<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] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
LOGO
4 LIBERTY LANE WEST, HAMPTON, NEW HAMPSHIRE 03842
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 1997
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, April 30, 1997, at 10:00
a.m., Eastern time, for the following purposes:
1. To elect directors.
2. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on March 19, 1997 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
how many shares you hold. Whether or not you intend to attend in person, we
urge you to mark, date and sign the enclosed proxy and return it in the
enclosed envelope, which does not require postage if mailed in the United
States.
LOGO
Thomas A. Witt
Secretary
Hampton, New Hampshire
March 28, 1997
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
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 1997
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 April 30, 1997, 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 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 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 4 Liberty Lane West,
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,
1997.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on March 19, 1997 are
entitled to vote at the annual meeting of stockholders. The only voting stock
of WTI outstanding is its common stock, of which 161,597,573 shares were
outstanding as of the close of business on March 19, 1997.
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, 1997, 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 Stock WMX Technologies, Inc. 104,621,810(1)(2) 64.8%
3003 Butterfield Road
Oak Brook, Illinois 60521
</TABLE>
- --------
(1) WMX Technologies, Inc. ("WMX") has sole voting and investment power over
all such 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."
<PAGE>
(2) Dean L. Buntrock and Donald F. Flynn 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.
ELECTION OF DIRECTORS
Three directors are to be elected at the meeting. All 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 2000.
Mr. Paul M. Montrone, who had served as a director of WTI or a predecessor
thereto since prior to 1989, resigned from the Board of Directors on January
30, 1997. Mr. William M. Daley, who had served as a director of WTI since
December 1993 and from August 1992 until August 1993, resigned on January 30,
1997 upon his confirmation as U.S. Secretary of Commerce. Mr. Phillip B.
Rooney, who had served as a director of WTI or a predecessor thereto since
September 1988 and as Chairman of the Board of WTI since November 1990,
resigned from those positions on February 17, 1997.
Unless otherwise instructed, properly executed proxies which are returned in
a timely manner will be voted for election of the three nominees. If, however,
any of such nominees should be unable or should fail to act as a nominee
because 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 1998 and 1999, respectively. In March 1997,
in order to equalize the number of directors in each class, the Board of
Directors (with the consent of Mr. Kehoe) moved Mr. Kehoe from the class whose
term expires in 1999 to the class whose term expires in 1998.
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 2000:
DEAN L. BUNTROCK, age 65, has been a director of WTI or a
LOGO predecessor thereto since September 1988 and Chairman of the
Board since March 1997. Mr. Buntrock has been a director and
Chairman of the Board of WMX since 1968 and served as its
Chief Executive Officer from 1968 until June 1996. Since
February 17, 1997, he has served WMX as its Acting Chief
Executive Officer. Mr. Buntrock was President of WMX from
September 1980 to November 1984. Mr. Buntrock is also a
director of Boston Chicken, Inc. and WM International.
JAMES E. KOENIG, age 49, 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 Executive Vice President of
WMX since February 1997. He served as Senior Vice President of
WMX from May 1992 until February 1997, as Chief Financial
Officer of WMX from December 1989 until February 1997 and as
Vice President and Treasurer of WMX from December 1986 until
July 1996. Mr. Koenig is also a director of WM International
and OHM Corporation.
LOGO
2
<PAGE>
LT. GEN. THOMAS P. STAFFORD, age 66, 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"),
Wackenhut, Inc. and Tracor Inc.
LOGO
DIRECTORS WHOSE TERMS EXPIRE AT ANNUAL MEETING IN 1998:
JOHN M. KEHOE, JR., age 63, has been a director of WTI since
LOGO May 1996. He has been President and Chief Executive Officer of
WTI since January 1997. From January 1993 until January 1997,
Mr. Kehoe was President and Chief Operating Officer of WTI. He
was 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.
