See Note 6 of Notes
to Consolidated Financial Statements for a further description of the Equity
Puchase Program. Such indebtedness was represented by nonrecourse promissory
notes issued to the Company which were secured by shares of Common Stock of
the Company purchased under such program as well as shares of the common
stock of WMX issued in connection with the 1990 Merger. The Company will not
issue additional shares of Common Stock under the Equity Purchase Program.
F-2
<PAGE>
SCHEDULE II (CONTINUED)
<TABLE>
<CAPTION>
BALANCE BALANCE BALANCE
DECEMBER 31, AMOUNTS DECEMBER 31, AMOUNTS DECEMBER 31,
1990 ADDITIONS COLLECTED 1991 ADDITIONS COLLECTED 1992
----------- --------- ------------- ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Purchase Program
Notes (1) (CONTINUED)
William R. Poor........... $ 685,097 $ 2,901 $ (687,998) $ -- $ -- $ -- $ --
John W. Rohrer............ 456,731 14,241 (271,089) 199,883 742 (200,625) --
David S. Rozendale........ 1,141,828 4,851 (1,146,679) -- -- -- --
Richard R. Russell........ 1,187,963 9,626 (1,197,589) -- -- -- --
John D. Sanford........... 685,097 47,266 -- 732,363 20,461 (752,824) --
David L. Schmitt.......... 1,141,828 14,725 (1,156,553) -- -- -- --
Steven G. Shapiro......... 913,462 11,964 (925,426) -- -- -- --
L. Roland Shipp........... 456,731 1,823 (458,554) -- -- -- --
Scott G. Sillars.......... 246,865 6,707 (174,683) 78,889 2,218 (81,107) --
Michael K. Sylvers........ 456,731 15,707 (271,146) 201,292 1,068 (202,360) --
Ronald C. Whitaker........ 569,938 33,342 (603,280) -- -- -- --
James F. Wood............. 131,383 1,738 (133,121) -- -- -- --
Other Notes
Donald F. Flynn........... -- -- -- -- -- -- --
Jerome D. Girsch.......... -- -- -- -- 154,871 -- 154,871
----------- -------- ------------ ---------- ------- ---------- --------
$37,245,477 $805,403 $(33,527,064) $4,523,816 $256,852 $(4,625,797) $154,871
=========== ======== ============ ========== ======== =========== ========
</TABLE>
<TABLE>
<CAPTION>
BALANCE
AMOUNTS DECEMBER 31,
ADDITIONS COLLECTED 1993
--------- ------------ ------------
<S> <C> <C> <C>
Equity Purchase Program
Notes (1) (CONTINUED)
William R. Poor........... $ -- $ -- $ --
John W. Rohrer............ -- -- --
David S. Rozendale........ -- -- --
Richard R. Russell........ -- -- --
John D. Sanford........... -- -- --
David L. Schmitt.......... -- -- --
Steven G. Shapiro......... -- -- --
L. Roland Shipp........... -- -- --
Scott G. Sillars.......... -- -- --
Michael K. Sylvers........ -- -- --
Ronald C. Whitaker........ -- -- --
James F. Wood............. -- -- --
Other Notes
Donald F. Flynn........... 176,633 -- 176,633
Jerome D. Girsch.......... -- (154,871) --
-------- --------- --------
$176,633 $(154,871) $176,633
======== ========= ========
</TABLE>
(1) Indebtedness indicated was related to purchases of common stock by
participants in the Company's Equity Purchase Program. See Note 6 of Notes
to Consolidated Financial Statements for a further description of the Equity
Puchase Program. Such indebtedness was represented by nonrecourse promissory
notes issued to the Company which were secured by shares of Common Stock of
the Company purchased under such program as well as shares of the common
stock of WMX issued in connection with the 1990 Merger. The Company will not
issue additional shares of Common Stock under the Equity Purchase Program.
F-3
<PAGE>
SCHEDULE V
WHEELABRATOR TECHNOLOGIES INC.
PROPERTY, PLANT AND EQUIPMENT
(000'S OMITTED)
<TABLE>
<CAPTION>
BALANCE AT NET ASSETS BALANCE
BEGINNING ADDITIONS FROM SALES AND OTHER AT END
OF PERIOD AT COST ACQUISITIONS RETIREMENTS CHANGES* OF PERIOD
---------- --------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1991
Land......................... $ 34,119 $ 250 $17,669 $ (197) $ 75 $ 51,916
Land options................. 171,484 -- -- -- -- 171,484
Buildings and improvements... 145,540 5,408 2,411 (12,467) 58,359 199,251
Machinery and equipment...... 507,551 17,172 18,413 (6,823) 221,424 757,737
Construction in progress..... 380,885 107,014 -- -- (284,717) 203,182
---------- -------- ------- -------- --------- ----------
Total....................... $1,239,579 $129,844 $38,493 $(19,487) $ (4,859) $1,383,570
========== ======== ======= ======== ========= ==========
Year ended December 31, 1992
Land......................... $ 51,916 $ 3,499 $ 467 $ (35) $ (87) $ 55,760
Land options................. 171,484 -- -- -- 114,323 285,807
Buildings and improvements... 199,251 39,510 8,210 (1,851) 7,849 252,969
Machinery and equipment...... 757,737 13,355 21,414 (6,382) 204,700 990,824
Construction in progress..... 203,182 91,661 26,930 -- (210,178) 111,595
---------- -------- ------- -------- --------- ----------
Total....................... $1,383,570 $148,025 $57,021 $ (8,268) $ 116,607 $1,696,955
========== ======== ======= ======== ========= ==========
Year ended December 31, 1993
Land......................... $ 55,760 $ -- $ 176 $ (192) $ (2,341) $ 53,403
Land options................. 285,807 -- -- -- -- 285,807
Buildings and improvements... 252,969 12,027 6,608 (5,504) (42,637) 223,463
Machinery and equipment...... 990,824 28,162 4,635 (4,686) 57,641 1,076,576
Construction in progress..... 111,595 251,448 -- -- (115,656) 247,387
---------- -------- ------- -------- --------- ----------
Total......... $1,696,955 $291,637 $11,419 $(10,382) $(102,993) $1,886,636
========== ======== ======= ======== ========= ==========
- --------------------
</TABLE>
* Represents the effect of translating foreign balance sheets to U.S.
Dollars, finalization of purchase price adjustments, and transfers from
construction in progress. In 1992, primarily reflects the impact of the
restatement of assets related to business combinations consummated before
the adoption of FAS 109 on a gross basis rather than on a net-of-tax basis
previously used. In 1993, primarily reflects the impact of the
contribution of certain businesses to form, in part, Rust International
Inc. See Note 2 of Notes to Consolidated Financial Statements for a
further description of the Company's investment in Rust International Inc.
F-4
<PAGE>
SCHEDULE VI
WHEELABRATOR TECHNOLOGIES INC.
ACCUMULATED DEPRECIATION
(000'S OMITTED)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING ADDITIONS SALES AND OTHER AT END
OF PERIOD AT COST RETIREMENTS CHANGES* OF PERIOD
--------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1991
Buildings and improvements... $ 29,737 $ 7,937 $(11,605) $ 6,421 $ 32,490
Machinery and equipment...... 100,976 27,684 (4,367) (7,098) 117,195
-------- ------- -------- -------- --------
Total....................... $130,713 $35,621 $(15,972) $ (677) $149,685
======== ======= ======== ======== ========
Year ended December 31, 1992
Buildings and improvements... $ 32,490 $15,147 $ (1,101) $ (214) $ 46,322
Machinery and equipment...... 117,195 44,339 (5,284) (858) 155,392
-------- ------- -------- -------- --------
Total....................... $149,685 $59,486 $ (6,385) $ (1,072) $201,714
======== ======= ======== ======== ========
Year ended December 31, 1993
Buildings and improvements... $ 46,322 $13,487 $ (61) $ (2,133) $ 57,615
Machinery and equipment...... 155,392 49,101 (3,698) (25,694) 175,101
-------- ------- -------- -------- --------
Total....................... $201,714 $62,588 $ (3,759) $(27,827) $232,716
======== ======= ======== ======== ========
</TABLE>
- -------------------
* Represents the effect of translating foreign balance sheets to U.S. Dollars
and finalization of purchase price adjustments. In 1993, primarily
reflects the impact of the contribution of certain businesses to form, in
part, Rust International Inc. See Note 2 of Notes to Consolidated
Financial Statements for a further description of the Company's investment
in Rust International Inc.
F-5
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Description Page
of Exhibit* Number**
- ----------- -----------
<S> <C> <C>
1. Inapplicable.
2.01 Agreement and Plan of Merger, dated March 30, 1990
and amended as of July 24, 1990, among the
registrant, WMX Technologies, Inc. ("WMX") and WM
Sub, Inc. (incorporated by reference to Exhibit 2.01
to the registrant's statement on Form S-4, Reg. No.
33-36118).
2.02 Rust International Inc. Organizational Agreement,
dated as of December 31, 1992 ("Organizational
Agreement"), by and among the registrant, The Brand
Companies, Inc. ("Brand") and Chemical Waste
Management, Inc. ("CWM") (incorporated by reference
to Exhibit 7 to Amendment No. 6 to Statement on
Schedule 13D filed on January 5, 1993 by WMX, the
registrant and CWM relating to securities of Brand).
3.01 Restated Certificate of Incorporation of the
registrant (incorporated by reference to Exhibit 3.01
to registrant's 1989 annual report on Form 10-K).
3.02 Certificate of Amendment to the registrant's Restated
Certificate of Incorporation dated May 6, 1993
(incorporated by reference to Exhibit 19 to the
registrant's report on Form 10-Q for the quarter
ended March 31, 1993).
3.03 By-Laws of the registrant as amended through November
1, 1990 (incorporated by reference to Exhibit 3.03 to
the registrant's 1990 annual report on Form 10-K).
4. None.
5. Inapplicable.
6. Inapplicable.
7. Inapplicable.
8. Inapplicable.
9. None.
</TABLE>
- ------------------
* In the case of incorporation by reference to documents filed by the
registrant under the Securities Exchange Act of 1934, the registrant's file
number under that Act is 0-14246.
**This information appears only on the manually signed original of this report.
E-1
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Description Page
of Exhibit* Number**
- ----------- -----------
<S> <C> <C>
10.01 Tax Sharing Agreement ("TSA"), dated as of December
15, 1988, between the registrant and Koll Real Estate
Group, Inc. ("KREG") (incorporated by reference to
Exhibit 10.02 to Amendment No. 3 on Form 8 to KREG's
registration statement on Form 10, Commission File
No. 0-17189).
10.02 Amendment to the TSA dated February 14, 1994.
10.03 Master Support Agreement, dated as of February 26,
1986, among Allied-Signal Inc. ("Allied Signal"), the
registrant and Signal Capital Corporation, as amended
and restated as of January 27, 1987, and as further
amended and restated as of December 7, 1988, among
Allied-Signal, Wheelabrator Technologies Inc. ("Old
WTI"), the Guaranteeing Subsidiaries referred to
therein, the Non-Company Resco Subsidiaries referred
to therein, the registrant and KREG (incorporated by
reference to Exhibit 10.22 to Amendment No. 3 on Form
8 to KREG's registration statement on Form 10,
Commission File No. 0-17189).
10.04 Assignment, Assumption and Release Agreement, dated
as of December 7, 1988, among the registrant, Old
WTI, the Old Guaranteeing Subsidiaries (as defined
therein) and Allied-Signal (incorporated by reference
to Exhibit 10.22B to Amendment No. 3 on Form 8 to
KREG's registration statement on Form 10, Commission
File No. 0-17189).
10.05 Assignment and Assumption Agreement, dated as of
December 7, 1988, among the registrant, Old WTI and
KREG (incorporated by reference to Exhibit 10.18B to
KREG's 1988 annual report on Form 10-K, Commission
File No. 0-17189).
10.06 Land Option Agreement, dated as of August 12, 1988,
between Old WTI and Waste Management, Inc. ("WMI")
(incorporated by reference to Exhibit 10.15 to the
registrant's 1988 annual report on Form 10-K).
10.07 Amendment No. 1 to Land Option Agreement, dated as of
June 1, 1992, between Resco Holdings Inc. ("Resco"),
as successor by merger to Old WTI, and WMI
(incorporated by reference to Exhibit 19.01 to the
registrant's 1992 annual report on Form 10-K).
10.08 Second Amended and Restated Airspace Dedication
Agreement, dated as of December 13, 1992, between
Resco and WMI (incorporated by reference to Exhibit
19.02 to the registrant's 1992 annual report on Form
10-K).
</TABLE>
- ------------------
* In the case of incorporation by reference to documents filed by the
registrant under the Securities Exchange Act of 1934, the registrant's file
number under that Act is 0-14246.
** This information appears only on the manually signed original of this report.
E-2
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Description Page
of Exhibit* Number**
- ----------- -----------
<S> <C> <C>
10.09 Disposal Agreement, dated as of March 1, 1989,
between Waste Management Inc. of Florida and Broward
Waste Energy (incorporated by reference to Exhibit
10.17A to the registrant's 1988 annual report on Form
10-K).
10.10 Guaranty, dated August 2, 1988, from WMX to the
registrant and Wheelabrator Technologies of North
America Inc., formerly known as Wheelabrator
Technologies Inc. ("WTNA") (incorporated by reference
to Exhibit 10.19 to the registrant's 1988 annual
report on Form 10-K).
10.11 Development Agreement, dated as of August 12, 1988,
between Old WTI and WMI (incorporated by reference to
Exhibit 10.21 to the registrant's 1988 annual report
on Form 10-K).
10.12 Amendment No. 1 to Development Agreement, dated as of
January 15, 1990, between Old WTI and WMI
(incorporated by reference to Exhibit 10.63 to
registrant's registration statement on Form 10-K).
10.13 Amendment No. 2 to Development Agreement, dated as of
June 1, 1992, between Resco and WMI (incorporated by
reference to Exhibit 19.03 to the registrant's 1992
annual report on Form 10-K).
10.14 Restricted Unit Plan for Non-Employee Directors of
the registrant, as amended through June 10, 1991
(incorporated by reference to Exhibit 19.03 to the
registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 1991).
10.15 Amendment, dated as of December 6, 1991, to the
Restricted Unit Plan for Non-Employee Directors of
the registrant (incorporated by reference to Exhibit
19.05 to the registrant's 1991 annual report on Form
10-K).
10.16 Deferred Director's Fee Plan adopted June 10, 1991
(incorporated by reference to Exhibit 19.02 to the
registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 1991).
10.17 Lease Agreement, dated as of September 15, 1987,
between The Connecticut Bank and Trust Company, N.A.,
as Owner Trustee, lessor, and Wheelabrator Millbury
Inc., lessee (incorporated by reference to Exhibit
10.51 to the registrant's 1988 annual report on Form
10-K).
</TABLE>
- ------------------
* In the case of incorporation by reference to documents filed by the
registrant under the Securities Exchange Act of 1934, the registrant's file
number under that Act is 0-14246.
**This information appears only on the manually signed original of this report.
E-3
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Description Page
of Exhibit* Number**
- ----------- -----------
<S> <C> <C>
10.18 Lease Agreement, dated as of December 30, 1987, as
amended and restated as of April 1, 1988, between The
Connecticut Bank and Trust Company, N.A., as
Corporate Owner Trustee, and Donald E. Smith, as
Individual Owner Trustee, lessor, and Signal Shasta
Energy Company Inc., lessee (incorporated by
reference to Exhibit 10.52 to the registrant's 1988
annual report on Form 10-K).
10.19 Lease Agreement, dated as of September 15, 1988,
between The Connecticut Bank and Trust Company, N.A.,
lessor, and Baltimore Refuse Energy Systems Company,
Limited Partnership, lessee (incorporated by
reference to Exhibit 10.40 to registrant's
registration statement on Form S-4, Reg. No. 33-
36118).
10.20 Second Amendment and Restatement of Lease Agreement,
dated as of May 1, 1988, between the First National
Bank of Boston, as Corporate Owner Trustee, James E.
Mogavero, as Individual Owner Trustee, lessor, and
Bridgeport Resco, lessee (incorporated be reference
to Exhibit 10.41 to registrant's registration
statement on Form S-4, Reg. No. 33-36118).
10.21 Modification Agreement, dated as of August 24, 1989,
among the registrant, Old WTI, WMI, KREG and Resco
(incorporated by reference to Exhibit 28.01 to the
registrant's Form 8-K dated August 24, 1989).
10.22 Assignment, Assumption and Release Agreement, dated
December 18, 1989, among KREG, Henley Holdings, Inc.,
Henley, Henley Support Co. Two, the registrant and
Resco amending the Modification Agreement
(incorporated by reference to Exhibit 10.69 to the
registrant's registration statement on Form S-4, Reg.
No. 33-36118).
10.23 Letter Agreement, dated October 25, 1990, among the
registrant, WMI, Resco, Henley and Henley Support Co.
Two amending the Modification Agreement (incorporated
by reference to Exhibit 10.46 to the registrant's
1990 annual report on Form 10-K).
10.24 Letter Agreement, dated November 8, 1991, among the
registrant, Henley, KREG, WMX, WMI, New Henley
Holdings Inc. and WTNA, amending the Modification
Agreement (incorporated by reference to Exhibit 10.23
to the registrant's 1991 annual report on Form 10-K).
</TABLE>
- ------------------
* In the case of incorporation by reference to documents filed by the
registrant under the Securities Exchange Act of 1934, the registrant's file
number under that Act is 0-14246.
**This information appears only on the manually signed original of this report.
E-4
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Description Page
of Exhibit* Number**
- ----------- -----------
<S> <C> <C>
10.25 1988 Stock Plan for Executive Employees of Old WTI
and its subsidiaries ("1988 Stock Plan")
(incorporated by reference to Exhibit 28.1 to
Amendment No. 1 to the registrant's registration
statement on Form S-8, Reg. No. 33-31523).
10.26 Amendments, dated as of September 7, 1990, to the
1988 Stock Plan (incorporated by reference to Exhibit
19.02 to the registrant's 1990 annual report on Form
10-K).
10.27 Amendment, dated as of November 1, 1990, to the 1988
Stock Plan (incorporated by reference to Exhibit
19.04 to the registrant's 1990 annual report on Form
10-K).
10.28 Amendment, dated as of December 6, 1991, to the 1988
Stock Plan (incorporated by reference to Exhibit
19.02 to the registrant's 1991 annual report on Form
10-K).
10.29 1986 Stock Plan for Executive Employees of the
registrant and its subsidiaries ("1986 Stock Plan")
(incorporated by reference to Exhibit 28.2 to
Amendment No. 1 to the registrant's registration
statement on Form S-8, Reg. No. 33-31523).
10.30 Amendment, dated as of November 1, 1990, to the 1986
Stock Plan (incorporated by reference to Exhibit
19.03 to the registrant's 1990 annual report on Form
10-K).
10.31 Amendment, dated as of December 6, 1991, to the 1986
Stock Plan (incorporated by reference to Exhibit
19.01 to the registrant's 1991 annual report on Form
10-K).
10.32 Restated Funding Agreement, dated as of September 7,
1990, among Resco, the registrant and WMX
(incorporated by reference to Exhibit 10.34 to the
registrant's 1990 annual report on Form 10-K).
10.33 Medical Waste Option Agreement, dated as of September
7, 1990, between WMI and the registrant (incorporated
by reference to Exhibit 10.36 to the registrant's
1990 annual report on Form 10-K).
10.34 Amendment No. 1 to Medical Waste Option Agreement,
dated as of June 1, 1992, between WMI and the
registrant (incorporated by reference to Exhibit
19.04 to the registrant's 1992 annual report on Form
10-K).
</TABLE>
- ------------------
* In the case of incorporation by reference to documents filed by the
registrant under the Securities Exchange Act of 1934, the registrant's file
number under that Act is 0-14246.
**This information appears only on the manually signed original of this report.
E-5
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Description Page
of Exhibit* Number**
- ----------- -----------
<S> <C> <C>
10.35 Intellectual Property Licensing Agreement, dated as
of September 7, 1990, by and among Waste Management
International, Inc. ("WMII"), WMI and the registrant
(incorporated by reference to Exhibit 10.37 to the
registrant's 1990 annual report on Form 10-K).
10.36 Amended and Restated Master Intercorporate Agreement,
dated as of November 1, 1993, by and among WMX, CWM
and the registrant.
10.37 Lease and Agreement, dated as of April 1, 1990,
between Asset Title Holding, Inc., lessor, and the
registrant, lessee (incorporated by reference to
Exhibit 10.40 to the registrant's 1990 annual report
on Form 10-K).
10.38 Wheelabrator Technologies Inc. Corporate Incentive
Bonus Plan (as amended and restated as of March 8,
1993) (incorporated by reference to Exhibit 10.36 to
the registrant's 1992 annual report on Form 10-K).
10.39 Wheelabrator Technologies Inc. Corporate Incentive
Bonus Plan (as amended and restated as of March 14,
1994).
10.40 Wheelabrator Technologies Inc. Long Term Incentive
Plan (as amended and restated as of March 23, 1994).
10.41 1991 Performance Unit Plan of the registrant
(incorporated by reference to Exhibit 10.48 of the
registrant's 1990 annual report on Form 10-K).
10.42 Retirement Plan for Non-Employee Directors of the
registrant (incorporated by reference to Exhibit
10.32 to the registrant's 1988 annual report on Form
10-K).
10.43 Amendment, dated as of September 7, 1990, to the
Retirement Plan for Non-Employee Directors of the
registrant (incorporated by reference to Exhibit
19.01 to the registrant's 1990 annual report on Form
10-K).
10.44 Amendment, dated June 10, 1991, to the Retirement
Plan for Non-Employee Directors of the registrant
(incorporated by reference to Exhibit 19.01 to the
registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 1991).
</TABLE>
- ------------------
* In the case of incorporation by reference to documents filed by the
registrant under the Securities Exchange Act of 1934, the registrant's file
number under that Act is 0-14246.
**This information appears only on the manually signed original of this report.
E-6
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Description Page
of Exhibit* Number**
- ----------- -----------
<S> <C> <C>
10.45 1991 Stock Option Plan for Non-Employee Directors of
the registrant ("1991 Directors Plan") adopted June
10, 1991 (incorporated by reference to Exhibit 19.04
to the registrant's quarterly report on Form 10-Q for
the quarter ended June 30, 1991).
10.46 Amendment to 1991 Directors Plan dated as of December
22, 1993.
10.47 1992 Stock Option Plan of the registrant
(incorporated by reference to Exhibit 10.45 to the
registrant's 1991 annual report on Form 10-K).
10.48 Rust Intercorporate Services Agreement, dated as of
January 1, 1993, by and among the registrant, Rust
International Inc. ("Rust"), WMX and CWM
(incorporated by reference to Exhibit 10.42 to the
registrants's 1992 annual report on Form 10-K).
10.49 Amendment No. 1 to Rust Intercorporate Services
Agreement dated as of August 10, 1993 by and among
the registrant, Rust, WMX and CWM.
10.50 Organizational Agreement (see Item 2.02 hereof).
10.51 Third Amended and Restated International Development
Agreement, dated as of January 1, 1993, among the
registrant, WMX, CWM, WMII, Waste Management
International B.V. ("WMIBV"), Waste Management
International plc ("WM International"), Rust, WTI
International Holdings Inc. ("WTI International") and
RIH Inc. ("RIH") (incorporated by reference to
Exhibit 19.05 to the registrant's 1992 annual report
on Form 10-K).
10.52 First Amended and Restated International Business
Opportunities Agreement ("IBOA"), dated as of January
1, 1993, by and among the registrant, WMX, CWM, WM
International, WMII and Rust (incorporated by
reference to Exhibit 28 to the registrant's
registration statement on Form S-3, Reg. No. 33-
59606).
10.53 Amendment Agreement, dated as of January 28, 1994, by
and among the registrant, WMX, CWM, WM International,
WMII and Rust amending the IBOA.
</TABLE>
- ------------------
* In the case of incorporation by reference to documents filed by the
registrant under the Securities Exchange Act of 1934, the registrant's file
number under that Act is 0-14246.
**This information appears only on the manually signed original of this report.
E-7
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Description Page
of Exhibit* Number**
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<S> <C> <C>
10.54 Amended and Restated Master Dividend Deed dated,
December 30, 1992, by and among the registrant, CWM,
WMII, WMX's foreign nominee, WM International, WMIBV,
RIH and WTI International (incorporated by reference
to Exhibit 19.07 to the registrant's 1992 annual
report on Form 10-K).
10.55 Reimbursement Agreement dated March 10, 1993, between
WMX and the registrant (incorporated by reference to
the registrant's registration statement on Form S-1,
Reg. No. 33-47575).
11. None.
12. None.
13.1 Management's Discussion and Analysis of Financial
Condition and Results of Operations.
13.2 Consolidated Financial Statements and Supplementary
Data.
14. Inapplicable.
15. Inapplicable.
16. None.
17. Inapplicable.
18. None.
19. Inapplicable.
20. Inapplicable.
21. List of subsidiaries of the registrant.
22. None.
23.1 Consent of Arthur Andersen & Co. regarding the
registrant.
</TABLE>
- ------------------
* In the case of incorporation by reference to documents filed by the
registrant under the Securities Exchange Act of 1934, the registrant's file
number under that Act is 0-14246.
**This information appears only on the manually signed original of this report.
E-8
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Description Page
of Exhibit* Number**
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<S> <C> <C>
23.2 Consent of Arthur Andersen & Co. regarding Rust.
24. None.
25. Inapplicable.
26. Inapplicable.
27. Inapplicable.
28. None.
99.01 Rust's Consolidated Balance Sheets as of December 31,
1992 and 1993, Consolidated Statements of Income,
Cash Flows and Changes in Stockholders' Equity for
each of the years in the three-year period ended
December 31, 1993 and Notes to Consolidated Financial
Statements (incorporated by reference to pages F-1
through F-17 of Rust's 1993 annual report on Form 10-
K, Commission File No. 1-11896).
