<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
CHEMICAL WASTE MANAGEMENT, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CHEMICAL WASTE MANAGEMENT, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, $.01 par value of Chemical Waste Management, Inc.
(2) Aggregate number of securities to which transaction applies:
44,865,376(1)
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: $9.4375
(4) Proposed maximum aggregate value of transaction: $423,416,986(1)
[_] 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:
- --------
(1) Estimated solely for purposes of computing the filing fee. The actual
number of shares of Chemical Waste Management, Inc. common stock to which
this transaction applies will be the number of such shares outstanding and
not directly or indirectly owned by WMX Technologies, Inc.
<PAGE>
PRELIMINARY COPY
CHEMICAL WASTE MANAGEMENT, INC.
LOGO 3001 Butterfield Road, Oak Brook, Illinois 60521
December , 1994
Dear Stockholder:
You are cordially invited to attend the Special Meeting of stockholders of
Chemical Waste Management, Inc. ("CWM") to be held on Friday, January 20, 1995
at 10:00 a.m., local time, in the Assembly Room of Harris Trust and Savings
Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois (the "Special
Meeting"). At this meeting, you will be asked to consider and vote on a
proposal to approve and adopt an Agreement and Plan of Merger, as amended (the
"Merger Agreement"), dated as of October 14, 1994 by and among CWM, WMX
Technologies, Inc. (the "Company"), a Delaware corporation and the owner of
approximately 78.6% of the outstanding shares of CWM's common stock, and WMX
Merger Sub, Inc. ("Merger Sub"), a Delaware corporation and wholly owned
subsidiary of the Company. The Merger Agreement provides for the Company's
acquisition, through the merger (the "Merger") of Merger Sub with and into CWM,
of the outstanding shares of CWM common stock not directly or indirectly owned
by the Company.
In the Merger, all publicly held shares of common stock, $.01 par value, of
CWM (shares of CWM common stock being referred to herein as the "CWM Shares"),
other than CWM Shares as to which appraisal rights are perfected under Delaware
law, will, by virtue of the Merger and without any action on the part of any
stockholder, be converted into convertible, subordinated notes of the Company
due January 20, 2005 and having a principal amount at maturity of $1,000 per
note (the "Notes"). Notes will be issued in the Merger at the rate of one Note
for each 81.1 CWM Shares. No fractional Notes will be issued in the Merger, and
instead, cash will be paid in lieu of any resulting fractional Note.
By virtue of the Merger, CWM Shares directly or indirectly owned by the
Company will be cancelled (except for CWM Shares held in escrow for exchange
for the Company's Liquid Yield Option Notes due 2012, which CWM Shares will be
converted into the merger consideration in the same manner as CWM Shares
generally). All shares of Merger Sub will be converted by virtue of the Merger
into CWM Shares, and CWM will be the corporation surviving the Merger. Upon
consummation of the Merger, CWM will be a wholly owned subsidiary of the
Company and the market trading of CWM Shares will cease. All of the foregoing,
including the terms on which CWM Shares will be converted into Notes and the
terms of the Notes, is more fully described in the attached Proxy Statement-
Prospectus, which you are encouraged to read in its entirety.
Application will be made to list the Notes and the Company Shares into which
the Notes are convertible on the New York Stock Exchange.
CWM has been advised by counsel that gain or loss will be recognized for
federal income tax purposes to each stockholder of CWM whose CWM Shares are
converted into Notes (or cash in lieu of a fractional Note) or who receives
cash in respect of CWM Shares as to which statutory appraisal rights are
perfected in the Merger. Each holder of a Note will also be required to include
in taxable income the interest paid in cash on a Note plus a portion of the
Original Issue Discount with respect to the Note, even though no cash interest
payments will be made to such holder in respect of such Original Issue
Discount. See "Certain Tax Considerations" in the accompanying Proxy Statement-
Prospectus.
Pursuant to Delaware law, the Merger Agreement must be approved and adopted
by the affirmative vote of the holders of a majority of the outstanding CWM
Shares. The Company has agreed to vote its CWM Shares for approval of the
Merger Agreement. HOWEVER, AS SPECIFIED IN THE MERGER AGREEMENT, IT IS A
CONDITION TO THE CONSUMMATION OF THE MERGER THAT THE MERGER AGREEMENT ALSO BE
APPROVED AND ADOPTED AT THE SPECIAL MEETING BY THE HOLDERS OF A MAJORITY OF THE
OUTSTANDING CWM SHARES WHICH ARE REPRESENTED AND ENTITLED TO BE VOTED AT THE
SPECIAL MEETING AND NOT DIRECTLY OR INDIRECTLY OWNED BY THE COMPANY. The Merger
is also subject to other conditions. See "The Merger Agreement--Conditions" in
the accompanying Proxy Statement-Prospectus.
<PAGE>
THE BOARD OF DIRECTORS OF CWM, UPON THE UNANIMOUS RECOMMENDATION OF A SPECIAL
COMMITTEE CONSISTING OF TWO INDEPENDENT DIRECTORS OF CWM, VOTED TO APPROVE THE
MERGER AGREEMENT AND TO SUBMIT THE MERGER AGREEMENT TO THE STOCKHOLDERS OF CWM
FOR THEIR CONSIDERATION AND VOTE. THE BOARD OF DIRECTORS OF CWM RECOMMENDS THAT
THE STOCKHOLDERS OF CWM VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AT THE SPECIAL MEETING.
The accompanying Proxy Statement-Prospectus provides a detailed description
of the Merger, the Merger Agreement and various other matters and provides
information as to the Company and CWM. Please give the accompanying Proxy
Statement-Prospectus your careful attention.
Whether or not you are personally able to attend the Special Meeting, please
complete, sign, date and return the enclosed proxy card as soon as possible.
CWM stockholders who do not vote in favor of approval and adoption of the
Merger Agreement and who comply with the requirements of Section 262 of the
Delaware General Corporation Law will have the right to seek an appraisal of
their CWM Shares in accordance with Delaware law. The first step in perfecting
such right must be taken prior to the taking of a vote on the Merger Agreement
at the Special Meeting. Please refer to "Delaware Statutory Appraisal Rights"
in the Proxy Statement-Prospectus and to Appendix C thereto for a complete
description of the steps that must be taken if you wish to perfect your right
to an appraisal under Delaware law.
Sincerely yours,
D. P. Payne
President and Chief Executive
Officer
NEITHER THIS TRANSACTION NOR THESE SECURITIES HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION. NEITHER THE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
STOCKHOLDERS WITH INQUIRIES RELATING TO THE MERGER AND OTHER
MATTERS OUTLINED IN THE ACCOMPANYING PROXY STATEMENT-
PROSPECTUS MAY DIRECT SUCH INQUIRIES TO CWM SHAREHOLDER
SERVICES AT FOUR STATION SQUARE, 4TH FLOOR, PITTSBURGH,
PENNSYLVANIA 15219, OR BY TELEPHONING TOLL FREE AT (800)
443-6474.
<PAGE>
PRELIMINARY COPY
CHEMICAL WASTE MANAGEMENT, INC.
LOGO 3001 Butterfield Road, Oak Brook, Illinois 60521
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 20, 1995
Notice is hereby given that a Special Meeting of stockholders of Chemical
Waste Management, Inc. ("CWM") will be held in the Assembly Room of Harris
Trust and Savings Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois,
on Friday, January 20, 1995 at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote upon approval and adoption of an Agreement and
Plan of Merger, as amended (the "Merger Agreement"), by and among CWM, WMX
Technologies, Inc. (the "Company"), a Delaware corporation and the owner of
approximately 78.6% of the outstanding shares of common stock, par value
$.01 per share, of CWM (the "CWM Shares"), and WMX Merger Sub, Inc.
("Merger Sub"), a Delaware corporation and wholly owned subsidiary of the
Company. The Merger Agreement provides for the Company's acquisition,
through the merger (the "Merger") of Merger Sub with and into CWM, as
described in the attached Proxy Statement-Prospectus, of the outstanding
CWM Shares not owned by the Company. As a result of the Merger, all
publicly held CWM Shares, other than CWM Shares as to which appraisal
rights are perfected under Delaware law, will, by virtue of the Merger and
without any action on the part of any stockholder, be converted into
convertible, subordinated notes of the Company due January 20, 2005 and
having a principal amount at maturity of $1,000 per note (the "Notes").
Notes will be issued in the Merger at the rate of one Note for each 81.1
CWM Shares, provided that no fractional Notes will be issued, and instead,
cash will be paid in lieu of any resulting fractional Note. By virtue of
the Merger, CWM Shares directly or indirectly owned by the Company will be
cancelled (except for CWM Shares held in escrow for exchange for the
Company's Liquid Yield Option Notes due 2012, which CWM Shares will be
converted into the merger consideration in the same manner as CWM Shares
generally). All shares of Merger Sub common stock will be converted by
virtue of the Merger into CWM Shares, and CWM will be the corporation
surviving the Merger. Upon consummation of the Merger, CWM will be a wholly
owned subsidiary of the Company and the market trading of CWM Shares will
cease. All of the foregoing, including the terms on which CWM Shares will
be converted into Notes and the terms of the Notes, is more fully described
in the attached Proxy Statement-Prospectus, to which a copy of the Merger
Agreement is attached as Appendix A. Please read these materials carefully.
The Merger is subject to the approval and adoption of the Merger
Agreement, in accordance with applicable provisions of the Delaware General
Corporation Law, by the affirmative vote of the holders of a majority of
the outstanding CWM Shares. The Company has agreed to vote its CWM Shares
for approval and adoption of the Merger Agreement. HOWEVER, AS SPECIFIED IN
THE MERGER AGREEMENT, IT IS A CONDITION TO THE CONSUMMATION OF THE MERGER
THAT THE MERGER AGREEMENT ALSO BE APPROVED AND ADOPTED BY THE HOLDERS OF A
MAJORITY OF THE CWM SHARES WHICH ARE REPRESENTED AND ENTITLED TO BE VOTED
AT THE SPECIAL MEETING AND NOT DIRECTLY OR INDIRECTLY OWNED BY THE COMPANY.
The Merger is also subject to other conditions. See "The Merger Agreement--
Conditions" in the accompanying Proxy Statement- Prospectus.
2. To transact such other business as may properly come before the
Special Meeting.
<PAGE>
Holders of record of CWM Shares at the close of business on December 7, 1994
are entitled to notice of and to vote at the Special Meeting or any
adjournments or postponements thereof. A list of such stockholders will be
available for examination by any stockholder for any purpose germane to the
Special Meeting, during normal business hours, at the offices of Harris Trust
and Savings Bank, 311 West Monroe Street, Chicago, Illinois, for a period of 10
days prior to the Special Meeting.
All of the foregoing is more fully described in the attached Proxy Statement-
Prospectus. Please read and consider the attached Proxy Statement-Prospectus
carefully.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas A. Witt
Secretary
Oak Brook, Illinois
December , 1994
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE
PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
<PAGE>
PRELIMINARY COPY DATED NOVEMBER 4, 1994
CHEMICAL WASTE MANAGEMENT, INC.
LOGO
WMX TECHNOLOGIES, INC.
LOGO PROXY STATEMENT-
PROSPECTUS
This Proxy Statement-Prospectus is being furnished to the holders of shares
of common stock, par value $.01 per share (the "CWM Shares"), of Chemical Waste
Management, Inc. ("CWM"), a Delaware corporation, in connection with the
solicitation of proxies for use at the Special Meeting of stockholders of CWM
(the "Special Meeting") to be held in the Assembly Room of Harris Trust and
Savings Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois, at 10:00
a.m., local time, on Friday, January 20, 1995, and at any adjournments or
postponements thereof. This Proxy Statement-Prospectus and the related proxy
card are first being sent to the holders of CWM Shares on or about December ,
1994. This proxy solicitation is being made by the Board of Directors of CWM.
At the Special Meeting, holders of CWM Shares will be asked to consider and
vote upon approval and adoption of the Agreement and Plan of Merger dated as of
October 14, 1994, as amended (the "Merger Agreement"), by and among CWM, WMX
Technologies, Inc. (the "Company"), a Delaware corporation and the owner of
approximately 78.6% of the issued and outstanding CWM Shares, and WMX Merger
Sub, Inc. ("Merger Sub"), a Delaware corporation and a wholly owned subsidiary
of the Company. The Merger Agreement provides for the Company's acquisition,
through the merger (the "Merger") of Merger Sub with and into CWM, as described
in this Proxy Statement-Prospectus, of the outstanding CWM Shares not owned by
the Company. Upon consummation of the Merger, CWM will be a wholly owned
subsidiary of the Company and the market trading of CWM Shares will cease.
In the Merger, all publicly held CWM Shares, other than CWM Shares as to
which appraisal rights are perfected under Delaware law ("Dissenting Shares"),
will, by virtue of the Merger and without any action on the part of any
stockholder, be converted into convertible, subordinated notes of the Company
due January 20, 2005 and having a principal amount at maturity of $1,000 per
note (the "Notes"). Notes will be issued in the Merger at the rate of one Note
for every 81.1 CWM Shares, provided that no fractional Notes will be issued,
and instead, cash will be paid in lieu thereof. The Notes are subordinated to
all existing and future Senior Indebtedness of the Company. Each Note will bear
cash interest from and after the date the Merger is consummated (the "Effective
Date") at the rate of 2.00% per annum of the $1,000 principal amount at
maturity of each Note, payable semi-annually on January 20 and July 20 of each
year.
Each Note will be convertible at the option of the holder at any time from
and after the Effective Date into shares of common stock, $1.00 par value per
share, of the Company (the "Company Shares"). The number of Company Shares to
be issued on conversion of a Note will be determined on the Effective Date by
dividing (i) $717.80 (the "Stated Issue Price") by (ii) the average of the per
share closing sale prices for Company Shares on the New York Stock Exchange
(the "NYSE") for the ten trading days immediately preceding the date of the
Special Meeting (the "Company Share Closing Price"), provided that the number
of Company Shares initially issuable on conversion of a Note shall not be less
than 21.90 nor more than 26.76. The Company may, at its option, in lieu of
issuing Company Shares on conversion of a Note, elect to pay cash equal to the
market value of the Company Shares otherwise issuable in such conversion.
Each Note will be purchased by the Company at the option of the holder on
March 15, 1998 and March 15, 2000, at prices of $790.24 and $843.35,
respectively, plus accrued but unpaid interest to the
(Continued on the following page)
--------------
The date of this Proxy Statement-Prospectus is December , 1994.
<PAGE>
purchase date. The Notes are redeemable at the option of the Company at any
time on or after March 15, 2000 at a redemption price for each Note equal to
the sum of (i) the Stated Issue Price, (ii) the accrued portion of the
difference (the "Stated Discount") between the $1,000 principal amount at
maturity and the Stated Issue Price of each Note and (iii) the accrued but
unpaid interest in respect of such Note to the date of redemption. See
"Description of Notes--Purchase of Notes at the Option of the Holder" and "--
Redemption of the Notes at the Option of the Company."
CWM and the Company have been advised by counsel that gain or loss will be
recognized for federal income tax purposes to each stockholder of CWM whose CWM
Shares are converted into Notes or cash in lieu of a fractional Note in the
Merger or who receives cash in respect of Dissenting Shares. Each Note is
expected to be issued at an original issue discount for United States federal
income tax purposes ("Original Issue Discount"). Original Issue Discount is
expected to differ from the Stated Discount. Holders of CWM Shares should be
aware that, although there will be no periodic payments of interest in respect
of such Original Issue Discount, accrued Original Issue Discount will be
includable periodically in a Holder's gross income for United States federal
income tax purposes prior to conversion, redemption, other disposition or
maturity of such Holder's Notes, whether such Notes are ultimately converted,
redeemed, sold (to the Company or otherwise) or paid at maturity. See "Certain
Tax Considerations."
Pursuant to the Delaware General Corporation Law, as amended (the "DGCL"),
the Merger Agreement must be approved and adopted by the affirmative vote of
the holders of a majority of the outstanding CWM Shares. The Company has agreed
to vote its CWM Shares for approval and adoption of the Merger Agreement.
HOWEVER, AS SPECIFIED IN THE MERGER AGREEMENT, IT IS A CONDITION TO THE
CONSUMMATION OF THE MERGER THAT THE MERGER AGREEMENT ALSO BE APPROVED AND
ADOPTED AT THE SPECIAL MEETING BY THE HOLDERS OF A MAJORITY OF THE CWM SHARES
WHICH ARE REPRESENTED AND ENTITLED TO BE VOTED AT THE SPECIAL MEETING AND NOT
DIRECTLY OR INDIRECTLY OWNED BY THE COMPANY. The Merger is also subject to
other conditions. See "The Merger Agreement--Conditions."
At the Special Meeting, holders of CWM Shares will also consider any other
business that may properly come before such meeting or any adjournments or
postponements thereof.
This Proxy Statement-Prospectus also constitutes the prospectus of the
Company, filed with the Securities and Exchange Commission (the "Commission")
as part of the Company's Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), for the issuance of up to $550,000,000 aggregate principal amount at
maturity of Notes and up to 17,543,000 Company Shares.
2
<PAGE>
No person has been authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus and, if given
or made, such information or representation must not be relied upon as having
been authorized by the Company or CWM. This Proxy Statement-Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
in any jurisdiction in which, or to any person to whom, it is unlawful to make
such offer or solicitation. Neither the delivery of this Proxy Statement-
Prospectus nor any offer or sale made hereunder shall, under any circumstances,
create any implication that there has been no change in information set forth
herein or in the affairs of CWM or the Company from the date hereof.
AVAILABLE INFORMATION
The Company has filed with the Commission a Rule 13e-3 Transaction Statement
on Schedule 13E-3 (including any amendments thereto, the "Schedule 13E-3")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
with respect to the Merger. As permitted by the rules and regulations of the
Commission, this Proxy Statement-Prospectus omits certain information contained
in the Registration Statement or the Schedule 13E-3, including the exhibits
thereto. For further information pertaining to the securities offered hereby,
reference is made to the Registration Statement, including the exhibits filed
as a part thereof or incorporated therein by reference.
CWM and the Company are subject to the informational requirements of the
Exchange Act, and, in accordance therewith, file reports, proxy statements and
other information with the Commission. Such reports, proxy statements, the
Schedule 13E-3 and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, New York, New
York 10048; and Chicago Regional Office, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The CWM Shares and the Company
Shares are listed on the NYSE and such material may also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
If the Merger is consummated, the CWM Shares will be delisted from the NYSE,
and the Company will take steps to terminate the registration of the CWM Shares
under the Exchange Act. As a result, CWM will no longer be subject to the
reporting requirements of the Exchange Act.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company under the Exchange
Act with the Commission (the "Company Reports") are incorporated herein by
reference.
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1994.
(3) The Company's Current Reports on Form 8-K dated February 8, July 28 and
October 14, 1994.
(4) The description of Company Shares set forth in the Company's application
on Form 8-A for Registration of Certain Classes of Securities dated April 25,
1972, and Amendments on Form 8 dated May 16, 1980 and November 26, 1985 to such
Application.
(5) The description of the rights to purchase the Company's Series A
Preferred Stock set forth in the Company's Application on Form 8-A for
Registration of Certain Classes of Securities, dated January 26, 1987.
3
<PAGE>
The following documents heretofore filed by CWM under the Exchange Act with
the Commission (the "CWM Reports") are incorporated herein by reference.
(1) CWM's Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
(2) CWM's Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30, and September 30, 1994.
(3) CWM's Current Reports on Form 8-K dated July 28 and October 14, 1994.
(4) The description of CWM Shares set forth in CWM's Application on Form 8-A
for Registration of Certain Classes of Securities dated September 5, 1986.
All documents filed by CWM and the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Proxy Statement-
Prospectus and prior to the date of the Special Meeting (or any adjournment or
postponement thereof) shall be deemed to be incorporated in this Proxy
Statement-Prospectus by reference and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement-Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement-Prospectus.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE, UPON ORAL OR WRITTEN REQUEST
BY ANY PERSON RECEIVING THIS PROXY STATEMENT-PROSPECTUS, FROM CWM SHAREHOLDER
SERVICES, FOUR STATION SQUARE, 4TH FLOOR, PITTSBURGH, PENNSYLVANIA 15219,
TELEPHONE (800) 443-6474. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY JANUARY 12, 1995.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.................................................................... 7
The Special Meeting...................................................... 7
The Parties.............................................................. 7
Background; Certain Relationships with Affiliates; Ownership of CWM...... 8
Record Date and Quorum................................................... 9
Vote Required; Certain CWM Shares Voting in Favor of the Merger.......... 9
Terms of the Merger; Description of Notes................................ 9
Exchange and Payment Procedures.......................................... 12
Background of the Merger................................................. 12
Recommendation of the Special Committee and the CWM Board of Directors... 12
Opinion of CWM's Financial Advisor....................................... 12
Interests of Certain Persons in the Merger............................... 13
Accounting Treatment..................................................... 13
Certain Tax Considerations............................................... 13
Litigation Regarding the Merger.......................................... 13
Regulatory Requirements.................................................. 14
Market Prices of CWM and Company Shares.................................. 14
Treatment of Stock Options and Liquid Yield Option(TM) Notes............. 14
Delaware Statutory Appraisal Rights...................................... 14
Comparison of Rights of Holders of CWM Shares and Company Shares......... 15
Selected Financial Data.................................................. 15
Comparative Historical and Pro Forma Per Share Data...................... 18
INFORMATION CONCERNING THE SPECIAL MEETING................................. 19
The Special Meeting...................................................... 19
Record Date; Quorum; Outstanding CWM Shares Entitled to Vote............. 19
Vote Required; Certain CWM Shares Voting in Favor of the Merger.......... 19
Action to Be Taken Under the Proxy....................................... 19
Accounting Treatment..................................................... 20
Proxy Solicitation....................................................... 20
SPECIAL FACTORS............................................................ 20
Certain Consequences of the Merger....................................... 20
Background of the Merger................................................. 21
Recommendation of the Special Committee and the Board of Directors of
CWM; Fairness of the Merger............................................. 25
Opinion of CWM's Financial Advisor....................................... 28
Plans for CWM after the Merger........................................... 33
Interests of Certain Persons in the Merger............................... 34
Litigation Regarding the Merger.......................................... 34
Fees and Expenses and Source of Funds.................................... 34
Regulatory Requirements.................................................. 35
THE MERGER AGREEMENT....................................................... 35
Merger Consideration..................................................... 35
Exchange and Payment Procedures.......................................... 35
Transfer of CWM Shares................................................... 36
Treatment of Stock Options............................................... 36
Treatment of LYONs....................................................... 37
Covenants................................................................ 37
Conditions............................................................... 38
Termination; Amendments.................................................. 39
Listing.................................................................. 39
DELAWARE STATUTORY APPRAISAL RIGHTS........................................ 40
CERTAIN PRELIMINARY 1994 AND 1995 STRATEGIC PLANNING INFORMATION OF CWM.... 42
CWM SHARE AND COMPANY SHARE MARKET PRICE INFORMATION; DIVIDEND INFORMATION;
AND CWM SHARE PURCHASE INFORMATION........................................ 44
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
CAPITALIZATION............................................................. 45
DESCRIPTION OF NOTES....................................................... 45
General.................................................................. 46
Subordination of Notes; Effect of Corporate Structure.................... 46
Conversion Rights........................................................ 48
Redemption of Notes at the Option of the Company......................... 49
Purchase of Notes at the Option of the Holder............................ 50
Change in Control Permits Purchase of Notes at the Option of the Holder.. 51
Mergers and Sales of Assets by the Company............................... 53
Events of Default; Notice and Waiver..................................... 53
Modification............................................................. 54
Limitations of Claims in Bankruptcy...................................... 55
Taxation of Notes........................................................ 55
Information Concerning the Trustee....................................... 55
CERTAIN TAX CONSIDERATIONS................................................. 55
Receipt of Notes and Cash................................................ 55
Original Issue Discount and Other Interest............................... 56
Disposition or Conversion................................................ 57
Constructive Dividend.................................................... 58
Backup Withholding....................................................... 58
BUSINESS OF THE COMPANY.................................................... 58
BUSINESS OF CWM............................................................ 59
CERTAIN RELATIONSHIPS AND TRANSACTIONS..................................... 60
International Transactions............................................... 60
Organization of Rust..................................................... 62
Cash Management, Financing and Related Arrangements...................... 63
Management, Technical and Other Services................................. 64
Rust Shareholders' Agreement............................................. 64
Other Transactions....................................................... 65
SECURITIES OWNERSHIP....................................................... 66
Ownership of Company Shares.............................................. 66
Ownership of CWM Shares.................................................. 69
Ownership of WTI Common Stock by Company Directors and Executive
Officers................................................................ 71
Ownership of Rust Common Stock........................................... 72
Ownership of Waste Management International Ordinary Shares by Company
Directors and Executive Officers........................................ 74
COMPARISON OF STOCKHOLDERS' RIGHTS......................................... 75
General.................................................................. 75
Authorized Capital....................................................... 75
Classified Board of Directors............................................ 75
Number of Directors; Removal; Filling Vacancies.......................... 75
No Company Stockholder Action by Written Consent; Special Meetings....... 76
Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors................................................ 76
Transactions with Interested Stockholders................................ 77
Amendment of Certain Provisions of the Certificates...................... 78
Company Rights........................................................... 78
General Anti-Takeover Effects............................................ 79
Liability and Indemnification of Officers and Directors.................. 80
EXPERTS.................................................................... 80
LEGAL MATTERS.............................................................. 81
PROPOSALS BY CWM STOCKHOLDERS.............................................. 81
INCORPORATION OF SUBSEQUENTLY FILED DOCUMENTS.............................. 81
APPENDIX A--AGREEMENT AND PLAN OF MERGER
APPENDIX B--OPINION OF CS FIRST BOSTON CORPORATION
APPENDIX C--SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
</TABLE>
6
<PAGE>
SUMMARY
The following is a summary of certain of the information contained elsewhere
in this Proxy Statement-Prospectus. This summary does not purport to be and is
not intended to be complete and is qualified in its entirety by reference to
the more detailed information appearing elsewhere in this Proxy Statement-
Prospectus, the Appendices hereto and the other documents referred to and
incorporated by reference herein. The stockholders of CWM are urged to read and
review carefully the entire Proxy Statement-Prospectus, including the
Appendices hereto and the other documents referred to and incorporated by
reference herein. Capitalized terms used but not defined in this summary have
the meanings ascribed to them elsewhere in this Proxy Statement-Prospectus.
THE SPECIAL MEETING
This Proxy Statement-Prospectus and the attached letter, notice and any other
documents included herewith are being furnished to the stockholders of CWM in
connection with the solicitation of proxies by the Board of Directors of CWM
for use at the Special Meeting to be held at 10:00 a.m., local time, on Friday,
January 20, 1995, in the Assembly Room of Harris Trust and Savings Bank, 111
West Monroe Street, 8th Floor, Chicago, Illinois, and at any and all
adjournments or postponements thereof. At the Special Meeting, the holders of
CWM Shares will be asked to consider and vote upon approval and adoption of the
Merger Agreement and to transact such other business as may properly come
before the meeting.
THE PARTIES
The Company
The Company (formerly named Waste Management, Inc.) is a leading
international provider of environmental, engineering and construction,
industrial and related services. See "Business of the Company." The principal
executive offices of the Company are located at 3003 Butterfield Road, Oak
Brook, Illinois 60521. The telephone number of the Company is (708) 572-8800.
Through Waste Management, Inc. (formerly named Waste Management of North
America, Inc.), a wholly owned subsidiary of the Company ("WMI"), the Company
provides integrated solid waste management services in North America to
commercial, industrial, municipal and residential customers, as well as to
other waste management companies.
CWM is an approximately 78.6%-owned subsidiary of the Company, and its
business is described below.
Wheelabrator Technologies Inc., an approximately 55%-owned subsidiary of the
Company ("WTI"), provides a wide array of environmental products and services
in North America and abroad. WTI's clean energy group is a leading developer of
facilities and systems for, and provider of services to, the trash-to-energy,
energy, and independent power markets. WTI's clean water group is principally
involved in the design, manufacture and operation of facilities and systems
used to purify water, to treat municipal and industrial wastewater, to treat
and manage biosolids resulting from the treatment of wastewater by converting
them into useful fertilizers, and to recycle organic wastes into compost
material useable for horticultural and agricultural purposes. WTI's clean air
group designs, fabricates and installs technologically advanced air pollution
emission control and measurement systems and equipment, including systems which
remove pollutants from the emissions of WTI's trash-to-energy facilities as
well as power plants and other industrial facilities.
Rust International Inc. ("Rust") is a subsidiary owned approximately 56% by
CWM and 40% by WTI, and its business is described below.
The Company provides comprehensive waste management and related services
internationally, primarily through Waste Management International plc, a
subsidiary owned 56% by the Company, 12% by Rust and 12% by WTI ("Waste
Management International"). Waste Management International provides a wide
range
7
<PAGE>
of solid and hazardous waste management services (or has interests in projects
or companies providing such services) in various countries in Europe and in
Argentina, Australia, Brunei, Hong Kong, Indonesia, Malaysia, New Zealand,
Singapore and Taiwan.
CWM
CWM is a leading provider of hazardous waste management services and, through
Rust, various other environmental and industrial services. CWM owns an
approximately 56% interest in Rust, a subsidiary engaged in furnishing
engineering, construction, environmental and infrastructure consulting,
hazardous substance remediation and a variety of other on-site industrial and
related services primarily to clients in government and in the chemical,
petrochemical, nuclear, energy, utility, pulp and paper, manufacturing,
environmental services and other industries. See "Business of CWM."
CWM participates internationally in the waste management services industry
through Rust's 12% equity interest in Waste Management International.
The principal executive offices of CWM are located at 3001 Butterfield Road,
Oak Brook, Illinois 60521. The telephone number of CWM is (708) 218-1500.
Merger Sub
Merger Sub is a wholly owned subsidiary of the Company formed to effectuate
the Merger. Merger Sub has not engaged in any operations to date. The principal
executive offices of Merger Sub are located at 3003 Butterfield Road, Oak
Brook, Illinois 60521. The telephone number of Merger Sub is (708) 572-8800.
BACKGROUND; CERTAIN RELATIONSHIPS WITH AFFILIATES; OWNERSHIP OF CWM
CWM was organized by the Company as a wholly owned subsidiary in 1978. In
1986, in anticipation of the initial public offering of CWM Shares, the Company
consolidated under CWM's ownership substantially all of the Company's ongoing
domestic businesses that then provided hazardous waste management services. In
1986, CWM engaged in an initial public offering of approximately 18.9% of the
post-offering CWM Shares. In connection with these and other transactions, CWM
and the Company and their respective subsidiaries have entered into various
agreements with respect to their ongoing relationships and other matters. See
"Certain Relationships and Transactions."
The Company currently owns approximately 78.6% of the outstanding CWM Shares
and will own 100% of the outstanding CWM Shares immediately upon consummation
of the Merger. As described above under "The Parties," CWM owns approximately
56% of Rust, which has an approximately 12% interest in Waste Management
International. In addition, WTI, of which the Company owns approximately 55%,
owns approximately 40% of Rust. The Company currently is able to elect the
entire Board of Directors of CWM and to control CWM's affairs.
The following table sets forth the ownership of the outstanding CWM Shares as
of December 7, 1994 (the record date for the Special Meeting) and as of
immediately after the Merger.
<TABLE>
<CAPTION>
NUMBER OF CWM SHARES
OWNED PERCENTAGE OF CLASS
----------------------- -----------------------
AS OF IMMEDIATELY AS OF IMMEDIATELY
DECEMBER 7, AFTER THE DECEMBER 7, AFTER THE
IDENTITY OF PERSON OR GROUP 1994 MERGER 1994 MERGER
- --------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Company(1)...................... 164,278,417 1,000 78.6% 100%
Public Stockholders of CWM...... 0 21.4% 0%
</TABLE>
- --------
(1) Such amounts and percentages do not reflect that certain members of the
Company's management may be deemed to be affiliates of the Company. See
"Securities Ownership--Ownership of CWM Shares."
8
<PAGE>
RECORD DATE AND QUORUM
The record date for the Special Meeting has been fixed by the Board of
Directors of CWM as the close of business on December 7, 1994 (the "Record
Date"). Only holders of record of CWM Shares on the Record Date will be
entitled to notice of and to vote at the Special Meeting and any adjournments
or postponements thereof. CWM stockholders of record on the Record Date are
entitled to one vote per CWM Share on any matter that may properly come before
the Special Meeting. As of the Record Date, there were CWM Shares
outstanding and entitled to vote at the Special Meeting, held of record by
holders. The presence, either in person or by properly executed
proxy, of the holders of a majority of the outstanding CWM Shares at the close
of business on the Record Date is necessary to constitute a quorum at the
Special Meeting.
VOTE REQUIRED; CERTAIN CWM SHARES VOTING IN FAVOR OF THE MERGER
Pursuant to the DGCL, in order for the Merger to take place, the Merger
Agreement must be approved and adopted by the affirmative vote of the holders
of a majority of the outstanding CWM Shares as of the Record Date (the "DGCL
Vote Requirement").
As of the Record Date, the Company was the owner of approximately 78.6% of
the outstanding CWM Shares, and as of October 15, 1994, directors and executive
officers of the Company held beneficial ownership in the aggregate of
approximately 1% of the outstanding CWM Shares. See "Securities Ownership--
Ownership of CWM Shares." The Company has agreed to vote its CWM Shares for
approval and adoption of the Merger Agreement. However, as specified in the
Merger Agreement, it is a condition to the consummation of the Merger that the
Merger Agreement be approved and adopted at the Special Meeting by the holders
of a majority of the outstanding CWM Shares which are represented and entitled
to be voted at the Special Meeting and not directly or indirectly owned by the
Company (the "Independent Vote Requirement"). The Merger is also subject to
various other conditions. See "The Merger Agreement--Conditions." See also,
"Information Concerning the Special Meeting--Vote Required; Certain CWM Shares
Voting in Favor of the Merger" and "--Action to be Taken Under the Proxy."
TERMS OF THE MERGER; DESCRIPTION OF NOTES
The following description of the Notes and the terms and conditions of the
Merger and the Merger Agreement is qualified in its entirety by reference to
the Indenture to be dated as of January 20, 1995 (the "Indenture"), by and
between the Company and , as trustee (the "Trustee"), the form of
which Indenture is filed as an exhibit to the Registration Statement and is
incorporated herein by reference (see "Description of Notes" herein) and by
reference to the copy of the Merger Agreement attached as Appendix A hereto:
Notes....................... An estimated $550,000,000 aggregate principal
amount at maturity of Notes due on January 20,
2005 (excluding approximately $260,000,000
aggregate principal amount at maturity of Notes
issuable upon conversion, if ever, of the LYONs
(as defined below under "Treatment of Stock
Options and Liquid Yield Option Notes")). The
aggregate principal amount at maturity of Notes
actually issued in the Merger will depend on the
number of CWM Shares for which cash is paid in
lieu of issuing fractional Notes and the number
of Dissenting Shares, if any. Each Note will have
a principal amount due at maturity of $1,000.
9
<PAGE>
Basis for Exchange.......... On the Effective Date, all publicly held CWM
Shares, other than Dissenting Shares, will,
without any action on the part of the holder
thereof, be converted into Notes on the basis of
one Note for every 81.1 CWM Shares, plus, as
applicable, cash in lieu of issuance of
fractional Notes, as provided below. By virtue of
the Merger, CWM Shares held by the Company and
its subsidiaries will be cancelled (except for
CWM Shares held in escrow for exchange for the
Company's Liquid Yield Option Notes due 2012,
which CWM Shares will be converted into the
merger consideration in the same manner as CWM
Shares generally).
Interest.................... Interest will be paid semi-annually on January 20
and July 20 of each year at the rate of 2.0% per
annum of the principal amount at maturity of each
Note from and after the Effective Date.
Stated Issue Price and The Notes will have a Stated Issue Price of
Stated Discount $717.80. The difference between the principal
amount at maturity of $1,000 and the Stated Issue
Price represents the Stated Discount which,
together with cash interest payable on the Notes
as described above, will accrue at a rate of
5.75% per annum (determined on a semi-annual bond
equivalent basis) based on the Stated Issue
Price. Such rate will be used solely for purposes
of determining the prices at which the Company
may be required to purchase or may redeem the
Notes (as described below) and will differ from a
Holder's actual yield.
Conversion Right............ Each Note will be convertible at the option of
the holder at any time on or prior to maturity,
unless previously redeemed or otherwise purchased
by the Company, into Company Shares. The
conversion ratio will be determined on the
Effective Date by dividing (i) the Stated Issue
Price of $717.80 by (ii) the Company Share
Closing Price, provided that the number of
Company Shares initially issuable upon conversion
of a Note shall not be less than 21.90, nor more
than 26.76. The Company may at its option in lieu
of issuing Company Shares on conversion of a Note
pay cash for each Company Share otherwise
issuable equal to the closing market price per
Company Share on the trading day immediately
preceding the date of such conversion.
Subordination............... The Notes will be subordinated to all existing
and future Senior Indebtedness (as defined herein
under "Description of Notes") of the Company. As
of September 30, 1994, the Company and its
subsidiaries had approximately $ billion of
outstanding indebtedness (excluding accrued
interest thereon) which constituted Senior
Indebtedness of the Company or outstanding
indebtedness (excluding consolidated intercompany
payables) of the subsidiaries of the Company not
guaranteed by the Company which would not have
constituted Senior Indebtedness but to which the
Notes would have been effectively subordinated.
There are no restrictions in the Indenture on the
creation of additional Senior Indebtedness (or
any other indebtedness), and the incurrence of
significant amounts of additional indebtedness
could have an adverse impact on the Company's
ability to service its indebtedness including the
Notes.
10
<PAGE>
Original Issue Discount..... Each Note is expected to be issued at an Original
Issue Discount for federal income tax purposes.
Original Issue Discount is expected to differ
from the Stated Discount. CWM stockholders should
be aware that although the Holder will receive no
cash payment in respect of such Original Issue
Discount, accrued Original Issue Discount will be
includable periodically in a Holder's gross
income for federal income tax purposes prior to
conversion, redemption, purchase or other
disposition of such Holder's Notes, whether such
Notes are ultimately converted, redeemed,
purchased, sold (to the Company or otherwise) or
paid at maturity. See "Certain Tax
Considerations" below.
Optional Redemption......... The Notes are redeemable on or after March 15,
2000 for cash at any time at the option of the
Company, in whole or in part, at redemption
prices equal to the sum of (i) the Stated Issue
Price, (ii) the accrued Stated Discount to the
date of redemption, and (iii) the accrued but
unpaid cash interest to the date of redemption.
Purchase at the Option of The Company will purchase for cash any Note at
the Holder.................. the option of the Holder on March 15, 1998 and
March 15, 2000 at purchase prices of $790.24 and
$843.35, respectively, plus accrued but unpaid
interest to the purchase date. Such purchase
prices include any amounts representing accrued
Stated Discount. The Company will also purchase
for cash any Note at the option of the Holder
following a Change in Control (as defined under
"Description of Notes") occurring on or prior to
March 15, 1998 at a purchase price determined in
the same manner as provided above under "Optional
Redemption."
Sinking Fund................ None.
Listing..................... Application will be made to list the Notes and
the Company Shares into which the Notes are
convertible on the NYSE.
Cash for Fractional Notes... No fractional Notes will be issued in the Merger.
Cash will be paid in respect of fractional Notes
that would otherwise be issuable in an amount
equal to the product of (i) the number of CWM
Shares not converted into whole Notes in the
Merger and (ii) an amount equal to the average of
the closing sale prices for CWM Shares on the
NYSE for the ten trading days immediately
preceding the date of the Special Meeting (the
"CWM Share Closing Price").
The Notes to be issued to holders of CWM Shares and cash in lieu of
fractional Notes are referred to herein as the "Merger Consideration."
Upon consummation of the Merger, CWM will be a wholly owned subsidiary of the
Company, and market trading of CWM Shares will cease. The Merger will be
consummated by the filing with the Secretary of State of the State of Delaware
of a certificate of merger (such certificate of merger being referred to herein
as the "Merger Certificate" and the time of such filing being referred to
herein as the "Effective Time"). It is currently anticipated that, if all
conditions to the Merger have been met or waived, the filing will take place on
the date of the Special Meeting, or as soon thereafter as is practicable. All
shares of Merger Sub will be converted in the Merger into CWM Shares.
11
<PAGE>
The respective obligations of CWM, the Company and Merger Sub to consummate
the Merger are subject to certain conditions. See "The Merger Agreement--
Conditions." One such condition is that the holders of a majority of the
outstanding CWM Shares which are represented and entitled to be voted at the
Special Meeting and not directly or indirectly owned by the Company vote for
approval and adoption of the Merger Agreement. There can be no assurance that
all of the conditions to the consummation of the Merger will be satisfied or
waived.
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time notwithstanding any approval thereof by the
stockholders of CWM, and the Merger Agreement may be amended under certain
conditions. See "The Merger Agreement--Termination; Amendments."
The Merger Agreement generally provides that all costs and expenses incurred
in connection with the Merger Agreement will be paid by the party incurring
such expenses.
EXCHANGE AND PAYMENT PROCEDURES
As soon as practicable after the Effective Time, ,
as exchange agent (the "Exchange Agent"), will mail to each record holder
(other than the Company or holders of Dissenting Shares) of an outstanding
certificate or certificates representing CWM Shares as of the Effective Time, a
letter of transmittal and instructions for use in effecting the surrender of
such certificates for exchange for the Merger Consideration. STOCKHOLDERS OF
CWM SHOULD NOT SUBMIT CERTIFICATES REPRESENTING THEIR CWM SHARES FOR EXCHANGE
FOR THE MERGER CONSIDERATION UNLESS AND UNTIL THEY RECEIVE SUCH A LETTER OF
TRANSMITTAL AND INSTRUCTIONS. See "The Merger Agreement--Exchange and Payment
Procedures."
BACKGROUND OF THE MERGER
For a detailed description of the Company's reasons for proposing the Merger
and of the events leading up to the approval and adoption of the Merger
Agreement by the Board of Directors of CWM, see "Special Factors--Background of
the Merger."