PAUL M. MEISTER, age 44, has been a director of WTI since
LOGO January 1997, and previously served as a director of WTI or a
predecessor thereto from September 1988 until May 1992. He
also served as Managing Director of WTI or a predecessor
thereto from September 1987 until November 1990, and he served
as Executive Vice President--Finance and Administration of WTI
from December 1989 until November 1990. Mr. Meister has been
Senior Vice President--Chief Financial Officer of Fisher
Scientific, a provider of scientific equipment and supplies,
since 1991. Mr. Meister is a director of The General Chemical
Group Inc., Power Control Technologies Inc., and Minerals
Technologies Inc.
EDWARD J. NOHA, age 69, has been a director of WTI since
January 1997. Since October 1992, Mr. Noha has been Chairman
of the Board of Directors of CNA Financial Corporation, an
insurance holding company. Previously he served as Chairman of
the Board of Directors and Chief Executive Officer of the CNA
Insurance Companies since February 1975. Mr. Noha is a
director of Loews Corporation.
LOGO
DIRECTORS WHOSE TERMS EXPIRE AT ANNUAL MEETING IN 1999:
DONALD F. FLYNN, age 57, 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. In March 1996, Discovery
Zone, Inc. announced that it filed a voluntary petition under
Chapter 11 of the U.S. Bankruptcy Code. He was Senior Vice
President of WMX from May 1975 to January 1991. Mr. Flynn also
serves as a director of WMX, Extended Stay America, Inc.,
Psychemedics Corporation and WM International.
3
<PAGE>
LOGO KAY HAHN HARRELL, age 56, 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 five years.
MANUEL SANCHEZ, age 49, has been a director of WTI since
LOGO August 1992. Mr. Sanchez is a co-founder and has been managing
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.
SECURITIES OWNERSHIP OF MANAGEMENT
OWNERSHIP OF WTI COMMON STOCK
The following table sets forth certain information, as of February 1, 1997,
as to the beneficial ownership of common stock of WTI by the directors of WTI,
the Chief Executive Officer of WTI, the four other most highly compensated
executive officers of WTI as of December 31, 1996, 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................ 116,377(3)(4) *
Donald F. Flynn................. 45,245(3) *
Kay Hahn Harrell................ 7,000 *
John M. Kehoe, Jr............... 360,293 *
James E. Koenig................. 121,500 *
Paul M. Meister................. 50,000 *
Edward J. Noha.................. 0 *
Phillip B. Rooney............... 374,769 *
Manuel Sanchez.................. 30,000(4) *
Lt. Gen. Thomas P. Stafford..... 30,212 *
John J. Goody................... 29,202 *
Richard S. Haak, Jr............. 41,673 *
John D. Sanford................. 138,790 *
All directors, nominees and
executive officers as a group
including persons named above
(15 persons)................... 1,383,698 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, 1997; (ii)
WTI shares held pursuant to WTI's Savings and Retirement Plan; (iii) 1,500
WTI shares over which Mr. Koenig has shared voting and investment power
with his spouse; 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
4
<PAGE>
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, 1997 had been exercised by that person or
group as follows: Ms. Harrell--6,000; Mr. Haak--39,449; Mr. Kehoe--
343,913; Mr. Koenig--120,000; Mr. Meister--50,000; Mr. Sanchez--30,000;
Mr. Sanford--96,842; Lt. Gen. Stafford--30,000; and all executive officers
and directors as a group (including such individuals)--777,583. 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 Flynn 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 and Sanchez have acquired beneficial ownership of the equivalent
of an additional 8,297, and 3,236 WTI shares, respectively, through their
voluntary deferral of all or a portion of their directors fees.
