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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 1-9253
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CHEMICAL WASTE MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2989152
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3001 BUTTERFIELD ROAD, OAK BROOK, ILLINOIS 60521
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (708)218-1500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of Each Exchange on
Title of Each Class Which Registered
--------------------------------- ------------------------------
Common Stock, $.01 par value New York Stock Exchange
Chicago Stock Exchange
Liquid Yield Option/TM/ Notes due 2010 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY
STOCKHOLDERS WHO WERE NOT AFFILIATES (AS DEFINED BY REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION) OF THE REGISTRANT WAS APPROXIMATELY
$458,890,244 AT FEBRUARY 1, 1994 (BASED ON THE CLOSING SALE PRICE ON THE NEW
YORK STOCK EXCHANGE COMPOSITE TAPE ON JANUARY 31, 1994, AS REPORTED BY THE WALL
STREET JOURNAL (MIDWEST EDITION)).
AT MARCH 23, 1994, THE REGISTRANT HAD ISSUED AND OUTSTANDING AN AGGREGATE
OF 212,422,463 SHARES OF ITS COMMON STOCK.
DOCUMENTS INCORPORATED BY REFERENCE
THOSE SECTIONS OR PORTIONS OF THE REGISTRANT'S 1993 ANNUAL REPORT TO
STOCKHOLDERS AND OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 5, 1994 DESCRIBED IN PARTS II, III AND IV HEREOF
ARE INCORPORATED BY REFERENCE IN THIS REPORT.
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PART I
ITEM 1. BUSINESS.
GENERAL
Chemical Waste Management, Inc. ("CWM") and its subsidiaries (hereinafter
collectively referred to as the "Company" unless the context indicates
otherwise) are leading providers of hazardous waste management services and
various other environmental and industrial services. The Company 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. The
Company also furnishes radioactive waste management services, primarily to
electric utilities and governmental entities. Through Rust International Inc.
("Rust"), an approximately 56%-owned subsidiary, the Company also furnishes
engineering, construction, environmental and infrastructure consulting,
hazardous substance remediation and other on-site industrial and related
services, primarily to clients in government and in the chemical, petrochemical,
nuclear, energy, utility, pulp and paper, manufacturing, environmental services
and other industries.
On December 31, 1992, CWM entered into an agreement with The Brand
Companies, Inc. ("Brand") and Wheelabrator Technologies Inc. ("WTI"), an
approximately 55% owned subsidiary of WMX Technologies, Inc. ("WMX"), pursuant
to which CWM and WTI agreed to organize Rust and to acquire newly issued shares
of Rust in exchange for contributing certain businesses and assets to Rust.
Under that agreement, CWM contributed primarily its hazardous substance
remediation services business, its approximately 56% ownership interest in Brand
and its 12% ownership interest in Waste Management International plc ("WM
International"). WTI contributed to Rust primarily its engineering and
construction and environmental and infrastructure consulting services businesses
and its international engineering unit based in London. On May 7, 1993, Brand
was merged into a subsidiary of Rust, and shares of Brand (other than those
owned by Rust) were converted, on a one-for-one basis, into shares of Rust, or,
for those Brand stockholders so electing, the right to receive $18.75 per Brand
share in cash. Rust is currently owned approximately 56% by CWM, 40% by WTI and
4% by public stockholders.
The Company participates internationally in the waste management services
industry through its equity interest in WM International, a company owned 12% by
Rust, 12% by WTI, 56% by WMX and 20% by public stockholders. WM 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
and New Zealand.
Through the end of 1992, the Company categorized its operations in two
industry segments: hazardous waste management and related services and specialty
contracting services. Beginning in 1993, to reflect the Company's acquisition of
a majority interest in Rust, the Company has categorized the latter segment
(which is composed of all of its non-core businesses) as engineering,
construction, industrial and related services. For information relating to
revenues, expenses and identifiable assets attributable to the Company's
different industry segments, see Note 16 to the Company's Consolidated Financial
Statements filed as an exhibit to this report and incorporated herein by
reference.
Regulatory or technological developments relating to the environment may
require companies engaged in environmental services businesses, including the
Company, to modify, supplement or replace equipment and facilities at costs
which may be substantial. Because certain of the businesses in which the
Company is engaged are intrinsically connected with the protection of the
environment and the potential discharge of materials into the environment, a
material portion of the Company's capital expenditures is, directly or
indirectly, related to such items. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" set forth on pages 7 to 14 of the
Company's 1993 Annual Report to Stockholders (which discussion is filed as an
exhibit to this report and incorporated by reference herein) for a review of
property and equipment expenditures
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by the Company for the last three years. The Company does not expect such
expenditures, which are incurred in the ordinary course of business, to have a
materially adverse impact on its and its subsidiaries' combined earnings or its
or its subsidiaries' competitive position in the foreseeable future because the
Company's environmental services businesses are based upon compliance with
environmental laws and regulations and its services are priced accordingly.
Although the Company strives to conduct its operations in compliance with
applicable laws and regulations, the Company believes that in the existing
climate of heightened legal, political and citizen awareness and concerns,
companies in the environmental services industry, including the Company, will be
faced, in the normal course of operating their businesses, with fines and
penalties and the need to expend funds for remedial work and related activities
with respect to waste treatment, storage and disposal facilities. Where the
Company concludes that it is probable that a liability has been incurred, a
provision is made in the Company's financial statements for the Company's best
estimate of the liability based on management's judgment and experience,
information available from regulatory agencies, and the number, financial
resources and relative degree of responsibility of other potentially responsible
parties who are jointly and severally liable for remediation of a specific
site, as well as the typical allocation of costs among such parties. If a
range of possible outcomes is estimated and no amount within the range appears
to be a better estimate than any other, then the Company provides for the
minimum amount within the range, in accordance with generally accepted
accounting principles. Such estimates are subsequently revised, as deemed
necessary, as additional information becomes available. While the Company does
not anticipate that the amount of any such revision will have a material adverse
effect on the Company's operations or financial condition, the measurement of
environmental liabilities is inherently difficult and the possibility remains
that technological, regulatory or enforcement developments, the results of
environmental studies or other factors could materially alter this expectation
at any time. Such matters could have a material adverse impact on earnings for
one or more fiscal quarters or years.
The environmental services industry is subject to extensive and evolving
regulation by federal, state, local and foreign authorities. Due to the
complexity of regulation of the industry and to public awareness, implementation
of existing and future laws, regulations or initiatives by different levels of
government may be inconsistent and difficult to foresee. The Company makes a
continuing effort to anticipate regulatory, political and legal developments
that might affect its operations but is not always able to do so. The Company
cannot predict the extent to which any legislation or regulation that may be
enacted or enforced in the future may affect its operations.
The Company was incorporated in Delaware as a wholly-owned subsidiary of
WMX in 1978, and since then has acquired certain businesses owned by WMX or
others. The Company is approximately 79% owned by WMX. The Company's common
stock is listed on the New York Stock Exchange under the trading symbol "CHW"
and is also listed on the Chicago Stock Exchange.
Unless the context indicates to the contrary, all statistical and financial
information under Items 1 and 2 of this report is given as of December 31, 1993,
and where such information relates to any period prior to 1993, it is presented
as if Rust had been in existence throughout such period. Statistical and
financial data appearing under the caption "Hazardous Waste Management and
Related Services" relates only to the Company's core business of chemical waste
and low-level and other radioactive waste services and does not include any data
relating to Rust. See "Engineering, Construction and Related Services."