99.02 Financial statement schedules of Rust (incorporated
by reference to pages F-18 through F-23 of Rust's
1993 annual report on Form 10-K, Commission File No.
1-11896).
</TABLE>
- ------------------
* In the case of incorporation by reference to documents filed by the
registrant under the Securities Exchange Act of 1934, the registrant's file
number under that Act is 0-14246.
**This information appears only on the manually signed original of this report.
E-9
<PAGE>
EXHIBIT NO. 10.02
AMENDMENT NO. 1 TO
TAX SHARING AGREEMENT
This Amendment Agreement ("Amendment Agreement") is made this 14th day of
February 1994 by and among Wheelabrator Technologies Inc. ("WTI"), Koll Real
Estate Group, Inc. ("Koll") and Abex, Inc. ("Abex") to amend certain provisions
of the Tax Sharing Agreement dated December 15, 1988 (the "Agreement") between
WTI (then known as The Wheelabrator Group Inc.) and Koll (then known as Henley
Newco Inc. and subsequently known at various time as The Henley Group, Inc.,
Henley Properties Inc. and The Bolsa Chica Company).
RECITALS
A. In connection with the formation of Koll, WTI transferred certain
assets, liabilities and businesses to Koll in December 1988;
B. In consideration of such transfer to Koll and to ensure that WTI had
minimum total equity, Koll agreed to pay to WTI the amount by which WTI's net
liabilities for certain federal, state or local taxes and related interest and
penalties exceeded $50 million;
C. The Agreement sets forth the respective rights and responsibilities of
WTI and Koll with respect to such tax indemnifications;
D. In consideration of Koll's contribution of certain assets, liabilities
and businesses to The Henley Group, Inc. ("HGI") in December 1989, HGI assumed
certain of Koll's obligations under the Agreement;
E. In consideration of HGI's contribution of certain assets, liabilities
and businesses to Abex in July 1992, Abex assumed certain of HGI's obligations
under the Agreement;
F. As a result of the various transactions referred to above, Abex is now
charged with responsibility to administer the Agreement;
G. At the request of Abex, Koll made a payment totaling $7,646,802 to WTI
in January 1993 to enable WTI to proceed with a partial settlement of
liabilities relating to an examination of the 1986-1988 federal income tax
returns of WTI and its consolidated subsidiaries; and
H. Certain issues have arisen among the parties as to the proper
interpretation of certain provisions of the Agreement and the parties desire to
amend and clarify the Agreement so as to resolve such issues.
<PAGE>
AGREEMENT
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration in hand paid, the parties agree as follows:
1. The definition of "Old Henley Increase" included in the Agreement
shall be modified as follows:
a. The word "or" immediately prior to "(iv)" shall be stricken.
b. The following shall be added immediately after the word
"Agreement," and before the word "net" in the definition:
"; or (v) any interest, penalties or additions to tax (and all
reasonable out-of-pocket costs incurred in connection with the
assessment or collection thereof) incurred in connection with
payments that are "Old Henley Increases" pursuant to this
paragraph, in each case . . . "
2. The definition of "Old Henley Limitation" included in the Agreement
shall be modified in its entirety to read as follows:
" 'Old Henley Limitation' means $51 million. "
3. Section 3.01(c) of the Agreement shall be modified in its entirety to
read as follows:
"(c) Determination of the Amount of any Old Henley Increase. For
purposes of determining the amount of any Old Henley Increase
described in clause (i) of the definition of "Old Henley
Increase" provided in Article I, any Final Determination which
results in a net increase in the Tax Detriments or a net decrease
in the Tax Benefits of any member of the Old Henley Affiliated
Group or of any Old Henley State or Local Affiliated Group or of
any Old Henley Company filing a Stand alone state or local income
or franchise tax return for any tax period ending before or
including the Disaffiliation Date (ignoring, for this purpose,
(1) any adjustment to a Tax Item of, the Tax Basis of, or any
excess loss account maintained with respect to, a WESI Company or
a WTI Business, or (2) the disallowance or reduction of any
carryback from a tax period beginning after the Disaffiliation
Date), shall be deemed to result in an Old Henley Increase in an
amount equal to (i) in the case of Old Henley Increases resulting
from net increases in income and gains, or net decreases in
deductions, losses or carryforwards of deductions or losses, the
amount of such net increase or net decrease multiplied (x) in the
case of adjustments affecting federal income tax items, by the
highest marginal
<PAGE>
rate of federal income tax in the year to which such Final
Determination relates (or the average of the highest marginal
rates in the event of an adjustment to rates during such year)
applicable to the particular category (such as long-term capital
gains) of corporate income for the year to which such Final
Determination relates and (y) in the case of adjustments
affecting state, local or income tax items, the actual effective
state or local tax rate, and (ii) in the case of Old Henley
Increases resulting from net decreases in credits or carry
forwards of credits or net increases in recapture of credits, the
amount of such net increase or net decrease. The amount of any
Old Henley Increase shall be increased by any interest, penalties
or additions to tax (and all reasonable out-of-pocket costs
incurred in connection with the assessment or collection thereof)
which are actually paid by any Old Henley Company to any
government or taxing authority as a result of the Final
Determination giving rise to such Old Henley Increase, and shall
be reduced by (1) the amount of any reduction in Taxes payable by
any Old Henley Company (computed as described in clauses (i) and
(ii) of this Section 3.01(c)) as a result of the payment of
Taxes, interest, penalties or addition to tax (and all reasonable
out-of-pocket costs incurred in connection with the assessment or
collection thereof) resulting from the Final Determination giving
rise to such Old Henley Increase and (m) any amount received by
Old Henley from HMC or Fisher pursuant to Section 2.02(b),
Section 5.03 or Section 5.04 of the Old Henley/HMC Tax Sharing
Agreement or Section 3.01(c) of the Old Henley/Fisher Tax Sharing
Agreement as a result of the Final Determination giving rise to
such Old Henley Increase. On or before December 31 of each year,
WTI shall provide the effective state and local tax rate to be
used in the following year. This effective rate shall be based
upon WTI's actual tax rate for returns filed each year."
4. In interpreting the Agreement as amended hereby, the parties agree
that:
a. The adjustment to 1987 taxable income related to the Master
Support Agreement As Amended and Restated as of December 7, 1988
among, inter alia, Allied-Signal Inc. and Resco Holdings Inc. (a
subsidiary of WTI) in the amount of $64,185,000, together with
the amortization allowed in 1987 and 1988 of $14,263,334 and all
future amortization in respect thereof, is a Tax Item of a WTI
Business.
<PAGE>
b. It is understood and agreed among the parties that Old Henley's
actual effective state tax rate, net of federal benefit, for
years through 1992 is 2% and such rate shall be used in
calculations through December 31, 1993.
c. An analysis of the Old Henley Limitation will be prepared and
provided to the parties no less often than quarterly and will
reflect the Old Henley Increases charged to the limitation.
5. Except as specifically amended by this Amendment Agreement, the
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to be
executed by their duly authorized officers on the date first above written.
KOLL REAL ESTATE GROUP, INC.
By: /s/ R. J. Pacini
-----------------------------------------
Its Chief Financial Officer
WHEELABRATOR TECHNOLOGIES INC.
By: /s/ Vaughn Hooks
------------------------------------
Its Assistant Treasurer
ABEX INC.
By: /s/ Clifford T. Dirkes
--------------------------------------
Its Vice President - Taxes
/wti\docs\taxamend.agr/
<PAGE>
EXHIBIT 10.36
AMENDED AND RESTATED MASTER INTERCORPORATE AGREEMENT
----------------------------------------------------
This Amended and Restated Master Intercorporate Agreement (the "Agreement")
is made as of the 1st day of November 1993 by and among WMX Technologies,
Inc.(formerly named "Waste Management, Inc."), a Delaware corporation ("WMX"),
Chemical Waste Management, Inc., a Delaware corporation and majority-owned
subsidiary of WMX ("CWM"), and Wheelabrator Technologies Inc., a Delaware
corporation and majority-owned subsidiary of WTI ("WTI").
WHEREAS, WMX, CWM and WTI entered into a Master Intercorporate Agreement
(the "Original Agreement") dated as of September 7, 1990 in connection with the
merger of WM Sub, Inc., formerly a wholly owned subsidiary of WMX, into WTI,
with WTI being the surviving corporation (the "Merger"), pursuant to an
Agreement and Plan of Merger dated March 30, 1990, as amended as of July 24,
1990 (the "Merger Agreement");
WHEREAS, the Original Agreement was amended in part by the International
Business Opportunities Agreement dated as of March 18, 1992 by and among WMX,
CWM, WTI, Waste Management International, Inc. and Waste Management
International plc (the "Original IBOA") (the Original Agreement, as amended by
the Original IBOA, being referred to herein as the "Amended Original
Agreement"). The Original IBOA has been amended and restated by the First
Amended and Restated International Business Opportunities Agreement (the
"Amended and Restated IBOA") dated as of January 1, 1993 by and among the
parties to the Original IBOA and Rust International Inc. ("Rust").
WHEREAS, the parties hereto wish hereby to amend and restate the Amended
Original Agreement in its entirety to reflect the modifications made pursuant to
the Amended and Restated IBOA and to provide for certain new matters.
NOW, THEREFORE, for and in consideration of the recitals set forth above,
and in consideration of the agreements, rights, obligations and covenants
contained herein, WMX, CWM and WTI hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 Particular Terms. As used in this
Agreement the following terms shall have the meaning ascribed to them below:
1.1.1 "Business Day" shall mean each Monday through Friday, other
than any such day on which banks in either New York City or Pittsburgh,
Pennsylvania are authorized not to be open for business generally.
1.1.2 "Effective Date" shall mean November 1, 1993.
1.1.3 "Event of Default" shall have the meaning set forth in
Section 9.2 hereof.
1.1.4 "Excess Cash" shall mean at any time funds of WTI or its
Subsidiaries from operations, the maturation of investments or otherwise which
WTI reasonably determines and advises WMX will not be required for the conduct
of its business and operations for the succeeding 30 days.
1.1.5 "Funding Agreement" shall have the meaning specified in
Section 13.9 hereof.
1.1.6 "Indebtedness" of a specified Person or Persons shall mean
all amounts owing by such Person or Persons to another specified Person or
Persons, including, without limitation, amounts owing with respect to loans made
on open account or otherwise, whether before, on or after the date hereof,
including, without limitation, principal thereof and premium, if any, and
interest thereon, and all amounts properly charged to an intercompany account of
such first specified Person or Persons.
1.1.7 "Insurance Subsidiary" shall mean National Guaranty
Insurance Company and Mountain Indemnity Insurance Company, each a Subsidiary of
WMX, and any future Subsidiary of WMX engaged in substantially the same business
as such Subsidiaries.
1.1.8 "International Development Agreement" shall mean that
certain Third Amended and Restated International Development Agreement dated
January 1, 1993 by and among WMX, WTI, CWM, WMII, Waste Management
International, Waste Management Europe N.V., Rust, WTI International Holdings
Inc. and RIH Inc.
1.1.9 "North America" shall mean Canada, Mexico and the United
States of America and its territories and possessions (including the District of
Columbia and the Commonwealth of Puerto Rico).
2
<PAGE>
1.1.10 "Open Account Indebtedness" shall mean with respect to WTI
and its Subsidiaries all Indebtedness of WTI and its Subsidiaries incurred on or
prior to the Effective Date on open account to WMX or any one or more
Subsidiaries of WMX, all Indebtedness of WTI and its Subsidiaries to WMX or any
one or more Subsidiaries of WMX incurred after the Effective Date pursuant to
Section 3.2.2 hereof and all other amounts now or at any time hereafter owing by
WTI and its Subsidiaries to WMX or any one or more of its Subsidiaries (other
than term loans).
1.1.11 "Person" shall mean any individual, partnership,
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
1.1.12 "Promissory Note" shall mean a promissory note executed by
a party hereto pursuant to Section 3.5 hereof.
1.1.13 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.1.14 "Subsidiary" shall mean for any Person, another Person
directly or indirectly controlled by such Person; provided, however, that for
purposes of this Agreement, (i) neither WTI nor any Person controlled by it
shall be deemed to be a Subsidiary of WMX or any Person controlled by WMX and
(ii) notwithstanding the foregoing, each Person controlled by WTI shall be
deemed to be a Subsidiary of WTI and each Person controlled by a Subsidiary of
WTI shall be deemed to be a Subsidiary of such Subsidiary of WTI.
1.1.15 "Waste Management International" shall mean Waste
Management International plc, a majority-owned subsidiary of WMX.
1.1.16 "WMX Controlled Subsidiary" shall mean a Subsidiary of WMX
that is under the control of WMX.
1.1.17 "WMII" shall mean Waste Management International, Inc., a
Delaware corporation and wholly owned subsidiary of WMX.
1.1.18 "WMI" shall mean Waste Management, Inc., an Illinois
corporation and wholly owned subsidiary of WMX (formerly known as "Waste
Management of North America, Inc.").
1.2 Other Terms. Other capitalized terms shall have the meanings
ascribed to them in particular provisions of this Agreement.
3
<PAGE>
ARTICLE II
THIS ARTICLE IS INTENTIONALLY LEFT BLANK.ARTICLE III
CASH MANAGEMENT, WORKING CAPITAL AND TREASURY SERVICES
------------------------------------------------------
3.1 Generally. WTI desires WMX to implement, as provided herein, a
cash management and working capital program with the objective of allowing WTI
to (a) obtain a return from WMX on investments of Excess Cash that will, over
time, exceed the returns WTI could reasonably expect to obtain from investing
such funds itself, and (b) obtain working capital financing at rates superior to
those otherwise available to WTI. WMX and WTI agree to use their reasonable
good faith efforts to implement, as provided herein, such a cash management and
working capital program and they further agree to review and renegotiate this
program from time to time as necessary to ensure that neither bears undue risks
or losses.
3.2. Indebtedness and Cash Requirements.
3.2.1 Commitment. Until the date of termination of this Agreement
pursuant to Article XII or otherwise pursuant to this Agreement, (the
"Termination Date"), and subject to Article XIII hereof, WMX agrees on the terms
and in the manner provided in this Article III to loan to WTI funds in such
amount as WTI may from time to time request, subject to a maximum aggregate
amount of Indebtedness of WTI and its Subsidiaries to WMX and its Subsidiaries
outstanding at any time equal to the sum of (i) the aggregate principal amount
of all Indebtedness of WMX and its Subsidiaries to WTI, if any, and its
Subsidiaries outstanding at the time (the "Compensating Balance Facility") plus
(ii) until September 7, 1995 $100 million (the "$100 Million Facility"). For
purposes of this Section 3.2.1, the Indebtedness of WTI and its Subsidiaries to
WMX and its Subsidiaries shall include, without limitation, (a) all Indebtedness
of WTI and its Subsidiaries to WMX and its Subsidiaries, whether incurred
before, on or after the date hereof, whether as intercompany advances, term
loans or otherwise, (b) all Indebtedness of WTI and its Subsidiaries guaranteed
by WMX or any of its Subsidiaries, whether before, on or after the Effective
Date and (c) all unpaid amounts properly charged by WMX or any of its
Subsidiaries to any intercompany account maintained with WTI or any of its
Subsidiaries, whether before, on or after the date hereof.
3.2.2 Open Account Indebtedness. WMX shall, at WTI's request,
advance funds to WTI on open account, subject to the limits specified in Section
3.2.1 above and
4
<PAGE>
subject to Articles IX and XIII hereof, whereupon the amount of such advance
shall constitute Open Account Indebtedness of WTI and its Subsidiaries. Subject
to Section 3.6 hereof, all Open Account Indebtedness of WTI shall be due and
payable on demand made at any time on or after the Termination Date; provided,
however, that if at any time prior to the Termination Date the outstanding
balance of Open Account Indebtedness of WTI and its Subsidiaries, together with
the outstanding aggregate balance of all other Indebtedness of WTI and its
Subsidiaries to WMX and its Subsidiaries (other than Open Account Indebtedness
represented by invoices issued by WMX or its Subsidiaries for goods sold or
services rendered to the extent such invoices are not yet due and payable by
their terms), exceeds the limit set forth in Section 3.2.1 hereof, then the
lesser of the amount of such excess or the entire balance of such Open Account
Indebtedness shall be due and payable on demand by WMX. WTI shall be entitled
to pay any or all Open Account Indebtedness at any time prior to its maturity
without payment of any premium or penalty.
3.2.3 Interest on Open Account Indebtedness. Interest shall accrue
on each day's balance of Open Account Indebtedness of WTI or its Subsidiaries to
WMX or its Subsidiaries at the effective rate per annum that would be payable by
WMX (inclusive of underwriters', dealers' or agents' commissions, fees or
charges) with respect to 30-day commercial paper issued by WMX on the first
business day of each month in which any Open Account Indebtedness of WTI or its
Subsidiaries is outstanding, plus such number of basis points as is necessary
and appropriate to effectively reimburse WMX for any expense (other than WMX's
effective rate for borrowing funds) of obtaining funds incurred by it, including
without limitation, WMX's cost of procuring or maintaining back-up credit lines
sufficient to enable WMX to reclassify such Open Account Indebtedness from
short-term to long-term ("Back-up Lines"). If on any day the net advance account
balance between WTI and its Subsidiaries on the one hand and WMX and its
Subsidiaries on the other hand, shows a credit due to WTI and its Subsidiaries,
WTI shall be entitled to interest on such balance for such day at a rate per
annum equal to (A) the effective rate (inclusive of underwriters', dealers' or
agents' commissions, charges or fees) that would be payable by WMX with respect
to 30-day commercial paper issued by WMX on the first business day of each month
in which such net balance due to WTI and its Subsidiaries occurs, minus (B) such
number of basis points as WMX and WTI agree as represents one-half of the spread
between (1) the rate determined pursuant to clause (A) above, and (2) the
effective interest
5
<PAGE>
rate per annum which would normally be receivable by WTI in investments in
commercial paper on the date and of the type specified in clause (A) above. To
the extent WTI can demonstrate the availability to it of lower comparable short-
term borrowing rates or higher rates of return on short-term investments of
comparable risk, maturity and amount, as the case may be, it shall be entitled
to such rates from WMX. Interest on Open Account Indebtedness of WTI and its
Subsidiaries, or on the net credit advance account balance to WTI and its
Subsidiaries, as the case may be, shall be due and payable on the first day of
each month and at the maturity of all Open Account Indebtedness, whether by
acceleration or otherwise, at such place or places as WMX or WTI, as the case
may be, may from time to time designate.
3.3 WMX Term Loans to WTI. In the event that prior to the
Termination Date WTI requires funds for the conduct of its business and
operations which it does not wish to procure as Open Account Indebtedness then
(i) if at the time there are outstanding term loan borrowings by WMX from WTI
pursuant to Section 3.4 below, WTI may borrow from WMX under the Compensating
Balance Facility, and WMX shall lend to WTI under the Compensating Balance
Facility, subject to the limit specified in Section 3.2.1(i) above, funds on a
term loan basis pursuant to the provisions of Section 3.5 hereof in such amount
as WTI may request, and (ii) WTI may borrow from WMX under the $100 Million
Facility, and WMX shall lend to WTI under the $100 Million Facility, subject to
the limits specified in Section 3.2.1(ii) above, funds on a term loan basis
pursuant to the provisions of Section 3.5 hereof in such amount as WTI may
request. WTI may make term loan borrowings pursuant to this Section 3.3 no more
often than once per calendar quarter.
3.4 WTI Term Loans to WMX. In the event that prior to the
Termination Date WTI has Excess Cash which it does not wish to apply toward
reduction of the debit balance, if any, of its Open Account Indebtedness to WMX
or, if such balance is then zero, to lend to WMX on open account, then no more
often than once per calendar quarter it shall lend such Excess Cash to WMX, and
WMX shall borrow such funds, pursuant to the provisions of Section 3.5 hereof;
provided, however, that WTI shall not be obligated to loan Excess Cash to WMX if
doing so would be a material factor in affecting WTI's ability to obtain or
maintain a Minimum Rating with respect to Qualified Outstanding Debt or if there
be none, a Hypothetical Debt Issuance (as such capitalized terms are defined in
the Funding Agreement).
6
<PAGE>
3.5 Term Loans.
3.5.1 Promissory Note and Maturity. At the time of WTI's or WMX's,
as the case may be, first borrowing of funds from WMX or WTI, as the case may
be, pursuant to Section 3.3 or 3.4 above, the borrowing party shall execute and
deliver to the lending party a Promissory Note substantially in the form of
Exhibit A attached hereto. Unless the parties to the loan otherwise agree in
writing at the time of the making of the loan, and subject to Section 3.6
hereof, each loan represented by such a Promissory Note shall be due on such
date, not to exceed ten (10) years from the date of the making of the loan for
borrowings by WTI under the Compensating Balance Facility and borrowings by WMX
from WTI and 270 days from the date of the making of the loan for borrowings by
WTI under the $100 Million Facility, as WTI and WMX shall agree at the time of
the making of the loan, provided that the maturity dates of any Compensating
Balance Facility term loan borrowings by WTI pursuant to Section 3.3 above shall
be coordinated with the maturity dates of WMX's term loan borrowings from WTI
pursuant to Section 3.4 above so that (i) for each Compensating Balance Facility
term loan borrowing principal amount, there is an equal or greater amount of WMX
term loan indebtedness to WTI which matures at the same time as or later than
such WTI borrowings and (ii) at no point in time may any principal amount of the
Compensating Balance Facility borrowing by WTI be outstanding in excess of the
outstanding balance of WMX term loan borrowings from WTI pursuant to Section 3.4
above. Each such loan shall, as WTI may choose at the time of the making of the
loan, either bear a stated rate of interest determined as provided in Section
3.5.2 or 3.5.3 below, as the case may be, or be made on a floating interest rate
basis, determined as provided in Section 3.5.4 below.
3.5.2 WTI Term Indebtedness. WTI shall pay interest to WMX on each
borrowing by WTI pursuant to Section 3.3 above (other than any borrowing which
is to bear a floating rate of interest) at such rate per annum as WTI and WMX
agree equals (a) the then current effective rate (inclusive of underwriters' or
dealers' commissions, charges or fees or similar charges) which would be payable
by WMX on commercial paper (in the case of a borrowing by WTI having a maturity
date of 270 or fewer days from the date of the making of the loan), or on
medium-term notes (in the case of a borrowing by the Company having a maturity
date more than 270 days from the date of the making of the loan) sold to an
unaffiliated purchaser through underwriters or agents and having a maturity date
7
<PAGE>
corresponding to the maturity date of such borrowing by WTI plus (b) such number
of basis points as is necessary and appropriate to effectively reimburse WMX for
any expense (other than WMX's effective rate for borrowing funds) of obtaining
funds incurred by it, including, without limitation, WMX's cost of procuring or
maintaining Back-Up Lines, provided, that if WTI can demonstrate the
availability of a lower borrowing rate for comparable borrowings at the time of
such borrowing, it shall be entitled to pay such lower rate.
3.5.3 WMX Term Indebtedness. Each loan from WTI to WMX pursuant to
Section 3.4 above shall bear a rate of interest per annum equal to (a) the
effective interest rate which WMX would be required to pay (inclusive of
underwriters', dealers' or agents' commissions, charges or fees or similar
charges) in the issuance to an unaffiliated purchaser of WMX commercial paper or
medium-term notes, as the case may be, of equal amount and maturity date, minus
(b) such number of basis points as WMX and WTI agree at the time of the making
of the loan as representing one-half of the spread between (i) the rate
determined pursuant to clause (a) of this Section 3.5.3 and (ii) the stated
interest rate which would normally be receivable by WTI in an investment in
commercial paper or medium-term notes issued by an unaffiliated party, as the
case may be, of amount, maturity and risk equal to the same instruments issued
by WMX. To the extent that WTI can demonstrate the availability to it at the
time of the making of a loan to WMX of higher rates of return on investments of
equal amount, risk and maturity, it shall be entitled to receive such rates from
WMX with respect to such loan.
3.5.4 Floating Interest Rate. The parties may agree at the time of
making any loan that the loan shall bear a floating interest rate determined on
the basis of such reference interest rate per annum or other basis, either with
or without any increase thereto or decrease therefrom, as the parties may at the
time agree, in which event the interest rate on such loan shall automatically
adjust as such reference rate or other basis adjusts. With respect to any
borrowing by WTI on a floating rate basis hereunder, the reference interest rate
or other basis to be agreed upon by the parties, together with the amount of any
increase thereto or decrease therefrom, shall not exceed that which would be
charged WTI for a comparable loan by an unaffiliated Person lending on an arms-
length basis.
3.5.5 Interest Payment Dates. If the maturity date of a loan
pursuant to Section 3.3 or 3.4 above is less than or equal to three months from
the date of the making of the loan, interest shall be due and payable in arrears
at the maturity date of the loan.
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If the maturity date of such loan is later than three months from the date of
the making of the loan, interest shall be due and payable in arrears at the end
of each calendar quarter following the date of the making of such loan (or where
a floating rate loan uses a basis involving other payment dates, on such other
payment dates), with a final payment on the date payment of such loan is due,
whether by acceleration or otherwise. Interest shall be based on the actual
number of days elapsed based on a 360 day year.
3.5.6 Manner of Payment. All payments of Indebtedness of WTI or
WMX, as the case may be, shall be made when and as due at such place as the
receiving party may from time to time designate.
3.6 Set-Off. In the event that either WTI or WMX fails to pay to the
other when due any payment of principal or interest with respect to a loan made
pursuant to Section 3.2, 3.3 or 3.4 above, the party entitled to receive such
payment may upon written notice to the other party set-off the amount of such
payment against any or all sums owed by it to the other party.
