<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
WHEELABRATOR TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The Board of Directors of Wheelabrator Technologies Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LOGO
of WHEELABRATOR TECHNOLOGIES INC.
LIBERTY LANE, HAMPTON, NEW HAMPSHIRE 03842
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 1996
You are cordially invited to attend the annual meeting of stockholders of
Wheelabrator Technologies Inc. which will be held at the Mellon Bank Building,
8 Loockerman Street, Dover, Delaware on Wednesday, May 1, 1996, at 10:00 a.m.,
Eastern time, for the following purposes:
1. To elect directors.
2. To consider and vote upon a stockholder proposal which is set forth
and described in the accompanying proxy statement.
3. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on March 20, 1996 are
entitled to vote at the meeting. A list of such stockholders will be available
for examination by any stockholder for any purpose germane to the meeting,
during normal business hours, at the Mellon Bank Building, 8 Loockerman
Street, Dover, Delaware, for a period of 10 days prior to the meeting.
It is important that your shares be represented at the meeting regardless of
the size of your holdings. Whether or not you intend to be present at the
meeting in person, we urge you to mark, date and sign the enclosed proxy and
return it in the envelope provided for that purpose, which does not require
postage if mailed in the United States.
LOGO
Herbert A. Getz
Secretary
Hampton, New Hampshire
March 28, 1996
YOU ARE URGED TO MARK, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY. THE PROXY IS
REVOCABLE AT ANY TIME PRIOR TO ITS USE.
Printed on recycled paper LOGO
<PAGE>
LOGO
of WHEELABRATOR TECHNOLOGIES INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 1996
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Wheelabrator Technologies Inc. ("WTI" or the "Company")
of proxies for use at the annual meeting of stockholders of WTI to be held at
the Mellon Bank Building, 8 Loockerman Street, Dover, Delaware at 10:00 a.m.,
Eastern time, on May 1, 1996, and at any adjournment or adjournments thereof.
Proxies properly executed and returned in a timely manner will be voted at the
meeting in accordance with the directions noted thereon. If no direction is
indicated, they will be voted for the election of the nominees named as
directors, against the stockholder proposal set forth and described herein and
on other matters presented for a vote in accordance with the judgment of the
persons acting under the proxies. Any stockholder giving a proxy has the power
to revoke it at any time before it is voted, either in person at the meeting,
by written notice to the Secretary of WTI or by delivery of a later-dated
proxy.
Election of each director requires a plurality of the votes of the shares of
WTI's common stock present in person or represented by proxy and entitled to
vote at the meeting. Approval of the stockholder proposal set forth and
described herein, and approval of any other matter submitted to the
stockholders for their consideration, requires the affirmative vote of the
holders of a majority of the shares of WTI's common stock present in person or
by proxy and entitled to vote at the meeting. An automated system administered
by WTI's transfer agent is used to tabulate the votes represented by proxy.
Ballots submitted at the meeting are tabulated by hand. Abstentions and broker
non-votes are counted as shares present in the determination of whether the
shares of stock represented at the meeting constitute a quorum. Each is
tabulated separately. Abstentions are counted in tabulations of the votes cast
on proposals presented to stockholders. Broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
WTI's principal executive offices are located at Liberty Lane, Hampton, New
Hampshire 03842 (telephone 603/929-3000). It is expected that proxy materials
will be mailed to stockholders beginning on or about March 28, 1996.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on March 20, 1996 are
entitled to vote at the annual meeting of stockholders. The only voting stock
of WTI outstanding is its common stock, of which 176,576,586 shares were
outstanding as of the close of business on March 20, 1996.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information concerning ownership of
WTI shares of common stock. Management knows of no person, other than as set
forth below, who, as of February 1, 1996, owned more than 5% of WTI's
outstanding capital stock.
<TABLE>
<CAPTION>
TITLE
OF NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
----- ------------------- -------------------- --------
<S> <C> <C> <C>
Common WMX Technologies, Inc. 104,621,810(1)(2) 58.3%
Stock 3003 Butterfield Road
Oak Brook, Illinois 60521
Common Sanford C. Bernstein & Co., Inc.(3) 11,747,630 6.4%
Stock One State Street Plaza
New York, New York 10004
</TABLE>
<PAGE>
- --------
(1) WMX Technologies, Inc. ("WMX") has sole voting and investment power over
99,796,086 shares. WMX shares voting and investment power with two wholly
owned subsidiaries of WMX over an aggregate of 4,825,724 shares. WTI and
WMX have entered into various agreements relating to certain restrictions
on disposition by WMX of common stock of WTI owned by WMX, WMX's right to
purchase shares of WTI's common stock, and registration rights (both
demand and participation). Additional information regarding the
relationships between WTI and WMX is set forth below under the caption
"Certain Transactions and Other Matters."
(2) Dean L. Buntrock and Phillip B. Rooney may be deemed to beneficially own
the shares of WTI common stock beneficially owned by WMX and shown in the
table above because each such person may be deemed to be an affiliate of
WMX. Each such person disclaims any beneficial ownership of such WTI
shares.
(3) The Company received a copy of a Schedule 13G for the year ended December
31, 1995 from Sanford C. Bernstein & Co., Inc., an investment
advisor/broker dealer. The information in the table is taken from the
Schedule 13G, which also stated, among other things, that the WTI
securities were held for the accounts of "discretionary clients."
ELECTION OF DIRECTORS
Four directors are to be elected at the meeting. Three of the persons named
below are serving as directors as of the date of this proxy statement and have
been designated by the Board of Directors as nominees for election as
directors for a term expiring at the annual meeting of stockholders in 1999.
One nominee, John M. Kehoe, Jr., is not currently serving as a director of the
Company. He has also been designated by the Board of Directors as a nominee
for election as a director for a term expiring at the annual meeting of
stockholders in 1999.
Unless otherwise instructed, properly executed proxies which are returned in
a timely manner will be voted for election of the four nominees. If, however,
any of such nominees should be unable or should fail to act as a nominee by
virtue of an unexpected occurrence, the proxies will be voted for such other
person as will be determined by the holders of the proxies in their
discretion, or the Board of Directors may make an appropriate reduction in the
number of directors to be elected. Two additional classes of directors named
below have terms which expire in 1997 and 1998, respectively.
As used herein, "WM International" means Waste Management International plc,
a subsidiary of WMX owned approximately 56% by WMX, 12% by WTI and 12% by Rust
International Inc. ("Rust"), a company owned 60% by WMX and 40% by WTI.
NOMINEES FOR TERMS EXPIRING AT ANNUAL MEETING IN 1999:
DONALD F. FLYNN, age 56, has been a director of WTI or a
LOGO predecessor thereto since September 1988. From February 1988
to the present, Mr. Flynn has served as Chairman of the Board
and President of Flynn Enterprises, Inc., a financial advisory
and venture capital firm. From July 1992 until February 1996
and May 1995, respectively, Mr. Flynn served as the Chairman
of the Board and Chief Executive Officer of Discovery Zone,
Inc., an operator of indoor entertainment and fitness
facilities designed for children. He was Senior Vice President
of WMX from May 1975 to January 1991. Mr. Flynn also serves as
a director of WMX, Psychemedics Corporation and WM
International.
LOGO
KAY HAHN HARRELL, age 55, has been a director of WTI since
May 1995. Since April 1993, Ms. Harrell has been Chairperson
and Chief Executive Officer of Fairmarsh Consultants, which
provides investment and financial consulting services. Prior
thereto, Ms. Harrell had been Senior Vice President and
Director of Investment Research of The Chicago Corporation, an
investment banking firm, for more than the past five years.
2
<PAGE>
LOGO JOHN M. KEHOE, JR., age 62, has been President and Chief
Operating Officer of WTI since January 1993 and Vice President
of WTI from December 1991 through December 1992. Since
November 1990, Mr. Kehoe has also served as President of
Wheelabrator Environmental Systems Inc., a subsidiary of WTI.
LOGO MANUEL SANCHEZ, age 48, has been a director of WTI since
August 1992. Mr. Sanchez is a co-founder and has been a
partner of the Chicago law firm of Sanchez & Daniels since
April 1987. From 1981 to 1987 he was a partner at the law firm
of Hinshaw, Culbertson, Moelmann, Hoban & Fuller. Mr. Sanchez
is also a director of Metropolitan Bank and Trust Company.
DIRECTORS WHOSE TERMS EXPIRE AT ANNUAL MEETING IN 1997:
LOGO DEAN L. BUNTROCK, age 64, has been a director of WTI or a
predecessor thereto since September 1988. Mr. Buntrock has
been Chairman of the Board and Chief Executive Officer of WMX
since 1968 and was President of WMX from September 1980 to
November 1984. Mr. Buntrock is also a director of Boston
Chicken, Inc. and WM International.
LOGO JAMES E. KOENIG, age 48, has been a director of WTI since
September 1990. Mr. Koenig served as Vice President, Chief
Financial Officer and Treasurer of WTI from November 1990 to
May 1993. Mr. Koenig has served as Senior Vice President of
WMX since May 1992, as Chief Financial Officer of WMX since
December 1989 and as Vice President and Treasurer of WMX since
December 1986. Mr. Koenig is also a director of WM
International and OHM Corporation.
LT. GEN. THOMAS P. STAFFORD, age 65, has been a director of
WTI or a predecessor thereto since September 1987. Lt. Gen.
Stafford has been a consultant with General Technical
Services, Inc. (consulting) since 1984. He is co-founder and
has been Vice Chairman of Stafford, Burke and Hecker, Inc., a
Washington-based consulting firm, since 1982. After serving as
an astronaut for a number of years, he retired in 1979 from
the U.S. Air Force as Deputy Chief of Staff for Research,
Development and Acquisition and became Vice Chairman of
Gibraltar Exploration Limited, an oil and gas exploration and
production company. Lt. Gen. Stafford is Chairman of the Board
of the Omega Watch Corporation of America, and is a director
of Tremont, Inc., Seagate Technologies, Inc., CMI, Inc.,
Pacific Scientific Company, Allied-Signal, Inc., Fisher
Scientific International Inc. ("Fisher Scientific") and
Wackenhut, Inc.
LOGO
3
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE AT ANNUAL MEETING IN 1998:
WILLIAM M. DALEY, age 47, has been a director of WTI since
December 1993. Prior thereto he served as a director of WTI
from August 1992 until August 1993, at which time he resigned
to serve as Special Counsel to the President of the United
States for the North American Free Trade Agreement. Mr. Daley
has been a partner of the Chicago law firm of Mayer, Brown &
Platt from May 1993 until the present, excluding a three month
leave to serve as Special Counsel to the President of the
United States, and prior thereto from 1985 to 1989. Mr. Daley
served as President and Chief Operating Officer of Amalgamated
Bank of Chicago from October 1990 to May 1993. From January
1993 to May 1993, Mr. Daley also served as President of
AmalgaTrust Co., Inc. From October 1989 until October 1990 he
served as the Vice Chairman of Amalgamated Bank of Chicago.
Mr. Daley is also a director of the Federal National Mortgage
Association and Everen Securities. WTI has utilized and
anticipates that it will continue to utilize the services of
Mayer, Brown & Platt.