HAZARDOUS WASTE MANAGEMENT AND RELATED SERVICES
CWM's principal business (excluding Rust and its subsidiaries) is to
provide 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
provides radioactive waste management services, primarily to electric utilities
and governmental entities. The principal services provided by CWM and its
subsidiaries (excluding Rust) accounted for the following percentages of CWM's
hazardous waste management and related services revenue for each of the three
years in the period ended December 31, 1993:
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<TABLE>
<CAPTION>
Year Ended December 31
-------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Treatment, resource recovery and disposal 63.2% 68.5% 70.6%
Special services 21.4% 15.3% 18.6%
Transportation 15.4% 16.2% 10.8%
</TABLE>
The revenues and net income from such services can fluctuate for interim
periods and from year to year for a number of reasons, including adverse weather
conditions and that demand for the services may be seasonal (less demand in the
winter months) and may be driven by changes in regulations.
CHEMICAL WASTE MANAGEMENT SERVICES
In the United States, most chemical wastes generated by industrial
processes are handled "on-site" at the generators' facilities. Since the mid-
1970's, public awareness of the harmful effects of unregulated disposal of
chemical wastes on the environment and health has led to extensive and evolving
federal, state and local regulation of chemical waste management activities.
The major federal statutes regulating the management of chemical wastes include
the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Toxic Substances Control Act ("TSCA") and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA" or
"Superfund"), all primarily administered by the United States Environmental
Protection Agency ("EPA"). CWM's business is heavily dependent upon the extent
to which regulations promulgated under these or similar state statutes and their
enforcement over time effectively require wastes to be managed in facilities of
the type owned and operated by the Company.
The chemical wastes handled by the Company include industrial by-products
and residues that have been identified as "hazardous" pursuant to RCRA (see
"Regulation--Chemical Waste" herein), as well as other materials contaminated
with a wide variety of chemical substances. The Company operates chemical waste
treatment, storage or disposal facilities in 18 states and is able to service
customers in most parts of the country through this network of facilities.
Additionally, certain chemical wastes, such as polychlorinated biphenyls
("PCBs"), are transported greater distances because they can be accepted only at
a limited number of treatment or disposal facilities. The Company also owns a
majority interest in a subsidiary which operates a resource recovery facility, a
disposal facility and storage facilities in Mexico.
The ongoing chemical waste management services provided by the Company are
typically performed pursuant to nonexclusive service agreements that obligate
the Company to accept from the customer chemical wastes conforming to the
provisions of the agreement. Fees are determined by such factors as the
chemical composition and volume or weight of the wastes involved, the type of
transportation or processing equipment utilized and distance to the processing
or disposal facility. The Company periodically reviews and adjusts the fees
charged for its services.
Prior to performing services for a customer, the Company's specially
trained personnel review the customer's waste profile sheet prepared by the
customer which contains information about the chemical composition of the waste.
A representative sample of the chemical waste may be analyzed in a Company
laboratory or in an independent laboratory for the purpose of enabling the
Company to recommend and approve the best method of transportation, treatment
and disposal and to designate a facility permitted to accept the waste. Upon
arrival at one of the Company's treatment, resource recovery or disposal
facilities, and prior to unloading, a representative sample of the delivered
waste is tested for several key characteristics and analyzed to confirm that it
conforms to the customer's waste profile sheet.
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Treatment, Resource Recovery and Disposal
The Company's treatment and resource recovery operations involve processing
chemical wastes through the use of thermal, physical, chemical or other
treatment methods at one or more of the Company's facilities. The residual
material produced by these interim processing operations is either disposed of
by burial in a secure disposal cell or by deep well injection, or it may be
managed through one of the Company's resource recovery programs. For example,
when drummed sludges are accepted by the Company for treatment and disposal, any
free liquids are decanted, recoverable liquids are separated for subsequent
treatment or reclamation, and nonrecoverable liquids are incinerated or
stabilized prior to disposal.
Thermal Treatment
Thermal treatment refers primarily to processes that use incineration as
the principal mechanism for waste destruction. Since August 1983, the Company
has operated a non-PCB fixed hearth incinerator at its facility in Sauget,
Illinois. Between 1986 and 1989, the Company completed three additional
incinerators at that facility. The Company also operates a 150 million BTU per
hour rotary kiln incinerator at its Port Arthur, Texas facility which is
permitted to destroy PCB wastes.
The Company's facilities also include a rotary kiln incinerator located in
Chicago, Illinois which has not operated since February 1991 when there was an
explosion in the kiln. Although the incinerator is fully functional, the
Company has not resumed operations at the facility and is continuing to discuss
with the Illinois Environmental Protection Agency the conditions under which
operations may resume.
The Company is seeking joint venture partners and reviewing other strategic
alternatives for certain of its incineration facilities.
Physical, Chemical and Other Treatment Methods
Physical treatment methods include distillation, evaporation and
separation. While distillation and evaporation utilize heat to remove liquids
from solids or sludges, separation utilizes such techniques as sedimentation,
filtration and flocculation to remove solid materials from liquids.
Sedimentation involves the settling of particles suspended in a liquid,
filtration involves passing a liquid through a porous mass to separate suspended
particles, and flocculation causes suspended material to form a loosely
aggregated mass. Certain aqueous wastes are also physically treated through the
use of a mobile carbon absorption filtration system. These methods may be used
alone or in conjunction with chemical, thermal or biological processes, the goal
being to reduce the volume of waste material or to make it suitable for further
treatment or disposal.
Chemical treatment methods include chemical oxidation and reduction,
chemical precipitation of heavy metals, hydrolysis and neutralization of acid
and alkaline wastes. Also, the Company has developed the CHEM-MATRIX/R/ system
for waste stabilization, which reduces the mobility and toxicity of hazardous
constituents and chemically binds them into a stable, solid mass prior to
disposal. These methods involve the transformation of wastes into inert
materials through one or more chemical reaction processes.
Resource Recovery
The Company has developed a program of reclamation and reuse of certain
chemical wastes, particularly solvent-based wastes, that are generated by
various industrial cleaning operations and metal finishing and other industrial
processes. Spent solvents that can be recycled are processed through thin film
evaporators and other processing equipment and are distilled into clean, usable
products. Nonrecoverable organic liquids with sufficient heat value are blended
to meet strict specifications for use as supplemental fuels for cement kilns,
blast furnaces and other high-efficiency boilers. The Company has developed
specialized equipment and processes for these
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purposes and has established relationships with a number of supplemental fuel
users around the country that will accept the blended material.
Disposal
The Company's secure land disposal facilities either have interim status or
have been issued permits under RCRA (see "Regulation--Chemical Waste" and
"Properties" herein). In general, the Company's land disposal facilities have
received the necessary permits and approvals to accept chemical wastes, although
some of such sites may only accept certain chemical wastes. Only chemical
wastes which are in a stable, solid form and which meet the applicable
regulatory requirements may be buried in the Company's secure disposal cells.
These land disposal facilities are sited, constructed and operated in a manner
designed to provide long-term containment of such waste. In accordance with
current applicable regulatory requirements, the Company's secure disposal cells
are being designed and engineered with double synthetic liners and double
collection systems for leachate (liquid which has percolated through or drained
from the buried waste). The synthetic liner system is placed over a three foot
layer of compacted clay at the bottom of the cell. Above each high density
polyethylene liner is a layer of synthetic or natural drainage material in which
any leachate that might form would be collected for removal. Completed secure
disposal cells are capped with synthetic material, covered with a layer of
topsoil and seeded to reduce the possibility that liquid might enter the cell.