3.7 Securities Representations. Each of WMX and WTI (a) represents
to the other that the note to be acquired by it pursuant to Section 3.5 above
will be acquired for investment purposes only and not with a view toward any
public distribution and (b) agrees not to sell or otherwise dispose of such note
except in accordance with the Securities Act and all applicable state securities
laws.
3.8 Waiver. Each of WTI, as to all Indebtedness of WTI to WMX
incurred pursuant to this Article III, and WMX, as to all Indebtedness of WMX to
WTI incurred pursuant to this Article III, hereby waives presentment, demand,
protest, notice of dishonor and any and all other notices, except as expressly
set forth in this Agreement.
3.9 Treasury Services. At WTI's request, WMX shall from time to time
consult with and advise WTI on such cash management, banking, letter of credit,
financing, strategic planning and other financial and treasury matters as are
within WMX's knowledge and experience.
ARTICLE IV
RISK MANAGEMENT AND SURETY BOND SERVICES
----------------------------------------
4.1 Risk Management Assistance. WMX will make available to WTI the
services of WMX's corporate risk management department for purposes of assisting
WTI in
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negotiating the purchase of WTI's insurance and risk management services
requirements. All costs incurred by WMX or any of its Subsidiaries to
unaffiliated third parties for insurance (including, without limitation,
allocations from WMX as provided below) provided or procured by WMX or its
Subsidiaries on behalf of WTI or its Subsidiaries shall be paid by WTI. The
cost of insurance coverage which benefits both WTI or its Subsidiaries, on the
one hand, and WMX or its Subsidiaries, on the other, including, without
limitation, retrospective premiums and self-insurance cost allocations, shall be
allocated so as to apportion such costs fairly between WTI and its Subsidiaries,
on the one hand, and WMX and its Subsidiaries, on the other, on the basis of
relative loss experience, total insurance costs, relative extent of coverage,
relative loss exposure and other appropriate factors, and will be allocated to
WTI and its Subsidiaries on a basis no less favorable to them than that
generally accorded WMX's less than wholly owned Subsidiaries. In the event of
any refund of any insurance premium to WMX with respect to any insurance
coverage applicable to WTI or its Subsidiaries, WMX shall pay, or credit against
other amounts due to WMX from WTI or its Subsidiaries, such portion of such
refund as is reasonably allocable to WTI and its Subsidiaries.
4.2 Surety Bonds. Subject to the limits of Section 4.4 below, WMX
shall use its reasonable good faith efforts to (a) procure surety bonds for or
on behalf of WTI and (b) issue guarantees or procure letters of credit for the
purpose of facilitating WTI's obtaining surety bonds on substantially the same
terms and conditions that are available from time to time for similar bonds
procured by WMX on behalf of its Subsidiaries, provided that the risk of loss
with respect to bonds procured for or on behalf of WTI or guarantees or letters
of credit issued or procured by WMX with respect to WTI bonds is comparable to
the risk of loss with respect to such bonds procured from time to time by WMX on
behalf of WMX's Subsidiaries. WTI shall compensate WMX for the procurement or
provision of surety bonds for or on behalf of WTI and its Subsidiaries on such
basis (including, without limitation, an allocation of all costs incurred by WMX
or any of its Subsidiaries to unaffiliated third parties in procuring or
providing surety bonds for or on behalf of all Persons controlled by it) as WMX
may from time to time reasonably determine, provided, that in any calendar year
the aggregate amount of such compensation for all surety bonds procured or
provided by WMX or its Subsidiaries for WTI and its Subsidiaries in such year
shall not exceed the
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aggregate annual cost which WTI would have incurred in procuring surety bonds of
the same type and amount from unaffiliated third parties during such year.
4.3 Captive Insurance Company.
4.3.1 WMX shall, subject to the requirements of all applicable
laws and regulations and subject to the limits of Section 4.4 below, cause its
Insurance Subsidiaries to offer WTI insurance and surety bond products and
services at prices and on terms substantially the same as those offered from
time to time to WMX's Subsidiaries; provided, that, subject to the requirements
of all applicable laws and regulations, the prices for any product or service or
related group of products or services which WTI has requested shall not exceed
the prices then currently available from non-affiliated providers of
substantially the same products and services or related group of products or
services; and provided further that if the risk of loss to an Insurance
Subsidiary from making products and services available to WTI is not comparable
to the risk of loss with respect to WMX's Subsidiaries, the prices and terms of
any such product or service which is offered to WTI may, in WMX's sole
discretion, reflect such different risk of loss. WMX will use its reasonable
good faith efforts to cause such products and services to be priced at a
discount to comparable products offered by independent third parties.
4.3.2 WTI hereby acknowledges that Insurance Subsidiaries issue
bonds and insurance policies in favor of third parties on behalf of Subsidiaries
of WMX subject to the requirement that such Subsidiaries reimburse the Insurance
Subsidiaries for all payments by the Insurance Subsidiaries to third parties
pursuant to such bonds or policies.
4.4 Limits. In no event shall WMX be obligated to provide, or cause
any Insurance Subsidiary or any of WMX's other Subsidiaries to provide, any
agreement, product or service contemplated under this Article IV, if doing so
would cause the Aggregate WMX Exposure (as defined below) to exceed an amount
equal to 30% of WTI's stockholders' equity, as shown on WTI's most recently
available annual or quarterly balance sheet prepared in accordance with
generally accepted accounting principles. As used herein, the term "Aggregate
WMX Exposure" shall mean the sum of:
(i) the aggregate penal sum of all outstanding surety bonds
procured by WMX (including those procured from an Insurance
Subsidiary) for or on behalf of WTI;
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(ii) the aggregate face amount of all guarantees issued by WMX
for or on behalf of WTI for the purpose of facilitating
WTI's obtaining surety bonds;
(iii) the aggregate face amount of all letters of credit procured
by WMX for or on behalf of WTI for the purpose of
facilitating WTI's obtaining surety bonds; and
(iv) the aggregate amount of the policy limits under insurance
policies issued by an Insurance Subsidiary for the benefit
of WTI.
Notwithstanding anything in this Agreement to the contrary, "Aggregate WMX
Exposure" shall not include any payment obligation of WMX under the Funding
Agreement or any Funding Action (as defined therein) undertaken by WMX pursuant
thereto.
ARTICLE V
ENVIRONMENTAL AUDIT SERVICES
----------------------------
5.1 Services. WMX shall make available to WTI such services of the
types generally provided by WMX's Environmental Audit Department to WMX's
Affiliates as WTI may from time to time reasonably request. Such services shall
include, but shall not be limited to, assisting WTI in developing and
implementing audit procedures relating to compliance by WTI's facilities with
all applicable requirements of environmental laws, regulations, permits and
licenses.
ARTICLE VI
FEDERAL AND STATE GOVERNMENT AFFAIRS
------------------------------------
6.1 Services. WMX shall make available to WTI such legislative,
regulatory and governmental evaluation, consultation and advisory services of
the types generally provided by WMX to its other Affiliates as WTI may from time
to time reasonably request, provided that the scope of such services shall be
limited to matters normally addressed by WMX's governmental affairs personnel
and shall include furnishing the same types of information relating to
legislative, regulatory and governmental affairs that WMX furnishes to its
Affiliates. Such services shall be provided through WMX's senior federal
governmental affairs personnel located in Washington, D.C.; WMX's senior state
governmental affairs personnel located in Oak Brook, Illinois; WMX's state
governmental affairs personnel
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located in WMX's regional offices; and WMX's network of outside federal and
state legislative, regulatory and governmental affairs consultants.
ARTICLE VII
MARKETING SUPPORT SERVICES
--------------------------
7.1 Marketing of WTI Services and Products. Subject to the provisions
of the International Development Agreement and the Amended and Restated IBOA,
WMX and CWM shall use their reasonable good faith efforts to assist WTI in
marketing WTI's environmental services and products. Without limitation, WMX
will (a) incorporate into its marketing programs, promotional materials and
promotional events, information about WTI and its services and products; (b)
develop marketing programs and related promotional materials which feature WTI
services and products as an important part of the package of comprehensive
environmental products and services provided by WMX; and (c) encourage its and
CWM's sales, marketing and environmental facilities development personnel and
managers of its local operations to (i) identify and refer to WTI information
regarding opportunities to sell WTI services and products to WMX customers, and
(ii) use their business relationships to provide reasonable assistance to WTI in
selling its services and products.
7.2 Marketing of WMX and CWM Services and Products. WTI shall use its
reasonable good faith efforts to assist WMX and CWM in marketing WMX's and CWM's
respective environmental services and products. In particular, WTI will (a)
incorporate into its marketing programs, promotional materials and promotional
events, information about WMX and its services and products; (b) develop
marketing program and related promotional materials which feature WMX services
and products as an important part of the package of environmental products and
services provided by WTI; and (c) encourage its sales, marketing and
environmental facilities development personnel and managers of its local
operations to (i) identify and refer to WMX or CWM, as appropriate, information
regarding opportunities to sell WMX and CWM services and products to WTI
customers, and (ii) use their business relationships to provide reasonable
assistance to WMX and CWM in selling their respective services and products.
7.3 Integration with Existing Programs. The parties' respective
obligations under this Article VII shall not require the termination or
modification of existing marketing programs
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or promotional materials or events; rather, as the parties renew or modify their
existing programs, materials or events, they shall incorporate information about
the services and products of the others, as provided above.
ARTICLE VIII
PREFERRED VENDOR RELATIONSHIP
-----------------------------
8.1 Designation of Preferred Vendor. WMX and CWM agree that WTI shall
be the Preferred Vendor (as defined below) to WMX and CWM for the following
services and products, as WMX or CWM may from time to time require from
unaffiliated third party vendors:
(a) all design and engineering services and equipment for air
pollution control facilities, systems and devices used or
required with respect to facilities located in North America,
which services or equipment are of the types then provided by
WTI (the "APC Services and Products"); and
(b) all engineered products of the types then manufactured or
assembled by WTI ("WTI Products").
8.2 Definition of "Preferred Vendor". As used herein, the term
"Preferred Vendor" means that,
(a) with respect to purchases of APC Services and Products or WTI
Products, in a single order or any series of related orders,
reasonably expected by WMX or CWM, as the case may be, to
cost $2 million dollars or more or,
(b) with respect to a combination of APC Services and Products
and WTI Products to be purchased by WMX or CWM with respect
to a particular project which WMX or CWM, as the case may be,
reasonably expects to generate aggregate expenditures by WMX
or CWM, as the case may be, of $2 million or more for APC
Services and Products and WTI Products in connection with
such project,
neither WMX nor CWM shall purchase such APC Services and Products or WTI
Products from any unaffiliated third party unless WMX or CWM, as the case may
be, has reasonably determined in good faith that the overall value, in terms of
price, terms and conditions,
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quality, documentation, service and other matters, of APC Services and Products
or WTI Products available from parties other than WTI significantly exceeds the
value of such APC Services and Products or WTI Products available from WTI,
provided that WMX or CWM, as the case may be, shall be excused from the
foregoing obligation if (i) WTI has failed to respond within a reasonable period
of time to a request by WMX or CWM, as the case may be, for a price quotation or
other terms or information with respect to APC Services and Products or WTI
Products or has failed to commit to deliver APC Services and Products or WTI
Products within the time period in which WMX or CWM, as the case may be, shall
have required such APC Services and Products or WTI Products to be delivered,
which time period, in either case, shall not be substantially shorter than the
time period that WMX or CWM would have required from or allowed to an
unaffiliated third party or, if WTI shall have made no such commitment, within a
reasonable period of time after WMX or CWM has ordered them; or (ii) in WMX's or
CWM's, as the case may be, reasonable, good faith judgment, the particular
project or product is not appropriate for WTI in light of the nature of WTI's
expertise and experience with similar projects.
ARTICLE IX
DEFAULT
-------
9.1. Right on Default. Upon the occurrence of an Event of Default (as
defined below), WMX may in its sole and exclusive discretion suspend or
terminate any or all of its obligations hereunder or may declare all Open
Account Indebtedness to be, and such Open Account Indebtedness shall, subject to
Section 3.6 hereof, thereupon become, immediately due and payable without
presentment, demand, protest, notice of dishonor or notice of any kind, all of
which are hereby waived by WTI. WMX's exercise of any particular right or remedy
shall not be deemed a waiver of any other right or remedy or to preclude the
exercise of any other right or remedy. No failure or delay by WMX in exercising
any right or remedy shall constitute a waiver of such right or remedy or any
other right or remedy. WTI shall give written notice to WMX of the occurrence of
any Event of Default within five Business Days of such occurrence.
9.2 Events of Default. For purposes hereof, each of the following
shall constitute an Event of Default:
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9.2.1 WTI fails to make when and as due any payment of any sums
required by the terms of this Agreement or any Promissory Note if either the
right of WTI to borrow funds pursuant to Article III hereof shall have been
terminated or suspended in accordance with this Agreement or the amount of such
payment when added to all other outstanding Indebtedness of WTI to WMX and its
Subsidiaries would exceed the limit set forth in Article III above as to all
Indebtedness of WTI to WMX, provided, however, that no such failure shall
constitute an Event of Default unless WTI or its Subsidiary
(i) shall have failed to cure such failure within five Business
Days of the date the payment was due or
(ii) shall have failed to pay interest at the rate provided below
on the amount of the required payment from the date when due
to the date of payment and such failure continues for five
Business Days from the date of WMX's written demand for
payment of such interest;
9.2.2 WTI or any of its Subsidiaries fails to make when and as due
any payment of principal or interest in respect of any indebtedness of WTI or
any of its Subsidiaries for borrowed money, the outstanding principal balance of
which plus accrued and unpaid interest exceeds an amount equal to five percent
of the total stockholders' equity of WTI and its Subsidiaries determined as of
the end of WTI's then most recently completed fiscal year on a consolidated
basis in accordance with generally accepted accounting principles (or its
equivalent in other currency in which such indebtedness is denominated), whether
such indebtedness is now existing or hereafter arising;
9.2.3 Any event or condition shall occur which (A) results in the
acceleration of the maturity of any indebtedness of WTI or any of its
Subsidiaries for borrowed money, the outstanding principal balance of which plus
accrued and unpaid interest exceeds an amount equal to five percent of the total
stockholders' equity of WTI and its Subsidiaries determined as of the end of
WTI's then most recently completed fiscal year on a consolidated basis in
accordance with generally accepted accounting principles (or its equivalent in
other currency in which such indebtedness is denominated), whether such
indebtedness is now existing or arises hereafter, or (B) enables (or with the
giving of notice or the passage of time or both would enable) the holder of such
indebtedness to accelerate the maturity thereof (except, for purposes of this
clause (B), any such indebtedness as to
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which WTI or its relevant Subsidiary shall have a right to cure the event or
condition in question and shall be practically able to effect a cure);
9.2.4 WTI or any of its Subsidiaries shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
9.2.5 An involuntary case or other proceeding shall be commenced
against WTI or any of its Subsidiaries seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days, or an order for
relief shall be entered against WTI or any of its Subsidiaries under any
applicable bankruptcy laws or similar laws as now or hereafter in effect;
9.2.6 Any material obligation of WTI under Article III or XIII of
this Agreement fails for any reason to be in full force and effect and fully
enforceable against WTI; or
9.2.7 WTI shall fail in any material respect to perform each and
every material obligation of it hereunder in timely fashion and such failure
shall continue unremedied for a period of ten days from and after WMX's giving
of written notice of such failure.
9.3 Default Interest. All payments due from WTI shall, if not paid
when due and if such failure to pay constitutes an Event of Default, bear
interest at a floating rate equal to the rate per annum publicly announced by
Mellon Bank, Pittsburgh, Pennsylvania, as its prime rate, which rate shall
change as such rate changes. Such interest shall be due on demand and shall not
duplicate any interest charged pursuant to any Promissory Note.
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ARTICLE X
OPTION TO ACQUIRE WTI STOCK
---------------------------
10.1 Consolidation Option. If, at any time or from time to time after
the date hereof, WTI shall propose to issue or shall have issued additional
shares of WTI voting capital stock ("WTI Stock") with the result that WMX and
its Affiliates will or would no longer beneficially own at least a majority of
the shares of WTI Stock on a primary basis at the time issued and outstanding,
WMX shall have the option (the "Consolidation Option") to purchase from WTI such
number of shares of WTI Stock as may be necessary to cause WMX and its
Affiliates to remain collectively the beneficial owners of a majority of the
shares of WTI Stock at the time issued and outstanding after giving effect
thereto. WTI shall notify WMX in advance of any WTI Stock issuance.
10.2 Duration of Option. The Consolidation Option shall be
exercisable at any time and from time to time upon the occurrence of each event
entitling WMX to purchase shares of WTI Stock pursuant to the Consolidation
Option (a "Triggering Event"), provided that the Consolidation Option shall
terminate and be of no further force or effect if it is not exercised prior to
April 30th of the calendar year next following the calendar year during which
there occurred a Triggering Event, unless prior to such April 30th other events
shall occur which cause, without the exercise of the Consolidation Option, WMX
to beneficially own a majority of the shares of WTI Stock issued and
outstanding.
10.3 Purchase Price. The purchase price payable upon the exercise of
the Consolidation Option shall be an amount equal to the Fair Market Value of
the shares of WTI Stock to be purchased. For purposes of this Agreement, "Fair
Market Value" shall be the average of the closing sale prices of WTI Stock on
the New York Stock Exchange Composite Transactions Tape, as reported in The Wall
Street Journal (Midwest Edition), for the shares of WTI Stock to be valued on
the five consecutive trading days ending five trading days prior to the closing
date specific by WMX as provided in Section 10.4 below, or if the WTI Stock is
not then listed on the New York Stock Exchange, the closing sale prices for WTI
Stock for such days on the principal stock exchange on which the WTI Stock is
then listed or admitted to trading, or if the WTI Stock is not then listed or
admitted on any stock exchange, the price as determined in the manner provided
in the International Development Agreement for the purchase of WMII stock by
WTI.
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10.4 Manner of Exercise and Purchase. The Consolidation Option shall
be exercisable at any time and from time to time prior to its expiration by
WMX's giving written notice to WTI of such exercise and the date selected by WMX
as the closing date for the purchase of shares of WTI Stock, which date shall
not be less than 11 or more than 30 trading days from the date of such notice.
On the closing date so designated, WTI shall transfer to WMX the shares of WTI
Stock issuable pursuant to the Consolidation Option against payment in
immediately available funds of the purchase price determined as provided in
Section 10.3 hereof.
10.5 Reservation of Shares: Representations and Warranties. WTI
shall reserve for issuance at all times during the period the Consolidation
Option is exercisable a number of shares of WTI Stock equal to the number of
shares of WTI Stock issuable upon exercise of the Consolidation Option and upon
exercise of the Consolidation Option will transfer to WMX the requisite number
of shares of WTI Stock, free and clear of any claim, lien, charge or other
encumbrance, with such representations and warranties as are customary and
appropriate.
10.6 Changes in Shares. In case WTI shall make or effect any
reclassification of WTI Stock into other shares of capital stock or securities,
the record or effective time for which shall occur between the date of this
Agreement and termination of the Consolidation Option, appropriate adjustment
shall be made to the number and character of the securities subject to the
Consolidation Option. ln the event of any merger, consolidation or
reorganization of WTI with or into any other person or persons, there shall be
substituted, on an equitable basis, for each share of WTI Stock subject to the
Consolidation Option, the number and kind of shares of stock or other securities
or property to which the holders of a share of WTI Stock will be entitled
pursuant to such transaction.
10.7 Registration Rights. WTI acknowledges and agrees that the
shares of WTI Stock to be issued upon exercise of the Consolidation Option shall
be subject to the registration rights set forth in the Modification Agreement
described in Section 2.1 hereof
ARTICLE XI
PAYMENT OF COSTS AND EXPENSES
-----------------------------
11.1 Services. In consideration of WMX's or its Subsidiaries'
provision of services to WTI or its Subsidiaries pursuant to this Agreement, WMX
and each of its Subsidiaries
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shall be entitled to reimbursement for its fully allocated costs of providing
services, in addition to all other payments to which it or its Subsidiaries are
entitled pursuant to this Agreement, upon the presentation of invoices supported
by (a) time records (or other evidence reasonably satisfactory to WTI)
reasonably identifying the nature of the service performed, the period of
performance and the identity of the personnel involved or (b) reasonably
satisfactory evidence of designation of any employee whose services are
dedicated in whole or in substantial part to serving WTI or its Subsidiaries and
the portion of such employee's efforts dedicated to the provision of services to
WTI or its Subsidiaries. Such fully allocated cost to WMX or its Subsidiaries
in providing services shall include, without limitation, the salaries, incentive
compensation, employment taxes, benefits and overhead associated with employees
of WMX or its Subsidiaries for their time spent providing services to WTI or its
Subsidiaries. WMX and its Subsidiaries shall also be entitled to receive
reimbursement for such disbursements and out-of-pocket expenses as may be
reasonably incurred by WMX or its Subsidiaries in providing such services, as
specified in an invoice from WMX or its Subsidiaries. WMX and each of its
Subsidiaries may, if it is not reasonably capable of providing the requested
services or if such provision would unreasonably disrupt any of its respective
activities, obtain such services from unaffiliated providers, and the fees and
expenses therein incurred by WMX or its Subsidiaries shall be reimbursable as
provided above. Subject to Section 11.3 hereof, each payment obligation of WTI
pursuant to this Section 11.1 shall be due and payable 30 days after the date of
invoice at such place or places as WMX may from time to time designate.
11.2 Marketing Expenses. Notwithstanding Section 11.1 above, the
parties hereto shall not charge each other for the costs of providing marketing
support services as provided in Article VII hereof, except for out-of-pocket
expenses that would not have been incurred by a party but for such party's
obligations pursuant to Article VII above. Without limitation, WMX and CWM
shall not charge WTI, and WTI shall not charge WMX or CWM, for allocation of
costs of producing promotional materials for the marketing of the party's own
products or services that include references to another's products or services.
Subject to the foregoing, WMX and CWM will reimburse WTI for its reasonable
expenses, as provided in Section 11.1 above for expenses of WMX, in providing
marketing services to WMX and CWM.
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11.3 Payment Through Open Account. In the interests of
administrative convenience, WMX may, from time to time during the term of this
Agreement, utilize the WMX intercorporate advance account payment system (in
accordance with WMX's procedures for such system as they may exist from time to
time) to charge any amount owed pursuant to this Agreement by WTI or any of its
Subsidiaries, as well as any other amount otherwise owed to WMX or any of its
Subsidiaries by WTI or any of its Subsidiaries, to an account maintained by WMX
or such Subsidiary for such purpose, and upon each such amount's being so
charged it shall constitute Open Account Indebtedness for purposes of this
Agreement. WMX may likewise credit such an account for any amount due to WTI or
its Subsidiaries from WMX or its Subsidiaries. To the extent that, and for such
period of time as, any such account reflects a credit balance in favor of WTI or
any of its Subsidiaries, such account shall accrue interest at the rates and in
the manner specified in Section 3.2.3 hereof for Open Account Indebtedness of
WTI to WMX, and the balance of such account shall be due and payable on demand
by WTI. WMX or its Subsidiaries shall from time to time be entitled to pay all
or any portion of the balance of any such account to WTI or any of its
Subsidiaries at any time prior to its maturity without payment of any premium or
penalty.
ARTICLE XII
TERM AND TERMINATION
--------------------
12.1 Term. Except to the extent otherwise provided in this
Agreement, this Agreement shall remain in full force and effect for so long as
the Consolidation Option shall be exercisable as provided in Section 10.2 above;
provided, that this Agreement shall terminate as to CWM at such time as CWM
ceases to be a Subsidiary of WMX; and provided further, that in order to allow
WTI to make alternative provisions for obtaining risk management and surety bond
services of the type to be provided by WMX pursuant to Article IV above, WMX
shall continue to provide such services and coverage to WTI for a period of 120
days following termination of this Agreement.
12.2 Effect of Termination. If this Agreement is terminated as to a
party for any reason, all rights and obligations of such party shall thereupon
terminate, except as provided in Section 12.1 above and except for Article XI
above and Articles XIII and XIV below.
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ARTICLE XIII
INDEMNIFICATION
---------------
13.1. Indemnification of WMX. WTI agrees to indemnify and hold
harmless WMX, each of its Subsidiaries and each of their respective directors,
officers, employees, agents, attorneys and representatives (the "Indemnified WMX
Parties") from and against any and all liabilities, claims, damages,
obligations, costs and expenses (including, without limitation, reasonable
attorneys' fees and court costs) asserted or made against any one or more
Indemnified WMX Parties by Persons other than one or more Indemnified WMX
Parties and arising from or relating to:
(a) WMX's, any Insurance Subsidiary's or any other WMX
Subsidiary's (A) having extended or procured coverage under
any WMX insurance policy to WTI, any of its Subsidiaries or
their respective businesses or properties, or having caused
such coverage to be so extended, if either an Insurance
Subsidiary is the issuer of such policy or WMX or any of its
Subsidiaries is obligated to reimburse the issuer of such
policy for payments made under such policy, (B) having
procured any surety bond or letter of credit for or on behalf
of WTI or any of its Subsidiaries or (C) having guaranteed or
otherwise assured the performance or payment of any
obligation of WTI or any of its Subsidiaries, whether before,
on or after the date hereof; or
(b) the failure of WTI or any of its Subsidiaries to pay when and
as due any Indebtedness and other obligations of WTI or any
of its Subsidiaries to WMX or any of its Subsidiaries.
13.2 Invoices by WMX. WMX shall furnish an invoice to WTI for the
amount of each payment requested pursuant to this Article XIII, and WTI shall
pay each such invoice within 30 days after receiving it, except to the extent
that such invoice includes any amount as to which WMX is not entitled to payment
by the terms of this Article XIII. WTI may at its option offset any or all of
the amount of such invoice against any indebtedness owed by WMX or any of its
Subsidiaries to WTI or its Subsidiaries.