OWNERSHIP OF WMX COMMON STOCK
The following table sets forth certain information, as of February 1, 1997,
as to the beneficial ownership of WMX common stock by the directors of WTI,
the Chief Executive Officer of WTI, the four other most highly compensated
executive officers of WTI as of December 31, 1996, 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................ 3,267,250(3) *
Donald F. Flynn................. 595,712 *
Kay Hahn Harrell................ 2,512 *
John M. Kehoe, Jr............... 40,557 *
James E. Koenig................. 264,020 *
Paul M. Meister................. 0 *
Edward J. Noha.................. 0 *
Phillip B. Rooney............... 1,403,945(3) *
Manuel Sanchez.................. 0 *
Lt. Gen. Thomas P. Stafford..... 0 *
John J. Goody................... 25,255 *
Richard S. Haak, Jr............. 123 *
John D. Sanford................. 2,910 *
All directors, nominees and
executive officers as a group
including persons named above
(15 persons)................... 5,602,284 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, 1997; (ii) WMX shares issuable
upon conversion of WMX Convertible Subordinated Notes due 2005
("Convertible Notes"); (iii) WMX shares
5
<PAGE>
held pursuant to WMX's Profit Sharing and Savings Plan and WTI's Savings
and Retirement Plan; and (iv) Messrs. Buntrock, Koenig and Rooney, and all
executive officers and directors as a group (including such individuals),
who have shared voting and investment power over 146,559, 52,661, 58,392
and 257,612 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 Mr.
Koenig are held jointly with his spouse. 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, 1997, in the amounts indicated: Mr.
Buntrock--43,439 (held by spouse); Mr. Rooney--103,146 (held by spouse
directly and as trustee for children); and all executive officers and
directors as a group (including such individuals)--146,585. 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, 1997 had been exercised as follows: Mr. Buntrock--659,662; Mr.
Flynn--87,617; Mr. Goody--21,300; Mr. Kehoe--7,060; Mr. Koenig--164,128;
Mr. Rooney--774,935; and all executive officers and directors as a group
(including such individuals)--1,717,415. 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) 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 76,541 and 64,854 shares, respectively, of
common stock of WMX in connection with their voluntary deferral of bonus
payments earned under WMX's Corporate Incentive Bonus Plan for 1995 and
1996.
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 five regular
meetings and one special meeting in 1996.
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. Meister (Chairman), Noha,
Sanchez and Lt. Gen. Stafford and Ms. Harrell are currently members of the
Audit Committee. Until January 30, 1997, Mr. Montrone served as Chairman of
the Audit Committee and Mr. Daley also served on 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). Mr. Buntrock (Chairman), Ms. Harrell and Lt. Gen. Stafford are
currently members of the Compensation Committee.
6
<PAGE>
During 1996, the Audit Committee met twice and the Compensation Committee
met four times. In 1996, during the time each director served in such
capacity, with the exception of one director who missed one Board meeting and
one committee meeting, and Mr. Flynn, who missed two board meetings, 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.
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, 1996, and (ii)
each of the four other most highly compensated executive officers of WTI at
December 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- --------------------
AWARDS PAYOUTS
OTHER ---------- --------- ALL
ANNUAL SECURITIES LONG-TERM OTHER
NAME AND COMPEN- UNDERLYING INCENTIVE COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) OPTIONS PAYOUTS SATION(2)
------------------ ---- -------- -------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Phillip B. Rooney(3) 1996 $ 0 $ 0 $ 0 0 $ 0 $ 0
Former Chairman of the Board and 1995 0 0 0 0 0 0
Chief Executive Officer 1994 0 0 0 0 0 0
John M. Kehoe, Jr. 1996 $356,250 $232,380 $ 0 0 $ 0 $37,349
President and Chief 1995 341,250 163,875 0 56,972 0 38,480
Executive Officer 1994 322,500 223,080 0 35,294 0 24,014
John J. Goody(4) 1996 $235,365 $ 90,000 $ 0 0 $ 0 $19,011
Vice President, Chief Executive 1995 73,336 43,542 0 3,438 0 6,239
Officer--Wheelabrator Water 1994 0 0 0 0 0 0
Technologies Inc.
John D. Sanford(5) 1996 $272,500 $153,600 $ 0 0 $ 0 $24,905
Executive Vice President, Chief 1995 219,192 87,400 0 16,147 0 22,279
Financial Officer and Treasurer 1994 196,250 108,160 0 15,686 0 13,897
Richard S. Haak, Jr. 1996 $164,000 $ 64,126 $ 0 0 $ 0 $14,261
Controller 1995 151,250 36,813 0 0 0 11,729
1994 137,500 47,320 0 0 0 9,616
</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 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.