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE CWM BOARD OF DIRECTORS
The Board of Directors of CWM appointed a special committee consisting of the
two directors of CWM who are not directors of the Company or any of its
subsidiaries (other than CWM) or officers or employees of the Company or any of
its subsidiaries (the "Special Committee") to review, evaluate and negotiate
the terms of the Merger. At a Special Committee meeting held on October 14,
1994, the Special Committee unanimously determined that the Merger was fair to,
and in the best interests of, CWM and its public stockholders, unanimously
approved the Merger and the Merger Agreement and unanimously determined to
recommend that the Board of Directors of CWM approve the Merger and the Merger
Agreement. Thereafter, based on the recommendation of the Special Committee,
the Board of Directors of CWM determined that the terms of the Merger were fair
to, and in the best interests of, the public stockholders of CWM, approved the
Merger and the Merger Agreement, and determined to recommend to the
stockholders of CWM that they vote for approval and adoption of the Merger
Agreement. ACCORDINGLY, THE BOARD OF DIRECTORS OF CWM RECOMMENDS THAT THE
STOCKHOLDERS OF CWM VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. See
"Special Factors--Recommendation of the Special Committee and the Board of
Directors of CWM; Fairness of the Merger."
OPINION OF CWM'S FINANCIAL ADVISOR
On October 14, 1994, CS First Boston Corporation ("CS First Boston") rendered
to the Special Committee its oral opinion, subsequently confirmed in writing,
to the effect that, as of such date, the
12
<PAGE>
consideration to be received in the Merger by the holders of CWM Shares (other
than the Company and its affiliates) was fair to such holders from a financial
point of view. The full text of the written opinion of CS First Boston dated
October 14, 1994, which sets forth the assumptions made, matters considered and
limitations on the review undertaken, is attached as Appendix B to this Proxy
Statement-Prospectus and should be read carefully in its entirety. See "Special
Factors--Opinion of CWM's Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Directors and executive officers of CWM beneficially owned as of October 15,
1994 less than 1% of the outstanding CWM Shares to be converted into the Merger
Consideration, and approximately 2.7% of the outstanding Company Shares.
Directors and executive officers of the Company beneficially owned as of
October 15, 1994 approximately 1% of the outstanding CWM Shares and 2.9% of the
outstanding Company Shares. See "Special Factors--Interests of Certain Persons
in the Merger" and "Securities Ownership--Ownership of Company Shares" and "--
Ownership of CWM Shares." All CWM Shares held by such directors and executive
officers at the Effective Time will, upon consummation of the Merger, be
converted into the right to receive the Merger Consideration.
Dean L. Buntrock, Donald F. Flynn, Peter H. Huizenga, Peer Pedersen, James E.
Koenig and Phillip B. Rooney, all of whom currently serve on the Board of
Directors of CWM, are also directors or officers or both of the Company. See
"Special Factors--Interests of Certain Persons in the Merger."
ACCOUNTING TREATMENT
The Company will treat the Merger as a purchase of the approximately 21.4%
minority interest in CWM.
CERTAIN TAX CONSIDERATIONS
The Merger will be a taxable transaction to the holders of CWM Shares. Each
stockholder will recognize gain or loss measured by the difference between (i)
the sum of the fair market value of the Notes and the amount of cash received
in the Merger and (ii) the stockholder's basis in the CWM Shares. See "Certain
Tax Considerations."
Each Note is expected to be issued with Original Issue Discount for federal
income tax purposes. A Holder of a Note will be required to include
periodically accrued Original Issue Discount in income for federal income tax
purposes prior to conversion, redemption, purchase, other disposition or
maturity of the Note. In addition, Holders will be required to include the
semi-annual cash interest payments on each Note in income in accordance with
their regular method of accounting. See "Certain Tax Considerations."
LITIGATION REGARDING THE MERGER
Several putative class action lawsuits seeking injunctive relief and
unspecified money damages were filed in the Chancery Court of the State of
Delaware in and for New Castle County between July 29 and August 5, 1994
against the Company, CWM and the individual directors of CWM in connection with
the proposed Merger. These lawsuits have since been consolidated for all
purposes into a single action captioned In re Chemical Waste Management, Inc.
Shareholders Litigation, the complaint in which alleges, among other things,
that the defendants have breached their fiduciary duties to CWM's minority
stockholders because the initially proposed merger consideration was inadequate
and unfair. Discovery is ongoing in the consolidated action. The Company and
CWM believe that their actions and those of CWM's Board of Directors (and its
Special Committee) in connection with the proposed Merger have been in
accordance with Delaware law. Accordingly, the Company, CWM and CWM's directors
intend to contest this lawsuit vigorously.
13
<PAGE>
REGULATORY REQUIREMENTS
Except for the filing of the Merger Certificate with the Secretary of State
of the State of Delaware after approval and adoption of the Merger Agreement
pursuant to the DGCL, and compliance with federal and state securities laws,
neither the Company nor CWM is aware of any material United States federal or
state or foreign governmental regulatory requirement necessary to be complied
with or approval that must be obtained in connection with the Merger.
MARKET PRICES OF CWM AND COMPANY SHARES
CWM Shares and Company Shares are traded on the NYSE under the symbols "CHW"
and "WMX," respectively. The following table shows the per share high and low
sales prices reported in the consolidated transaction reporting system, as
reported in The Wall Street Journal (Midwest edition) for transactions in CWM
Shares and Company Shares on July 28, 1994 (the trading day on which the
initial proposal to effectuate the Merger was publicly announced after the
close of the NYSE), October 14, 1994 (the trading day on which the approval of
the Merger Agreement was publicly announced after the close of the NYSE) and
December , 1994. See "CWM Share and Company Share Market Price Information;
Dividend Information; and CWM Share Purchase Information."
<TABLE>
<CAPTION>
MARKET PRICE
OF CWM MARKET PRICE OF
SHARES COMPANY SHARES
------------ ---------------
HIGH LOW HIGH LOW
----- ------ ------- -------
<S> <C> <C> <C> <C>
July 28, 1994................................ $ 8 $7 3/4 $29 3/8 $28 5/8
October 14, 1994............................. 8 1/4 7 3/4 29 1/4 28 3/4
December , 1994...........................
</TABLE>
TREATMENT OF STOCK OPTIONS AND LIQUID YIELD OPTION(TM) NOTES
Each option to acquire CWM Shares which is outstanding under CWM stock option
plans will, upon consummation of the Merger, be adjusted by virtue of the
Merger into the right to purchase on the exercise thereof the number of Company
Shares determined on the Effective Date by multiplying the number of CWM Shares
subject to such option by the quotient determined by dividing the CWM Share
Closing Price by the Company Share Closing Price (rounded up to the nearest
whole number if such number of Company Shares is not a whole number) at a price
per Company Share equal to the quotient determined by dividing the aggregate
option exercise price payable for CWM Shares by the terms of such option by the
number of Company Shares issuable on exercise of such option, as provided
above, subject to all other terms specified in such options. See "The Merger
Agreement--Treatment of Stock Options."
The Liquid Yield Option Notes due 2010 issued by CWM (the "CWM LYONs") and
the Liquid Yield Option Notes due 2012 issued by the Company (the "Company
LYONs" and together with the CWM LYONs, the "LYONs") currently are convertible
into (in the case of the CWM LYONs) or exchangeable for (in the case of the
Company LYONs) CWM Shares. Upon consummation of the Merger, the LYONs will
become convertible into the Merger Consideration to which the holders would
have been entitled had they converted or exchanged the LYONs immediately prior
to the Effective Time. See "The Merger Agreement--Treatment of LYONs."
DELAWARE STATUTORY APPRAISAL RIGHTS
Under Delaware law, record holders of CWM Shares who, prior to the CWM
stockholder vote on the Merger, properly demand appraisal and vote against or
abstain from voting with respect to the Merger have the right to obtain a cash
payment for the "fair value" of their CWM Shares (excluding any element of
value arising from the accomplishment or expectation of the Merger). In order
to exercise such rights, holders must comply with the procedural requirements
of Section 262 of the DGCL, a description of which is provided under "Delaware
Statutory Appraisal Rights" and the full text of which is attached to this
Proxy Statement-
- --------
(TM)Merrill Lynch & Co.
14
<PAGE>
Prospectus as Appendix C. Such "fair value" would be determined in judicial
proceedings, the result of which cannot be predicted. Failure to take any of
the steps required under Section 262 on a timely basis may result in the loss
of appraisal rights.
COMPARISON OF RIGHTS OF HOLDERS OF CWM SHARES AND COMPANY SHARES
CWM and the Company are each incorporated under the DGCL. Accordingly, there
are no differences in the rights of holders of CWM Shares and Company Shares
pursuant to applicable state law. Certain provisions of the Company's
Certificate of Incorporation may have an anti-takeover effect. These include
provisions establishing a classified board of directors, prohibiting
stockholder action by written consent, preventing stockholders from calling
special meetings, providing that directors may be removed only for cause, and
requiring an 80% vote of the voting stock of the Company to amend any of the
foregoing provisions. CWM's Certificate of Incorporation contains all of the
foregoing provisions except the prohibition of stockholder action by written
consent. In addition, both the Company By-Laws and the CWM By-Laws contain
advance notice provisions with respect to director nominations by stockholders
and stockholder proposals which may also have an anti-takeover effect. Pursuant
to a plan adopted by the Company in January 1987, each Company Share carries
the right (referred to herein as a "Right") to purchase one four-hundredth
(subject to adjustment) of a share of Series A Preferred Stock, $1.00 par value
("Preferred Stock") at a price of $68.75 (subject to adjustment). The Rights
are tradeable only with the Company Shares until they become exercisable. The
Rights become exercisable ten days after the earlier of a public announcement
that a person has acquired 20% or more of the Company's outstanding voting
stock or a person's commencement or announcement of a tender or exchange offer
that would result in such person's owning 30% or more of the Company's
outstanding voting stock. The Rights are subject to redemption by the Company
at a price of $.0125 per Right, subject to certain limitations, and will expire
on February 6, 1997. The Preferred Stock carries certain preferential dividend
and liquidation rights and certain voting and other rights. If the Company or
its assets are acquired in certain merger or other transactions after a person
acquires Company voting stock or commences or announces an offer as provided
above, each holder of a Right may purchase, at the exercise price of the Right,
shares of common stock of the acquiring company having a market value of two
times the exercise price of the Right. If the Company is the survivor in
certain merger transactions or in the event of certain other "self-dealing"
transactions, each holder of a Right may purchase, at the exercise price of the
Right, shares of Preferred Stock having a market value of twice the exercise
price of the Right. Rights held by an acquiring person become void upon the
occurrence of such events.
For a more detailed description of the capital stock of CWM and the Company
and the differences in rights of holders of CWM Shares and Company Shares
attributable to differences between CWM's and the Company's respective
Certificates of Incorporation and attributable to the Rights, see "Comparison
of Stockholders' Rights."
SELECTED FINANCIAL DATA
The following selected financial data of CWM and the Company should be read
in conjunction with the Consolidated Financial Statements and the notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" of each of CWM and the Company incorporated by reference into the
Form 10-K Annual Reports of CWM and the Company, respectively, for the year
ended December 31, 1993, and the quarterly reports on Form 10-Q of CWM and the
Company, respectively, for the three-month and nine-month periods ended
September 30, 1994, which Form 10-K and 10-Q Reports are incorporated by
reference herein. The historical financial data for CWM and the Company as of
December 31, 1989, 1990, 1991, 1992 and 1993 and for the periods then ended
have been derived from financial statements audited by Arthur Andersen LLP,
independent public accountants. See notes to CWM's and the Company's
Consolidated Financial Statements incorporated by reference into CWM's and the
Company's respective Form 10-K Reports for the year ended December 31, 1993 for
further discussion of the basis of presentation and principles of
consolidation.
15
<PAGE>
CHEMICAL WASTE MANAGEMENT, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(000'S OMITTED IN TABLE, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(UNAUDITED)
AS OF AND FOR THE
NINE MONTHS ENDED
AS OF AND FOR THE YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------ --------------------
1989 1990 1991 1992 1993(1) 1993(1) 1994(1)
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $ 846,778 $1,146,972 $1,358,344 $1,518,603 $2,129,791 $1,570,987 $
Income (loss) before
cumulative effect of
change in accounting
principle(2)........... $ 144,243 $ 175,591 $ 100,806 $ 129,735 $ (300,316) $ (316,014) $
Average shares and
equivalent shares
outstanding during the
period................. 202,111 207,238 206,917 204,967 210,700 211,170
Earnings (loss) per
common and common
equivalent share before
cumulative effect of
change in accounting
principle.............. $ 0.71 $0.85 $ 0.49 $ 0.63 $ (1.43) $ (1.50) $
Dividends per share(3).. $ 0.11 $ 0.15 $ 0.19 $ 0.20 $ 0.10 $ 0.10 $
Total assets............ $1,105,154 $1,606,460 $2,025,512 $2,442,379 $3,124,044 $3,117,386 $
Due to WMX Technologies,
Inc.................... $ 104,162 $ 53,230 $ 326,593 $ 626,712 $1,134,596 $1,075,954 $
Other long-term debt.... $ 3,515 $ 190,319 $ 373,680 $ 138,338 $ 58,318 $ 84,747 $
Redeemable preferred
stock.................. $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ -- $ -- $
Stockholders' equity.... $ 794,663 $ 960,642 $ 921,403 $1,146,581 $ 694,919 $ 683,135 $
</TABLE>
- --------
(1) Results for 1993 and the nine months of 1994 reflect the consolidation of
Rust. See Note 1 to Consolidated Financial Statements of CWM incorporated
by reference herein.
(2) Includes special charges, before tax, of $36,000,000 in 1991, $111,200,000
in 1992 and $550,000,000 in 1993 and the nine months ended September 30,
1993, and also includes non-taxable gains of $10,700,000 in 1991,
$47,000,000 in 1992 and $10,500,000 in 1993 and the nine months ended
September 30, 1993 resulting from issuance of stock by subsidiary and
equity investee. See Notes 2 and 17 to CWM's Consolidated Financial
Statements incorporated by reference herein.
(3) In August 1993, CWM's Board of Directors suspended indefinitely the payment
of quarterly cash dividends on CWM Shares.
16
<PAGE>
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(000'S OMITTED IN TABLE, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
(UNAUDITED)
AS OF AND FOR THE NINE
MONTHS ENDED
AS OF AND FOR THE YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------ -----------------------
1989(1) 1990(2) 1991(3) 1992(4) 1993(5) 1993(5) 1994
---------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $4,413,742 $ 6,034,406 $ 7,550,914 $ 8,661,027 $ 9,135,577 $ 6,748,668 $
Income before
extraordinary item and
cumulative effect of
accounting changes..... $ 562,135 $ 709,309 $ 606,323 $ 921,175 $ 452,776 $ 289,853 $
Extraordinary item, net
of income taxes........ -- 24,547 -- -- -- --
Cumulative effect of
accounting changes..... -- -- -- 71,139 -- --
Net income.............. $ 562,135 $ 684,762 $ 606,323 $ 850,036 $ 452,776 $ 289,853 $
Average shares and
equivalent shares
outstanding............ 459,727 476,580 493,167 493,948 485,374 485,911
Earnings (loss) per
common and common
equivalent share:
Income before
extraordinary item
and cumulative effect
of accounting
changes.............. $ 1.22 $ 1.49 $ 1.23 $ 1.86 $ .93 $ .60 $
Extraordinary item.... -- (.05) -- -- -- --
Cumulative effect of
accounting changes... -- -- -- (.14) -- --
Net income............ $ 1.22 $ 1.44 $ 1.23 $ 1.72 $ .93 $ .60 $
Dividends per share..... $ .29 $ .35 $ .42 $ .50 $ .58 $ .43 $
Total Assets............ $6,405,209 $10,518,243 $12,572,310 $14,114,180 $16,264,476 $16,146,148 $
Long-term debt.......... $1,503,817 $ 3,139,623 $ 3,782,973 $ 4,312,511 $ 6,145,584 $ 5,260,166 $
Put Options............. $ -- $ -- $ -- $ -- $ -- $ -- $
Stockholders' equity.... $2,738,015 $ 3,673,017 $ 4,133,100 $ 4,319,645 $ 4,159,452 $ 4,072,954 $
Ratios of earnings to
fixed charges.......... 7.13 to 1 6.43 to 1 4.15 to 1 5.13 to 1 2.70 to 1 2.45 to 1
</TABLE>
- --------
(1) The results for 1989 include a non-taxable gain of $70,826,000 resulting
from the public offering of 5,000,000 shares of common stock of CWM in
October 1989 and special charges of $112,000,000 before tax.
(2) The results for 1990 include an extraordinary charge of $24,547,000, or
$.05 per share, representing the Company's percentage interest in the
writedown by WTI of WTI's investment in the stock of The Henley Group, Inc.
and Henley Properties Inc. to market value.
(3) The results for 1991 include a special charge of $296,000,000, before tax
and minority interest, primarily to reflect then current estimates of the
environmental remediation liabilities at waste disposal sites previously
used or operated by the Company and its subsidiaries or their predecessors.
See Note 11 to the Company's Consolidated Financial Statements incorporated
by reference herein.
(4) The results for 1992 include a non-taxable gain of $240,000,000 (before
minority interest) resulting from the initial public offering of Waste
Management International, as well as special charges of $219,900,000,
before tax and minority interest, primarily related to writedowns of the
Company's medical waste business, CWM incinerators in Chicago, Illinois and
Tijuana, Mexico and The Brand Companies, Inc.'s ("Brand") investment in its
asbestos abatement business and certain restructuring costs incurred by
Brand and CWM related to the formation of Rust and one-time after-tax
charges aggregating $71,139,000, or $.14 per share, related to the
cumulative effect of adopting two new accounting standards. See Notes 1, 9
and 11 to the Company's Consolidated Financial Statements incorporated by
reference herein.
(5) The results for 1993 and the nine months ended September 30, 1993 include a
non-taxable gain of $15,109,000, relating to the issuance of shares by
Rust, as well as the Company's share of a special asset revaluation and
restructuring charge of $550,000,000, before tax and minority interest,
recorded by CWM related primarily to a revaluation of its thermal treatment
business, and a provision of approximately $14,000,000 to adjust deferred
income taxes resulting from the 1993 tax law change. See Notes 1 and 11 to
the Company's Consolidated Financial Statements incorporated by reference
herein.
(6) Certain amounts have been restated to conform to 1994 classifications.
17
<PAGE>
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
The following table sets forth certain historical information per Company
Share and per CWM Share and the pro forma effect of the Merger on each Company
Share determined as if the Merger had taken place as of January 1, 1993 and on
the assumption that the Notes were outstanding throughout the periods
presented:
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1993
------------------------------
PER COMPANY
SHARE PER PRO FORMA
BEFORE CWM PER COMPANY
MERGER SHARE SHARE
----------- ----- -----------
<S> <C> <C> <C>
Book value....................................... $8.60 $3.32 $8.43
Cash dividends declared.......................... .58 .10 .58
Income (loss).................................... .93 (1.43) .76
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1994
-----------------------------
PER COMPANY
SHARE PER PRO FORMA
BEFORE CWM PER COMPANY
MERGER SHARE SHARE
----------- ----- -----------
<S> <C> <C> <C>
Book value........................................ $ $ $
Cash dividends declared........................... .45 -- .45
Income............................................ 1.20 .22 1.19
</TABLE>
18
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETING
THE SPECIAL MEETING
The Special Meeting is scheduled to be held on Friday, January 20, 1995 at
10:00 a.m., local time, in the Assembly Room of Harris Trust and Savings Bank,
111 West Monroe Street, 8th Floor, Chicago, Illinois. At the Special Meeting,
the holders of CWM Shares will be asked to consider and vote upon approval and
adoption of the Merger Agreement and to transact such other business as may
properly come before the meeting. Information concerning the Special Meeting
and the Merger Agreement is set forth below.
RECORD DATE; QUORUM; OUTSTANDING CWM SHARES ENTITLED TO VOTE
The Record Date for the Special Meeting has been fixed as the close of
business on December 7, 1994. Only holders of record of CWM Shares on the
Record Date are entitled to notice of and to vote at the Special Meeting.
Holders of CWM Shares on the Record Date are entitled to one vote for each CWM
Share held on matters properly presented at the Special Meeting. A
stockholders' list will be available for examination by holders of CWM Shares
at the Special Meeting and at CWM's corporate offices for the 10 days preceding
such meeting.
At the close of business on the Record Date, there were CWM Shares
issued and outstanding held of record by registered holders. The
holders of a majority of the CWM Shares entitled to vote who are present in
person or represented by proxy will constitute a quorum for the transaction of
business at the Special Meeting. The Company's approximately 78.6% ownership of
the outstanding CWM Shares will be sufficient to create a quorum at the Special
Meeting.
VOTE REQUIRED; CERTAIN CWM SHARES VOTING IN FAVOR OF THE MERGER
Pursuant to the DGCL, the Merger Agreement must be approved and adopted by
the affirmative vote of the holders of a majority of the outstanding CWM Shares
(the "DGCL Vote Requirement"). The Company has agreed to vote its CWM Shares
for approval and adoption of the Merger Agreement. As of the Record Date, the
Company was the owner of 164,278,417 CWM Shares (approximately 78.6% of the
outstanding CWM Shares). HOWEVER, AS SPECIFIED IN THE MERGER AGREEMENT, IT IS A
CONDITION TO CONSUMMATION OF THE MERGER THAT THE MERGER AGREEMENT BE APPROVED
AND ADOPTED AT THE SPECIAL MEETING BY THE HOLDERS OF A MAJORITY OF THE CWM
SHARES WHICH ARE REPRESENTED AND ENTITLED TO VOTE AT THE SPECIAL MEETING AND
NOT DIRECTLY OR INDIRECTLY OWNED BY THE COMPANY (THE "INDEPENDENT VOTE
REQUIREMENT"). The Merger is also subject to other conditions. See "The Merger
Agreement--Conditions."
Failure to return an executed proxy card or to vote in person at the Special
Meeting or voting to abstain will constitute, in effect, a vote against
approval and adoption of the Merger Agreement for purposes of the DGCL Vote
Requirement. CWM Shares not represented in person or by proxy at the Special
Meeting will not be counted for purposes of determining whether or not the
Independent Vote Requirement has been satisfied. Failure to return an executed
proxy card or to vote in person at the Special Meeting will not affect the
Independent Vote Requirement, but voting to abstain will, in effect, constitute
a vote against approval and adoption of the Merger Agreement for purposes of
the Independent Vote Requirement.
ACTION TO BE TAKEN UNDER THE PROXY
All proxies in the enclosed form that are properly executed and returned to
CWM's transfer agent, Harris Trust and Savings Bank, on or before the date of
the Special Meeting, and not revoked, will be voted at the Special Meeting or
any adjournments or postponements thereof in accordance with any instructions
thereon, or, if no instructions are provided, will be voted FOR adoption and
approval of the Merger Agreement. Any stockholder who has given a proxy
pursuant to this solicitation may revoke it by attending
19
<PAGE>
the Special Meeting and giving oral notice of his or her intention to vote in
person, without compliance with any other formalities. In addition, any proxy
given pursuant to this solicitation may be revoked prior to the Special Meeting
by delivering to the Secretary of CWM an instrument revoking it or a duly
executed proxy bearing a later date.
Management of CWM does not know of any matters other than those set forth
herein which may come before the Special Meeting. If any other matters are
properly presented to the Special Meeting for action, it is intended that the
persons named in the enclosed form of proxy and acting thereunder will vote in
accordance with their best judgment on such matters. Such matters could include
an adjournment or postponement of the Special Meeting from time to time in the
event the CWM Board of Directors or the Special Committee determines that
holders of CWM Shares have not had sufficient time to consider the Merger
Agreement. If any such determination is made, additional proxies may be
solicited during such adjournment period.
ACCOUNTING TREATMENT
The Company will treat the Merger as a purchase of the approximately 21.4%
minority interest in CWM.
PROXY SOLICITATION
The expense of preparing and mailing this Proxy Statement-Prospectus and the
proxies solicited hereby will be borne by CWM. The expense of printing this
Proxy Statement-Prospectus will be borne equally by the Company and CWM. In
addition to the use of the mails, proxies may be solicited by officers and
directors and regular employees of CWM, without additional remuneration, by
personal interviews, written communication, telephone, telegraph or facsimile
transmission. CWM will also request brokerage firms, nominees, custodians and
fiduciaries to forward proxy materials to the beneficial owners of CWM Shares
held of record and will provide reimbursement for the cost of forwarding the
material in accordance with customary charges. CWM has hired Morrow & Co., Inc.
to coordinate the solicitation of such proxies by and through such holders for
a fee of approximately $6,000 plus expenses.
SPECIAL FACTORS
CERTAIN CONSEQUENCES OF THE MERGER
Pursuant to the Merger Agreement, following approval and adoption of the
Merger Agreement and subject to the fulfillment or waiver of certain
conditions, Merger Sub will be merged with and into CWM, and CWM will continue
as the surviving corporation of the Merger. Upon consummation of the Merger,
CWM will be a wholly owned subsidiary of the Company, market trading of CWM
Shares will cease and CWM will take steps to terminate the registration of CWM
Shares under the Exchange Act. Such termination will cause CWM to no longer be
subject to the reporting requirements of the Exchange Act. The Notes to be
issued to CWM public stockholders in the Merger are described below. See "The
Merger Agreement--Merger Consideration," and "--Exchange and Payment
Procedures" and "Description of Notes." The shares of Merger Sub will be
converted in the Merger into CWM Shares.
The directors of CWM immediately after the Merger will be D. P. Payne,
President of CWM, Jerome D. Girsch, Executive Vice President, Chief Financial
Officer, Treasurer and Controller of CWM, and Brian J. Clarke, Vice President
and General Counsel of CWM. The officers of CWM immediately prior to the
Effective Time will be the officers of CWM as the surviving corporation of the
Merger. The Certificate of Incorporation and By-Laws of Merger Sub immediately
prior to the Effective Time will be the Certificate of Incorporation and By-
Laws of CWM as the surviving corporation of the Merger.
20
<PAGE>
BACKGROUND OF THE MERGER
Events Prior to Formulation of the Initial Merger Proposal
During the late spring and early summer of 1993, the management of CWM became
concerned about conditions prevailing in the hazardous waste management
industry. Management believed that CWM's earnings from hazardous waste
management operations in 1993 were being adversely affected by the lingering
effect of the economic recession in the United States on CWM's customers, and
that there were also a number of changes in the hazardous waste services
industry at work. Management believed that these changes were contributing to
both a decline in waste volumes from environmental clean-up projects which
generate hazardous waste for off-site treatment and disposal at CWM's
facilities and softness in the commercial hazardous waste incineration market.
It appeared to CWM's management that the pace of adoption of key environmental
regulations, which fueled much of the hazardous waste services industry's
growth during the 1980's, was substantially reduced and that incremental demand
for hazardous waste disposal services was no longer being significantly created
by such regulations. It also appeared that demand was being adversely affected
by uncertainty about the federal government's regulatory direction concerning
hazardous waste management and environmental clean-up requirements for
industry, and by the efforts of hazardous waste generators to reduce hazardous
waste output and manage hazardous wastes on site.
Because they did not foresee any near-term abatement of these conditions,
CWM's management made the decision, announced in July 1993, (i) to review
possible alternatives to the configuration of CWM's network of treatment and
disposal facilities, and (ii) to review whether certain assets relating to
CWM's hazardous waste incineration services were appropriately valued. This
review was completed by the end of September 1993, at which time CWM announced
that it would record a special asset revaluation and restructuring charge of
$363 million (after tax), relating primarily to a revaluation of CWM's thermal
treatment businesses, and that it would undertake a strategic reconfiguration
of CWM's operations to meet the then-current levels of market demand. CWM's
restructuring plans included eliminating approximately 1,200 positions,
consolidating and restructuring certain operations and administrative
functions, selling certain service centers, and seeking joint venture partners
and reviewing other strategic alternatives for its Port Arthur, Texas
incinerator.
These same concerns about the future of the hazardous waste industry caused
the management of the Company to consider briefly during the summer of 1993
whether or not it would be beneficial to seek to combine CWM with one or more
of the Company's other business units or to engage in some other transaction,
including the possible acquisition by the Company of the CWM Shares held by the
public stockholders. Management consideration of these possibilities was
discontinued in September 1993, primarily as a result of three developments.
First, the management of CWM completed the CWM asset revaluation and
restructuring described above, and it was believed that the decisions made in
that process would help to improve CWM's prospects. Second, the Company's
management was also aware of the possibility that conditions in the hazardous
waste services industry had not yet stabilized, which meant that any attempt to
value CWM for the purpose of a business combination would have been very
difficult. Third, the Company's management did not wish to impede efforts to
explore other strategic alternatives, including the possibility of combining
all or parts of the hazardous waste operations of a third party with those of
CWM. In this regard, CWM discussed the possibility of a joint venture with a
third party in the fall of 1993 and again in the spring of 1994, but the
discussions were terminated without any agreement in principle as to the
structure, terms or other aspects of such a combination.
The adverse business conditions affecting the hazardous waste industry
continued into 1994, and commencing in the late spring of 1994, the managements
of CWM and the Company intensified their focus on further possible actions to
be taken. The managements were aware by May 1994 that, despite the substantial
reduction in costs which CWM had begun to realize as a consequence of the CWM
restructuring and asset revaluation in the third quarter of 1993, and despite
CWM management's ongoing efforts to further
21
<PAGE>
reduce costs and maintain revenues, CWM's overall results and prospects had
continued to deteriorate. In early June 1994, Dean L. Buntrock, Chairman of the
Company, James E. Koenig, Senior Vice President, Chief Financial Officer and
Treasurer of the Company, Herbert A. Getz, Vice President, General Counsel and
Secretary of the Company, D. P. Payne, President of CWM, and Jerome D. Girsch,
Executive Vice President, Chief Financial Officer, Controller and Treasurer of
CWM, toured several of CWM's key operating sites. After these visits and after
reviewing CWM's situation in detail, the managements of CWM and the Company
concluded that further restructuring and cost savings were needed for CWM. They
also determined that additional cost savings could be realized if CWM were
wholly owned by the Company and certain CWM functions were more closely
integrated with those of the Company or WMI.
Development of and Reasons for the Merger Proposal
With these views in mind, the managements of the Company and CWM during late
June and July 1994 formulated a merger proposal (the "Initial Merger Proposal")
in which CWM Shares held by public stockholders of CWM would be converted into
Company Shares on the basis of the relative closing stock prices on the day of
the public announcement of the proposed transaction (which resulted in an
initial proposed exchange ratio of .27 of a Company Share for each public CWM
Share for an implied value per CWM Share of $7.86 based on the closing price
per Company Share on such date). The managements of CWM and the Company
believed that the transaction contemplated by the Initial Merger Proposal would
produce benefits for both parties and would lead to an improved long-term
outlook for CWM. Elimination of CWM's publicly-traded status alone was expected
to produce approximately $1.5 to $2 million in direct annual cost savings,
which would be in addition to the elimination of a substantial time commitment
by senior management of both CWM and the Company to the separate activities of
the CWM Board of Directors and its Committees. In addition, the combination of
the two companies would provide the Company with substantial flexibility to
further reduce CWM's corporate and regional selling, general and administrative
costs through the integration of certain of those functions with Company or WMI
functions.
At the operations level, the Company's management believed that the proposed
transaction would provide several opportunities to lower costs at both CWM and
WMI through integration of certain CWM functions (such as transportation and
equipment maintenance) with those of WMI, creation of opportunities for CWM and
WMI to share equipment, personnel and facilities (such as the construction of
non-hazardous waste disposal facilities at CWM sites or conversion of certain
CWM sites to non-hazardous waste disposal facilities), and better coordination
of certain activities (such as non-hazardous "special" waste marketing).
The Company's management also believed that the combination of CWM with the
Company would simplify the structure and the decision-making process of the
Company's overall domestic waste disposal operations.
Review of the Merger Proposals
On July 28, 1994, the Initial Merger Proposal was presented to the Company's
Board of Directors. At that meeting, the Company's Board of Directors reviewed
the Initial Merger Proposal and then authorized the Company's management to
present the Initial Merger Proposal to CWM and to negotiate with CWM over the
terms of the transaction contemplated thereby, subject to final approval by the
Company's Board. On the same day, CWM's management presented and explained the
Initial Merger Proposal to the CWM Board of Directors, which then appointed Kay
Hahn Harrell and James B. Edwards as the members of the Special Committee
created to review, evaluate and negotiate with respect to the terms of the
proposal and to consider alternatives to it. The CWM Board of Directors also
authorized the Special Committee to retain independent legal counsel and
financial advisors, at CWM's expense, in connection therewith. Following the
Board and Special Committee meetings on July 28, the Initial Merger Proposal
was publicly announced. Neither Ms. Harrell nor Dr. Edwards has ever been
employed by the Company or CWM. Ms. Harrell is a party to a Consulting
Agreement with CWM, originally entered into as of May 1, 1993 for a one-year
term and renewed for a second one-year term as of May 1, 1994, whereby CWM
agreed to pay Ms. Harrell a fee
22
<PAGE>
of $60,000 per year for consulting services, principally in the areas of
investor relations, financial and investment analysis and strategic planning,
which Ms. Harrell agreed to provide. The agreement also provides for CWM's
reimbursement of reasonable expenses incurred by Ms. Harrell in providing such
services. Information concerning CWM's compensation to Ms. Harrell and Dr.
Edwards for their services as directors is incorporated by reference to CWM's
1993 Annual Report on Form 10-K.
At the Special Committee's first meeting on July 28, 1994, the Special
Committee elected Ms. Harrell as Chairperson of the Special Committee, retained
the law firm of Skadden, Arps, Slate, Meagher and Flom ("Skadden Arps") as
legal counsel to the Special Committee and determined to retain an investment
banking firm to act as financial advisor to the Special Committee. On August 9,
1994, the Special Committee interviewed several investment banking firms
(including CS First Boston) and, on August 12, 1994, retained CS First Boston
as financial advisor to the Special Committee.
Following such meetings, the Special Committee, with the assistance of its
advisors, began the process of evaluating the Initial Merger Proposal. From
August 29 to September 5, representatives of CS First Boston held due diligence
meetings with senior management of the Company, CWM and their respective
affiliates, including WMI, WTI, Rust and Waste Management International,
regarding the Initial Merger Proposal and the business, financial condition and
prospects of each of the companies. At a meeting on September 9, 1994, the
Special Committee reviewed and discussed with its advisors CS First Boston's
preliminary evaluation of the Initial Merger Proposal from a financial point of
view, the preliminary due diligence that CS First Boston had conducted to date,
including its discussions with senior management of the Company, CWM and their
respective affiliates, and the additional due diligence to be conducted by CS
First Boston.
At a telephonic Special Committee meeting held on September 14, 1994, CS
First Boston provided an update as to the additional due diligence that it had
performed and its evaluation of the financial aspects of the Initial Merger
Proposal. The Special Committee concluded, based in part on CS First Boston's
analysis, that it should seek to improve the Initial Merger Proposal. The
Special Committee and its advisors discussed possible modifications to improve
the Initial Merger Proposal, including, among other things, increasing the
proposed exchange ratio and calculating the exchange ratio based on the market
price of Company Shares over several trading days prior to closing in order to
protect CWM public stockholders in the event that the market price of Company
Shares should decrease between the date that the parties agreed to the terms of
the proposed merger and the closing of the transaction. At the conclusion of
the meeting, the Special Committee authorized CS First Boston and Skadden Arps
to meet with representatives of the Company to propose and negotiate certain
modifications to the Initial Merger Proposal discussed at such meeting.
On September 16, 1994, Messrs. Koenig and Getz and Thomas A. Witt, Vice
President and Associate General Counsel of the Company and the Secretary of
CWM, met with representatives of CS First Boston and Skadden Arps. CS First
Boston discussed with the Company's representatives its preliminary analysis of
the financial aspects of the Initial Merger Proposal and reported the Special
Committee's desire for certain modifications thereto, including, among other
things, an increase in the exchange ratio to .42 of a Company Share for each
public CWM Share, which would increase the value of the consideration to be
received by CWM public stockholders to $11.75 per CWM Share in the proposed
merger (based on the closing price of Company Shares on September 12, 1994),
and to have the number of Company Shares to be issued in the proposed merger
determined (subject to certain minimum and maximum limits on the number of
Company Shares that would be issued to the CWM public stockholders in the
transaction) by reference to the market price of Company Shares over the
several days preceding the Special Meeting, rather than the Company Share price
on July 28, 1994, the day of announcement of the Initial Merger Proposal. Mr.
Koenig indicated to the CS First Boston representatives a number of matters
which he believed warranted further investigation and reconsideration,
principally the estimates of the cost savings which might be realized as a
result of measures being implemented by CWM management and as a consequence of
the combination of CWM with the Company, and certain assumptions regarding
CWM's expected revenues, cash flows and earnings for 1995 and subsequent years.
23
<PAGE>
After further meetings and discussions regarding possible cost savings and
other financial matters with CWM's management, on September 21, 1994, the
Special Committee's legal and financial advisors discussed the cost savings
which CWM management believed were potentially achievable with Messrs. Koenig
and Witt and John Repke, Manager of Financial Services of the Company. On
September 22, 1994, at a meeting of the Special Committee, representatives of
CS First Boston and Skadden Arps provided an update to the Special Committee as
to their meetings with representatives of the Company and CWM's management. CS
First Boston also provided an update as to its analysis of the financial
aspects of the Initial Merger Proposal, taking into account the revised
estimates of potentially achievable cost savings, which were based on its
discussions with CWM's management. On September 23, 1994, Messrs. Koenig, Getz
and Witt again met with representatives of CS First Boston and Skadden Arps to
discuss the Initial Merger Proposal and the appropriate valuation of CWM. At
such meeting, Mr. Koenig stated that he would be willing to recommend to the
Company's Board of Directors that the value to be ascribed to each public CWM
Share for purposes of the transaction be raised to $8.60. The Special
Committee's legal and financial advisors continued to advocate a higher value.
On September 26, 1994, Ms. Harrell, accompanied by representatives of CS
First Boston and Skadden Arps, met with Messrs. Koenig, Getz and Witt, with Dr.
Edwards participating in the meeting by telephone, in order to explore further
the appropriate valuation of CWM. During this meeting, Dr. Edwards indicated
his belief that unless the value to be ascribed to each public CWM Share for
purposes of the transaction were to be increased, the merger was unlikely to be
approved by the CWM public stockholders at the Special Meeting. Following this
discussion, Ms. Harrell and representatives of CS First Boston and Skadden Arps
met separately with CWM's management to further review CWM's business prospects
and CS First Boston's analysis. After these meetings, Ms. Harrell and Mr.
Koenig, accompanied by their respective advisors, met again, and Mr. Koenig
indicated his willingness to recommend to the Company's Board of Directors that
a value of $8.75 be ascribed to each CWM Share in the proposed merger. On the
evening of September 26, 1994, the Special Committee held a telephonic meeting
with its advisors to review the matters discussed that day with the Company's
management.
On September 28, 1994, Messrs. Koenig, Getz and Witt participated in a
telephone conference call with representatives of CS First Boston and Skadden
Arps to further discuss the terms of the proposed transaction. During the call,
the Special Committee's legal and financial advisors indicated that the
negotiations between the Company and the Special Committee appeared to have
reached an impasse and that the Special Committee was considering a temporary
suspension of further discussions in order to evaluate further the terms of the
proposed transaction. In this context, they also requested that Mr. Koenig
present the Company's best offer. In a subsequent telephone call that day, Mr.
Koenig advised the representatives of CS First Boston and Skadden Arps that in
his view the Company's best offer would be to ascribe a value of $8.85 to each
CWM Share in the proposed merger, and he requested that this information be
conveyed to the Special Committee. The Special Committee reviewed the Company's
suggested revised terms of the proposed merger with its financial and legal
advisors and decided that it should continue to seek to improve the terms of
the proposed transaction.
Mr. Koenig and Ms. Harrell exchanged telephone calls on September 28 and
September 29 and discussed generally the desirability of finding a way to
bridge the gap between the respective positions of the Company and the Special
Committee. During these discussions, Mr. Koenig raised and discussed with Ms.
Harrell the possibility of the Company's issuing a non-interest bearing,
subordinated, convertible debt security as an alternative form of merger
consideration. The Special Committee held several discussions with its advisors
on September 28 and September 29 regarding the possibility of pursuing
alternative forms of consideration in the transaction, and determined to
explore such a debt security in order to improve the value of the consideration
to be received by CWM public stockholders in the transaction. Following these
discussions, on September 29, representatives of CS First Boston and Skadden
Arps notified Messrs. Koenig, Getz and Witt that the Special Committee had
instructed them to explore one or more possible alternative forms of merger
consideration, including such debt securities. Mr. Koenig indicated that the
Company would be willing to consider the issuance of such debt securities and
requested a more specific proposal regarding the terms of the debt securities.
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On September 30, CS First Boston submitted a proposal to the Company on
behalf of the Special Committee providing for the conversion of CWM Shares held
by the public stockholders into non-interest bearing, convertible, subordinated
10-year notes of the Company (the "Revised Merger Proposal"). Over the next
several days, Ms. Harrell, Dr. Edwards, representatives of CS First Boston and
Skadden Arps, Messrs. Getz, Witt and Repke, Thomas C. Hau, Vice President and
Controller of the Company, Bruce D. Tobecksen, Vice President-Finance of the
Company, and Gary M. Koche, Assistant Manager-Financial Services of the
Company, conferred by telephone on numerous occasions to discuss the Revised
Merger Proposal and several alternative terms of the proposed notes and their
appropriate valuation. The Company also consulted with Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") in evaluating the terms of the
Revised Merger Proposal and in structuring alternative terms, and during this
period, representatives of CS First Boston and Merrill Lynch conferred several
times to discuss such matters. In discussions with the Company's
representatives, the Special Committee and its advisors continued to press for
a higher value to be attributed to the CWM Shares and proposed several features
of the notes to improve their value for the public stockholders, including a
cash interest payment feature, longer protection from redemption by the Company
and more than one opportunity to have notes repurchased by the Company at the
option of the holder. The Company's representatives declined to increase the
value to be attributed by the Company to the CWM Shares in the proposed merger
above $8.85 for purposes of determining the ratio for conversion of notes into
Company Shares, but indicated their willingness to consider these additional
terms.