13.3 Defense. WTI may at its option assume and control the defense,
compromise, settlement and discharge of each matter as to which any Person is or
becomes entitled to indemnification pursuant to this Article XIII. WMX agrees
not to compromise, settle or dis-
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charge any such matter without WTI's written consent unless an Event of Default
shall have occurred (which consent shall not be unreasonably withheld or
delayed). WTI agrees not to compromise, settle or discharge any such matter
without WMX's written consent (which consent shall not be unreasonably withheld
or delayed) if any claim shall have been made or threatened against any Person
entitled to indemnification under this Article XIII in connection with any such
matter unless such compromise, settlement or discharge includes a valid,
enforceable and unconditional written release of each such Person. This Article
XIII shall survive any and all terminations of this Agreement.
ARTICLE XIV
MISCELLANEOUS
-------------
14.1 Consequential Damages. In no event shall any party hereto be
liable to any other for any consequential damages arising from, in connection
with or relating to any matter provided for in this Agreement.
14.2 No Agency. In connection with the parties' performance of
services hereunder, the relationship of the parties shall be solely that of
independent contractors and none of the parties shall be or hold itself out as
the agent of the other.
14.3 Limitation on Services. In the event that WTI requests a level of
services pursuant hereto that WMX is unable to provide without material
disruption of or adverse impact upon the conduct of WMX's business or
operations, WMX shall be entitled to reduce the volume of services provided to
WTI to such level as will not have such effects. In such event WMX will use its
reasonable good faith efforts to overcome such effects so as to be able to
provide the services desired by WTI.
14.4 Mutual Cooperation.
14.4.1 WMX agrees that from time to time at the request of WTI it
will discuss with WTI the types of services other than those provided for herein
which WMX would be able to provide to WTI. If WTI desires to obtain those
services, WMX and WTI will negotiate and agree upon the terms under which WMX
will provide such services including, without limitation, the payment of
compensation and expenses to WMX on substantially the terms specified in Article
XI hereof.
14.4.2 Each party agrees to furnish to each of the other parties
such reports, statements, documents and information as are within its possession
from time to time and
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as reasonably requested by any such party for any lawful purpose of such other
party relating to this Agreement, the transaction contemplated hereby, or WMX's
ownership of WTI Stock including, without limitation, preparation of financial
statements and tax returns and defense of lawsuits and claims, provided that the
possessing party may require the requesting party to enter into an agreement
obligating the requesting party to maintain the confidentiality of any
confidential report, statement, document or information of the possessing party
and not to use the same to the detriment of the possessing party.
14.5 Services Optional. Except as provided in Section 3.4 hereof, WTI
shall not be obligated to use any services of WMX hereunder and may provide such
services by itself or obtain them from any other Person.
14.6 Modification and Waiver. This Agreement may be modified in any
manner and at any time, but only by written instrument executed by the parties
hereto. Any of the terms, covenants and conditions of this Agreement may be
waived at any time by the party entitled to the benefit of such term, covenant
or condition, however, such waiver must be in writing and executed by the party
against whom such waiver is asserted. No such modification or waiver executed by
WTI shall be effective against WTI until approved or verified by a majority of
the WTI Independent Directors (as defined in the International Development
Agreement). No course of dealing will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any party
under or by reason of this Agreement.
14.7 Notices. All notices, consents, requests, demands and other
communications hereunder shall be in writing and shall be deemed given and
effective five business days after being mailed first class, certified or
registered mail, postage prepaid, return receipt requested, addressed as set
forth below, or two business days after being sent by overnight courier, telex
or telecopy (by a machine that indicates the telex or telecopy number of the
machine to which such communication is sent and the receipt by such machine of
such communication) to the address or telecopy number set forth below,
(i) If to WMX:
3003 Butterfield Road
Oak Brook, Illinois 60521
Attention: General Counsel
Telecopier: (708) 218-1553
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(ii) If to CWM:
3001 Butterfield Road
Oak Brook, Illinois 60521
Attention: General Counsel
Telecopier: (708) 218-1553
(iii) If to WTI:
3003 Butterfield Road
Oak Brook, Illinois 60521
Attention: Secretary
Telecopier: (708) 218-1553
or, in each case, at such other address or to such other person as may be
specified in writing.
14.8 Headings. 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.
14.9 Entire Agreement. This Agreement is one of the Ancillary
Agreements contemplated by the Merger Agreement and embodies the entire
agreement and understanding and supersedes all prior agreements and
understandings of the parties (including without limitation the matters set
forth in Schedule II of the Merger Agreement) with respect to the matters
contemplated hereby, other than as reflected in, the International Development
Agreement, the Medical Waste Option Agreement dated September 7, 1990 by and
between WMI and WTI, the Intellectual Property Licensing Agreement dated
September 7, 1990 by and between WMX, WMI and WTI and the Restated Funding
Agreement dated September 7, 1990 of even date herewith by and between WMX and
WTI and Resco Holdings Inc. (the "Funding Agreement").
14.10 Subsidiaries. The parties hereto acknowledge that they often
conduct their business operations through controlled Subsidiaries. The parties
hereto therefore agree that they will cause their respective direct and indirect
controlled Subsidiaries to abide by the terms of this Agreement as if they were
parties hereto to the extent necessary to carry out
25
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the purposes of this Agreement. Further, each party shall be entitled to cause
its obligation hereunder to be satisfied, and to cause its benefits hereunder to
be received, by its Subsidiaries.
14.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
14.12 Choice of Law. This Agreement shall be interpreted and construed
in accordance with the internal laws (and not the conflicts of laws rules) of
the State of Illinois applicable to contracts made and to be performed in the
State of Illinois.
14.13 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties and their
respective permitted successors and assigns, but, subject to Section 14.10
above, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party without the prior written consent of
the other party hereto.
14.14 Severability. If any provision of this Agreement is prohibited
by or held to be invalid under applicable law, such provision will be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement on the date first
above written.
WMX TECHNOLOGIES, INC. CHEMICAL WASTE MANAGEMENT, INC.
By /s/ James E. Koenig By /s/ Jerome D. Girsch
-------------------------------- -----------------------------------
James E. Koenig Jerome D. Girsch
Its Senior Vice President, Chief Its Executive Vice President, Chief
Financial Officer and Treasurer Financial Officer, Controller and
Treasurer
WHEELABRATOR TECHNOLOGIES INC.
By /s/ John D. Sanford
--------------------------------
John D. Sanford
Its Vice President, Chief Financial
Officer and Treasurer
26
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EXHIBIT A
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD BY THE HOLDER HEREOF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENT OF THE ACT. BY ITS ACCEPTANCE OF THIS PROMISSORY NOTE,
THE HOLDER HEREOF REPRESENTS THAT THIS PROMISSORY NOTE IS BEING ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH,
ANY PUBLIC DISTRIBUTION HEREOF AND THAT ANY RESALE OF THIS PROMISSORY NOTE WILL
BE MADE ONLY PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE ACT.
[WMX TECHNOLOGIES, INC.]
[WHEELABRATOR TECHNOLOGIES INC.]
PROMISSORY NOTE
_______________________, 199___ Oak Brook, Illinois
FOR VALUE RECEIVED, the undersigned [WHEELABRATOR TECHNOLOGIES INC.] [WMX
TECHNOLOGIES, INC.] ("Payor") promises to pay to the order of [WMX TECHNOLOGIES,
INC.] [WHEELABRATOR TECHNOLOGIES INC.] ("Payee") a sum equal to the amount of
each loan by Payee pursuant to Article III of the Amended and Restated Master
Intercorporate Agreement dated as of November 1, 1993 by and between Payor,
Payee and Chemical Waste Management, Inc. (the "Agreement") plus interest on the
outstanding principal balance of the loan at the rate determined pursuant to
Article III of the Agreement for the actual number of days elapsed from and
inclusive of the date of the making of the loan to, but exclusive of, the date
of payment of the amount due at maturity of such loan, based on a 360 day year.
Contempo-raneously with the making of each loan by Payee to Payor pursuant to
Article III of the Agreement, Payor shall issue to Payee a written confirmation.
Each confirmation shall state the amount of funds loaned, the amount due at
maturity (if different from the amount of funds loaned), the maturity date of
the loan and the rate of interest or basis for determining interest, if any,
applicable to such loan, all determined as provided in Article III of the
Agreement. The issuance of a confirmation shall not be conclusive as to the
accuracy of the information contained therein, and failure of Payor to issue
such confirmation shall not affect Payor's obligations hereunder. Payee shall
inform Payor with reasonable promptness of any inaccuracy therein, but neither
Payee's failure to do so nor making any errors in so informing Payor shall
affect Payor's obligations hereunder.
1. All payments of principal and interest shall be due on the dates
determined pursuant to Article III of the Agreement and shall be made in
immediately available funds, at the principal office of _______________________
Bank in ______________________ or such other place, or in such other manner, as
Payee may from time to time designate by advance written notice to Payor. All
required payments of principal, interest or other amounts shall, if not paid
when due, bear interest at a floating rate equal to the rate per annum publicly
announced by Mellon Bank, Pittsburgh, Pennsylvania as its prime rate, which rate
shall change as such
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prime rate changes and shall not duplicate any interest charged under this
Promissory Note. Such interest shall be payable on demand.
2. The Payor represents and warrants as follows, which representations
and warranties shall survive the execution and delivery of this Promissory Note
and each loan of funds to Payor pursuant hereto and shall be deemed made as of
the date hereof and as of the date of each borrowing by Payor pursuant to the
Agreement.
(a) Payor is a corporation duly organized and validly existing under the
laws of the State of Delaware, has full power and authority to execute, deliver
and perform its obligations under this Promissory Note and has taken all actions
required for the due execution and delivery of, and performance of its
obligations under, this Promissory Note.
(b) This Promissory Note is the valid and legally binding obligation of
Payor in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency and other similar laws affecting creditors' rights generally and to
general equitable principles.
(c) The execution and delivery of, and performance of its obligations
under, this Promissory Note will not constitute a violation or breach of or
default under Payor's certificate of incorporation or bylaws or any applicable
law, regulation or rule or any agreement or instrument to which Payor or any of
its Subsidiaries (as defined in the Agreement) is a party or by which it or any
of its property is bound.
(d) Payor has obtained all consents, approvals and authorizations and
effected all declarations, filings and registrations required to be obtained or
made by Payor in connection with the execution and delivery of, or performance
of its obligations under, this Promissory Note.
3. Upon the occurrence of an Event of Default (as defined below), Payee
may by written notice to Payor declare the principal amount of this Promissory
Note (together with accrued interest thereon) to be, and such principal amount
(together with such interest) shall thereupon become, immediately due and
payable without presentment, demand, protest, notice of dishonor or other notice
of any kind, all of which are hereby waived by Payor except as expressly set
forth herein. Payee's exercise of any right or remedy shall not be deemed a
waiver of any other right or remedy or to preclude the exercise of any right or
remedy. No failure or delay by Payee in exercising any right or remedy shall
constitute a waiver of such rights or remedy or any other right or remedy.
Payor shall give written notice to Payee of the occurrence of any Event of
Default within five Business Days (as defined in the Agreement) of such
occurrence.
4. For purposes hereof, each of the following shall constitute an Event
of Default:
(a) Payor fails to make when and as due any payment of principal, interest
or other amount required by the terms of this Promissory Note, by the terms of
any other Promissory Note (as defined in the Agreement) or by the terms of
Article III of the Agreement to be paid (a "Required Payment"), provided,
however, that no such failure shall constitute an Event of Default unless Payor
shall have failed (i) to cure such failure within five Business Days of the date
the Required Payment was due or (ii) to pay interest on the amount of the
Required Payment from the date when due to the date of payment of the Required
Payment and such failure continues uncured for five Business Days from the date
of Payee's written demand for payment of such interest;
2
<PAGE>
(b) Payor or any Subsidiary of Payor shall fail to make when and as due any
payment of principal or interest in respect of any indebtedness of Payor or any
of its Subsidiaries for borrowed money, the outstanding principal balance of
which exceeds, together with accrued interest thereon, an amount equal to five
percent of the total stockholders' equity of the Payor and its Subsidiaries
determined as of the end of the Payor's then most recently completed fiscal year
on a consolidated basis in accordance with generally accepted accounting
principles (or its equivalent in other currency in which such indebtedness is
denominated), whether such indebtedness is now existing or arises hereafter;
(c) any event or condition shall occur which (i) results in the
acceleration of the maturity of any indebtedness of Payor or any of its
Subsidiaries for borrowed money, the outstanding principal balance of which,
plus accrued and unpaid interest, exceeds an amount equal to five percent of the
total stockholders' equity of the Payor and its Subsidiaries determined as of
the end of the Payor's then most recently completed fiscal year on a
consolidated basis in accordance with generally accepted accounting principles
(or its equivalent in other currency in which such indebtedness is denominated),
whether such indebtedness is now existing or arises hereafter, or (ii) enables
(or with the giving of notice or the passage of time or both, would enable) the
holder of such indebtedness to accelerate the maturity thereof (except, for
purposes of this clause (ii), any such indebtedness as to which Payor or its
Subsidiaries shall have a right to cure the event or condition in question and
shall be practically able to effect a cure);
(d) Payor or any of its Subsidiaries shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing.
(e) an involuntary case or other proceeding shall be commenced against the
Payor or any of its Subsidiaries seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against Payor or any of its Subsidiaries under any
applicable bankruptcy laws or similar laws as now or hereafter in effect.
(f) any representation, warranty, certification of statement made by Payor
hereunder shall prove to have been incorrect in any material respect when made
or deemed made; or
(g) this Promissory Note shall for any reason fail to be in full force and
effect and fully enforceable against Payor or Payor shall so assert.
5. All payments made pursuant to this Promissory Note shall be made
without deduction for any present or future taxes, withholdings, deductions or
any other charges ("Taxes") imposed or required by any governmental authority,
it being understood that the net amount to be received by the Payee after
payment of the Taxes shall not be less than the payment provided for herein.
Payor covenants to make all payments necessary to ensure that Payee receives
such net amount. If Payor makes any such deduction and payment in respect of
Taxes and if Payee or any of its Subsidiaries, as the case may be, determines in
good faith that it has
3
<PAGE>
been granted by any relevant tax authority a credit against Taxes due or a
refund of Taxes paid, to the extent that it may do so without prejudice to the
retention of the amount of that credit or refund, Payee or its relevant
Subsidiary shall reimburse Payor or its relevant Subsidiary, as the case may be,
for such amount (if any) as Payee shall in good faith determine to be the
proportion of that credit or refund which is attributable (or, where Payee is
entitled to more than one credit or refund, which is reasonably allocable) to
the said deduction and payment.
6. The outstanding principal amount hereof may be prepaid by the Payor in
whole or in part, provided, that at the time of making any pre-payment, Payor
shall also pay to Payee all accrued interest to such time and all reasonable
losses, costs and expenses incurred by Payee in the re-deployment by Payee of
the amount of such pre-payment.
7. Whenever any payment required to be made under this Promissory Note
shall be due on a day other than a Business Day, such payment may be made on the
next succeeding Business Day, and such extensions of time shall in such case be
included in the computation of interest.
8. Payor waives presentment, demand, protest, notice of dishonor and any
and all other notices in connection with this Promissory Note except as set
forth herein.
9. Payment of principal and interest due from Payor pursuant hereto shall
be subject to offset by Payor of any payment of principal or interest due and
payable to Payor or any of its Subsidiaries from Payee pursuant to, or as
otherwise contemplated by, Article III of the Agreement.
10. All notices, consents, requests, demands and other communications
hereunder shall be in writing and shall be deemed given and effective five
Business Days after being mailed first class, certified or registered mail,
postage prepaid, return receipt requested, addressed as set forth below, or two
business days after being sent by overnight courier, telex or telecopy (by a
machine that indicates the telex or telecopy number of the machine to which such
communication is sent and the receipt by such machine of such communication) to
the address or telecopy number set forth below.
If to Payee:
___________________
___________________
___________________
If to Payor:
___________________
___________________
___________________
or, in each case, at such other address or to such other person as may be
specified in writing.
11. This Promissory Note shall be interpreted and construed in accordance
with the internal laws (and not the conflicts of laws rules) of the State of
Illinois applicable to contracts made and to be performed in the State of
Illinois.
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<PAGE>
12. If any provision of this Promissory Note is prohibited by or held to
be invalid under applicable law, such provision will be ineffective to the
extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Promissory Note.
[WHEELABRATOR TECHNOLOGIES INC.]
[WMX TECHNOLOGIES, INC.]
By: ________________________________
Its: _______________________________
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EXHIBIT NO. 10.39
WHEELABRATOR TECHNOLOGIES INC.
CORPORATE INCENTIVE BONUS PLAN
(AS AMENDED AND RESTATED AS OF MARCH 14, 1994)
1. PURPOSE. The purpose of the Wheelabrator Technologies Inc. Corporate
Incentive Bonus Plan (the "Plan") is to advance the interests of Wheelabrator
Technologies Inc. (the "Company") by providing for annual bonuses for officers
and other key employees of the Company, its direct and indirect subsidiaries and
its direct or indirect parent companies (collectively, the "Affiliates"), so as
to attract and retain such officers and key employees, make their compensation
competitive with other opportunities, and to the extent provided herein provide
them with an incentive to strive to increase the Company's earnings by focusing
on the Expanded Management System ("EMS").
2. ADMINISTRATION. With respect to participation in the Plan by individuals
who are either officers of the Company or the chief operating officer of one of
the Company's principal operating groups (the "Operating Group Officers"), the
Plan shall be administered by the Compensation and Stock Option Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). The Board
may in its discretion designate the Board or a committee other than the
Committee to administer the Plan, in which event the Board or such other
committee shall be deemed the "Committee" hereunder. Notwithstanding the
foregoing, with respect to participation in the Plan by key employees who are
not described in the first sentence of this Section 2, the Plan shall be
administered by a management committee composed of the Company's Chairman of the
Board, President and Chief Operating Officer, and Chief Financial Officer (or
one or more persons designated by them), and all references herein to the
"Committee" shall be deemed to mean such committee as to matters involving the
participation of such key employees in the Plan.
3. PARTICIPANTS; TERMINATION OF EMPLOYMENT.
(a) Participants in the Plan shall be selected by the Committee on an
annual basis. Participation shall be limited to officers or other key employees
of the Company or any of its Affiliates.
(b) Officers or other key employees who become eligible to participate in
the Plan after the beginning of a calendar year (a "Plan Year") shall, subject
to selection and approval by the Committee, be entitled to a bonus prorated to
reflect such participant's actual number of full months of participation during
the Plan Year.
(c) If, during the Plan Year, a participant's job assignment is modified
such that the participant's target bonus (as described below) is no longer
representative of the participant's position, the participant's target bonus
shall be adjusted, subject to Committee approval, as of the first day of the
month following the change in position to
<PAGE>
a target bonus commensurate with the participant's new position. Thereafter,
the participant shall be entitled to a performance award under the Plan prorated
between the target bonus categories to reflect the number of months during the
Plan Year during which the participant participated under each such category.
(d) A participant whose employment with the Company or its Affiliates
terminates during the Plan Year shall not be entitled to the payment of a bonus
under the Plan, except as the Committee may otherwise determine in its sole
discretion. 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 Affiliates or
interfere in any way with the right of the Company or any of its Affiliates to
terminate a participant's employment at any time.
4. BONUSES.
(A) DEFINITIONS
As used in this Plan:
(i) "Targeted Attainment Percentage" shall mean the Core Business
Targeted Attainment Percentage and the Business Unit Targeted Attainment
Percentage, as the context shall require.
(ii) "Core Business Targeted Attainment Percentage" shall mean a
percentage of the budgeted pre-tax earnings of the Company, specifically
excluding equity income from investments, as designated by the Committee.
(iii) "Business Unit Targeted Attainment Percentage" shall mean a
percentage of the budgeted pre-tax earnings of a particular business unit
of the Company, as designated by the Committee.
(B) PERFORMANCE CRITERIA AND TARGET BONUS
(i) 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 applicable
performance criteria described below. The Committee shall, on an annual basis,
establish a "target bonus" for each participant equal to a percentage of base
salary of such participant paid for such Plan Year.
(ii) Participants in the Plan shall have their bonuses, if any, for a Plan
Year determined on the basis of:
(A) the Core Business Targeted Attainment Percentage achieved for the
Plan Year;
<PAGE>
(B) the Business Unit Targeted Attainment Percentage applicable to a
Business Unit of the Company for which such participant has substantial
management responsibility achieved for the Plan Year; or
(C) a weighted average of (A) and (B) above.
The Committee shall for each Plan Year establish (x) the criteria from (A)
through (C) above to apply to each participant, (y) as to participants to whom
the criteria specified in (A) or (B) above are applicable (but not (C)), the
percentage of target bonus earned at various levels of the relevant Targeted
Attainment Percentage, including the minimum relevant Targeted Attainment
Percentage below which no portion of target bonus shall be earned and (z) in the
case of the criterion specified in (C) above, the portion of the participant's
target bonus which is to be determined by reference to each of the relevant
Targeted Attainment Percentages listed in clauses (A) and (B) above, and the
percentages of target bonus earned at various levels of the relevant Targeted
Attainment Percentages listed in (A) and (B) above, including the minimum
relevant Targeted Attainment Percentage below which no portion of target bonus
shall be earned as to such Targeted Attainment Percentage.
(iii) Notwithstanding the foregoing, no bonus shall be payable to the
Chief Executive Officer of the Company if the Committee shall have determined
that he has not established programs and systems which are adequate to further
the implementation of each of the Principles in the Rust International Inc.
Environmental Policy.
(c) ACCOUNTING
In the event that there are recorded special items in income or expense, or
changes in generally accepted accounting principles or accounting methods are
implemented which render the pre-tax earnings data not comparable between years
or the targeted objectives specified above incompatible with the purpose and
intent of the Plan, the Committee may in its sole discretion make appropriate
adjustments to the pre-tax earnings data or such objectives.
5. PAYMENT. Payment of bonuses for any Plan Year shall be in cash and made as
promptly as practicable following completion of the Company's consolidated
financial statements for such Plan Year.
6. ADJUSTMENTS FOR CHANGES IN STOCK; MERGERS; ETC. In the event of a Change
in Control (as such term is defined in the Wheelabrator Technologies Inc. 1992
Stock Option Plan, as amended from time to time) of the Company (i) the Plan
Year shall end as of the end of the calendar quarter coincident with or next
following the date of such Change in Control (or such other date as established
by the Committee), (ii) the Committee shall
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cause the bonuses payable to participants to be promptly calculated and (iii)
the Company shall pay such bonuses to participants as promptly as practicable
following the Committee's determination, notwithstanding any 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 established by the Committee pursuant to Section 4 as it deems
appropriate.
7. PARTICIPANT'S INTERESTS. A participant's benefits hereunder shall at all
times be reflected on the Company's books as a general unsecured and unfunded
obligation of the Company and the Plan shall not give any person any right or
security interest in any asset of the Company nor shall it imply any trust or
segregation of assets by the Company.
8. NON-ALIENATION OF BENEFITS. 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 person arising under the Plan is subject to voluntary or
involuntary alienation, sale, transfer, or assignment without the Company's
consent.
9. 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 Internal Revenue 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.
10. NO EMPLOYMENT RIGHTS. The Plan is not a contract of employment and
participation in the Plan will not cause any participant to have any rights to
continue as an employee of the Company or any of its Affiliates, or any right or
claim to any benefit under the Plan except as specifically provided herein.
11. GENDER AND NUMBER. Where the context admits, words denoting men include
women, the plural includes the singular, and the singular includes the plural.
12. 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.
13. AMENDMENT OR TERMINATION. The Committee 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 previously
awarded to such participant.
4
<PAGE>
14. 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.
15. CONTROLLING LAW. The Plan shall be construed in accordance with the
internal laws of the State of Illinois.
* * *
The foregoing is the true and complete text of the amended and restated
Wheelabrator Technologies Inc. Corporate Incentive Bonus Plan as amended and
restated by the Compensation and Stock Option Committee of the Board of
Directors of Wheelabrator Technologies Inc. as of March 14, 1994.
/s/ Stephen P. Stanczak
--------------------------------
Stephen P. Stanczak, Secretary
5
<PAGE>
EXHIBIT NO. 10.40
WHEELABRATOR TECHNOLOGIES INC.
LONG TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED AS OF MARCH 23, 1994)
1. PURPOSE. The purpose of the Wheelabrator Technologies Inc. Long Term
Incentive Plan (the "Plan") is to advance the interests of Wheelabrator
Technologies Inc. (the "Company") by providing for long-term performance awards
for officers of the Company so as to attract and retain such officers, make
their compensation competitive with other opportunities, and cause them to
strive to increase the Company's cumulative returns to its stockholders.
2. ADMINISTRATION. The Plan shall be administered by the Compensation and Stock
Option Committee (the "Committee") of the Board of Directors of the Company (the
"Board"). The Board may in its discretion designate the Board or another
Committee thereof to administer the Plan, in which event the Board or such other
Committee shall be deemed the "Committee" hereunder.
3. PARTICIPANTS; PERFORMANCE PERIODS; PRORATION OF AWARDS.
(a) Participants in the Plan shall be selected by the Committee.
Participation shall be limited to employees who are officers of the Company or
one or more of its subsidiaries.
(b) Participants who become eligible to participate in the Plan after June
1, 1993 shall, subject to selection and approval by the Committee, be entitled
to target and performance awards pursuant to Section 4 hereof for each
Performance Period (as hereinafter defined) determined pursuant hereto. For
purposes hereof, each "Performance Period" during the term of the Plan shall
begin on a January 1 and shall terminate on the December 31 of the third
calendar year ending thereafter; provided that the first Performance Period
pursuant to the Plan shall begin on June 1, 1993 and shall end on December 31,
1995.