Closed cells must be maintained for at least 30 years.
At three of its locations, the Company isolates treated chemical wastes in
liquid form by injection into deep wells (see "Properties" herein). Deep well
technology involves drilling wells in suitable rock formations far below the
base of fresh water and separated from it by other substantial geological
confining layers.
Other Chemical Waste Services
The Company furnishes other specialized chemical waste services. For
example, the Company provides waste reduction consulting services for industrial
clients with the goal of designing site-specific waste minimization programs,
and to that end conducts facility inspections and evaluations of alternatives
for managing customer waste streams. Customer support services also include
assured destruction of sensitive materials (aged, counterfeit or damaged
products), on-site management services with respect to chemical process wastes,
assistance to small quantity generators in complying with RCRA, and
consolidation, secure packaging and transportation of small quantities of aged
chemicals, reagents and other laboratory wastes for disposal.
Transportation
Chemical waste may be collected from customers and transported by the
Company or delivered by customers to the Company's facilities. Chemical waste
is transported by the Company primarily in specially constructed tankers and
semi-trailers, including stainless steel and rubber or epoxy-lined tankers and
vacuum trucks, or in containers or drums on trailers designed to comply with
applicable regulations and specifications of the U.S. Department of
Transportation ("DOT") relating to the transportation of hazardous materials.
The Company's chemical waste transportation fleet includes approximately 395
tractors and 920 trailers. Liquid waste is frequently transported in bulk but
also may be transported in drums. Heavier sludges or bulk solids are
transported in sealed roll-off boxes or bulk trailers. The Company may utilize
the services of subcontractors to transport waste in some circumstances. In
some locations, the Company may also utilize rail transportation by means of
tank cars, piggyback trailers or intermodal containers.
The Company operates 35 transportation centers from which its
transportation fleet is dispatched or fleet maintenance operations are
conducted. The Company also operates several facilities at which waste
collected from or delivered by customers may be analyzed and consolidated prior
to further shipment.
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LOW-LEVEL AND OTHER RADIOACTIVE WASTE SERVICES
Radioactive wastes with varying degrees of radioactivity are generated by
nuclear reactors and by medical, industrial, research and governmental users of
radioactive material. Radioactive wastes are generally classified as either
high-level or low-level. High-level radioactive waste, such as spent nuclear
fuel and waste generated during the reprocessing of spent fuel from nuclear
reactors, contains substantial quantities of long-lived radionuclides and is the
ultimate responsibility of the federal government. Low-level radioactive waste,
which decays more quickly than high-level waste, largely consists of dry
compressible wastes (such as contaminated gloves, paper, tools and clothing),
resins and filters which have removed radioactive contaminants from nuclear
reactor cooling water, solidified wastes from power plants which have become
contaminated with radioactive substances and irradiated hardware.
The Company provides comprehensive low-level radioactive waste management
services in the United States consisting of disposal, processing and various
other special services, and transportation. To a lesser extent, it also
provides services with respect to radioactive waste which has become mixed with
regulated chemical waste. The Company generally enters into long-term service
agreements with its customers. A particular agreement may include all or part
of the services performed by the Company.
Disposal
The Company's radioactive waste disposal operations currently involve low-
level radioactive waste only. Its Barnwell, South Carolina facility is one of
two licensed commercial low-level radioactive waste disposal facilities in the
United States, and has been in operation since 1971. Waste accepted for burial
at the Barnwell facility is segregated by waste classification and placed in
specially engineered disposal cells of various sizes excavated in clay-rich
soils. Waste, which must be in approved containers, is placed in a trench,
backfilled and covered with compacted clay-rich cap material followed by
topsoil. Systematic environmental monitoring is conducted in accordance with
state and federal licensing requirements.
Fees for burial are set by the Company based upon volume, level of
radioactivity and handling considerations. A trust has been established and
funded to pay the estimated cost of decommissioning the Barnwell facility. A
second fund, for the extended care of the facility, is funded by a surcharge on
each cubic foot of waste received. In the event the extra charges collected to
restore and maintain the facility are insufficient to cover the costs of
restoring or maintaining the site after its closure (which the Company has no
reason to expect), the Company may be liable for the extra costs. Through an
annual license fee, the State of South Carolina recovers direct and indirect
costs it incurs to monitor facility operations.
In accordance with the aims of the Low-Level Radioactive Waste Policy Act
of 1980, eight southeastern states comprise the Southeast Interstate Low-Level
Radioactive Waste Management Compact (the "Southeast Compact"). The Southeast
Compact initially designated the Barnwell site as the disposal facility to
receive all low-level radioactive waste generated in the eight-state compact
region through 1992. Late in 1985, Congress passed the Low-Level Radioactive
Waste Policy Amendments Act (the "1985 Act"). In addition to consenting to the
Southeast Compact and six other regional compacts, the 1985 Act, among other
things, amended prior law to allow continued access to the Barnwell facility by
generators located outside the compact region. In exchange for such continued
access, generators outside the Southeast Compact region pay surcharges to the
State of South Carolina for each cubic foot of waste disposed of by the Company.
The 1985 Act also established milestones for states that are not part of a
compact region with an operating disposal facility. If the development of new
facilities does not progress in accordance with such milestones, penalties may
be imposed in the form of higher surcharges and, ultimately, denial of access to
the Barnwell facility.
During September 1986, the Southeast Compact Commission designated North
Carolina as the next state to host the Southeast Compact regional disposal
facility, and since then the State of North Carolina has been
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taking steps toward siting and licensing a regional disposal facility. In
December 1993, the North Carolina Low-Level Radioactive Waste Management
Authority voted to select a site in that state for development by the Company as
a regional disposal facility. During 1992, South Carolina adopted legislation
allowing the Barnwell site to continue operating until December 31, 1995, and to
continue receiving waste generated outside the Southeast Compact until June 30,
1994. The Southeast Compact subsequently increased the surcharges payable by
generators located outside the compact region. The Company expects the South
Carolina legislature to consider extending to December 31, 1995 the date the
Barnwell site must stop accepting waste generated outside the Southeast Compact,
but there can be no assurance that such extension will be obtained.
During the third quarter of 1989, the Company entered into contracts with
the responsible agencies for the Southeast Compact and the Central Midwest Low-
Level Radioactive Waste Compact, whose member states are Illinois and Kentucky
(the "Central Midwest Compact"), to site, license, construct, operate and close
new regional low-level radioactive waste disposal facilities for those Compacts,
which facilities are intended to be located in North Carolina and Illinois,
respectively. During the third quarter of 1990, the Company entered into a
similar contract for the Appalachian States Low-Level Radioactive Waste Compact
(whose member states are Pennsylvania, West Virginia, Maryland and Delaware).
The terms of these contracts range from 20 to 30 years. Because of the
difficulties associated with the process of siting and licensing such
facilities, their development has not proceeded in the manner and on the
schedule contemplated by the respective Compact authorities. For example, in
October 1992, a special state commission which had been examining the siting of
a proposed disposal facility in Illinois declined to approve it, as a
consequence of which the timetable for establishing such a facility is
uncertain. The Company was subsequently directed to stop certain of its work
under its contract with the Central Midwest Compact.
At this time the Company is unable to predict the effect which these
developments might have upon its business. However, the Company's earnings for
one or more fiscal quarters or years could be adversely affected if the Company
is unable to open a new facility in North Carolina after the closure of the
Barnwell site.