From September 30 through October 11, the Special Committee held several
telephonic meetings and various other discussions with its advisors regarding
the terms of the Revised Merger Proposal. At such meetings, representatives of
CS First Boston and Skadden Arps reviewed with the Special Committee the terms
and provisions of the notes proposed to be issued by the Company in the Revised
Merger Proposal and the discussions and negotiations with the Company with
respect thereto. CS First Boston also reviewed with the Special Committee its
preliminary valuation analysis of such notes. On October 11, after several
telephone discussions between the Special Committee members, together with the
CS First Boston and Skadden Arps representatives, and various Company
representatives, an agreement in principle was reached whereby the Notes,
having the material terms specified in the section of this Proxy Statement-
Prospectus entitled "Description of Notes," would be issued in the transaction
to the CWM public stockholders (the "Final Merger Proposal"). At a telephonic
meeting of the Special Committee on October 14, 1994, CS First Boston made a
presentation of its financial analyses and rendered its oral opinion,
subsequently confirmed in writing, to the Special Committee to the effect that,
as of such date, the consideration to be received in the Merger by the holders
of CWM Shares (other than the Company and its affiliates) was fair to such
holders from a financial point of view. See "--Opinion of CWM's Financial
Advisor."
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS OF CWM;
FAIRNESS OF THE MERGER
At the Special Committee meeting held on October 14, 1994, the Special
Committee unanimously determined that the Merger was fair to, and in the best
interests of, CWM and its public stockholders, unanimously approved the Merger
and the Merger Agreement and unanimously determined to recommend that the Board
of Directors of CWM approve the Merger and the Merger Agreement. Thereafter,
based on the recommendation of the Special Committee, the Board of Directors of
CWM determined that the terms of the Merger were fair to, and in the best
interests of, the public stockholders of CWM, approved the Merger and the
Merger Agreement and determined to recommend to the stockholders of CWM that
they vote for approval and adoption the Merger Agreement.
THE BOARD OF DIRECTORS OF CWM RECOMMENDS THAT THE STOCKHOLDERS OF CWM VOTE
FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Reasons for the Special Committee's Recommendation
In determining to recommend that the Board of Directors of CWM approve the
Merger and the Merger Agreement, and in determining the fairness of the terms
of the Merger, the Special Committee considered the factors described below.
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(i) Business, condition and prospects of CWM and the Company. In evaluating
the terms of the Merger, the Special Committee considered the financial
condition, assets, results of operations, business and prospects of CWM and the
Company and their affiliates, the risks involved in achieving those prospects
and the general condition and outlook of the hazardous waste industry and the
solid waste and other industries in which the Company participates. The Special
Committee members reviewed these matters with representatives of CS First
Boston who had conducted a due diligence review of CWM, the Company and their
affiliates. The Special Committee noted that the outlook for the hazardous
waste industry is uncertain and that the negative industry trends could cause
CWM's business and prospects to further deteriorate.
(ii) Financial Analyses and Opinion of CS First Boston. The Special Committee
considered the financial analyses of CS First Boston and the opinion of CS
First Boston to the effect that, as of the date of such opinion, the
consideration to be received in the Merger by the holders of CWM Shares (other
than the Company and its affiliates) was fair to such holders from a financial
point of view. See "--Opinion of CWM's Financial Advisor" for a description of
the financial analyses undertaken by CS First Boston.
(iii) Historical and Recent Market Prices. The Special Committee considered
the trading history of Company Shares and CWM Shares, including trading prices
for periods up to one year prior to the announcement of the Initial Merger
Proposal. The Special Committee members noted that the Merger presented the
public stockholders of CWM with an opportunity to receive Notes which would
represent a premium for their shares over recent and current market prices for
CWM Shares, and that such a premium was consistent with premiums paid in recent
similar transactions reviewed by CS First Boston. See "--Opinion of CWM's
Financial Advisor--CWM Shares--Analysis of Selected Minority Buy-outs" and "--
The Notes."
(iv) Valuation of the Notes and Terms of the Notes. The Special Committee
considered the fact that, based on the assumptions in its analysis, CS First
Boston valued the Notes, on a fully distributed basis, at $9.50 to $10.00 per
CWM Share. See "Opinion of CWM's Financial Advisor--The Notes." The Special
Committee also considered the terms of the Notes. The Special Committee members
took into account the fact that the Notes are immediately convertible into
Company Shares upon consummation of the Merger, and the fact that the
conversion ratio will provide the CWM public stockholders, upon conversion,
with more Company Shares per CWM Share than they would have received pursuant
to the Initial Merger Proposal. In addition, the Special Committee members
noted that the conversion ratio was based on an implied value of $8.85 per CWM
Share, which was equivalent to the maximum implied value of CWM Shares that the
Company had indicated it was willing to consider in a transaction structured as
a stock-for-stock exchange. The Special Committee members also took into
account the fact that the Company will pay in cash a semi-annual interest
payment of 2% per annum of the $1,000 principal amount at maturity of the Notes
and that the Notes are expected to be issued at a discount. The Special
Committee also noted that the Company will be required to purchase the Notes
for cash at the holder's option on specified dates approximately three and five
years after the Effective Date in the amount of the Stated Issue Price of
$717.80 per Note plus accrued Stated Discount and accrued but unpaid interest
to such dates and that the Notes have call protection for five years. The
Special Committee also considered the credit rating of the Company as issuer of
the Notes and various factors which could influence the value of the Notes
between October 14, 1994 and the date that the Notes would be issued in the
Merger and thereafter.
(v) Alternatives. The Special Committee considered but decided not to explore
with third parties alternatives to the Initial Merger Proposal and subsequent
proposals. The reasons for not pursuing such alternatives were that (a) the
Company controls CWM and the Special Committee understood from the
Company that retaining control of CWM was important to the Company for a number
of reasons, particularly the substantial exposure of the Company as a guarantor
of CWM obligations, including site closure and post-closure obligations, and
the strategic importance to the Company as an environmental services provider
of having access to hazardous waste treatment and disposal capacity and the
knowledge and technology related thereto, (b) the Special Committee did not
receive any unsolicited proposals for the purchase of CWM after the Initial
Merger Proposal was announced, and (c) the Special Committee did not believe
any alternatives
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were promising in light of the state of the hazardous waste industry and CWM's
core business and its prospects and the Special Committee's understanding of
previous consideration by Company and CWM management of the options available
for CWM. Based on the foregoing factors and after discussions with its
advisors, the Special Committee concluded that it was unlikely that a
solicitation of other bidders would result in an offer to acquire all of CWM or
the interest of the public stockholders at a higher price or on better terms
than pursuant to the Merger and would in any event delay negotiating a
transaction with the Company. The Special Committee also considered the
likelihood of consummating the Merger and the effects on and risks to the CWM
public stockholders of not consummating or delaying the Merger or not accepting
the Company's proposal, and the Special Committee took account of the fact that
the Special Committee can terminate the Merger Agreement under certain
circumstances, including if it materially modifies or changes its
recommendation of the Merger or CS First Boston withdraws or modifies in any
material respect its fairness opinion prior to the Effective Date. See "The
Merger Agreement--Conditions" and "--Termination; Amendments."
(vi) Independent Negotiations. The Special Committee considered the fact that
the terms of the Merger, including the terms of the Notes, were determined
through arm's-length discussions and negotiations by members of the Special
Committee, with the assistance of CS First Boston and Skadden Arps, and
representatives of the Company and that such discussions and negotiations
resulted in an increase in value to be received by the public stockholders of
CWM in the Merger compared to the value offered in the Initial Merger Proposal.
The Special Committee was of the view that, based on the discussions and
negotiations with representatives of the Company, the terms of the Notes, and
the principal amount at maturity of the Notes to be offered per CWM Share,
reflected the highest price the Company was willing to pay and that any further
negotiations would not result in a higher price and might jeopardize the
possibility of reaching an agreement with the Company.
(vii) The Ability to Obtain an Interest in the Company. The Special Committee
considered the ability of the public stockholders of CWM to obtain an interest
in the ongoing business of the Company and its affiliates and to maintain an
interest in the ongoing business of CWM by converting the Notes into Company
Shares at any time after consummation of the Merger.
(viii) Terms of the Merger Agreement. The Special Committee considered the
terms and conditions of the Merger Agreement, including the amount and form of
the consideration, the nature of the parties' representations, warranties,
covenants and agreements, and the ability of the Special Committee to terminate
the Merger Agreement under certain circumstances. See "The Merger Agreement--
Conditions" and "--Termination; Amendments."
(ix) Independent Vote Requirement. The Special Committee also considered the
fact that a vote of a majority of the publicly held CWM Shares present and
entitled to be voted at the Special Meeting is required to approve the Merger
Agreement.
In light of the number and variety of factors the Special Committee
considered in connection with its evaluation of the Merger, the Special
Committee did not find it practicable to quantify or otherwise assign relative
weights to the foregoing factors, and, accordingly, the Special Committee did
not do so.
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Reasons for the Recommendation of the CWM Board of Directors
In determining the fairness of the terms of the Merger, to approve the Merger
and the Merger Agreement and to recommend that the stockholders of CWM approve
the Merger Agreement, the Board of Directors of CWM adopted the analysis of the
Special Committee with respect to the financial evaluation of CWM, the Merger
Consideration and the merits of the Merger.
OPINION OF CWM'S FINANCIAL ADVISOR
CS First Boston was retained by the Special Committee to act as its financial
advisor in connection with the Merger. CS First Boston is an internationally
recognized investment banking firm and was selected by the Special Committee
based on CS First Boston's experience and expertise. As part of its investment
banking business, CS First Boston is regularly engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.
In connection with CS First Boston's engagement, the Special Committee
requested that CS First Boston evaluate the fairness, from a financial point of
view, to the holders of CWM Shares (other than the Company and its affiliates)
of the consideration to be received in the Merger by such holders. On October
14, 1994, CS First Boston rendered to the Special Committee its oral opinion,
subsequently confirmed in writing, to the effect that, as of such date, the
consideration to be received in the Merger by the holders of CWM Shares (other
than the Company and its affiliates) was fair to such holders from a financial
point of view.
In arriving at its opinion, CS First Boston (i) reviewed the Merger Agreement
and certain publicly available business and financial information relating to
CWM, the Company and certain of their affiliates, (ii) reviewed certain other
information, including financial forecasts, provided by CWM, the Company and
certain of their affiliates, (iii) met with the managements of CWM, the Company
and certain of their affiliates to discuss the business and prospects of CWM,
the Company and such affiliates, (iv) evaluated the pro forma financial impact
of the Merger on the Company, (v) considered certain financial and stock market
data of CWM, the Company and certain of their affiliates and compared that data
with similar data for other publicly held companies in businesses similar to
those of CWM, the Company and certain of their affiliates, (vi) considered, to
the extent publicly available, the financial terms of selected purchases of
public minority interests and certain other business combinations recently
effected and (vii) considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
CS First Boston deemed relevant.
In connection with its review, CS First Boston did not assume responsibility
for independent verification of any of the information provided to or otherwise
reviewed by CS First Boston and relied upon its being complete and accurate in
all respects. With respect to financial forecasts and other data reviewed,
including, without limitation, estimates of liability for environmental
matters, reserves established with respect thereto, and estimates of annual
expenses in connection therewith, the respective managements of CWM and the
Company advised CS First Boston that such forecasts and other data were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of CWM, the Company and their
affiliates as to the future financial performance of CWM, the Company and such
affiliates. In addition, CS First Boston did not make an independent evaluation
or appraisal of the assets or liabilities (contingent or otherwise) of CWM, the
Company or their affiliates, nor was CS First Boston furnished with any such
evaluations or appraisals. CS First Boston expressed no opinion as to what the
value of the Notes actually will be when issued to CWM stockholders pursuant to
the Merger or the price at which such Notes or the Company Shares into which
such Notes are convertible will trade subsequent to the Merger. CS First Boston
was not requested to, and did not, solicit third party indications of interest
in acquiring all or any part of CWM. CS First Boston's opinion is necessarily
based on information available to it and financial, stock market and other
conditions and circumstances as they existed and could be evaluated on the date
of
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its opinion. Although CS First Boston evaluated the fairness of the
consideration to be received in the Merger by the holders of CWM Shares (other
than the Company and its affiliates) from a financial point of view, CS First
Boston was not asked to and did not recommend the specific consideration
payable in the Merger. No other limitations were imposed by the Special
Committee on CS First Boston with respect to the investigations made or
procedures followed by CS First Boston.
The full text of CS First Boston's written opinion, dated October 14, 1994,
which sets forth the assumptions made, matters considered and limitations on
the review undertaken, is attached as Appendix B to this Proxy Statement-
Prospectus and is incorporated herein by reference. HOLDERS OF CWM SHARES ARE
URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. CS First Boston's opinion
is directed only to the fairness of the consideration to be received in the
Merger by the holders of CWM Shares (other than the Company and its affiliates)
from a financial point of view, does not address any other aspect of the Merger
and does not constitute a recommendation to any stockholder as to how such
stockholder should vote at the Special Meeting. The summary of the opinion of
CS First Boston set forth in this Proxy Statement-Prospectus is qualified in
its entirety by reference to the full text of such opinion.
In preparing its opinion to the Special Committee, CS First Boston performed
a variety of financial and comparative analyses, including those described
below, and provided the Special Committee with a written presentation with
respect to such analyses. A copy of CS First Boston's written presentation to
the Special Committee has been filed as an exhibit to the Schedule 13E-3 filed
by CWM and the Company with the Commission and will be available for inspection
and copying at the principal executive offices of CWM during regular business
hours by any interested stockholder of CWM or representative of such
stockholder who has been so designated in writing and may be inspected and
copied, and obtained by mail, from the Commission in the manner specified in
"Available Information." The summary of CS First Boston's analyses set forth
below does not purport to be a complete description of the analyses underlying
CS First Boston's opinion or presentation to the Special Committee. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, CS First Boston did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, CS First Boston believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors, without considering all analyses and factors, could create a
misleading or incomplete view of the processes underlying such analyses and its
opinion. In its analyses, CS First Boston made numerous assumptions with
respect to CWM, the Company and their affiliates, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of CWM and the Company. The estimates contained in
such analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by such analyses. In addition, analyses relating to the
value of businesses or securities do not purport to be appraisals or to reflect
the prices at which businesses or securities actually may be sold. Accordingly,
because such estimates are inherently subject to substantial uncertainty, none
of CWM, the Company, CS First Boston or any other person assumes responsibility
for their accuracy.
CWM Shares
In analyzing the value of the CWM Shares to be exchanged in the Merger, CS
First Boston (i) analyzed the market prices at which CWM Shares traded in the
six- and twelve-month periods immediately preceding October 11, 1994 and the
implied purchase price premiums over those market prices to be paid to CWM
public stockholders in the Merger, based on CS First Boston's valuation of the
Notes (the "Market Price Premium Analysis"), (ii) analyzed the purchase prices
paid to minority shareholders in selected recent buy-outs of public minority
interests by other companies and the values of CWM Shares implied by the
purchase price premiums paid in those transactions (the "Analysis of Selected
Minority Buy-outs") and (iii) performed
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a Comparable Company Analysis, Comparable Transaction Analysis and Discounted
Cash Flow Analysis of the core hazardous waste operations (which operations do
not include those of Rust) of CWM (the "CWM Core Business") and Rust as its
majority affiliate.
Market Price Premium Analysis. CS First Boston analyzed the closing prices of
the CWM Shares at certain dates over the six- and twelve-month periods
preceding October 11, 1994 and the implied purchase price premiums of the CWM
Shares as of such dates based on the valuation reference range for the Notes,
on a fully distributed basis, of $9.50 to $10.00. This analysis resulted in a
range of purchase price premiums for CWM Shares of (i) 17% to 23% based on the
$8.125 closing price of CWM Shares one week prior to the announcement of the
Initial Merger Proposal on July 28, 1994, (ii) 23% to 29% based on the $7.75
closing price of CWM Shares as of October 11, 1994 and (iii) (16%) to (11%)
based on the $11.25 high closing price of CWM Shares over the six-month period
immediately prior to October 11, 1994, 27% to 33% based on the $7.50 low
closing price of CWM Shares over such six-month period and 10% to 16% based on
the $8.615 average closing price of CWM Shares over such six-month period. The
implied purchase price premiums derived from the closing prices of the CWM
Shares at certain dates over the twelve-month period preceding October 11, 1994
did not differ significantly from the implied purchase price premiums derived
from the closing prices of CWM Shares over the six-month period described
above.
Analysis of Selected Minority Buy-outs. Using publicly available information,
CS First Boston analyzed the purchase prices and premiums over stock prices at
various dates prior to transaction announcement paid in the following selected
minority buy-out transactions: Intergroup Healthcare Corp./Foundation Health
Corp., Ogden Projects Inc./Ogden Corporation, FoxMeyer Corp./National
Intergroup Inc., Scripps Howard Broadcasting/EW Scripps Co., Holnam
Inc./Holderbank Financiere Gloris Ltd., Medical Marketing Group/Medco
Containment Services, Valley Fashions Inc./Westpoint-Pepperell Inc., PHL Corp.,
Inc./Leucadia National Corp., Frank B. Hall & Co., Inc./Reliance Group Holdings
Inc., Grace Energy Corp./W.R. Grace & Co., Unocal Exploration Corp./Unocal
Corp., Spelling Entertainment Inc./The Charter Company, American Television and
Communications/Time Warner, Arkla Exploration Co./Arkla Inc., Jiffy Lube
International Inc./Penzoil Acquisition Corp., Country Lakes Food Inc./Land O'
Lakes Inc., Weigh-Tronix Inc./Stavely Industries plc and Metcalf & Eddy
Companies/Air & Water Tech. Corp. (the "Selected Public Minority Buy-out
Transactions"). This analysis resulted in a range of purchase price premiums
paid in Selected Minority Buy-out Transactions of (21%) to 55%, with an average
purchase price premium of 17%. CS First Boston compared the purchase price
premiums paid in the Selected Minority Buy-out Transactions with the implied
purchase price premiums to be paid for CWM Shares in the Merger, based on the
fully distributed valuation reference range for the Notes equivalent to $9.50
to $10.00 per CWM Share. This analysis resulted in a range of purchase price
premiums for CWM Shares of 17% to 23%, with an average purchase price premium
of 20%, based on the $8.125 closing price of CWM Shares one week prior to the
announcement of the Initial Merger Proposal.
Comparable Company Analysis. CS First Boston reviewed and compared certain
actual and estimated financial, operating and stock market information of CWM
and Rust and selected companies in the hazardous waste and engineering and
construction industries. Hazardous waste companies included Clean Harbors Inc.,
Envirosource Inc., Laidlaw Inc., Philip Environmental Inc., Rollins
Environmental Services Inc. and Safety-Kleen Corp. (the "Comparable Hazardous
Waste Companies"). Engineering and construction companies included Dames &
Moore Inc., Fluor Corporation, Foster Wheeler Corporation and Jacobs
Engineering Group Inc. (the "Comparable Engineering and Construction Companies"
and, together with the Comparable Hazardous Waste Companies, the "Comparable
Companies"). CS First Boston compared equity values as a multiple of projected
fiscal 1994 and fiscal 1995 net income, and enterprise values (equity value
plus total debt, preferred stock and minority interest, less cash) as a
multiple of projected fiscal 1994 and fiscal 1995 sales, operating cash flow
and operating income. All multiples were based on closing stock prices as of
October 11, 1994. This analysis resulted in an enterprise valuation reference
range for the CWM Core Business of approximately $1.0 billion to $1.2 billion
and an enterprise valuation range for Rust of approximately $1.3 billion to
$1.45 billion.
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Comparable Transaction Analysis. Using publicly available information, CS
First Boston analyzed the purchase prices and multiples paid in selected merger
or acquisition transactions in the hazardous waste and engineering and
construction industries. Transactions in the hazardous waste industry included
Rollins Environmental Services Inc./Aptus Inc., Earth Technology Corp.
USA/HazWaste Industries, Philip Environmental Inc./Nortru, Inc., Philip
Environmental Inc./Burlington Environmental, Inc., Republic Waste Industries
Inc./Stout Environmental Inc., Brambles USA/Environmental Systems Co.,
EnviroSource Inc./Envirosafe Services (acquisition of partial interest), Severn
Trent plc/Biffa, Shanks & McEwan Group plc/Rechem Environmental Services plc,
BUS Berzelius Umwelt Service/Horsehead Resource Development (acquisition of
partial interest), Clean Harbors Inc./ChemClear Inc., Laidlaw Transport/Laidlaw
Industries and Union Pacific Corp./USPCI, Inc. (the "Selected Hazardous Waste
Transactions"). Transactions in the engineering and construction industry
included Bain Capital/Professional Services Industries Inc., Raytheon Engineers
& Constructors/Ebasco Services Inc., Rust International/The Brand Companies,
Inc., Tilbury Group plc/Robert M. Douglas Holdings plc, JWP Inc./Resource
Recycling Technologies Inc. (acquisition of partial interest), Trafalgar House
plc/Davy Corp. plc, Ogden Corp./ERC Environmental and Energy Services Co.
(acquisition of remaining partial interest), Lyonnaise des Eaux/Dumez S.A.,
Ogden Corp./ ERC International Inc., Thermo Instrument Systems, Inc./Thermo
Environmental Corp., EG&G/Dynatrend, W.R. Grace & Co./Canonie Environmental
Services Corp. (acquisition of partial interest), R-C Acquisition Inc./Research
Cottrell and Dresser Industries/MW Kellog Co. (the "Selected Engineering and
Construction Transactions" and, together with the Selected Hazardous Waste
Transactions, the "Comparable Transactions"). CS First Boston compared purchase
prices as a multiple of latest available 12 months net income and book value,
and adjusted purchase prices (equity purchase price plus net debt assumed) as a
multiple of latest available 12 months sales, operating cash flow and operating
income. This analysis resulted in an enterprise valuation reference range for
the CWM Core Business of approximately $1.2 billion to $1.5 billion and an
enterprise valuation reference range for Rust of approximately $1.5 billion to
$1.8 billion.
Discounted Cash Flow Analysis. CS First Boston performed a discounted cash
flow analysis of the projected unleveraged free cash flow of CWM and Rust for
the fiscal years ended December 31, 1994 through 1999, based upon certain
operating and financial assumptions, forecasts and other information provided
by the respective managements of CWM and Rust. For purposes of such analysis,
CS First Boston utilized discount rates of 10.5% and 11.0% and terminal year
operating income multiples ranging from 13.0x to 13.5x for CWM and discount
rates of 12.5% to 13.0% and terminal year operating income multiples of 11.5x
to 12.5x for Rust. This analysis resulted in an enterprise valuation reference
range for the CWM Core Business of approximately $1.5 billion to $1.6 billion
and an enterprise valuation reference range for Rust of approximately $1.7
billion to $1.85 billion. CS First Boston also performed a discounted cash flow
analysis of the potential cost savings which would result from further
integrating the operations of CWM and the Company for the fiscal years ended
December 1995 through 1997, based on certain operating and financial
assumptions, forecasts and other information provided by the management of CWM.
CS First Boston utilized the same discount rates and terminal year operating
income multiples for this analysis as it did for its analysis of the projected
unleveraged free cash flow of CWM described above. This analysis resulted in a
valuation range of incremental cost savings resulting from the Merger of
approximately $30 million to $160 million.
The Comparable Company Analysis, Comparable Transaction Analysis and
Discounted Cash Flow Analysis for CWM resulted in aggregate enterprise and
equity valuation reference ranges for CWM of approximately $3.2 billion to $3.9
billion and $1.2 billion to $1.8 billion, respectively. The Special Committee
recognized that such valuation reference ranges reflected the negative industry
trends and the uncertain outlook for the hazardous waste industry. The Special
Committee noted that improvements in the future prospects for the hazardous
waste industry and realization of greater incremental cost savings than those
estimated (as set forth in the preceding paragraph) would have a positive
effect on the value of CWM.
Company Shares
In analyzing the value of the Company Shares into which the Notes are
convertible, CS First Boston performed a Comparable Company Analysis,
Comparable Transaction Analysis and Discounted Cash Flow
31
<PAGE>
Analysis of WMI, the Company's wholly owned subsidiary engaged in the solid
waste management business. CS First Boston also considered the values derived
for CWM and Rust described above under "--CWM Shares" and the market values of
the Company's other majority-owned affiliates, WTI and Waste Management
International.
Comparable Company Analysis. CS First Boston reviewed and compared certain
actual and estimated financial, operating and stock market information of WMI
and the following selected companies in the solid waste industry: Attwoods plc,
Browning Ferris Industries Inc., Chambers Development Company Inc., Laidlaw
Inc., Mid-American Waste Systems Inc. and Western Waste Industries (the
"Comparable Solid Waste Companies"). CS First Boston compared equity values as
a multiple of projected fiscal 1994 and fiscal 1995 net income, and enterprise
values (equity value plus total debt, preferred stock and minority interest,
less cash) as a multiple of projected fiscal 1994 and fiscal 1995 sales,
operating cash flow and operating income. All multiples were based on closing
stock prices as of October 11, 1994. This analysis resulted in an enterprise
valuation reference range for WMI of approximately $12.0 billion to $14.0
billion.
Comparable Transaction Analysis. Using publicly available information, CS
First Boston analyzed the purchase prices and multiples paid in the following
selected merger or acquisition transactions in the solid waste industry:
Browning Ferris Industries Inc./Attwoods plc, USA Waste Services Inc./Envirofil
Inc., Browning Ferris Industries Inc./Western Waste Industries Inc.
(terminated), Browning Ferris Industries Inc./Otto Holding International
B.V.(pending), Envirofil/Sacramento Valley Environmental Waste Company, Allied
Waste Industries Inc./Lemons Landfill Corp., Lemons Waste System and other
assets, United Waste Systems Inc./Kelly Run Sanitation Inc., USA Waste/Best Pak
Disposal, Allied Waste Industries Inc./National Scavenger Services Inc. and
W.J. Flyte Corp., USA Waste/North Shore Waste Control, Allied Waste
Industries/Super Services Waste, Sanifill/Redwood Landfill Inc., Sanifill/Nu-
Way Industries, Sanifill/Delaware Recyclable Products, Republic Waste
Industries Inc./Anderson Solid Waste Inc., BET plc/Anglo United, Attwoods
plc/Laidlaw Transportation Ltd. and Laidlaw Transportation Ltd/Laidlaw
Industries (the "Selected Solid Waste Transactions"). CS First Boston compared
purchase prices as a multiple of latest available 12 months net income and book
value, and adjusted purchase prices (equity purchase price plus net debt
assumed) as a multiple of latest available 12 months sales, operating cash flow
and operating income. This analysis resulted in an enterprise valuation
reference range for WMI of approximately $15.0 billion to $16.5 billion.
Discounted Cash Flow Analysis. CS First Boston performed a discounted cash
flow analysis of the projected unleveraged free cash flow of WMI for the fiscal
years ended December 31, 1994 through 1999, based upon certain operating and
financial assumptions, forecasts and other information provided by the
management of WMI and the Company. For purposes of such analysis, CS First
Boston utilized discount rates of 10.5% and 11.0% and terminal year operating
income multiples ranging from 13.5x to 14.0x. This analysis resulted in an
enterprise valuation reference range for WMI of approximately $14.0 billion to
$15.0 billion.
The Comparable Company Analysis, Comparable Transaction Analysis and
Discounted Cash Flow Analysis for WMI resulted in an aggregate enterprise
valuation range for WMI of approximately $13.0 billion to $15.0 billion. This
enterprise valuation reference range for WMI, together with the valuation
reference ranges previously derived for CWM and Rust and the market values of
WTI and Waste Management International, resulted in aggregate enterprise and
equity valuation reference ranges for the Company of approximately $22.7
billion to $25.5 billion and $13.7 billion to $16.3 billion, respectively.
The Notes
CS First Boston analyzed the value of the Notes to be received by the holders
of CWM Shares in the Merger based on the expected trading value of the Notes on
a fully distributed basis. In performing such analysis, CS First Boston
analyzed the key terms of the Notes, including their principal amount, stated
maturity, interest rate, rate of accrual of Stated Discount, optional
redemption by the Company, the
32
<PAGE>
Company's purchase obligation at the option of the holder and conversion
rights. CS First Boston also analyzed the trading values of currently
outstanding convertible securities of the Company, CWM and selected other
companies, including Motorola, Inc., Automatic Data Processing, Alza
Corporation, Lowe's Companies, Chiron Corporation and Hanson America. CS First
Boston also considered a number of factors relevant to the valuation of
convertible debt securities, including prevailing market interest rates,
current spreads over United States Treasury securities for comparable
securities, the Company's credit rating as issuer of the Notes, the historical
and implied volatility of the Company Shares, the discounts to the future
volatility estimates of other newly issued convertible securities, and the
current dividend yield for the Company Shares. This analysis resulted in a
fully distributed valuation reference range for the Notes of approximately
$770.50 to $811.00 per Note, or an equivalent of $9.50 to $10.00 per CWM Share
and an equivalent equity valuation reference range for CWM of approximately
$2.0 billion to $2.1 billion.
Miscellaneous
Pursuant to the terms of CS First Boston's engagement, CWM has agreed to pay
CS First Boston for its services in connection with the Merger an aggregate
financial advisory fee of $1.1 million. Payment of CS First Boston's fee was
not contingent on the rendering of a fairness opinion or the consummation of a
transaction. CWM has also agreed to reimburse CS First Boston for its
reasonable out-of-pocket expenses, including the reasonable fees and expenses
of legal counsel and other advisors, and to indemnify CS First Boston and
certain related persons or entities against certain liabilities, including
liabilities under the federal securities laws, relating to or arising out of
its engagement.
In the ordinary course of its business, CS First Boston and its affiliates
may actively trade the debt and equity securities of CWM, the Company and their
affiliates for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
As of the date of this Proxy Statement-Prospectus, CS First Boston and its
affiliates beneficially own approximately 2,800,000 CWM Shares. Credit Suisse,
the parent company of CS First Boston, has provided banking services, including
the issuances of letters of credit, to the Company in the ordinary course of
business, for which services Credit Suisse has received customary fees, and
Credit Suisse is expected to provide such services in the future. The Company
also maintains a $50,000,000 credit line with Credit Suisse, for which the
Company pays customary fees.
PLANS FOR CWM AFTER THE MERGER
The Company has not as of the date of this Proxy Statement-Prospectus
approved any specific plans or proposals for any extraordinary corporate
transaction involving CWM after the Merger, any sale or transfer of a material
amount of assets of CWM after the Merger or material change in CWM's corporate
structure or business. However, as noted above under "Background of the
Merger--Development of and Reasons for the Merger Proposal," one of the reasons
for the Company's proposing to engage in the Merger is to achieve certain
operational and cost efficiencies that may result from combining certain
functions and operations of CWM and its subsidiaries with those of the Company
or certain of its subsidiaries. The Company intends after the Merger to cause
CWM to engage in such transactions and material changes as may be appropriate
in the Company's judgment in order to achieve such efficiencies. In addition,
while the Company does not have any present intention to sell or transfer any
material amount of assets of CWM, the Company's plans may change at any time,
and the Company may in the future elect to cause CWM to sell, transfer or
otherwise dispose of all or any portion of the assets of CWM to the Company or
any one or more of its subsidiaries or to any other parties as warranted by
future conditions. The Company may also as warranted in light of future
conditions cause changes in CWM's dividend policy, indebtedness or
capitalization, including the payment of dividends and repayment of
indebtedness to the Company.
33
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Directors and executive officers of CWM (including any person who served as a
director or executive officer of CWM at any time during 1993) beneficially
owned as of October 15, 1994 less than 1% of the outstanding CWM Shares and
2.7% of the outstanding Company Shares. Directors and executive officers of the
Company (including any person who served as a director or executive officer of
the Company at any time during 1993) owned as of October 15, 1994 approximately
1% of the outstanding CWM Shares and 2.9% of the outstanding Company Shares.
All CWM Shares held by such directors and executive officers at the Effective
Time will upon consummation of the Merger, along with all other publicly held
CWM Shares (other than Dissenting Shares), be converted into the right to
receive the Merger Consideration. The Company and CWM believe that it is the
present intention of their respective directors and executive officers who own
CWM Shares, and of the Trustees of the Company's Profit Sharing and Savings
Plan, to vote all CWM Shares as to which they possess voting power for approval
and adoption of the Merger Agreement. See "Securities Ownership--Ownership of
CWM Shares" and "Securities Ownership--Ownership of Company Shares."
Dean L. Buntrock, Phillip B. Rooney, Donald F. Flynn, Peer Pedersen and Peter
H. Huizenga, all of whom currently serve on the Board of Directors of CWM, are
also directors of the Company. In addition, James E. Koenig, a director of CWM,
serves as Senior Vice President, Chief Financial Officer and Treasurer of the
Company.
LITIGATION REGARDING THE MERGER
Several putative class action lawsuits seeking injunctive relief and
unspecified money damages were filed in the Chancery Court of the State of
Delaware in and for New Castle County between July 29 and August 5, 1994
against the Company, CWM and the individual directors of CWM in connection with
the proposed Merger. These lawsuits have since been consolidated for all
purposes into a single action captioned In re Chemical Waste Management, Inc.
Shareholders Litigation, the complaint in which alleges, among other things,
that the defendants have breached their fiduciary duties to CWM's minority
stockholders because the initially proposed merger consideration was inadequate
and unfair. Discovery is ongoing in the consolidated action. The Company and
CWM believe that their actions and those of CWM's Board of Directors (and its
Special Committee) in connection with the proposed Merger have been in
accordance with Delaware law. Accordingly, the Company, CWM and CWM's directors
intend to contest this lawsuit vigorously.
FEES AND EXPENSES AND SOURCE OF FUNDS
The estimated costs and fees of the Company, Merger Sub and CWM in connection
with the Merger and related transactions are as follows:
<TABLE>
<S> <C>
Investment Banking Fees and Expenses.......................... $1,200,000
Filing Fees................................................... 150,000
Legal Fees and Expenses....................................... 250,000
Printing, Mailing and Proxy Solicitation Fees................. 500,000
Accounting Fees............................................... 30,000
Miscellaneous................................................. 20,000
----------
Total....................................................... $2,150,000
==========
</TABLE>
The Merger Agreement calls for such fees and expenses to be paid by the party
which incurred them, except for financial printing costs, which shall be borne
equally by the Company and CWM.
The Company, Merger Sub and CWM do not currently know the amount of funds
which will be required to complete the Merger, primarily because the amount of
payments of cash in lieu of issuance of fractional Notes and payments in
respect of Dissenting Shares, if any, cannot be predicted. Funds required by
the Company to complete the Merger will come from the Company's working
capital, sale of short-term promissory notes or the underwritten sale of notes
or bonds.
34
<PAGE>
REGULATORY REQUIREMENTS
Except for the filing of the Merger Certificate with the Secretary of State
of the State of Delaware after the approval and adoption of the Merger
Agreement pursuant to the DGCL, and compliance with federal and state
securities laws, neither the Company nor CWM is aware of any material United
States federal or state or foreign governmental regulatory requirement
necessary to be complied with or approval that must be obtained in connection
with the Merger.
THE MERGER AGREEMENT
The following includes a description of certain provisions of the Merger
Agreement and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached hereto as Appendix A and is incorporated
herein by reference.
MERGER CONSIDERATION
In the Merger, all publicly held CWM Shares, other than Dissenting Shares,
will, by virtue of the Merger and without any action on the part of such
stockholder, be converted into the Notes. By virtue of the Merger, CWM Shares
held by the Company and its subsidiaries will be cancelled (except for CWM
Shares held in escrow for exchange for the Company LYONs, which CWM Shares will
be converted into the Merger Consideration in the same manner as CWM Shares
generally). Notes will be issued in the Merger at the rate of one Note for
every 81.1 CWM Shares (as determined after taking into account all CWM Shares
held by such holder), provided that no fractional Notes will be issued, and
instead cash will be paid to a holder for each CWM Share not converted into a
Note at a price per CWM Share equal to the CWM Share Closing Price. The terms
of the Notes are described below under "Description of Notes."
The Merger Consideration was determined as the result of the Company's
Initial Merger Proposal and subsequent negotiation thereof by the Special
Committee with the management of the Company. See "Special Factors--Background
of the Merger," "--Recommendation of the Special Committee and the Board of
Directors of CWM; Fairness of the Merger," "--Fairness Opinion" and Appendix B.
EXCHANGE AND PAYMENT PROCEDURES
As soon as practicable after the Effective Time, the Exchange Agent will mail
to each record holder (other than the Company or holders of Dissenting Shares)
of an outstanding certificate or certificates representing CWM Shares as of the
Effective Time, a letter of transmittal and instructions for use in effecting
the surrender of such certificates for exchange for the Merger Consideration.
Upon surrender to the Exchange Agent of a certificate representing CWM Shares,
together with such letter of transmittal, duly executed, the holder of such
certificate shall be entitled to receive in exchange therefor a certificate
representing the number of Notes and, if applicable, cash in lieu of a
fractional Note, determined as specified above under "--Merger Consideration."
Notes issued in exchange for CWM Shares formerly represented by any such
certificate shall be deemed issued, and the recipient thereof shall be deemed
to have become the record holder thereof, as of the Effective Time. Until
surrendered in accordance with the foregoing instructions, each certificate
representing CWM Shares will represent for all purposes only the right to
receive the number of Notes determined as specified above under "--Merger
Consideration," and, if applicable, cash in lieu of a fractional Note (together
with any interest or redemption price payable in respect of the Notes as to
which an interest payment date or redemption date shall have occurred on or
after the Effective Time). No interest or other payments becoming due in
respect of the Notes after the Effective Time will be paid to the holder of any
unsurrendered certificate representing CWM Shares until the holder of record of
such certificate surrenders it in accordance with the foregoing procedures, and
no interest shall be paid on any such interest or other payment.
35
<PAGE>
If any certificate evidencing Notes is to be issued pursuant to the
provisions of the Merger Agreement, or any payment is to be made in lieu of a
fractional Note, to a person other than the person in whose name the
certificate representing CWM Shares surrendered in exchange therefor is
registered, a condition of such exchange or payment is that any such
certificate so surrendered be properly endorsed or otherwise in proper form for
transfer and that the person requesting such issuance or payment either pay any
transfer or other taxes required by reason of the issuance or payment to a
person other than the registered holder of such certificate surrendered, or
establish to the satisfaction of the Company that such tax has been paid or is
not applicable.
STOCKHOLDERS OF CWM SHOULD NOT SEND THEIR CWM STOCK CERTIFICATES NOW AND
SHOULD SEND THEM ONLY PURSUANT TO INSTRUCTIONS SET FORTH IN LETTERS OF
TRANSMITTAL TO BE MAILED TO STOCKHOLDERS AS SOON AS PRACTICABLE AFTER THE
EFFECTIVE TIME. IN ALL CASES, THE MERGER CONSIDERATION WILL BE PROVIDED ONLY IN
ACCORDANCE WITH THE PROCEDURES SET FORTH IN THIS PROXY STATEMENT-PROSPECTUS AND
SUCH LETTERS OF TRANSMITTAL.
The Company and CWM strongly recommend that certificates for CWM Shares and
letters of transmittal be transmitted only by registered United States mail,
return receipt requested, appropriately insured. Holders of CWM Shares whose
certificates are lost will be required at the holder's expense to furnish a
lost certificate affidavit and bond acceptable in form and substance to Harris
Trust and Savings Bank, CWM's transfer agent.
Any Merger Consideration not validly claimed by CWM stockholders will be
subject to surrender to governmental entities pursuant to applicable abandoned
property, escheat or similar laws. Neither the Exchange Agent nor any party to
the Merger Agreement will be liable to any holder of certificates formerly
representing CWM Shares for any amount paid to any such governmental entity.
The Company will pay all charges and expenses of the Exchange Agent in
connection with the Merger and the payment and issuance of the Merger
Consideration.
Any questions concerning exchange and payment procedures and requests for
letters of transmittal may be addressed to the Exchange Agent at .
TRANSFER OF CWM SHARES
No transfer of CWM Shares will be made on the stock transfer books of CWM
after the close of business on the day immediately prior to the Effective Date.
If, on or after the Effective Date, certificates for CWM Shares are presented,
they will be cancelled and exchanged for certificates representing Notes, plus,
when applicable, cash in lieu of resulting fractional Notes, as provided in the
preceding section of this Proxy Statement-Prospectus.
TREATMENT OF STOCK OPTIONS
The Merger Agreement provides that each outstanding option to acquire CWM
Shares under the Chemical Waste Management, Inc. 1986 Stock Option Plan, the
Chemical Waste Management, Inc. 1992 Stock Option Plan, the Chemical Waste
Management, Inc. 1992 Stock Option Plan for Non-Employee Directors and the
Chemical Waste Management, Inc. 1990 ServiceShares Plan, in each case as such
plan may have been amended (collectively the "Stock Option Plans"), will, upon
consummation of the Merger, be adjusted by virtue of the Merger and without any
action on the part of the holder thereof into the right to purchase on exercise
thereof the number of Company Shares determined by multiplying the number of
CWM Shares subject to such option by the quotient determined by dividing the
CWM Share Closing Price by the Company Share Closing Price (rounded up to the
nearest whole number if such number of Company Shares is not a whole number) at
a price per Company Share equal to the quotient determined by dividing the
aggregate option exercise price payable for CWM Shares by the terms of such
option by the number of Company Shares issuable on exercise of such option as
provided above, subject to all other terms specified in such option.
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<PAGE>
TREATMENT OF LYONS
The Merger Agreement and the indentures for the CWM LYONs provide that each
outstanding CWM LYON, which currently is convertible into CWM Shares issuable
by CWM at the rate of 11.676 CWM Shares per CWM LYON, will, upon consummation
of the Merger, be adjusted by virtue of the Merger and without any action on
the part of the holder thereof, into the right to receive on conversion thereof
upon the terms and conditions specified in such LYON, the Merger Consideration
to which the holder of such LYON would have been entitled had he or she
exercised the right to convert such LYON into CWM Shares immediately before the
Effective Time. Under the indenture for the Company LYONs, which currently are
exchangeable for 17.218 CWM Shares per Company LYON, each Company LYON will be
accorded the same treatment. Pursuant to a Supplemental Indenture with Harris
Trust and Savings Bank, as trustee with respect to the CWM LYONs, the Company
will assume CWM's obligations under the CWM LYONs.