(c) If an officer of the Company becomes eligible to participate in the
Plan during any Performance Period, the participant's award for such Performance
Period shall be prorated to reflect such participant's actual number of full
months of participation. If, during any Performance Period, a participant's job
assignment is modified such that the participant's target award (as described
below) is no longer representative of the participant's position, the
participant's target award shall be adjusted, subject to Committee approval, as
of the first day of the month following the change in position to a target award
commensurate with the participant's new position. Thereafter, the participant
shall be entitled to a performance award under the Plan prorated between the
target award categories to reflect the number of months during the Performance
Period during which the participant participated under each such category.
<PAGE>
4. TARGET AND PERFORMANCE AWARDS.
(a) The Committee shall establish a percentage of each participant's annual
base salary as of the last day of each Performance Period as a "target award"
for such Performance Period.
(b) Each participant in the Wheelabrator Technologies Inc. Long-Term
Incentive Plan shall be entitled to a performance award for each Performance
Period based on the percentile rank of the Company's Total Stockholder Return
(as hereinafter defined) among the Total Stockholder Returns of the companies
that comprise the Standard & Poor's 500 Stock Index (the "S&P 500") during such
Performance Period. For purposes hereof, "Total Stockholder Return" of the
Company shall mean the cumulative return on its Common Stock expressed as a
percentage, determined by dividing (i) the sum of (a) the cumulative amount of
dividends paid for the applicable Performance Period, assuming dividend
reinvestment, and (b) the difference between the average of the closing sales
prices of such common stock on the last five trading days of such Performance
Period and the last five trading days preceding the first day of such
Performance Period, by (ii) the average of the closing sales prices of such
common stock on the last five trading days preceding the first day of such
Performance Period. The "Total Stockholder Return" of any of the companies that
comprise the S&P 500 shall mean the cumulative return on its common stock
expressed as a percentage, determined by dividing (i) the sum of (a) the
cumulative amount of dividends paid for the applicable Performance Period,
assuming dividend reinvestment, and (b) the difference between the closing sales
price of such common stock on the last trading day of such Performance Period
and the last trading day preceding the first day of such Performance Period, by
(ii) the closing sales price of such common stock on the last trading day
preceding the first day of such Performance Period.
(c) The Committee may determine, in its sole discretion, that a
participant's award for any Performance Period shall be calculated, in whole or
in part, based upon the formula established with respect to a long term
incentive plan of any subsidiary of the Company.
5. CASH AND DEFERRED AWARDS.
(a) Performance awards for each Performance Period shall be payable as
follows:
(i) An amount equal to 50% of the performance award (the "Cash Award")
shall be paid in cash as soon as practicable after the end of the Performance
Period; and
(ii) An amount equal to 50% of the performance award (the "Deferred
Award"), adjusted as set forth in Section 6 hereof, shall be paid in cash as
soon as practicable after the date of vesting, determined pursuant to Section 7
hereof.
<PAGE>
(b) The maximum amount of a performance award that may be awarded pursuant
to Section 4(b) hereof to a participant with respect to any Performance Period
pursuant to this Plan shall be limited to 250% of the participant's base salary
as of the last day of the Performance Period. The Deferred Award portion of
each performance award shall be subject to adjustment as contemplated by Section
6 hereof.
6. DEFERRED AWARD GRANT AND PAYMENT. (a) An amount equal to the Deferred
Award granted to each participant pursuant hereto shall be credited to a
bookkeeping account maintained by the Company in the name of each participant (a
"Deferred Account") as of the last day of each Performance Period with respect
to which a Deferred Award is payable. Each amount so credited shall be deemed
to have been invested in shares of the Company's common stock, par value $1.00
per share ("Common Stock"), as of the last trading day of such Performance
Period. During the period that any part or all of a participant's Deferred
Account is deemed to have been invested in shares of Common Stock, such Deferred
Account shall be deemed to receive all dividends (whether in the form of stock
or cash) and stock splits which would be received with respect to such shares as
if such investment had actually been made and such amounts shall be deemed to be
reinvested in shares of Common Stock as of the date of receipt, and appropriate
credit shall be made to the participant's Deferred Account to reflect such
deemed receipts and reinvestments. The investments described above shall be
deemed to have been made at a price equal to the average of the closing sales
prices of the Common Stock on the New York Stock Exchange Composite Tape (as
reported in The Wall Street Journal, Midwest Edition), on each of the five
trading days immediately preceding the date as of which a deemed investment is
made.
(b) As soon as practicable following the date of vesting of a Deferred
Award pursuant to Section 7 hereof, the shares of Common Stock deemed reflected
in each participant's Deferred Account shall be deemed to have been sold at a
price equal to the average of the closing sales prices of the Common Stock on
the New York Stock Exchange Composite Tape (as reported in The Wall Street
Journal, Midwest Edition), on each of the five trading days immediately
preceding the date of such vesting, and the proceeds thereof shall be
distributed as soon as practicable to each participant or designated beneficiary
in cash.
(c) Subject to Section 8 hereof, in the event of a merger, consolidation,
exchange of shares or recapitalization of the Company, a similar event affecting
the Common Stock, or any other event determined by the Committee in its sole
discretion, the Common Stock deemed reflected by a participant's Deferred
Account may be deemed by the Committee, in its sole discretion, to be sold,
exchanged or otherwise disposed of, and the Committee may make appropriate
adjustments in each participant's Deferred Account to recognize such event, and
the assumed proceeds of any such disposition may be deemed to be reinvested in
any security which the Committee in its sole discretion determines is an
appropriate replacement security, or, alternatively, paid to the participant in
cash, in the discretion of the Committee.
3
<PAGE>
7. VESTING.
(a) Unless the Committee shall otherwise determine, in its sole discretion,
a participant whose employment as an officer of the Company or one of its
subsidiaries is terminated during any Performance Period shall not be entitled
to the payment of a performance award under the Plan for such Performance
Period.
(b) A participant's right to receive a Cash Award or any portion thereof
for any Performance Period shall not vest until the close of business on the
last day of such Performance Period; provided that if the participant is not an
officer of the Company or one of its subsidiaries on such date, such award or
any portion thereof shall not vest unless the Committee shall otherwise
determine, in its sole discretion.
(c) A participant's right to receive a Deferred Award or any portion
thereof for any Performance Period shall not vest until the close of business on
the date three years after the last day of such Performance Period; provided
that if the participant is not an officer of the Company or one of its
subsidiaries on such date, then such award or any portion thereof shall not
vest, except as hereinafter provided, or as the Committee shall otherwise
determine, in its sole discretion. If the participant is not an officer of the
Company or one of its subsidiaries on such date as a result of the participant's
normal retirement at or after age 65, death or total disability, the participant
or his beneficiary designated pursuant to Section 10 hereof shall be entitled to
payment of such Deferred Award as soon as practicable after such normal
retirement, death or total disability, in an amount equal to the value of such
Deferred Account as of the last day of the month in which such normal
retirement, death or total disability occurs.
8. CHANGE IN CONTROL. In the event of a Change in Control (as such term is
defined in the Company's 1993 Stock Option Plan, as amended from time to time)
of the Company, (i) each Performance Period which has not yet ended shall end as
of the calendar quarter coincident with or next following the date of such
Change in Control (or such other date as established by the Committee), (ii)
each unpaid Cash Award from such Performance Periods and each unpaid Deferred
Award from such Performance Periods and from prior Performance Periods shall
vest as of the close of business on the last day of each such Performance Period
(or such other date established by the Committee), (iii) the Committee shall
cause the performance awards payable to participants to be promptly calculated,
and (iv) the Company shall pay such performance awards to participants as
promptly as practicable following the Committee's determination, notwithstanding
any Plan provision to the contrary. In calculating the performance awards
payable to participants in connection with a Change in Control, the Committee is
authorized to take into consideration and make adjustments for such factors as
it deems appropriate.
9. PARTICIPANT'S INTERESTS. Although Deferred Awards payable to a
participant hereunder are measured by the value of and income derived from the
investments
4
<PAGE>
deemed made in Common Stock, the Company will not issue any such shares or make
any such investment on behalf of a participant. A participant's benefits
hereunder shall at all times be reflected on the Company's books as a general
unsecured and unfunded obligation of the Company and the Plan shall not give any
person any right or security interest in any asset of the Company nor shall it
imply any trust or segregation of assets by the Company.
10. DESIGNATION OF BENEFICIARIES. A participant from time to time may name in
writing any person or persons (who may be named concurrently, contingently or
successively) to whom his or her benefits are to be paid if he or she dies
before complete payment of such benefits. Each such beneficiary designation
will revoke all prior designations by the participant with respect to the Plan,
shall not require the consent of any previously named beneficiary, shall be in a
form prescribed by the Committee, and will be effective only when filed with the
Committee during the participant's lifetime. If the participant fails to
designate a beneficiary before his or her death, as provided above, or if the
beneficiary designated by the participant dies before the date of the
participant's death or before complete payment of the participant's benefits,
the Company, in its discretion, may pay the remaining unpaid portion of the
participant's benefits to either (i) one or more of the participant's relatives
by blood, adoption or marriage and in such proportion as the Company determines;
or (ii) the legal representative or representatives of the estate of the last to
die of the participant and his or her designated beneficiary.
11. FACILITY OF PAYMENT. If a participant or his or her beneficiary is
entitled to payments under the Plan and in the Company's opinion such person
becomes in any way incapacitated so as to be unable to manage his or her
financial affairs, the Company may make payments to the participant's or
beneficiary's legal representative, or to a relative or friend of the
participant or beneficiary for such person's benefit, or the Company may make
payments for the benefits of the participant or beneficiary in any manner that
it considers advisable. Any payment made in accordance with the preceding
sentence shall be a full and complete discharge of any liability for such
payment hereunder.
12. NON-ALIENATION OF BENEFITS. 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 person arising under the Plan is subject to voluntary or
involuntary alienation, sale, transfer, or assignment without the Company's
consent.
13. 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 Internal Revenue 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.
5
<PAGE>
14. NO EMPLOYMENT RIGHTS. The Plan is not a contract of employment and
participation in the Plan will not cause any participant to have any rights to
continue as an employee of the Company (or any affiliated entity), or any right
or claim to any benefit under the Plan, unless the right or claim has
specifically vested under the Plan.
15. 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 absolute discretion of the Committee or the
Company, as the case may be. Any such determination shall be conclusive.
16. AMENDMENT OR TERMINATION. The Committee 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 vested award under the Plan.
17. SUCCESSORS. Unless otherwise agreed to, 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.
18. CONTROLLING LAW. The Plan shall be construed in accordance with the
internal laws of the State of Illinois.
* * *
The foregoing is the true and complete text of the amended and restated
Wheelabrator Technologies Inc. Long Term Incentive Plan as adopted by the Board
of Directors of Wheelabrator Technologies Inc. on March 23, 1994.
/s/ Stephen P. Stanczak
-------------------------------
Stephen P. Stanczak, Secretary
6
<PAGE>
EXHIBIT NO. 10.46
AMENDMENT DATED DECEMBER 22, 1993
TO
WHEELABRATOR TECHNOLOGIES INC.
1991 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. The Wheelabrator Technologies Inc. 1991 Stock Option Plan for Non-
Employee Directors (the "Directors Plan") is hereby amended by adding the
following new subparagraph (d) to Paragraph 3 thereof:
"(d) Notwithstanding the provisions of subparagraph 3(a) to the
contrary, in the event an option expires unexercised as to any shares
of Stock as the result of the resignation of a director for any bona
fide reason, a new option grant equal to the lesser of (i) the number
of shares of Stock which expired unexercised and (ii) 15,000 shares of
Stock, shall be automatically granted to such person upon reelection
or reappointment as a director of the Company."
2. The Directors Plan is hereby amended by replacing the existing
Paragraph 11 in its entirety with the following new Paragraph 11:
"11. EFFECTIVE DATE OF AMENDMENTS. The Board of Directors may
adopt and authorize amendments to this Plan subject to subsequent
approval of the stockholders of the Company or receipt by the Company
of a no-action letter from the staff of the Securities and Exchange
Commission (the "Commission") to the effect that stockholder approval
of such amendment is not required pursuant to Rule 16b-3 of the rules
and regulations of the Commission promulgated under the Securities
Exchange Act of 1934. Options may be granted under this Plan prior,
but subject, to the receipt of such no-action letter or the approval
of such amendment by the stockholders of the Company and, in either
such case, the date of grant shall be determined without reference to
the date of receipt of such no-action letter or the approval of such
amendment by the stockholders of the Company. Notwithstanding any
other provision of this Plan to the contrary, no option granted
hereunder pursuant to such an amendment shall be exercisable prior to
the date on which such amendment is approved by stockholders or a no-
action letter in respect of such amendment is received by the Company
as herein contemplated. In the event that as the result of an event
described in Paragraph 7(b), an option becomes exercisable prior to
the date on which receipt of such no-action letter or
<PAGE>
stockholder approval is obtained, the period for exercise thereof
shall automatically be extended to allow for such exercise to made
within three months following the date on which such no-action letter
or stockholder approval is obtained."
<PAGE>
EXHIBIT NO. 10.49
AMENDMENT NO. 1 TO RUST INTERCORPORATE SERVICES AGREEMENT
This Amendment No. 1 (the "Amendment") to that certain Rust Intercorporate
Services Agreement (the "Services Agreement") dated as of January 1, 1993 by and
among WMX Technologies, Inc. (formerly known as Waste Management, Inc.) ("WMX"),
Chemical Waste Management, Inc. ("CWM"), Wheelabrator Technologies Inc., ("WTI")
and Rust International Inc. ("Rust"), all Delaware corporations, is made as of
August 10, 1993 by and among WMX, CWM, WTI and Rust.
RECITALS
WHEREAS, WMX, CWM, WTI and Rust desire to amend the Services Agreement as
set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereby agree as follows (terms capitalized
herein to have the meanings specified herein or in the Services Agreement):
AGREEMENTS
1. Modification of Services Agreement. (a) Section 4(a) of the Services
Agreement is hereby amended to substitute the words "$450 million through
December 31, 1993 and $350 million thereafter" for the words "$350 million" in
clause (i) thereof.
(b) Section 4(c) is hereby amended to read in its entirety as follows:
"(c) WMX Term Loans to the Company. In the event that the Company
requires funds for the conduct of its business and operations which it does
not wish to procure as Open Account Indebtedness, the Company may borrow
from WMX, and WMX shall lend to the Company, subject to a limit of $350
million plus the amount specified in Section 4(a)(ii) above, funds on a
term loan basis pursuant to the provisions of Sections 4(e), (f), and (h)-
(m) hereof in such amount as the Company may request."
2. Other Provisions. Except as expressly set forth in this Amendment,
all provisions of the Services Agreement in effect immediately prior to the
execution and delivery of this Amendment shall remain in full force and effect
in accordance with their terms.
<PAGE>
3. Choice of Law. This Amendment shall be interpreted and construed in
accordance with the internal laws (and not the conflicts of laws rules) of the
State of Illinois applicable to contracts made and to be performed in the State
of Illinois.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date set forth above.
WMX TECHNOLOGIES, INC.
By: /s/ Thomas C. Hau
--------------------------------------------
Thomas C. Hau
Vice President and Controller
CHEMICAL WASTE MANAGEMENT, INC.
By: /s/ Jerome D. Girsch
--------------------------------------------
Jerome D. Girsch
Executive Vice President, Treasurer,
Controller and Chief Financial Officer
WHEELABRATOR TECHNOLOGIES INC.
By: /s/ John Sanford
--------------------------------------------
John Sanford
Vice President, Chief Financial Officer
and Treasurer
RUST INTERNATIONAL INC.
By: /s/ Herbert A. Getz
--------------------------------------------
Herbert A. Getz
Vice President
<PAGE>
EXHIBIT NO. 10.53
AMENDMENT AGREEMENT
THIS AMENDMENT (the "Amendment") is made as of the 28th day of January,
1994 by and among WMX TECHNOLOGIES, INC., CHEMICAL WASTE MANAGEMENT, INC.,
WHEELABRATOR TECHNOLOGIES INC., WASTE MANAGEMENT INTERNATIONAL, INC., WASTE
MANAGEMENT INTERNATIONAL plc and RUST INTERNATIONAL INC.
RECITALS
WHEREAS, the parties hereto are also party to a certain First Amended and
Restated International Business Opportunities Agreement dated as of January 1,
1993 (the "Agreement") pursuant to which they have allocated various business
opportunities among themselves.
WHEREAS, Chemical Waste Management, Inc. and Waste Management, Inc., a
wholly owned subsidiary of WMX Technologies, Inc., agree that it is in their
best interests to amend the Agreement with respect to the allocation set forth
therein of certain business opportunities in Mexico;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 3.2(b)(ii) of the Agreement is hereby deleted in its entirety
and the following is inserted in its stead:
(ii) opportunities in North America (other than opportunities
allocated to Rust under this Section 3.2(b)) relating to the storage,
processing, treatment or disposal of (A) radioactive wastes, (B)
hazardous wastes in the United States currently or in the future
regulated under the Resource Conservation and Recovery Act or wastes
the storage, treatment or disposal of which is currently regulated as
hazardous or toxic under the Toxic Substances Control Act in the
United States, (C) such wastes in Canada which would be so regulated
in the United States or (D) wastes in Mexico which are currently or in
the future regulated as hazardous or toxic under the general law of
Ecological Equilibrium and Protection to the Environment, as such law
now exists or in the future may be amended, modified, revised or
restated, or other applicable laws in Mexico, shall be allocated to
CWM;
2. Headings. The headings contained in this Amendment are for reference
<PAGE>
purposes only and shall not affect in any way the meaning or interpretation of
this Amendment.
3. Third Party Rights. This Amendment shall not provide any third parties
with any remedy, claim, liability, reimbursement, cause of action or other right
in excess of those existing without reference to this Amendment.
4. Affiliates. The parties hereto acknowledge that they often conduct
their business operations through controlled Affiliates (as defined in the
Agreement). The parties hereto therefore agree that they will cause their
respective direct and indirect controlled Affiliates to abide by the terms of
this Amendment as if they were parties hereto to the extent necessary to carry
out the purposes of this Amendment. Further, each party shall be entitled to
cause its obligations hereunder to be satisfied, and to cause its benefits
hereunder to be received, by its controlled Affiliates.
5. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
6. Choice of Law. This Amendment shall be interpreted and construed in
accordance with the internal laws (and not the conflicts of laws rules) of the
State of Illinois applicable to contracts made and to be performed in the State
of Illinois.
7. Assignment. This Amendment and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
permitted successors and assigns, but neither this Amendment nor any of the
rights, interests or obligations hereunder shall be assigned by any party
without the prior written consent of the other parties hereto.
8. Severability. If any provision of this Amendment is prohibited by or
held to be invalid under applicable law, such provision will be ineffective to
the extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Amendment. Each provision in this Amendment shall be read and
construed independently of the other provisions hereof. If any provision of this
Amendment, as applied to any party or to any circumstances, is adjudged by a
court to be invalid or unenforceable for any reason, such judgment shall in no
way affect any other provision of this Amendment, the application of such
provision in any other circumstances or to any other party or the validity or
enforceability of this Amendment. If any provision or part of a provision in
this Amendment is held to be unenforceable because of the duration of such
provision, the geographical area covered by such provision or the range of
activities covered by such provision, the parties agree that the court making
such determination will have the power to reduce the duration, area and scope of
such provisions and to delete specific words or phrases, if and as necessary
under law, and in its reduced form such provision will then be enforceable and
will be enforced.
9. Registration of Agreement. If there is any provision of this
Amendment, or of any agreement or arrangement of which this Amendment forms
part, which causes or
2
<PAGE>
would cause this Agreement or that agreement to be subject to registration under
the Restrictive Trade Practices Act 1976 of Great Britain, then that provision
shall not take effect until the day after particulars of this Amendment or that
agreement or arrangement (as the case may be) have been furnished to the
Director General of Fair Trading pursuant to Section 24 of that Act.
10. Ratification. Except as specifically amended hereby, the Agreement is
hereby ratified, confirmed and approved.
WMX TECHNOLOGIES, INC.
By:/s/ James E. Koenig
--------------------------------
Name: James E. Koenig
Title: Senior Vice Preident, Chief Financial
Officer and Treasurer
CHEMICAL WASTE MANAGEMENT, INC.
By:/s/ Jerome D. Girsch
-------------------------------
Name: Jerome D. Girsch
Title: Vice President, Chief Financial
Officer, Treasurer and Controller
WHEELABRATOR TECHNOLOGIES INC.
By:/s/ John D. Sanford
-------------------------------
Name: John D. Sanford
Title: Vice President, Chief Financial
Officer and Treasurer
WASTE MANAGEMENT INTERNATIONAL, INC.
By:/s/ Herbert A. Getz
--------------------------------
Name: Herbert A. Getz
Title: Vice President
WASTE MANAGEMENT INTERNATIONAL PLC
By:/s/ Edwin G. Falkman
---------------------------------
Name: Edwin G. Falkman
Title: Chief Executive
RUST INTERNATIONAL INC.
By:/s/ Harold W. Ingalls
---------------------------------
Name: Harold W. Ingalls
Title: Vice President, Chief Financial
Officer and Treasurer
3
<PAGE>
EXHIBIT 13.1
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Prior to January 1, 1993, Wheelabrator Technologies Inc. ("Wheelabrator" or the
"Company") conducted business in two industry segments: Environmental Operations
and Environmental and Infrastructure Engineering Services. The businesses
within the Environmental Operations segment are principally involved in
providing clean energy through trash-to-energy and independent power facility
ownership and operation, providing clean water products and services including
municipal water and wastewater treatment facility operation, biosolids
management and industrial water and wastewater management, and providing clean
air through a broad range of air quality control systems designed for industrial
and utility applications.
Pursuant to an agreement with Chemical Waste Management, Inc. ("CWM") and the
Brand Companies, Inc. ("Brand"), effective January 1, 1993, Wheelabrator
contributed the businesses that constituted its Environmental and Infrastructure
Engineering Services segment along with certain other assets to form, in part,
Rust International Inc. ("Rust"), a new engineering and construction company. In
early May 1993, Brand was merged into a subsidiary of Rust. The Brand merger
involved issuance of additional shares of Rust common stock to acquire certain
outstanding Brand shares and reduced Wheelabrator's ownership of Rust from the
approximately 42 percent originally held by the Company to approximately 40
percent. (See Note 2 of the Notes to Consolidated Financial Statements.)
The Rust transaction has no effect on Wheelabrator's 1992 and prior historical
financial statements. The Company accounts for its investment in Rust using the
equity method, which results in a reduction of revenue, operating expenses and
selling and administrative costs for 1993 compared to prior years.
Wheelabrator's share of Rust's 1993 net income is included in equity in earnings
of affiliates.
RESULTS OF OPERATIONS
The discussion and analysis of the Company's results of operations that follows
focuses on the operating results of Wheelabrator's current lines of business
and, as such, is based on historical Environmental Operations segment results
for 1991, proforma results for 1992 that assume the Rust transaction had
occurred on January 1, 1992, and historical 1993 results. Environmental
Operations segment information for 1991 and proforma information for 1992 is set
forth in Notes 9 and 2, respectively, of the Notes to Consolidated Financial
Statements.
Comparative information for Environmental Operations is summarized below (in
millions):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1991 1992 1993
<S> <C> <C> <C>
Revenue $775.7 $928.3 $1,142.2
Operating expenses 541.0 633.6 792.7
Selling and
administrative expenses 92.5 97.9 107.3
------ ------ --------
Income from operations $142.2 $196.8 $ 242.2
====== ====== ========
</TABLE>
1
<PAGE>
1992 Compared with 1991
- -----------------------
Proforma 1992 revenue increased 20 percent versus comparable 1991 Environmental
Operations segment revenue. Air and water quality control businesses acquired
in 1991 and 1992 contributed approximately 40 percent of this revenue growth.
These acquisitions provided Wheelabrator with an operating base and necessary
technical expertise to address the biosolids management requirements of
municipal and industrial customers and also broadened the Company's air quality
product offerings to include volatile organic compounds ("VOC") and odor control
systems as well as continuous emissions monitoring equipment. An additional 25
percent of the revenue increase is attributable to commencing operations at two
new 2,250 ton per day trash-to-energy facilities in Broward County, Florida and
an 800 ton per day trash-to-energy facility in Spokane, Washington. The South
Broward County facility began commercial operations in the third quarter of
1991, and the North Broward facility began commercial operations in the second
quarter of 1992. Partially offsetting the revenue increases from the Broward
facilities was the late 1991 transition of the Spokane facility, which is owned
by the City of Spokane, from construction to long-term contract operation.
Existing businesses were responsible for the balance of 1992's revenue growth.
Increases in trash receipts and electrical generation at operating energy
facilities and higher activity at the Company's Air Pollution Control unit were
primarily responsible. The Company's energy, water and air businesses
represented approximately 59 percent, 30 percent and 11 percent, respectively,
of total proforma 1992 revenue compared with 63 percent, 32 percent, and five
percent, respectively, of total 1991 Environmental Operations segment revenue.
Gross margins improved from 30.3 percent in 1991 to 31.7 percent in 1992,
principally due to operating cost efficiencies realized within the Company's
energy facilities. Gross margins in the air and water businesses decreased
slightly during 1992 and reflect the impact, including goodwill amortization, of
acquisitions made during 1991 and 1992 as well as competitive pressures in
municipal water and wastewater service and utility air quality markets.
Increases in selling and administrative expenses for 1992 compared to 1991
relate to acquired businesses, which typically increase these costs until the
acquisitions are integrated into existing operations. As a percentage of
revenue, however, selling and administrative expenses declined from 11.9 percent
in 1991 to 10.5 percent in 1992.
Interest expense, which relates almost entirely to project debt associated with
the Company's trash-to-energy facilities, increased compared with 1991 primarily
because of the commencement of operations at the two Broward County facilities.