Special Services
The Company processes low-level radioactive waste at its customers' plants
to enable such waste to be shipped in dry rather than liquid form to meet the
requirements for receipt at disposal facilities and to reduce the volume of
waste that must be transported. Processing operations include solidification,
demineralization, dewatering and filtration. The Company's services in this
regard include supplying all equipment, containers, associated hardware,
operating personnel and quality control programs and procedures. In addition,
the Company can design and fabricate specialized equipment and containers to
meet the requirements of individual customers.
Other services offered by the Company include decommissioning nuclear
facilities, which involves dismantling buildings and equipment (projects that
typically are nonrecurring), and providing electro-chemical, abrasive and
chemical removal of radioactive contamination. In addition, the Company
provides management services for spent nuclear fuel storage pools. The Company
has developed techniques and equipment such as crusher/shear to process nonfuel
components stored in such pools, in order to create more space for spent fuel
storage. Through a joint venture and an exclusive domestic licensing agreement
with a German company, the Company is developing and marketing in the United
States nuclear waste management services and products currently in use in
Europe, including casks and other products for handling spent fuel.
Transportation
Most low-level radioactive waste is transported by truck to burial sites.
In order to meet the special needs of its customers, the Company develops
transportation plans ranging from per trip service to dedication of equipment.
The Company's transportation fleet consists of approximately 25 tractors and 85
heavy-duty
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trailers, including specialty trailers such as shielded vans, drop decks and
lowboys. Transportation terminals are located in South Carolina and Illinois.
Low-level radioactive waste requiring additional shielding must be
transported in shipping casks licensed by the U.S. Nuclear Regulatory Commission
("NRC"). The Company owns approximately 60 such casks, as well as a variety of
other containers designed to meet the varying needs of the nuclear industry.
ENGINEERING, CONSTRUCTION, INDUSTRIAL AND RELATED SERVICES
Rust is a leading provider, through its subsidiaries, of engineering,
construction and environmental and infrastructure consulting services, hazardous
substance remediation services and other on-site industrial and related
services, primarily to clients in government and in the chemical, petrochemical,
nuclear, energy, utility, pulp and paper, manufacturing, environmental services
and other industries. The types of engineering, construction and environmental
and infrastructure consulting services provided by Rust include process and
design engineering, plant, facility and related infrastructure construction,
project and construction management and oversight services, site analyses,
remedial investigations, feasibility studies, environmental assessments, and
architectural services. The types of hazardous substance remediation and other
on-site industrial and related services provided by Rust include on-site
remediation of hazardous substances, scaffolding, industrial cleaning and
maintenance and nuclear and utility services and maintenance. In addition, Rust
provides engineering and environmental and infrastructure consulting services to
clients in several countries outside of North America.
ENGINEERING, CONSTRUCTION AND ENVIRONMENTAL AND INFRASTRUCTURE CONSULTING
SERVICES
The industrial engineering services provided by Rust are of two general
types, process engineering and facility design engineering. Process engineers
create the processes by which facilities operate, such as chemical,
petrochemical, energy and pulp and paper plants. Design engineering services
provided by Rust encompass the following disciplines: architectural; electrical;
control systems; process piping; mechanical; structural; heating, ventilation
and air conditioning ("HVAC"); and civil. The construction services provided by
Rust include primarily the new construction and retrofitting of power generation
facilities, including coal-fired power plants, nuclear power plants, gas turbine
and cogeneration plants, and industrial facilities, including chemical,
petrochemical, pulp and paper, food and beverage, iron and steel, automotive,
utility and industrial power and other manufacturing facilities. Rust also
requisitions and procures equipment and construction materials for clients,
performs quality assurance and quality control oversight of vendor manufacturing
practices and provides infrastructure and marine construction, dredging,
underwater diving, and dismantling and demolition services. Rust's engineering
and construction services are provided on a stand-alone basis but are also
provided together under engineering, procurement and construction contracts
which include engineering services, procurement of facility equipment and
materials and construction services.
Rust's environmental and infrastructure consulting services provide
alternative solutions for client problems relating to removing and disposing of
hazardous and toxic substances, and managing solid waste, water and wastewater,
groundwater and air resources. Such services are provided primarily to private
industry and also to federal, state and local governments, including the
Department of Defense (the "DOD") and the Department of Energy (the "DOE"). The
services include performing remedial investigations for the purpose of
characterizing hazardous waste sites, preparing risk assessment reports and
feasibility studies setting forth recommended alternative remedial actions, and
providing engineering design and construction oversight services for remediation
projects. The services provided also include the siting, permitting, design and
construction oversight of solid and hazardous waste landfills and related
facilities. Study, design and construction oversight services are also
provided, primarily to municipalities, in connection with wastewater collection
and treatment, potable water supply treatment and distribution, and the building
of streets, highways, airports, bridges, waterways and rail services.
Additional services provided through Rust include environmental assessment
services, the design of systems to properly and safely store, convey, treat and
dispose of industrial, hazardous and
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radioactive materials, and consulting services regarding disposal, waste
minimization methods and techniques, air quality regulation and industrial
hygiene and safety.
Through a series of acquisitions completed during the period from late
1992 through February 1994, Rust has developed an international engineering and
consulting business performing projects in 24 countries. In Europe, Rust has
offices in the United Kingdom, Germany, Sweden and Italy. Rust has offices
located throughout the Asia Pacific region, including Australia, Hong Kong,
China, Singapore, Malaysia and Indonesia. Rust also has an office in Dubai,
U.A.E. Rust's foreign subsidiaries provide process and design engineering
services, environmental and infrastructure engineering services and construction
management services to national, regional and local governments and to clients
in the utility and industrial power and general manufacturing industries. In
addition, Rust provides engineering and consulting services to WM International
worldwide.
Rust received 45%, 43% and 52% of its total consolidated revenues in 1991,
1992 and 1993, respectively, from the performance of engineering, construction
and environmental and infrastructure consulting services. The revenues and net
income from such services can fluctuate for interim periods and from year to
year for any number of reasons, including (i) the seasonal nature of significant
portions of the business (less activity during the winter months), and (ii)
performance hindrances such as technical problems, labor shortages or disputes,
weather and delays caused by other external sources.
REMEDIATION AND OTHER ON-SITE INDUSTRIAL AND RELATED SERVICES
Hazardous Substance Remediation Services
Rust performs on-site hazardous chemical and radioactive substance
remediation services for clients in the chemical, petrochemical, automotive and
other manufacturing industries and for federal, state and local government
entities, including the DOD and the DOE in connection with such projects as the
remediation of military bases and other government installations, the EPA in
connection with CERCLA projects and various state environmental agencies. Rust
treats hazardous substances on-site using a variety of methods and technologies,
including, among others, mobile incineration technology, thermal desorption to
separate organic contaminants from soils or solids for subsequent treatment of
the organic vapor stream, sludge drying, soil washing, stabilization, physical
separation and, to a lesser extent, bioremediation, which involves the breakdown
of hazardous substances with microorganisms. Rust's hazardous substance
remediation services also include the containment and closure of contaminated
sites and the cleaning, relining and sealing of liquid containment and treatment
ponds, lagoons and other surface impoundments.