The following table shows the prices of CWM LYONs and Company LYONs provided
by Chase Manhattan Bank as of July 28, 1994 (the trading day on which the
initial proposal to effectuate the Merger was publicly announced after the
close of the NYSE), October 14, 1994 (the trading day on which the approval of
the Merger Agreement was publicly announced after the close of the NYSE) and
December , 1994.
<TABLE>
<CAPTION>
CWM COMPANY
LYONS LYONS
<S> <C> <C>
July 28, 1994............................................. $381.25 $350.00
October 14, 1994.......................................... 387.50 351.25
December , 1994.........................................
</TABLE>
COVENANTS
CWM has agreed in the Merger Agreement (subject to the ability of the Special
Committee or the Board of Directors of CWM to change its recommendation as to
the Merger at any time if the failure to do so would be inconsistent with its
fiduciary obligations) to submit the Merger Agreement for CWM stockholder
consideration at the Special Meeting and to recommend to the CWM stockholders
the approval of the transactions contemplated by the Merger Agreement.
The Company has agreed in the Merger Agreement not to dispose of its CWM
Shares prior to the Effective Time (except upon exercise of Company LYONs
exchange rights) or to undertake any stock splits or certain actions with
respect to Company Shares prior to the Effective Time, and has agreed to vote
its CWM Shares in favor of the Merger and to use all reasonable efforts to
cause the Notes and the Company Shares issuable upon conversion thereof to be
listed on the NYSE, subject to notice of issuance. Merger Sub agreed not to
engage in any activities prior to the Effective Time except as provided in the
Merger Agreement. The Company has also agreed to cause CWM to maintain for not
less than three years director and officer liability insurance providing at
least the same amounts and coverage for CWM's officers and directors as the
current policies maintained by or on behalf of CWM and that all rights to
indemnification now existing in favor of the present directors or officers of
CWM and its subsidiaries as in effect on the date of the Merger Agreement shall
continue for a period of six years beyond the Merger.
The Company and CWM have agreed in the Merger Agreement (i) to prepare and
file with the Commission this Proxy Statement-Prospectus, the Registration
Statement and the Schedule 13E-3 and otherwise to make all necessary filings
and take all necessary actions in order to comply with federal and state
securities laws applicable to all the transactions contemplated by the Merger
Agreement; (ii) to afford each other and each other's representatives
reasonable access to information needed for the purpose of evaluating the
transactions contemplated by the Merger Agreement; (iii) to consult with each
other in advance of making public announcements concerning the Merger; and (iv)
to use all reasonable efforts to take or cause to be taken all action and to do
or cause to be done all things necessary or advisable to consummate the
transactions contemplated by the Merger Agreement.
37
<PAGE>
CONDITIONS
The obligations of CWM, Merger Sub and the Company to consummate the Merger
are subject to the fulfillment or waiver (if permissible) at or prior to the
Effective Time of certain conditions, including (i) the satisfaction of the
DGCL Vote Requirement and the Independent Vote Requirement; (ii) there not
being in effect any statute, rule, regulation, executive order, ruling or
injunction or other order of a court or agency directing that the transactions
contemplated by the Merger Agreement not be consummated; (iii) the approval for
listing on the NYSE of the Notes and the Company Shares issuable upon
conversion of the Notes, such listing to become effective immediately upon
notice of issuance of the Notes at the Effective Time; (iv) the Registration
Statement having been declared effective under the Securities Act and not
having become the subject of any stop order or proceedings seeking a stop
order, the Indenture having been qualified under the Trust Indenture Act of
1939, and all necessary state securities law permits and authorizations having
been obtained; (v) all required governmental consents and approvals having been
obtained and continuing to be in effect at the Effective Time, except for
failures which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect (as defined below) on the Company
(assuming the Merger had taken place); and (vi) CS First Boston not having
withdrawn or modified in any material respect its Fairness Opinion.
The obligation of CWM to effect the Merger is subject to the fulfillment or
waiver (if permissible) at or prior to the Effective Time of the following
conditions: (i) the representations and warranties of the Company and Merger
Sub in the Merger Agreement being true when made and as of the Effective Time
(except for permitted changes), except for such failures to be true which are
not reasonably likely to have a Material Adverse Effect; (ii) the Company and
Merger Sub having performed in all material respects their material obligations
contained in the Merger Agreement to be performed or complied with by the
Company or Merger Sub at or prior to the Effective Time; (iii) the delivery to
CWM of certificates of the Company and Merger Sub to the effect that the
conditions set forth in (i) and (ii) have been fulfilled; and (iv) except as
disclosed in reports filed by the Company with the Commission prior to the date
of the Merger Agreement or as contemplated by the Merger Agreement, since June
30, 1994, the Company not suffering a Material Adverse Effect.
The obligations of the Company and Merger Sub to effect the Merger are
subject to the fulfillment or waiver (if permissible) at or prior to the
Effective Time of the following conditions: (i) the representations and
warranties of CWM in the Merger Agreement being true when made and as of the
Effective Time (except for permitted changes), except for such failures to be
true which, individually or in the aggregate, are not reasonably likely to have
a Material Adverse Effect; (ii) CWM having performed in all material respects
its material obligations contained in the Merger Agreement to be performed or
complied with by CWM at or prior to the Effective Time; (iii) the delivery to
the Company and Merger Sub of a certificate of CWM to the effect that the
conditions set forth in (i) and (ii) have been fulfilled; and (iv) except as
disclosed in reports filed by CWM with the Commission prior to the date of the
Merger Agreement or as contemplated by the Merger Agreement or as otherwise
known to the Company at or prior to the date of the Merger Agreement, since
June 30, 1994, CWM not suffering a Material Adverse Effect.
As used in the Merger Agreement, the term "Material Adverse Effect" means
with respect to CWM any adverse change in the financial condition, business,
properties or results of operations of CWM and its subsidiaries (to the extent
owned by CWM) which is material to CWM and its subsidiaries (to the extent
owned by CWM), taken as a whole, and, with respect to the Company, any adverse
change in the financial condition, business, properties or results of
operations of the Company and its subsidiaries (to the extent owned by the
Company) which is material to the Company and its subsidiaries (to the extent
owned by the Company), taken as a whole.
The Merger Agreement provides that the parties thereto may waive compliance
in whole or in part with any of the conditions contained therein to the extent
permitted by law, provided that any such waiver by CWM must be approved by the
Special Committee. As of the date of this Proxy Statement-Prospectus, CWM, the
Company and Merger Sub have no present intention of waiving any material
conditions under the Merger Agreement.
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<PAGE>
TERMINATION; AMENDMENTS
The Merger Agreement provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval by the stockholders of CWM: (i) by mutual written consent of the
Company and CWM (with the concurrence of the Special Committee); (ii) by either
the Company or CWM (with the concurrence of the Special Committee in the case
of termination by CWM) if (a) any court of competent jurisdiction in the United
States or some other governmental body or regulatory authority shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable, (b)
the Merger shall not have been consummated by March 31, 1995, provided that the
right to terminate the Merger Agreement in such event is not available to any
party whose failure to fulfill any of its obligations under the Merger
Agreement results in the failure of the Merger to occur on or before such date,
or (c) the Merger Agreement and the Merger shall have been voted on by
stockholders of CWM at the Special Meeting and the vote shall not have been
sufficient to satisfy the DGCL Vote Requirement or the Independent Vote
Requirement; (iii) by the Company if (a) CWM shall have failed to perform in
any material respect any of its material obligations under the Merger Agreement
theretofore to be performed by CWM, which failure to perform has not been cured
within 30 days following receipt by CWM of notice of such failure to perform
from the Company, (b) any material representation or warranty of CWM contained
in the Merger Agreement shall not be true and correct in all material respects
when made or on and as of the Effective Time as if made on and as of the
Effective Time (except to the extent any such representation or warranty
relates to a particular date); provided, that such failure to be true and
correct has not been cured within 30 days following receipt by CWM of notice of
such failure to be true and correct from the Company, or (c) the Special
Committee or the Board of Directors of CWM withdraws or materially modifies or
changes its recommendation of the Merger Agreement or the Merger and the
Special Committee or the Board of Directors of CWM after consultation with its
counsel determines that the failure to take such action would be inconsistent
with its fiduciary duties to CWM's stockholders under applicable law; and (iv)
by CWM with the concurrence of the Special Committee if (a) Merger Sub or the
Company shall have failed to perform in any material respect any of their
material obligations under the Merger Agreement theretofore to be performed by
the Company or Merger Sub, which failure to perform has not been cured within
30 days following receipt by the Company of notice of such failure to perform
from CWM, (b) any material representation or warranty of Merger Sub or the
Company contained in the Merger Agreement shall not be true and correct in all
material respects when made or on and as of the Effective Time as if made on
and as of the Effective Time (except to the extent any such representation or
warranty relates to a particular date); provided, that such failure to be true
and correct has not been cured within 30 days following receipt by the Company
of notice of such failure to be true and correct from CWM or (c) the Special
Committee or the Board of Directors of CWM withdraws or materially modifies or
changes its recommendation of the Merger Agreement or the Merger and the
Special Committee or the Board of Directors of CWM after consultation with its
counsel determines that the failure to take such action would be inconsistent
with its fiduciary duties to CWM's stockholders under applicable law.
The Merger Agreement provides that it may be amended by the parties thereto
at any time before or after approval thereof by the stockholders of CWM, but,
after such approval, no amendment can be made which by law requires further
approval by such stockholders without such further approval. Any amendment of
the Merger Agreement requires the consent of the Special Committee.
LISTING
The Merger Agreement provides that the Company will use all reasonable
efforts to obtain, prior to the Effective Time, approval for the listing on the
NYSE of the Notes issuable as a result of the Merger and the Company Shares
issuable on conversion of the Notes upon notice of issuance.
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<PAGE>
DELAWARE STATUTORY APPRAISAL RIGHTS
Holders of CWM Shares are entitled to appraisal rights under Section 262 of
the DGCL. A person having a beneficial interest in CWM Shares held of record in
the name of another person, such as a broker or nominee, must act promptly to
cause the record holder to follow the steps summarized below properly and in a
timely manner to perfect whatever appraisal rights the beneficial owner may
have.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO
APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL
TEXT OF SECTION 262, WHICH IS REPRINTED IN ITS ENTIRETY AS APPENDIX C TO THIS
PROXY STATEMENT-PROSPECTUS. All references in Section 262 and in this summary
to a "stockholder" are to the record holder of the CWM Shares as to which
appraisal rights are asserted. As used herein, "Surviving Corporation" means
CWM as the corporation surviving the Merger.
Under the DGCL, holders of CWM Shares who do not wish to accept pursuant to
the Merger the consideration provided for in the Merger Agreement and who
follow the procedures set forth in Section 262 will be entitled to have their
CWM Shares appraised by the Delaware Court of Chancery and to receive payment
in cash of the "fair value" of such shares, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest, if any, as determined by such court.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the Special Meeting, the
corporation, not less than 20 days prior to the meeting, must notify each of
its stockholders entitled to appraisal rights that such appraisal rights are
available and include in such notice a copy of Section 262. This Proxy
Statement-Prospectus shall constitute such notice to the holders of CWM Shares
and the applicable statutory provisions of the DGCL are attached to this Proxy
Statement-Prospectus as Appendix C. Any stockholder who wishes to exercise such
appraisal rights, or who wishes to preserve his right to do so, should review
the following discussion and Appendix C carefully because failure to timely and
properly comply with the procedures specified will result in the loss of
appraisal rights under the DGCL.
A holder of CWM Shares wishing to exercise his appraisal rights must deliver
to the Secretary of CWM, before the vote on the Merger Agreement at the Special
Meeting, a written demand for appraisal of his CWM Shares and must not vote his
shares of stock in favor of approval and adoption of the Merger Agreement.
Because a proxy which does not contain voting instructions will, unless
revoked, be voted for approval and adoption of the Merger Agreement, a holder
of CWM Shares who votes by proxy and who wishes to exercise his appraisal
rights must (i) vote against approval and adoption of the Merger Agreement or
(ii) abstain from voting on approval and adoption of the Merger Agreement.
Neither voting (in person or by proxy) against, abstaining from voting on or
failing to vote on the proposal to approve and adopt the Merger Agreement will
constitute a written demand for appraisal within the meaning of Section 262.
The written demand for appraisal must be in addition to and separate from any
such proxy or vote. In addition, a holder of CWM Shares wishing to exercise his
or her appraisal rights must hold of record such shares on the date the written
demand for appraisal is made and must continue to hold such shares until the
Effective Time.
Only a holder of record of CWM Shares is entitled to assert appraisal rights
for the CWM Shares registered in that holder's name. A demand for appraisal
should be executed by or on behalf of the holder of record, fully and
correctly, as his or her name appears on the stock certificates. If the CWM
Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity,
and if the CWM Shares are owned of record by more than one person, as in a
joint tenancy and tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for such
owner or owners. A record holder such as a broker who holds CWM Shares as
nominee for several beneficial owners may exercise appraisal rights with
respect
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<PAGE>
to the CWM Shares held for one or more beneficial owners while not exercising
such rights with respect to the CWM Shares held for other beneficial owners; in
such case, the written demand should set forth the number of CWM Shares as to
which appraisal is sought and when no number of CWM Shares is expressly
mentioned the demand will be presumed to cover all CWM Shares held in the name
of the record owner. Stockholders who hold their CWM Shares in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such a nominee. All written demands for
appraisal should be delivered to Thomas A. Witt, Secretary of CWM, either in
person or by mail (certified mail, return receipt requested, being the
recommended form of transmittal) addressed to him at Chemical Waste Management,
Inc., 3001 Butterfield Road, Oak Brook, Illinois 60521.
Within ten days after the Effective Time, the Surviving Corporation must send
a notice as to the effectiveness of the Merger to each former stockholder of
CWM who has made such a written demand for appraisal and who has not voted in
favor of approval and adoption of the Merger Agreement. Within 120 days after
the Effective Time, but not thereafter, the Surviving Corporation, or any
stockholder who is entitled to appraisal rights under Section 262 and has
complied with the requirements of Section 262, may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
CWM Shares. The Surviving Corporation is under no obligation to and has no
present intention to file a petition in respect to the appraisal of the fair
value of the CWM Shares. Accordingly, it is the obligation of the stockholders
to initiate all necessary action to perfect their appraisal rights within the
time prescribed in Section 262.
Within 120 days after the Effective Time, any stockholder who has complied
with the requirements under Section 262 for exercise of appraisal rights will
be entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth the aggregate number of CWM Shares with respect to
which demands for appraisal have been received and which have not voted in
favor of approval and adoption of the Merger Agreement, and the aggregate
number of holders of such shares. Such statements must be mailed within ten
days after a written request therefor has been received by the Surviving
Corporation.
If a petition for appraisal is duly filed by a holder of CWM Shares and a
copy thereof is delivered to the Surviving Corporation, the Surviving
Corporation will then be obligated within 20 days to provide the Delaware Court
of Chancery with a duly verified list containing the names and addresses of all
holders of CWM Shares who have demanded appraisal of their shares. After notice
to such holders of CWM Shares, the Delaware Court of Chancery is empowered to
conduct a hearing upon the petition to determine those holders of CWM Shares
who have complied with Section 262 and who have become entitled to appraisal
rights under that section. The Delaware Court of Chancery may require the
holders of CWM Shares who have demanded payment for their shares to submit
their stock certificates to the Register in Chancery for a notation thereon of
the pendency of the appraisal proceedings; and if any stockholder fails to
comply with such direction, the Delaware Court of Chancery may dismiss the
proceedings as to such stockholder.
After determining the stockholders entitled to an appraisal, the Delaware
Court of Chancery will appraise the "fair value" of their CWM Shares, exclusive
of any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. Stockholders considering seeking
appraisal should be aware that the fair value of their CWM Shares as determined
under Section 262 could be more than, the same as or less than the
consideration they would receive pursuant to the Merger Agreement if they did
not seek appraisal of their CWM Shares and that investment banking opinions as
to fairness from a financial point of view are not necessarily opinions as to
fair value under Section 262. The Delaware Supreme Court has stated that "proof
of value by any techniques or methods which are generally considered acceptable
in the financial community and otherwise admissible in court" should be
considered in the appraisal proceedings. In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on factual
circumstances, may or may not be a dissenter's exclusive remedy. The Court will
also determine the amount of interest, if any, to be paid upon the amounts to
be received by persons whose CWM Shares have been appraised. The costs of
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<PAGE>
the action may be determined by the Court and taxed upon the parties as the
Court deems equitable. The Court may also order that all or a portion of the
expenses incurred by any stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all of the CWM Shares entitled to appraisal.
Any holder of shares who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the CWM
Shares subject to the appraisal demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends
or other distributions, other than the Merger Consideration, payable to holders
of record of CWM Shares as of a date prior to the Effective Time).
If any stockholder who demands appraisal of his CWM Shares under Section 262
fails to perfect, or effectively withdraws or loses, his right to appraisal as
provided in the DGCL the CWM Shares of such stockholder will be converted into
the right to receive the Merger Consideration in accordance with the Merger
Agreement. A stockholder will fail to perfect, or effectively lose or withdraw,
his right to appraisal if he votes for approval and adoption of the Merger
Agreement (or submits a proxy without voting instructions) or if no petition
for appraisal is filed within 120 days after the Effective Time of the Merger
or if the stockholder delivers to CWM (or, after the Effective Time, to the
Surviving Corporation) a written withdrawal of his demand for appraisal and an
acceptance of the Merger, except that any such attempt to withdraw made more
than 60 days after the Effective Time will require the written approval of the
Surviving Corporation.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
CERTAIN PRELIMINARY 1994 AND 1995
STRATEGIC PLANNING INFORMATION OF CWM
CWM does not as a matter of course publicly disclose internal budgets, plans,
estimates or forecasts as to future revenues, earnings or other financial
information. The consolidated income statement data as to the years ending
December 31, 1994 and 1995 summarized below reflect information that was
contained in preliminary strategic plans which were prepared by management of
CWM in August 1994 and furnished to the Company in connection with the regular
conduct of the Company's business. These preliminary plans were based upon a
variety of estimates and assumptions, the material ones of which are set forth
below. The estimates and assumptions underlying the preliminary plans involved
judgments with respect to, among other things, future economic, competitive,
regulatory and financial market conditions and future business decisions which
may not be realized and are inherently subject to significant business,
economic, competitive and regulatory uncertainties, all of which are difficult
to predict and many of which are beyond the control of CWM. While CWM believes
these estimates and assumptions to have been reasonable, there can be no
assurance that the preliminary plans will be realized, and actual results may
vary materially from those shown. In light of the uncertainties inherent in
forward-looking information of any kind, the inclusion of this preliminary plan
information herein should not be regarded as a representation by CWM, the
Company or any other person that the anticipated results will be achieved.
Primarily as a result of changes affecting certain markets in which CWM
competes, many of the goals which have been contained in CWM's prior
preliminary strategic plans of this type have not been achieved. Accordingly,
investors are cautioned not to place undue reliance on such information.
This information was not prepared with a view to public disclosure or
compliance with the published guidelines of the Commission regarding forecasts,
nor was it prepared in accordance with the guidelines established by the
American Institute of Certified Public Accountants for preparation and
presentation of financial forecasts. The information set forth below does not
purport to present results of operations in
42
<PAGE>
accordance with generally accepted accounting principles, nor has it been
audited, compiled, or otherwise examined by Arthur Andersen & Co. or any other
independent accountants. Accordingly, neither Arthur Andersen & Co. nor any
other independent accountants assume any responsibility for the information
presented below.
Neither CWM nor the Company intends to update or otherwise revise the
information presented below to reflect circumstances existing after the date of
the most recent financial statements incorporated by reference in this Proxy
Statement-Prospectus or to reflect the occurrence of unanticipated events. The
information presented below should be read together with CWM's Consolidated
Financial Statements and the notes thereto incorporated by reference in this
Proxy Statement-Prospectus and other information contained or incorporated by
reference in this Proxy Statement-Prospectus.
Subject to the qualifications and limitations stated above, the information
presented below was based on the following material assumptions:
1. The economic expansion underway during the summer of 1994 would
continue in the United States and in the other countries in which CWM
operates or seeks to operate, without a significant increase in prevailing
interest rates.
2. No material changes would be made to CWM's organizational structure as
it existed in late August 1994 except for such modifications as CWM's
management had planned as of that time (which did not include the Merger).
3. Except as noted below, CWM's businesses would not be materially
affected by changes in regulations which apply to the services offered to
customers.
4. There would be no significant change in the competitive environment,
including the pricing of services and the number of principal competitors,
prior to the end of 1995.
5. Adequate capital would be available to support growth in working
capital and the addition of fixed capital to support projected revenue
growth.
6. No dividends would be paid at least through the end of 1995.
7. A sufficient number of skilled workers would continue to be available
to meet customer needs.
8. CWM would be able to continue to attract key executives as needed to
properly support and control the growth of its business.
9. Weather would not be unusually severe in any of CWM's principal
markets.
10. Income tax rates applicable to CWM would not change.
11. Revenue growth would be modest on a consolidated basis as a result of
the impact of the following factors:
. Continuation of customer initiatives in the areas of waste
minimization, recycling and the treatment of hazardous waste to enable
such waste to be managed outside of the Subtitle C regulatory system
imposed by the Resource Conservation and Recovery Act, and
continuation of an unsettled environmental regulatory climate in
several of CWM's other United States markets.
. The acceleration of low-level radioactive waste volumes received for
disposal at CWM's facility in Barnwell, South Carolina in anticipation
of a June 30, 1994 state deadline which denied access to the facility
as of that date by customers outside an eight-state region in the
southeastern United States and the expected cessation of disposal
operations at that facility at the end of 1995 before replacement
disposal facilities are developed.
. No material growth in revenue from services provided to affiliates of
WMX.
. Successful expansion in international markets.
12. Operating costs as a percent of revenue would decline as a result of
internal restructuring and better utilization of productivity-enhancing
technology.
13. All acquisitions completed by CWM in 1993 and 1994 would continue to
perform as expected by CWM management.
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<PAGE>
The following consolidated income statement data of CWM reflect information
that was contained in the preliminary strategic plans referred to above
(000,000's omitted, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Revenue............................... $2,261.0 $2,317.0
Income before income taxes............ $ 122.7 $ 146.7
Net income............................ $ 63.3 $ 75.9
Earnings per share.................... $ 0.30 $ 0.36
</TABLE>
CWM SHARE AND COMPANY SHARE
MARKET PRICE INFORMATION; DIVIDEND INFORMATION; AND CWM SHARE PURCHASE
INFORMATION
CWM Shares and Company Shares are traded on the NYSE under the symbols "CHW"
and "WMX," respectively. The following table shows the per share high and low
sales prices reported in the consolidated transaction reporting system for
transactions in CWM Shares and Company Shares for the periods indicated and for
July 28, 1994 (the trading day on which the initial proposal to effectuate the
Merger was publicly announced after the close of the NYSE), October 14, 1994
(the trading day on which the approval of the Merger Agreement was publicly
announced after the close of the NYSE), and December , 1994. The following
table also shows for the periods indicated the dividends declared per CWM Share
and Company Share. Holders of CWM Shares are encouraged to obtain current
market quotations for CWM Shares and Company Shares.
<TABLE>
<CAPTION>
DIVIDENDS
MARKET PRICE OF DIVIDENDS MARKET PRICE OF DECLARED
CWM SHARES DECLARED COMPANY SHARES PER
--------------- PER CWM --------------- COMPANY
HIGH LOW SHARE HIGH LOW SHARE
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1992
First Quarter............ $23 1/2 $18 1/2 $.05 $46 5/8 $37 3/4 $.11
Second Quarter........... 20 1/4 16 3/8 .05 41 1/4 32 7/8 .13
Third Quarter............ 18 3/4 16 3/8 .05 36 7/8 32 .13
Fourth Quarter........... 22 17 5/8 .05 41 5/8 34 .13
1993
First Quarter............ $21 3/8 $15 5/8 $.05 $40 1/4 $33 5/8 $.13
Second Quarter........... 15 3/4 9 .05 36 3/8 29 1/4 .15
Third Quarter............ 10 7 3/8 -- 33 1/8 29 1/2 .15
Fourth Quarter........... 9 3/8 7 -- 30 5/8 23 .15
1994
First Quarter............ $11 3/8 $ 7 1/2 $ -- $30 3/4 $23 $.15
Second Quarter........... 9 3/4 7 1/8 -- 29 3/8 22 5/8 .15
Third Quarter............ 9 1/2 7 1/2 -- 30 3/8 26 3/8 .15
Fourth Quarter (through
December )............ --
July 28, 1994............ $ 8 $ 7 3/4 $ -- $29 3/8 $28 5/8 $ --
October 14, 1994......... 8 1/4 7 3/4 -- 29 1/4 28 3/4 --
December , 1994........ -- --
</TABLE>
In August 1993, the CWM Board of Directors suspended indefinitely the payment
of quarterly cash dividends on CWM Shares.
The declaration of future dividends, if any, in respect of Company Shares,
and if the proposed Merger is not consummated, CWM Shares, will necessarily be
dependent upon business conditions, the earnings and financial position of the
Company and CWM, respectively, the Company's and CWM's respective plans with
respect to operating and capital expenditures and such other matters as their
respective Boards of Directors deem relevant.
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The following table shows for the periods indicated the amount of shares
purchased, the range of prices paid and the average purchase price for all
purchases by CWM of CWM Shares.
<TABLE>
<CAPTION>
AVERAGE
NUMBER OF RANGE OF PRICES PURCHASE
CWM PER CWM SHARE PRICE
SHARES --------------- PER CWM
PURCHASED HIGH LOW SHARE
--------- ------- ------- --------
<S> <C> <C> <C> <C>
1992
First Quarter.............................. -- $ -- $ -- $ --
Second Quarter............................. -- -- -- --
Third Quarter.............................. 1,451,000 16 7/8 16 3/8 16.765
Fourth Quarter............................. -- -- -- --
1993
First Quarter.............................. 660,000 $ 17 $16 1/8 $16.521
Second Quarter............................. 1,127,000 16 10 12.938
Third Quarter.............................. 1,513,300 9 1/8 7 1/2 8.538
Fourth Quarter............................. -- -- -- --
1994
First Quarter.............................. -- $ -- $ -- $ --
Second Quarter............................. -- -- -- --
Third Quarter.............................. -- -- -- --
Fourth Quarter
(through December )..................... -- -- -- --
</TABLE>
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of the Company at September 30, 1994 and as adjusted to give
effect to the issuance of the Notes in the Merger.
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, 1994
------------------------
OUTSTANDING AS ADJUSTED
----------- ------------
(000S OMITTED)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt................... $ $
Long-term debt (excluding current portion):
Bonds and notes payable.............................
Notes offered hereby................................
Minority interest.....................................
Put options...........................................
Total stockholders' equity............................
Total capitalization.............................. $ $
</TABLE>
DESCRIPTION OF NOTES
The Notes are to be issued under the Indenture. A copy of the form of the
Indenture is filed as an exhibit to the Registration Statement of which this
Proxy Statement-Prospectus is a part. The following summaries of certain
provisions of the Notes and the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Notes and the Indenture, including the definitions therein of
certain terms which are not otherwise defined in this Proxy Statement-
Prospectus. Wherever particular provisions or defined terms of the Indenture
(or of the Form of Note which is a part thereof) are referred to, such
provisions or defined terms are incorporated herein by reference. References
herein are to sections in the Indenture and paragraphs in the Form of Note.
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<PAGE>
GENERAL
The Notes will be unsecured obligations of the Company limited to a maximum
of $810,000,000 aggregate principal amount at maturity and will mature on
January 20, 2005. The amount of Notes issued in the Merger is expected to be
less than that maximum amount as a result of the payment of cash in lieu of
fractional Notes and as a result of Dissenting Shares, if any. In addition,
Notes will not be issued in respect of the currently outstanding CWM LYONs
unless and until the holders thereof elect to convert such LYONs into Notes,
which may never occur. The principal amount at maturity of each Note is $1,000
and will be payable at the office of the Paying Agent, initially the Trustee,
in the Borough of Manhattan, the City of New York, or any other office of the
Paying Agent maintained for such purpose. (Sections 4.1 and 4.5 and Form of
Note, paragraph 2.)
The Notes will bear interest from and after the Effective Date at the rate of
2% per annum of the $1,000 principal amount at maturity of each Note, payable
semi-annually on January 20 and July 20 of each year. The Notes will have a
Stated Issue Price of $717.80 per $1,000 of principal amount at maturity. The
difference between the principal amount at maturity of $1,000 and the Stated
Issue Price represents the Stated Discount which, together with cash interest
payable on the Notes as described above, will accrue at a rate of 5.75% per
annum (determined on a semi-annual bond equivalent basis) based on the Stated
Issue Price. Such rate will be used solely for purposes of determining the
Redemption Price, the Purchase Price and the Change in Control Price and will
differ from a Holder's actual yield. The calculation of the accrual of Stated
Discount in the period during which a Note remains outstanding will be on a
semi-annual bond equivalent basis using a 360-day year composed of twelve 30-
day months; such accrual will commence on the Effective Date. (Form of Note,
paragraph 1.) Maturity, conversion, purchase by the Company at the option of a
Holder (including upon a Change in Control) or redemption of a Note will cause
such Stated Discount and interest to cease to accrue on such Note, under the
terms and subject to the conditions of the Indenture. (Section 2.8.) The
Company may not reissue a Note that has matured or been converted, purchased by
the Company at the option of a Holder (including upon a Change in Control),
redeemed or otherwise cancelled (except for registration of transfer, exchange
or replacement thereof). (Section 2.10.)
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount at maturity or an integral multiple
thereof. (Section 2.6 and Form of Note, paragraph 11.) Notes may be presented
for conversion at the office of the Conversion Agent and for exchange or
registration of transfer at the office of the Registrar, each such agent
initially being the Trustee. (Sections 2.6 and 11.2 and Form of Note, paragraph
9.) The Company will not charge a service charge for any registration of
transfer or exchange of Notes; however, the Company may require payment by a
Holder of a sum sufficient to cover any tax, assessment or other governmental
charge payable in connection therewith. (Section 2.6.)
SUBORDINATION OF NOTES; EFFECT OF CORPORATE STRUCTURE
Indebtedness evidenced by the Notes will be subordinated in right of payment,
as set forth in the Indenture, to the prior payment in full of all existing and
future Senior Indebtedness of the Company. (Section 10.1 and Form of Note,
paragraph 8.) Senior Indebtedness is defined in the Indenture as the principal
of (and premium, if any) and interest on (including interest accruing after the
filing of a petition initiating any proceeding pursuant to any Bankruptcy Law,
but only to the extent allowed or permitted to the holder of such Debt against
the bankruptcy or any other insolvency estate of the Company in such
proceeding) and fees, expenses, reimbursement obligations, indemnity
obligations and other amounts due on or in connection with any Debt incurred,
assumed or guaranteed by the Company, whether outstanding on the date of the
Indenture or thereafter incurred, assumed or guaranteed, and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any such Debt. Excluded from the definition of Senior
Indebtedness are the following: (a) any Debt which expressly provides (i) that
such Debt shall not be senior in right of payment to the Notes, or (ii) that
such Debt shall be subordinated to any other Debt of the Company, unless such
Debt expressly provides that such Debt shall be senior in right of payment to
the
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<PAGE>
Notes; (b) any Debt of the Company in respect of the Notes; (c) any Debt of the
Company to any Subsidiary or Affiliate of the Company; and (d) the Company
LYONs, the CWM LYONs and the Company's Liquid Yield Option Notes due 2001.
(Section 10.1.)
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of assets, (i)
the Holders of the Notes will be required to pay over their share of such
distribution to the holders of Senior Indebtedness until such Senior
Indebtedness is paid in full (Section 10.2); and (ii) creditors of the Company
who are not Holders of Notes or holders of Senior Indebtedness may recover
less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than Holders of Notes.
If the Notes are declared due and payable prior to their Stated Maturity by
reason of the occurrence of an Event of Default, then the Company is obligated
to notify promptly holders of Senior Indebtedness of such acceleration. The
Company may not pay the Notes, any repurchase or redemption price in respect
thereof, cash in respect of a conversion or interest thereon until 120 days
have passed after such notice of acceleration is given and may thereafter pay
the Notes, any repurchase or redemption price in respect thereof, cash in
respect of a conversion and interest thereon if the terms of the Indenture
otherwise permit payment at that time. (Section 10.3.)
No payment of the principal amount at maturity, Redemption Price, Purchase
Price, Change in Control Purchase Price, cash in respect of a conversion (other
than cash in lieu of fractional shares) or interest with respect to any Notes
may be made, nor may the Company acquire any Notes, if any default with respect
to Senior Indebtedness occurs and is continuing that permits the acceleration
of the maturity thereof and either such default is the subject of judicial
proceedings or the Company receives notice of the default, unless (a) 120 days
pass after notice of the default is given and such default is not then the
subject of judicial proceedings or the default with respect to the Senior
Indebtedness is cured or waived and (b) the terms of the Indenture otherwise
permit such payment or acquisition of the Notes at that time. (Section 10.4.)
The Notes are obligations exclusively of the Company. Since the operations of
the Company are currently conducted in part through subsidiaries, the cash flow
and the consequent ability to service debt, including the Notes, of the Company
are dependent, in part, upon the earnings of its subsidiaries and the
distribution of those earnings to or upon loans or other payments of funds by
those subsidiaries to the Company. The subsidiaries are separate and distinct
legal entities and have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the Notes or to make any funds available therefor,
whether by dividends, loans or other payments. In addition, the payment of
dividends and the making of loans and advances to the Company by its
subsidiaries may be subject to statutory, regulatory or contractual
restrictions, are contingent upon the earnings of those subsidiaries and are
subject to various business considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the Holders of
the Notes to participate in those assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except
to the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company.
As of September 30, 1994, the Company and its subsidiaries had approximately
$ billion of Debt outstanding (excluding accrued interest thereon) which
constituted Senior Indebtedness of the Company or outstanding indebtedness
(excluding consolidated intercompany payables) of the subsidiaries of the
Company not guaranteed by the Company, which would not have constituted Senior
Indebtedness but to which the Notes would have been effectively subordinated.
There are no restrictions in the Indenture on the creation of additional Senior
Indebtedness (or any other indebtedness).
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<PAGE>
CONVERSION RIGHTS
A Holder of a Note may convert it at any time after the Effective Date;
provided, however, that if a Note is called for redemption by the Company, the
Holder may convert it only until the close of business on the Redemption Date.
On conversion of a Note, the Company may elect to deliver Company Shares or an
amount of cash determined as described below. A Note in respect of which a
Holder has delivered a Purchase Notice or a Change in Control Purchase Notice
exercising the option of such Holder to require the Company to purchase such
Note may be converted only if such notice is withdrawn in accordance with the
terms of the Indenture. (Form of Note, paragraph 9.) A Holder may convert a
portion of such Holder's Notes so long as such portion is $1,000 principal
amount at maturity or an integral multiple thereof. (Section 11.1.)
The initial Conversion Rate will be a number of Company Shares per Note
determined on the Effective Date by dividing the Stated Issue Price of $717.80
by the Company Share Closing Price, subject to adjustment upon the occurrence
of certain events described below, provided that the initial Conversion Rate
will be not less than 21.90 nor more than 26.76 Company Shares per Note. (Form
of Note, paragraph 9.) See "CWM Share and Company Share Market Price
Information; Dividend Information; and CWM Share Purchase Information." A
Holder otherwise entitled to a fractional Company Share on conversion shall
receive cash equal to the Sale Price (as defined below) on the Business Day
immediately preceding the Conversion Date multiplied by the fraction of a
Company Share to which such Holder would otherwise be entitled. (Section 11.3.)
On conversion of a Note, a Holder will not receive any cash payment
representing accrued Stated Discount, accrued Original Issue Discount or
accrued but unpaid interest. The Company's delivery to the Holder of the fixed
number of Company Shares into which the Note is convertible (together with the
cash payment, if any, in lieu of a fractional share) or cash in the applicable
amount, as described below, will be deemed to satisfy the Company's obligation
to pay the principal amount of the Note, including the accrued Stated Discount
and accrued Original Issue Discount attributable to the period from the Issue
Date to the Conversion Date, and accrued but unpaid interest. Thus, the accrued
Stated Discount, accrued Original Issue Discount and accrued but unpaid
interest will be deemed to be paid in full rather than cancelled, extinguished
or forfeited. (Section 11.2.)
To convert a Note, a Holder must (i) complete and manually sign the
conversion notice on the back of the Note (or complete and manually sign a
facsimile thereof) and deliver such notice to the Conversion Agent, (ii)
surrender the Note to the Conversion Agent, (iii) if required, furnish
appropriate endorsements and transfer documents, and (iv) if required, pay all
transfer or similar taxes. (Section 11.2 and Form of Note, paragraph 9.)
In lieu of delivering Company Shares upon notice of conversion of any Note,
the Company may elect to pay the Holder surrendering such Note an amount in
cash per Note equal to the Sale Price (as defined below) of a Company Share on
the Business Day immediately prior to the Conversion Date multiplied by the
Conversion Rate in effect on the Conversion Date, subject to adjustment upon
the occurrence of certain events described below; provided that if such payment
of cash is not allowed pursuant to the provisions of the Indenture or
otherwise, the Company shall deliver Company Shares (and cash in lieu of
fractional shares) as set forth below. (Section 11.1.) Upon conversion of any
Notes, the Company shall inform the Holder through the Conversion Agent of its
election to deliver Company Shares or to pay cash in lieu of delivery of such
shares, as soon as practicable following the Conversion Date. If the Company
elects to deliver Company Shares, such shares will be delivered through the
Conversion Agent no later than the seventh Business Day following the
Conversion Date. If the Company elects to pay cash, such cash payment will be
made to the Holder surrendering such Notes no later than the fifth Business Day
following such Conversion Date. (Section 11.2.) See "Certain Tax
Considerations--Disposition or Conversion."
The Company may not pay cash upon conversion of any Notes (other than cash in
lieu of fractional shares) if there has occurred and is continuing an Event of
Default described under "--Events of Default; Notice and Waiver" below (other
than a default in such payment on such Notes). (Section 11.1.)
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<PAGE>
The "Sale Price" on any date means the closing per share sale price for
Company Shares (or, if no closing price is reported, the average of the bid and
ask prices or, if more than one in either case, the average of the average bid
and average ask prices) on such date as reported in the composite transactions
for the principal United States securities exchange on which Company Shares are
traded or, if Company Shares are not listed on a United States national or
regional securities exchange, as reported by the National Association of
Securities Dealers Automated Quotation System. (Section 11.1.)
The Conversion Rate will be adjusted for dividends or distributions on
Company Shares payable in Company Shares or other Capital Stock; subdivisions,
combinations or certain reclassifications of Company Shares; distributions to
all holders of Company Shares of certain rights to purchase Company Shares for
a period expiring within 60 days at less than the Quoted Price at the time; and
distributions to such holders of assets or debt securities of the Company or
certain rights to purchase securities of the Company (excluding cash dividends
or other cash distributions from current or retained earnings other than any
Extraordinary Cash Dividend). However, no adjustment need be made if Holders
may participate in the transaction or in certain other cases. In cases where
the fair market value of assets, debt securities or certain rights, warrants or
options to purchase securities of the Company distributed to shareholders
exceeds the Average Quoted Price of Company Shares, or such Average Quoted
Price exceeds the fair market value of such assets, debt securities or rights,
warrants or options so distributed by less than $1.00, rather than being
entitled to an adjustment in the Conversion Rate, the Holder of a Note upon
conversion thereof will be entitled to receive, in addition to the Company
Shares into which such Note is convertible, the kind and amount of assets, debt
securities or rights, warrants or options comprising the distribution that such
Holder would have received if such Holder had converted such Note immediately
prior to the record date for determining the shareholders entitled to receive
the distribution. The Indenture permits the Company to increase the Conversion
Rate from time to time. (Sections 11.6, 11.7, 11.8, and 11.12 and Form of Note,
paragraph 9.)
If the Company is party to a consolidation, merger or binding share exchange
or a transfer of all or substantially all of its assets, the right to convert a
Note into Company Shares may be changed into a right to convert it into the
kind and amount of securities, cash or other assets of the Company or another
person which the Holder would have received if the Holder had converted such
Holder's Notes immediately prior to the transaction. (Section 11.14.)
Upon any taxable distribution to holders of Company Shares which results in
an adjustment of the Conversion Rate or if the Conversion Rate is increased at
the discretion of the Company, the Holders of the Notes may, in certain
circumstances, be deemed to have received a distribution subject to federal
income tax as a dividend. See "Certain Tax Considerations--Constructive
Dividend."
REDEMPTION OF NOTES AT THE OPTION OF THE COMPANY
No sinking fund is provided for the Notes. The Company may redeem the Notes
at any time on or after March 15, 2000 for cash as a whole at any time, or from
time to time in part for the Redemption Price plus accrued but unpaid interest
to the Redemption Date. (Sections 3.1 and 3.2 and Form of Note, paragraph 5.)
Not less than 30 days' nor more than 60 days' notice of redemption shall be
given by mail to Holders of Notes. (Section 3.3 and Form of Note, paragraph 7.)
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<PAGE>
The table below shows Redemption Prices of a Note per $1,000 principal amount
at maturity on March 15, 2000, at each March 15 thereafter prior to maturity
and at maturity on January 20, 2005, which prices reflect the accrued Stated
Discount to such dates. The Redemption Price of a Note redeemed between such
dates would include an additional amount reflecting the additional accrued
Stated Discount since the next preceding date in the table. The Company will
also pay accrued but unpaid interest to the actual Redemption Date. (Form of
Note, paragraph 5.)
<TABLE>
<CAPTION>
(1) (2) (3)
STATED ACCRUED REDEMPTION
ISSUE STATED PRICE
REDEMPTION DATE PRICE DISCOUNT (1) + (2)
- --------------- ------- -------- ----------
<S> <C> <C> <C>
March 15, 2000...................................... $717.80 $125.55 $843.35
March 15, 2001...................................... 717.80 154.45 872.25
March 15, 2002...................................... 717.80 185.04 902.84
March 15, 2003...................................... 717.80 217.41 935.21
March 15, 2004...................................... 717.80 251.67 969.47
At maturity......................................... 717.80 282.20 1,000.00
</TABLE>
If less than all of the outstanding Notes are to be redeemed, the Trustee
shall select the Notes to be redeemed in principal amounts at maturity of
$1,000 or integral multiples thereof by lot, pro rata or by another method the
Trustee considers fair and appropriate. If a portion of a Holder's Notes is
selected for partial redemption and such Holder converts a portion of such
Notes, such converted portion shall be deemed to be of the portion selected for
redemption. (Section 3.2.)