Interest costs for these facilities were capitalized during their construction
periods. Interest income decreased versus 1991 due to lower investment earnings
on lower cash balances. Wheelabrator's equity in the earnings of its Waste
Management International plc ("WM International") affiliate increased in 1992 as
a result of growth in that company's operations. On a proforma basis, in 1992
the Company would have recognized $13.4 million of equity income from Rust's net
operating earnings, compared with 1991 historical net earnings of approximately
4.2 million from the Environmental and Infrastructure Engineering Services
industry segment.
During 1992, the Company recognized a nontaxable gain of $47.0 million
associated with the initial public offering ("IPO") of shares by WM
International. Proforma 1992 results also include a $19.5 million nonoperating
gain related to Wheelabrator's equity interest in a similar gain recognized by
Rust in connection with WM International's IPO.
Excluding the effects of the WM International IPO gains and the 1991 gain on the
sale of equity interests in certain foreign manufacturing operations, proforma
1992 income before accounting changes was $125.5 million, or $0.67 per share,
compared with 1991 historical net income of $97.2 million, or $0.56 per share.
Net income for 1992 reflects one-time charges relating to the adoption,
effective January 1, 1992, of two new accounting standards: Statements of
Financial Accounting Standards No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions ("FAS 106"), and No. 109, Accounting for Income
Taxes ("FAS 109"). Adopting FAS 106 resulted in a one-time cumulative after-tax
charge of approximately $29.0 million, or
2
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
$0.16 per share. The adoption of FAS 109 resulted in a one-time cumulative
charge of approximately $13.2 million, or $0.07 per share. The FAS 109 charge
resulted primarily from increasing previously discounted deferred taxes, a
method not permitted under FAS 109. Operating results for 1992 were not
significantly impacted by these two accounting changes. (See Notes 1 and 3 of
the Notes to Consolidated Financial Statements.)
1993 Compared with 1992
Revenues for 1993 increased 23 percent compared to proforma revenues for the
previous year. Approximately 40 percent of this growth came from air and water
quality control companies acquired during 1992 and 1993. The businesses acquired
during 1993 significantly expanded Wheelabrator's capabilities to meet the water
and wastewater management needs of industrial customers and provided entry into
certain regional biosolids and air quality equipment markets as well as
additional wastewater treatment technology. Successful project development
efforts are responsible for an additional 30 percent of the 1993 revenue
increase and include the full year impact of the North Broward County trash-to-
energy facility, the third quarter 1993 start of commercial operations at the
Company's New York Organic Fertilizer Company ("NYOFCO") biosolids pelletizer
facility located in New York City and construction revenues from the Lisbon,
Connecticut trash-to-energy facility being built by Wheelabrator for the Eastern
Connecticut Resource Recovery Authority ("ECRRA"). Construction began in the
third quarter of 1993 on the Lisbon facility, which will be operated by the
Company under a long-term contract with ECRRA following scheduled facility
completion in late 1995. Existing businesses contributed the remaining 30
percent of revenue growth in 1993 versus 1992. The major factors in this
internal growth were higher revenue from air quality control system construction
and installation and greater tonnage at certain trash-to-energy facilities with
related increases in trash disposal and electrical generation revenues. Pricing
for non-contract, or spot, trash disposal remained, on average, at approximately
1992 levels. Energy businesses represented approximately 52 percent of
consolidated 1993 revenue, while the water and air businesses accounted for 32
percent and 16 percent, respectively.
Wheelabrator's overall gross margin decreased to 30.6 percent in 1993 from
proforma 1992's 31.7 percent level. This decline primarily reflects the
effects, including the amortization of goodwill associated with acquisitions, of
changes in the Company's ongoing business mix brought about by the rapid growth
of air and water operations. In part because they are less capital intensive,
these businesses typically have lower gross margins than the Company's energy
operations. Selling and administrative expenses increased in absolute terms
compared with proforma 1992 levels but decreased as a percentage of revenue to
9.4 percent for 1993 compared to 10.5 percent the previous year. This decline
is attributable to the integration of acquired companies into existing
businesses and to continuing Company-wide administrative cost containment
efforts.
Interest expense decreased in 1993 despite the full year impact of interest
costs associated with the North Broward County trash-to-energy facility, due to
the early retirement of certain outstanding above-market rate long-term debt,
including approximately $75.2 million in the third quarter of 1992 associated
with the Company's Saugus, Massachusetts trash-to-energy facility and an
additional $40.0 million in the first quarter of 1993 associated with its trash-
to-energy facility in Westchester County, New York. The decline in 1993
interest earnings results from lower cash balances and interest rates when
compared to the prior year. Wheelabrator's equity in the operating earnings of
its WM International and Rust affiliates increased compared to proforma prior
year results due to earnings growth at Rust. As a result of adverse foreign
currency translation effects, WM International's contribution to equity earnings
declined versus 1992 despite substantially increased local currency earnings.
3
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
The Company recognized a $7.7 million nontaxable gain in 1993 related to Rust's
issuance of additional shares in connection with the Brand merger. (See Note 2
of the Notes to Consolidated Financial Statements.) Prior year results include
a similar nontaxable gain of $47.0 million associated with the WM International
IPO. Proforma 1992 results also include a $19.5 million nonoperating gain
related to Wheelabrator's equity interest in a similar gain recognized by Rust
in connection with WM International's IPO.
The Company's 1993 tax provision includes a $6.5 million increase in deferred
taxes in accordance with FAS 109 as a result of the August enactment of the
Omnibus Budget Reconciliation Act of 1993. (See Note 3 to the Notes to
Consolidated Financial Statements.)
Excluding the above-mentioned 1992 and 1993 nonoperating gains from affiliate
stock transactions and the 1993 deferred tax provision adjustment, net income
for 1993 increased 29 percent to $161.9 million, or $0.86 per share, compared
with proforma 1992 income before accounting changes of $125.5 million, or $0.67
per share. Net income for 1992 reflects one-time charges totaling $42.2
million, or $0.23 per share, relating to the adoption, effective January 1,
1992, of two new accounting standards: FAS 106 and FAS 109. More detail on
these charges is provided as part of the "1992 Compared with 1991" section of
this discussion.
The U.S. Supreme Court heard oral arguments in December 1993 in a case
challenging the constitutionality of the Town of Clarkstown, New York's solid
waste flow control ordinance. Flow control typically involves a municipality
specifying the disposal site for all solid waste generated within its borders.
In January 1994, the U.S. Supreme Court also heard arguments in another case to
determine whether ash from the combustion of municipal solid waste should be
exempt from federal hazardous waste regulations. Decisions on both cases are
expected in the spring. Regardless of the court's decisions on these two cases,
the Company does not believe the outcomes will have a material adverse impact on
the Company's financial condition or results of operations.
The majority of the businesses in which the Company is engaged are intrinsically
connected with the protection of the environment and involve the potential for
discharge of regulated materials into the environment. In addition, the Company
becomes involved, in the normal course of business, in judicial and
administrative proceedings related to alleged violations of licenses, permits,
laws or regulations or differing interpretations of applicable requirements.
Wheelabrator has instituted procedures to periodically evaluate potential
environmental exposures. When the Company concludes it is probable that a
liability has been incurred, provision is made in the financial statements for
the Company's best estimate of the liability. These estimates are adjusted as
necessary when additional information becomes available. To date, such
provisions have not been material.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of capital during the past several years relate to
investments in new projects, acquisitions and repayments of long-term project
debt. Wheelabrator currently has several projects in various stages of
construction, as discussed in more detail below, and has additional projects
under development. The Company also intends to continue its diversification
through select acquisitions into air and water quality control markets, both
domestically and internationally.
4
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Wheelabrator believes it has access to sufficient capital resources to finance
its development and construction projects along with future acquisitions.
Operating cash flows or borrowings from WMX Technologies, Inc. ("WMX") pursuant
to the Master Intercorporate Agreement between the Company and WMX may be
utilized to meet short-term funding requirements. Wheelabrator may borrow up to
$100 million until September 1995 pursuant to this agreement, plus the amount of
cash invested with WMX. The Company currently anticipates meeting its needs for
any external long-term capital by permanently financing certain projects.
Generally, Wheelabrator provides long-term financing for its projects through a
combination of project debt and equity investments by the Company. Wheelabrator
will retain ownership of and make equity investments in projects where the
Company's tax position and available financing terms make retention of ownership
tax benefits desirable. Sale and leasebacks or other financing techniques may
be used where the tax benefits will produce lower overall financing costs and
potentially greater returns.
During 1993 construction was completed on the $120 million NYOFCO biosolids
pelletizer facility in New York City, which began commercial operations in
August after successfully completing its acceptance tests. Construction
continued on a $192 million, 1,500 ton-per-day trash-to-energy facility and
associated recycling center in Falls Township, Pennsylvania, as did work on the
Company's $78 million wood waste and scrap tire power generating facility in
Polk County, Florida. Both of these facilities are expected to begin commercial
operations in mid-1994. Additionally, the Company is approximately 60 percent
through construction on a $36 million biosolids pelletizer facility in
Baltimore, Maryland, and a $5 million biosolids composting facility in
Rochester, New Hampshire began start-up at year end. To date, funding for the
above projects has been provided from the Company's available cash. Capital
expenditures for new project construction totalled $114.4 million, $81.3
million, and $262.2 million in 1991, 1992 and 1993, respectively, and are
anticipated to require approximately $120 million of capital in 1994.
Standard and Poors Corporation affirmed the Company's debt rating as a
provisional "A" in 1993, which should enable Wheelabrator to provide certain
guarantees of financial performance on future projects without the cost of third
party credit support. Favorable implied debt ratings received from Standard and
Poors Corporation and Moody's Investors Service, Inc. in 1991 have already
allowed Wheelabrator to significantly reduce the cost of third party credit
support for certain trash-to-energy and independent power facilities owned or
leased by the Company.
The Company acquired in 1993 seven businesses engaged in providing water and
air quality - related environmental products and services as well as independent
power in exchange for approximately 1.6 million shares of Wheelabrator common
stock and $15.0 million of cash. The Company purchased three businesses in 1991
and 17 businesses during 1992 that provided environmental engineering, biosolids
management and various clean air technologies. Nine of the 1991 and 1992
acquisitions serve the air and water quality control markets, while the other
eleven were included in the businesses contributed to the formation of Rust.
Wheelabrator paid cash and issued common stock of approximately $37.7 million
and 15.2 million shares and $115.5 million and 6.8 million shares, respectively,
for the 1991 and 1992 acquisitions. The proforma effect of the Environmental
Operations segment acquisitions made in 1991, 1992 and 1993 on the Company's
results of operations is not material. (See Note 2 of the Notes to Consolidated
Financial Statements.)
In April 1993, the Company filed with the Securities and Exchange Commission an
updated "shelf" registration statement covering 12.8 million shares of the
Company's common stock for issuance in connection with future acquisitions.
5
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Wheelabrator has continued to refinance at lower interest rates, or repay prior
to maturity, certain of its existing project debt. In 1991 the Company
completed a transaction that resulted in the refinancing in the first quarter of
1993 of approximately $154.3 million of long-term project debt underlying the
sale leaseback financing of its Baltimore, Maryland trash-to-energy facility.
The benefit of this refunding, which reduced the interest rate on the debt from
approximately ten percent to seven percent, will be recognized through lower
lease payments over the remaining life of the operating lease term. In the
third quarter of 1992 approximately $75.2 million of project debt relating to
its Saugus, Massachusetts trash-to-energy facility was retired. During the
first quarter of 1993, Wheelabrator retired early, at par value, letter of
credit backed debt of approximately $40.0 million relating to its Westchester
County, New York trash-to-energy facility. An additional $13.0 million of the
Westchester facility's project bonds have been retired early since that bond
issue became callable in 1992.
In March 1994, the Company completed the refinancing of the remaining $113.0
million of project debt associated with the Westchester County facility. The
refinancing decreased the interest rate on this debt from approximately 10.25
percent to 5.6 percent. In conjunction with this transaction, the Company
agreed to share one-half of the interest rate savings with Westchester County in
exchange for certain agreements relating to the County's involvement in the
retrofit of the facility to meet the requirements of the Clean Air Act
Amendments of 1990 (the "CAAA") and a five-year extension of the solid waste
disposal agreement with the County. Additionally, the County has agreed,
subject to certain regulatory requirements and other conditions, to finance 80
percent of the cost of the retrofit and, in turn, the Company has agreed to
provide the funds necessary to pay the remaining costs for the retrofit. The
benefits of the refinancing will begin to be realized in 1994, while the costs
associated with the facility retrofit are not expected to be incurred until the
latter part of this decade. Taken together, these activities are not expected to
have a material impact on the Company's liquidity or results of operations.
Before the turn of the century, the air pollution control systems at certain
other trash-to-energy facilities owned or leased by Wheelabrator will be
required to be modified to comply with more stringent air pollution control
standards such as those in the CAAA. Required compliance dates for affected
facilities, including Westchester County, are not yet known because the U.S.
Environmental Protection Agency has not issued the final emission regulations
and timetables required by the CAAA. Although the expenditures related to such
modifications will likely be significant, they are not expected to have a
material adverse effect on the Company's liquidity or results of operations
because provisions in the impacted facilities' long-term waste supply agreements
allow the Company to recover from customers the great majority of incremental
capital and operating costs.
In September 1993, the two regional solid waste districts that together form the
major customer of the Company's 200 ton-per-day trash-to-energy facility in
Claremont, New Hampshire filed for bankruptcy under Chapter 9 of the Federal
Bankruptcy Code. Wheelabrator filed a motion to dismiss the bankruptcy in the
belief that the districts' actions were an attempt to avoid settling a long-
standing contract payment dispute and were otherwise without merit. In a ruling
issued in February 1994, the United States Bankruptcy Court for the District of
New Hampshire agreed with the Company's position and dismissed the districts'
bankruptcy petition. This ruling has been appealed by the districts.
Wheelabrator has made provision in its financial statements for the expected
cost of these legal proceedings as well as the settlement of amounts in dispute.
Further, even if the districts are successful, the impact on the Company's
financial condition and results of operations will not be material.
6
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
On February 16, 1994, a Connecticut Superior Court judge issued a decision on
appeals of the Connecticut Department of Environmental Protection's ("DEP")
issuance of a permit to construct the Lisbon, Connecticut trash-to-energy
facility currently being built by Wheelabrator. In the ruling, the judge agreed
with the Company's position on all issues raised in the appeals but remanded the
permit back to the DEP for further proceedings on an uncontested permit
condition that requires the Lisbon facility to dispose of only Connecticut
waste. The Company intends to pursue aggressively favorable resolution of this
permit remand through appropriate judicial and regulatory procedures. Although
Wheelabrator believes that the probability of an adverse determination as a
result of the judge's remand order is remote, such a determination could result
in the permanent termination of facility construction. Through a guarantee
agreement with ECRRA, the facility's owner, such a consequence may require the
Company to redeem the debt issued to finance the facility. In the unlikely
event this were to occur, the resulting payments could have a material adverse
impact on the Company's financial condition and results of operations.
Wheelabrator effected a two-for-one stock split through the issuance on January
7, 1993, of one additional share of common stock for each share outstanding on
December 23, 1992. All share and per share amounts in this report have been
adjusted to reflect the split for the periods presented. On January 7, 1993, the
Company also paid a cash dividend of $0.01 per common share that was declared in
November 1992. On April 1, 1993, WTI paid a cash dividend in the amount of
$0.02 per common share. Additionally, in May 1993 the Board of Directors
declared an annual cash dividend in the amount of $0.06 per common share that
was paid on July 1, 1993, to stockholders of record on June 17, 1993. This
brought the total dividends declared by the Board of Directors in 1993 to $0.08
per share, a 100% increase over the dividends declared in 1992.
The Company is authorized to repurchase up to a total of 8.0 million shares of
its common stock through March 1996 on the open market or in privately
negotiated transactions, provided market conditions make it attractive to do so.
During 1992 approximately 4.2 million shares were repurchased at an aggregate
cost of approximately $57.6 million. No shares were repurchased in 1993.
Wheelabrator and Koll Real Estate Group, Inc. ("KREG", formerly The Bolsa Chica
Company) are parties to a tax sharing agreement covering periods during which
Wheelabrator, KREG, The Henley Group Inc. ("Henley") and their respective
affiliates were included in the same consolidated group for federal income tax
purposes. Pursuant to a recapitalization of Henley in 1992, Abex Inc. ("Abex")
has assumed certain of Henley's obligations to KREG under a similar tax sharing
agreement. (See Note 3 of the Notes to Consolidated Financial Statements.) In
January 1993, the Internal Revenue Service ("IRS") completed an examination of
Wheelabrator's consolidated federal income tax returns for the period 1986-1988.
Pursuant to the settlement of agreed issues with the IRS, the Company made a
payment of approximately $61.7 million for taxes and interest, the liability for
which had previously been recorded. Adjusted for the current tax benefit to
Wheelabrator of the interest paid and certain tax benefits realizable by the
Company in years after 1988, the Company's $50.0 million tax sharing obligation
with KREG was reduced approximately $28.8 million by this payment. In the only
material unresolved issue arising from the 1986-1988 examination, the IRS
proposed a significant adjustment related to the 1988 sale of a former
subsidiary. Abex, KREG and Wheelabrator disputed the position taken by the IRS
in an action filed before the U.S. Tax Court. In March 1994, Wheelabrator and
the IRS filed a Stipulation of Settlement with the U.S. Tax Court resolving the
treatment of this disputed issue. Subject to the $21.2 million remaining
balance of the $50.0 million tax sharing obligation described above,
Wheelabrator is indemnified by KREG and Abex from the liability assessed with
regard to this issue. Although the Company is responsible for the initial
payment of tax, plus interest, KREG and Abex have confirmed to the Company their
respective indemnification obligations.
7
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
FINANCIAL CONDITION
Wheelabrator's financial condition at December 31, 1993, compared to that at
December 31, 1992, primarily reflects the impact of the Rust transaction. The
net impact of the transaction was not material to the Company's overall balance
sheet, as contributed net assets were replaced by an equity investment in the
new company. Several individual line items, however, were affected by the
transaction. Total current assets were reduced by $188.8 million primarily as a
result of contributed net receivables of $93.2 million, costs and earnings in
excess of billings of $64.8 million and other current assets of $28.3 million.
Net property, plant and equipment declined $72.8 million as a result of the
transaction, and cost in excess of net assets of acquired businesses declined
$76.1 million. Other assets also fell, reflecting the contribution of $30.0
million in waste disposal credits to Rust. Contribution of construction
business trade payables, accrued liabilities and advance payments on contracts
reduced liabilities approximately $133.2 million. (See Note 2 to the Notes to
Consolidated Financial Statements.)
After giving effect to the Rust transaction, the change in the Company's
financial position reflects normal operating activities as well as the uses of
capital discussed above.
ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statements of Financial
Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits
("FAS 112"), and No. 115, Accounting for Certain Debt and Equity Securities
("FAS 115"). The Company is required to adopt both of these new standards
during the first quarter of 1994. Based upon its analysis to date,
Wheelabrator does not believe the adoption of FAS 112 will have a material
impact on its financial statements since its current accounting is substantially
in compliance with the new standard. The Company does not have and does not
contemplate acquiring significant investments of the type covered in FAS 115.
8
<PAGE>
EXHIBIT 13.2
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(000's omitted, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1991 1992 1993
<S> <C> <C> <C>
Revenue $1,173,449 $1,483,054 $1,142,219
Operating expenses 906,226 1,108,780 792,719
Selling and administrative expenses 118,441 148,355 107,276
Interest expense 54,635 75,569 64,484
Interest income (38,818) (34,656) (18,278)
Equity in earnings of affiliates (13,501) (15,365) (44,809)
Gains from stock transactions of affiliates - (47,000) (7,680)
Gains from sale of foreign equity investments (47,063) - -
Other income, net (7,010) (5,705) (4,530)
---------- ---------- ----------
Income before income taxes and cumulative
effects of accounting changes 200,539 253,076 253,037
Income tax provision 74,480 76,694 89,935
---------- ---------- ----------
Income before cumulative effects of
accounting changes 126,059 176,382 163,102
Cumulative effects of accounting changes:
Postretirement benefits, net - (29,010) -
Income taxes - (13,220) -
---------- ---------- ----------
Net income $ 126,059 $ 134,152 $ 163,102
========== ========== ==========
Weighted average common shares outstanding 172,400 188,200 188,900
========== ========== ==========
Earnings per common share:
Before cumulative effects of accounting
changes $ 0.73 $ 0.94 $ 0.86
Cumulative effects of accounting changes:
Postretirement benefits, net - (0.16) -
Income taxes - (0.07) -
---------- ---------- ----------
Net income $ 0.73 $ 0.71 $ 0.86
========== ========== ==========
Dividends declared per common share $ - $ 0.04 $ 0.08
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000's omitted except share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------
1992 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 291,271 $ 36,719
Receivables, net 247,521 188,241
Costs and earnings in excess of billing 80,693 25,712
Other current assets 91,311 84,684
---------- ----------
Total current assets 710,796 335,356
Property, plant and equipment, net 1,495,241 1,653,920
Cost in excess of net assets of acquired businesses 226,498 205,886
Investments in affiliates 199,188 561,045
Other assets 365,350 334,071
---------- ----------
Total assets $2,997,073 $3,090,278
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term project debt $ 37,345 $ 33,754
Accounts payable 79,268 70,762
Accrued liabilities 304,247 197,123
Advance payments on contracts 38,472 28,147
---------- ----------
Total current liabilities 459,332 329,786
---------- ----------
Long-term project debt 857,625 776,858
---------- ----------
Deferred income taxes 239,248 292,364
---------- ----------
Deferred income 101,391 106,562
---------- ----------
Other long-term liabilities 300,134 297,870
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $1.00 per share, - -
none issued or outstanding
Common stock, par value $0.01 per share,
186,473,025 shares outstanding in 1992,
188,820,322 shares outstanding in 1993 1,865 1,888
Capital in excess of par value 758,646 874,580
Cumulative translation adjustment (17,785) (33,670)
Treasury stock, 43,127 shares in 1993, at cost - (717)
Retained earnings 296,617 444,757
---------- ----------
Total stockholders' equity 1,039,343 1,286,838
---------- ----------
Total liabilities and stockholders' equity $2,997,073 $3,090,278
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1991 1992 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income before cumulative effects of accounting changes $ 126,059 $ 176,382 $ 163,102
Adjustments to reconcile net income to cash flows from
operating activities:
Depreciation and amortization 40,346 67,879 75,323
Deferred taxes 5,020 61,604 61,477
Undistributed earnings of affiliates (10,902) (15,365) (44,809)
Gains from sale of foreign equity investments (47,063) -- --
Gains from stock transactions of affiliates -- (47,000) (7,680)
Deferred lease expense (6,540) (10,540) (7,349)
Changes in assets and liabilities, net of effects of
acquired and contributed businesses:
Receivables, net 13,075 (37,981) (25,283)
Costs and earnings in excess of billings (2,343) (30,601) (9,174)
Other current assets 3,492 (23,001) (22,870)
Accounts payable (7,913) (7,766) (32,008)
Accrued liabilities (8,294) 12,614 (22,666)
Advance payments on contracts (46,617) (31,393) 380
Other long-term liabilities 34,847 5,317 23,205
Other, net (2,457) (4,258) (27,267)
--------- --------- ---------
Net cash provided by operating activities 90,710 115,891 124,381
--------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures (129,844) (148,025) (291,637)
Sale of property, plant and equipment 7,619 756 1,682
Investments held by trustees 81,455 18,763 9,917
Cash paid for acquisitions, net of acquired cash (86,220) (145,521) (14,983)
Sale of investments in foreign affiliates 154,585 -- --
Other, net 2,823 4,785 7,524
--------- --------- ---------
Net cash provided by (used for) investing activities 30,418 (269,242) (287,497)
--------- --------- ---------
FINANCING ACTIVITIES
Additions to long-term project debt 33,411 652 --
Repayments of long-term project debt (23,782) (129,666) (82,185)
Proceeds from exercise of stock options and
Equity Purchase Program note repayments, net 60,067 31,026 7,575
Dividends paid -- (5,553) (16,826)
Stock repurchase program -- (57,629) --
Other, net 626 2,315 --
--------- --------- ---------
Net cash provided by (used for) financing activities 70,322 (158,855) (91,436)
--------- --------- ---------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents 191,450 (312,206) (254,552)
Cash and cash equivalents at beginning of period 412,027 603,477 291,271
--------- --------- ---------
Cash and cash equivalents at end of period $ 603,477 $ 291,271 $ 36,719
========= ========= =========
Supplemental disclosure:
Interest paid, net of amounts capitalized $ 53,367 $ 78,421 $ 62,490
========= ========= =========
Income taxes paid $ 27,356 $ 22,112 $ 85,441
========= ========= =========
Significant noncash investing activities:
Net assets contributed to Rust International Inc. $ -- $ -- $ 244,278
========= ========= =========
Businesses acquired for common stock $ 151,048 $ 85,182 $ 30,972
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
(000'S omitted)
<TABLE>
<CAPTION>
Equity
Capital in Purchase Cumulative
Common Excess of Program Translation Treasury Retained
Stock Par Value Notes Adjustment Stock Earnings Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1990 $1,645 $515,441 $(37,245) $ 22,314 - $ 43,823 $ 545,978
Net income - - - - - 126,059 126,059
Foreign currency
translation - 10,976 - (2,777) - - 8,199
Exercise of stock
options 20 15,764 - - - - 15,784
Equity Purchase
Program - - 32,721 - - - 32,721
Tax benefit from
stock options and
Equity Purchase
Program - 11,562 - - - - 11,562
Common stock issued
for acquisitions 32 40,653 - - - - 40,685
Investment in
Waste Management
International plc 120 110,243 - - - - 110,363
---------- -------- ---------- ----------- -------- -------- ----------
Balance,
December 31, 1991 1,817 704,639 (4,524) 19,537 - 169,882 891,351
Net income - - - - - 134,152 134,152
Dividends declared - - - - - (7,417) (7,417)
Foreign currency
translation - - - (37,322) - - (37,322)
Exercise of stock
options 8 (3,004) - - 21,147 - 18,151
Equity Purchase
Program - - 4,524 - - - 4,524
Tax benefit from
stock options and
Equity Purchase
Program - 8,351 - - - - 8,351
Common stock issued
for acquisitions 40 85,142 - - - - 85,182
Stock repurchases - - - - (57,629) - (57,629)
Treasury shares
distributed for
stock split - (36,482) - - 36,482 - -
---------- -------- ---------- ----------- -------- -------- ----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1992 1,865 758,646 - (17,785) - 296,617 1,039,343
Net income - - - - - 163,102 163,102
Dividends declared - - - - - (14,962) (14,962)
Foreign currency
translation - - - (15,885) - - (15,885)
Exercise of stock
options 7 4,195 - - 3 - 4,205
Tax benefit from
stock options - 3,370 - - - - 3,370
Common stock issued
for acquisitions 16 30,707 - - 249 - 30,972
Treasury shares
from acquisition
adjustments - - - - (969) - (969)
Investment in Rust
International Inc. - 77,662 - - - - 77,662
---------- -------- ---------- ----------- -------- -------- ----------
Balance,
December 31, 1993 $1,888 $874,580 $ - $(33,670) $ (717) $444,757 $1,286,838
========== ======== ========== =========== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(000's omitted in all tables except, per share amounts)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Wheelabrator Technologies Inc. ("Wheelabrator" or the "Company") is a majority-
owned subsidiary of WMX Technologies, Inc. ("WMX"). Wheelabrator is a multi-
faceted environmental services company engaged in trash-to-energy and
independent power facility ownership and operation, providing a comprehensive
range of water and wastewater treatment products and services to municipal and
industrial customers, and supplying air quality control systems for a broad
range of industrial and utility applications.