Hazardous substance remediation services provided to Rust's private
industry clients often involve the implementation of "records of decision"
promulgated by the EPA in response to results of EPA environmental analysis and
investigation. In connection with the remediation of military bases and other
government installations, the DOD and DOE are experimenting with awarding multi-
disciplined remediation contracts known as Total Environmental Restoration
Contracts ("TERCs") and Environmental Restoration and Management Contracts
("ERMCs") to a single company capable of providing the management services
necessary to oversee the entire project. The company selected is, in effect,
the project's general contractor. In August 1993, the U.S. Army Corps of
Engineers awarded to Rust two TERCs under which Rust could be paid up to $350
million over a ten year period. As the TERCs are structured, Rust will perform
work pursuant to individual delivery orders negotiated on a project-by-project
basis. There can be no assurance that the number of delivery orders ultimately
issued or successfully negotiated and performed by Rust will aggregate $350
million in fees. Rust intends to utilize its integrated approach to providing a
full range of engineering, construction, environmental consulting, on-site
hazardous substance remediation and other industrial services to pursue
additional comprehensive federal government contracts.
On-Site Industrial and Related Services
Rust provides various on-site industrial and related services. Such
services consist primarily of scaffolding, industrial cleaning, catalyst
handling, plant services and nuclear and utility services. Rust provides
scaffolding services primarily to the chemical, petrochemical and utilities
industries, as well as other clients. In most cases, the scaffolding services
are provided in conjunction with periodic, routine cleaning and maintenance of
refineries, chemical plants and utilities, although such services are also
performed in connection with new construction projects. Rust performs four
types of industrial cleaning services -- water blasting, chemical
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cleaning, vacuuming and water filtration--primarily for clients in the
petrochemical, chemical, and pulp and paper industries, utilities and, to a
lesser extent, the government sector. Rust's catalyst handling services include
the unloading, screening, classifying for reuse, disposing and reloading of
catalyst, primarily to customers in the refining, petrochemical, chemical and
gas processing industries using solid catalyst in reactors to convert, through
chemical reactions, various hydrocarbon substances into higher grades or
specific products and to remove unwanted byproducts. Rust's on-site plant
services include providing personnel to perform mechanical and electrical
services, equipment installation, welding, HVAC, warehousing and inventory
management services and technical support in the area of industrial hygiene and
safety training. Rust assists clients in the nuclear and utility industries in
solving electrical, mechanical, engineering and related technical services
problems. Rust also provides spent fuel storage (rerack) services to the
nuclear power industry.
Rust received 55%, 57% and 48% of its total consolidated revenues in 1991,
1992 and 1993, respectively, from the performance of hazardous substance
remediation and other on-site industrial and related services (including
asbestos abatement services until the May 1992 sale of that business as
described in "Acquisitions and Dispositions"). The revenues and net income from
such services can fluctuate for interim periods and from year to year for a
number of reasons, including that (i) the demand for many of these services is
seasonal (less activity during the winter months), (ii) the performance of such
services on a given project may be affected by technical problems, labor
shortages and disputes, weather and delays caused by external sources and
fluctuations in the price of materials, (iii) in the case of the hazardous
substance remediation business, changes in federal, state and local funding or
enforcement priorities, and (iv) in the case of on-site industrial and related
services, demand is also affected by the periodic scheduling of outages at
utilities and other industrial facilities.
BACKLOG
Rust's backlog consists of uncompleted portions of engineering,
construction, environmental and infrastructure consulting, remediation and on-
site industrial and other related services contracts.
As of December 31, 1993, Rust had estimated consolidated backlog of work
under contracts believed to be firm of $1.022 billion, as compared with an
estimated backlog of $902 million as of December 31, 1992. Approximately 73% of
Rust's consolidated backlog is expected to be completed in 1994. Although
backlog reflects only business considered to be firm and is an indication of
future revenues, there can be no assurance that contract cancellations or scope
adjustments will not occur, or as to when revenue from such backlog will be
realized. Backlog shown above does not include approximately $350 million in
respect of TERCs awarded to Rust by the U. S. Army Corps of Engineers in 1993.
See "Remediation and Other On-Site Industrial and Related Services--Hazardous
Substance Remediation Services." There can be no assurance that specific
projects identified and performed by the Company pursuant to such TERCs will
result in aggregate revenues of $350 million over the terms of such contracts.
EQUITY INVESTMENTS
Rust owns approximately 12% of the outstanding ordinary shares of WM
International, a leading international provider of comprehensive waste
management and related services which conducts substantially all of the waste
management operations located outside of North America of WMX and its
affiliates. WM International records and reports its earnings in Pounds
Sterling. Currency fluctuations affecting the Pounds Sterling exchange rates
will cause Rust's earnings from WM International to fluctuate. Rust may from
time to time engage in hedging transactions in order to mitigate the effect of
such exchange fluctuations.
Rust and OHM Corporation each hold approximately 40% of the outstanding
shares of NSC Corporation ("NSC"). The remaining outstanding shares are
publicly held. NSC is an environmental services company providing asbestos
abatement and other related services to a broad range of commercial and
industrial clients and governmental agencies throughout the United States.
During 1993, NSC consummated a transaction with Brand and WMX, pursuant to
which NSC acquired the assets of the asbestos abatement division of Brand in
exchange for the issuance to Brand of NSC common stock and all of its interest
in several industrial cleaning and maintenance services businesses. See
"Acquisitions and Dispositions."
COMPLIANCE
Because generators remain responsible by law for their hazardous wastes
even after the wastes have been transferred to a third party for disposal, the
Company believes that an essential part of the services it provides to its
customers is a high level of confidence regarding its ability to comply with
applicable
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environmental regulatory requirements. The Company's compliance program has
been developed for each of its operational facilities under the direction of its
experienced professional compliance staff, many of whose members have prior
environmental regulatory experience. The Company's requirements are in certain
cases more stringent than those imposed by regulation. See "Regulation" herein.
The Company views compliance as the responsibility of all its employees and
periodically conducts training programs on various aspects of hazardous
materials management. Each treatment and disposal facility has a compliance
coordinator assigned to it. Facility laboratories are monitored by the
Company's quality assurance and quality control personnel. The Company's in-
house environmental attorneys and other professionals closely follow regulatory
developments and have extensive experience in dealing with compliance matters.
The Company believes that community relations are an integral part of its
responsibility and, for each community in which it operates, has set up programs
to respond to community concerns.
TECHNOLOGY
The Company's hazardous waste analytical and development activities include
an extensive quality assurance and quality control program involving periodic
audits of Company laboratories, verification of laboratory performance and the
establishment of standards for analytical work performed at the Company's own
facilities as well as at outside laboratories utilized by the Company. Other
activities include development of analytical methods, performance of waste
sample analyses for certain customers and participation in the federal and state
regulatory processes.
The Clemson Technical Center (the "Center") located in Anderson, South
Carolina and currently being operated by Rust, provides the Company with
technical support, including hazardous substance treatability studies and pilot
plant design and demonstration services. Such services often are funded by
third parties. For instance, the Center is currently performing process
development services on behalf of Rust under four programs being funded by the
DOE to test specific technology applications at DOE facilities.
The Company owns or licenses a number of patents and patent applications or
other proprietary technology that are important to various aspects of its
business, but the patents and licenses are not considered material to the
conduct of any of its businesses. The Company believes that its businesses
depend primarily on such factors as quality and cost of services, project
development capability, engineering and technical skill, and financial strength
rather than on patent protection.