LOGO
PAUL M. MONTRONE, age 54, has been a director of WTI or a
predecessor thereto since prior to 1989. He also served as
Chairman of the Board and Chief Executive Officer of WTI from
prior to 1989 until November 1990 and Vice Chairman of the
Board of WTI from November 1990 until May 1991. Since December
1991, Mr. Montrone has been President, Chief Executive Officer
and a director of Fisher Scientific, a manufacturer of
laboratory equipment and supplies. He also served as Vice
Chairman of the Board of Abex, Inc. ("Abex"), a designer and
manufacturer of engineered components for aerospace, defense,
industrial and commercial markets, or its predecessors, from
1992 to 1995. Since prior to 1989, Mr. Montrone has also been
President of The General Chemical Group, Inc., a chemical
company. From prior to 1989 until 1992 he served as the
Managing Director--President of The Henley Group, Inc.
LOGO
PHILLIP B. ROONEY, age 51, has been a director of WTI or a
LOGO predecessor thereto since September 1988. Mr. Rooney has been
Chairman of the Board and Chief Executive Officer of WTI since
November 1990. He has also been President and Chief Operating
Officer of WMX since November 1984 and, since January 1994,
Chairman of the Board and Chief Executive Officer of Waste
Management, Inc. ("WMI"), a wholly-owned subsidiary of WMX.
Mr. Rooney is also a director of WMX, WM International,
Illinois Tool Works Inc., Caremark International Inc., Urban
Shopping Centers, Inc. and ServiceMaster Management
Corporation, the general partner of ServiceMaster Limited
Partnership.
4
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
OWNERSHIP OF WTI COMMON STOCK
The following table sets forth certain information, as of February 1, 1996,
as to the beneficial ownership of common stock of WTI by the directors and the
nominee for director of WTI, the Chairman of the Board and Chief Executive
Officer of WTI, the four other most highly compensated executive officers of
WTI as of December 31, 1995, and all directors, nominees and persons serving
as executive officers of WTI as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF WTI
COMMON STOCK PERCENT OF WTI
NAME BENEFICIALLY OWNED(1)(2) COMMON STOCK(2)
---- ------------------------ ---------------
<S> <C> <C>
Dean L. Buntrock................ 135,000(3)(4) *
William M. Daley................ 8,000(4) *
Donald F. Flynn................. 45,245 *
Kay Hahn Harrell................ 4,000 *
John M. Kehoe, Jr............... 317,587 *
James E. Koenig................. 121,500 *
Paul M. Montrone................ 256,000 *
Phillip B. Rooney............... 374,769(3) *
Manuel Sanchez.................. 18,000(4) *
Lt. Gen. Thomas P. Stafford..... 30,212 *
John J. Goody................... 4,817 *
John D. Sanford................. 121,858 *
James F. Wood................... 50,908 *
All directors, nominees and
executive officers as a group
including persons named above
(17 persons)................... 1,960,373 1.0
</TABLE>
- --------
*Less than one percent.
(1) The above named persons and members of such group have sole voting power
and sole investment power over WTI shares listed, except (i) WTI shares
covered by options exercisable within 60 days of February 1, 1996; (ii)
WTI shares held pursuant to WTI's Savings and Retirement Plan; (iii) 1,500
and 2,000 WTI shares over which Mr. Koenig and Mr. Daley have shared
voting and investment power with their respective spouses; and (iv) 10,000
WTI shares that may be deemed to be beneficially owned by each of Messrs.
Buntrock, Flynn and Rooney as a result of restricted units granted
pursuant to WTI's Restricted Unit Plan for Non-Employee Directors. Such
restricted units are the only restricted units remaining outstanding under
such plan, and no further restricted units will be granted under such
plan. At the time any of Messrs. Buntrock, Flynn or Rooney cease to be a
member of the Board, such person will receive 10,000 shares of WTI common
stock or, at the discretion of the Board, the cash equivalent thereof.
Such persons disclaim any beneficial ownership of the WTI shares
represented by such restricted units.
(2) The numbers and percentages of WTI shares owned by the above named persons
and the members of such group assume, in each case, that currently
outstanding stock options covering WTI shares which were exercisable
within 60 days of February 1, 1996 had been exercised by that person or
group as follows: Mr. Buntrock--33,336; Mr. Daley--6,000; Ms. Harrell--
3,000; Mr. Kehoe--302,248; Mr. Koenig--120,000; Mr. Montrone--256,000; Mr.
Sanchez--18,000; Mr. Sanford--80,978; Lt. Gen. Stafford--30,000; Mr.
Wood--47,490; and all executive officers and directors as a group
(including such individuals)--1,362,355. Such persons and the members of
such group disclaim any beneficial ownership of the WTI shares subject to
such options.
(3) Excludes an aggregate of 104,621,810 WTI shares that may be deemed to be
beneficially owned by Messrs. Buntrock and Rooney because each such person
may be deemed to be an affiliate of WMX (See "Principal Stockholders").
Each such person disclaims any beneficial ownership of such WTI shares.
(4) Pursuant to the Company's Deferred Director's Fee Plan, described below
under "Deferred Compensation Plan for Non-Employee Directors," Messrs.
Buntrock, Daley and Sanchez have acquired beneficial ownership of the
equivalent of an additional 8,228, 5,709 and 2,744 WTI shares,
respectively, through their voluntary deferral of all or a portion of
their directors fees.
5
<PAGE>
OWNERSHIP OF WMX COMMON STOCK
The following table sets forth certain information, as of February 1, 1996,
as to the beneficial ownership of WMX common stock by the directors and the
nominee for director of WTI, the Chairman of the Board and Chief Executive
Officer of WTI, the four other most highly compensated executive officers of
WTI as of December 31, 1995, and all directors, nominees and persons serving
as executive officers of WTI as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF WMX COMMON STOCK PERCENT OF WMX
NAME BENEFICIALLY OWNED(1)(2) COMMON STOCK(2)
---- ------------------------ ---------------
<S> <C> <C>
Dean L. Buntrock................ 3,537,683(3) *
William M. Daley................ 1,000 *
Donald F. Flynn................. 595,581 *
Kay Hahn Harrell................ 2,512 *
John M. Kehoe, Jr............... 33,505 *
James E. Koenig................. 153,965 *
Paul M. Montrone................ 0 *
Phillip B. Rooney............... 1,222,382(3) *
Manuel Sanchez.................. 200 *
Lt. Gen. Thomas P. Stafford..... 0 *
John J. Goody................... 357 *
John D. Sanford................. 197 *
James F. Wood................... 268 *
All directors, nominees and
executive officers as a group
including persons named above
(17 persons)................... 5,673,967 1.2
</TABLE>
- --------
*Less than one percent.
(1) The above named persons and members of such group have sole voting power
and sole investment power over WMX shares listed, except (i) WMX shares
covered by options granted under WMX's stock option plans which were
exercisable within 60 days of February 1, 1996; (ii) WMX shares issuable
upon conversion of WMX Convertible Subordinated Notes due 2005
("Convertible Notes"); (iii) WMX shares held pursuant to WMX's Profit
Sharing and Savings Plan and WTI's Savings and Retirement Plan; and (iv)
Messrs. Buntrock, Daley, Koenig and Rooney, and all executive officers and
directors as a group (including such individuals), who have shared voting
and investment power over 458,418, 1,000, 39,837, 65,567 and 610,484 WMX
shares, respectively. Such WMX shares shown for Messrs. Buntrock and
Rooney are held in trusts or foundations over which such individuals share
voting and investment power with other co-trustees or directors of such
trusts and foundations. Such WMX shares shown for Messrs. Daley and Koenig
are held jointly with their respective spouses. Ownership of WMX shares
shown for Messrs. Buntrock and Rooney, and for all officers and directors
as a group, includes WMX shares not held directly by them but held by or
for the benefit of (i) their spouses or (ii) their minor children and
other children residing with them, as to which they have neither
investment power nor voting power. WMX shares were held by or for the
benefit of such spouses or children of the following directors and all
executive officers and directors as a group at February 1, 1996, in the
amounts indicated: Mr. Buntrock--42,404 (held by spouse); Mr. Rooney--
101,184 (held by spouse directly and as trustee for children); and all
executive officers and directors as a group (including such individuals)--
143,839. Additionally, ownership of shares shown for Mr. Koenig includes
1,200 WMX shares held by him as trustee of a family trust in which Mr.
Koenig has no pecuniary interest. Each of the above named persons and the
members of such group disclaim any beneficial ownership of such WMX
shares.
(2) The numbers and percentages of WMX shares owned by the above named persons
and the members of such group assume that currently outstanding stock
options covering WMX shares which were exercisable within 60 days of
February 1, 1996 had been exercised as follows: Mr. Buntrock--672,527; Mr.
Flynn--87,617; Mr. Koenig--111,472; Mr. Rooney--679,037; and all executive
officers and directors as a group
6
<PAGE>
(including such individuals)--1,627,962. Such numbers and percentages also
assume that 312 WMX shares were issued to Ms. Harrell upon conversion of
Convertible Notes. Such persons and the members of such group disclaim any
beneficial ownership of the WMX shares subject to such options or issuable
upon conversion of Convertible Notes.
(3) Subsequent to February 1, 1996, pursuant to WMX's Non-Qualified Profit
Sharing and Savings Plus Plan, Messrs. Buntrock and Rooney acquired
beneficial ownership of the equivalent of an additional 75,017 and 47,765
shares, respectively, of common stock of WMX in connection with their
voluntary deferral of bonus payments earned under WMX's Corporate
Incentive Bonus Plan.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors has, pursuant to its powers, designated several
committees of the Board, including an Audit Committee and a Compensation and
Stock Option Committee (the "Compensation Committee"), the functions and
membership of which are described below. Because a majority of the Company's
outstanding common stock is owned by WMX, the Board of Directors does not have
a standing Nominating Committee. The Board of Directors held four regular
meetings and four special meetings in 1995.
The Audit Committee's functions include making recommendations to the Board
of Directors on the selection of WTI's auditors, reviewing the arrangements
for and scope of the independent auditors' examination, meeting with the
independent auditors, the Board of Directors and certain officers of WTI to
review the adequacy of internal controls and reporting, reviewing compliance
with and adherence to the Company's policies on business ethics and
environmental compliance, and performing any other duties or functions deemed
appropriate by the Board of Directors. Messrs. Montrone (Chairman), Daley,
Sanchez, Lt. Gen. Stafford and Ms. Harrell are currently members of the Audit
Committee.
The Compensation Committee is responsible for establishing salaries and
bonuses to be paid to executive officers of WTI and its principal
subsidiaries, and for the administration of WTI's 1986, 1988, 1989 and 1992
Stock Option Plans and the grant of options under the 1992 Stock Option Plan
(no further options may be granted under the 1986, 1988 or 1989 Stock Option
Plans). Messrs. Buntrock (Chairman), Ms. Harrell and Lt. Gen. Stafford are
currently members of the Compensation Committee.