Prior to or on the Redemption Date, the Company is required to deposit with
the Paying Agent money sufficient to pay the Redemption Price plus accrued but
unpaid interest to the Redemption Date. Payment of the Redemption Price plus
accrued but unpaid interest to the Redemption Date is conditioned upon delivery
of such Note (together with necessary endorsements) to the Paying Agent at its
office in the Borough of Manhattan, the City of New York, or any other office
of the Paying Agent maintained for such purpose, at any time (whether prior to,
on or after the Redemption Date) after the notice of redemption is given.
Payment of the Redemption Price plus accrued but unpaid interest to the
Redemption Date for such Note will be made promptly following the later of the
Redemption Date or the time of delivery of such Note. (Section 3.4.) If on the
Business Day following the Redemption Date the Paying Agent holds, in
accordance with the terms of the Indenture, money sufficient to pay the
Redemption Price plus accrued but unpaid interest to the Redemption Date of
such Note, then, on and after such date, Stated Discount and interest on such
Note will cease to accrue, whether or not such Note is delivered to the Paying
Agent, and all other rights of the Holder shall terminate (other than the right
to receive the Redemption Price plus accrued but unpaid interest to the
Redemption Date upon delivery of the Note). (Section 2.8.)
PURCHASE OF NOTES AT THE OPTION OF THE HOLDER
On March 15, 1998, and on March 15, 2000 (each a "Purchase Date"), the
Company will purchase for cash in the amount of the Purchase Price, plus
accrued but unpaid interest to the Purchase Date, at the option of the Holder
thereof, any outstanding Note for which a Purchase Notice has been delivered to
the Paying Agent from the opening of business on the date that is 20 Business
Days prior to the Purchase Date until the close of business on the Purchase
Date and not withdrawn, subject to certain conditions. The Purchase Notice
shall state (i) the certificate numbers of the Notes to be delivered by the
Holder thereof for purchase by the Company; (ii) the portion of the principal
amount at maturity of Notes to be purchased, which portion must be $1,000 or an
integral multiple thereof; and (iii) that such Notes are to be purchased by the
Company pursuant to the applicable provisions of the Notes and the Indenture.
(Section 3.8.)
The Purchase Price payable to the Holder of a Note demanding purchase thereof
shall be equal to $790.24 for a purchase on March 15, 1998 and $843.35 for a
purchase on March 15, 2000. Such amounts plus accrued but unpaid interest to
the Purchase Date will represent the entire purchase price, and no additional
amounts will be paid in respect of accrued Stated Discount or accrued Original
Issue Discount.
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<PAGE>
Any Purchase Notice may be withdrawn by the Holder by a written notice of
withdrawal delivered by the Holder to the Paying Agent prior to the close of
business on the Purchase Date. The notice of withdrawal shall state the
principal amount at maturity and the certificate numbers of the Notes to which
the withdrawal notice relates and the principal amount at maturity, if any,
which remains subject to the Purchase Notice. (Section 3.10.)
Payment of the Purchase Price plus accrued but unpaid interest to the
Purchase Date for a Note for which a Purchase Notice has been delivered and not
withdrawn is conditioned upon delivery of such Note (together with necessary
endorsements) to the Paying Agent at its office in the Borough of Manhattan,
the City of New York, or any other office of the Paying Agent maintained for
such purpose, at any time (whether prior to, on or after the Purchase Date)
after the delivery of such Purchase Notice. Payment of the Purchase Price plus
accrued but unpaid interest to the Purchase Date for such Note will be made
promptly following the later of the Purchase Date or the time of delivery of
such Note. (Section 3.8.) If on the Business Day following the Purchase Date
the Paying Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Purchase Price plus accrued but unpaid interest to the
Purchase Date of such Notes, then, on and after such date, Stated Discount and
interest on such Note will cease to accrue, whether or not such Note is
delivered to the Paying Agent, and all other rights of the Holder shall
terminate (other than the right to receive the Purchase Price plus accrued but
unpaid interest to the Purchase Date upon delivery of the Note). (Section 2.8.)
No Notes may be purchased if there has occurred and is continuing an Event of
Default described under "--Events of Default; Notice and Waiver" below (other
than a default in the payment of the Purchase Price with respect to such
Notes). (Section 3.10.)
CHANGE IN CONTROL PERMITS PURCHASE OF NOTES AT THE OPTION OF THE HOLDER
In the event of any Change in Control (as defined below) of the Company
occurring on or prior to March 15, 1998, each Holder of Notes will have the
right, at the Holder's option, subject to the terms and conditions of the
Indenture, to require the Company to purchase all or any portion (provided that
the principal amount at maturity must be $1,000 or an integral multiple
thereof) of the Holder's Notes as of the date (a "Change in Control Purchase
Date") that is 35 Business Days after the occurrence of such Change in Control
at a cash price equal to the Stated Issue Price plus accrued Stated Discount to
the Change in Control Purchase Date (the "Change in Control Purchase Price"),
together with accrued but unpaid interest to the Change in Control Purchase
Date. (Section 3.9 and Form of Note, paragraph 6.)
Within 15 Business Days after the occurrence of a Change in Control, the
Company is obligated to mail to the Trustee and to all Holders of Notes at
their addresses shown in the register of the Registrar (and to beneficial
owners as required by applicable law) a notice regarding the Change in Control,
which notice shall include a form of Change in Control Purchase Notice (a
"Change in Control Purchase Notice") to be completed by the Holder and shall
state, among other things: (i) the events causing a Change in Control and the
date of such Change in Control, (ii) the last date on which the Change in
Control purchase right may be exercised, (iii) the Change in Control Purchase
Price, plus the amount of accrued but unpaid interest payable by the Company,
(iv) the Change in Control Purchase Date, (v) the name and address of the
Paying Agent and the Conversion Agent, (vi) the Conversion Rate and any
adjustments thereto, (vii) that Notes with respect to which a Change in Control
Purchase Notice is given by the Holder may be converted only if the Change in
Control Purchase Notice has been withdrawn in accordance with the terms of the
Indenture, and (viii) the procedures that Holders must follow to exercise these
rights. The Company will cause a copy of such notice to be published once in a
daily newspaper of national circulation. (Section 3.9.)
To exercise this right, the Holder must deliver the Change in Control
Purchase Notice to the Paying Agent (initially the Trustee) prior to the close
of business on the Change in Control Purchase Date. The Change in Control
Purchase Notice shall state (i) the certificate numbers of the Notes to be
delivered by the Holder thereof for purchase by the Company; (ii) the portion
of the principal amount at maturity of Notes to be purchased, which portion
must be $1,000 or an integral multiple thereof; and (iii) that such Notes are
to be purchased by the Company pursuant to the applicable provisions of the
Notes. (Section 3.9.)
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<PAGE>
Any Change in Control Purchase Notice may be withdrawn by the Holder by a
written notice of withdrawal delivered to the Paying Agent prior to the close
of business on the Change in Control Purchase Date. The notice of withdrawal
shall state the principal amount at maturity and the certificate numbers of the
Notes as to which the withdrawal notice relates and the principal amount at
maturity, if any, which remains subject to a Change in Control Purchase Notice.
(Section 3.10.)
Payment of the Change in Control Purchase Price, plus accrued but unpaid
interest to the Change in Control Purchase Date, for a Note for which a Change
in Control Purchase Notice has been delivered and not validly withdrawn is
conditioned upon delivery of such Note (together with necessary endorsements)
to the Paying Agent at any time (whether prior to, on or after the Change in
Control Purchase Date) after the delivery of such Change in Control Purchase
Notice. (Section 3.9.) Payment of the Change in Control Purchase Price, plus
accrued but unpaid interest to the Change in Control Purchase Date, for such
Note will be made promptly following the later of the Change in Control
Purchase Date or the time of delivery of such Note. (Section 3.9.) If on the
Business Day following the Change in Control Purchase Date the Paying Agent
holds, in accordance with the terms of the Indenture, money sufficient to pay
the Change in Control Purchase Price, plus accrued but unpaid interest to the
Change in Control Purchase Date, of such Note, then, immediately after such
Change in Control Purchase Date, Stated Discount, Original Issue Discount and
interest on such Note will cease to accrue, whether or not such Note is
delivered to the Paying Agent, and all other rights of the Holder shall
terminate (other than the right to receive the Change in Control Purchase
Price, plus accrued but unpaid interest to the Change in Control Purchase Date,
of such Note, upon delivery of the Note). (Section 2.8.)
Under the Indenture, a "Change in Control" of the Company is deemed to have
occurred at such time as (i) any person, including its Affiliates and
Associates (other than the Company, its Subsidiaries, or their employee benefit
plans) files a Schedule 13D or 14D-1 (or any successor schedule, form or report
under the Exchange Act) disclosing that such person has become the beneficial
owner of 50% or more of the voting power of Company Shares or other Capital
Stock of the Company into which Company Shares are reclassified or changed,
with certain exceptions, or (ii) there shall be consummated any consolidation
or merger of the Company (a) in which the Company is not the continuing or
surviving corporation or (b) pursuant to which the Company Shares (or such
other Capital Stock) would be converted into cash, securities or other
property, in each case, other than a consolidation or merger of the Company in
which the holders of Company Shares (or such other Capital Stock) immediately
prior to the consolidation or merger have, directly or indirectly, at least a
majority of the common equity of the continuing or surviving corporation
immediately after the consolidation or merger. (Section 3.9.) The Indenture
does not permit the Board of Directors of the Company to waive the Company's
obligation to purchase Notes at the option of Holders in the event of a Change
in Control of the Company.
The Change in Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company. The
Change in Control purchase feature, however, is not the result of management's
knowledge of any specific effort to accumulate Company Shares or to obtain
control of the Company by means of a merger, tender offer, solicitation or
otherwise, or part of a plan by management to adopt a series of anti-takeover
provisions. Instead, the Change in Control purchase feature is a standard term
contained in other securities similar to the Notes, and the terms of such
feature resulted from negotiations between the Company and the Special
Committee.
The Company could, in the future, enter into certain transactions, including
certain recapitalizations of the Company, that would not constitute a Change in
Control with respect to the Change in Control purchase feature of the Notes,
but that would increase the amount of Senior Indebtedness outstanding at such
time. No Notes may be purchased at the option of Holders upon a Change in
Control of the Company if there has occurred (prior to, on or after the giving,
by the Holders of such Notes, of the required Change in Control Purchase
Notice) and is continuing an Event of Default with respect to the Notes
described under "--Events of Default; Notice and Waiver" below (other than a
default in the payment of the Change in Control Purchase
52
<PAGE>
Price, plus accrued but unpaid interest to the Change in Control Purchase Date,
of such Note, with respect to such Notes). (Section 3.10.) Further, the Notes
are subordinated to the prior payment of Senior Indebtedness as described under
"--Subordination of Notes; Effect of Corporate Structure" above. Certain Senior
Indebtedness of the Company may be accelerated upon the occurrence of certain
events that may constitute a Change in Control.
The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Exchange Act which may then be applicable
and will file Schedule 13E-4 or any other schedule required thereunder in
connection with any offer by the Company to purchase Notes at the option of
Holders, including upon a Change in Control. (Section 3.13.)
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge with or into any other person
or convey, transfer or lease all or substantially all its properties and assets
to another person, unless, among other items, (i) the Company shall be the
surviving corporation or the resulting, surviving or transferee person is
organized and existing under the laws of the United States, any state thereof
or the District of Columbia and such person expressly assumes by a supplemental
indenture all obligations of the Company under the Notes and the Indenture, and
(ii) the Company or such successor person shall not immediately thereafter be
in default under the Indenture. Upon the assumption of the Company's
obligations by such a person in such circumstances, subject to certain
exceptions, the Company shall be discharged from all obligations under the
Notes and the Indenture. (Section 5.1.)
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein shall
have happened and be continuing, either the Trustee or the Holders of not less
than 25% in aggregate principal amount at maturity of the Notes then
outstanding may declare the Stated Issue Price of the Notes plus the accrued
Stated Discount and accrued but unpaid interest on the Notes to the date of
such declaration to be immediately due and payable. In the case of certain
events of bankruptcy or insolvency, the Stated Issue Price of the Notes plus
accrued Stated Discount and accrued but unpaid interest thereon to the
occurrence of such event shall automatically become and be immediately due and
payable without any declaration or other act on the part of the Trustee or the
Holders. Upon acceleration, as described in either of the preceding sentences,
the subordination provisions of the Indenture preclude any payment being made
to Holders of Notes for at least 120 days. (Section 10.3.) See "--Subordination
of Notes; Effect of Corporate Structure." Under certain circumstances, the
Holders of a majority in aggregate principal amount at maturity of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences. (Sections 6.2 and 6.4.) Interest shall accrue and be
payable on demand upon a default in the payment of the principal amount at
maturity, cash in respect of a conversion, or any Redemption Price, Purchase
Price or Change in Control Purchase Price plus accrued but unpaid interest with
respect to any Note, and interest shall accrue and be payable on demand on
overdue interest (to the extent that the payment of such interest shall be
legally enforceable). (Form of Note, paragraph 1.)
Under the Indenture, Events of Default are defined as: (i) default in payment
of the principal amount at maturity, interest, Redemption Price, Purchase Price
or Change in Control Purchase Price with respect to any Note when such becomes
due and payable or default in payment of cash or delivery of Company Shares
upon conversion of any Note (whether or not any such payment is prohibited by
the provisions of the Indenture); (ii) failure by the Company to comply with
any of its other agreements in the Notes or the Indenture upon the receipt by
the Company of notice of such default by the Trustee or by Holders of not less
than 25% in aggregate principal amount at maturity of the Notes then
outstanding and the Company's failure to cure such default within 60 days after
receipt by the Company of such notice; or (iii) certain events of bankruptcy or
insolvency. (Section 6.1.)
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<PAGE>
The Trustee shall give notice to Holders of the Notes of any continuing
default known to the Trustee within 90 days after the occurrence thereof;
provided, that the Trustee may withhold such notice, as to any default other
than a payment default, if it determines in good faith that withholding the
notice is in the interests of the Holders (Section 7.5.)
The Holders of a majority in aggregate principal amount at maturity of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust
or power conferred on the Trustee, provided that such direction shall not be in
conflict with any law or the Indenture and subject to certain other
limitations. (Section 6.5.) No Holder of any Note will have any right to pursue
any remedy with respect to the Indenture or the Notes, unless (i) such Holder
shall have previously given the Trustee written notice of a continuing Event of
Default; (ii) the Holders of at least 25% in aggregate principal amount at
maturity of the outstanding Notes shall have made a written request to the
Trustee to pursue such remedy; (iii) such Holder or Holders have offered to the
Trustee reasonable indemnity satisfactory to the Trustee; (iv) the Holders of a
majority in aggregate principal amount at maturity of the outstanding Notes
have not given the Trustee a direction inconsistent with such request within 60
days after receipt of such request; and (v) the Trustee shall have failed to
comply with the request within such 60-day period. (Section 6.6.)
However, the right of any Holder (x) to receive payment of the principal
amount at maturity, interest, cash in respect of a conversion, Redemption
Price, Purchase Price or Change in Control Purchase Price with respect to any
Note and any interest in respect of a default in the payment of any such
amounts on such Note, on or after the due date expressed in such Note, (y) to
convert a Note or (z) to institute suit for the enforcement of any such
payments or conversion shall not be impaired or adversely affected without such
Holder's consent. (Section 6.7.) The Holders of a majority in aggregate
principal amount at maturity of the outstanding Notes may waive an existing
default and its consequences, other than (i) any default in any payment on the
Notes, (ii) any default with respect to the conversion rights of the Notes or
(iii) any default in respect of certain covenants or provisions in the
Indenture which may not be modified without the consent of the Holder of each
Note as described in "--Modification" below. (Section 6.4.)
The Company will be required to furnish to the Trustee annually a statement
as to any default by the Company in the performance and observance of its
obligations under the Indenture. (Section 4.3.)
MODIFICATION
Without the consent of any Holder of Notes, the Company and the Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency,
provided that such amendment does not adversely affect the rights of any Holder
of Notes, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Notes in addition to certificated Notes (so long as any "registration-required
obligation" within the meaning of Section 163(f)(2) of the Internal Revenue
Code is in registered form for purposes of the Internal Revenue Code), to make
any change that does not adversely affect the rights of any Holder of Notes or
to comply with the Trust Indenture Act of 1939 or any amendment thereto, and
any requirement of the Commission in connection with the qualification of the
Indenture. (Section 9.1.) No amendment may be made to the subordination
provisions of the Indenture that adversely affects the rights of any holder of
Senior Indebtedness then outstanding, unless the holders of such Senior
Indebtedness (as required pursuant to the terms of such Senior Indebtedness)
consent to such change. (Section 9.2.)
Modification and amendment of the Indenture or the Notes may be effected by
the Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount at maturity of the Notes then
outstanding. However, without the consent of each Holder affected thereby, no
amendment may, among other things: (i) reduce the principal amount at maturity,
Stated Issue Price, interest, amount of cash to be paid by the Company in
respect of a conversion, Purchase Price, Change in Control Purchase Price or
Redemption Price with respect to any Note, or extend the stated maturity of any
Note or alter the
54
<PAGE>
manner or rate of accrual of discount or interest, or make any Note payable in
money or securities other than that stated in the Notes; (ii) make any
reduction in the principal amount at maturity of Notes whose Holders must
consent to an amendment or any waiver under the Indenture or modify the
Indenture provisions relating to such amendments or waivers; (iii) make any
change that adversely affects the right to convert any Note or the right to
require the Company to purchase a Note; (iv) modify the provisions of the
Indenture relating to the subordination of the Notes in a manner adverse to the
Holders of the Notes; or (v) impair the right to institute suit for the
enforcement of any payment with respect to, or conversion of, the Notes.
(Section 9.2.)
LIMITATIONS OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of the Company, the claim
of the Holder of a Note is, under Title 11 of the United States Code, limited
to the Tax Issue Price (as defined under "Certain Tax Considerations--Original
Issue Discount and Other Interest") of the Note plus that portion of the
Original Issue Discount that has accrued from the Date of Issue to the
commencement of the Proceeding.
TAXATION OF NOTES
See "Certain Tax Considerations" for a discussion of certain tax aspects
which will apply to Holders of Notes.
INFORMATION CONCERNING THE TRUSTEE
The Company maintains deposit accounts and conducts other banking
transactions with the Trustee in the ordinary course of business.
CERTAIN TAX CONSIDERATIONS
The following is a summary of certain of the expected federal income tax
consequences of the receipt of Notes and cash in the Merger in exchange for CWM
Shares and of the ownership, disposition and conversion of the Notes. Such tax
treatment may vary depending upon a Holder's particular situation. This summary
does not discuss all of the tax consequences which may be relevant to certain
types of Holders subject to special treatment under the federal income tax laws
(such as individual retirement accounts and other tax-deferred accounts, life
insurance companies, tax-exempt organizations, dealers in securities and
foreign persons). The summary of the federal income tax consequences of the
ownership, disposition and conversion of the Notes is limited to Holders who
will acquire the Notes in the Merger and who will hold the Notes as capital
assets. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations promulgated thereunder, rulings, official
pronouncements, and judicial decisions, all as in effect as of the date of this
Proxy Statement-Prospectus. All of these are subject to change or to different
interpretations by the Internal Revenue Service ("IRS") or the courts.
Accordingly, stockholders of CWM should consult their own tax advisers with
respect to the particular consequences to them of the receipt of Notes and cash
in the Merger and holding, disposing of and converting Notes, including the
applicability and effect of any state, local or foreign tax laws to which they
may be subject and of any legislative or administrative changes in law.
The Company has been advised by its counsel, Bell, Boyd & Lloyd, that, in the
opinion of such counsel, the Notes will be treated as indebtedness for federal
income tax purposes. The following discussion of tax consequences assumes that
the Notes will be treated as indebtedness.
RECEIPT OF NOTES AND CASH
The Merger will be a taxable transaction to the public stockholders of CWM.
Each such stockholder will recognize gain or loss measured by the difference
between the sum of the fair market value of the Notes
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and the amount of cash received by the stockholder in the Merger and the
stockholder's basis in the CWM Shares exchanged therefor. If the CWM Shares
were held by such stockholder as capital assets, the gain or loss will be
capital gain or loss (which will be long term if the CWM Shares have been held
for more than one year). The amount of the tax on the gain recognized by a
stockholder as a result of the Merger may exceed the amount of cash, if any,
received by the stockholder in the Merger.
ORIGINAL ISSUE DISCOUNT AND OTHER INTEREST
If, as the Company believes is likely to be the case, the Notes are
determined to have Original Issue Discount for federal income tax purposes
under the rules described below, Holders will be required to include Original
Issue Discount in income periodically over the term of the Notes before receipt
of the cash attributable to such income. The amount of Original Issue Discount
is expected to differ from the Stated Discount. Whether or not the Notes are
determined to have Original Issue Discount, Holders will be required to include
the semi-annual cash interest payments on the Notes in income under their
regular method of accounting.
For federal income tax purposes, the excess, if any, of the "stated
redemption price at maturity" (which does not include cash interest) of a Note
over the "Tax Issue Price" will constitute Original Issue Discount. The Tax
Issue Price of a Note will be its fair market value on the Effective Date. The
Tax Issue Price is expected to differ from the Stated Issue Price of $717.80.
Because a Holder has options to require the Company to purchase a Note on March
15, 1998 and March 15, 2000 and the Company has the right to redeem a Note at
any time after March 15, 2000, one of these earlier dates may be treated as the
maturity date and the Purchase Price or Redemption Price, as the case may be,
payable on such date may be treated as the stated redemption price at maturity
of a Note for purposes of determining the amount and accrual of Original Issue
Discount. If the exercise of a Holder's option to require the Company to
purchase a Note would increase the yield on a Note, it will be assumed for
these purposes that the option will be exercised. Similarly, if the exercise of
the Company's right to redeem a Note would decrease the yield on the Note, it
will be assumed that the Company will exercise the right.
If the Tax Issue Price is higher than the Stated Issue Price of $717.80 but
less than $832.81, the Company will be assumed to exercise its right to redeem
the Notes on March 15, 2000 for a stated redemption price at maturity of
$843.35, with the result that Original Issue Discount will accrue prior to that
date at a slower rate than would otherwise be the case. If the Tax Issue Price
is less than $717.80, each Holder will be assumed to exercise its right to
require the Company to purchase a Note on March 15, 1998 for a stated
redemption price at maturity of $790.24, with the result that Original Issue
Discount will accrue prior to that date at a faster rate than would otherwise
be the case. If the Tax Issue Price of a Note is more than $832.81 (the price
at which the Company may redeem a Note on March 15, 2000 less the amount
defined by the Code as de minimis Original Issue Discount), the Notes will be
treated as not having Original Issue Discount prior to March 15, 2000, but will
have Original Issue Discount for periods thereafter if the Company does not
exercise its right to redeem the Notes, as described in the next paragraph.
If an option to require purchase or right to redeem that is assumed to be
exercised under these rules is not in fact exercised, for purposes of
calculating future accruals of Original Issue Discount the Notes will be
treated as reissued for an amount equal to the applicable deemed stated
redemption price at maturity as described above. Thereafter, accrued Original
Issue Discount on the Notes will equal accrued Stated Discount.
If the Notes are determined to have Original Issue Discount, a Holder will be
required to include in gross income for federal income tax purposes the sum of
the daily portions of Original Issue Discount with respect to a Note for each
day during the taxable year or portion of a taxable year on which such Holder
holds the Note ("Accrued Original Issue Discount"). The daily portion is
determined by allocating to each
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day of an accrual period a pro rata portion of the Original Issue Discount
allocable to that accrual period. The "accrual period" for a Note may be of any
length and may vary in length over the term of the Note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs on the first day or the final day of an accrual
period. The Company and the Holder may choose different accrual periods. The
amount of Original Issue Discount on a Note allocable to each accrual period is
determined by (i) multiplying the "adjusted issue price" (as defined below) of
the Note at the beginning of an accrual period by the yield to maturity of the
Note (determined on the basis of compounding at the end of each accrual period
and properly adjusted for the length of the accrual period and using the
maturity date determined as described above) and (ii) subtracting from that
product the amount of cash interest payable during the accrual period. The
"adjusted issue price" of a Note at the beginning of any accrual period will be
the sum of its Tax Issue Price and the amount of Original Issue Discount
allocable to all prior periods.
Recently adopted Treasury regulations generally provide that if a principal
purpose in structuring a debt instrument (including, for example, the existence
of a call option) is to achieve a result that is unreasonable in light of the
purposes of the Code, the IRS can depart from the otherwise applicable rules to
prevent such a result. If the Tax Issue Price is higher than the Stated Issue
Price, the effect of treating the Company as exercising its right to redeem the
Notes on March 15, 2000 will result in the accrual of Original Issue Discount
at a slower rate than would be the case if the Notes did not contain the call
option. While the matter is not free from doubt in the absence of any precedent
interpreting these regulations, the Company does not believe that the
regulations apply to the Notes and intends to report the amount of Original
Issue Discount accruing on the Notes in accordance with the foregoing
discussion.
The Company will be required to furnish annually to the IRS and to certain
non-corporate Holders information regarding the amount of Original Issue
Discount attributable to that year.
DISPOSITION OR CONVERSION
A Holder's initial basis for determining gain or loss on the sale or other
disposition of a Note will be the Tax Issue Price of the Note. A Holder's basis
will be increased by any Accrued Original Issue Discount includable in such
Holder's gross income. Gain or loss upon a sale or other disposition of a Note
(including a sale to the Company) will generally be capital gain or loss (which
will be long term if the Note is held for more than one year). Net capital
gains of individuals are, under certain circumstances, taxed at lower rates
than items of ordinary income.
A Holder's conversion of a Note into Company Shares generally will not be a
taxable event (except with respect to cash received in lieu of a fractional
share, discussed below). The Holder's obligation to include in gross income the
daily portions of Original Issue Discount with respect to a Note will terminate
prospectively on the date of conversion. The Holder's basis in the Company
Shares received on conversion of a Note will be the same as the Holder's
adjusted basis in the Note at the time of conversion (exclusive of any tax
basis allocable to a fractional share), and the holding period for the Company
Shares received on conversion will include the holding period of the Note
converted (assuming each is held as a capital asset), except that the Holder's
holding period for Company Shares allocable to Accrued Original Issue Discount
may commence on the day following the date of conversion. Gain or loss upon a
sale or other disposition of the Company Shares received on conversion of a
Note will be capital gain or loss if the Company Shares are capital assets in
the hands of the Holder.
Under the current advance ruling policy of the IRS, cash received in lieu of
a fractional Company Share upon conversion of a Note should be treated as a
payment in exchange for the fractional interest in such Company Share.
Accordingly, if the Company Shares are capital assets in the hands of the
Holder, the receipt of cash in lieu of a fractional Company Share should
generally result in capital gain or loss, if any, measured by the difference
between the cash received for the fractional share interest and the Holder's
adjusted basis in the fractional share interest.
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If a Holder elects to convert a Note into Company Shares but the Company
chooses to deliver cash rather than Company Shares, such an exchange will be a
taxable sale. The Holder will recognize gain or loss upon the sale, measured by
the difference between the amount of cash payable to the Holder and the
Holder's adjusted basis in the Note. The gain or loss recognized by the Holder
will be capital gain or loss.
If the Holder elects to exercise his option to tender a Note to the Company
on a Purchase Date or Change in Control Purchase Date, or the Company elects to
redeem a Note, such an exchange will be a taxable sale. The Holder will
recognize gain or loss upon the sale, measured by the difference between the
amount of cash payable by the Company to the Holder in satisfaction of the
purchase price and the Holder's adjusted basis in the Note. Gain or loss
recognized by the Holder will be capital gain or loss.
CONSTRUCTIVE DIVIDEND
If at any time the Company makes a distribution of property to stockholders
which would be taxable to such stockholders as a dividend for federal income
tax purposes (for example, distributions of evidences of indebtedness or assets
of the Company, but generally not stock dividends or rights to subscribe for
Company Shares) and, pursuant to the antidilution provisions of the Indenture,
the Conversion Rate of the Notes is increased, such increase may be deemed to
be the payment of a taxable dividend to Holders of Notes. If the Conversion
Rate is increased at the discretion of the Company, such increase may be deemed
to be the payment of a taxable dividend to Holders of Notes.
BACKUP WITHHOLDING
Certain non-corporate CWM stockholders may be subject to backup withholding
at a rate of 31% on (i) any cash proceeds otherwise payable as part of the
Merger Consideration and (ii) any Original Issue Discount or interest paid on
the Notes. Generally, backup withholding will not apply to CWM stockholders or
Holders of Notes who provide their taxpayer identification numbers to the
Exchange Agent or Paying Agent and certify under penalties of perjury that
their numbers are correct and that they are not subject to backup withholding
due to notification by the IRS that they have underreported interest or
dividend income. Additional information about the exemptions from backup
withholding will be contained in the Letter of Transmittal to be mailed to
stockholders after the Effective Date.
BUSINESS OF THE COMPANY
The Company is a leading international provider of environmental, engineering
and construction, industrial and related services.
Through WMI, the Company provides integrated solid waste management services
in North America to commercial, industrial, municipal and residential
customers, as well as to other waste management companies. These services
consist of solid waste collection, transfer, resource recovery and disposal
services. As part of these services, the Company is engaged in providing,
through its Recycle America(R) and Recycle Canada(R) programs, paper, glass,
plastic and metal recycling services to commercial and industrial operations
and curbside recycling services for such materials to residences; in removing
methane gas from sanitary landfill facilities for use in electricity
generation; and in providing medical and infectious waste management services
to hospitals and other health care and related facilities. In addition, through
WMI the Company provides street sweeping and parking lot cleaning services,
portable fencing and power pole services and Port-O-Let(R) portable sanitation
services to municipalities and commercial customers.
CWM is an approximately 78.6%-owned subsidiary of the Company, and its
business is described below under "Business of CWM."
WTI, an approximately 55%-owned subsidiary of the Company, provides a wide
array of environmental products and systems in North America and abroad. WTI's
clean energy group is a leading developer of facilities and systems for, and
provider of services to, the trash-to-energy, energy, and independent power
markets. Through the clean energy group, WTI develops, arranges financing for,
operates and owns facilities that dispose of trash and other waste materials in
an environmentally acceptable manner by recycling it into energy in the form of
electricity and steam. WTI's clean water group is principally involved in the
design,
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manufacture and operation of facilities and systems used to purify water, to
treat municipal and industrial wastewater, to treat and manage biosolids
resulting from the treatment of wastewater by converting them into useful
fertilizers, and to recycle organic wastes into compost material useable for
horticultural and agricultural purposes. The clean water group also designs and
manufactures various products and systems used in water and wastewater
treatment facilities and industrial facilities, precision profile wire screens
for use in groundwater wells and other industrial applications, and certain
other industrial equipment. WTI's clean air group designs, fabricates and
installs technologically advanced air pollution emission control and
measurement systems and equipment, including systems which remove pollutants
from the emissions of WTI's trash-to-energy facilities as well as power plants
and other industrial facilities.
Rust is a subsidiary owned approximately 56% by CWM and 40% by WTI, and its
business is described below under "Business of CWM."
The Company provides comprehensive waste management and related services
internationally, primarily through Waste Management International, a subsidiary
owned 56% by the Company, 12% by Rust and 12% by WTI. Waste Management
International provides a wide range of solid and hazardous waste management
services (or has interests in projects or companies providing such services) in
various countries in Europe and in Argentina, Australia, Brunei, Hong Kong,
Indonesia, Malaysia, New Zealand, Singapore and Taiwan.
The Company also owns an approximately 28% interest in ServiceMaster Consumer
Services L.P., a provider of lawn care, pest control and other consumer
services. The remaining ownership interest is held indirectly by ServiceMaster
Limited Partnership.
The Company was incorporated in Delaware in 1968 and subsequently succeeded
to certain businesses owned by its organizers and others. Company Shares are
listed on the NYSE under the trading symbol "WMX" and are also listed on the
Frankfurt Stock Exchange, the London Stock Exchange, the Chicago Stock Exchange
and the Swiss Stock Exchanges in Basle, Zurich and Geneva. Additional
information concerning the Company is included in the Company Reports
incorporated by reference in this Proxy Statement-Prospectus. See "Documents
Incorporated by Reference."
BUSINESS OF CWM
CWM is a leading provider of hazardous waste management services and various
other environmental and industrial services. CWM furnishes chemical waste
management services, including transportation, treatment, resource recovery and
disposal, to commercial and industrial customers, as well as to other waste
management companies and to governmental entities. CWM also furnishes
radioactive waste management services, primarily to electric utilities and
governmental entities.
CWM also owns approximately 56% of Rust, a subsidiary engaged in furnishing
engineering, construction, environmental and infrastructure consulting,
hazardous substance remediation and a variety of other on-site industrial and
related services, primarily to clients in government and in the chemical,
petrochemical, nuclear, energy, utility, pulp and paper, manufacturing,
environmental services and other industries.
On January 1, 1993, CWM and WTI formed Rust and acquired 58% and 42%,
respectively, of Rust's outstanding shares. Rust was created to serve the
engineering, construction, environmental and infrastructure consulting,
hazardous substance remediation and on-site industrial and related services
markets, which the managements of CWM, WTI and Brand believed could be served
more effectively by organizing the Company's several business units serving
those markets into a single integrated company. WTI contributed primarily its
engineering and construction and environmental and infrastructure consulting
services businesses and its then recently formed international engineering unit
based in London. CWM contributed primarily its hazardous substance remediation
services business, its approximately 56% ownership interest in
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Brand, and its 12% ownership interest in Waste Management International. On May
7, 1993, Brand was merged into a subsidiary of Rust, and shares of Brand (other
than those owned by Rust or exchanged for cash in the merger) were converted
into shares of Rust. Brand changed its name to "Rust Industrial Services Inc."
and is now a wholly owned subsidiary of Rust. See also "Certain Relationships
and Transactions" for information as to certain agreements pertaining to Rust.
CWM was organized by the Company as a wholly owned subsidiary in 1978. In
1986, in anticipation of the initial public offering of CWM Shares, the Company
consolidated under CWM's ownership substantially all of the Company's ongoing
domestic businesses that then provided hazardous waste management services. In
1986, CWM engaged in an initial public offering of approximately 18.9% of the
post-offering CWM Shares. In connection with these and other transactions, CWM
and the Company and their respective subsidiaries have entered into various
agreements with respect to their ongoing relationships and other matters. See
"Certain Relationships and Transactions."
CWM is approximately 78.6%-owned by the Company. CWM Shares are listed on the
NYSE under the trading symbol "CHW" and are also listed on the Chicago Stock
Exchange. Additional information concerning CWM is included in the CWM Reports
incorporated by reference in this Proxy Statement-Prospectus. See "Documents
Incorporated by Reference."
CERTAIN RELATIONSHIPS AND TRANSACTIONS
CWM and the Company (or certain of their respective subsidiaries) have
entered into a number of interrelated agreements with respect to their ongoing
relationships and certain transactions. Because of the complexity of the
various relationships between CWM and the Company (including their respective
subsidiaries), there can be no assurance that each of such agreements, or the
transactions provided for therein, considered separately, has been or will be
effected on terms no less favorable to CWM than could have been or could be
obtained from unaffiliated third parties. However, it has been the intention of
CWM and the Company 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
CWM, the Company and their respective subsidiaries. In the event that the
Merger does not occur, any such future arrangements and transactions are
expected to be determined through negotiation between them, but there can be no
assurance that conflicts of interest will not occur. In the event that the
Merger does not occur, CWM intends to seek the approval of its independent
directors for any agreement which its management or any independent director of
CWM believes to be of material importance to CWM and to involve a significant
conflict of interest with the Company or its affiliated companies.
The following is a summary of certain past, current and anticipated future
arrangements and transactions between or among CWM, the Company and their
respective affiliates. CWM anticipates that, if necessary and if the Merger
does not occur, it will be able to negotiate an extension through December 31,
1995 of the agreements described below which expire on December 31, 1994.
However, there can be no assurance that the Company will agree to any such
extension and there can be no assurance as to the terms and conditions which
the Company may request in connection with any such extension or any agreement.
INTERNATIONAL TRANSACTIONS
Acquisition of Waste Management International Interest
In 1990, pursuant to an agreement among the Company, CWM, WTI and a
predecessor of Waste Management International, the predecessor granted to each
of CWM and WTI an option to purchase 15% of the common voting stock of such
predecessor for an amount equal to 85% of its fair market value. In 1991, CWM
exercised the option. The purchase price of $168,974,000 was based upon a
valuation analysis of
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the predecessor prepared by an independent investment banking firm and was paid
in CWM's case by delivery to the predecessor of notes of a subsidiary of the
predecessor acquired by CWM from the Company in exchange for the issuance to
the Company of a 6% subordinated debenture due 2001, convertible into CWM
Shares at a conversion price of $21.00 per share. As a result of a corporate
restructuring of Waste Management International's predecessor completed in
1992, each of CWM and WTI acquired a 15% equity interest in Waste Management
International, which now indirectly owns substantially all of the Company's
waste management services businesses outside of North America. In connection
with such restructuring, the shareholders of Waste Management International
contributed, on a pro rata basis, an additional $200,000,000 to the capital of
Waste Management International. CWM's share of such contribution was
$30,000,000. In 1992, the Company exercised its right to convert the
subordinated debenture and received 8,046,380 CWM Shares in such conversion. In
1992, CWM paid interest of $10,138,440 on the debenture. In late 1992, CWM
transferred its Waste Management International interest to Rust in connection
with Rust's formation. See "Business of CWM."
International Business Opportunities Agreement
CWM has also entered into an Amended and Restated International Business
Opportunities Agreement, as amended, with the Company, Rust, WTI, Waste
Management International and an affiliate of Waste Management International
pursuant to which, in part, CWM agreed that, in order to minimize the potential
for conflicts of interest among various subsidiaries under the common control
of the Company, the Company has the right to direct all business opportunities
to the Company-controlled subsidiary which, in the Company's reasonable and
good faith judgment, has the most experience and expertise in that line of
business. Opportunities in North America (other than those relating to
hazardous substance remediation services, which have been allocated to Rust)
relating to storage, processing, treatment or disposal of (i) radioactive
wastes, or (ii) hazardous wastes regulated under the Resource Conservation and
Recovery Act or wastes the storage, treatment or disposal of which as of
January 1993 was regulated under the Toxic Substances Control Act in the United
States, (iii) such wastes in Canada which would be so regulated in the United
States, or (iv) wastes in Mexico which are currently or in the future regulated
as hazardous or toxic under Mexican law, have been allocated to CWM.
Opportunities worldwide relating to (a) architectural services, (b) engineering
and design services, other than those relating to (1) chimneys and air
pollution control equipment and facilities, (2) facilities and systems for
water, wastewater and sewage treatment outside North America, but only (x)
where the customer is seeking third-party operation and maintenance services in
addition to those customarily involved in start-up and commissioning tests, or
(y) which are designed for treating hazardous waste streams, whether or not the
customer is seeking third-party operation and maintenance services, and (3)
waste-to-energy facilities outside of North America, (c) procurement,
construction and construction management services, including marine
construction and dredging, but excluding such services as they relate to (1)
hazardous substance remediation services outside North America, (2) chimneys
and air pollution control equipment and facilities, (3) facilities and systems
for water, wastewater and sewage treatment outside North America, but only (in
the case of facilities and systems falling within this item (3)) (x) where the
customer is seeking third-party operation and maintenance services in addition
to those customarily involved in start-up and commissioning tests, or (y) which
are designed for treating hazardous waste streams, whether or not the customer
is seeking third-party operation and maintenance services, and (4) waste-to-
energy facilities outside North America, (d) scaffolding services, (e)
demolition and dismantling services, (f) environmental consulting services,
including, without limitation, environmental facility siting and permitting
services, remedial investigations and feasibility studies, contaminant
assessments, risk assessments and air quality analyses, and (g) industrial
facility and power plant maintenance services, have been allocated to Rust, as
well as opportunities in North America relating to hazardous substance
remediation services.
Pursuant to that Agreement, CWM and Rust also agreed not to conduct waste
management services operations, including, without limitation, collection,
transfer, recycling and land disposal of solid wastes; collection, storage,
processing, treatment or disposal of hazardous wastes (including hazardous
substance remediation services); the design, development, construction,
operation and maintenance of waste-to-energy
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facilities; and the design, engineering and construction (where the customer is
seeking third-party operation and maintenance services in addition to those
customarily involved in start-up and commissioning tests), operation and
maintenance of facilities and systems for water, wastewater and sewage
treatment (including facilities for treating hazardous waste streams, whether
or not the customer is seeking third-party operation and maintenance services),
outside of North America until the later of July 1, 2000 and the date the
Company ceases to beneficially own a majority of the outstanding voting equity
interests of CWM or Rust, as the case may be, or a majority of all outstanding
voting equity interests of Waste Management International.
The Amended and Restated International Business Opportunities Agreement is
the successor to a similar agreement originally entered into in 1992 in
connection with the initial public offering of Waste Management International.
That earlier agreement was itself the successor in part to a Master
Intercorporate Agreement entered into in 1990 by the Company, CWM and WTI in
connection with the Company's acquisition of a majority interest in WTI
containing, in pertinent part, similar provisions.
International Development Agreement
Pursuant to a Third Amended and Restated International Development Agreement,
CWM, Rust, WTI, the Company and certain of their affiliates have agreed that
for so long as the Company has beneficial ownership of a majority of the
outstanding shares of Waste Management International and so long as Rust has
beneficial ownership of shares having not less than 10% of the voting power of
Waste Management International, each of CWM, Rust and WTI will vote their Waste
Management International shares so that one designee of Rust (or such greater
number as shall equal the total number of directors multiplied by the
percentage of outstanding Waste Management International shares beneficially
owned by Rust, reduced to the nearest whole number) will be elected to the
Board of Directors of Waste Management International. Mr. Buntrock has been
designated as Rust's designee. CWM has an option, which has been assigned to
Rust, to maintain beneficial ownership of Waste Management International
outstanding shares at a level having not less than 10% of the voting power of
outstanding Waste Management International securities. In addition, Rust has
granted to the Company a right of first refusal with respect to its beneficial
interest in the Waste Management International shares, the Company has granted
to Rust certain participation rights with respect to a disposition of Waste
Management International shares and Waste Management International has granted
to Rust rights to participation and demand registrations under the Securities
Act and rights to have Waste Management International facilitate sales in
offerings made outside of the United States.