CUSTOMERS AND MARKETING
CWM's services are primarily marketed by its local sales force located
throughout the United States. Sales personnel develop and maintain
relationships with clients in an effort to keep abreast of planned future
projects and, where applicable, to attempt to ensure that CWM is included on
proposal or bid lists. With respect to its chemical waste management services
business, sales efforts have been directed at establishing relationships with
virtually all of the several hundred largest industrial companies in the United
States, with large governmental departments and agencies and, more recently,
with small quantity generators of chemical wastes. A portion of such services
performed by CWM is arranged through brokers. CWM's radioactive waste
management operations provide services primarily to electric utilities operating
nuclear power plants, as well as to industrial companies, universities,
hospitals and the federal government.
Rust's services are primarily marketed by Rust's local sales force located
throughout the United States. Rust markets its services by stressing its
skills, project performance record, the price at which its services are provided
and the efficiency with which its services are performed. Rust also stresses
its safety record, particularly with respect to its on-site industrial and
related services, the nature of which involve, in some cases, a substantial
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degree of safety risk. Rust also promotes its engineering and construction
services by entering into relationships with third parties for the purpose of
developing projects. In connection therewith, Rust may from time to time have
some portion of its capital resources at risk in connection with financing,
designing, building, owning and operating such projects.
Rust received 11.6%, 8.7% and 15.8% of its total consolidated revenues in
1991, 1992 and 1993, respectively, from WMX and its affiliates. Transactions
with WMX and its affiliates are conducted on a competitive basis and there is no
assurance that Rust will continue to receive substantially similar amounts of
revenue from WMX or its affiliates. However, WMX and its affiliates have agreed
that Rust will be the preferred provider to WMX and its affiliates (other than
WM International) of the types of services provided by Rust, subject to certain
limitations. Rust also received 11.6% of its total consolidated revenues in
1993 from direct contracts with the United States Government and its departments
and agencies. Business with the United States Government is also highly
competitive, and there is no assurance that Rust will continue to receive such
business.
No other customer or related group of customers accounted for a material
portion of the Company's business in 1993.
COMPETITION
Competition in the chemical waste management services market is encountered
from a number of sources, including several national or regional waste
management firms, firms specializing primarily in chemical waste management,
local waste management firms and, to a much greater extent, generators of
chemical wastes which seek to reduce the volume of or otherwise process and
dispose of such wastes themselves. The basis of competition is primarily
technical expertise and the price, quality and reliability of service.
The Company does not believe that any other firm offers as many treatment
technologies and as broad a network of chemical waste transportation, treatment,
storage and disposal facilities as does the Company. Due to the significant
extent to which certain chemical waste generators process and dispose of such
wastes themselves, the Company does not believe that any company accounts for a
material portion of the total domestic chemical waste management market. As a
result of the considerable capital expenditures needed to develop a permitted
treatment, storage or disposal facility for chemical wastes, and the difficulty
of obtaining permits, companies which have such permitted facilities may have a
competitive advantage.
In addition to the Company's Barnwell, South Carolina facility, there is
only one other licensed commercial low-level radioactive waste disposal facility
in operation in the United States, located near Richland, Washington. Since
January 1, 1993, that facility accepts waste for disposal only from certain
states west of the Mississippi River. Of the electric utilities in the United
States that operate nuclear power plants, most are located in the eastern
portion of the country. The Company believes that it currently disposes of the
majority of low-level radioactive waste generated commercially in states east of
the Mississippi River at its Barnwell facility. Because licensed disposal
facilities require considerable capital expenditures, and because licenses are
difficult to obtain, companies which have licensed facilities may have a
competitive advantage. However, many of the Company's utility customers are
believed to be considering on-site storage of low-level radioactive waste.
Competition in the other nuclear services provided by the Company is encountered
from a number of companies.
Although Rust is a leading provider of engineering, construction,
environmental and infrastructure consulting, hazardous substance remediation and
other on-site industrial and related services, the Company does not believe that
any entity accounts for a material portion of this decentralized, highly
fragmented market. The service industries in which Rust operates are highly
competitive and certain aspects require substantial human and capital resources.
Rust encounters intense competition, primarily in pricing, quality and
reliability of services from various sources in all aspects of its engineering,
construction, environmental and infrastructure consulting services and its
construction, hazardous substance remediation, and industrial and other on-site
and related
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services operations. Other competitive factors include the ability to deliver
an expanded range of environmentally related services, type of equipment used,
response time and employee safety record. Some competitors of Rust may have
substantially greater financial resources than Rust. Particularly with respect
to large contracts, such as for the government sector, or contracts or bids with
respect to construction or development of industrial or power facilities, Rust
may be required to commit substantial resources over a long period of time
without any assurance of being selected to perform, or of successfully
completing such projects.
Until such time as WMX ceases to own shares having a majority of the voting
power in the election of CWM's directors, WMX has agreed not to engage directly
or indirectly in the storage, processing, treatment or disposal of (i) low-level
radioactive waste in the United States or Canada, (ii) hazardous wastes
regulated under RCRA, or wastes the storage, treatment or disposal of which was
regulated under TSCA at the time of WMX's agreement with the Company in
September 1986 or (iii) such wastes in Canada which would be so regulated in
the United States. The Company has also entered into an Amended and Restated
International Business Opportunities Agreement with WMX, Rust, WTI, WM
International and an affiliate of WM International pursuant to which, in part,
the Company agreed that, in order to minimize the potential for conflicts of
interest among various subsidiaries under the common control of WMX, WMX has the
right to direct all business opportunities to the WMX controlled subsidiary
which, in WMX's reasonable and good faith judgment, has the most experience and
expertise in that line of business. 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 the
Company. 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, the Company 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 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 WMX ceases to beneficially own
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a majority of the outstanding voting equity interests of the Company or Rust, as
the case may be, or a majority of all outstanding voting equity interests of WM
International. In addition, the terms of the NSC Purchase Agreement (as
hereinafter defined) provide, among other things, that none of CWM, Rust, WTI,
WMX or their respective affiliates will compete with NSC Corporation in the
asbestos abatement business for a period of five years. See "Acquisitions and
Dispositions" and Items 12 and 13.
INSURANCE
While the Company believes it operates professionally and prudently, its
business exposes it to risks such as the potential for harmful substances
escaping into the environment and causing damage or injuries, the cost of which
could be substantial. The Company currently has liability insurance coverage
for non-nuclear related occurrences under environmental impairment, primary
casualty and excess liability insurance policies maintained by WMX, the costs of
which are shared. See Item 13. Pursuant to RCRA, the Company is required to
maintain environmental impairment liability insurance coverage with specified
minimum policy limits for sudden and nonsudden accidental occurrences. The
required minimum coverages are $1,000,000 per occurrence/$2,000,000 aggregate
per year for sudden accidental occurrences, and $3,000,000 per
occurrence/$6,000,000 aggregate per year for nonsudden accidental occurrences,
in each case exclusive of defense costs. The Company believes that its policies
comply with applicable environmental regulatory financial responsibility
requirements.
The market for non-sudden environmental impairment liability insurance is
constricted, with only a few insurance companies currently offering coverage and
with coverage entailing limited amounts with restrictive terms and high premium
costs. Consequently, the Company is utilizing coverage under the one non-sudden
environmental impairment liability insurance policy maintained by WMX. Under
that policy, losses paid by the carrier must be reimbursed over a period of
years, subject to a requirement that WMX make advance deposits with the carrier
for such purpose. A claim covered under such an insurance policy which does not
transfer risk, if successful and of sufficient magnitude, could have a material
adverse effect on the Company's business, earnings or financial condition.