During 1995, the Audit Committee met twice and the Compensation Committee
met three times. In 1995, during the time each director served in such
capacity, with the exception of one director who missed one Board meeting, all
of the directors attended all of the meetings of the Board and all meetings
held by committees of the Board on which such director served.
7
<PAGE>
COMPENSATION
The following table sets forth certain information with respect to cash
compensation for services in all capacities paid or accrued by WTI and its
subsidiaries for the past three years, to or on behalf of (i) the Chairman of
the Board and Chief Executive Officer of WTI at December 31, 1995, and (ii)
each of the four other most highly compensated executive officers of WTI at
December 31, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ---------------------
AWARDS PAYOUTS
OTHER ---------- ----------
ANNUAL SECURITIES LONG-TERM ALL OTHER
NAME AND COMPEN- UNDERLYING INCENTIVE COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) OPTIONS PAYOUTS(2) SATION(3)
- ------------------ ---- -------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Phillip B. Rooney 1995 $ 0 $ 0 $ 0 0 $ -- $ 0
Chairman of the Board and 1994 0 0 0 0 -- 0
Chief Executive Officer(4) 1993 0 0 0 0 97,800 0
John M. Kehoe, Jr. 1995 $341,250 $163,875 $ 0 56,972 $ -- $38,480
President and Chief 1994 322,500 223,080 0 35,294 -- 24,014
Operating Officer 1993 300,000 240,000 0 32,688 12,569 40,340
John J. Goody(5) 1995 $ 73,336 $ 43,542 $ 0 3,438 $ -- $ 6,239
Vice President; Chief Executive 1994 0 0 0 0 -- 0
Officer-Wheelabrator Water 1993 0 0 0 0 -- 0
Technologies Inc.
John D. Sanford 1995 $219,192 $ 87,400 $ 0 16,147 $ -- $22,279
Executive Vice President, Chief 1994 196,250 108,160 0 15,686 -- 13,897
Financial Officer and Treasurer 1993 174,555 69,950 0 11,622 5,191 18,113
James F. Wood 1995 $217,500 $109,588 $ 0 24,220 $ -- $22,731
Senior Vice President and General 1994 205,000 124,908 0 16,471 -- 16,333
Manager-Wheelabrator 1993 191,226 146,300 0 13,801 1,191 24,866
Environmental Systems Inc.
</TABLE>
- --------
(1) Excludes perquisites and other benefits unless the aggregate amount of
such compensation equals at least the lesser of $50,000 and 10 percent of
the total annual salary and bonus reported for the named executive
officer.
(2) Amounts shown were paid pursuant to the Company's Performance Unit Plan, a
long term incentive plan covering the two-year period ended December 31,
1992.
(3) Amounts shown were contributed by the Company under the Company's Savings
and Retirement Plan and Supplemental Benefit Plan. Pursuant to the
Supplemental Benefit Plan, each participant's account is credited with the
amount of the contribution, if any, that would have been made on behalf of
such participant to the Savings and Retirement Plan but for certain
limitations on such contributions imposed by the Internal Revenue Code of
1986, as amended.
(4) Mr. Rooney is compensated by WMX in his capacity as an employee of WMX and
received no cash compensation from WTI for his services, except that Mr.
Rooney received compensation from WTI in 1993 for services rendered to the
Company under a long term incentive compensation plan covering the two-
year period ended December 31, 1992.
(5) Mr. Goody commenced employment with the Company in August 1995.
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STOCK OPTIONS
The following table sets forth certain information with respect to stock
options granted to the persons named in the Summary Compensation Table during
the year ended December 31, 1995:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(4)
----------------------------------------- ---------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE
GRANTED IN FISCAL PER EXPIRATION
NAME (1)(2) YEAR SHARE DATE(3) 0% 5% 10%
- ---- ---------- ---------- -------- ---------- --- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phillip B. Rooney....... 0 -- -- -- -- -- --
John M. Kehoe, Jr....... 56,972 4.46% $13.625 4/3/2002 $0 $ 316,009 $ 736,435
John J. Goody........... 3,438 .27% $16.000 8/7/2002 $0 $ 22,394 $ 52,187
John D. Sanford......... 16,147 1.26% $13.625 4/3/2002 $0 $ 89,563 $ 208,720
James F. Wood........... 24,220 1.90% $13.625 4/3/2002 $0 $ 134,342 $ 313,074
All Stockholders(5)..... -- -- -- 4/3/2002 $0 $1,013,837,987 $2,362,673,634
</TABLE>
- --------
(1) The option holder has the right to pay the exercise price by delivering
previously acquired shares of WTI's common stock, and to have shares
withheld to satisfy tax withholding requirements in connection with the
exercise of options. Such options become immediately exercisable upon a
change in control of the Company, as defined in the option plan. Options
are non-transferable other than by will or the laws of descent and
distribution.
(2) Options become exercisable in three equal cumulative annual installments
commencing April 3, 1996, except that Mr. Goody's options become
exercisable in three equal cumulative annual installments commencing August
7, 1996.
(3) Options were granted for a term of seven years, subject to earlier
termination in certain events related to termination of employment.
(4) The amounts under the columns labeled "5%" and "10%" are included by the
Company pursuant to certain rules promulgated by the Securities and
Exchange Commission and are not intended to forecast future appreciation,
if any, in the price of the Company's common stock. Such amounts are based
on the assumption that the named persons hold the options granted for their
full seven year term. The actual value of the options will vary in
accordance with the market price of the Company's common stock. The column
headed "0%" is included to demonstrate that the options were granted at
fair market value and that the optionees will not recognize any gain
without an increase in the stock price, which increase benefits all
stockholders commensurately.
(5) Based upon the market price of the Company's common stock and the total
shares outstanding at the date of grant, if the market price of the
Company's common stock increased at the 5% or 10% rates shown in the table
above, stockholders as a group would realize aggregate gains (excluding
dividends) in the amounts shown above during the period from grant date to
expiration date for the options expiring during the year 2002.
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The following table sets forth certain information as to each exercise of
stock options during the year ended December 31, 1995 by the persons named in
the Summary Compensation Table and the fiscal year-end value of unexercised
options:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE OPTIONS AT FY-END OPTIONS AT FY-END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Phillip B. Rooney....... 0 $ 0 --/-- $0/$0
John M. Kehoe, Jr....... 0 $ 0 279,587/91,397 $2,005,915/$178,037
John J. Goody........... 0 $ 0 15,702/3,438 $43,360/$2,578
John D. Sanford......... 0 $ 0 71,875/30,478 $421,645/$50,459
James F. Wood........... 0 $ 0 37,400/39,800 $63,687/$75,687
</TABLE>
LONG TERM INCENTIVE PLAN AWARDS
The following table sets forth certain information as to awards made under
the Wheelabrator Technologies Inc. Long Term Incentive Plan (the "LTIP") with
respect to the year ended December 31, 1995 to the persons named in the
Summary Compensation Table:
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER NON-STOCK PRICE BASED
NUMBER OF SHARES, OTHER PERIOD PLANS(3)
UNITS OR OTHER UNTIL MATURATION ---------------------------
NAME RIGHTS(1) OR PAYOUT(2) THRESHOLD TARGET MAXIMUM
---- ----------------- ---------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
John M. Kehoe, Jr....... -- 3 years $138,000 $138,000 $414,000
John J. Goody........... -- 3 years 88,000 88,000 264,000
John D. Sanford......... -- 3 years 92,000 92,000 276,000
</TABLE>
- --------
(1) Awards consist of the designation of target percentages of annual salary
at the end of the performance period to be paid if the Company achieves
certain performance objectives. No payout occurs unless the Company
achieves certain threshold performance objectives. Above the threshold,
payouts may be greater than the target percentages to the extent that the
Company's performance exceeds target objectives specified. Payouts under
the LTIP are based on the rank of the Company's total stockholder return
(stock price appreciation plus reinvested dividends) among the total
stockholder returns of the companies that comprise the Standard & Poor's
500 Stock Index over the performance period.
(2) The performance period includes calendar years 1995, 1996 and 1997.
(3) At the end of the performance period, an amount equal to 50% of the
performance award, if any, is paid in cash, and the remaining 50% is
deemed to be invested in Company common stock. The participant is entitled
to receive the value of such deemed investment on the date three years
after the end of the performance period; provided generally that the
participant is an officer of the Company or one of its affiliates on that
date. The estimated future payouts were calculated using year-end 1995
salaries, they assume that a performance award will be earned at the
levels shown, and do not reflect any possible subsequent increase or
decrease in the value of the portion of the award which would be required
to be deferred under the terms of the LTIP.
ANNUAL COMPENSATION OF NON-EMPLOYEE DIRECTORS
Each member of the Board of Directors who is not an employee of WTI or an
employee of WMX or one of its other subsidiaries is paid an annual fee of
$45,000.
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<PAGE>
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
WTI maintains a Deferred Director's Fee Plan under which non-employee
directors may make an irrevocable election to defer receipt of all or a
portion of the directors fees payable to them until termination of their
membership on the Board of Directors. Such deferred amounts are deemed to be
invested in WTI's common stock and during the period of deferral such deferred
amounts are credited with the dividends or stock splits, if any, that would be
received had such investment actually been made. Upon termination of the
director's service, the common stock reflected by the deferred account is
deemed to be sold, and the deemed proceeds of such sale (or an amount equal to
the amount originally deferred, if greater) will be distributed to the
director in cash, either in a lump sum or installments.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
The Retirement Plan for Non-Employee Directors (the "Directors' Retirement
Plan") was amended by the Board of Directors on June 10, 1991 to limit
participation in such plan to those non-employee directors and former non-
employee directors who were covered by the plan as of such date. No person who
becomes a non-employee member of the Board of Directors after June 10, 1991
will be eligible for retirement benefits under the Directors' Retirement Plan.
As amended, the Directors' Retirement Plan provides that any non-employee
director elected to the Board of Directors in connection with the August 1989
merger of a predecessor of WTI known prior to August 1989 as Wheelabrator
Technologies Inc. ("Old WTI") into Resco Holdings Inc. ("Resco"), a wholly-
owned subsidiary of WTI (the "1989 Merger"), or at any time thereafter prior
to June 10, 1991 who retires from the Board of Directors with at least five
years of service as a non-employee director of WTI (or Old WTI or certain
other predecessor companies) is eligible for an annual retirement benefit for
the remainder of the director's lifetime equal to 50% of the director's fee in
effect at the director's retirement. The annual retirement benefit will be
increased by 10% of such fee for each additional year of eligible service
above five years, up to 100% of such fee for 10 or more years of service as a
non-employee director or for directors who retire at age 72, the mandatory
retirement age for directors. The benefit payable by WTI to a retired non-
employee director will be reduced by the amount of any retirement benefit
payable to such director under the Retirement Plan for Non-Employee Directors
of Old WTI or certain other predecessor companies, but in no event below the
amount that would be payable by taking into account only service as a non-
employee director of WTI.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The 1991 Stock Option Plan for Non-Employee Directors (the "Directors Plan")
covers 300,000 shares of WTI's common stock. Each director of WTI who is
neither an officer nor full-time employee of WTI or any of its subsidiaries
and who is neither an officer, employee or director of WMX or any of its
subsidiaries, other than WTI and WTI's subsidiaries, upon election or
appointment to the Board of Directors, is granted an option under the
Directors Plan to purchase a total of 15,000 shares of WTI's common stock at
the fair market value (as defined in the Directors Plan) of the stock of WTI
at the time of grant. All options under the Directors Plan are for a term of
10 years from the date of grant and become exercisable with respect to 20% of
the total number of shares subject to the option six months after the date of
grant and with respect to an additional 20% at the end of each 12-month period
thereafter on a cumulative basis during the succeeding four years.