The Third Amended and Restated International Development Agreement is the
successor in part to several earlier agreements originally entered into in 1990
in connection with the Company's acquisition of a majority position in WTI.
Other International Transactions
CWM is also a party to a master licensing agreement with the Company, WTI,
Waste Management International and Rust whereby Waste Management International
agreed to license intellectual property to CWM, the Company, WTI and Rust, and
those parties agreed to license intellectual property to Waste Management
International. Licenses are to be granted on request and are to provide for the
payment of royalties determined on an arms-length basis. The master agreement
is to remain in effect until the later of July 1, 2000 and the date the Company
ceases to own beneficially a majority of the outstanding voting interests of
one or more of the other parties.
ORGANIZATION OF RUST
Pursuant to an Organizational Agreement among Brand, CWM and WTI, on January
1, 1993, CWM contributed to Rust, in exchange for 46,682,031 shares of Rust
common stock, or approximately 58% of the outstanding capital stock of Rust:
(i) 100% of its ownership in Brand, which amounted to 12,575,870 shares, or 56%
of the outstanding common stock of Brand; (ii) its hazardous substance
remediation services business,
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consisting primarily of CWM Remedial Services Group, Inc.; (iii) beneficial
ownership of all Waste Management International ordinary shares owned by CWM,
constituting 12% of the outstanding ordinary shares of Waste Management
International, together with all of CWM's rights attendant to such shares; and
(iv) an aggregate of $141,000,000 in principal amount of indebtedness
outstanding under that certain Temporary Funding Agreement dated February 22,
1991, as amended, between Brand and CWM. At the same time, WTI contributed to
Rust, in exchange for 33,216,060 shares of Rust common stock, or approximately
42% of the outstanding capital stock of Rust: (i) 100% of the outstanding
common stock of its two principal engineering, construction and environmental
and infrastructure consulting businesses, SEC Donohue Inc. and Rust
International Corporation (Delaware); (ii) 100% of the common stock of its
London-based international engineering and consulting business, Wheelabrator
Technologies International Holdings Inc.; (iii) certain disposal credits in the
aggregate amount of $30,000,000 at facilities owned or operated by WMI; and
(iv) an aggregate of $68,000,000 in cash, notes receivable and pre-funded
acquisition costs. In addition, the Company, CWM, WTI, Rust and various of
their affiliates entered into various ancillary agreements and the parties
agreed to cause Rust to repay to CWM the outstanding indebtedness of CWM's
hazardous substance remediation services subsidiary in the aggregate principal
amount of $75,000,000. This transaction was approved by the independent members
of the Boards of Directors of CWM, WTI and Brand.
On January 1, 1993, Rust, Brand and Rust Services Inc., a wholly owned
subsidiary of Rust, entered into an Agreement and Plan of Merger pursuant to
which Brand was merged into Rust Services Inc. Each share of Brand common stock
outstanding immediately prior to the effective time of the merger (other than
shares of Brand common stock held by Rust or held in the treasury of Brand,
which were cancelled) was converted, at the option of the holder thereof, into
one share of common stock of Rust or the right to receive $18.75 in cash. The
cost (approximately $130,000,000) of acquiring the Brand shares exchanged for
cash was financed through Rust's credit facility with the Company described
below.
CASH MANAGEMENT, FINANCING AND RELATED ARRANGEMENTS
CWM and the Company have entered into an agreement under which the Company
will manage CWM's cash and fund CWM's cash requirements, up to a maximum of
$810,000,000, from year to year until terminated as of the end of a calendar
year upon 30 days' notice. The Company will make demand loans to CWM, at a rate
equivalent to the Company's effective rate for 30-day commercial paper plus
such number of basis points as effectively reimburses the Company for its
expenses in obtaining funds. The Company will also make term loans, at the
option of CWM, with maturities up to ten years, at rates equivalent to the
Company's cost for loans of similar duration, or such floating rates of
interest as may be agreed upon. If CWM is in a positive cash position with the
Company, CWM is entitled to interest at a rate based on the Company's 30-day
commercial paper rate. If CWM demonstrates the availability to it of better
returns on short-term investments or lower borrowing costs, the Company has
agreed to provide such terms to CWM. Such transactions resulted in aggregate
interest charges to CWM of $8,195,545 during 1991, $16,568,967 during 1992,
$20,955,989 during 1993 and $23,378,319 for the first nine months of 1994, and
at December 31, 1993 and September 30, 1994, CWM owed the Company $744,304,833
and $794,720,268, respectively.
The Company has also agreed to continue to provide CWM (at CWM's expense)
with all appropriate insurance coverages and bid, performance and other surety
bonds to the extent reasonably available, and to use all reasonable efforts to
furnish such corporate guarantees, letters of credit and bonds relating to
certain continuing federal environmental financial assurance mechanisms as CWM
may reasonably request, subject to certain limitations and conditions, from
year to year until terminated as of the end of a calendar year upon 30 days
notice. CWM has agreed to indemnify the Company against certain losses and
expenses that may be incurred by the Company in connection therewith. CWM's
allocable share of insurance costs will be determined on the basis of the risk
and loss experience rating system utilized by the Company.
CWM, the Company, WTI and Rust have also entered into a Rust Intercorporate
Services Agreement pursuant to which the Company agreed to loan to Rust up to
$350,000,000, and provide Rust (at Rust's expense) with all appropriate
insurance coverages and bid, performance and other surety bonds to the extent
63
<PAGE>
reasonably available, all on terms substantially similar to the Company's
arrangement with CWM described above. The arrangement is in effect until
December 31, 1997. In August 1993, the maximum amount of this credit facility
was increased to $450,000,000 until December 31, 1993, at which time Rust
executed a promissory note to the Company in the aggregate amount of
$100,000,000, bearing interest at an annual rate of 6% and maturing on December
31, 1998, and the maximum amount of the credit facility was reduced to
$350,000,000. On December 31, 1993, $50,000,000 outstanding under the credit
facility was converted into a five-year term loan bearing interest at an annual
rate of 6%. Such transactions resulted in aggregate interest charges to Rust of
$8,584,653 during 1993 and $13,646,392 for the first nine months of 1994, and
at December 31, 1993 and September 30, 1994, Rust owed the Company
approximately $390,000,000 and $409,200,000, respectively.
Pursuant to that Agreement, CWM has agreed to reimburse Rust for certain
business development expenses in an amount not to exceed $10,000,000 in each of
1993 and 1994 (to induce Rust to develop and implement a business development
program with a particular emphasis on its hazardous substance remediation
services business). Rust has the right to defer CWM's obligation to reimburse
such expenses from year to year until December 31, 1997. Such reimbursement for
1993 was deferred. Through September 1994, CWM reimbursed Rust in the amount of
approximately $7,300,000 pursuant to such arrangement. The timing or amount of
future such reimbursement payments cannot be predicted.
MANAGEMENT, TECHNICAL AND OTHER SERVICES
CWM and the Company and their various subsidiaries provide services to each
other in the ordinary course of business. During 1991, 1992 and 1993, revenue
earned by CWM from the Company and its subsidiaries for such services was
$12,164,584, $19,575,258 and $217,404,417 (including $210,476,769 earned by
Rust from the Company and its subsidiaries), respectively, and operating
expenses charged to CWM by the Company and such subsidiaries for such services
in those years were $10,005,544, $5,287,628 and $16,762,692 (including
$12,332,175 charged to Rust by the Company and such subsidiaries),
respectively. In January 1992, CWM committed to dispose of a minimum of 770,000
tons of non-hazardous solid wastes in landfills owned or operated by
subsidiaries of the Company over the 24-month period ended December 31, 1993 at
negotiated rates which CWM believes were favorable. This commitment was
terminated by mutual agreement as of May 31, 1993.
The Company, CWM and WTI have agreed that Rust will be a 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 industrial construction services of the type generally
offered by Rust and its subsidiaries. WTI is a preferred vendor to the Company
and CWM of certain engineered products and services and CWM is a preferred
vendor to a subsidiary of Rust of services of the type provided by CWM.
In 1991, 1992 and 1993, CWM was charged an aggregate of approximately
$4,631,117, $5,190,209 and $9,795,000, respectively, by the Company and a
subsidiary for various administrative, accounting, financial and other
services. The Company has agreed to provide such services to CWM from year to
year until the arrangement is terminated as of the end of a calendar year upon
30 days' notice. Pursuant to such agreement, the Company is entitled to
reimbursement for its fully allocated costs of providing services.
CWM leases certain office facilities, including CWM's corporate headquarters,
from the Company or the WMX Technologies, Inc. Pension Trust, and certain
chemical waste management facilities from subsidiaries of the Company, for
which CWM made payments aggregating $689,523 in 1991, $4,522,923 in 1992 and
$1,547,376 in 1993, consisting of rent and reimbursement of incidental costs.
In addition, CWM subleased certain facilities to the Company during 1993, for
which the Company paid rent of $133,000.
RUST SHAREHOLDERS' AGREEMENT
Rust, WTI and CWM have entered into a Rust Shareholders' and Registration
Rights Agreement pursuant to which CWM and WTI each will have certain demand
and participation registration rights and rights of first refusal with respect
to Rust common stock. CWM and WTI also have the right to purchase
64
<PAGE>
from Rust at fair market value such number of shares of Rust common stock as
may be necessary to maintain beneficial ownership of 51% and 22%, respectively.
A shareholder's right to purchase Rust common stock will terminate on the
earlier of (i) January 1, 2003, (ii) the April 30 in any calendar year
following a year in which the right is exercisable, the shareholder has failed
to exercise the right and such shareholder does not beneficially own at least
50% (in the case of CWM) or at least 20% (in the case of WTI) of Rust common
stock then outstanding, and (iii) the date on which such shareholder owns less
than 51% (in the case of CWM) or less than 22% (in the case of WTI) of such
Rust common stock then outstanding, as a direct result of transfers by such
shareholder. For so long as WTI or its subsidiaries own or have the option to
acquire at least 20% of the issued and outstanding shares of Rust common stock,
WTI will have the right to nominate two directors of Rust.
OTHER TRANSACTIONS
The Company and certain of its subsidiaries, on one hand, and CWM, on the
other hand, have previously transferred various chemical waste management
businesses and other properties to each other and have conditionally agreed to
indemnify each other against liabilities and obligations, including unknown or
contingent environmental and other liabilities, if any, primarily related to
such businesses and properties transferred to them. Also, the Company has
conditionally agreed to indemnify CWM against liabilities and obligations
primarily related to certain chemical waste businesses which continue to be
owned by CWM, and previously agreed to retain certain chemical waste facilities
which the Company or its subsidiaries had acquired and which are no longer in
operation. In this connection, CWM has agreed until September 30, 2006, subject
to certain volume limitations, to provide treatment and disposal services at a
rate equal to its cost plus 10% in respect of hazardous wastes from sites owned
or used by the Company, and the Company has agreed to extend the same
arrangement to CWM in respect of non-hazardous wastes from sites owned or used
by CWM.
CWM has granted to the Company the right to purchase from CWM such number of
shares of capital stock as may be necessary to enable the Company to
beneficially own, together with all other shares of capital stock of CWM
beneficially owned by the Company, capital stock having not less than 55% of
the voting power of all capital stock of CWM having power to vote in the
election of directors. This right is exercisable at any time when the Company
beneficially owns capital stock of CWM possessing less than 55% of such voting
power, and expires on the March 31 next following a December 31 as of which the
Company fails to own beneficially capital stock possessing more than 50% of the
voting power of all outstanding capital stock of CWM. The purchase price for
such shares will be the then current fair market value of such shares.
In the ordinary course of business, various assets, including used vehicles,
equipment, land, leasehold improvements, furniture and fixtures, are
transferred at their net book value between CWM and the Company and their
respective affiliated companies. During 1991 and 1993, net transfers of such
assets to the Company and its affiliated companies from CWM amounted to an
aggregate of $1,374,328 and $8,174,913, respectively. During 1992, net
transfers of such assets to CWM from the Company and its affiliated companies
amounted to an aggregate of $267,912. Such amount in 1993 includes proceeds
from the sale to WMI of certain assets comprising a facility that manufactured
containers for CWM and WMI for $7,107,758, which was equivalent to their net
book value and which CWM believes was substantially equivalent to their fair
market value. The transaction was approved by the independent directors of CWM.
In April 1993, CWM transferred to WMI certain assets and licensed to WMI
certain technology used in connection with the bioremediation of oil-
contaminated soils for an aggregate consideration of $2,500,000, which was
determined to be the fair market value of such assets and technology based on
management projections. At the time of the transfer, CWM's investment in those
assets and technology was approximately $19,000. The transaction was approved
by the independent directors of CWM.
In connection with the 1988 offering by the Company of Company LYONs
exchangeable for CWM Shares and in consideration of an extension of the term of
the intercompany financing agreements described above, CWM agreed to use its
best efforts to maintain a current registration statement covering the CWM
Shares issuable upon exchange of the Company LYONs and to indemnify the Company
against certain
65
<PAGE>
liabilities, including liabilities under the Securities Act, as they may relate
to the registration statement. If the Merger is consummated, the Company LYONs
will become convertible into Notes instead of CWM Shares, as provided above
under "The Merger Agreement -- Treatment of LYONs."
In 1992, CWM sold to WTI all of the outstanding common stock of Sirrine
Environmental Consultants, Inc. ("Sirrine"). The purchase price of $40,000,000
was based upon a valuation analysis prepared by an independent investment
banking firm and was paid by delivery of 1,362,862 shares of WTI common stock.
CWM acquired Sirrine in March 1990 for $8,671,891. At the time of the sale to
WTI, CWM's investment in Sirrine was $18,008,634. As part of this transaction,
CWM agreed (which agreement has since been terminated) to purchase from WTI at
standard rates services of the type provided by Sirrine with a value of
$40,000,000 over the next five years.
In 1990, in connection with the Company's acquisition of a majority interest
in WTI, CWM and the Company agreed that WTI would be the preferred vendor to
them of certain goods furnished by WTI. Pursuant to such arrangement, provided
that the value of WTI's goods at least equals that of third parties' goods, CWM
and the Company are to place all orders of $2 million or more with WTI.
SECURITIES OWNERSHIP
OWNERSHIP OF COMPANY SHARES
By Company Directors and Executive Officers
The following table sets forth certain information as of October 15, 1994 as
to the beneficial ownership of Company Shares by the directors, the Chairman of
the Board and Chief Executive Officer and the four other most highly
compensated executive officers of the Company as of December 31, 1993, by each
of two individuals who ceased to be executive officers of the Company during
1993 but whose reportable salary and bonus would have placed them in the group
of the four other most highly compensated executive officers of the Company,
and by all directors and persons serving as executive officers of the Company
and such two individuals as a group:
<TABLE>
<CAPTION>
NUMBER OF COMPANY PERCENT OF
SHARES OUTSTANDING
BENEFICIALLY OWNED COMPANY SHARES
NAME (1)(2) (2)(3)
- ---- ------------------ --------------
<S> <C> <C>
Dean L. Buntrock............................ 3,138,800 *
Phillip B. Rooney........................... 749,838 *
H. Jesse Arnelle............................ 9,300 *
Howard H. Baker, Jr......................... 22,000 *
Pastora San Juan Cafferty................... 300 *
Jerry E. Dempsey............................ 540,393 *
Donald F. Flynn............................. 537,667 *
Peter H. Huizenga........................... 8,131,655 1.7
Peer Pedersen............................... 212,597 *
James R. Peterson........................... 82,400 *
Alexander B. Trowbridge..................... 20,000 *
James E. Koenig............................. 89,729 *
J. Steven Bergerson......................... 212,516 *
Thomas C. Hau............................... 51,781 *
William P. Hulligan......................... 166,969 *
D. P. Payne................................. 71,939 *
All directors and executive officers as a
group including persons named above (18
persons)................................... 14,181,903 2.9
</TABLE>
- --------
(1) Directors and executive officers included in the group have sole voting
power and sole investment power over shares listed, except (i) shares
covered by options granted under the Company's stock option plans which
were exercisable within 60 days of October 15, 1994; (ii) shares held
pursuant to the Company's
66
<PAGE>
Profit Sharing and Savings Plan; and (iii) Messrs. Bergerson, Buntrock,
Huizenga, Pedersen and Rooney, and all executive officers and directors as a
group (including such individuals), who have shared voting and investment
power over 850, 133,093, 224,394, 12,597, 23,932 and 431,722 shares,
respectively. Such shares shown for Messrs. Buntrock, Huizenga, Pedersen 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 or foundations, and such shares shown for Mr. Bergerson are held
jointly with his spouse. Ownership of shares shown for Messrs. Buntrock,
Dempsey, Huizenga, Koenig and Rooney, and for all executive officers and
directors as a group, includes Company 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. Shares were held by or for the benefit of
such spouses or children of the following persons and the executive officers
and directors as a group at October 15, 1994, in the amounts indicated: Mr.
Buntrock--40,352 (held by spouse); Mr. Dempsey--1,000 (held by spouse); Mr.
Huizenga--680,778 (held by spouse directly and as trustee); Mr. Koenig--30
(held by spouse); Mr. Rooney--106,450 (held directly by adult child and by
spouse directly and as trustee for children); and all executive officers and
directors as a group (including such individuals)--828,929. Additionally,
ownership of shares shown for Mr. Koenig includes 1,200 shares held by him
as trustee of a family trust in which he has no pecuniary interest. Each of
the above named persons and the members of such group disclaim any
beneficial ownership of such shares.
(2) The numbers and percentages of shares shown in the table above are based on
the assumption that currently outstanding stock options covering Company
Shares which were exercisable within 60 days of October 15, 1994 had been
exercised as follows: Mr. Arnelle--9,000; Mr. Baker--20,000; Mr.
Bergerson--62,748; Mr. Buntrock--296,532; Mr. Dempsey--120,373; Mr. Flynn--
29,893; Mr. Hau--51,752; Mr. Hulligan--85,942; Mr. Koenig--56,215; Mr.
Payne--71,739; Mr. Rooney--223,311; Mr. Trowbridge-- 20,000; and all
executive officers and directors as a group (including such individuals)--
1,146,806. Such persons and the members of such group disclaim any
beneficial ownership of the shares subject to such options.
(3) The Company does not know of any person who, as of October 15, 1994, owned
more than five percent of the outstanding Company Shares.
By CWM Directors and Executive Officers
The following table sets forth certain information as of October 15, 1994 as
to the beneficial ownership of Company Shares by the directors of CWM, the
President and Chief Executive Officer and the four other most highly
compensated executive officers of CWM as of December 31, 1993, and all
directors and persons serving as executive officers of CWM as a group:
<TABLE>
<CAPTION>
NUMBER OF COMPANY
SHARES
BENEFICIALLY PERCENT OF OUTSTANDING
NAME OWNED(1)(2) COMPANY SHARES(2)
- ---- ----------------- ----------------------
<S> <C> <C>
Dean L. Buntrock...................... 3,138,800 *
James B. Edwards...................... 1,200 *
Donald F. Flynn....................... 537,667 *
Jerome D. Girsch...................... 221,661 *
Kay Hahn Harrell...................... 2,200 *
Peter H. Huizenga..................... 8,131,655 1.7
James E. Koenig....................... 89,729 *
D. P. Payne........................... 71,939 *
Peer Pedersen......................... 212,597 *
Phillip B. Rooney..................... 749,838 *
James T. Banks........................ 3,639 *
Rodger D. Henson...................... 16,502 *
Richard C. Scherr..................... 800 *
All directors and executive officers
as a group
including persons named above (14
persons)............................. 13,178,227 2.7
</TABLE>
- --------
*Less than one percent
67
<PAGE>
(1) The above named persons and members of such group have sole voting power
and sole investment power over shares listed, except for (i) shares covered
by options granted under the Company's stock option plans and which were
exercisable within 60 days of October 15, 1994; (ii) shares held pursuant
to the Company's Profit Sharing and Savings Plan; and (iii) Messrs.
Buntrock, Huizenga, Pedersen and Rooney, who have shared voting and
investment power over 133,093, 224,394, 12,597 and 23,932 shares,
respectively. Such shares are held in trusts or foundations over which such
individuals share voting and investment power with other co-trustees or
directors of such trusts or foundations. Ownership of shares shown for
Messrs. Buntrock, Girsch, Huizenga, Koenig and Rooney includes Company
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.
Shares were held by or for the benefit of such spouses or children of the
following persons at October 15, 1994 in the amounts indicated: Mr.
Buntrock--40,352 (held by spouse); Mr. Girsch--27,050 (held by spouse); Mr.
Huizenga--680,778 (held by spouse directly and as trustee); Mr. Koenig--30
(held by spouse); and Mr. Rooney--106,450 (held directly by adult child and
by spouse directly and as trustee for children). Additionally, ownership of
shares shown for Mr. Koenig includes 1,200 shares held by him as trustee of
a family trust in which he has no pecuniary interest. Such persons and the
members of such group disclaim any beneficial ownership of such shares.
(2) The numbers and percentages of shares as shown in the table are based on
the assumption that currently outstanding stock options granted by the
Company and exercisable within 60 days of October 15, 1994 had been
exercised as follows: Mr. Buntrock--296,532; Mr. Flynn--29,893; Mr.
Girsch--68,365; Mr. Koenig--56,215; Mr. Payne--71,739; Mr. Rooney--223,311;
and Mr. Banks--3,616. Such persons disclaim any beneficial ownership of the
shares subject to such options.
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<PAGE>
OWNERSHIP OF CWM SHARES
By the Company, Certain Plans and Its Directors and Executive Officers
The following table sets forth certain information as of October 15, 1994 as
to the beneficial ownership of CWM Shares by the Company, certain plans and by
the directors, the Chairman of the Board and Chief Executive Officer and the
four other most highly compensated executive officers of the Company as of
December 31, 1993, by each of two individuals who ceased to be executive
officers of the Company during 1993 but whose reportable salary and bonus would
have placed them in the group of the four other most highly compensated
executive officers of the Company, and by all directors and persons serving as
executive officers of the Company and such two individuals as a group:
<TABLE>
<CAPTION>
NUMBER OF CWM PERCENT OF
SHARES BENEFICIALLY OUTSTANDING
NAME OWNED(1)(2)(3) CWM SHARES(2)(3)
---- ------------------- ----------------
<S> <C> <C>
WMX Technologies, Inc..................... 164,278,417 78.6%
3003 Butterfield Road
Oak Brook, Illinois 60521
WMX Technologies, Inc. Profit Sharing and
Savings Plan (the "Profit Sharing Plan"). 922,392 *
Dean L. Buntrock.......................... 630,305 *
Phillip B. Rooney......................... 640,419 *
H. Jesse Arnelle.......................... 0 *
Howard H. Baker, Jr....................... 0 *
Pastora San Juan Cafferty................. 0 *
Jerry E. Dempsey.......................... 400,934 *
Donald F. Flynn........................... 163,384 *
Peter H. Huizenga......................... 0 *
Peer Pedersen............................. 40,000 *
James R. Peterson......................... 5,200 *
Alexander B. Trowbridge................... 1,000 *
James E. Koenig........................... 47,422 *
J. Steven Bergerson....................... 900 *
Thomas C. Hau............................. 45 *
William P. Hulligan....................... 10,190 *
D. P. Payne............................... 162,484 *
All directors and executive officers as a
group including
individuals named above (18 persons)..... 2,102,383 1.0
</TABLE>
- --------
*Less than 1 percent.
(1) Directors and executive officers included in the group have sole voting
power and sole investment power over CWM Shares listed, except (i) CWM
Shares covered by options exercisable within 60 days of October 15, 1994;
(ii) CWM Shares held pursuant to the Company's Profit Sharing and Savings
Plan; and (iii) Mr. Trowbridge, and all executive officers and directors as
a group (including Mr. Trowbridge), who have shared voting and investment
power over 1,000 and 1,100 CWM Shares, respectively. Such CWM Shares shown
for Mr. Trowbridge are held jointly with his spouse. Ownership of CWM
Shares shown for Messrs. Bergerson and Dempsey includes CWM 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. CWM Shares were
held by or for the benefit of such spouses or children of the following
persons at October 15, 1994, in the amounts indicated: Mr. Bergerson--900
(held by children); and Mr. Dempsey--2,000 (held by spouse). Each of the
above named persons disclaim any beneficial ownership of such shares.
69
<PAGE>
(2) Except for the CWM Shares shown for the Company, the numbers and
percentages above exclude an aggregate of 164,278,417 CWM Shares
beneficially owned by the Company that may be deemed to be beneficially
owned by Messrs. Buntrock and Rooney because each such person may be deemed
to be an affiliate of the Company. Each such person disclaims any
beneficial ownership of such CWM Shares.
(3) The numbers and percentages of CWM Shares shown in the table above are
based on the assumption that currently outstanding stock options covering
CWM Shares which were exercisable within 60 days of October 15, 1994 had
been exercised as follows: Mr. Buntrock--358,371; Mr. Dempsey--295,649; Mr.
Flynn--163,384; Mr. Koenig--47,422; Mr. Payne--162,484; Mr. Rooney--
529,265; and all executive officers and directors as a group (including
such individuals)--1,556,575. Such persons and the members of such group
disclaim any beneficial ownership of the CWM Shares subject to such
options.
By CWM Directors and Executive Officers
The following table sets forth certain information as of October 15, 1994 as
to the beneficial ownership of CWM Shares by the directors of CWM, the
President and Chief Executive Officer and the four other most highly
compensated executive officers of CWM as of December 31, 1993, and all
directors and persons serving as executive officers of CWM as a group:
<TABLE>
<CAPTION>
NUMBER OF CWM SHARES PERCENT OF OUTSTANDING
NAME BENEFICIALLY OWNED(1)(2)(3) CWM SHARES(2)(3)
- ---- --------------------------- ----------------------
<S> <C> <C>
Dean L. Buntrock............ 630,305 *
James B. Edwards............ 21,400 *
Donald F. Flynn............. 163,384 *
Jerome D. Girsch............ 26,593 *
Kay Hahn Harrell............ 5,000 *
Peter H. Huizenga........... 0 *
James E. Koenig............. 47,422 *
D. P. Payne................. 162,484 *
Peer Pedersen............... 40,000 *
Phillip B. Rooney........... 640,419 *
James T. Banks.............. 6,583 *
Rodger D. Henson............ 58,308 *
Richard C. Scherr........... 10,024 *
All directors and executive
officers as a group
including persons named
above (14 persons)......... 1,819,354 *
</TABLE>
- --------
*Less than one percent
(1) The above persons and members of such group have sole voting power and sole
investment power over shares listed, except for (i) shares covered by
options granted under CWM's stock option plans which were exercisable
within 60 days of October 15, 1994; and (ii) shares held pursuant to the
Company's Profit Sharing and Savings Plan. Ownership of shares shown for
Dr. Edwards includes 400 CWM Shares not held directly by him but held by
his spouse, as to which he has neither investment power nor voting power.
Dr. Edwards disclaims any beneficial ownership of such shares.
(2) Excludes 164,278,417 shares beneficially owned by the Company that may be
deemed to be beneficially owned by Messrs. Buntrock and Rooney because each
such person may be deemed to be an affiliate of the Company. Each such
person disclaims beneficial ownership of such shares.
(3) The numbers and percentages of shares shown in the table are based on the
assumption that currently outstanding stock options which were exercisable
within 60 days of October 15, 1994 had been exercised as follows: Mr.
Buntrock--358,371; Dr. Edwards--20,000; Mr. Flynn--163,384; Mr. Girsch--
19,593; Ms. Harrell--4,000; Mr. Koenig--47,422; Mr. Payne--162,484; Mr.
Rooney--529,265; Mr. Banks--6,583; Mr. Henson--58,308; Mr. Scherr--8,524;
and all executive officers and directors as a group (including such
individuals)--1,385,366. Such persons and the members of such group
disclaim any beneficial ownership of the shares subject to such options.
70
<PAGE>
Sales of CWM Shares subsequent to October 15, 1994 were made in broker
transactions on the NYSE by the persons, at the prices, on the dates and in the
amounts indicated as follows:
<TABLE>
<CAPTION>
PRICE PER NUMBER OF
NAME CWM SHARE DATE CWM SHARES
- ---- --------- ------------------- ----------
<S> <C> <C> <C>
J. Steven Bergerson.................. $ 9.50 October 19, 1994 900(1)
Jerry E. Dempsey..................... 9.50 October 21, 1994 10,000
9.625 October 24, 1994 30,000
9.625 October 26, 1994 3,600
9.50 October 31, 1994 10,000
9.50 November 1, 1994 5,000
Phillip B. Rooney.................... 9.50 October 20, 1994 109,916
9.375 October 20, 1994 1,238
Profit Sharing Plan.................. 7.75-9.50 October 17-31, 1994 86,500
</TABLE>
- --------
(1)CWM Shares formerly held by Mr. Bergerson's children.
OWNERSHIP OF WTI COMMON STOCK BY COMPANY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of October 15, 1994 as
to the beneficial ownership of WTI common stock by the directors, the Chairman
of the Board and Chief Executive Officer and the four other most highly
compensated executive officers of the Company as of December 31, 1993, by each
of two individuals who ceased to be executive officers of the Company during
1993 but whose reportable salary and bonus would have placed them in the group
of the four other most highly compensated executive officers of the Company,
and by all directors and persons serving as executive officers of the Company
and such two individuals as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF WTI COMMON PERCENT OF
STOCK BENEFICIALLY WTI COMMON
NAME OWNED(1)(2)(3) STOCK(2)(3)
- ---- ------------------ -----------
<S> <C> <C>
Dean L. Buntrock........ 135,000 *
Phillip B. Rooney....... 274,769 *
H. Jesse Arnelle........ 0 *
Howard H. Baker, Jr..... 0 *
Pastora San Juan
Cafferty............... 0 *
Jerry E. Dempsey........ 34,336 *
Donald F. Flynn......... 45,245 *
Peter H. Huizenga....... 0 *
Peer Pedersen........... 0 *
James R. Peterson....... 0 *
Alexander B. Trowbridge. 0 *
James E. Koenig......... 121,500 *
J. Steven Bergerson..... 0 *
Thomas C. Hau........... 0 *
William P. Hulligan..... 0 *
D. P. Payne............. 0 *
All directors and
executive officers as a
group
including persons named
above (18 persons)..... 851,050 *
</TABLE>
- --------
* Less than 1 percent.
(1) Directors and executive officers included in the 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 October 15, 1994;
(ii) all executive officers and directors as a group, who have shared
voting and investment power over a total of 200 WTI shares; and (iii)
10,000 WTI shares deemed to be beneficially owned by each of Messrs.
Buntrock, Flynn and Rooney as a result of restricted units granted pursuant
to WTI's Restricted Unit Plan for Non-Employee Directors. Such persons
disclaim any beneficial ownership of the WTI shares subject to such
restricted units.
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<PAGE>
(2) Excludes an aggregate of 104,621,810 WTI shares beneficially owned by the
Company that may be deemed beneficially owned by Messrs. Buntrock and
Rooney because each such person may be deemed to be an affiliate of the
Company. Excludes an aggregate of 1,025,724 WTI shares beneficially owned
by CWM that may be deemed beneficially owned by Messrs. Koenig and Payne
because each such person may be deemed to be an affiliate of CWM. Each such
person disclaims any beneficial ownership of such WTI shares.
(3) The numbers and percentages of WTI shares shown in the table above are
based on the assumption that currently outstanding stock options covering
WTI shares which were exercisable within 60 days of October 15, 1994 had
been exercised as follows: Mr. Buntrock--33,336; Mr. Koenig--120,000; and
all executive officers and directors as a group (including such
individuals)--393,336. Such persons and the members of such group disclaim
any beneficial ownership of the shares subject to such options.
OWNERSHIP OF RUST COMMON STOCK
By Company Directors and Executive Officers
The following table sets forth certain information as of October 15, 1994 as
to the beneficial ownership of Rust common stock by the directors, the Chairman
of the Board and Chief Executive Officer and the four other most highly
compensated executive officers of the Company as of December 31, 1993, by each
of two individuals who ceased to be executive officers of the Company during
1993 but whose reportable salary and bonus would have placed them in the group
of the four other most highly compensated executive officers of the Company,
and by all directors and persons serving as executive officers of the Company
and such two individuals as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF RUST COMMON PERCENT OF
STOCK BENEFICIALLY RUST COMMON
NAME OWNED(1)(2)(3) STOCK(2)(3)
- ---- ------------------ -----------
<S> <C> <C>
Dean L. Buntrock........ 15,000 *
Phillip B. Rooney....... 60,010 *
H. Jesse Arnelle........ 0 *
Howard H. Baker, Jr..... 0 *
Pastora San Juan
Cafferty............... 0 *
Jerry E. Dempsey........ 0 *
Donald F. Flynn......... 0 *
Peter H. Huizenga....... 0 *
Peer Pedersen........... 0 *
James R. Peterson....... 0 *
Alexander B. Trowbridge. 0 *
James E. Koenig......... 5,084 *
J. Steven Bergerson..... 0 *
Thomas C. Hau........... 0 *
William P. Hulligan..... 0 *
D. P. Payne............. 8,000 *
All directors and
executive officers as a
group
including persons named
above (18 persons)..... 95,162 *
</TABLE>
- --------
*Less than 1 percent.
(1) Directors and executive officers included in the group have sole voting
power and sole investment power over Rust shares listed, except (i) Rust
shares covered by options exercisable within 60 days of October 15, 1994;
and (ii) all executive officers and directors as a group, who have shared
voting and investment power over a total of 400 Rust shares.
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<PAGE>
(2) Excludes an aggregate of 79,898,091 Rust shares beneficially owned by the
Company that may be deemed beneficially owned by Messrs. Buntrock and
Rooney because each such person may be deemed to be an affiliate of the
Company. Excludes an aggregate of 46,682,031 Rust shares beneficially owned
by CWM that may be deemed beneficially owned by Messrs. Koenig and Payne
because each such person may be deemed to be an affiliate of CWM, and
excludes an aggregate of 33,216,060 Rust shares beneficially owned by WTI
that may be deemed beneficially owned by Mr. Koenig because he may be
deemed to be an affiliate of WTI. Each such person disclaims any beneficial
ownership of such Rust shares.
(3) The numbers and percentages of Rust shares shown in the table above are
based on the assumption that currently outstanding stock options covering
Rust shares which were exercisable within 60 days of October 15, 1994 had
been exercised as follows: Mr. Koenig--3,334; Mr. Payne--8,000; Mr.
Rooney-- 50,010; and all executive officers and directors as a group
(including such individuals)--68,012. Such persons and members of such
group disclaim any beneficial ownership of the shares subject to such
options.
By CWM Directors and Executive Officers
The following table sets forth certain information as of October 15, 1994 as
to the beneficial ownership of common stock of Rust by the directors of CWM,
the President and Chief Executive Officer and the four other most highly
compensated executive officers of CWM as of December 31, 1993, and all
directors and persons serving as executive officers of CWM as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF RUST COMMON PERCENT OF
STOCK BENEFICIALLY RUST COMMON
NAME OWNED(1)(2) STOCK(2)
- ---- ------------------ -----------
<S> <C> <C>
Dean L. Buntrock........ 15,000 *
James B. Edwards........ 0 *
Donald F. Flynn......... 0 *
Jerome D. Girsch........ 0 *
Kay Hahn Harrell........ 0 *
Peter H. Huizenga....... 0 *
James E. Koenig......... 5,084 *
D. P. Payne............. 8,000 *
Peer Pedersen........... 0 *
Phillip B. Rooney....... 60,010 *
James T. Banks.......... 0 *
Rodger D. Henson........ 0 *
Richard C. Scherr....... 0 *
All directors and
executive officers as a
group
including persons named
above (14 persons)..... 88,094 *
</TABLE>
- --------
* Less than one percent
(1) The above named persons and members of such group have sole voting power
and sole investment power over shares listed, except for Rust shares
covered by options exercisable within 60 days of October 15, 1994. The
table excludes 46,682,031 shares beneficially owned by CWM that may be
deemed to be beneficially owned by Messrs. Buntrock, Girsch, Koenig, Payne
and Rooney because each such person may be deemed to be an affiliate of
CWM. Each such person disclaims any beneficial ownership of such shares.
(2) The numbers and percentages of shares shown in the table are based on the
assumption that currently outstanding stock options granted by Rust and
exercisable within 60 days of October 15, 1994 had been exercised as
follows: Mr. Koenig--3,334; Mr. Payne--8,000; Mr. Rooney--50,010. Such
persons disclaim any beneficial ownership of the shares subject to such
options.
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<PAGE>
OWNERSHIP OF WASTE MANAGEMENT INTERNATIONAL ORDINARY SHARES BY COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of October 15, 1994 as
to the beneficial ownership of Waste Management International ordinary shares
(including ordinary shares represented by American Depositary Shares) by the
directors, the Chairman of the Board and Chief Executive Officer and the four
other most highly compensated executive officers of the Company as of December
31, 1993, by each of two individuals who ceased to be executive officers of the
Company during 1993 but whose reportable salary and bonus would have placed
them in the group of the four other most highly compensated executive officers
of the Company, and by all directors and persons serving as executive officers
of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF
WASTE MANAGEMENT INTERNATIONAL PERCENT OF
ORDINARY SHARES BENEFICIALLY WASTE MANAGEMENT INTERNATIONAL
NAME OWNED(1)(2)(3) ORDINARY SHARES(2)(3)
---- ------------------------------ ------------------------------
<S> <C> <C>
Dean L. Buntrock........ 156,534 *
Phillip B. Rooney....... 153,334 *
H. Jesse Arnelle........ 0 *
Howard H. Baker, Jr..... 1,000 *
Pastora San Juan
Cafferty............... 0 *
Jerry E. Dempsey........ 2,000 *
Donald F. Flynn......... 233,334 *
Peter H. Huizenga....... 550,000 *
Peer Pedersen........... 10,000 *
James R. Peterson....... 0 *
Alexander B. Trowbridge. 600 *
James E. Koenig......... 70,667 *
J. Steven Bergerson..... 0 *
Thomas C. Hau........... 26,667 *
William P. Hulligan..... 20,000 *
D. P. Payne............. 1,000 *
All directors and
executive officers as a
group including persons
named above (18
persons)............... 1,252,803 *
</TABLE>
- --------
* Less than 1 percent.
(1) Directors and executive officers included in the group have sole voting
power and sole investment power over Waste Management International shares
listed, except (i) Waste Management International shares covered by options
exercisable within 60 days of October 15, 1994; and (ii) Messrs. Payne and
Trowbridge, and all executive officers and directors as a group (including
such individuals), who have shared voting and investment power over 1,000,
600 and 2,600 Waste Management International shares, respectively. Such
Waste Management International shares shown for Messrs. Payne and
Trowbridge are held jointly with their respective spouses. Ownership of
shares shown for Messrs. Buntrock, Dempsey and Huizenga includes Waste
Management International shares not held directly by them but held by or
for the benefit of (i) their spouses or (ii) their minor children, as to
which they have neither investment power nor voting power. Waste Management
International shares were held by or for the benefit of such spouses or
children of the following persons at October 15, 1994 in the amounts
indicated: Mr. Buntrock--3,000 (held by spouse); Mr Dempsey--2,000 (held by
spouse) and Mr. Huizenga--30,000 (held by spouse). Each of the above named
persons disclaim any beneficial ownership of such shares.
(2) Excludes an aggregate of 300,000,000 Waste Management International shares
beneficially owned by the Company that may be deemed beneficially owned by
Messrs. Buntrock and Rooney because each such person may be deemed to be an
affiliate of the Company. Excludes an aggregate of 90,000,000 Waste
Management International shares beneficially owned by WTI and Rust that may
be deemed beneficially owned by Mr. Koenig because he may be deemed to be
an affiliate of WTI and Rust. Each such person disclaims any beneficial
ownership of such Waste Management International shares.
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<PAGE>
(3) The numbers and percentages of Waste Management International shares shown
in the table above are based on the assumption that currently outstanding
stock options covering Waste Management International shares which were
exercisable within 60 days of October 15, 1994 had been exercised as
follows: Messrs. Buntrock, Flynn and Rooney--133,334 each; Mr. Hau--26,667;
Mr. Koenig--66,667 and all executive officers and directors as a group
(including such individuals)--520,003. Such persons and members of such
group disclaim any beneficial ownership of the shares subject to such
options.
COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
The Company and CWM are both Delaware corporations and thus the differences
in the rights of the Company stockholders and CWM stockholders are due to their
certificates of incorporation, their By-Laws and the Rights Agreement (the
"Rights Agreement") between the Company and Harris Trust and Savings Bank, as
Rights Agent. The following is a brief summary of the more significant of these
differences. Such summary is qualified in its entirety by reference to the
Company's Restated Certificate of Incorporation, as amended (the "Company
Certificate"), the Company's By-Laws (the "Company By-Laws") and the Rights
Agreement, which have been incorporated by reference as exhibits to the
Registration Statement, and CWM's Certificate of Incorporation (the "CWM
Certificate") and CWM's By-Laws (the "CWM By-Laws"), which are incorporated by
reference into CWM's 1993 Form 10-K Report. In addition, the Board of Directors
of the Company has adopted a policy providing that the Company shall not,
without further stockholder approval, issue for cash voting stock or securities
convertible into voting stock of the Company having a vote in excess of 10% of
the vote represented by all voting stock immediately subsequent to such
issuance to any person, entity or group, which issuance is made (a) in response
to a pending or threatened unsolicited attempt to acquire all of the shares of
the Company which acquisition attempt is not recommended to stockholders of the
Company by the Board or (b) to an employee stock ownership plan for the purpose
of deterring unsolicited attempts to acquire all of the shares of the Company
which are not yet pending or threatened. The policy does not prohibit any
issuance of voting stock pursuant to the Rights Agreement adopted by the
Company in 1987 and the policy is subject to the continuing fiduciary duties of
the Board to the stockholders of the Company.