PRINCIPLES OF CONSOLIDATION
The Company's financial statements include the accounts of all subsidiaries,
after elimination of material intercompany transactions and accounts.
Investments in affiliates the Company does not control are accounted for using
the equity method after elimination of material interaffiliate transactions.
Prior to January 1, 1993, the Company consolidated the financial results of
certain businesses contributed to form, in part, Rust International Inc.
("Rust"). Beginning in 1993, the Company's investment in Rust has been
accounted for using the equity method (see Note 2).
REVENUE RECOGNITION Long-term engineering and construction contract earnings
are recognized on the percentage-of-completion basis. Estimated losses are
recognized in full when identified. All other revenues are recognized when
services are rendered or products are shipped.
CONSOLIDATED STATEMENTS OF CASH FLOWS For purposes of the Consolidated
Statements of Cash Flows, all highly liquid instruments purchased with an
original maturity of three months or less and investments with WMX are
considered to be cash equivalents.
Wheelabrator and WMX are parties to a Master Intercorporate Agreement that
provides, among other things, for Wheelabrator to lend excess cash to WMX at
interest rates at least as favorable as those Wheelabrator could otherwise
obtain. Under the terms of this agreement, in the event Wheelabrator requires
short-term cash for the conduct of its business and operations, WMX will make
available to Wheelabrator such amounts as Wheelabrator requires, up to a total
of $100.0 million in excess of amounts loaned by Wheelabrator to WMX. In
addition, a right of set-off exists for amounts owed by either Wheelabrator or
WMX. As such, net amounts invested with WMX pursuant to this agreement are
considered to be highly liquid cash equivalents and are included in cash and
cash equivalents on the Company's consolidated balance sheets. The Company had
net investments with WMX of approximately $222.5 million and $14.9 million, as
of December 31, 1992 and 1993, respectively.
PROPERTY, PLANT AND EQUIPMENT are carried at cost and are generally
depreciated on a straight-line basis using estimated lives that range from 3 to
35 years.
The Company holds options to purchase or lease sites for future trash-to-energy
or other facilities at existing or future WMX landfills. These land options
are classified as property, plant and equipment. The cost attributable to the
option for each utilized site will be amortized on a straight-line basis over
the estimated useful life of the facility upon commencement of operations.
COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES is amortized on a
straight-line basis over a maximum of 40 years. The accumulated amortization
balances for 1992 and 1993 were $8.2 million and $10.0 million, respectively.
On an ongoing basis, the Company measures realizability of goodwill by the
ability of the acquired businesses to generate current and expected future
operating income in excess of unamortized goodwill. If such realizability is
in doubt, an adjustment is made to reduce the carrying value of the goodwill.
Such adjustments have not historically been material to the Company's financial
statements.
DEVELOPMENT AGREEMENT The Company and WMX are parties to an agreement which
provides for the reimbursement by WMX of certain project development expenses
incurred by Wheelabrator, subject to certain limitations. Under this
agreement, Wheelabrator billed WMX $ 10.0 million and $6.9 million in 1991 and
1993 respectively. An additional $7.6 million of development costs remain
billable under the terms of the agreement, which expires in August 1994.
5
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
DISPOSAL CREDITS are classified as other assets until applied against the cost
of disposing of ash residue from the Company's trash-to-energy facilities or
other materials such as biosolids at WMX landfills. These credits are charged
to expense as utilized. On January 1, 1993, $30.0 million of the credits were
contributed to Rust as part of the transaction discussed in Note 2. In 1993
the Company utilized $1.9 million of disposal credits and at December 31, 1993
had approximately $36.7 million of disposal credits remaining.
FACILITY MAINTENANCE ACCRUAL In order to match more consistently expenditures
for major maintenance activities with revenues the Company follows a policy of
accruing for major maintenance expenditures at its trash-to-energy and
independent power facilities. Such accruals are based upon planned maintenance
expenditures and are classified as current or noncurrent liabilities based on
the expected timing of the expenditures.
INCOME TAXES are based on pretax financial statement income and include a
deferred tax provision for the effect of temporary differences in the
recognition of income and expense for financial statement and tax reporting
purposes. Deferred income taxes are not provided on undistributed earnings of
affiliates because these earnings are considered to be permanently reinvested.
Further, deferred taxes are not provided on gains from stock transactions of
affiliates because the Company in conjunction with WMX intends to control its
investment in affiliates to maintain the nontaxable status of such gains.
Investment credits have been deferred and are included in income as a reduction
of income tax expenses over the estimated useful lives of the assets that gave
rise to the credits.
Effective January 1, 1992, the Company changed its method of accounting for
income taxes as a result of the adoption of Statement of Financial Accounting
Standards ("FAS") No. 109, Accounting for Income Taxes ("FAS 109"). The
cumulative effect of the change was a charge of approximately $13.2 million, or
$0.07 per share (see Note 3).
ENVIRONMENTAL LIABILITIES Estimated closure and post-closure monitoring costs
associated with ash residue monofills for which the Company is responsible
include such items as final cap and cover on the site, leachate management and
groundwater monitoring and are recognized in proportion to use of the permitted
capacity of such disposal sites. These accruals for closure and post-closure
costs relate to expenditures to be incurred after a monofill ceases to accept
ash residue. To the extent similar costs are incurred during the active life
of the site, they are expensed as incurred. Preparation costs associated with
these sites and their individual cells are capitalized and amortized over the
respective estimated life of the disposal site or individual cell.
Wheelabrator has instituted procedures to periodically evaluate other potential
environmental exposures. When the Company concludes it is probable that a
liability has been incurred, provision is made in the financial statements for
the Company's best estimate of the liability. Such estimates are subsequently
revised as deemed necessary when additional information becomes available.
While the Company does not anticipate that any such adjustment would be
material to its financial statements, it is reasonably possible that future
technological, regulatory or enforcement developments, results of environmental
studies, or other factors could alter this expectation and necessitate the
recording of additional liabilities, which could be material. At December 31,
1992 and 1993, total environmental accruals, which include closure and post-
closure costs, were approximately $27.0 million and $24.5 million,
respectively.
POSTRETIREMENT BENEFITS Wheelabrator provides certain postretirement benefits
other than pensions primarily to a limited number of former employees. The
majority of Wheelabrator's active employees will not receive postretirement
benefits other than pensions. Effective January 1, 1992, the Company adopted
FAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions ("FAS 106"), on the immediate recognition basis. The cumulative
effect of the change was a pretax charge of approximately $44.9 million ($29.0
million, or $0.16 per share after tax) (see Note 6).
EARNINGS PER COMMON SHARE are calculated using the weighted average number of
shares outstanding for each period, including the effect of common stock
equivalents using the treasury stock method. Common stock equivalents consist
of unexercised stock options and shares pledged under the Company's Equity
Purchase Program (see Note 6).
6
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
The Company effected a two-for-one split of its common stock on January 7,
1993, in the form of a dividend of one additional share of common stock for
each share outstanding on December 23, 1992. Earnings per common share and the
number of shares outstanding have been adjusted to give retroactive effect to
the stock split for all periods presented.
PROSPECTIVE ACCOUNTING CHANGES The Financial Accounting Standards Board has
issued FAS No. 112, Employers' Accounting for Postemployment Benefits ("FAS
112"), and FAS No. 115, Accounting for Certain Debt and Equity Securities ("FAS
115"). The Company is required to adopt both of these new standards in 1994.
Based upon its analysis to date, the Company does not believe the adoption of
FAS 112 will have a material impact on its financial statements since its
current accounting is substantially in compliance with the new standard. The
Company does not have and does not contemplate acquiring significant
investments of the type covered in FAS 115.
RECLASSIFICATION Certain prior period amounts have been reclassified to
conform with the current year presentation.
NOTE 2 - CAPITAL TRANSACTIONS, ACQUISITIONS AND DIVESTITURES
WASTE MANAGEMENT INTERNATIONAL In the third quarter of 1991, Wheelabrator
issued approximately 12.0 million shares of common stock to WMX in exchange for
a 15 percent equity interest in a predecessor of Waste Management International
plc ("WM International"), a subsidiary of WMX. WM International now owns
substantially all of WMX's waste management services operations outside of
North America. The investment is accounted for using the equity method. In
1992 the shareholders of WM International provided an additional $200.0 million
cash capital contribution in proportion to their relative ownership
percentages. Wheelabrator's share of the additional capital contribution was
$30.0 million. In April 1992, WM International sold previously unissued ordinary
shares in an initial public offering ("IPO"), thereby reducing Wheelabrator's
equity interest in WM International from 15 percent to 12 percent. Wheelabrator
recognized a $47.0 million nontaxable gain as a result of this transaction. As
of December 31, 1993, WM International was owned approximately 12 percent by
Wheelabrator, 12 percent by Rust, 56 percent by WMX and 20 percent by the
public.
During 1991, 1992 and 1993, respectively, Wheelabrator recorded equity in net
income of WM International of $7.5 million, $15.6 million and $13.8 million.
Wheelabrator's investment in WM International totaled approximately $195.7
million and $194.0 million as of December 31, 1992 and 1993. If valued at the
December 31, 1993 quoted closing price of publicly traded shares, the
calculated value of the Company's investment in WM International would have
exceeded the Company's carrying value by approximately $200.0 million. A
summary of certain financial information for WM International follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1992 1993
<S> <C> <C>
Current assets...................................... $ 688,869 $ 629,786
Noncurrent assets................................... 2,103,934 2,694,489
Current liabilities................................. 585,701 533,266
Noncurrent liabilities.............................. 429,100 904,007
Minority interest................................... 147,329 270,640
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1991 1992 1993
<S> <C> <C> <C>
Revenue................................ $1,075,070 $1,445,735 $1,411,211
Gross profit........................... 316,946 412,472 402,065
Net income............................. 80,433 120,113 114,246
</TABLE>
7
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
RUST INTERNATIONAL Pursuant to an agreement with two WMX subsidiaries,
Chemical Waste Management, Inc. ("CWM") and The Brand Companies, Inc.
("Brand"), effective January 1, 1993, Wheelabrator contributed its engineering
and construction business, its environmental and infrastructure consulting
services business and certain other assets to form, in part, Rust, a new
engineering and construction company. CWM contributed its hazardous substances
remediation services group, its 56 percent equity interest in Brand, its 12
percent interest in WM International and certain other assets to Rust. In
early May 1993, Brand was merged into a subsidiary of Rust. Under the terms of
the merger, those Brand stockholders who did not elect to receive $18.75 per
Brand share in cash received shares of Rust common stock for their Brand shares
on a one-for-one basis. The issuance of additional Rust shares to acquire the
balance of Brand shares resulted in the Company recognizing a nontaxable gain
of $7.7 million and reduced Wheelabrator's ownership from approximately 42
percent to approximately 40 percent. CWM currently owns 56 percent of Rust,
and four percent is owned by the public. As a result of the transaction,
beginning in 1993 the Company no longer consolidates the financial results of
the businesses that it contributed. Wheelabrator now records its investment in
Rust using the equity method, which results in a reduction of revenue,
operating expenses and selling and administrative costs compared to prior
years, with Wheelabrator's share of Rust's 1993 net income included in equity
in earnings of affiliates. The transaction has no effect on the Company's 1992
and prior financial statements.
8
<PAGE>
The following summary condensed financial statements show the proforma effect
on the Company's consolidated balance sheet as of December 31, 1992 and on its
consolidated statement of income for 1992, as if the Rust transaction,
excluding the merger of Brand, had occurred January 1, 1992 (unaudited):
<TABLE>
<CAPTION>
December 31, 1992 Rust Proforma As
As Reported Contribution Adjustments Adjusted
------------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
Current assets $ 710,796 $(188,793) $ - $ 522,003
Property, plant
and equipment, net 1,495,241 (72,798) - 1,422,443
Investments in affiliates 199,188 (1,021) 321,940 520,107
Other assets 591,848 (114,826) - 477,022
---------- --------- -------- ----------
Total assets $2,997,073 $(377,438) $321,940 $2,941,575
========== ========= ======== ==========
Current liabilities $ 459,332 $(109,446) $ - $ 349,886
Long-term project debt 857,625 - - 857,625
Other long-term liabilities 640,773 (23,714) - 617,059
Stockholders' equity 1,039,343 (244,278) 321,940 1,117,005
---------- --------- -------- ----------
Total liabilities and
stockholders' equity $2,997,073 $(377,438) $321,940 $2,941,575
========== ========= ======== ==========
Revenue $1,483,054 $(554,741) $ - $ 928,313
Operating expenses 1,108,780 (475,166) - 633,614
Selling and
administrative expenses 148,355 (50,435) - 97,920
Gains from stock
transactions of affiliates/1/ (47,000) - (19,538) (66,538)
Other, net 19,843 (609) (13,397) 5,837
---------- --------- -------- ----------
- ------------
/1/The proforma adjustment to gains from stock transactions of affiliates
reflects the gain recognized by Rust in connection with WM International's
IPO in April 1992. Wheelabrator's total proforma equity in Rust's net income for
1992 was $32,935.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Income before taxes and
accounting changes 253,076 (28,531) 32,935 257,480
Income tax provision 76,694 (11,260) - 65,434
---------- --------- -------- ----------
Income before accounting
changes $ 176,382 $ (17,271) $ 32,935 $ 192,046
========== ========= ======== ==========
Earnings per common share
before accounting changes $ 0.94 $ 1.02
========== ==========
</TABLE>
9
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
During 1993 Wheelabrator recorded equity in net income of Rust of $31.3
million. Wheelabrator's investment in Rust totaled approximately $364.9
million as of December 31, 1993. If valued at the December 31, 1993 quoted
closing price of publicly traded shares, the calculated value of the Company's
investment in Rust would have exceeded the Company's carrying value by
approximately $391.0 million. A summary of 1993 financial information for Rust
follows:
<TABLE>
<CAPTION>
December 31, 1993
-----------------
<S> <C>
Current assets.............................. $ 500,416
Noncurrent assets........................... 1,138,035
Current liabilities......................... 249,350
Noncurrent liabilities...................... 496,897
Year Ended December 31, 1993
----------------------------
Revenue..................................... $1,534,465
Gross profit................................ 284,557
Net income.................................. 79,964
</TABLE>
During 1993 Wheelabrator paid Rust approximately $144.7 million for
engineering, construction management and other services provided. The terms of
the transactions between the Company and Rust are generally the same as the
terms of comparable transactions with unaffiliated third parties.
ACQUISITIONS The Company acquired three businesses during 1991 and 17
businesses during 1992 that provide environmental engineering, biosolids
management and various clean air technologies. Nine of the 1991 and 1992
acquisitions serve the air and water quality control markets, while the other
11 were included in the businesses contributed to the formation of Rust.
Wheelabrator paid cash and issued common stock of approximately $37.7 million
and 15.2 million shares, and $115.5 million and 6.8 million shares,
respectively, for the 1991 and 1992 acquisitions. In 1993 the Company acquired
seven businesses engaged in providing water and air quality-related
environmental products and services as well as independent power in exchange
for approximately 1.6 million shares of Wheelabrator common stock and $15.0
million of cash. The Company utilizes the purchase method of accounting, and
the purchase price of the foregoing acquisitions has been allocated to their
respective net assets based upon fair market values. The results of operations
of acquired entities have been included in Wheelabrator's financial statements
from their respective dates of acquisition. The proforma effect of the
acquisitions made during 1991 and 1993 is not material.
10
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
The following summarizes the effects of businesses acquired during 1992 had
they been acquired as of January 1, 1991 (unaudited):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1991 1992
<S> <C> <C>
Revenue, as reported.................... $1,173,449 $1,483,054
Revenue of purchased businesses for
period prior to acquisition........... 239,097 122,912
---------- ----------
Proforma revenue........................ $1,412,546 $1,605,966
========== ==========
Net income before accounting changes,
as reported........................... $ 126,059 $ 176,382
Net income of purchased businesses for
period prior to acquisition........... 13,712 3,321
Adjustment for interest and
amortization of cost in excess of
net assets of acquired businesses..... (7,943) (4,681)
---------- ----------
Proforma net income..................... $ 131,828 $ 175,022
========== ==========
Earnings per share before
accounting changes,
as reported........................... $ 0.73 $ 0.94
Effect of purchased businesses
for period prior to acquisition....... 0.01 (0.02)
---------- ----------
Proforma earnings per share............. $ 0.74 $ 0.92
========== ==========
</TABLE>
DIVESTITURES In 1991, Wheelabrator sold its equity interests in two foreign
industrial abrasives manufacturers. Total proceeds from the sale of such
interests were approximately $154.6 million, resulting in a combined pretax
gain of approximately $47.1 million. Equity earnings from the divested
interests were not significant to the Company's results of operations.
NOTE 3 - TAXES
Wheelabrator and Koll Real Estate Group, Inc. ("KREG", formerly the Bolsa Chica
Company) are parties to a tax sharing agreement which provides for the payment
of taxes, the cooperation of the parties in realizing certain tax benefits, and
the conduct of tax audits and various related matters for the periods during
which Wheelabrator, KREG, The Henley Group ("Henley") and their respective
affiliates were included in the same consolidated group for federal income tax
purposes. Pursuant to a recapitalization of Henley in 1992, Abex Inc. ("Abex")
has assumed certain of Henley's obligations to KREG under a similar tax sharing
agreement. Wheelabrator is generally responsible for any increase in the
income tax liability (including related interest and penalties) of any
consolidated, combined or unitary tax group which included the Company, Abex,
KREG and any of their predecessors and affiliates for tax periods ending prior
to December 31, 1988. However, KREG will indemnify Wheelabrator to the extent
that any such increased tax liability attributable to Abex and KREG affiliates
exceeds $50.0 million. The Company's liability for the $50.0 million
obligation has been previously recorded. KREG is generally indemnified by Abex
to the extent that such tax liabilities payable by KREG exceed $25.0 million.
11
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
In January 1993, the Internal Revenue Service ("IRS") completed an examination
of Wheelabrator's consolidated federal income tax returns for the period 1986-
1988. In the only material unresolved issue, the IRS proposed a significant
adjustment related to the 1988 sale of a former subsidiary. Abex, KREG and
Wheelabrator disputed the position taken by the IRS in an action filed before
the U.S. Tax Court. In March 1994, Wheelabrator and the IRS filed a
stipulation of settlement with the U.S. Tax Court resolving the treatment of
this disputed issue. Subject to the $21.2 million remaining balance of the
$50.0 million tax sharing obligation described above, the Company is
indemnified by KREG and Abex for the full amount of the liability assessed with
regard to this issue. Although the Company is primarily liable for the tax,
plus interest, KREG and Abex have each confirmed to the Company their
respective indemnification obligations.
The Company implemented FAS 109 effective January 1, 1992. Excluding the one-
time charge of approximately $13.2 million, or $0.07 per share, the adoption of
FAS 109 did not materially impact the Company's 1992 operating results. The
adoption of FAS 109 resulted in an increase in deferred income tax assets and
liabilities generally reflecting the impact of the restatement of assets
related to business combinations consummated before the adoption of FAS 109 on
a gross basis rather than on the net-of-tax basis previously used. The charge
resulted primarily from increasing deferred taxes previously discounted, a
method not permitted under FAS 109.
In accordance with FAS 109, during the third quarter of 1993, the Company
recorded a $6.5 million increase in deferred taxes due to the August enactment
of the Omnibus Budget Reconciliation Act of 1993.
12
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
A summary of the Company's income tax provision is given below. Income from
foreign sources is not material.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1991 1992 1993
<S> <C> <C> <C>
Federal:
Current $54,862 $ 9,275 $19,125
Deferred 4,265 48,497 54,780
State:
Current 14,598 5,815 9,333
Deferred 755 13,107 6,697
------- ------- -------
Total $74,480 $76,694 $89,935
======= ======= =======
</TABLE>
The principal items accounting for the difference in income taxes computed at
the U.S. statutory rates and as recorded are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1991 1992 1993
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% 35.0%
State income taxes after federal
income tax benefit 5.1 4.9 4.1
Equity income (2.3) (2.1) (6.2)
Non-deductible expenses 1.3 0.7 1.0
Non-taxable gain from stock
transactions of affiliates - (6.3) (1.1)
</TABLE>
<TABLE>
<S> <C> <C> <C>
Deferred tax revaluation relating to
Omnibus Budget Reconciliation Act - - 2.6
Other, net (1.0) (0.9) 0.1
---- ---- ----
Effective tax rate 37.1% 30.3% 35.5%
==== ==== ====
</TABLE>
The principal components of the deferred tax provision for 1991 were the excess
of tax over financial statement depreciation, deferred income and reserves not
deductible until paid. The adoption of FAS 109 required a change in the method
of accounting for income taxes to an asset and liability approach.
13
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
The principal items that comprise the 1992 and 1993 deferred tax (assets) and
liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1992 1993
<S> <C> <C>
Reserves not deductible until paid $(130,686) $(104,841)
Deferred income (27,569) (26,948)
Basis difference in investments (30,564) (16,937)
Alternative minimum tax credit carryforwards (14,000) (19,000)
State net operating loss carryforwards (10,903) (11,692)
Other (1,263) (12,335)
Less: Valuation allowance 22,545 20,413
--------- ---------
Subtotal (192,440) (171,340)
--------- ---------
Property, plant and equipment 355,260 403,570
Nondeductible prepaid expenses 27,413 14,945
Other 49,015 45,189
--------- ---------
Subtotal 431,688 463,704
--------- ---------
Deferred tax liability $ 239,248 $ 292,364
========= =========
</TABLE>
The Company has approximately $19.0 million of alternative minimum tax credit
carryforwards that may be carried forward indefinitely. Also, various
subsidiaries have state operating loss carryforwards of approximately $200.0
million with expiration dates through the year 2008. Valuation allowances have
been established due to the uncertainty of ultimately realizing the tax benefit
of certain state net operating loss carryforwards and the tax benefits
attributed to basis differences in certain investments. The change in the
valuation allowance relates primarily to the realization of tax benefits due to
the disposition of certain investments.
14
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
NOTE 4 - CAPITAL STOCK
COMMON STOCK Wheelabrator is authorized to issue 500.0 million shares of
common stock, par value $0.01 per share. As of December 31, 1993, 188.9
million shares were issued of which 188.8 million were outstanding.
Approximately 104.6 million shares were held by WMX or its subsidiaries. Under
certain circumstances, WMX has options to purchase at fair market value newly
issued shares of Wheelabrator common stock. WMX also has certain registration
rights until August 24, 1999 with respect to certain of the Wheelabrator common
stock it holds. The Company effected a two-for-one split of its common stock
on January 7, 1993, in the form of a dividend of one additional share of common
stock for each share outstanding on December 23, 1992. Share and per share
amounts have been adjusted to reflect the split for all periods. During 1992
the Company repurchased approximately 4.2 million shares of its common stock
for an aggregate cost of approximately $57.6 million. The Company is
authorized to repurchase up to a total of 8.0 million shares of its common
stock through March 1996 on the open market or in privately negotiated
transactions, if market conditions make it attractive to do so.
During 1992 Wheelabrator declared cash dividends totaling $0.04 per common
share, of which $0.03 per share was paid in 1992 and $0.01 per share was paid
in January 1993. Additionally, during 1993 the Company declared and paid cash
dividends totaling $0.08 per common share.
PREFERRED STOCK Wheelabrator is authorized to issue 50.0 million shares of
preferred stock, none of which was issued or outstanding at December 31, 1993.
NOTE 5 - LONG-TERM PROJECT DEBT AND LEASE COMMITMENTS
Long-term debt related to Wheelabrator's projects is as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1992 1993
<S> <C> <C>
Industrial development revenue bonds due 1994
to 2010 at rates of 2.5%-10.5% $782,505 $709,027
Private placement bonds due 1994 to 2008 at rates
of 10.64%-13.875% 36,849 34,121
Project financing from syndicates of commercial
banks due 1994 to 2000 at rates of 1.5%
above LIBOR 42,636 38,309
Secured notes payable related to coal-handling facilities
due 1994 to 2000 at rates of 9%-9.875% 32,980 29,155
-------- --------
894,970 810,612
Less: Current portion 37,345 33,754
-------- --------
Total long-term project debt $857,625 $776,858
======== ========
</TABLE>
15
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
The aggregate fair market value of Wheelabrator's long-term debt was
approximately $1,043,000 and $978,400 on December 31, 1992 and 1993,
respectively. The fair value of the Company's long-term debt was determined by
discounting future cash flows at the quoted or estimated current rate
applicable to each type of debt.