Under the Directors Plan, in the event that WTI's shares of common stock are
changed by a stock dividend, split or combination of shares, or a merger,
consolidation or reorganization with another company in which holders of WTI's
common stock receive other securities, or any other relevant change in the
capitalization of WTI, a proportionate or equitable adjustment will be made in
the number or kind of shares subject to unexercised options or available for
options and in the purchase price for shares. If an option expires or is
terminated or cancelled unexercised as to any shares, such released shares may
again be optioned (including a grant in substitution for a cancelled option).
Shares subject to options may be made available from unissued or reacquired
shares of common stock.
Options are not transferable by the optionee otherwise than by will or the
laws of descent and distribution. Options terminate if the optionee ceases to
be a director of WTI for any reason other than death, permanent disability,
resignation or retirement. If the optionee ceases to be a director of WTI
because of death or permanent
11
<PAGE>
disability, the optionee or his heirs, legatees or legal representative may
exercise the option in full at any time during its term within three months
after the date of termination. In the event of resignation or retirement, an
option may be exercised by the optionee (or if he dies after retirement by his
heirs, legatees or legal representative) at any time during its term within
three months after the date of retirement, but only to the extent it was
exercisable on the date of retirement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At various times during 1995, Messrs. Buntrock (Chairman), Ms. Harrell and
Lt. General Stafford served as members of the Compensation Committee of WTI's
Board of Directors.
Mr. Rooney, WTI's Chairman and Chief Executive Officer, is a member of the
Board of Directors of WMX. Mr. Buntrock is the Chairman of the Board and Chief
Executive Officer of WMX. In 1995, WTI was paid approximately $38 million for
goods and services provided to WMX and its subsidiaries (other than the Company
and its subsidiaries). The various transactions between WTI and WMX and their
respective subsidiaries are described below under "Certain Transactions and
Other Matters--Transactions Between WTI and WMX."
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Report of the
Compensation and Stock Option Committee" and "WTI Stock Performance" will not
be deemed to be filed or to be proxy soliciting material or incorporated by
reference in any prior or future filings by the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
GENERAL POLICIES
The compensation of the Company's executive officers is determined by the
Compensation Committee of the Board of Directors. The Company's compensation
programs are intended to enable the Company to attract, motivate and retain the
management talent required to achieve aggressive corporate objectives in a
rapidly changing and technology-based industry, and thereby increase
stockholder value. The Company's policy is to provide incentives to its senior
management to achieve both short-term and long-term objectives and to reward
exceptional leadership, performance and contributions to the development of the
Company's business.
To attain these objectives, the Company's executive compensation program
includes a substantial incentive component which is "at risk" based on the
performance of the Company's business, primarily as reflected in the
achievement of pre-determined financial or other performance goals and, in the
case of John M. Kehoe, the Company's President and Chief Operating Officer,
based on furthering the Company's environmental principles. As an executive
officer's level of management responsibility in the Company increases, a
greater portion of his or her potential total compensation depends upon the
performance of the Company or one or more of its operating units as measured by
objective standards over one or more years.
Also for the purpose of more directly aligning their interests with the long-
term financial interests of the Company's stockholders, many of the Company's
employees, including its executive officers, are eligible to be granted stock
options periodically. The Company has also adopted a stock ownership policy and
a deferred compensation program to encourage officer investment in the Company.
See "Stock Ownership and Deferred Compensation Programs" below.
In assessing the competitiveness of the overall compensation and individual
compensation components of the Company's executive officers, the Compensation
Committee considers data from surveys of, and comparisons to, other companies.
With respect to the Company's executive officers, the Compensation Committee
reviews primarily compensation data for a group of comparator companies
compiled with the assistance of the Company's independent compensation
consultant (the "Comparator Companies"). The Comparator Companies were selected
primarily because their size and operating and financial characteristics
12
<PAGE>
make it likely that they will compete for the services of executives who have
experience and skills similar to those which the Company requires. For several
executive officers, the Compensation Committee did not believe that sufficient
information was publicly available as to the Comparator Companies for
comparison to such officers' respective positions. Accordingly, in making
compensation comparisons as to such officers, the Compensation Committee also
reviewed published survey data provided by the Company's compensation
consultant. References in this report to the Comparator Companies include such
survey data furnished by the Company's compensation consultant.
In making its decision on 1995 compensation, the Compensation Committee did
not target officer base salaries or total compensation at any specific point in
the range of salaries or total compensation paid by the Comparator Companies.
The Compensation Committee believes, however, that base salaries paid in 1995
to its executive officers correspond generally to the middle of the range of
Comparator Companies. It is the Company's general practice to structure the
incentive components of executive officers' compensation so that approximately
one-half to two-thirds of total targeted compensation for the Company's
executive officers is "at risk" through participation in the Company's
incentive compensation plans, including the Company's stock option plan. The
Compensation Committee believes that targeted incentive compensation
constitutes a somewhat higher percentage of total targeted compensation for the
Company's executive officers than that of the Comparator Companies. The
Compensation Committee believes, however, that a greater emphasis on "at risk"
compensation elements will result in the enhancement of stockholder value.
Under the Omnibus Budget Reconciliation Act of 1993, compensation paid to
certain executive officers of the Company in excess of $1 million in 1995 and
subsequent years may be non-deductible for federal income tax purposes unless
the compensation is "performance-based" or otherwise exempt under the law and
Internal Revenue Service regulations. Based upon current levels of cash
compensation payable by the Company, the Compensation Committee does not
anticipate that the $1 million deductibility cap will affect the Company for
the foreseeable future. In light of the foregoing, and because the Compensation
Committee believes it is currently more important to retain the flexibility to
adjust incentive compensation upward or downward based upon unanticipated
circumstances and performance-related matters, the Compensation Committee has
determined not to seek to qualify the Company's incentive compensation plans
under the law and applicable regulations at this time. The Compensation
Committee will review this matter from time to time as events warrant.
COMPENSATION OF EXECUTIVE OFFICERS GENERALLY
Salary
The Compensation Committee annually establishes the base salaries which will
be paid to the Company's executive officers during the coming year. In setting
salaries, the Compensation Committee generally takes into account a number of
factors, including the Company's results of operations and other Company
performance measures, competitive compensation data, comparisons of salaries
and responsibilities among the Company's executive officers, the desired
proportion of incentive compensation in the officer's total compensation
package, and qualitative factors bearing on an individual's experience,
responsibilities, management and leadership abilities and job performance. The
Compensation Committee generally does not expressly assign greater weight to
any one or more of such factors than to others.
Incentive Compensation Plans
The Compensation Committee also administers the Company's incentive
compensation plans in which executive officers participate. In doing so, the
Compensation Committee considers the Company's results of operations and other
Company performance measures (including management's plans for the Company's
growth and profitability and achievement of strategic goals), determines the
corporate performance criteria to be used for the determination of incentive
compensation awards, and fixes the levels of target and maximum awards for
participants and the minimum level of attainment of performance objectives
necessary for awards to be made under each incentive compensation plan. The
Company has typically had in effect at any one time both an annual and multi-
year incentive compensation plan, as well as a stock option plan.
13
<PAGE>
Annual Plan
For 1995, each of the Company's executive officers (except Mr. Rooney) was a
named participant in the Company's Corporate Incentive Bonus Plan (the "Annual
Plan"). Under the Annual Plan, target awards for such officers ranging from
25% to 50% of the participant's salary at year end were payable depending upon
the Company's percentage of attainment of budgeted core pre-tax income (based
on operating results which exclude income from equity investees) and, to a
lesser extent, upon WMX's achievement of its budgeted earnings per share. In
the case of certain officers who had management responsibility for one of the
Company's operating groups, target awards were payable based in part on the
Company's percentage of attainment of budgeted core pre-tax income and in
larger part on that operating group's percentage of attainment of its budgeted
pre-tax goal. The Annual Plan award formula for 1995 was designed to
disproportionately increase or decrease a participant's annual incentive
compensation in the event that actual results exceed or fall short of targeted
levels. The maximum incentive bonus in each case was set at an amount equal to
twice the amount of a participant's target bonus. The Annual Plan also
required the Compensation Committee to find that Mr. Kehoe had furthered the
implementation of the Company's environmental principles before any award
could be paid to him under the Annual Plan.
Under the terms of the Annual Plan, any officer whose bonus was based in
whole or in part on the Company's attainment of budgeted core pre-tax income
would not receive that portion of his or her award unless a specified minimum
percentage of the budgeted core pre-tax income was achieved. In the case of
any officer whose bonus was based in part upon WMX earnings per share results,
that portion of his or her award was not payable unless a specified minimum
earnings per share growth was achieved by WMX. In 1995, the Company achieved
97.3% of its budgeted core pre-tax income objective and WMX achieved its
specified minimum earnings per share growth. Five executive officers whose
bonuses were based in part on Company pre-tax income and in part on WMX
earnings per share results received bonuses equal to 94.7% of their target
bonuses. Two executive officers whose bonuses were based in part on the
results of individual operating units of the Company received bonuses equal to
18% and 124% of their target bonuses, respectively.
Long Term Plan
Under the Wheelabrator Technologies Inc. Long Term Incentive Plan (the
"LTIP"), payments, if any, are to be made following the end of each
performance period, which normally last three years. The first performance
period was from mid-1993 through 1995, the second extends from 1994 through
1996 and the third extends from 1995 through 1997. The Compensation Committee
named Mr. Kehoe as the only participant for the first and second performance
periods, and Messrs. Kehoe, Goody and Sanford as participants for the third
performance period. The Compensation Committee intends to continue to name
such individuals as participants in the LTIP in subsequent years. The
Compensation Committee may, in its discretion, name additional executive
officers as participants in the LTIP in the future.
Under the LTIP, the Compensation Committee determines participants' target
awards as a percentage of each participant's salary as of the end of each
performance period. The target award would be payable depending on the
Company's total return to stockholders compared to that of the companies
comprising the Standard & Poor's 500 Stock Index (the "S&P 500") during the
performance period. Total return to stockholders is defined for this purpose
as the sum of price appreciation plus reinvested dividends over the
performance period, divided by the share price at the beginning of the period.
Under the LTIP, participants will be paid target awards if the Company's total
stockholder return places it at a percentile ranking selected by the
Compensation Committee in relation to the S&P 500 companies. The percentage of
the target award to be paid will vary upwards to 300% of the target award if
the Company's total stockholder return places it at a higher percentile
ranking in relation to the S&P 500 companies and, for the performance period
ending in 1995, downwards to 50% of the target award if the Company's total
stockholder return places it at a specified minimum ranking. For the
performance periods ending in 1996 and 1997, the minimum threshold for payment
of a bonus was set at the target award level. If the Company's total
stockholder return places it below the specified minimum ranking in relation
to the S&P 500 companies, then no award is to be paid for the relevant
performance period. Mr. Kehoe received no payment for the first performance
period ending December 31, 1995 under the LTIP.