AUTHORIZED CAPITAL
The total number of shares of all classes of stock authorized to be issued by
CWM is 550 million shares, of which 50 million shares shall be preferred stock
and 500 million shares shall be common stock, and the total number of shares of
all classes of stock authorized to be issued by the Company is 1.55 billion
shares, of which 50 million shares shall be preferred stock and 1.5 billion
shares shall be common stock.
CLASSIFIED BOARD OF DIRECTORS
The CWM Certificate and the Company Certificate each provide that their
respective Boards of Directors are divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of
each of the CWM and the Company boards are elected each year.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
The CWM Certificate and the Company Certificate each provides that the number
of directors is fixed by the companies' respective By-Laws (subject to the
limits set forth in their respective certificates of incorporation), and the
respective Certificates and By-Laws further provide that vacancies and newly
created directorships shall be filled by a majority of directors then in
office, although less than a quorum, or by a sole remaining director; provided,
that under the By-Laws of each company, if the number of directors then in
office constitutes less than a majority of the whole board as constituted
immediately prior to such vacancies or newly created directorship, upon the
application of any stockholder or stockholders holding at least 10
75
<PAGE>
percent of the total number of shares outstanding having the right to vote for
such directors, the Court of Chancery of the State of Delaware may summarily
order an election to fill such vacancies or newly created directorship or to
replace the directors chosen by the directors then in office. In addition, each
of CWM and the Company has adopted Emergency By-Laws which provide that in the
event the Board of Directors should be unable to function by reason of
vacancies on the Board of Directors due to, among other things, death or
incapacity, an Emergency Management Committee, as appointed or consisting of
members chosen in a manner determined by, and to the extent authorized by, the
Board of Directors, shall have and may exercise the powers of the Board of
Directors and shall be deemed to constitute the Board of Directors until such
time as a Board of Directors has been elected by the companies' respective
stockholders and duly qualified.
The CWM Certificate and By-Laws and the Company Certificate and By-Laws each
provide that each director shall serve until the annual meeting of stockholders
in the year in which his or her term expires and his or her successor is duly
elected and qualified, subject to his or her prior death, retirement,
resignation or removal for cause.
NO COMPANY STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
Unlike the CWM Certificate, the Company Certificate provides that stockholder
action can be taken only at an annual or special meeting of stockholders and
specifically prohibits stockholder action by written consent in lieu of a
meeting.
The CWM Certificate and By-Laws and the Company Certificate and By-Laws
provide that a special meeting of stockholders may be called only by the
President or the Secretary or by resolution of the Board of Directors,
including a majority of the Continuing Directors (defined as each director who
was a member of the Board prior to the time a person became an Interested
Stockholder (as defined below) and who was not affiliated or associated with
such Interested Stockholder, or proposed for election as a director by or on
behalf of such Interested Stockholder, and any successor to such a Continuing
Director who is not affiliated or associated with the Interested Stockholder
and is recommended to succeed a Continuing Director by the majority of such
Continuing Directors) if at the time in question an Interested Stockholder
exists (defined in part as any person, other than (i) with respect to the
Company, the Company, or, with respect to CWM, CWM or the Company, (ii) their
respective subsidiaries or (iii) their respective employee benefit plans or any
trustee or fiduciary with respect to any such plans, which, together with
affiliates and associates, was the beneficial holder of more than 5% of the
outstanding shares of common stock or was within the past two years the
beneficial holder of more than 5% of the outstanding shares of common stock.)
The Company Certificate and By-Laws also permit the Chairman of the Board of
Directors to call a special meeting. Both the Company By-Laws and the CWM By-
Laws provide that the business to be transacted at any special meeting shall be
limited to the purposes specified in the notice of meeting.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND STOCKHOLDER NOMINATIONS
OF DIRECTORS
The CWM By-Laws and the Company By-Laws each establish an advance notice
procedure with regard to the nomination, other than by the Board of Directors
or a committee thereof, of candidates for election as directors (the
"Nomination Procedure") and with regard to certain matters to be brought before
an annual meeting of stockholders (the "Business Procedure").
The Business Procedure provides that at an annual meeting, subject to any
other applicable requirements, only such business may be conducted as has been
brought before the meeting by, or at the direction of, the Board of Directors
or by a stockholder who has given timely prior written notice, in proper form,
to the Secretary. In all cases, to be timely, notice must be received not less
than 30 days nor more than 60 days prior to the meeting (or if fewer than 40
days' notice or prior public disclosure of the meeting date is given or made to
stockholders, not later than the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made). Under the Business Procedure, to be in proper form, notice relating
to the conduct of other business at an annual meeting must contain certain
76
<PAGE>
information about such business and about the stockholder who proposes to bring
such business before the meeting, including a brief description of the business
the stockholder proposes to bring before the meeting, the reasons for
conducting such business at such meeting, the name and address, as they appear
on the books of the corporation, of the stockholder proposing such business,
the class and number of shares owned by such stockholder as of the record date,
and any material interest of such stockholder in the business so proposed. If
the Chairman of the annual meeting determines that such other business was not
properly brought before such meeting in accordance with the Business Procedure,
such business will not be conducted at such meeting.
The Nominating Procedure provides that only persons who are nominated by, or
by a committee appointed by, the Board of Directors or by a stockholder who has
given timely prior written notice, in proper form, to the Secretary prior to
the meeting at which directors are to be elected, shall be eligible for
election as directors. In all cases, to be timely, notice must be received not
less than 30 days nor more than 60 days prior to the meeting (or if fewer than
40 days' notice or prior public disclosure of the meeting date is given or made
to stockholders, not later than the tenth day following the day on which such
notice was mailed or such public disclosure was made). Under the Nomination
Procedure, to be in proper form, notice from a stockholder who proposes to
nominate a person at a meeting for election as a director must contain certain
information about the proposed nominee, including age, business and residence
addresses, principal occupation, the class and number of shares of stock
beneficially owned and such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
proposed nominee, and certain information about the stockholder proposing to
nominate that person. Under the Nomination Procedure, any person nominated by
the Board of Directors or by a committee appointed by the Board may be
requested to furnish the information that would be required to be set forth in
a stockholder's notice of nomination with respect to such nominee. The Chairman
of the meeting may determine that a person was not nominated in accordance with
the Nomination Procedure, and that the defective nomination shall be
disregarded.
TRANSACTIONS WITH INTERESTED STOCKHOLDERS
Both CWM and the Company are governed by the provisions of Section 203 of the
DGCL ("Section 203"). Section 203 prevents an "Interested Stockholder" (defined
for purposes of Section 203 as a person beneficially owning 15% or more of a
corporation's voting stock) from engaging in a "Business Combination" (as
defined in Section 203) with a Delaware corporation for three years following
the date such person became an Interested Stockholder unless: (i) before such
person became an Interested Stockholder, the Board of Directors of the
corporation approved the transaction in which the Interested Stockholder became
an Interested Stockholder; (ii) upon consummation of the transaction which
resulted in the Interested Stockholder becoming an Interested Stockholder, the
Interested Stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers and employee stock ownership plans that
do not provide for confidential voting by plan participants); or (iii)
following the transaction in which such person became an Interested
Stockholder, the Business Combination is (x) approved by the Board of Directors
of the corporation and (y) authorized at a meeting of stockholders by the
affirmative vote of the holders of 66 2/3% of the outstanding voting stock of
the corporation not owned by the Interested Stockholder. Section 203 may impede
takeovers that in some circumstances might be beneficial to stockholders of the
Company.
The CWM Certificate and the Company Certificate each contain provisions which
prevent "greenmail" payments or the repurchase of any shares of common stock
from Interested Stockholders, as defined in the respective certificates, at a
price greater than the Fair Market Value of such shares (defined as the closing
sale price on the NYSE on the trading date immediately preceding the date in
question) and provisions which establish safeguards in connection with certain
Business Transactions with any Interested Stockholder, which Business
Transaction has not been approved by majority vote of the Continuing Directors
(generally, requiring approval of the holders of at least a majority of the
outstanding shares of common stock, other
77
<PAGE>
than common stock held by Interested Stockholders). Business Transaction is
generally defined as (a) any merger or consolidation of CWM or the Company,
respectively, with or into an Interested Stockholder, (b) any sale, lease or
other disposition of all or any "Substantial Portion" ($15,000,000) of assets
or securities of CWM or the Company, respectively, or any subsidiary thereof,
to or with an Interested Stockholder, (c) the issuance of any securities of the
Company or one of its subsidiaries to an Interested Stockholder, (d) any
recapitalization of CWM or the Company, respectively, the effect of which would
be to increase the voting power of an Interested Stockholder, (e) the adoption
of any plan for liquidation or dissolution of CWM or the Company, respectively,
proposed by or on behalf of an Interested Stockholder, and (f) any agreement,
contract or other arrangement providing for one or more of the actions
specified in the foregoing clauses (a) through (e).
AMENDMENT OF CERTAIN PROVISIONS OF THE CERTIFICATES
The CWM Certificate and the Company Certificate each contain provisions
requiring the affirmative vote of the holders of at least 80% of the common
stock to amend certain provisions of the Certificate (including the provisions
relating to the number, term, removal and classification of directors, the
calling of special meetings, prevention of "greenmail" payments and
transactions with Interested Stockholders).
COMPANY RIGHTS
In January 1987, the Company declared a dividend of one right (a "Right") for
each outstanding Company Share. Each Right entitles the registered holder to
purchase from the Company one four-hundredth of a share of Company Series A
Preferred Stock at a price of $68.75 (the "Exercise Price"), subject to
adjustment. The description and terms of the Rights are set forth in the Rights
Agreement.
The Rights are evidenced by and transferred with and only with the Company
Shares until the earlier to occur of (i) ten days following a public
announcement that a person or group, including any affiliates or associates of
such person or group, acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the Company's outstanding voting stock (such person
or group being hereinafter known as an "Acquiring Person") or (ii) ten days
following the commencement of, or first public announcement of the intent to
commence (which intent to commence is not withdrawn within five business days),
a tender offer or exchange offer if, upon consummation thereof, the offeror
would be the beneficial owner of 30% or more of the Company's outstanding
voting stock (the earlier of such dates being called the "Distribution Date").
As soon as practicable following the Distribution Date, separate certificates
evidencing the Rights will be mailed to holders of record of Company Shares as
of the close of business on the Distribution Date. The Rights are not
exercisable until the Distribution Date and will expire on February 6, 1997,
unless earlier redeemed by the Company as described below. The Exercise Price
payable per Right, and the number of Rights or the number of shares of Company
Series A Preferred Stock or other securities or property issuable upon exercise
of the Rights, are subject to adjustment in certain events from time to time to
prevent dilution. Each Company Share issued upon conversion of any Note while
the Rights Agreement is in effect will also automatically have attached to it
one Right.
Preferred Stock purchasable upon exercise of the Rights will be
nonredeemable. Each share of Company Series A Preferred Stock will have a
minimum preferential quarterly dividend rate of $5 per share, but will be
entitled to not less than an aggregate dividend of 400 times the dividend
declared on Company Shares. In the event of liquidation, the holders of the
Company Series A Preferred Stock will receive a preferential liquidation
payment equal to the greater of $100 or 400 times the payment made per Company
Share. Each share of Company Series A Preferred Stock will have 400 votes,
voting together with the Company Shares. In addition, the Company Series A
Preferred Stock contains class vote provisions paralleling the class vote
requirements for the Company's Shares which prevent "greenmail" payments by the
Company and establish safeguards in connection with certain business
transactions. Finally, in the event of any merger, consolidation or other
transaction in which outstanding Company Shares are exchanged, each share of
Company Series A
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<PAGE>
Preferred Stock will be entitled to receive 400 times the amount received per
Company Share. These rights are protected by customary antidilution provisions.
Because of the nature of the Company Series A Preferred Stock's dividend,
liquidation and voting rights, the value of one four-hundredth interest in a
share of Company Series A Preferred Stock purchasable upon exercise of each
Right is intended to approximate the value of one Company Share.
In the event that the Company is acquired in a merger or other business
combination transaction, or 50% or more of its assets or earning power are sold
in one transaction or a series of transactions, proper provision shall be made
so that each holder of a Right shall thereafter have the right to receive, upon
the exercise thereof at the then current Exercise Price of the Right, that
number of shares of common stock of the acquiring company (or, in the event
there is more than one acquiring company, the acquiring company receiving the
greatest portion of the assets or earning power transferred) which at the time
of such transaction would have a market value of two times the Exercise Price
of the Right. In the event that the Company is the surviving corporation in a
merger and the Company Shares are not changed or exchanged, or in the event
that an Acquiring Person engages in one of a number of self-dealing
transactions specified in the Rights Agreement, proper provision shall be made
so that each holder of a Right will thereafter have the right to receive, upon
exercise thereof at the then current Exercise Price, that number of shares of
Company Series A Preferred Stock having a market value of two times the
Exercise Price of the Right. Upon the occurrence of any of the transactions
referred to in this paragraph, any Rights that are or were at any time
beneficially owned by an Acquiring Person engaging in any of such transactions
or receiving the benefits thereof on or after the time the Acquiring Person
became such shall become void.
With certain exceptions, no adjustment in the Exercise Price will be required
until cumulative adjustments require an adjustment of at least 1% in such
Exercise Price. No fractional shares need be issued (other than fractions which
are integral multiples of one one-hundredth of a share of Company Series A
Preferred Stock) and, in lieu thereof, an adjustment in cash may be made based
on the market price of the Company Series A Preferred Stock on the last trading
day prior to the date of exercise.
At any time prior to ten days following a public announcement that an
Acquiring Person exists, the Company may redeem the Rights in whole, but not in
part, at a price of $.0125 per Right (the "Redemption Price"). Immediately upon
the action of the Board of Directors of the Company electing to redeem the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company as a result of the ownership of the Right,
including, without limitation, the right to vote or to receive dividends.
A copy of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement.
CWM does not have a rights agreement.
GENERAL ANTI-TAKEOVER EFFECTS
The foregoing Company and CWM "anti-takeover" provisions and, in the case of
the Company, the Rights issued pursuant to the Rights Agreement, together with,
in the case of CWM, the approximately 78.6% ownership position of the Company
before the Merger, may impede or, in the case of CWM before the Merger, prevent
takeovers that in some circumstances might be beneficial to the Company and CWM
stockholders. Such provisions, Rights and ownership position would not impede
or prohibit most takeovers approved by existing directors, and such provisions
and Rights are designed to enhance or have the effect of enhancing the ability
of the Board of Directors, and ultimately the stockholders, to negotiate with
potential acquirers from the strongest position. Such provisions, Rights and
ownership position do, however, have the
79
<PAGE>
overall effect of making it more difficult in the case of the Company and
virtually impossible in the case of CWM without the approval of the directors
thereof to acquire and exercise control over the Company and CWM and to remove
incumbent officers and directors, thus providing such officers and directors
with enhanced ability to retain their positions. Such provisions might also
limit opportunities for stockholder participation in certain types of
transactions even though such transactions might be favored by a majority of
the stockholders.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the DGCL empowers corporations to indemnify, subject to the
standards set forth therein, any person in connection with any action, suit or
proceeding brought or threatened by reason of the fact that he or she is or was
serving as a director, officer, employee or agent of the corporation or is or
was serving as such with respect to another corporation at the request of such
corporation. The DGCL also provides that corporations may purchase
indemnification insurance on behalf of any such director, officer, employee or
agent. The Company Certificate and By-Laws and the CWM Certificate and By-Laws
each provide for the indemnification by the Company or CWM, as the case may be,
of each director, officer, employee or agent of the Company or CWM, as the case
may be, to the fullest extent permitted by the DGCL, except as to any action
brought by or on behalf of such person without prior approval of the board of
directors of CWM or the Company, as the case may be.
Section 102(b)(7) of the DGCL permits Delaware corporations to include in
their certificates of incorporation a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty of care as a director. The
Company Certificate and the CWM Certificate contain provisions which eliminate
the personal liability of the officers and directors of the Company and CWM in
certain circumstances.
Under an insurance policy maintained by the Company, the directors and
officers of the Company are insured, within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of certain claims, actions, suits or proceedings, which may be brought
against them by reason of being or having been such directors and officers.
CWM's officers and directors are covered by insurance policies providing them
(and their heirs and other legal representatives) with coverage against certain
liabilities arising from any negligent act, omission or breach of duty claimed
against them by reason of their being officers and directors of CWM. The
Company has agreed to maintain the above-described indemnification rights and
insurance for directors and officers of CWM pursuant to the Merger Agreement.
See "The Merger Agreement--Covenants."
EXPERTS
The audited Consolidated Financial Statements and Schedules of the Company
and subsidiaries and CWM and subsidiaries for the year ended December 31, 1993,
incorporated by reference in this Proxy Statement-Prospectus, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in auditing and accounting
in giving said reports. Reference is made to the reports of Arthur Andersen LLP
on such financial statements, which include an explanatory paragraph with
respect to the Company's and CWM's change in its methods of accounting for
income taxes and postretirement benefits other than pensions, effective January
1, 1992, as discussed in notes 1 and 9 to the Company's Consolidated Financial
Statements and notes 3 and 14 to CWM's Consolidated Financial Statements
incorporated by reference into this Proxy Statement-Prospectus.
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LEGAL MATTERS
The validity under the DGCL of the Notes to be issued in the Merger and
certain other matters, including the tax consequences of the Merger, will be
passed upon for the Company by Bell, Boyd & Lloyd, Chicago, Illinois. At
October 31, 1994, partners and associates of Bell, Boyd & Lloyd had an
approximate aggregate beneficial ownership or interest in 4,577 Company Shares,
1,600 CWM Shares, 428 shares of WTI's common stock, 8,700 Waste Management
International American Depositary Shares (each of which represents two ordinary
shares of Waste Management International) and 1,000 shares of Rust's common
stock, including shares owned by their spouses, minor children and relatives
living in their households.
PROPOSALS BY CWM STOCKHOLDERS
If the Merger is consummated, there will be no public stockholders of CWM and
no public participation in any future CWM stockholders meeting. However, if the
Merger is not consummated, CWM's public stockholders will continue to be
entitled to attend and participate in CWM stockholder meetings. If the Merger
is not consummated, any proposals by stockholders intended to be presented at
the 1995 annual meeting must have been received by CWM no later than November
30, 1994 in order to be considered by the Board of Directors for inclusion in
CWM's 1995 proxy statement. In order for a stockholder to nominate a candidate
for director, under CWM's By-Laws, timely notice of the nomination must be
received by CWM 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 CWM
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 CWM 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 CWM's 1995 proxy statement.
In each case, the notice must be given to the Secretary of CWM, whose address
is 3001 Butterfield Road, Oak Brook, Illinois 60521. Any stockholder desiring a
copy of CWM's By-Laws will be furnished one without charge upon written request
of the Secretary.
INCORPORATION OF SUBSEQUENTLY FILED DOCUMENTS
In addition to all other documents incorporated by reference in this Proxy
Statement-Prospectus (see "Documents Incorporated by Reference"), all documents
filed by CWM and the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Proxy Statement-Prospectus and prior to
the date of the Special Meeting (or any adjournment or postponement thereof)
shall be deemed to be incorporated in this Proxy Statement-Prospectus by
reference and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes
of this Proxy Statement-Prospectus to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement-
Prospectus.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WMX TECHNOLOGIES, INC.,
WMX MERGER SUB, INC.
AND
CHEMICAL WASTE MANAGEMENT, INC.
OCTOBER 14, 1994
AS AMENDED AND RESTATED
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLES PAGE
- -------- ----
<S> <C>
RECITALS.................................................................. A-1
I THE MERGER; EFFECTIVE TIME; CLOSING................................. A-1
1.1 The Merger.......................................................... A-1
1.2 Effective Time...................................................... A-1
1.3 Closing............................................................. A-1
II ARTICLES OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION.. A-1
2.1 Articles of Incorporation........................................... A-1
2.2 By-Laws............................................................. A-2
III DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION................. A-2
3.1 Directors........................................................... A-2
3.2 Officers............................................................ A-2
IV MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE
MERGER.............................................................. A-2
4.1 Merger Consideration; Conversion or Cancellation of Shares in the
Merger.............................................................. A-2
4.2 Payment for Shares in the Merger.................................... A-3
4.3 Fractional Notes.................................................... A-3
4.4 Transfer of Shares After the Effective Time......................... A-4
4.5 Stock Options....................................................... A-4
4.6 Liquid Yield OptionTM Notes due 2010................................ A-4
4.7 Dissenting Shares................................................... A-4
V REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... A-5
5.1 Corporate Organization and Qualification............................ A-5
5.2 Capitalization...................................................... A-5
5.3 Authority Relative to This Agreement................................ A-5
5.4 Consents and Approvals; No Violation................................ A-6
5.5 SEC Reports; Financial Statements................................... A-6
5.6 Absence of Certain Changes or Events................................ A-6
5.7 Undisclosed Liabilities............................................. A-6
5.8 Litigation.......................................................... A-7
5.9 S-4 Registration Statement; Schedule 13E-3; Proxy Statement/
Prospectus.......................................................... A-7
5.10 Environmental Laws and Regulations.................................. A-7
5.11 Compliance with Applicable Laws..................................... A-7
5.12 Opinion of Financial Advisor........................................ A-8
VI REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............. A-8
6.1 Corporate Organization and Qualification............................ A-8
6.2 Capitalization...................................................... A-8
6.3 Authority Relative to This Agreement................................ A-8
6.4 Consents and Approvals; No Violation................................ A-9
6.5 SEC Reports; Financial Statements................................... A-9
6.6 Absence of Certain Changes or Events................................ A-10
6.7 Undisclosed Liabilities............................................. A-10
6.8 Litigation.......................................................... A-10
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLES PAGE
- -------- ----
<S> <C>
6.9 S-4 Registration Statement; Schedule 13E-3; Proxy Statement/
Prospectus........................................................ A-10
6.10 Authorization for Notes and Parent Common Shares.................. A-10
6.11 Interim Operations of Merger Sub.................................. A-11
6.12 Environmental Laws and Regulations................................ A-11
6.13 Compliance with Applicable Laws................................... A-11
6.14 Ownership of Shares............................................... A-11
VII ADDITIONAL COVENANTS AND AGREEMENTS................................... A-11
7.1 Stockholders' Approval............................................ A-11
7.2 Registration Statement............................................ A-12
7.3 All Reasonable Efforts............................................ A-12
7.4 Access to Information............................................. A-12
7.5 Publicity......................................................... A-12
7.6 Indemnification of Officers and Directors......................... A-13
7.7 Blue Sky Permits.................................................. A-13
7.8 NYSE Listing...................................................... A-13
7.9 Conduct of Business of Merger Sub................................. A-14
7.10 Parent Common Shares.............................................. A-14
VIII CONDITIONS........................................................... A-14
8.1 Condition to Each Party's Obligations............................. A-14
8.2 Additional Conditions to the Obligations of Parent and Merger Sub. A-14
8.3 Additional Conditions to the Obligations of the Company........... A-15
IX TERMINATION........................................................... A-15
9.1 Termination by Mutual Consent..................................... A-15
9.2 Termination by Either Parent or the Company....................... A-15
9.3 Termination by Parent............................................. A-16
9.4 Termination by the Company........................................ A-16
9.5 Effect of Termination............................................. A-16
X MISCELLANEOUS AND GENERAL............................................. A-16
10.1 Payment of Expenses............................................... A-16
10.2 Survival of Representations and Warranties........................ A-16
10.3 Modification or Amendment......................................... A-17
10.4 Waiver of Conditions.............................................. A-17
10.5 Counterparts...................................................... A-17
10.6 Governing Law..................................................... A-17
10.7 Notices........................................................... A-17
10.8 Entire Agreement; Assignment...................................... A-18
10.9 Parties in Interest............................................... A-18
10.10 Certain Definitions............................................... A-18
10.11 Obligation of Parent.............................................. A-18
10.12 Validity.......................................................... A-18
10.13 Captions.......................................................... A-18
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Agreement"), dated as of October 14,
1994, by and among WMX Technologies, Inc., a Delaware corporation ("Parent"),
WMX Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Chemical Waste Management, Inc., a Delaware
corporation (the "Company").
RECITALS
Whereas, the Boards of Directors of Parent and Merger Sub each have
determined that it is in the best interests of their respective stockholders
for Merger Sub to merge with and into the Company upon the terms and subject to
the conditions of this Agreement; and
Whereas, the Board of Directors of the Company, based upon the unanimous
recommendation of a special committee of independent directors of the Company
(the "Special Committee"), has determined that it is in the best interests of
the Company's stockholders for Merger Sub to merge with and into the Company
upon the terms and subject to the conditions of this Agreement.
Now, Therefore, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, Parent,
Merger Sub and the Company hereby agree as follows:
ARTICLE I
The Merger; Effective Time; Closing
1.1 The Merger. Subject to the terms and conditions of this Agreement and the
Delaware General Corporation Law (the "DGCL"), at the Effective Time (as
defined in Section 1.2), the Company and Merger Sub shall consummate a merger
(the "Merger") in which (a) Merger Sub shall be merged with and into the
Company and the separate corporate existence of Merger Sub shall thereupon
cease, (b) the Company shall be the successor or surviving corporation in the
Merger and shall continue to be governed by the laws of the State of Delaware,
and (c) the separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. The corporation surviving the Merger is sometimes hereinafter referred
to as the "Surviving Corporation." The Merger shall have the effects set forth
in the DGCL.
1.2 Effective Time. Subject to the terms and conditions of this Agreement,
Parent, Merger Sub and the Company will cause an appropriate Certificate of
Merger (the "Certificate of Merger") to be executed and filed on the date of
the Closing (as defined in Section 1.3) (or on such other date as Parent and
the Company may agree) with the Secretary of State of the State of Delaware as
provided in the DGCL. The Merger shall become effective at the time and on the
date on which the Certificate of Merger has been duly filed with the Secretary
of State of the State of Delaware or such other time as is agreed upon by the
parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time."
1.3 Closing. The closing of the Merger (the "Closing") shall take place (a)
at the offices of WMX Technologies, Inc. in Oak Brook, Illinois at 10:00 a.m.
on the first business day following the date on which the last of the
conditions set forth in Article VIII hereof shall be fulfilled or waived in
accordance with this Agreement or (b) at such other place, time and date as
Parent and the Company may agree (the "Closing Date").
ARTICLE II
Articles of Incorporation and By-Laws of the Surviving Corporation
2.1 Articles of Incorporation. The Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, except that Article
I thereof shall be amended to read in its entirety as follows: "The name of the
Corporation is Chemical Waste Management, Inc."
A-1
<PAGE>
2.2 By-Laws. The By-Laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving Corporation.
ARTICLE III
Directors and Officers of The Surviving Corporation
3.1 Directors. The directors of Merger Sub at the Effective Time shall, from
and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
3.2 Officers. The officers of the Company at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
ARTICLE IV
Merger Consideration; Conversion or Cancellation of Shares in The Merger
4.1 Merger Consideration; Conversion or Cancellation of Shares in the Merger.
At the Effective Time, by virtue of the Merger and without any action on the
part of the holders of any shares (the "Shares") of common stock, $.01 par
value per share, of the Company (the "Company Common Stock") or capital stock
of Merger Sub:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares to be cancelled pursuant to Section 4.1(c) and any
Dissenting Shares (as hereinafter defined in Section 4.7)) shall be
converted into $12.33 principal amount at maturity of Convertible
Subordinated Notes of Parent ("Notes") having the principal terms (the
"Principal Terms") set forth in the term sheet attached hereto as Annex I
and such other customary terms as the parties hereto and their advisors
shall agree upon. The Notes shall be issued pursuant to an indenture (the
"Indenture") to be dated the Closing Date and to be entered into between
Parent and a trustee to be selected by Parent and reasonably satisfactory
to the Company. The Indenture shall contain the Principal Terms and shall
be satisfactory to the Company and the Special Committee.
(b) All Shares to be converted into Notes pursuant to this Section 4.1
shall cease to be outstanding, be cancelled and retired and cease to exist,
and each holder of a certificate representing any such Shares shall
thereafter cease to have any rights with respect thereto, except the right
to receive therefor, upon the surrender of such certificate in accordance
with Section 4.2, the amount of Notes specified above (the "Merger
Consideration") and cash in lieu of Fractional Notes (as hereinafter
defined in Section 4.3).
(c) At the Effective Time, each Share (other than the Parent Converted
Shares, as hereinafter defined in Section 10.10) issued and outstanding and
owned by Parent, Merger Sub or any direct or indirect wholly-owned
subsidiary of Parent (collectively, the "Parent Companies") or any of the
Company's direct or indirect wholly owned subsidiaries or treasury shares
held by the Company immediately prior to the Effective Time shall cease to
be outstanding, be cancelled and retired without payment of any
consideration therefor and cease to exist.
(d) At the Effective Time, each share of common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
A-2
<PAGE>
4.2 Payment for Shares in the Merger. The manner of making payment for Shares
in the Merger shall be as follows:
(a) As soon as reasonably practicable following the Effective Time,
Parent shall make available to Harris Trust and Savings Bank (the "Exchange
Agent"), or such other exchange agent selected by Parent and reasonably
acceptable to the Company for the benefit of the holders of Shares, a
sufficient number of certificates representing Notes required to effect the
delivery of the aggregate Merger Consideration and sufficient cash for
delivery in lieu of Fractional Notes pursuant to Section 4.3 (the
certificates representing Notes comprising such aggregate Merger
Consideration and cash in lieu of Fractional Notes being hereinafter
referred to as the "Merger Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Notes and cash in lieu of
Fractional Notes contemplated to be issued pursuant to Sections 4.1 and 4.3
out of the Merger Exchange Fund. The Merger Exchange Fund shall not be used
for any other purpose.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record (other than holders of
certificates of Shares referred to in Section 4.1(c) or Dissenting Shares)
of a certificate or certificates which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates") (i) a form of
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) and (ii) instructions
for use in effecting the surrender of the Certificates for payment
therefor. Upon surrender of Certificates for cancellation to the Exchange
Agent, together with such letter of transmittal duly executed and any other
required documents, the holder of such Certificates shall be entitled to
receive for each of the Shares represented by such Certificates the Merger
Consideration and any cash in lieu of Fractional Notes and the Certificates
so surrendered shall forthwith be cancelled. Until so surrendered, such
Certificates shall represent solely the right to receive the Merger
Consideration and any cash in lieu of Fractional Notes as contemplated by
Section 4.3 with respect to each of the Shares represented thereby. No
interest on the Notes will be paid to persons entitled by reason of the
Merger to receive Notes until such persons surrender their Certificates. As
soon as reasonably practicable following such surrender, there shall be
paid any interest on the Notes payable between the Effective Time and the
time of such surrender. If any certificate representing Notes is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of certificates for such Notes in a name
other than that of the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of Shares
for any Notes or interest thereon, or, in accordance with Section 4.3, cash
in lieu of Fractional Notes, delivered to a public official pursuant to
applicable escheat law.
(c) Any portion of the Merger Exchange Fund and any interest with respect
to Notes made available to the Exchange Agent which remains unclaimed by
the former stockholders of the Company for six months after the Effective
Time shall be delivered to Parent, upon demand of Parent, and any former
stockholders of the Company shall thereafter look only to Parent for
payment of their claim for the Merger Consideration for the Shares or for
cash in lieu of Fractional Notes.
4.3 Fractional Notes. Notes shall be issued only in denominations of $1,000
and integral multiples of $1,000. Holders of Shares will not be entitled to
receive Notes in principal amounts of less than $1,000, or in principal amounts
in excess of $1,000 (or an integral multiple of $1,000) but less than the next
highest multiple of $1,000 ("Fractional Notes"). Each holder of Shares shall be
entitled to receive in lieu of any Fractional Notes to which such holder
otherwise would have been entitled pursuant to Section 4.2 (after taking into
account all Shares then held of record by such holder) cash in an amount equal
to the product of (i) the number of Shares of such holder which otherwise would
have been converted into such Fractional
A-3
<PAGE>
Note and (ii) the average of the per share closing prices on the New York Stock
Exchange, Inc. (the "NYSE") of Shares (as reported in the NYSE Composite
Transactions) during the 10 consecutive trading days (the "Trading Period")
ending on the trading day prior to the Stockholder Meeting (as hereinafter
defined in Section 5.9) (the "Company Closing Price").
4.4 Transfer of Shares After the Effective Time. No transfers of Shares shall
be made on the stock transfer books of the Company after the close of business
on the day prior to the date of the Effective Time.
4.5 Stock Options.
(a) After the Effective Time, each option (an "Option") which has been
granted under the Company's 1986 Plan for Non-Employee Directors, 1986
Stock Option Plan, 1990 Service Shares Stock Option Plan, 1992 Stock Option
Plan and 1992 Stock Option Plan for Non-Employee Directors, in each case as
such plan has been amended (collectively, the "Option Plans"), and is
outstanding at the Effective Time, whether or not then exercisable, shall
be assumed by Parent and shall be deemed to constitute an option to
acquire, on the terms and conditions as were applicable under such Option,
that number of Parent Common Shares equal to the product of (i) that number
of Shares as the holder of such Option would have been entitled to receive
had such holder exercised such Option in full immediately prior to the
Effective Time (not taking into account whether such option was in fact
exercisable at such time) and (ii) the quotient derived by dividing the
Company Closing Price by the average of the per share closing prices on the
NYSE of Parent Common Shares (as defined below) (as reported in the NYSE
Composite Transactions) during the Trading Period, but rounded up to the
next whole number of Parent Common Shares, at a price per share equal to
(x) the aggregate exercise price for the Shares subject to such Option
divided by (y) the number of full Parent Common Shares deemed purchasable
pursuant to such Option. As soon as practicable after the Effective Time,
Parent shall deliver to each holder of an Option an appropriate notice
setting forth such holder's right to acquire Parent Common Shares and the
Option agreements of each such holder shall be deemed to be appropriately
amended so that such Options shall represent rights to acquire Parent
Common Shares on the same terms and conditions as contained in the
outstanding Options. "Parent Common Shares" shall mean shares of common
stock, $1.00 par value per share, of Parent, including the associated
rights (the "Parent Rights") to purchase shares of Series A Preferred Stock
of Parent, pursuant to the Rights Agreement, dated as of February 6, 1987,
as amended, between Parent and Harris Trust and Savings Bank, as Rights
Agent (the "Parent Rights Agreement").
(b) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of Parent Common Shares for delivery upon
exercise of the Options assumed in accordance with Section 4.5(a).
4.6 Liquid Yield Option(TM) Notes due 2010. From and after the Effective
Time, the Liquid Yield Option(TM) Notes due 2010 (the "Company LYONs") issued
by the Company which, as of the date hereof, are exchangeable for Shares, shall
be assumed by Parent and shall be convertible into Notes. The parties agree to
take all actions required in connection with the transactions contemplated by
this Agreement by the Indenture, dated as of August 1, 1990, by and between the
Company and Harris Trust and Savings Bank, as Trustee, including the execution
of a supplemental indenture.
4.7 Dissenting Shares.
(a) Notwithstanding any other provision of this Agreement to the
contrary, Shares that are outstanding immediately prior to the Effective
Time and which are held by stockholders who shall have not voted in favor
of the Merger or consented thereto in writing and who shall have demanded
properly in writing appraisal for such shares in accordance with DGCL
Section 262 and who shall not have withdrawn such demand or otherwise have
forfeited appraisal rights (collectively, the "Dissenting Shares") shall
not be converted into or represent the right to receive the Merger
Consideration. Such stockholders shall be entitled to receive payment of
the appraised value of such Shares held by them in
A-4
<PAGE>
accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or
who effectively shall have withdrawn or lost their rights to appraisal of
such Shares under such Section 262 shall thereupon be deemed to have been
converted into and to have become exchangeable, as of the Effective Time,
for the right to receive, without any interest thereon, the Merger
Consideration, upon surrender, in the manner provided in Section 4.2 of the
Certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to the DGCL and received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Parent, make any payment with
respect to any demands for appraisal, or offer to settle, or settle, any
such demands.
ARTICLE V
Representations and Warranties of the Company
The Company hereby represents and warrants to Parent and Merger Sub that:
5.1 Corporate Organization and Qualification. Each of the Company and its
Significant Subsidiaries (as hereinafter defined in Section 10.10) (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) is qualified and in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification and (iii) has all requisite power and authority to own its
properties and to carry on its business as it is now being conducted, except
where failure to so qualify, be in good standing or have such power and
authority would not, individually or in the aggregate, have a Material Adverse
Effect (as hereinafter defined in Section 10.10).
5.2 Capitalization. The authorized capital stock of the Company consists of
(i) 500,000,000 shares of Company Common Stock, of which, as of August 31,
1994, 209,143,793 Shares were issued and outstanding, and (ii) 50,000,000
shares of preferred stock, par value $.01 per share, of which, as of August 31,
1994, no shares were issued and outstanding. All of the outstanding Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
As of August 31, 1994, 8,631,386 Shares were reserved for issuance upon
exercise of outstanding Options pursuant to the Option Plans, and 3,910,561
Shares were reserved for issuance upon conversion of outstanding Company LYONs.
Except as set forth above and, except for Parent's option to acquire Shares
pursuant to Section 6.08 of the Intercorporate Agreement, dated as of September
3, 1986, by and between Parent and the Company, there are not as of the date
hereof any outstanding or authorized options, warrants, calls, rights
(including preemptive rights), commitments or any other agreements of any
character which the Company is a party to, or may be bound by, requiring it to
issue, transfer, sell, purchase, redeem or acquire any shares of capital stock
or any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for, any shares of capital stock of the Company.
5.3 Authority Relative to This Agreement. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than the approval of this Agreement and the Merger by the stockholders
of the Company in accordance with Section 251 of the DGCL, the Company's
Certificate of Incorporation and Section 8.1(a) hereof). This Agreement has
been duly and validly executed and delivered by the Company and, assuming this
Agreement constitutes the valid and binding agreement of Parent and Merger Sub,
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constitutes the valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except that the enforcement hereof
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
5.4 Consents and Approvals; No Violation. Neither the execution and delivery
of this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the Certificate of Incorporation or By-Laws of the Company;
(b) require of the Company or its subsidiaries any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) pursuant to the applicable requirements of
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder, (ii) the
filing of the Certificate of Merger pursuant to the DGCL, (iii) as may be
required by any applicable state securities or "blue sky" laws or state
takeover laws or (iv) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not,
individually or in the aggregate, have a Material Adverse Effect; (c) result in
a violation or breach of, or constitute a default under any of the terms,
conditions or provisions of any note, license, agreement or other instrument or
obligation to which the Company or any of its Significant Subsidiaries may be
bound, except for such violations, breaches and defaults as to which requisite
waivers or consents have been obtained or which would not, individually or in
the aggregate, have a Material Adverse Effect; or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or
any of its subsidiaries, except for violations which would not, individually or
in the aggregate, have a Material Adverse Effect.
5.5 SEC Reports; Financial Statements.
(a) The Company has filed all periodic reports required to be filed by it
since January 1, 1994 with the Securities and Exchange Commission (the
"SEC") pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which as of their respective dates complied
in all material respects with all applicable requirements of the Exchange
Act (collectively, the "Company SEC Reports"). None of the Company SEC
Reports, including, without limitation, any financial statements or
schedules included therein, as of their respective dates, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The consolidated financial statements (including the related notes
thereto) of the Company included in the Company SEC Reports complied in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with generally accepted accounting principles applied on a
basis consistent with prior periods (except as otherwise noted therein),
and present fairly the consolidated financial position of the Company and
its consolidated subsidiaries as of their respective dates, and the
consolidated results of their operations and cash flows for the periods
presented therein (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments).
5.6 Absence of Certain Changes or Events. Except as disclosed in the Company
SEC Reports filed prior to the date of this Agreement, as contemplated by this
Agreement or as otherwise known to Parent or Merger Sub at or prior to the date
of this Agreement, since June 30, 1994, the business of the Company has been
carried on only in the ordinary and usual course, and the Company has not
suffered any Material Adverse Effect.
5.7 Undisclosed Liabilities. Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement, as contemplated by this Agreement or
as otherwise known to Parent or Merger Sub at or prior to the date of this
Agreement, there are no liabilities or obligations of the Company or its
subsidiaries of any kind whatsoever, whether accrued, contingent, absolute or
otherwise, that would be required by
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generally accepted accounting principles to be reflected on a consolidated
balance sheet of the Company, other than liabilities or obligations (i)
incurred in the ordinary course of business consistent with past practice since
June 30, 1994 or (ii) which would not, individually or in the aggregate, have a
Material Adverse Effect.
5.8 Litigation. Except as disclosed in the Company SEC Reports filed prior to
the date of this Agreement or for any litigation relating to the transactions
contemplated by this Agreement, (i) there are no actions, claims, suits,
proceedings or governmental investigations pending or, to the knowledge of the
Company, threatened, involving or affecting Company or any of its subsidiaries
which, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect and (ii) there are no judgments, decrees, injunctions,
rules or orders of any court or governmental or regulatory authority applicable
to the Company or any of its subsidiaries, which, individually or in the
aggregate, would have a Material Adverse Effect.
5.9 S-4 Registration Statement; Schedule 13E-3; Proxy Statement/Prospectus.
None of the information to be supplied by and relating to the Company for
inclusion or incorporation by reference in the S-4 Registration Statement, the
Schedule 13E-3 or the Proxy Statement (as such terms are hereinafter defined in
Section 7.2) will (i) in the case of the S-4 Registration Statement, at the
time it becomes effective and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or (ii) in the case of the Schedule 13E-3 and the Proxy Statement,
at the time of the mailing of the Proxy Statement and at the time of the
stockholder meeting of the Company in connection with the vote of such
stockholders with respect to the Merger and this Agreement (the "Stockholder
Meeting"), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any event with
respect to the Company should occur which is required to be described in an
amendment of, or a supplement to, the Proxy Statement, the Schedule 13E-3 or
the S-4 Registration Statement, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as required
by law, disseminated to the stockholders of the Company. With respect to the
information relating to the Company, the Schedule 13E-3 and the Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act. For purposes of this Section 5.9, any statement which is made or
incorporated by reference in the Proxy Statement, the Schedule 13E-3 or the S-4
Registration Statement shall be deemed modified or superseded to the extent any
later filed document incorporated by reference in the Proxy Statement, the
Schedule 13E-3 or the S-4 Registration Statement or any statement included in
the Proxy Statement, the Schedule 13E-3 or the S-4 Registration Statement
modifies or supersedes such earlier statement.