The Company has nuclear insurance in an amount substantially exceeding that
which is required by the State of South Carolina to cover liabilities arising
out of its low-level radioactive waste disposal operations and certain of its
transportation services. The Company's other operations at nuclear power plants
are insured under the nuclear liability and compensation system established by
the Price-Anderson Act amendment to the Atomic Energy Act of 1954.
EMPLOYEES
The Company (excluding Rust) employed approximately 4,400 persons at
December 31, 1993. Of this number, the Company employed approximately 200 as
managers or executives, approximately 3,200 in transportation, treatment,
resource recovery and disposal activities (including approximately 900
performing technical, analytical or engineering services), and approximately
1,000 in sales, clerical, data processing and other activities. At that date,
approximately 250 of such employees were represented by various labor unions
under collective bargaining agreements expiring on various dates through 1997.
Excluding Rust, five collective bargaining agreements will expire in 1994.
Rust employed approximately 16,000 persons at December 31, 1993, of whom
approximately 1,400 were employed as managers or executives, approximately 5,100
provided technical or engineering services (excluding craft personnel hired on
a temporary basis), approximately 1,500 were employed in sales, clerical and
data processing activities and approximately 8,000 were employed in other
activities, principally providing hourly rated labor. At that date,
approximately 2,100 of Rust's employees were represented by various labor unions
under numerous collective bargaining agreements, most of which have one-to three
year terms but provide for automatic renewal if not terminated by a party
thereto.
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The Company and its subsidiaries have not experienced a significant work
stoppage and consider their employee relations to be good.
ACQUISITIONS AND DISPOSITIONS
Since commencing operations, the Company's businesses have expanded in part
through acquisitions of other companies, and certain assets of other companies,
engaged in various phases of the environmental, engineering, construction and
industrial services industries. See Note 4 to the Company's Consolidated
Financial Statements filed as an exhibit to this report and incorporated herein
by reference.
In September 1988, CWM acquired newly issued common and convertible
preferred shares from Brand equivalent to a 49% ownership interest in Brand.
Most of the consideration was paid in cash, with the balance consisting of CWM's
asbestos abatement businesses which were transferred to Brand and CWM's
agreement, among other matters, to furnish certain services to Brand. In
October 1990, CWM exercised options increasing its ownership of Brand capital
stock to a majority interest. In January 1993, CWM contributed its Brand shares
to Rust.
In May 1993, pursuant to an agreement (the "NSC Purchase Agreement") by and
among NSC, NSC's wholly owned subsidiary, NSC Industrial Services Corp., Brand,
WMX and OHM Corporation, previously an approximately 70% stockholder of NSC,
Brand transferred its asbestos abatement business to NSC in exchange for an
approximately 41% interest in NSC Corporation and two industrial services
companies of NSC. Rust assumed the rights and obligations of Brand under the NSC
Purchase Agreement upon consummation of the merger of Brand into a subsidiary of
Rust.
In August 1993, Rust acquired EnClean, Inc., an industrial and
environmental services business providing hydroblasting, industrial vacuuming,
chemical cleaning, separation technology, site remediation and catalyst handling
services. The acquisition expanded Rust's presence primarily in the Gulf Coast
area and added chemical cleaning and catalyst handling to the services already
provided by Rust.
In September 1993, CWM announced plans to, among other things, eliminate
approximately 1,200 positions by year-end 1994, consolidate operations in its
treatment and land disposal group, restructure its sales and service regions,
sell selected service centers in marginal service lines and geographies, seek
joint venture partners and review other strategic alternatives for its Port
Arthur, Texas incinerator and centralize additional functions. CWM is
restructuring its hazardous waste management and related services operations on
the assumption that future base business revenue growth, if any, will not keep
pace with the recovery in the general economy, and plans not to make investments
which are primarily supported by non-recurring (event business) volumes.
REGULATION
The environmental services industry is subject to extensive and evolving
regulation by federal, state, local and foreign authorities. In particular, the
regulatory process requires firms in the Company's industry to obtain and retain
numerous governmental permits to conduct various aspects of their operations,
any of which may be subject to revocation, modification or denial. As a result
of governmental policies and attitudes relating to the environmental services
industry which are subject to reassessment and change, the Company believes that
its ability to obtain applicable permits from governmental authorities on a
timely basis, and to retain such permits, could be impaired. The Company is not
in a position at the present time to assess the extent of the impact of such
potential changes in governmental policies and attitudes on the permitting
processes, but it could be significant. In particular, adverse decisions by
governmental authorities on permit applications submitted by the Company may
result in abandonment of projects, premature closure of facilities or
restriction of operations, which could have a material adverse effect on the
Company's earnings for one or more fiscal quarter or years.
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Due to the complexity of regulation of the industry and to public pressure,
implementation of existing or future laws, regulations or initiatives by
different levels of government may be inconsistent and difficult to foresee.
The Company makes a continuing effort to anticipate regulatory, political and
legal developments that might affect its operations, but is not always able to
do so. In this regard, federal, state, local and foreign governments have from
time to time proposed or adopted other types of laws, regulations or initiatives
with respect to the environmental services industry. Included among them have
been laws, regulations and initiatives in the United States to ban or restrict
the interstate shipment of hazardous wastes, impose higher taxes on out-of-state
hazardous waste shipments than in-state shipments and reclassify certain
categories of hazardous wastes as non-hazardous. In particular, the federal
government currently is considering several fundamental changes to laws and
regulations that define which wastes are hazardous, that establish treatment
standards for certain wastes that could lead to their reclassification as non-
hazardous, and that revise the nature and extent of responsible parties'
obligations to remediate contaminated property. While the outcome of these
deliberations cannot be predicted, it is possible that some of the changes under
consideration could facilitate exemptions from hazardous waste requirements for
significant volumes of waste and alter the types of treatment and disposal that
will be required. If such changes are implemented, the overall impact on the
Company's business is likely to be unfavorable. While the Company cannot
predict the extent to which any legislation or regulation that may be enacted or
enforced in the future may affect its operations, such matters could have a
material adverse impact on earnings for one or more fiscal quarters or years.
In addition to environmental laws and regulations, federal government
contractors, including the Company, are subject to extensive regulations under
the Federal Acquisition Regulation and numerous statutes which deal with the
accuracy of cost and pricing information furnished to the government, the
allowability of costs charged to the government, the conditions under which
contracts may be modified or terminated, and other similar matters. Various
aspects of the Company's operations are subject to audit by agencies of the
federal government in connection with its performance of work under such
contracts as well as its submission of bids or proposals to the government.
Under certain circumstances, the government may have the right to modify
contract price terms unilaterally. Failure to comply with contract provisions or
other applicable requirements may result in termination of the contract, the
imposition of civil and criminal penalties against the Company, or the
suspension or debarment of all or a part of the Company from federal government
work, which could have a material adverse impact upon the Company's operations,
financial condition or earnings. Among the reasons for debarment are violations
of various statutes, including those related to employment practices, the
protection of the environment, the accuracy of records and the recording of
costs. Some state and local governments have similar suspension and debarment
laws or regulations.
Because of heightened public awareness of environmental issues, companies
in the environmental service business, including the Company, may in the normal
course of their business be expected periodically to become subject to judicial
and administrative proceedings. Governmental agencies may seek to impose fines
on the Company or revoke, deny renewal of, or modify the Company's operating
permits or licenses. The Company is also subject to actions brought by private
parties or special interest groups in connection with the permitting or
licensing of its operations, alleging violations of such permits and licenses,
or other matters. In addition, increasing governmental scrutiny of the
environmental compliance records of the Company or one or more of its affiliates
could cause a private or public entity seeking environmental services to
disqualify the Company from competing for one or more projects, on the grounds
that these records display inadequate attention to environmental compliance.