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<PAGE>
The LTIP also mandates that the payment of one-half of any award otherwise
payable at the end of a performance period be deferred for an additional
three-year period. During the deferral period, such amount is to be deemed
invested in shares of the Company, subject to increase or decrease in value
over the deferral period. The purpose of the deferral is to provide an
additional incentive to participants (who forfeit deferred amounts if they
leave the Company during the deferral period) to remain with the Company and
an additional linkage between compensation and Company performance.
Stock Options
Stock options may be granted to key employees, including the Company's
executive officers, by the Compensation Committee under the Company's 1992
Stock Option Plan (the "1992 Option Plan"). Among the Company's executive
officers, the number of shares subject to options granted to each individual
generally depends upon his or her base salary and the level of that officer's
management responsibility. In 1995, the largest grant was awarded to the
Company's Chief Operating Officer, reflecting the Compensation Committee's
view of Mr. Kehoe's potential to have a significant impact on the Company's
profitability and growth. With the exception of Mr. Rooney, who did not
receive an annual grant under the 1992 Option Plan in light of his
participation in a similar stock option plan maintained by WMX, executive
officers typically receive grants each year determined by dividing percentages
of the officers' salaries, which percentages range from 150% to 225%, by the
market price of the Company's common stock at the time of grant. The
Compensation Committee generally intends stock option grants to constitute at
least one-half of the officers' total targeted "at risk" compensation. In an
effort to encourage intercompany cooperation and teamwork among the WMX-
affiliated group, Messrs. Kehoe and Sanford received a 1995 stock option grant
from WMX. In the case of Mr. Sanford, the WMX grant was in lieu of a portion
of the Company grant which he otherwise would have received under the 1992
Option Plan. As further detailed below, Mr. Kehoe's WMX grant was in addition
to his Company stock option grant. All options under the 1992 Option Plan are
non-qualified stock options which are granted at an exercise price equal to
100% of fair market value on the date of grant. These options typically have a
term of seven years and become exercisable in cumulative increments of one-
third of the total number of shares subject to the option during each of the
first three years of the option term.
Stock Ownership and Deferred Compensation Programs
In 1995, the Company instituted an officer stock ownership program. Under
the program, Company officers are expected to acquire and maintain specified
levels of ownership of stock of the Company ranging from total stock value of
one and one-half times salary for certain officers to three times salary in
the case of officers who are members of the WMX Management Committee. At least
one-half of each officer's ownership target must be satisfied by having an
investment in Company stock, with investments in WMX or WM International
permitted to satisfy the balance of the ownership requirement. Also in 1995,
the Company adopted a deferral component to a pre-existing plan whereby
Company officers are encouraged to defer payments under the Annual Plan into
an unfunded investment account that tracks the performance of the Company's
stock (or, if deemed to be invested in WMX stock, the performance of that
stock). Officers who participate have their deferral investment "matched" by a
20% credit to the officer's deferral account, subject to vesting requirements.
The value of the deferral accounts is subject to increase or decrease in
accordance with Company or WMX stock price movements, as the case may be, and
hence is fully "at risk." The deferral generally continues for so long as the
officer is an employee of the Company and thereby effectively commits the
participating officers to an equity investment in the Company for the duration
of their careers with the Company.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Although he was actively involved in the management and affairs of the
Company, Phillip B. Rooney, the Company's Chairman and Chief Executive
Officer, did not receive any salary from the Company for 1995. Mr. Rooney is
compensated by WMX in his capacity as President and Chief Operating Officer of
that company. WTI does not reimburse WMX for any part of Mr. Rooney's salary.
During 1995, Mr. Rooney did not participate in
15
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the Annual Plan and, accordingly, did not receive any compensation thereunder.
In addition, although he was eligible to participate in the 1992 Option Plan,
Mr. Rooney did not receive a grant thereunder during 1995. He was also
eligible to participate in the LTIP, but was not named as a participant
thereunder.
COMPENSATION OF THE PRESIDENT AND CHIEF OPERATING OFFICER
In light of the fact that the Company's Chief Executive Officer received no
compensation from the Company for 1995, the Compensation Committee deems it
appropriate to review its deliberations in respect of the Company's most
highly compensated executive officer, John M. Kehoe, Jr.
Salary
In determining 1995 base compensation of Mr. Kehoe, the Compensation
Committee reviewed a number of the Company's significant accomplishments
achieved in 1994 under the leadership of Mr. Kehoe. Specifically, the
Compensation Committee evaluated the Company's 1994 operating results, led by
the clean energy group, which included a 16 percent increase in revenues over
1993, a 13 percent increase in earnings per share over 1993, and core pre-tax
income (which excludes equity income from Rust and WM International) of $253
million, which exceeded the Company's 1994 budget. In addition, the
Compensation Committee considered Mr. Kehoe's successful efforts to refocus
management on the Company's core business of providing clean energy while at
the same time expanding the Company's opportunities in, and emphasis on, its
clean water business.
Through such efforts, during 1994 the Company completed construction and
successful start-up of the Falls Township, Pennsylvania 1,500 ton per day
trash-to-energy facility, the wood-waste, tire and landfill gas-fired Ridge
Generating Station in Polk County, Florida and the 55-ton per day sludge dryer
and pelletizer facility in Baltimore, Maryland; commenced construction of a
500-ton per day trash-to-energy facility in Lisbon, Connecticut; continued
progress towards the privatization of a publicly-owned wastewater treatment
facility in Franklin, Ohio; expanded its water and wastewater process systems
and equipment business through acquisitions in Europe and Asia; and expanded
into Mexico through the acquisition of a 49 percent interest in (and operating
rights to) a nine million gallon per day wastewater treatment plant in Mexico
City. In addition, the Company responded aggressively to a U.S. Supreme Court
decision in May 1994 regarding the potential to characterize ash generated at
its trash-to-energy facilities as hazardous by mobilizing management to work
proactively with industry, municipal governments and the U.S. Environmental
Protection Agency to mitigate the impact of such decision on the Company's
operations. Moreover, the Company turned the decision to its advantage by
licensing its patented WesPhix(R) ash treatment technology to numerous other
trash-to-energy facilities throughout the United States. In their
deliberations, the Compensation Committee did not accord greater weight to any
one of the matters considered over any other such matter.
The Compensation Committee also considered a report and data furnished by
the Company's compensation consultant concerning Mr. Kehoe's compensation
relative to that of the chief operating officers of the Comparator Companies.
The report concluded that Mr. Kehoe's proposed 1995 salary would place him in
the middle of the range of salaries which could be expected to be paid to the
chief operating officers of the Comparator Companies.
Based on these considerations, the Compensation Committee set Mr. Kehoe's
1995 base compensation at $345,000.
Annual Plan
For 1995, the Compensation Committee awarded Mr. Kehoe a target Annual Plan
participation of 50%
of his 1995 salary, the same as his 1994 participation level. The Compensation
Committee determined that in light of the LTIP and stock option components of
Mr. Kehoe's incentive compensation structure (discussed below), Mr. Kehoe's
participation in the Annual Plan at the 50% level was appropriate in order for
Mr. Kehoe's intended incentive compensation to constitute a substantial part
of his intended total 1995 compensation.
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In making this decision, the Compensation Committee also considered the report
of the Company's compensation consultant which indicated that, on average,
bonuses paid to the Chief Operating Officers of the Comparator Companies
averaged approximately 66% of their base salaries. Based on the Company's 1995
core pre-tax income and WMX 1995 earnings per share, as specified under the
Annual Plan, Mr. Kehoe received a bonus equal to $163,875 in 1995, which is
approximately 94.7% of his target under the Annual Plan and approximately
47.4% of his base salary.
LTIP
Under the Company's LTIP, for the performance period ending December 31,
1997, the Compensation Committee awarded Mr. Kehoe a target award equal to 40%
of his salary as of the end of such period. The Compensation Committee's
selection of the 40% participation level for Mr. Kehoe reflects the Company's
compensation practices, under which incentive compensation under the LTIP,
together with the Annual Plan and stock options, is to comprise between one-
half and two-thirds of total targeted compensation for Mr. Kehoe. The
Compensation Committee also considered the level of awards typically made and
its understanding of long term compensation awards by the Comparator
Companies. As noted above, no payment will be made to Mr. Kehoe pursuant to
this LTIP award, if ever, until the completion of the specified performance
period and the Company's achievement of at least the minimum specified
performance criterion. In this regard, the 1993-1995 performance period under
the LTIP has ended with no award being paid to Mr. Kehoe.
Stock Options
The Compensation Committee's 1995 grant of options to Mr. Kehoe under the
1992 Option Plan was determined by multiplying Mr. Kehoe's base compensation
by 225 percent and dividing the product of that calculation by the per share
option exercise price, which was the fair market value of a share of the
Company's common stock as of the date of grant. In selecting this formula, the
Compensation Committee considered the Company's historical stock option grant
practices, as well as the goal of maintaining incentive compensation as a
substantial portion of Mr. Kehoe's total compensation and of making stock
option grants at a level of approximately one-half of total incentive
compensation. For 1995, Mr. Kehoe also received a WMX stock option grant equal
to 100% of his base salary in recognition of his participation on the WMX
Management Committee.
Dean L. Buntrock (Chairman)
Kay Hahn Harrell
Lt. Gen. Thomas P. Stafford
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WTI STOCK PERFORMANCE
The following graph and table compare the yearly percentage change in the
cumulative total returns on WTI's common stock, the Standard & Poor's 500
Index and the Smith Barney Solid Waste Index (in each case assuming dividend
reinvestment, but only for the portion of the period for which dividends were
paid in the case of the Company):
COMPARISON OF 5-YEAR CUMULATIVE RETURN
VS. S&P 500 AND SMITH BARNEY SOLID WASTE INDICES(1)(2)(3)
LOGO
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Wheelabrator Technologies Inc. $100 $177 $190 $183 $153 $175
S&P 500 Index $100 $131 $190 $155 $157 $215
Smith Barney Solid Waste Index $100 $107 $ 98 $ 74 $ 77 $ 88
</TABLE>
- --------
(1) Historical results are not necessarily indicative of future performance.
(2) Assumes $100 invested on December 31, 1990 in WTI common stock, the S&P
500 Index, and the Smith Barney Solid Waste Index.
(3) Upon consummation of the merger on September 7, 1990 between WTI and a
subsidiary of WMX (the "1990 Merger") pursuant to which WMX obtained
majority ownership of WTI, each share of the Company's common stock
outstanding on the merger date (except shares held by WMX) was converted
into (i) .574 of a share of Company common stock and (ii) .469 of a share
of WMX common stock. The performance graph and table assume that all of
the shares of WMX common stock were sold by the recipient thereof
immediately following the 1990 Merger and that the proceeds of such sale
(without deductions for brokerage commissions or other costs) were
reinvested by such recipient in the Company's common stock on the same
date. The foregoing transactions would have resulted in ownership of
approximately the same number of shares of Company common stock both
before and after the 1990 Merger.