(3) Mr. Rooney was compensated by WMX in his capacity as an employee of WMX
and received no cash compensation from WTI for his services.
(4) Mr. Goody commenced employment with the Company in August 1995.
(5) Mr. Sanford's salary's was increased to $300,000 effective July 1, 1996,
in connection with his becoming Treasurer of WMX. Pursuant to an agreement
with WMX, half of Mr. Sanford's salary was allocated to each Company.
7
<PAGE>
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, 1996:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(4)
-------------------------------------------------- ---------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE PRICE EXPIRATION
NAME GRANTED(1)(2) YEAR PER SHARE DATE(3) 0% 5% 10%
- ---- ------------- ---------- -------------- ---------- --- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phillip B. Rooney....... 0 -- -- -- -- -- --
John M. Kehoe, Jr....... 32,727 2.75% $16.50 4/1/2003 $ 0 $ 219,832 $ 512,303
John J. Goody........... 21,818 1.83% $16.50 4/1/2003 $ 0 $ 146,555 $ 341,535
John D. Sanford......... 15,758 1.32% $16.50 4/1/2003 $ 0 $ 105,849 $ 246,673
Richard S. Haak, Jr. 15,182 1.28% $16.50 4/1/2003 $ 0 $ 101,980 $ 237,656
All Stockholders(5). -- -- -- 4/1/2003 $ 0 $1,186,239,792 $2,764,443,152
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
- --------
(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 1, 1997.
(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 2003.
8
<PAGE>
The following table sets forth certain information as to each exercise of
stock options during the year ended December 31, 1996 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>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AT FY-END OPTIONS AT FY-END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Phillip B. Rooney....... 0 $ 0 --/-- $0/$0
John M. Kehoe, Jr....... 0 $ 0 321,240/82,471 $1,932,755/$99,697
John J. Goody........... 0 $ 0 16,848/24,110 $35,796/$573
John D. Sanford......... 0 $ 0 86,361/31,750 $406,327/$28,255
Richard S. Haak, Jr..... 5,888 $37,254 30,728/30,218 $35,734/$29,862
</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, 1996 to the persons named in the
Summary Compensation Table:
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS
PERIOD UNDER
UNTIL NON-STOCK PRICE BASED
NUMBER OF MATURATION PLANS(3)
SHARES, UNITS OR OR -------------------------
NAME OTHER RIGHTS(1) PAYOUT(2) THRESHOLD TARGET MAXIMUM
- ---- ---------------- ----------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
John M. Kehoe, Jr........ -- 3 years 144,000 144,000 432,000
John J. Goody............ -- 3 years 96,000 96,000 288,000
John D. Sanford.......... -- 3 years 120,000 120,000 360,000
</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 1996, 1997 and 1998.
(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 1996
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.
9
<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
10
<PAGE>
disability, resignation or retirement. If the optionee ceases to be a director
of WTI because of death or permanent 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 1996, Messrs. Buntrock (Chairman), Ms. Harrell and
Lt. General Stafford served as members of the Compensation Committee of WTI's
Board of Directors.
Mr. Rooney, who was WTI's Chairman and Chief Executive Officer in 1996, was
a member of the Board of Directors of WMX during 1996. Mr. Buntrock is the
Chairman of the Board and was Chief Executive Officer of WMX until June 1996
and became its Acting Chief Executive Officer in February 1997. In 1996, WTI
was paid approximately $27.5 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 provide incentives to its senior management to
achieve both short-term and long-term objectives, to reward exceptional
leadership, performance and contributions to the development of the Company's
business, and thereby increase stockholder value.
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, Jr. the Company's President, 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
11
<PAGE>
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 make it likely
that they will compete for the services of executives who have experience and
skills similar to those which the Company requires. References in this report
to the Comparator Companies also include survey data furnished by the
Company's compensation consultant in the case of several officers.
In making its decision on 1996 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 1996 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 1996 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,
incentive compensation terms 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.