At December 31, 1993 long-term debt was collateralized by property, plant and
equipment with a net book value of approximately $894.4 million and
approximately $88.3 million of investments held by trustees. Investments held
by trustees typically represent proceeds of long-term debt related to trash-to-
energy and independent power projects. These amounts generally consist of
reserve funds maintained pursuant to project financing agreement requirements.
The investments are held in trust, and use by the Company is restricted.
Financing for certain trash-to-energy facilities currently operated by the
Company has been provided through sale and leaseback transactions arranged in
previous years. The leases are classified as operating leases, with lease
expense being recognized on a straight-line basis over the base and bargain
renewal periods of each agreement. Timing differences between lease payments
and financial statement lease expense are included in other assets in the
consolidated balance sheets. Gains realized on the sale transactions are
included in deferred income in the consolidated balance sheets and are being
amortized over the terms of the respective leases.
Principal payments on project debt and non-cancelable operating lease payments
for operating and office facilities at December 31, 1993 are due as follows:
<TABLE>
<CAPTION>
Project Operating
Debt Leases
-------- ----------
<S> <C> <C>
1994 $ 33,754 $ 80,046
1995 36,317 84,814
1996 39,974 83,785
1997 43,166 85,704
1998 47,255 86,790
Thereafter 610,146 838,520
-------- ----------
Total $810,612 $1,259,659
======== ==========
</TABLE>
The Company capitalized net interest expense of $26.9 million, $2.2 million and
$10.0 million during 1991, 1992 and 1993, respectively, in connection with
various projects under construction.
16
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
Resco Holdings Inc. ("Resco"), a wholly owned subsidiary of Wheelabrator, and
Allied-Signal Inc. ("Allied Signal") are parties to an agreement which provides
for specific credit support by Allied-Signal for certain of Resco's trash-to-
energy project subsidiaries. Under the agreement, Allied-Signal may require
Resco to refinance, without Allied-Signal credit support, indebtedness of
supported trash-to-energy projects if it is economical (as defined in the
agreement) to do so. Resco and certain of its subsidiaries have agreed to
reimburse Allied-Signal for all amounts which may be paid by it under the
agreement or various related credit support obligations. No support payments
have been made by Allied-Signal as of December 31, 1993.
Resco is also required to maintain a minimum level of tangible net worth
(approximately $549.8 million as of December 31, 1993). As of December 31,
1993, Resco was in compliance with this provision. Resco has agreed not to
declare or pay any cash dividends to the Company at any time Resco's tangible
net worth is less than the required amount. Resco owns substantially all of
the net operating assets of the Company except certain net assets including
cash and investments. The Company has the ability to pay cash dividends using
assets other than those restricted within Resco.
NOTE 6 - STOCK AND BENEFIT PLANS
EQUITY PURCHASE PROGRAM In 1986, Wheelabrator established the Equity Purchase
Program which authorized the issuance and sale of shares of Wheelabrator common
stock to key corporate managers. The Equity Purchase Program also provided
that Wheelabrator lend participants 90 percent of their purchase price. All of
such loans matured and were repaid with interest during 1992. No additional
shares may be issued under the Equity Purchase Program.
STOCK OPTION PLANS Wheelabrator's Stock Option Plans provide for the grant of
non-qualified options to purchase shares of the Company's common stock at a
price equal to fair market value at the time of grant.
17
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
The status of the plans (including predecessor plans under which options remain
outstanding) through December 31, 1993 was as follows:
<TABLE>
<CAPTION>
Shares Option Price
------ -------------
<S> <C> <C>
January 1, 1991
Outstanding 6,125 $ 3.87 - $ 9.24
Available for future grant 1,548 - -
------
1991: Granted 1,556 $11.90 - $13.35
Exercised (1,341) $ 3.87 - $13.35
Cancelled (100) $ 3.87 - $13.35
Additional shares reserved
for future grant 300 - -
------
December 31, 1991
Outstanding 6,240 $ 3.87 - $13.35
Available for future grant 392 - -
------
1992: Granted 1,584 $13.55 - $15.75
Exercised (2,211) $ 3.87 - $11.94
Cancelled:
Predecessor plans (91) $ 7.76 - $11.90
Current plans (58) $15.75
Predecessor plan shares cancelled
upon initiation of 1992 plan (152) - -
Additional shares reserved for
future grant under current plans 7,000 - -
------
December 31, 1992
Outstanding 5,464 $ 3.87 - $15.75
Available for future grant 5,714 - -
------
1993: Granted 673 $17.69 - $20.65
Exercised (1,031) $ 3.87 - $15.75
Cancelled:
Predecessor plans (14) $11.90
Current plans (46) $14.25 - $20.65
------
December 31, 1993
Outstanding 5,046 $ 3.87 - $20.65
======
Available for future grant 5,087 - -
======
Exercisable at end of year 3,163 $ 3.87 - $15.75
======
</TABLE>
18
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
Outstanding options generally have a term of seven years from the date of the
grant and expire at various dates through December 17, 2000.
SAVINGS AND RETIREMENT PLAN Substantially all employees are participants in
the Wheelabrator Savings and Retirement Plan, which is a qualified defined
contribution plan consisting of a savings account component (the "Savings
Account") and a retirement account component (the "Retirement Account"). Under
the terms of the Savings Account, eligible employees of the Company may elect
to contribute a portion of their annual compensation not to exceed 16 percent.
The Company is required to match a minimum of 30 percent of the first six
percent of salary contributed by an employee. Under the terms of the
Retirement Account, eligible employees of the Company receive an annual
contribution equal to a minimum of three percent of their eligible earnings.
Employees vest in Company contributions and the associated earnings in the
Savings Account at 20 percent per year and in the Retirement Account after five
years. Wheelabrator's contributions to such plans during 1991, 1992 and 1993
amounted to approximately $12.9 million, $16.3 million and $15.8 million,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company provides certain
postretirement benefits other than pensions, which are primarily health care
benefits offered to a limited number of former employees. The majority of the
Company's active employees will not receive postretirement benefits other than
pensions.
The Company implemented FAS 106 on the immediate recognition basis effective
January 1, 1992. FAS 106 required a change from accounting for postretirement
benefits other than pensions from a cash to an accrual basis. Excluding the
one-time pretax charge of approximately $44.9 million ($29.0 million, or $0.16
per share, after tax), the adoption of FAS 106 did not have a significant
effect on earnings for the year ended 1992. The service and interest
components of the net periodic cost of postretirement benefits other than
pensions were $0.2 million and $3.1 million , respectively, in 1992 and $0.1
million and $2.6 million, respectively, in 1993.
The following sets forth the plans' funded status reconciled with amounts
reported in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
December 31,
----------------
1992 1993
<S> <C> <C>
Accumulated postretirement benefit
obligation (APBO):
Retirees $41,110 $43,113
Fully eligible active plan participants 2,297 623
Other active plan participants 1,798 789
------- -------
Total APBO 45,205 44,525
Unrecognized:
Prior service cost - 347
Gain/(loss) - (2,658)
------- -------
Accrued postretirement benefit
liability $45,205 $42,214
======= =======
</TABLE>
19
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
For measurement purposes, a 12 percent annual rate of increase in the per
capita cost of covered health care claims was assumed for 1992, decreasing by
0.5 percent annually to 7.5 percent in 2001 and remaining at that level
thereafter. Increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1993 by approximately $3.9 million and
increase the aggregate of the service and interest cost components of net
periodic post retirement benefit cost for 1993 by $0.2 million. The weighted
average discount rate used in determining the accumulated post retirement
benefit obligation was eight percent in 1992 and seven percent in 1993 based on
expected payout patterns.
NOTE 7 - ADDITIONAL FINANCIAL INFORMATION
The allowance for doubtful accounts amounted to $14.2 million and $9.3 million
as of December 31, 1992 and 1993, respectively.
The following is a summary of inventories, which are valued at the lower of
first-in, first-out cost or market and are included in other current assets:
<TABLE>
<CAPTION>
December 31,
----------------------
1992 1993
<S> <C> <C>
Raw materials $ 5,636 $ 5,256
Work in process 7,944 7,531
Finished goods 12,371 10,343
------- -------
$25,951 $23,130
======= =======
</TABLE>
Also included in other current assets are spare parts and supplies of $20,875
and $24,422 as of December 31, 1992 and 1993, respectively.
The following is a summary of property, plant and equipment:
<TABLE>
<CAPTION>
December 31,
----------------------
1992 1993
<S> <C> <C>
Land $ 55,760 $ 53,403
Land options 285,807 285,807
Machinery and equipment 990,824 1,076,576
Buildings and improvements 252,969 223,463
Construction-in-progress 111,595 247,387
Less: accumulated depreciation (201,714) (232,716)
---------- ----------
$1,495,241 $1,653,920
========== ==========
</TABLE>
20
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
The following is a summary of accrued liabilities:
<TABLE>
December 31,
----------------------
1992 1993
<S> <C> <C>
Wages, salaries and benefits $ 59,978 $ 30,493
Tax sharing agreement 50,000 -
Warranty reserves 20,729 11,563
Interest and lease expense 56,041 43,793
Insurance and professional 16,569 12,625
Other 100,930 98,649
-------- --------
$304,247 $197,123
======== ========
</TABLE>
Certain additional financial data are presented below:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1991 1992 1993
<S> <C> <C> <C>
Maintenance and repair expense $51,342 $48,106 $48,618
Research and development expense 3,891 2,574 4,073
Rent expense 76,361 88,358 71,442
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company has issued or is a party to approximately 180 bank letters of
credit, performance bonds and other guarantees. Such guarantees (averaging
$2.0 million each), are given in the ordinary course of business. Management
does not expect these guarantees will have a material adverse effect on the
financial position or results of operations of the Company. On February 16,
1994, a Connecticut Superior Court judge issued a decision on appeals of the
Connecticut Department of Environmental Protection's ("DEP") issuance of a
permit to construct the Lisbon, Connecticut trash-to-energy facility currently
being built by Wheelabrator. In the ruling, the judge agreed with the
Company's position on all issues raised in the appeals but remanded the permit
back to the DEP for further proceedings on an uncontested permit condition that
requires the Lisbon facility to dispose of only Connecticut waste. The Company
intends to pursue aggressively favorable resolution of this permit remand
through appropriate judicial and regulatory procedures. Although Wheelabrator
believes that the probability of an adverse determination as a result of the
judge's remand order is remote, such a determination could result in the
permanent termination of facility construction. Through a guarantee agreement
with the Eastern Connecticut Resource Recovery Authority, the facility's owner,
such a consequence may require the Company to redeem the debt issued to finance
the facility. In the unlikely event this were to occur, the resulting payments
could have a material adverse impact on the Company's financial condition and
results of operations.
There are various lawsuits and claims pending against Wheelabrator which have
arisen in the normal course of Wheelabrator's business and relate mainly to
matters of product liability, personal injury and property damage. The outcome
of these matters is not presently determinable, but in the opinion of
management, based on the advice of counsel, the ultimate resolution of these
matters will not have a material adverse effect on the financial condition or
results of operations of the Company.
21
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
NOTE 9 - SEGMENT AND GEOGRAPHIC INFORMATION
During 1991 and 1992 the Company conducted business in two principal industry
segments: Environmental Operations and Environmental and Infrastructure
Engineering Services.
The businesses within the Environmental Operations segment are principally
involved in providing clean energy through trash-to-energy and independent
power facility ownership and operation, providing clean water and wastewater
products and services including municipal water and wastewater treatment
facility operation, biosolids management and industrial water and wastewater
management, and providing clean air quality control systems designed for
industrial and utility applications. The Environmental and Infrastructure
Engineering Services segment provided environmental engineering, architectural,
scientific and photogrammetric services, as well as industrial process design
and engineering project management services. Intersegment revenues were at
prices which approximate market and were not material.
Effective January 1, 1993, Wheelabrator contributed the businesses that
constituted its Environmental and Infrastructure Engineering Services segment
along with certain other assets to form, in part, Rust (see Note 2). As a
result, during 1993 the Company conducted business solely within the
Environmental Operations industry.
Wheelabrator has foreign operations, primarily in Canada and Europe. Foreign
assets, results of operations and export revenues are not significant.
<TABLE>
<CAPTION>
Environmental and
Infrastructure
Environmental Engineering
Operations Services Total
------------- ----------------- ----------
<S> <C> <C> <C>
1991
- ----
Revenue $ 775,673 $397,776 $1,173,449
Operating expenses 540,969 365,257 906,226
Selling and
administrative expenses 92,533 25,908 118,441
---------- -------- ----------
Income from operations $ 142,171 $ 6,611 $ 148,782
========== ======== ==========
Identifiable assets
(at year-end) $2,014,784 $168,914 $2,183,698
========== ======== ==========
Depreciation and
amortization expense $ 35,776 $ 4,570 $ 40,346
========== ======== ==========
Capital expenditures $ 125,119 $ 4,725 $ 129,844
========== ======== ==========
1992
- ----
Revenue $ 928,313 $554,741 $1,483,054
Operating expenses 636,126 472,654 1,108,780
Selling and
administrative expenses 90,567 57,788 148,355
---------- ======== ----------
Income from operations $ 201,620 $ 24,299 $ 225,919
========== ======== ==========
Identifiable assets
(at year-end) $2,437,368 $318,734 $2,756,102
========== ======== ==========
Depreciation and
amortization expenses $ 58,410 $ 9,469 $ 67,879
========== ======== ==========
Capital expenditures $ 100,561 $ 47,464 $ 148,025
========== ======== ==========
</TABLE>
. Identifiable assets exclude unallocated corporate assets of $560.0 million
and $241.0 million at year-end 1991 and 1992, respectively.
22
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
NOTE 10 - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth Full Year
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
1992
- ----
Revenue $321,382 $359,268 $381,953 $420,451 $1,483,054
Operating expenses 246,739 264,324 282,450 315,267 1,108,780
Net income before
cumulative effects of
accounting changes 26,593 79,214(2) 33,399 37,176 176,382
Net income (loss) (15,637)(1) 79,214 33,399 37,176 134,152(1)
Earnings per common share:
Before cumulative
effects of
accounting changes 0.14 0.42(2) 0.18 0.20 0.94
Net income (loss) (0.09)(1) 0.42 0.18 0.20 0.71(1)
Weighted average common
shares outstanding 186,600 188,600 187,000 188,000 188,200
Market price
High 18 5/16 15 15/16 17 1/8 19 1/2 19 1/2
Low 14 15/16 13 13 15 5/16 13
1993
- ----
Revenue $245,525 $279,978 $283,882 $332,834 $1,142,219
Operating expenses 171,706 193,643 194,619 232,751 792,719
Net income 33,408 49,800(3) 35,734(4) 44,160 163,102
Net income per common share 0.18 0.26(3) 0.19(4) 0.23 0.86
Weighted average common
shares outstanding 188,300 188,500 188,900 189,700 188,900
Market price
High 23 1/2 21 1/4 20 18 1/8 23 1/2
Low 18 1/8 17 5/8 14 3/4 14 5/8 14 5/8
</TABLE>
(1) Reflects cumulative effect of accounting changes. See Note 1.
(2) Includes gain related to WM International IPO. See Note 2.
(3) Includes gain from issuance of stock by equity investee. See Note 2.
(4) Reflects increase in U.S. federal income taxes under the Omnibus Budget
Reconciliation Act of 1993. See Note 3.
23
<PAGE>
EXHIBIT NO. 21
SUBSIDIARIES OF REGISTRANT
Set forth below is a list of subsidiaries of Wheelabrator Technologies Inc.
as of December 31 1993. Each subsidiary is organized under the laws of the
jurisdiction indicated in parenthesis.
Bio Gro Acquisition Sub, Inc. (Delaware)
MRI Holding Company (Delaware)
Massachusetts Refusetech, Inc. (Delaware)
Resco Holdings Inc. (Delaware)
Filtres Crepines Johnson (France) S.A. (France)
Johnson Filtration Systems Limited (Ireland)
Johnson Screens (Australia) Pty. Ltd. (Australia)
Neptune Microfloc, Incorporated (Oregon)
Pullman Torkelson Utility Fuels Company (Delaware)
Signal Overseas Capital Corporation N.V. (Netherlands)
Swenson S. A. (France)
Swindell-Dressler Energy Supply Company (Delaware)
Swindell-Dressler Leasing Company (Delaware)
WESI Peekskill Inc. (Delaware)
WESI Westchester Inc. (Delaware)
Wheelabrator-Berger (Maschinenfabriken) GmbH (West Germany)
WB Industrienlagen Consulting GmbH (West Germany)
Wheelabrator-Berger Stiftung GmbH (West Germany)
Wheelabrator Clean Air Systems Inc. (Delaware)
ARI Technologies, Inc. (Illinois)
Altech Instrumentation Systems, Inc. (California)
Amcec Corporation (Delaware)
Huntington Energy Systems Inc. (Delaware)
Pullman Power Products Corporation (Delaware)
Pullman Power Products International Corporation (Delaware)
Pullman Power Products of Ohio, Inc. (Ohio)
Westates Carbon, Inc. (California)
Westates Carbon-Arizona, Inc. (Arizona)
Wheelabrator Air Pollution Control Inc. (Delaware)
Wheelabrator Clean Water Systems Inc. (Delaware)
Arizona Soils Composting, Inc. (Arizona)
Bio Gro Systems, Inc. (Maryland)
Bio Gro Florida, Inc. (Florida)
EnviroLand, Incorporated (Michigan)
Soaring Vista Properties, Inc. (Maryland)
Wheelabrator Cobb Inc. (Delaware)
<PAGE>
Wheelabrator Hagerstown Inc. (Delaware)
Enviro-Gro Technologies, Inc. (New York)
Enviro-Gro Technologies II, Inc. (New York)
EGT, Inc. (Maryland)
International Process Systems Canada Inc. (Ontario)
IPS International, Inc. (Delaware)
AllGro, Inc. (Delaware)
International Process Systems, Inc. (Delaware)
IPS Pompano Inc. (Delaware)
IPS Rochester Inc. (Delaware)
IPS Sterling Inc. (Delaware)
IPS Torrington Inc. (Delaware)
WIPS Putnam Inc. (Delaware)
IPS Quinte Inc. (Ontario)
Wheelabrator EOS Inc. (Delaware)
Envirotech Operating Services (Petaluma), Inc. (Delaware)
Wheelabrator EOS Puerto Rico Inc. (Delaware)
Wheelabrator Mexicana S.A. de C.V., Inc. (Mexico)
Wheelabrator Cleanfuel Corporation (Delaware)
Wheelabrator Coal Refinery Inc. (Delaware)
CRC Company (Delaware)
International Coal Refinery Company (Delaware)
The Wheelabrator Corporation (Delaware)
Wheelabrator Canada Inc. (Ontario)
MPF Engineered Filtered Products Inc. (Ontario)
Wheelabrator Technologies (UK) Limited (United Kingdom)
Tilghman Wheelabrator Limited (United Kingdom)
Tilghman Wheelabrator Special Products Ltd. (United Kingdom)
Blastrac Europe Ltd. (United Kingdom)
JFS Limited (United Kingdom)
Neptune Nichols Limited (United Kingdom)
Northedge Limited (United Kingdom)
R.B.S. Pension Trustees Limited (United Kingdom)
St. George's Engineering Ltd. (United Kingdom)
Tilghman (1988) Limited (United Kingdom)
Tilghman (Broadheath) Limited (United Kingdom)
Tilghman (Engineers) Limited (United Kingdom)
Wheelabrator do Brasil Limitada (Brazil)
Wheelabrator Energy Leasing Company (Delaware)
Wheelabrator Energy Systems Inc. (Delaware)
Wheelabrator Engineered Systems Inc. (Delaware)
JFS (Japan) Ltd. (Japan)
HPD Canada Limited (Illinois)
Mem Tech Inc. (Illinois)
2
<PAGE>
Wheelabrator HPD Inc. (Illinois)
Wheelabrator Environmental Systems Inc. (Delaware)
Bensalem Power Company (Pennsylvania)
NH/VT Energy Recovery Corporation (New Hampshire)
North Broward Holdings Inc. (Delaware)
Wheelabrator North Broward Inc. (Delaware)
North Broward County Resource Recovery Project, Inc. (Florida)
Recycle First North Andover Inc. (Delaware)
Riley Energy Systems of Lisbon Corporation (Delaware)
Riley Energy Systems of Lisbon Connecticut Corp. (Connecticut)
SES Bridgeport Inc. (Delaware)
SES Brooklyn Inc. (Delaware)
SES Brooklyn Navy Yard Inc. (Delaware)
SES Connecticut Inc. (Delaware)
SES North Andover Inc. (Delaware)
SES Seattle Inc. (Delaware)
Signal Capital Sherman Station Inc. (Delaware)
Signal RESCO, Inc. (Delaware)
South Broward Holdings Inc. (Delaware)
Wheelabrator South Broward Inc. (Delaware)
South Broward County Resource Recovery Project, Inc. (Florida)
WES Medical Services of Florida Inc. (Delaware)
WES Medical Services of North Carolina Inc. (Delaware)
WES Medical Services of Ohio Inc. (Delaware)
WES Medical Services of Texas Inc. (Delaware)
WES Medical Services of Wisconsin Inc. (Delaware)
WESI Baltimore Inc. (Delaware)
WESI Capital Inc. (Delaware)
WESI Peabody Inc. (Delaware)
WESI Saugus Inc. (Delaware)
Wheelabrator Baltimore Inc. (Delaware)
Wheelabrator Bridgeport Inc. (Delaware)
Wheelabrator Cedar Creek Inc. (Delaware)
Wheelabrator Concord Inc. (Delaware)
Wheelabrator Concord Operating Inc. (Delaware)
Wheelabrator Connecticut Inc. (Delaware)
Wheelabrator Culm Services Inc. (Delaware)
Wheelabrator Epping Inc. (Delaware)
Wheelabrator Falls Inc. (Delaware)
Wheelabrator Frackville Energy Company Inc. (Delaware)
Wheelabrator Frackville Properties Inc. (Delaware)
Wheelabrator Fuel Services Inc. (Delaware)
Wheelabrator Genesee Inc. (Delaware)
Wheelabrator Gloucester Inc. (Delaware)
3
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Wheelabrator Hudson Energy Company Inc. (Delaware)
Wheelabrator McKay Bay Inc. (Florida)
Wheelabrator Mecklenburg Inc. (Delaware)
Wheelabrator Millbury Inc. (Delaware)
Wheelabrator NHC Inc. (Delaware)
Wheelabrator Norwalk Energy Company Inc. (Delaware)
Wheelabrator New Hampshire Inc. (Delaware)
Wheelabrator New Jersey Inc. (Delaware)
Wheelabrator North Shore Inc. (Delaware)
Wheelabrator Northampton Energy Company Inc. (Delaware)
Wheelabrator Northampton Inc. (Delaware)
Wheelabrator Northampton Linerboard Company Inc. (Delaware)
Wheelabrator Penacook Inc. (Delaware)
Wheelabrator Pinellas Inc. (Delaware)
Wheelabrator Plant Services Inc. (Delaware)
Wheelabrator Polk Inc. (Delaware)
Wheelabrator Pottstown Inc. (Delaware)
Wheelabrator Putnam Inc. (Delaware)
Wheelabrator Ridge Energy Inc. (Delaware)
Wheelabrator San Diego Inc. (Delaware)
Wheelabrator Saugus Inc. (Delaware)
Wheelabrator Shasta Energy Company Inc. (Delaware)
Wheelabrator Sherman Station One Inc. (Delaware)
Wheelabrator Sherman Station Two Inc. (Delaware)
Wheelabrator Shrewsbury Inc. (Delaware)
Wheelabrator Spokane Inc. (Delaware)
Wheelabrator Tidewater Inc. (Delaware)
Wheelabrator Fuels Service Corporation (Delaware)
Wheelabrator Coal Services Company (Delaware)
Wheelabrator Land Resources Inc. (Delaware)
Wheelabrator Sinto do Brasil Equipamentos Industriais Ltda. (Brazil)
Wheelabrator Utility Services Inc. (Delaware)
WTI Rust Holdings Inc. (Delaware)
Signal Own-And-Operate Inc. (Delaware)
Wheelabrator EOS Canada Inc. (Ontario)
WTI International Holdings Inc. (Delaware)
WTI Jinyuan Limited Inc. (Delaware)
WTI Jinyuan Power Inc. (Delaware)
WTI Pingliang Limited Inc. (Delaware)
WTI Pingliang Power Inc. (Delaware)
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Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports to the Stockholders of Wheelabrator Technologies Inc., included
(or incorporated by reference) in this Form 10-K, and into the registrant's
previously filed Registration Statements on Form S-8 (registration nos. 33-
31523, 33-13720, 33-47989 and 33-48837) and into the registrant's previously
filed Registration Statement on Form S-4 (registration no. 33-36118) and into
the registrant's previously filed Registration Statement on Form S-3
(registration no. 33-59606).
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
New York, New York,
March 25, 1994
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports to the Stockholders of Rust International Inc., included (or
incorporated by reference) in this Form 10-K, and into the registrant's
previously filed Registration Statements on Form S-8 (registration nos. 33-
31523, 33-13720, 33-47989 and 33-48837) and into the registrant's previously
filed Registration Statement on Form S-4 (registration no. 33-36118) and into
the registrant's previously filed Registration Statement on Form S-3
(registration no. 33-59606).
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 25, 1994