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CERTAIN TRANSACTIONS AND OTHER MATTERS
TRANSACTIONS BETWEEN WTI AND WMX
WTI and certain of its subsidiaries are parties to agreements with WMX and
certain of its subsidiaries which, among other things, govern the ongoing
relationships between the various members of the WMX family of companies. A
number of such agreements, some of which are described below, were entered into
in connection with the 1988 acquisition by WMI (then known as Waste Management
of North America, Inc.) of a 22% interest in WTI (the "1988 Transaction") and
the subsequent 1990 Merger which resulted in WMX acquiring ownership of a
majority of WTI's common stock. A number of additional agreements were entered
into in connection with WTI's acquisition of an equity interest in WM
International in 1991 and the formation of Rust in January 1993, each of which
transactions is described below.
Due to the complexity of the various relationships between WTI and WMX
(including their respective subsidiaries), there can be no assurance that each
of such agreements, or the transactions provided for therein, when considered
separately, has been or will be effected on terms no less favorable to WTI than
could have been obtained from unaffiliated third parties. It has, however, been
the intention of both WTI and WMX that such agreements and transactions, taken
as a whole, should accommodate their respective interests in a manner that is
fair to all parties, while continuing certain mutually beneficial joint
arrangements. Additional or modified arrangements and transactions may be
entered into by WTI, WMX and their respective subsidiaries. While any such
future arrangements and transactions are expected to be determined through
negotiation between them, there can be no assurance that conflicts of interest
will not occur. The Company intends to seek the approval of its independent
directors for any agreement which management or any independent director of the
Company believes to be of material importance to the Company and to involve a
significant conflict of interest with WMX and its affiliated companies.
LAND OPTION AGREEMENT. Pursuant to a Land Option Agreement originally entered
into at the time of the 1988 Transaction and subsequently amended, Resco, as
the successor by merger to Old WTI, was granted an exclusive option (the "Land
Option") to purchase, lease or sublease parcels of real estate at or adjacent
to landfill facilities located in the United States or Canada owned or leased
by WMI or its affiliates or subsidiaries. The potential uses for such option
parcels include trash-to-energy facilities, biosolids management and organic
waste composting facilities and, should WTI exercise its option under an
agreement between the Company and WMI (the "Medical Waste Option Agreement"),
medical waste incineration and autoclave facilities. The Land Option Agreement
was amended in August 1995 to, among other things, accelerate the renewal date
to a current date and increase the renewal fee from $10 million to $15 million;
extend the term of the Land Option Agreement to December 31, 2020; add a
schedule setting forth the minimum portion of the Land Option to be allocated
to each parcel acquired; terminate the Land Option (except with respect to the
guarantee of value described below) upon a Change in Control (as defined in the
Land Option Agreement) of WTI; and provide for a WMX guarantee of the book
value (less related deferred taxes) of any portion of the Land Option that WTI
has not been able to allocate to facilities by December 31, 2020. The per-acre
purchase price of any parcel purchased pursuant to the Land Option Agreement
will be equal to the book value per acre on the books of WMI for such parcel.
Pursuant to such amendment, during 1995 the Company paid WMX $15 million to
renew the Land Option. Also under the terms of the Land Option Agreement,
during 1995 the Company paid $72,000 in lease payments to WMI pursuant to a
site at a WMI landfill upon which the Company has developed a composting
facility.
SECOND AMENDED AND RESTATED AIRSPACE DEDICATION AGREEMENT. The original
Airspace Dedication Agreement was entered into in connection with the 1988
Transaction and was subsequently amended in June 1992. Pursuant to such
agreement, WMI agreed to dedicate airspace at landfill sites owned, leased or
operated by subsidiaries or affiliates of WMI (a "Disposal Site") for the
disposal of ash residue ("Ash Residue") (which includes ash residue from
medical waste incineration facilities in the event WTI exercises its right to
acquire WMI's medical waste business pursuant to the Medical Waste Option
Agreement) and non-hazardous biosolids and by-pass waste ("Other Waste")
generated at or from facilities owned or operated by Resco. In December 1992,
the agreement was again amended and restated in connection with the formation
of Rust, described below
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under "Rust Transaction," to expand the definition of Other Waste to include
special wastes removed from third-party sites being remediated by Resco or any
of its affiliates. The Second Amended and Restated Airspace Dedication
Agreement (the "Second Amended and Restated ADA") was executed in connection
with the assignment by Resco to Rust of $30 million of disposal credits which,
as described below, have subsequently been cancelled.
Under the Second Amended and Restated ADA, Resco may reserve dedicated
airspace at any one or more Disposal Sites for a term ending August 12, 2008,
subject to extension in certain circumstances involving an event of force
majeure. Such reservations of airspace must be at Disposal Sites properly
permitted to dispose of the type of waste proposed for disposal, and may not
exceed a total of 35% of the airspace available for the type of waste proposed
for disposal at any such Disposal Site. The price-per-ton that will be charged
Resco by WMI to dispose of waste covered by the Second Amended and Restated
ADA at any Disposal Site will generally be not greater than the most favorable
per ton price charged by the Disposal Site to customers other than Resco for
the acceptance and disposal of similar quantities and types of waste on
similar terms and conditions excluding, however, charges to disposal customers
who pay a premium for long-term guaranteed waste disposal. Under the original
agreement, WMI granted Resco disposal credits totalling $70 million ("Disposal
Credits"), to be applied against the aggregate cost of disposing of Ash
Residue at the rate of 20% of the applicable disposal price described above.
The availability of the Disposal Credits was extended to cover all waste
eligible for disposal under the Second Amended and Restated ADA. As amended
and restated, the ADA also provides for Disposal Credits to be applied against
disposal fees paid by Resco and its subsidiaries under separately negotiated
disposal arrangements with WMI, such as the arrangement described below under
"Disposal Agreement." On January 1, 1993, as a part of the consideration paid
by WTI in the Rust Transaction described below, Resco contributed $30 million
in unused Disposal Credits to Rust. The contribution of Disposal Credits was
made pursuant to a provision of the ADA allowing Resco to sell all or any part
of the unused portion of the Disposal Credits to any third party, subject to
WMI's right of first refusal with respect to each such sale. In November 1995,
WMI and Rust agreed that Rust's unused portion of its Disposal Credit would be
cancelled upon the payment by WMI to Rust of cash in an amount equal to the
portion of the Disposal Credit that remained unused by Rust as of the date of
payment (the "Unused Disposal Credit"). Pursuant to such agreements, WMX paid
Rust $27.5 million for Rust's Unused Disposal Credits, which were subsequently
cancelled. In 1995, Resco paid WMI a total of $12.1 million for disposal of
waste pursuant to the Second Amended and Restated ADA and used $3.0 million in
Disposal Credits.
DISPOSAL AGREEMENT. In 1989, Waste Management Inc. of Florida, a subsidiary
of WMI, entered into a Disposal Agreement with a Resco subsidiary for the
disposal of ash residue and bypass waste from the 2,250 ton-per-day trash-to-
energy facility owned and operated by such subsidiary in Broward County,
Florida (the "North Broward Project"). The disposal price for ash residue is
based upon a contractually specified formula. Pursuant to the Second Amended
and Restated ADA, described above, the amount paid by the North Broward
Project for disposal of ash residue and bypass waste since June 1, 1992 has
been reduced by Disposal Credits available thereunder. In 1995, the disposal
price per ton, net of Disposal Credits, was $34.12. For disposal of bypass
waste, the North Broward Project will be charged the same rates as other users
of the landfill, as reduced by available Disposal Credits. During 1995, the
North Broward Project paid approximately $7.7 million in ash disposal fees to
WMI, net of Disposal Credits.
RESTATED FUNDING AGREEMENT. Pursuant to a Restated Funding Agreement entered
into between WMX and WTI in connection with the 1990 Merger, WMX agreed to use
all 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 (the "Securities"), which may be
either debt, equity or a combination thereof. WMX's obligations will be deemed
satisfied by the purchase of the 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
20
<PAGE>
suspended if WTI does not reasonably demonstrate its ability to pay interest
or 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. WTI has
received 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. 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 WTI 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.
INTELLECTUAL PROPERTY LICENSING AGREEMENT. In connection with the 1990
Merger, an Intellectual Property Licensing Agreement was entered into among
WTI, WM International and WMI and provides, among other things, that WTI has a
10-year, non-exclusive, royalty-free license, with two successive 5-year
renewal options, to (i) the "BRINI" recycling and composting technology owned
by WM International; (ii) 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 the development or operation of
recycling facilities at or adjacent to any WTI facility; and (iii) the
proprietary technology and know-how of WMI in the area of landfill gas
recovery and the conversion of such gas to energy. WMI further agreed to use
reasonable and good faith efforts to give WTI substantial responsibility for
the electricity-generating portion of each landfill gas-to-energy facility
owned by WMI. WMI agreed that only WTI shall develop the business of
designing, constructing, operating and maintaining landfill gas recovery
facilities for governmental, industrial and other third party customers, and
that WMI will assist WTI in such development. 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
minimum financial objectives established by the Board of 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
shall terminate, as to facilities not already operational, contractually
committed or the subject of, or contemplated by, a bid or other submission
previously made by WTI or WMI, as the case may be, at the earlier of the
termination of the stated license periods, the expiration of any patent
licensed pursuant thereto, or the date on which WTI is no longer a majority-
owned subsidiary of WMX.
AMENDED AND RESTATED MASTER INTERCORPORATE AGREEMENT. The Company, WMX and
Chemical Waste Management, Inc. ("CWM"), a wholly owned subsidiary of WMX, are
parties to an Amended and Restated Master Intercorporate Agreement (the
"Amended Intercorporate Agreement"), originally entered into in connection
with the 1990 Merger, which provides, among other things, that WTI invest its
excess cash in WMX obligations (so long as such investments would not be a
material factor in affecting the ability of WTI to obtain or maintain an "A"
long-term debt rating). Under the Amended Intercorporate Agreement, WMX is
required to fund WTI's working capital requirements on an unsecured basis (but
with rights of set off), with the aggregate outstanding advances not to exceed
at any time the amount of WTI excess cash then invested with WMX (the
"Compensating Balance Facility"), plus (until December 31, 1996 and to the
extent not prohibited by agreements with third parties) $100 million (the
"$100 Million Facility"). WTI may borrow such funds from WMX on open account
under both the $100 Million Facility and the Compensating Balance Facility at
floating interest rates that will match WMX's 30-day commercial paper rate
plus WMX's cost of providing funds. WTI may at its option also borrow funds
for fixed terms of up to ten years under the Compensating Balance Facility
(however the maturities of such borrowings may not extend beyond the date on
which WTI's deposits with WMX come due) and for fixed terms of up to 270 days
under the $100 Million Facility. The interest rate for any fixed or term loan
borrowing by WTI will be WMX's total effective cost for borrowings of a
comparable maturity. To the extent that WTI can demonstrate the availability
to it of lower short-term borrowing rates, or higher rates of return on short-
term investments involving risks comparable to those inherent in investments
in short-term debt instruments of WMX, it is entitled to pay such rates on
amounts
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borrowed from WMX or receive such rates on amounts invested with WMX, as the
case may be. As of December 31, 1995, the amount of WTI's deposits with WMX
(including principal and accrued but unpaid interest) totalled approximately $
87.5 million. The largest amount on deposit with WMX during 1995 was
approximately $190.4 million. During 1995, WTI was paid interest on such
deposits at rates ranging from 5.79% to 7.88% depending upon maturity. As of
December 31, 1995, approximately $50.2 million was due to WMX from WTI
(including principal and accrued but unpaid interest). The largest amount of
such obligations outstanding during 1995 was approximately $221.2 million.