12
<PAGE>
Annual Plan
For 1996, each of the Company's executive officers who was not an employee
of WMX throughout the year 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 30 percent to 50 percent of the participant's
salary at year end were payable, in varying proportions, based upon the
Company's achievement of its budgeted core earnings per share, (which exclude
income from equity investees) the Company's core cash flow performance and
WMX's achievement of its budgeted earnings per share (the "Corporate
Components"). In the case of certain line of business officers, target awards
were payable, in varying proportions, based on the particular line of
business's percentage of attainment of budgeted core pre-tax income, that line
of business's cash flow performance and WMX's achievement of its budgeted
earnings per share (the "Line of Business Components"). The Annual Plan award
formula for 1996 was designed to disproportionately increase or decrease a
participant's annual incentive compensation in the event that actual results
exceeded or fell 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. In
addition, for 1996, bonus awards based upon line of business results were
subject to reduction by up to 30% if the particular line of business did not
achieve specific non-financial objectives relating to the Company's Expanded
Management System.
The terms of the Annual Plan specified a minimum level for each of the three
components of the bonus awards, and a particular component of any officer's
bonus award was not payable unless such specified minimum level was achieved.
In 1996, the Company exceeded its budgeted core earnings per share and core
cash flow objectives, thereby entitling those executive officers participating
in the Annual Plan whose bonus was based on the Corporate Components to
receive a bonus in an amount equal to approximately 128 percent of their
target bonus. Of those executive officers whose bonus was based on the Line of
Business Components, two received bonuses equal to 129 percent and 100 percent
of their target bonuses, respectively.
Long Term Plan
Under 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 extended from 1994 through 1996, the second extends from 1995 through
1997 and the third extends from 1996 through 1998. The Compensation Committee
named Mr. Kehoe as the only participant for the first performance period, and
Messrs. Kehoe, Goody and Sanford as participants for the second and third
performance periods. The Compensation Committee intends to continue to name
Mr. Kehoe as a participant 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 minimum
threshold for payment of a bonus was set at the target award level, with the
percentage of the target award to be paid varying upwards to 300 percent 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. 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.
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
13
<PAGE>
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 1996, the largest grant was awarded to the
Company's President, 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 executive officers who were employees of WMX
throughout the year, who did not receive an annual grant under the 1992 Option
Plan in light of their 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 percent to 225 percent, 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, Goody and Sanford
received a 1996 stock option grant from WMX in lieu of a portion of the
Company grant which they otherwise would have received under the 1992 Option
Plan. All options under the 1992 Option Plan are non-qualified stock options
which are granted at an exercise price equal to 100 percent of fair market
value on the date of grant. These options 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
Under the Company's officer stock ownership 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 two 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. Under a deferral component, 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
during 1996, did not receive any salary from the Company for 1996. Mr. Rooney
was compensated by WMX in his capacity as Chief Executive Officer and
President of that company. WTI does not reimburse WMX for any part of Mr.
Rooney's salary. During 1996, Mr. Rooney did not participate in 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 1996. He was also eligible to
participate in the LTIP, but was not named as a participant thereunder.
14
<PAGE>
COMPENSATION OF THE PRESIDENT
In light of the fact that the Company's Chief Executive Officer received no
compensation from the Company for 1996, 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 1996 base compensation of Mr. Kehoe, the Compensation
Committee reviewed a number of the Company's significant accomplishments
achieved in 1995 under the leadership of Mr. Kehoe. Specifically, the
Compensation Committee evaluated the Company's 1995 operating results, led by
the clean energy group, which included a 9.6 percent increase in revenues over
1994, an 8 percent increase in earnings per share over 1994, and core pre-tax
income (which excludes equity income from Rust and WM International) of $258
million, which exceeded the Company's 1995 budget. In addition, the
Compensation Committee considered Mr. Kehoe's successful efforts to refocus
management on the Company's core business of converting trash and other waste
fuels into clean energy while at the same time helping to implement the
Company's strategic goals by restructuring its principal businesses into clean
energy and clean water line of businesses.