5.10 Environmental Laws and Regulations. Except as set forth in the Company
SEC Reports filed prior to the date of this Agreement, (i) the Company and each
of its Significant Subsidiaries are in compliance with all applicable federal,
state and local laws and regulations relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), except for non-compliance that would not, individually
or in the aggregate, have a Material Adverse Effect, and (ii) neither the
Company nor any of its Significant Subsidiaries has received written notice of,
or, to the knowledge of the Company, is the subject of, any action, cause of
action, claim, investigation, demand or notice by any person or entity alleging
liability under or non-compliance with any Environmental Law (an "Environmental
Claim") which, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect.
5.11 Compliance with Applicable Laws. The Company and its subsidiaries hold
all permits, licenses, variances, exemptions, orders, franchises and approvals
of all governmental or regulatory authorities necessary for the lawful conduct
of its business, except where the failure to so hold would not, individually or
in the aggregate, have a Material Adverse Effect (the "Company Permits"). The
Company and its subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply would not, individually or in
the aggregate, have a Material Adverse Effect. Except as disclosed in the
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Company SEC Reports filed prior to the date of this Agreement, the business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental or regulatory authorities, except for possible
violations which, individually or in the aggregate, would not have a Material
Adverse Effect.
5.12 Opinion of Financial Advisor. The Special Committee has received the
opinion (the "Fairness Opinion") of CS First Boston Corporation ("CS First
Boston"), the Special Committee's financial advisor, dated the date of this
Agreement, to the effect that, as of such date, the consideration to be
received in the Merger is fair to the holders of Company Common Stock (other
than the Parent Companies) from a financial point of view.
ARTICLE VI
Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub represent and warrant, jointly and severally, to the
Company that:
6.1 Corporate Organization and Qualification. Each of Parent and its
Significant Subsidiaries and Merger Sub (i) is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation, (ii) is qualified and in good standing as a
foreign corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification and (iii)
has all requisite power and authority to own its properties and to carry on its
business as it is now being conducted, except where the failure to so qualify,
be in such good standing or have such power and authority would not,
individually or in the aggregate, have a Material Adverse Effect.
6.2 Capitalization. The authorized capital stock of Parent consists of (i)
1,500,000,000 Parent Common Shares of which, as of August 31, 1994, 483,812,769
were issued and outstanding and (ii) 50,000,000 shares of preferred stock, $1
par value per share (the "Parent Preferred Shares"), of which, as of August 31,
1994, none were issued and outstanding. All of the outstanding shares of
capital stock of Parent have been duly authorized and validly issued and are
fully paid and nonassessable. As of August 31, 1994, 14,595,105 Parent Common
Shares were reserved for issuance upon exercise of outstanding options under
Parent's 1982 Stock Option Plan, 1981 Stock Option Plan for Non-Employee
Directors, 1992 Stock Option Plan, 1992 Stock Option Plan for Non-Employee
Directors, Replacement Stock Option Plan and 1990 Service Shares Stock Option
Plan and the Modulaire Industries 1983 Amended Incentive Stock Option Plan, in
each case as such plan has been amended (collectively, the "Parent Option
Plans"), and 697,147 Parent Common Shares were reserved for issuance upon
conversion of Liquid Yield Option(TM) Notes due 2001. Except as set forth above
and for (i) put options, which obligate Parent to purchase not more than
9,000,000 Parent Common Shares, (ii) up to 10,085,883 Parent Common Shares
issuable in connection with acquisitions by Parent, (iii) the right of Parent
to acquire additional shares of Wheelabrator Technologies, Inc. ("WTI"), Waste
Management International plc ("WME") and the Company and of the Company and WTI
to acquire shares of Rust International Inc. ("Rust") and of Rust and WTI to
acquire shares of WME, (iv) the Parent Rights and (v) stock option plans of
subsidiaries of Parent, there are not, as of the date hereof, any outstanding
or authorized options, warrants, calls, rights (including preemptive rights),
commitments or any other agreements of any character which Parent or any of its
Significant Subsidiaries is a party to, or may be bound by, requiring it to
issue, transfer, sell, purchase, redeem or acquire any Parent Common Shares or
any shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock of Parent or any of its Significant Subsidiaries. The authorized
capital stock of Merger Sub consists of 1,000 shares of common stock, par value
$1.00 per share, all of which at the Effective Time will be validly issued,
fully paid and nonassessable and owned by Parent and any wholly-owned
subsidiary of Parent free and clear of all liens, charges, claims or
encumbrances.
6.3 Authority Relative to This Agreement. Each of Parent and Merger Sub has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
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hereby. This Agreement and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by the
respective Boards of Directors of Parent and Merger Sub and by Parent as sole
stockholder of Merger Sub, and no other corporate proceedings on the part of
Parent and Merger Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Merger Sub and,
assuming this Agreement constitutes the valid and binding agreement of the
Company, constitutes valid and binding agreements of each of Parent and Merger
Sub, enforceable against each of them in accordance with its terms, except that
the enforcement hereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or
in equity).
6.4 Consents and Approvals; No Violation. Neither the execution and delivery
of this Agreement by Parent or Merger Sub nor the consummation by Parent and
Merger Sub of the transactions contemplated hereby will (a) conflict with or
result in any breach of any provision of the Certificate of Incorporation or
the By-Laws, respectively, of Parent or Merger Sub; (b) require of Parent or
its subsidiaries (except the Company) any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except (i) pursuant to the applicable requirements of the Securities
Act, the Exchange Act and the Trust Indenture Act (as hereinafter defined in
Section 7.2) and the rules and regulations promulgated thereunder, (ii) the
filing of the Certificate of Merger pursuant to the DGCL, (iii) as may be
required by any applicable state securities or "blue sky" laws or state
takeover laws, (iv) filings with, and approval of, the NYSE or (v) where the
failure to obtain such consent, approval, authorization or permit, or to make
such filing or notification, would not, individually or in the aggregate, have
a Material Adverse Effect; (c) result in a violation or breach of, or
constitute a default under any of the terms, conditions or provisions of any
note, license, agreement or other instrument or obligation to which Parent or
any of its Significant Subsidiaries (other than the Company) may be bound,
except for such violations, breaches and defaults as to which requisite waivers
or consents have been obtained or which would not, individually or in the
aggregate, have a Material Adverse Effect; or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent or any of
its subsidiaries (other than the Company), except for violations which would
not, individually or in the aggregate, have a Material Adverse Effect.
6.5 SEC Reports; Financial Statements.
(a) Parent has filed all periodic reports required to be filed by it
since January 1, 1994 with the SEC pursuant to the federal securities laws
and the SEC rules and regulations thereunder, all of which as of their
respective dates complied in all material respects with all applicable
requirements of the Exchange Act (collectively, the "Parent SEC Reports").
Except with respect to information about the Company furnished by the
Company to Parent for inclusion in the Parent SEC Reports, none of the
Parent SEC Reports, including, without limitation, any financial statements
or schedules included therein, as of their respective dates, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The consolidated financial statements (including the related notes
thereto) of Parent included in the Parent SEC Reports complied in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with generally accepted accounting principles applied on a
basis consistent with prior periods (except as otherwise noted therein),
and (assuming that all information about the Company furnished by the
Company to Parent for inclusion in Parent's consolidated financial
statements is true and complete in all material respects) present fairly
the consolidated financial position of Parent and its consolidated
subsidiaries as of their respective dates, and the consolidated results of
their operations and cash flows for the periods presented therein (subject,
in the case of the unaudited interim financial statements, to normal year-
end adjustments).
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6.6 Absence of Certain Changes or Events. Except as disclosed in the Parent
SEC Reports filed prior to the date of this Agreement or as contemplated by
this Agreement, since June 30, 1994, the business of Parent has been carried on
only in the ordinary and usual course, and Parent has not suffered any Material
Adverse Effect.
6.7 Undisclosed Liabilities. Except as disclosed in the Parent SEC Reports
filed prior to the date of this Agreement or as contemplated by this Agreement,
there are no liabilities or obligations of Parent or its subsidiaries (except
for the Company and its subsidiaries) of any kind whatsoever, whether accrued,
contingent, absolute or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of
Parent, other than liabilities or obligations (i) incurred in the ordinary
course of business consistent with past practice since June 30, 1994 or (ii)
which would not, individually or in the aggregate, have a Material Adverse
Effect.
6.8 Litigation. Except as disclosed in the Parent SEC Reports filed prior to
the date of this Agreement or for any litigation relating to the transactions
contemplated by this Agreement, (i) there are no actions, claims, suits,
proceedings or governmental investigations pending or, to the knowledge of
Parent, threatened, involving or affecting Parent or any of its subsidiaries
(except for the Company and its subsidiaries) which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect and (ii)
there are no judgments, decrees, injunctions, rules or orders of any court or
governmental or regulatory authority applicable to Parent or any of its
subsidiaries (except for the Company and its subsidiaries) which would,
individually or in the aggregate, have a Material Adverse Effect.
6.9 S-4 Registration Statement; Schedule 13E-3; Proxy Statement/Prospectus.
None of the information to be supplied by Parent or Merger Sub for inclusion or
incorporation by reference in the S-4 Registration Statement, the Schedule 13E-
3 or the Proxy Statement (except for information about the Company furnished by
the Company to Parent) will (i) in the case of the S-4 Registration Statement,
at the time it becomes effective and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or (ii) in the case of the Schedule 13E-3 and the Proxy Statement,
at the time of the mailing of the Proxy Statement and at the time of the
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event with
respect to Parent, its officers and directors or any of its subsidiaries shall
occur which is required to be described in an amendment of, or a supplement to,
the Proxy Statement, the Schedule 13E-3 or the S-4 Registration Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
the Company. The Schedule 13E-3 and the Proxy Statement (except with respect to
information relating to the Company) will comply as to form in all material
respects with the provisions of the Exchange Act, and the S-4 Registration
Statement (except with respect to information relating to the Company) will
comply as to form in all material respects with the provisions of the
Securities Act. For purposes of this Section 6.9, any statement which is made
or incorporated by reference in the Proxy Statement, the Schedule 13E-3 or the
S-4 Registration Statement shall be deemed modified or superseded to the extent
any later filed document incorporated by reference in the Proxy Statement, the
Schedule 13E-3 or the S-4 Registration Statement or any statement included in
the Proxy Statement, the Schedule 13E-3 or the S-4 Registration Statement
modifies or supersedes such earlier statement.
6.10 Authorization for Notes and Parent Common Shares. Prior to the Effective
Time, Parent will have taken all necessary action to permit it to issue the
Notes and the Parent Common Shares issuable upon conversion of the Notes.
Parent Common Shares issued upon conversion of the Notes will, when issued, be
validly issued, fully paid and nonassessable and no person will have any
preemptive right of subscription or purchase in respect thereof. Such Parent
Common Shares will, when issued, be registered or exempt from registration
under the Securities Act and the Exchange Act and registered or exempt from
registration under any applicable state securities laws and will, when issued,
be listed on the NYSE, subject to notice of official
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issuance. At Closing, the Indenture will have been duly authorized and will be
the valid and binding obligation of Parent. The Notes, upon issuance pursuant
to the Indenture, will have been duly authorized and will be valid and binding
obligations of Parent entitled to the benefits of the Indenture.
6.11 Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not engaged
in any business activities or conducted any operations other than in connection
with the transactions contemplated hereby.
6.12 Environmental Laws and Regulations. As of the date of this Agreement,
except as set forth in the Parent SEC Reports filed prior to the date of this
Agreement, (i) Parent and each of its Significant Subsidiaries (other than the
Company) are in compliance with all Environmental Laws, except for non-
compliance that would not, individually or in the aggregate, have a Material
Adverse Effect and (ii) neither Parent nor any of its Significant Subsidiaries
(other than the Company) has received written notice of, or, to the knowledge
of Parent, is the subject of, any Environmental Claim which, individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect.
6.13 Compliance with Applicable Laws. Parent and its subsidiaries (other than
the Company) hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all governmental or regulatory authorities
necessary for the lawful conduct of their respective businesses, except where
the failure to so hold would not, individually or in the aggregate, have a
Material Adverse Effect (the "Parent Permits"). Parent and its subsidiaries
(other than the Company) are in compliance with the terms of the Parent
Permits, except where the failure so to comply would not, individually or in
the aggregate, have a Material Adverse Effect. Except as disclosed in the
Parent SEC Reports filed prior to the date of this Agreement, the businesses of
Parent and its subsidiaries (other than the Company) are not being conducted in
violation of any law, ordinance or regulation of any governmental or regulatory
authorities, except for possible violations which, individually or in the
aggregate, would not have a Material Adverse Effect.
6.14 Ownership of Shares. As of the date hereof, the Parent Companies own
164,278,417 Shares.
ARTICLE VII
Additional Covenants and Agreements
7.1 Stockholders' Approval.
(a) The Company shall submit this Agreement and the transactions
contemplated hereby for the approval of its stockholders at the Stockholder
Meeting as promptly as practicable and shall use all reasonable efforts to
obtain stockholder approval and adoption of this Agreement and the
transactions contemplated hereby, such Stockholder Meeting to be held as
soon as practicable following the date upon which the S-4 Registration
Statement becomes effective, and the Company shall, through its Board of
Directors, recommend to its stockholders approval of the transactions
contemplated by this Agreement, subject to the provisions of Section 7.1(b)
hereof.
(b) Notwithstanding the foregoing, the Special Committee or the Board of
Directors of the Company may at any time prior to the Effective Time
withdraw, modify or change any recommendation and declaration regarding
this Agreement or the Merger, or recommend and declare advisable any other
offer or proposal, if in the opinion of the Special Committee or the Board
of Directors after consultation with its counsel the failure to so
withdraw, modify or change its recommendation and declaration would be
inconsistent with its fiduciary duties to its stockholders under applicable
law.
(c) From the date hereof to the Effective Time, Parent shall not sell or
otherwise dispose of the Shares that it owns, except upon exchange of
Parent LYONs (as hereinafter defined in Section 10.10(d)). At the
Stockholder Meeting, or any adjournment thereof, Parent shall vote the
Shares it owns in favor of the Merger.
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7.2 Registration Statement. Parent and the Company will, as promptly as
practicable, prepare and file with the SEC a proxy statement/prospectus, a Rule
13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") and forms
of proxy in connection with the vote of the Company's stockholders with respect
to the Merger and this Agreement (such proxy statement/prospectus, together
with any amendments thereof or supplements thereto, in each case in the form or
forms mailed to the Company's stockholders, is herein called the "Proxy
Statement"). Parent will, as promptly as practicable, prepare and file with the
SEC a registration statement on Form S-4 (as amended or supplemented, the "S-4
Registration Statement"), containing the Proxy Statement, and the Schedule 13E-
3 in connection with the registration under the Securities Act of Notes and
Parent Common Shares issuable upon conversion of the Notes (except to the
extent an exemption from registration is available). Parent and the Company
will each use all reasonable efforts to have or cause the S-4 Registration
Statement declared effective as promptly as practicable, including, without
limitation, causing their accountants to deliver necessary or required
instruments such as opinions and certificates, and will take any other action
required or necessary to be taken under federal or state securities laws (other
than qualifying to do business in any jurisdiction, subjecting itself to
taxation in any jurisdiction or giving any general consent to service of
process in any jurisdiction) or otherwise in connection with the registration
process. The Company and Parent will each use all reasonable efforts to cause
the Schedule 13E-3 and the Proxy Statement to be mailed to stockholders of the
Company at the earliest practicable date. Parent shall prepare and file the
Indenture with the SEC for qualification under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"), and shall use all reasonable efforts to
cause the trustee under the Indenture to file a T-1 under the Trustee Indenture
Act.
7.3 All Reasonable Efforts.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto shall use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including
using all reasonable efforts to obtain all necessary or appropriate
waivers, consents and approvals, to effect all necessary registrations,
filings and submissions and to lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as expeditiously
as possible), subject, however, to the requisite vote of the stockholders
of the Company.
(b) Notwithstanding the foregoing, the Company shall not be obligated to
use all reasonable efforts or take any action pursuant to this Section 7.3
if in the opinion of the Special Committee or the Board of Directors after
consultation with its counsel such actions would be inconsistent with its
fiduciary duties to the Company's stockholders under applicable law.
7.4 Access to Information. Upon reasonable notice, each of the Company and
Parent shall (and shall cause each of its subsidiaries to) afford to officers,
employees, counsel, accountants and other authorized representatives of the
other party hereto ("Respective Representatives"), in order to evaluate the
transactions contemplated by this Agreement, reasonable access during normal
business hours throughout the period prior to the Effective Time, to its
properties, books and records and, during such period, shall (and shall cause
each of its subsidiaries to) furnish promptly to such Respective
Representatives all information concerning its business, properties and
personnel as may reasonably be requested. Each of the Company and Parent agrees
that it will, and will cause its Respective Representatives to, keep all such
information confidential (except as required by law and except for information
(i) which is or becomes generally available to the public, (ii) which was
available to such party on a nonconfidential basis prior to disclosure to such
party or (iii) which becomes available to such a party on a non-confidential
basis from a source other than the other party) and will not, and will cause
its Respective Representatives not to, use any information obtained pursuant to
this Section 7.4 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement.
7.5 Publicity. The parties will consult with each other and will mutually
agree upon any press releases or public announcements pertaining to the Merger
and shall not issue any such press releases or make any such
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public announcements prior to such consultation and agreement, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange, in which case the party proposing to
issue such press release or make such public announcement shall use all
reasonable efforts to consult in good faith with the other party before issuing
any such press releases or making any such public announcements.
7.6 Indemnification of Directors and Officers.
(a) From and after the Effective Time, the Surviving Corporation shall
maintain, and Parent agrees to cause the Surviving Corporation to maintain,
for not less than three years director and officer liability insurance, to
the extent such coverage is commercially available, providing at least the
same amounts and coverage with respect to the Company's officers and
directors as the current policies maintained by or on behalf of the
Company, and containing terms and conditions which are no less advantageous
with respect to matters existing or occurring on or prior to the Effective
Time, and in the event any claim is made against present directors or
officers of the Company that is covered, in whole or in part, or
potentially so covered by insurance, the Surviving Corporation and Parent
shall do nothing that would forfeit, jeopardize, restrict or limit the
insurance coverage available for that claim until the final disposition of
that claim. All rights to indemnification now existing in favor of the
present directors or officers of the Company and its respective
subsidiaries as provided in their respective certificates or articles of
incorporation or by-laws or otherwise in effect on the date hereof shall
survive the Merger for a period of six years, and, during such period, the
Certificate of Incorporation and By-Laws of the Surviving Corporation shall
not be amended to reduce or limit the rights of indemnity of the present
directors or officers of the Company, or the ability of the Surviving
Corporation to indemnify them, nor to hinder, delay or make more difficult
the exercise of such rights of indemnity or the ability to indemnify. In
addition, the Company (and, after the Effective Time, the Surviving
Corporation) shall pay expenses in advance of the final disposition of any
action or proceeding to the full extent permitted by law to each director
or officer of the Company and its respective subsidiaries seeking
indemnification pursuant to the existing rights of indemnification required
to be maintained in the preceding sentence.
(b) Without limiting the foregoing, in any case in which approval by the
Surviving Corporation is required to effectuate any indemnification under
this Section 7.6, Parent shall cause the Surviving Corporation to direct,
at the election of the director or officer of the Company seeking
indemnification hereunder, that the determination of any such approval
shall be made by independent counsel reasonably acceptable to the Surviving
Corporation selected by such director or officer of the Company seeking
indemnification hereunder.
(c) This Section 7.6 shall survive the consummation of the Merger. The
provisions of this Section 7.6 are intended to be for the benefit of, and
shall be enforceable by, the present directors or officers of the Company,
as the case may be. If the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other corporation or
entity and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties or assets to any individual, corporation or any other entity, in
each such case, proper provision shall be made so that the successors and
assigns of the Surviving Corporation shall assume the obligations set forth
in this Section 7.6.
7.7 Blue Sky Permits. Parent shall use all reasonable efforts to obtain,
prior to the effective date of the S-4 Registration Statement, all necessary
state securities laws or "blue sky" permits and approvals required to carry out
the transactions contemplated by this Agreement and the Merger (other than
qualifying to do business in any jurisdiction, subjecting itself to taxation in
any jurisdiction or giving any general consent to service of process in any
jurisdiction), and will pay all expenses incident thereto.
7.8 NYSE Listing. Parent shall use all reasonable efforts to cause the Notes
and the Parent Common Shares issuable upon conversion of the Notes to be listed
on the NYSE, subject to notice of official issuance thereof.
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7.9 Conduct of Business of Merger Sub. During the period of time from the
date of this Agreement to the Effective Time, Merger Sub shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
7.10 Parent Common Shares. Parent shall not split, combine, subdivide or
reclassify any shares of its capital stock prior to the Effective Time or
declare a stock dividend or other stock distribution in Parent Common Shares
with a record date prior to the Effective Time.
ARTICLE VIII
Conditions
8.1 Condition to Each Party's Obligations. The respective obligations of each
party to effect the Merger are subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
duly approved and adopted at the Stockholder Meeting by (i) the holders of
a majority of the Shares outstanding as of the record date and (ii) the
holders of a majority of the Shares outstanding which are present in person
or represented by proxy at the Stockholder Meeting and entitled to vote
thereat, excluding Shares owned by the Parent Companies.
(b) Injunction. There shall not be in effect any statute, rule,
regulation, executive order, decree, ruling or injunction or other order of
a court or governmental or regulatory agency of competent jurisdiction
directing that the transactions contemplated herein not be consummated;
provided, however, that prior to invoking this condition each party shall
use all reasonable efforts to have any such decree, ruling, injunction or
order vacated.
(c) S-4 Registration Statement; "Blue Sky" Permits. The S-4 Registration
Statement shall have become effective and the Indenture shall have been
qualified under the Trust Indenture Act and no stop order suspending the
effectiveness of the S-4 Registration Statement shall have been issued and
no proceedings for such purpose shall have been initiated and be continuing
by the SEC. Parent shall have received all state securities laws or "blue
sky" permits and authorizations necessary to consummate the transactions
contemplated hereby.
(d) Listing of Parent Common Shares and Notes. The Notes and the Parent
Common Shares issuable upon conversion of the Notes and the other such
shares required to be reserved for issuance in connection with the Merger
shall have been authorized for listing on the NYSE, subject to notice of
official issuance.
(e) Governmental Filings and Consents. All governmental consents, orders
and approvals legally required for the consummation of the Merger and the
transactions contemplated hereby shall have been obtained and be in effect
at the Effective Time, except where the failure to obtain any such consent
would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Parent (assuming the Merger had taken place).
(f) Fairness Opinion. CS First Boston shall not have withdrawn or
modified in any material respect its Fairness Opinion on or prior to the
Closing Date.
8.2 Additional Conditions to the Obligations of Parent and Merger Sub. The
respective obligations of Parent and Merger Sub to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived in whole or in part by Parent or
Merger Sub, as the case may be, to the extent permitted by applicable law.
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct when made
and as of the Effective Time with the same force and effect as though the
same had been made on and as of the Effective Time (except for changes
permitted by this Agreement and except to the extent they relate to a
particular date), except for such
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failures to be true and correct which, individually or in the aggregate,
are not reasonably likely to have a Material Adverse Effect.
(b) Performance. The Company shall have performed in all material
respects all of its material obligations under this Agreement theretofore
to be performed.
(c) Officer's Certificate. Parent shall have received at the Effective
Time a certificate dated the Effective Time and executed by the President
or a Vice President of the Company certifying to the fulfillment of the
conditions specified in Sections 8.2(a) and (b) hereof.
(d) Material Adverse Effect. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, as contemplated by this
Agreement or as otherwise known to Parent or Merger Sub at or prior to the
date hereof, since June 30, 1994, the Company has not suffered a Material
Adverse Effect.
8.3 Additional Conditions to the Obligations of the Company. The obligation
of the Company to effect the Merger is subject to the satisfaction at or prior
to the Effective Time of the following conditions, any and all of which may be
waived in whole or in part by the Company (with the concurrence of the Special
Committee) to the extent permitted by applicable law:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub set forth in this Agreement shall be true and correct
when made and as of the Effective Time with the same force and effect as
though the same had been made on and as of the Effective Time (except for
changes permitted by this Agreement and except to the extent they relate to
a particular date), except for such failures to be true and correct which,
individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
(b) Performance. Parent and Merger Sub shall have performed in all
material respects all of their respective material obligations under this
Agreement theretofore to be performed.
(c) Officer's Certificate. The Company shall have received at the
Effective Time a certificate dated the Effective Time and executed by the
President or a Vice President of the Parent certifying to the fulfillment
of the conditions specified in Sections 8.3(a) and (b) hereof.
(d) Material Adverse Effect. Except as disclosed in the Parent SEC
Reports filed prior to the date hereof or as contemplated by this
Agreement, since June 30, 1994, Parent has not suffered a Material Adverse
Effect.
ARTICLE IX
Termination
9.1 Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by stockholders of the Company, by the mutual written
consent of Parent and the Company (with the concurrence of the Special
Committee).
9.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned by either Parent or the Company
(with the concurrence of the Special Committee in the case of termination by
the Company), before or after the approval by stockholders of the Company, if
(a) any court of competent jurisdiction in the United States or some other
governmental body or regulatory authority shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable, (b) the Merger shall not have been
consummated by March 31, 1995, provided that the right to terminate this
Agreement pursuant to this Section 9.2(b) shall not be available to any party
whose failure to fulfill any of its obligation under this Agreement results in
the failure of the Merger to occur on or before
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such date, or (c) this Agreement and the Merger shall have been voted on by
stockholders of the Company at the Stockholder Meeting and the vote shall not
have been sufficient to satisfy the condition set forth in Section 8.1(a).
9.3 Termination by Parent. This Agreement may be terminated by Parent and the
Merger may be abandoned prior to the Effective Time, before or after the
approval by stockholders of the Company, if (a) the Company shall have failed
to perform in any material respect any of its material obligations under this
Agreement theretofore to be performed by the Company, which failure to perform
has not been cured within 30 days following receipt by the Company of notice of
such failure to perform from Parent, (b) any material representation or
warranty of the Company contained in this Agreement shall not be true and
correct in all material respects when made or on and as of the Effective Time
as if made on and as of the Effective Time (except to the extent any such
representation or warranty relates to a particular date); provided, that such
failure to be true and correct has not been cured within 30 days following
receipt by the Company of notice of such failure to be true and correct from
Parent, or (c) the Special Committee or the Board of Directors of the Company
withdraws or materially modifies or changes its recommendation of this
Agreement or the Merger and the Special Committee or the Board of Directors of
the Company after consultation with its counsel determines that the failure to
take such action would be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law.
9.4 Termination by the Company. This Agreement may be terminated by the
Company with the concurrence of the Special Committee and the Merger may be
abandoned prior to the Effective Time, before or after the approval by
stockholders of the Company, if (a) Merger Sub or Parent shall have failed to
perform in any material respect any of their material obligations under this
Agreement theretofore to be performed by Parent or Merger Sub, which failure to
perform has not been cured within 30 days following receipt by Parent of notice
of such failure to perform from the Company, (b) any material representation or
warranty of Merger Sub or Parent contained in this Agreement shall not be true
and correct in all material respects when made or on and as of the Effective
Time as if made on and as of the Effective Time (except to the extent any such
representation or warranty relates to a particular date); provided, that such
failure to be true and correct has not been cured within 30 days following
receipt by Parent of notice of such failure to be true and correct from the
Company or (c) the Special Committee or the Board of Directors of the Company
withdraws or materially modifies or changes its recommendation of this
Agreement or the Merger and the Special Committee or the Board of Directors of
the Company after consultation with its counsel determines that the failure to
take such action would be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law.
9.5 Effect of Termination. In the event of the termination and abandonment of
this Agreement pursuant to Article IX, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party hereto
or its affiliates, directors, officers or stockholders, other than the
provisions of this Section 9.5 and the provisions of Sections 7.5, 10.1 and
10.2 and the last sentence of Section 7.4. Nothing contained in this Section
9.5 shall relieve any party from liability for any breach of this Agreement.
ARTICLE X
Miscellaneous and General
10.1 Payment of Expenses. Whether or not the Merger shall be consummated,
each party hereto shall pay its own expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby. The cost of printing the S-4 Registration
Statement and the Proxy Statement shall be borne equally by the Company and
Parent.
10.2 Survival of Representations and Warranties. The representations and
warranties made herein shall not survive beyond the earlier of termination of
this Agreement or the Effective Time. This Section 10.2 shall
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not limit any covenant or agreement of the parties hereto which by its terms
contemplates performance after the Effective Time.
10.3 Modification or Amendment. Subject to the applicable provisions of the
DGCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval of this Agreement by the stockholders of the Company, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. Notwithstanding the foregoing, any amendment or
modification of this Agreement shall require the consent of the Special
Committee.
10.4 Waiver of Conditions. The conditions to each of the parties' obligations
to consummate the Merger are for the sole benefit of such party and may be
waived by such party in whole or in part to the extent permitted by applicable
law; provided, however, that the waiver of any conditions by the Company shall
require the consent of the Special Committee.
10.5 Counterparts. For the convenience of the parties hereto, this Agreement
may be executed in any number of counterparts, each such counterpart being
deemed to be an original instrument, and all such counterparts shall together
constitute the same agreement.
10.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
10.7 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other parties shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile transmission (with a confirming copy sent by overnight courier), as
follows:
(a) If to the Company, to
D.P. Payne
President and Chief Executive Officer
Chemical Waste Management, Inc.
3001 Butterfield Road
Oak Brook, Illinois 60521
(708) 218-1620 (telephone)
(708) 684-7054 (telecopier)
with a copy to:
Kay Hahn Harrell
Chairperson of the Special Committee of the Board of Directors of
Chemical Waste Management, Inc.
and
Charles W. Mulaney, Jr., Esq.
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
(312) 407-0700 (telephone)
(312) 407-0411 (telecopier)
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(b) If to Parent or Merger Sub, to
Herbert A. Getz, Esq.
Vice President, General Counsel and Secretary
WMX Technologies, Inc.
3003 Butterfield Road
Oak Brook, Illinois 60521
(708) 572-8840 (telephone)
(708) 218-1553 (telecopier)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
10.8 Entire Agreement; Assignment. This Agreement (a) constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter
hereof and (b) shall not be assigned by operation of law or otherwise.
10.9 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, other than the right of
stockholders of the Company to receive the consideration payable in the Merger
pursuant to Article IV hereof is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement; provided, however, that the provisions of Section 7.6
shall inure to the benefit of and be enforceable by the present directors and
officers of the Company.
10.10 Certain Definitions. As used herein:
(a) "Significant Subsidiary" shall have the meaning ascribed to it under
Rule 1-02 of Regulation S-X of the SEC.
(b) "subsidiary" shall mean, when used with reference to any entity, any
corporation a majority of the outstanding voting securities of which are
owned directly or indirectly by such former entity.
(c) "Material Adverse Effect" with respect to the Company shall mean any
adverse change in the financial condition, business, properties or results
of operation of the Company and its subsidiaries (to the extent owned by
the Company) which is material to the Company and its subsidiaries (to the
extent owned by the Company) taken as a whole. "Material Adverse Effect"
with respect to Parent shall mean any adverse change in the financial
condition, business, properties or results of operation of Parent and its
subsidiaries (to the extent owned by Parent) which is material to Parent
and its subsidiaries (to the extent owned by Parent) taken as a whole.
(d) The "Parent Converted Shares" shall mean the 8,255,993 Shares held by
Harris Trust and Savings Bank, as Escrow Agent, for delivery upon exchange
of outstanding Liquid Yield Option(TM) Notes due 2012 (the "Parent LYONs")
issued by Parent.
10.11 Obligation of Parent. Whenever this Agreement requires Merger Sub to
take any action, such requirement shall be deemed to include an undertaking on
the part of Parent to cause Merger Sub to take such action and a guarantee of
the performance thereof.
10.12 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.13 Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
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In Witness Whereof, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
Chemical Waste Management, Inc.
/s/ D. P. Payne
By: _________________________________
Name:D. P. Payne
Title:President
WMX Technologies, Inc.
/s/ Herbert A. Getz
By: _________________________________
Name:Herbert A. Getz
Title:Vice President
WMX Merger Sub, Inc.
/s/ Herbert A. Getz
By: _________________________________
Name:Herbert A. Getz
Title:Vice President
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ANNEX I
PRINCIPAL TERMS OF WMX TECHNOLOGIES, INC.
CONVERTIBLE SUBORDINATED NOTES
Issuer: WMX Technologies, Inc. ("WMX").
Security: Registered subordinated debt obligation
of WMX (a "Note").
Exchange Ratio: Chemical Waste Management, Inc. ("CHW")
shareholders will receive one Note for
every 81.1 shares of CHW common stock
exchanged in the merger, in accordance
with the terms and provisions of the
Merger Agreement.
Issue Price/Principal Amount: Each Note will have a stated issue price
of $717.80 (the "Stated Issue Price") and
a principal amount (the "Principal
Amount") due at maturity of $1,000 (the
difference between the Issue Price and
the Principal Amount being referred to
herein as the "Stated Discount").
Denominations: Issuable in minimum denominations of
$1,000 and integral multiples thereof.
Maturity: Each Note will mature on the tenth
anniversary of the issue date, unless
converted by the Holder of the Note or
purchased or redeemed by WMX prior to
maturity.
Yield to Maturity/Interest: 5.75% per annum (computed on a semi-
annual bond equivalent basis) calculated
from the issue date and based on the
Stated Issue Price. Interest will be
payable semi-annually in cash at a rate
of 2% of the Principal Amount per annum.
Convertibility: Each Note will be convertible at the
option of the holder at any time prior to
maturity, unless previously redeemed or
otherwise purchased by WMX, into that
number of shares of WMX common stock (the
"Conversion Rate") equal to the quotient
derived by dividing 717.80 by the average
of the per share closing price (the "WMX
Closing Price") of WMX common stock on
the 10 trading days prior to the
Stockholder Meeting; provided, however,
that the Conversion Rate shall not be
less than 21.90 or more than 26.76. WMX
may, at its option, pay such Holder cash
for each converted Note in an amount
equal to the Conversion Rate multiplied
by the closing market price of WMX common
stock on the day prior to the date of
conversion. The Conversion Rate will not
be adjusted for accrued Stated Discount
or accrued but unpaid interest upon
conversion and the Holder will not
receive any cash payment representing
accrued Stated Discount or accrued but
unpaid interest; such accrued Stated
Discount and accrued but unpaid interest
will be deemed paid by the WMX common
stock received on conversion.
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Listing: WMX will apply to list the Notes on the
New York Stock Exchange.
Optional Redemption: The Notes will not be redeemable by WMX
prior to March 15, 2000. Thereafter, the
Notes will be redeemable in cash at the
option of WMX, in whole or in part, at
any time at the Stated Issue Price plus
accrued Stated Discount and accrued but
unpaid interest through the date of
redemption.
Purchase at the Option of the WMX will purchase the Notes in cash, at
Holder: the option of the Holder, on March 15,
1998 and March 15, 2000 at a price per
Note of $790.24 and $843.35, respectively
(Stated Issue Price plus accrued Stated
Discount) plus accrued but unpaid
interest.
Subordination: The Notes will be subordinated to all
existing and future debt of WMX not
designated as subordinated debt.
Sinking Fund: None.
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APPENDIX B
CS First Boston
CS First Boston Corporation 55 East 52nd Street
New York, NY 10055-0186
Telephone 212 909 2000
October 14, 1994
The Special Committee of the Board of Directors
Chemical Waste Management, Inc.
3001 Butterfield Road
Oak Brook, Illinois 60521
Members of the Special Committee:
You have asked us to advise you with respect to the fairness to the holders
of the common stock of Chemical Waste Management, Inc. ("CHW"), other than WMX
Technologies, Inc. ("WMX") and its affiliates, from a financial point of view,
of the consideration to be received by such holders pursuant to the terms of
the Agreement and Plan of Merger, dated as of October 14, 1994 (the "Merger
Agreement"), by and among WMX, WMX Merger Sub, Inc., a subsidiary of WMX
("Merger Sub"), and CHW. The Merger Agreement provides for, among other things,
(i) the merger of Merger Sub with and into CHW pursuant to which CHW will
become a wholly owned subsidiary of WMX (the "Merger") and (ii) the conversion
of each outstanding share of the common stock, par value $0.01 per share, of
CHW (the "CHW Common Stock") into the right to receive $12.33 principal amount
at maturity of Convertible Subordinated Notes of WMX, the principal terms of
which are described in Annex I to the Merger Agreement (the "Notes").
In arriving at our opinion, we have reviewed the Merger Agreement and certain
publicly available business and financial information relating to CHW, WMX and
certain of their affiliates. We have reviewed certain other information,
including financial forecasts, provided to us by CHW, WMX and certain of their
affiliates, and have met with the respective managements of CHW, WMX and
certain of their affiliates to discuss the businesses and prospects of CHW, WMX
and such affiliates. We also have evaluated the pro forma financial impact of
the Merger on WMX.
We also have considered certain financial and stock market data of CHW, WMX
and certain of their affiliates, and we have compared that data with similar
data for other publicly held companies in businesses similar to those of CHW,
WMX and such affiliates and we have considered, to the extent publicly
available, the financial terms of certain other business combinations which
have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed responsibility for
independent verification of any of the foregoing information and have relied
upon its being complete and accurate in all respects. With respect to the
financial forecasts and other data reviewed by us, including without
limitation, estimates of liability for environmental matters, reserves
established with respect thereto, and estimates of annual expenses in
connection therewith, the managements of CHW and WMX have advised us that such
forecasts and other data have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the respective managements
of CHW, WMX and their affiliates as to the future financial performance of CHW,
WMX and such affiliates. In addition, we have not made an independent
evaluation or appraisal of
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The Special Committee of the Board of Directors
Chemical Waste Management, Inc.
October 14, 1994
Page 2
the assets or liabilities (contingent or otherwise) of CHW, WMX or their
affiliates, nor have we been furnished with any such evaluations or appraisals.
We are not expressing any opinion as to what the value of the Notes actually
will be when issued to CHW stockholders pursuant to the Merger or the price at
which such Notes or the common stock, par value $1.00 per share, of WMX into
which such Notes are convertible will trade subsequent to the Merger. We were
not requested to, and did not, solicit third party indications of interest in
acquiring all or any part of CHW. Our opinion is necessarily based on
information available to us and financial, stock market and other conditions
and circumstances as they exist and can be evaluated on the date hereof.
CS First Boston is an internationally recognized investment banking firm and
is regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
We have acted as financial advisor to the Special Committee in connection
with the Merger and will receive a fee for our services. In the ordinary course
of our business, CS First Boston and its affiliates may actively trade the debt
and equity securities of CHW, WMX and their affiliates for their own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities. As of the date hereof, CS First Boston
and its affiliates beneficially own approximately 2,800,000 shares of CHW
Common Stock.
It is understood that this letter is for the information of the Special
Committee only in its evaluation of the Merger and may not be relied upon by
any other person, nor does our opinion constitute a recommendation to any
stockholder of CHW as to how such stockholder should vote on the proposed
Merger. This letter is not to be quoted or referred to, in whole or in part, in
any registration statement, prospectus or proxy statement, or in any other
document used in connection with the offering or sale of securities, nor shall
this letter be used for any other purposes, without CS First Boston's prior
written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received in the Merger by the holders of
CHW Common Stock (other than WMX and its affiliates) is fair to such holders
from a financial point of view.
Very truly yours,
CS FIRST BOSTON CORPORATION
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APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S) 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)(S) 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock which, at the
record date fixed to determine the stockholders entitled to receive notice
of and to vote at the meeting of stockholders to act upon the agreement of
merger or consolidation, were either (i) listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc., or (ii) held of record by more than 2,000 stockholders; and
further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger
did not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of (S) 251 of this
title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)(S)
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except: a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation; b. Shares of stock of any
other corporation which at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or held of
record by more than 2,000 stockholders; c. Cash in lieu of fractional
shares of the corporations described in the foregoing subparagraph a. and
b. of this paragraph; or d. Any combination of the shares of stock and cash
in lieu of fractional shares described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior
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to the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or
(S) 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after his written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the date of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
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(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and in the case of holders
of shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceedings may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
of the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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PROXY CWM PROXY
CHEMICAL WASTE MANAGEMENT, INC.
SPECIAL MEETING, JANUARY 20, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
D. P. Payne, Jerome D. Girsch and Thomas A. Witt, each with power of
substitution, are hereby authorized to vote all shares of common stock of
Chemical Waste Management, Inc. which the undersigned would be entitled to vote
if personally present at the Special Meeting of Stockholders of Chemical Waste
Management, Inc., to be held on Friday, January 20, 1995, and at any
adjournments, as designated on the reverse hereof.
A MAJORITY (OR IF ANY ONE, THEN THAT ONE) OF THE ABOVE PERSONS OR THEIR
SUBSTITUTES WHO SHALL BE PRESENT AND ACTING AT THE MEETING SHALL HAVE THE
POWERS CONFERRED HEREBY.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
DO NOT SUBMIT ANY STOCK CERTIFICATES WITH THIS PROXY CARD.
(Continued and to be signed on reverse side.)
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<PAGE>
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PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [_]
A VOTE FOR APPROVAL AND ADOPTION OF THE BELOW-DESCRIBED AGREEMENT AND PLAN OF
MERGER IS RECOMMENDED BY THE BOARD OF DIRECTORS.
1. Approval and adoption of the Agreement and Plan of Merger dated as of
October 14, 1994, as amended, by and among Chemical Waste Management, Inc.,
WMX Technologies, Inc. and WMX Merger Sub, Inc.
FOR AGAINST ABSTAIN
[_] [_] [_]
2. In their discretion, on such other business as may properly come before the
meeting.
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 FOR
PROPOSAL NO. 1 ABOVE AND WILL BE VOTED AS
RECOMMENDED BY THE PROXY HOLDERS LISTED ON
THE REVERSE HEREOF AS TO ANY OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING.
Dated: ________________,1994
Signature(s) ______________________________
___________________________________________
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.
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