Obligations due to WMX during 1995 bore interest at rates, adjusted every 30
days, ranging from 5.76% to 6.08% as of year-end.
Under the Amended Intercorporate Agreement, WMX also agreed to make available
to WTI various corporate and support services, including, among other things,
the services of WMX's transportation, federal and state government affairs,
legal, treasury, tax and environmental audit departments. The Amended
Intercorporate Agreement also requires WMX to make available to WTI the
services of WMX's corporate risk management department for purposes of
administering WTI's insurance and risk management programs. Such corporate
support and risk management services are supplied by WMX on a cost
reimbursement basis. In 1995, WTI paid WMX approximately $3.8 million for these
and related services.
Pursuant to the Amended Intercorporate Agreement, WTI is designated as the
preferred vendor to WMX and CWM for all engineered products of the types then
being manufactured or assembled by WTI, including water process equipment and
air pollution control systems and equipment. During 1995, WTI charged WMX and
its subsidiaries approximately $1 million for such products. The amounts
charged for such products were determined on an arms-length basis and are
believed to approximate the market value thereof.
The Amended Intercorporate Agreement also provides that WMX has the
cumulative, continuing right to purchase from WTI for cash or cash equivalents
such number of shares of WTI capital stock as may be necessary for WMX to
continue to own a majority of WTI's outstanding voting stock. WMX's rights
under this option will expire in the event that such option is exercisable as
of the end of any calendar year and is not exercised by April 30 of the
immediately following year. The purchase price for the shares of WTI capital
stock will be the then current fair market value of such shares. WTI is
required to maintain a sufficient number of shares of authorized but unissued
capital stock, together with any treasury stock, to permit WMX to exercise its
option, and will take such reasonable steps as WMX may request to cause such
shares to be listed on the New York Stock Exchange upon issuance and to be
subject to the registration rights currently held by WMX with respect to shares
of WTI stock already held by it.
With the exception of the $100 Million Facility, which expires December 31,
1996, with automatic annual renewal periods thereafter, the Amended
Intercorporate Agreement will terminate at the time of the termination of WMX's
option to maintain WTI as a majority-owned subsidiary of WMX. Either WMX or the
Company have the right to terminate the $100 Million Facility effective as of
any renewal date by providing 90 days prior written notice of its intent to so
terminate the facility.
WM INTERNATIONAL AGREEMENTS. The Company, WMX, CWM, WM International, Waste
Management International, Inc., Waste Management Europe N.V., WTI International
Holdings Inc. and RIH Inc. are parties to a Third Amended and Restated
International Development Agreement ("IDA") dated January 1, 1993. The IDA is a
successor to an agreement originally entered into by WMX, CWM, WTI and certain
of their affiliates in connection with the 1990 Merger.
The IDA was twice amended and restated in its entirety, first in connection
with the initial public offering by WM International of ordinary shares of its
capital stock, and again in connection with the Rust Transaction, described
below, primarily to provide for the transfer, from CWM to Rust, of CWM's rights
thereunder. Pursuant to the IDA, as amended, WTI, WMX and Rust have agreed to
vote their WM International shares so that one designee of WTI (or such greater
number as shall equal the total number of directors multiplied by the
percentage of outstanding WM International shares held by WTI, reduced to the
nearest whole number) shall be elected to the Board of Directors of WM
International, so long as WTI continues to own or has the right to acquire at
least
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10% of WM International's outstanding shares (Mr. Rooney has been designated
by WTI as its designee). This agreement also grants WTI an option to maintain
beneficial ownership of WM International's outstanding shares at a level
having not less than 10% of the voting power of outstanding WM International
securities. Pursuant to this agreement, WTI granted to WMX certain rights of
first refusal with respect to its WM International shares, WMX granted to WTI
certain participation rights with respect to a disposition of WM International
shares by WMX, and WM International granted to WTI rights to participation and
demand registrations under the Securities Act of 1933 and rights to have WM
International facilitate sales in offerings made outside of the United States.
At the time of WM International's initial public offering, WTI, CWM, WMX,
Waste Management International, Inc. and WM International entered into an
International Business Opportunities Agreement, which includes certain terms
previously contained in the IDA and the Master Intercorporate Agreement
discussed above. The International Business Opportunities Agreement was
amended and restated in connection with the Rust Transaction, described below,
and Rust was added as a party. 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 all business opportunities
to the WMX-controlled subsidiary which, in WMX's reasonable and good faith
judgment, has the most experience and expertise in that line of business.
Waste management services opportunities outside of North America will be
allocated primarily to WM International, and WTI has agreed not to conduct
waste management services operations outside of North America other than
through its interest in WM International until the later of July 1, 2000 and
the date WMX ceases to beneficially own a majority of the outstanding shares
of common stock of WTI or a majority of all outstanding voting equity
interests of WM International.
WTI, CWM, Rust, WMX and WM International are also parties to a First Amended
and Restated Master License Agreement originally entered into in connection
with the initial public offering of WM International. Under the Master License
Agreement, as amended, each of WMX, CWM, Rust and WTI, on the one hand, and WM
International, on the other, was granted the right to obtain from time to time
a non-exclusive license of patents, technology, trademarks, know-how and other
intellectual property of the other. A party's license of intellectual property
would be usable only within the scope of activities allocated to the party by
the Amended and Restated International Business Opportunities Agreement and
would be subject to the party's payment of a royalty equal to the fair market
value of the license at the time of the grant of the license (subject to a
"most favored nation" pricing provision). Sublicensing is not permitted. All
of the parties have agreed to share business information and to keep such
information confidential. Any services to be provided by the licensing party
in connection with the grant of the license and the compensation for the
services would be as agreed by the parties to the license at the time of its
grant. The Amended and Restated International Business Opportunities Agreement
permits WTI to license technology to third parties anywhere in the world,
subject to certain conditions.
In July 1995, the Company and WM International entered into a joint venture
agreement to develop waste-to-energy ("WTE") projects outside of North
America, Germany and Italy (the "Joint Venture"). The Joint Venture will have
the first right to develop WTE projects anywhere in the world outside of North
America (which remains exclusively allocated to WTI), Germany and Italy (which
remain exclusively allocated to WM International). WTI will have
responsibility for early stage development of WTE projects and will bear all
of the costs of these development activities. Subject to some exceptions, the
Company has committed to expend $10 million toward such development costs
during the initial five-year term of the Joint Venture, which expires on July
1, 2000. Thereafter, the Joint Venture will continue indefinitely, subject to
the right of either WM International or the Company to terminate it by giving
one year's written notice. WM International has the option to hold up to a
49%-equity interest in each project developed by WTI pursuant to the Joint
Venture. During 1995, WTI expended $712,421 in development costs pursuant to
the Joint Venture.
RUST TRANSACTION. In December 1992, an Organizational Agreement was entered
into among WTI, CWM and The Brand Companies, Inc. ("Brand") pursuant to which
WTI and CWM agreed to organize Rust and to acquire newly issued shares of Rust
in exchange for contributing certain businesses to Rust (the "Rust
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Transaction"). On January 1, 1993, pursuant to the Organizational Agreement,
WTI contributed to Rust, in exchange for approximately 42% of the outstanding
capital stock of Rust at that time, its two principal engineering,
environmental consulting and construction businesses, its London-based
international engineering and consulting business, certain Disposal Credits
and cash. At the same time, CWM contributed to Rust, in exchange for
approximately 58% of the outstanding capital stock of Rust at that time, all
of its ownership in Brand, its hazardous substance remediation services
businesses, its ownership interest in WM International and certain
indebtedness owed by Brand to CWM. In addition, WTI, CWM, Rust and various of
their affiliates entered into several ancillary agreements described below or
under "WM International Agreements" above.
Subsequent to the Rust Transaction, on May 7, 1993 Brand was merged into a
subsidiary of Rust, and Rust became owned approximately 40% by WTI, 56% by
CWM, and 4% by the former public stockholders of Brand. In July 1995, WMX
acquired the outstanding shares of Rust common stock not already owned by the
Company or CWM. Although the Company was offered the opportunity to
participate in the transaction, the Company determined not to participate
following a review of the proposed transaction by WTI's independent directors.
The transaction did not affect WTI's 40% ownership interest in Rust nor did it
effect any change in control of Rust.
WTI, WMX, CWM and Rust have also entered into the Rust Intercorporate
Services Agreement pursuant to which WMX has committed to loan to Rust up to
$350 million, and to provide Rust (at Rust's expense) with all appropriate
insurance coverages and bid, performance and other surety bonds to the extent
reasonably available, all on terms substantially similar to WMX's arrangement
with WTI as described above under "Amended and Restated Master Intercorporate
Agreement." Under the Rust Intercorporate Services Agreement, Rust has also
agreed to provide WTI with certain administrative and benefit services
previously managed by one of the WTI subsidiaries contributed to Rust. Such
services are provided on a fully-allocated cost basis. WTI was charged
approximately $111,211 for such services provided by Rust during 1995. WMX,
WTI and CWM have also agreed that Rust will be the preferred vendor of
architectural, design, engineering, construction and construction management
services (including related procurement services), environmental consulting
and engineering services, hazardous substance remediation services, and
industrial maintenance and other construction services of the type generally
offered by Rust and its subsidiaries to third parties. During 1995, WTI paid
Rust $21.4 million for such services, which WTI believes reflects the
approximate value for which WTI could have obtained comparable services from
unaffiliated third parties. In January 1996, partially as a consequence of
Rust's decision to sell its process engineering and construction businesses,
the Rust Intercorporate Services Agreement was amended to authorize WMX and
its subsidiaries to provide management services to Rust Industrial Services
Inc., a Rust subsidiary, and to authorize the Company to find and implement
alternative arrangements for obtaining benefits administrative services. With
the exception of certain provisions related to the committed credit facility
discussed above, the Rust Intercorporate Services Agreement will terminate on
December 31, 1997 unless earlier terminated by WMX following the occurrence of
certain events of default.
OTHER PAYMENTS. WTI provides services to, and purchases services from, WMX
and its affiliated companies in the ordinary course of business at market
rates. During 1995, WTI made payments in addition to those described above of
(i) approximately $1.6 million to WMI for waste transportation services; (ii)
approximately $243,000 to WMX for office space rental; and (iii) approximately
$240,000 to WMI for operating a transfer station leased by WTI from a regional
waste management authority. During 1995, WMI delivered waste for disposal to
certain WTI facilities pursuant to various contractual arrangements, for which
WMI paid disposal fees aggregating approximately $17.6 million. In addition,
during 1995 Rust paid WTI $744,000 for office space rental.