Through such efforts, during 1995 the Company's clean water group achieved a
noteworthy accomplishment in winning the first municipal water treatment
privatization under a federal Executive Order, in Franklin, Ohio, and being
selected to negotiate a similar project in Wilmington, Delaware. The Company's
clean energy group achieved access to the world-wide market for that group's
products and services through the successful negotiation and implementation of
a joint venture framework with WM International for identifying and exploiting
market opportunities outside North America, Italy and Germany. The clean
energy group also essentially completed construction and start-up of the
Lisbon, Connecticut trash-to-energy facility. In addition, substantial efforts
were made to reduce the Company's overhead level. 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 average of the compensation data for the second and
third highest paid executives of the Comparator Companies. The report
concluded that Mr. Kehoe's proposed 1996 salary would place him slightly above
the midpoint of the range of salaries which could be expected to be paid to
the comparable executives of the Comparator Companies.
Based on these considerations, the Compensation Committee set Mr. Kehoe's
1996 base compensation at $360,000.
Annual Plan
For 1996 the Compensation Committee awarded Mr. Kehoe a target Annual Plan
participation of 50 percent of his 1996 salary, the same as his 1995
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 percent level was appropriate in order for Mr. Kehoe's intended
incentive compensation to constitute a substantial part of his intended total
1996 compensation. 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 comparable executives of the Comparator
Companies averaged approximately 56 percent of their base salaries. Based on
the Corporate Components as specified under the Annual Plan, Mr. Kehoe
received a bonus equal to $232,380 in 1996, which is approximately 129 percent
of his target under the Annual Plan and approximately 65 percent of his base
salary.
LTIP
Under the Company's LTIP, for the performance period ending December 31,
1998, the Compensation Committee awarded Mr. Kehoe a target award equal to 40%
of his salary as of the end of such period. The
15
<PAGE>
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 1994-1996 performance
period under the LTIP has ended with no award being paid to Mr. Kehoe.
Stock Options
The Compensation Committee's 1996 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, and reducing the total by one-
third. To enhance cooperation and coordination among the WMX-affiliated
companies, one-third of the stock option grant otherwise awardable to Mr.
Kehoe consisted of options to acquire shares of common stock of WMX. 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.
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)
LOGO
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Wheelabrator Technologies Inc. $100 $108 $104 $ 87 $ 99 $ 97
S&P 500 Index $100 $108 $118 $120 $165 $203
Smith Barney Solid Waste Index $100 $ 92 $ 69 $ 72 $ 82 $ 97
</TABLE>
- --------
(1) Historical results are not necessarily indicative of future performance.
(2) Assumes $100 invested on December 31, 1991 in WTI common stock, the S&P
500 Index, and the Smith Barney Solid Waste Index.
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
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connection with the 1988 acquisition by Waste Management, Inc., a wholly owned
subsidiary of WMX ("Waste Management") (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 Waste Management 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 Waste
Management (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.
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, Waste Management agreed to dedicate airspace at landfill sites
owned, leased or operated by subsidiaries or affiliates of Waste Management (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 Waste Management'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 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
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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 Waste Management 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, Waste Management
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. The Second Amended and Restated ADA
also provides for Disposal Credits to be applied against disposal fees paid by
Resco and its subsidiaries under separately negotiated disposal arrangements
with Waste Management, 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 Second Amended and Restated ADA allowing Resco
to sell all or any part of the unused portion of the Disposal Credits to any
third party, subject to Waste Management's right of first refusal with respect
to each such sale. In November 1995, Waste Management and Rust agreed that
Rust's unused portion of its Disposal Credit would be cancelled upon the
payment by Waste Management 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 1996, Resco paid Waste Management a total of $12.1 million for
disposal of waste pursuant to the Second Amended and Restated ADA and used
$2.5 million in Disposal Credits.
DISPOSAL AGREEMENT. In 1989, Waste Management Inc. of Florida, a subsidiary
of Waste Management, 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"). For disposal of bypass waste,
the North Broward Project will be charged the same rates as other users of the
landfill. 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. During 1996, the North Broward Project paid
approximately $7.6 million in ash disposal fees to Waste Management, 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 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. 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.