WMX has agreed to provide a guarantee in respect of WTI's outstanding
indebtedness at one of its trash-to-energy facilities. As consideration for
WMX's credit support, the Company pays WMX an annual fee equal to 0.25% of the
principal amount of such outstanding indebtedness. WTI believes such annual
fee to be at a rate equal to or better than that obtainable from unaffiliated
third parties with a similar credit rating. In 1995, WTI paid WMX
approximately $94,000 for such credit support.
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OTHER TRANSACTIONS
STOCK OPTION PLAN LOANS. When an option is exercised by an optionee under
the 1992 Stock Option Plan or the Directors Plan at a time when the fair
market value of the underlying stock exceeds the option exercise price, the
difference is treated as ordinary income to the optionee for income tax
purposes and the Company is entitled to a deduction equal to such amount. The
Internal Revenue Service has indicated that it will disallow such a deduction
unless the employer withholds the tax payable by the optionee by reason of
such exercise. To facilitate the purchase of stock upon exercise of such
options, and to assure itself of the deductions, the Company has a policy of
making available interest-free loans, in an amount up to the equivalent of all
applicable tax withholding requirements, to optionees whose exercise of
options results in ordinary income to them in excess of $10,000. All such
loans are required to be repaid not later than April 15 in the year following
the year in which such loans were made, unless otherwise extended. There were
no such loans in excess of $60,000 outstanding to the Company's directors and
executive officers during the period from January 1, 1995 through March 15,
1996. The Company also makes available to optionees interest-free loans for a
period not to exceed 15 days to facilitate the exercise of options and the
sale of the underlying stock. There were no such loans in excess of $60,000
outstanding to the Company's directors and executive officers during the
period from January 1, 1995 through March 15, 1996.
STOCKHOLDER PROPOSAL
The Company has been notified that the Central Pension Fund of the
International Union of Operating Engineers and Participating Employers, 4115
Chesapeake Street, N.W., Washington, D.C. 20016-4665, beneficial owner of
7,300 shares of the Company's common stock, has given notice of its intention
to present for consideration and action at the annual meeting the following
proposal. FOR THE REASONS SET FORTH BELOW, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE PROPOSAL.
STOCKHOLDER PROPOSAL
"BE IT RESOLVED: that the stockholders of Wheelabrator Technologies
(or "Company") urge that the Board of Directors take the necessary
steps, in compliance with Delaware state law, to declassify the Board
of Directors for the purpose of director elections. The Board
declassification shall be done in a manner that does not affect the
unexpired terms of directors previously elected."
SUPPORTING STATEMENT OF PROPONENT
"The Board of Directors of the Company is divided into three classes
serving staggered three-year terms. It is our belief that the
classification of the Board of Directors is not in the best interests
of the Company and its shareholders. The elimination of the staggered
board would require each director to stand for election annually. This
procedure would allow shareholders an opportunity to annually register
their views on the performance of the board collectively and each
director individually. Concerns that the annual election of all
directors would leave the Company without experienced board members in
the event that all incumbents are voted out is unfounded. If the owners
should choose to replace the entire board, it would be obvious that the
incumbent directors' contributions were not valued.
"It is our belief that a company's corporate governance procedures
and practices, and the level of management accountability they impose,
are related to the financial performance of a company. We believe sound
corporate governance practices, such as the annual election of all
directors, will impose
25
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the level of management accountability necessary to help ensure that a
good performance record is attainable over the long-term. Regardless of
whether a shareholder believes the current Board or management team is
performing satisfactorily or not, we believe it is clearly in the best
interest of the Company and its shareholders to take definitive action
as owners if they believe the Board is failing to realize the full
potential of the Company's assets.
"A classified board of directors protects the incumbency of the Board
of Directors and current management which in turn limits accountability
to stockholders. In addition to a classified Board, we believe the
Company has the following measures in place which further protect
incumbency and limit accountability to shareholders: no confidential or
secret ballot proxy voting; no cumulative voting; and blank check
preferred stock. We believe that allowing shareholders to annually
register their views on the performance of the Board and each Director
is one of the best methods to ensure that our Company will be managed
in the best interest of shareholders, both now and in the long-term.
"We urge your support for this proposal."
OPPOSING STATEMENT OF THE BOARD OF DIRECTORS
Since the Company first became a publicly traded corporation in 1986, its
Restated Certificate of Incorporation has provided for dividing the Board of
Directors into three classes, with approximately one-third of the Directors
elected each year to staggered three-year terms. The Board continues to believe
that a classified Board is in the best interests of the Company and its
stockholders.
A classified Board helps to ensure that a majority of the Board at any given
time has prior experience serving as Directors of the Company. This enhances
the likelihood of stability and continuity in the leadership and policies of
the Company while preserving the ability of the Company's stockholders to make
changes in the Board's membership. The Board also believes that the existence
of minimum three-year, as opposed to one-year, terms for Directors assists the
Company in attracting Director candidates who are willing to make longer-term
commitments to serving the Company, which in turn increases the overall
knowledge and experience of the Board with respect to the Company's operations.
A large number of major U.S. companies have classified boards of directors.
Statistics compiled by the American Society of Corporate Secretaries show that
stockholders of public companies have continued to support the use of
classified boards, as indicated by the fact that more than 97% of all
stockholder proposals aimed at eliminating classified boards which were voted
upon during the past three years and which were tracked by the Society have
been defeated.
For the reasons stated above, the Board of Directors believes that the
proposal is not in the best interests of the Company and its stockholders.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been selected by the Board of Directors, upon the
recommendation of its Audit Committee, to continue to act as the Company's
independent auditors in 1996. Representatives of Arthur Andersen LLP will be
present at the 1996 annual meeting of stockholders, will have the opportunity
to make a statement if they desire to do so, and will be available to respond
to appropriate questions.
FINANCIAL STATEMENTS
WTI has enclosed its Annual Report to Stockholders for the year ended
December 31, 1995 with this proxy statement. Stockholders are referred to the
report for financial and other information about WTI, but such report is not
incorporated in this proxy statement and is not a part of the proxy soliciting
material.
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PROPOSALS BY STOCKHOLDERS
Any proposals by stockholders intended to be presented at the 1997 annual
meeting must be received by WTI no later than November 28, 1996 in order to be
considered by the Board of Directors for inclusion in WTI's 1997 proxy
statement. In order for a stockholder to nominate a candidate for director,
under WTI's by-laws timely notice of the nomination must be received by WTI in
advance of the meeting. Ordinarily, such notice must be received not less than
30 nor more than 60 days before the meeting (but if WTI gives less than 40 days
notice of the meeting, then such notice must be received prior to the meeting
and within 10 days after notice of the meeting is mailed or other public
disclosure of the meeting is made). The stockholder filing the notice of
nomination must describe various matters regarding the nominee, including such
information as name, address, occupation and shares held.
In order for a stockholder to bring other business before a stockholder
meeting, timely notice must be received by WTI within the time limits described
above. Such notice must include a description of the proposed business, the
reasons therefor, and other specific matters. These requirements are separate
from and in addition to the requirements a stockholder must meet to have a
proposal considered for inclusion in WTI's 1997 proxy statement.
In each case the notice must be given to the Secretary of WTI, whose address
is 3003 Butterfield Road, Oak Brook, Illinois 60521. Any stockholder desiring a
copy of WTI's by-laws will be furnished one without charge upon written request
to the Secretary.
OTHER MATTERS
You are again urged to attend the annual meeting. Proxies will be solicited
by the Board of Directors through use of the mails. Proxies may also be
solicited by directors, officers and a small number of other employees of WTI
personally or by mail, telephone or otherwise, but such persons will not be
compensated for such services. Brokerage firms, banks, fiduciaries, voting
trustees or other nominees will be requested to forward the soliciting material
to the beneficial owners of stock held of record by them, and WTI has hired
Reinhard Associates to coordinate the solicitation of proxies by and through
such holders for a fee of approximately $3,500 plus expenses. The entire cost
of the Board of Directors' solicitation will be borne by WTI.
The Board of Directors does not intend to present, and does not have any
reason to believe that others will present, any item of business at the annual
meeting other than those specifically set forth in the notice of the meeting.
However, if other matters are presented for a vote, the proxies will be voted
as to such matters in accordance with the judgment of the persons acting under
the proxies.
By Order of the Board of Directors,
LOGO
Herbert A. Getz
Secretary
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WHEELABRATOR TECHNOLOGIES INC.
Annual Meeting, May 1, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Phillip B. Rooney and Herbert A. Getz, each with power of substitution,
are hereby authorized to vote all shares of common stock of Wheelabrator
Technologies Inc. which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of Wheelabrator Technologies Inc.
to be held on Wednesday, May 1, 1996, and at any adjournments, as specified on
the reverse side.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS.
(Please mark this Proxy and sign and date it on the
reverse side hereof and return it in the enclosed envelope.)
FOLD AND DETACH HERE
Please mark
your votes as
indicated in
this example [X]
A vote FOR proposal 1 is recommended by the Board of Directors.
1. Election of Directors.
FOR each WITHHOLD
nominee listed AUTHORITY
except nominee(s) to vote for each
written to the right nominee listed
[_] [_]
Nominees: Donald F. Flynn, Kay Hahn Harrell, John M. Kehoe, Jr., Manuel Sanchez
(Instructions: To withhold authority to vote for any individual nominee, write
the nominee's name on the line provided below.)
________________________________________________________________________________
A vote AGAINST proposal 2 is recommended by the Board of Directors.
2. Stockholder proposal regarding declassification of the Board of Directors.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, on such other business as may properly come before the
meeting.
A MAJORITY (OR IF ONLY ONE, THEN THAT
ONE) OF THE PERSONS NAMED ON THE REVERSE
SIDE OR THEIR SUBSTITUTES WHO SHALL BE
PRESENT AND ACTING AT THE MEETING SHALL
HAVE THE POWERS CONFERRED HEREBY.
Dated _____________________________, 1996
_________________________________________
_________________________________________
Signature of Stockholder(s)--Please sign
name exactly as imprinted (do not print).
Please indicate any change of address.
NOTE: Executors, administrators, trustees
and others signing in a representative
capacity should indicate the capacity in
which they sign. If shares are held
jointly, EACH holder should sign.
PLEASE MARK, DATE, SIGN AND RETURN THIS
PROXY.
FOLD AND DETACH HERE
<PAGE>
SUPPLEMENT TO PROXY STATEMENT OF WHEELABRATOR TECHNOLOGIES INC. (THE
"COMPANY")
FOR ITS ANNUAL MEETING OF STOCKHOLDERS, MAY 1, 1996
After the above-described proxy statement was printed, Discovery Zone, Inc.
announced on March 25, 1996 that it had filed a voluntary petition under
Chapter 11 of the U.S. Bankruptcy Code. As disclosed in the proxy statement,
Donald F. Flynn, a director of the Company, formerly served as an executive
officer and director of Discovery Zone, Inc.