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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 Waste Management 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 Waste Management 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 Waste
Management in the area of landfill gas recovery and the conversion of such gas
to energy. Waste Management 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 Waste Management.
Waste Management 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 Waste
Management 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 Waste Management, it will share such technology and know-
how with Waste Management 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 Waste Management. 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 Waste
Management, 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 shall
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, 1997 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 borrowed from WMX or receive such rates on amounts invested with WMX,
as the case may be. As of December 31, 1996, the amount of WTI's deposits with
WMX (including principal and accrued but unpaid interest) totalled
approximately $ 393.1 million. The largest amount on deposit with WMX during
1996 was approximately $393.1 million. During 1996, WTI was paid interest on
such deposits at rates ranging from 5.23% to 7.88% depending upon maturity. As
of December 31, 1996, approximately $109.9 million was due to WMX from WTI
(including principal and accrued but unpaid interest). The largest amount of
such obligations outstanding during 1996 was approximately $213.1
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million. Obligations due to WMX during 1996 bore interest at rates, adjusted
every 30 days, ranging from 5.27% to 5.56% as of year-end. In addition, during
part of 1996, the Company issued a short term note to WMX for $75 million,
with essentially the same terms as borrowing under the Amended Intercorporate
Agreement. The proceeds of this note were used to finance second quarter share
repurchases and such note was repaid during the fourth quarter.
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 1996, WTI paid WMX approximately $4.2 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 1996, WTI charged WMX and
its subsidiaries approximately $0.7 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,
1997, 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 (the "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 10% of WM International's outstanding shares (Mr. Buntrock 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
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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 1996, WTI expended $922,000 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
Transaction"). On January 1, 1993, pursuant to the Organizational Agreement,
WTI contributed to Rust, in
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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 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
$227,800 for such services provided by Rust during 1996. 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 1996, WTI paid Rust $2.6 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 1996, WTI made payments in addition to those described above of
(i) approximately $6.2 million to Waste Management for waste transportation
and transfer station operation services; (ii) approximately $262,000 to WMX
for office space rental; and (iii) approximately $386,000 to Waste Management
for miscellaneous equipment rentals and services. During 1996, Waste
Management delivered waste for disposal to certain WTI facilities pursuant to
various contractual arrangements, for which Waste Management paid disposal
fees aggregating approximately $27.2 million. During 1996, Rust paid WTI
$261,000 for office space rental, and Waste Management paid WTI $67,000 for
office space rental. In addition, WTI received approximately $91,000 from WMX
and its affiliates in royalties.
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 1996, WTI paid WMX
approximately $82,000 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, 1996 through March 15,
1997. 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. The largest amounts of such loans from the
Company in excess of $60,000 pursuant to such policy which were outstanding to
the Company's directors and executive officers during the period from January
1, 1996 through March 15, 1997 were as follows: Mr. Haak--$70,546; Mark Paul--
$867,351; James Wood--$261,482; Mr. Meister--$1,295,955. Such loans have been
repaid and are not outstanding as of March 15, 1997.
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 1997. Representatives of Arthur Andersen LLP will be
present at the 1997 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, 1996 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.
PROPOSALS BY STOCKHOLDERS
Any proposals by stockholders intended to be presented at the 1998 annual
meeting must be received by WTI no later than November 28, 1997 in order to be
considered by the Board of Directors for inclusion in WTI's 1998 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 1998 proxy statement.
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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
Thomas A. Witt
Secretary
25
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
Annual Meeting, April 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Dean L. Buntrock and Thomas A. Witt, 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, April 30, 1997, 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]
A vote FOR proposal 1 is recommended by the Board of Directors.
1 Election of Directors.
FOR each WITHHOLD Nominees: Dean L. Buntrock,
nominee listed AUTHORITY James E. Koenig.
except nominee(s) TO vote for each Lt. Gen. Thomas P. Stafford
written to the right nominee listed
[_] [_] (Instructions: To withhold authority
to vote for any
individual nominee,
write the nominee's
name on the line
provided below.)
-----------------------------------
2. In their discretion, on such other business as may property 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 , 1997
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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]