CHEMICAL WASTE
The Company is required to obtain federal, state, local and foreign
governmental permits for its chemical waste treatment (including resource
recovery), storage and disposal facilities. Such permits are difficult to
obtain, and in most instances extensive geological studies, tests and public
hearings are required before permits may be issued. The Company's treatment,
storage and disposal facilities are also subject to siting, zoning and land use
restrictions, as well as to regulations (including certain requirements pursuant
to federal statutes) which may govern operating procedures and water and air
pollution, among other matters. In particular, the Company's operations in the
United States are subject to the Safe Drinking Water Act (which regulates deep
well injection), TSCA (pursuant to which the EPA has promulgated regulations
concerning the disposal of PCBs), the Clean
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Water Act (which regulates the discharge of pollutants into surface waters and
sewers by municipal, industrial and other sources) and the Clean Air Act (which
regulates emissions into the air of certain potentially harmful substances). In
its transportation operations, the Company is subject to the jurisdiction of the
Interstate Commerce Commission and is regulated by the DOT and by regulatory
agencies in each state. Employee safety and health standards under the
Occupational Safety and Health Act ("OSHA") are also applicable.
RCRA
Pursuant to RCRA, the EPA has established and administers a comprehensive,
"cradle-to-grave" system for the management of a wide range of industrial by-
products and residues identified as "hazardous" wastes. States that have
adopted hazardous waste management programs with standards at least as stringent
as those promulgated by the EPA may be authorized by the EPA to administer their
programs in lieu of RCRA.
Under RCRA and federal transportation laws, all generators of hazardous
wastes are required to label shipments in accordance with detailed regulations
and prepare a detailed manifest identifying the material and stating its
destination before shipment offsite. A transporter must deliver the hazardous
wastes in accordance with the manifest and only to a treatment, storage or
disposal facility having a RCRA permit or interim status under RCRA. Every
facility that treats or disposes of hazardous wastes must obtain a RCRA permit
from the EPA or an authorized state and must comply with certain operating
standards. The RCRA permitting process involves applying for interim status and
also for a final permit. Under RCRA and the implementing regulations,
facilities which have obtained interim status are allowed to continue operating
by complying with certain minimum standards pending issuance of a permit.
Amendments to RCRA enacted in 1984 expanded its scope by, among other
things, adding wastes to the hazardous category and providing for the regulation
of hazardous wastes generated in quantities greater than 100 kilograms per month
(reduced from the prior cutoff of regulatory authority at the 1,000 kilograms
per month level). Additionally, the amendments impose restrictions on land
disposal of certain hazardous wastes and prescribe more stringent standards for
hazardous waste land disposal facilities. The amendments also contain a
statement of policy that reliance on land disposal of hazardous wastes should be
minimized or prohibited. Land disposal of certain types of untreated hazardous
wastes was banned except where the EPA determined that land disposal of such
wastes and treatment residuals should be permitted. In accordance with the
amendments, the disposal of liquids in hazardous waste land disposal facilities
was prohibited in 1985. Since 1983, it has been the Company's practice to
prohibit the disposal of liquids in secure land disposal cells.
Also under the RCRA amendments, by November 1985, RCRA-regulated hazardous
waste facilities with land disposal operations were required to certify
compliance with groundwater monitoring and financial responsibility
requirements, or be faced with the loss of federal authority to operate. All of
the Company's affected facilities for which continued operations are planned
certified compliance with these requirements. The requirement to certify
applied to approximately 1,500 RCRA-regulated facilities nationwide, although
not all of them were then operating or have continued to operate. Of those
facilities, approximately one-third were able to certify and remain eligible to
operate.
EPA currently is considering a number of fundamental changes to its
regulations under RCRA that could facilitate exemptions from hazardous waste
management requirements, including policies and regulations that could implement
the following changes: redefine the criteria for determining whether wastes are
hazardous; prescribe treatment levels which, if achieved, could render wastes
non-hazardous; encourage further recycling and waste minimization; reduce
treatment requirements for certain wastes to encourage alternatives to
incineration; establish new operating standards for combustion technologies; and
indirectly encourage on-site remediation. Because many of these initiatives are
at an early stage of development, the Company cannot predict the final decisions
EPA might make or the extent of their impact on the Company's business.
17
<PAGE>
Of the Company's chemical waste treatment, resource recovery or disposal
facilities in the United States, all but three have been issued permits under
RCRA. Such facilities without RCRA permits continue to have interim status.
Final permits are to be issued jointly by authorized states subject to EPA
oversight and by the EPA. The regulations governing issuance of permits contain
detailed standards for hazardous waste facilities on matters such as waste
analysis, security, inspections, training, preparedness and prevention,
emergency procedures, reporting and recordkeeping. Once issued, a final permit
has a maximum fixed term of 10 years, and such permits for land disposal
facilities are required to be reviewed five years from the date of issuance.
The issuing agency (either the EPA or an authorized state) may review or modify
a permit at any time during its term.
The Company believes that each of its operating treatment, storage or
disposal facilities is in substantial compliance with the applicable
requirements promulgated pursuant to RCRA, and the Company expects that each
facility with interim status ultimately can qualify to be issued a RCRA permit.
It is possible, however, that in some instances the issuance of a permit could
be made conditional upon the initiation or completion by the Company of certain
modifications or corrective actions at the facility in question. If so,
substantial additional capital expenditures on the part of the Company could be
necessary. In addition, permits may be issued with restrictions that would
limit the Company's future operations at a facility. The Company anticipates
that once a permit is issued with respect to a facility, the permit will be
reauthorized at the end of its term if the facility's operations are in
compliance with applicable requirements. However, there can be no assurance
that such will be the case.
In addition to the foregoing provisions, RCRA regulations require the
Company to demonstrate financial responsibility for bodily injury and property
damage to third parties caused by both sudden and nonsudden accidental
occurrences (see "Insurance" herein). Also, RCRA regulations require the
Company to provide financial assurance that funds will be available when needed
for closure and post-closure care, the costs of which could be substantial, at
its chemical waste treatment, storage and disposal facilities. Such regulations
allow the financial assurance requirements to be satisfied by various means,
including letters of credit, surety bonds, trust funds, a financial (net worth)
test and a guarantee by a parent corporation. The Company is currently
satisfying such requirements through a combination of the various allowable
methods, including letters of credit and guarantees in the requisite form
provided by WMX, which WMX has agreed to continue to furnish under certain
conditions for a limited period of time (see Item 13). The Company accrues for
closure costs for individual secure land disposal cells as airspace is utilized.
The Company does not accrue for closure costs of other facilities which are not
consumed as used. The Company believes that it will continue to be able to
satisfy the RCRA financial assurance requirements through WMX or other means,
although possibly at an increased cost.
Superfund
Superfund provides for immediate response and removal actions coordinated
by the EPA to releases of hazardous substances into the environment, and
authorizes the federal government either to clean up facilities at which
hazardous substances have created actual or potential environmental hazards or
to order persons responsible for the situation to do so. Superfund assigns
liability for these response and other related costs to parties involved in the
generation, transfer and disposal of such hazardous substances. Superfund has
been interpreted as creating strict, joint and several liability for costs of
removal and remediation, other necessary response costs and damages for injury
to natural resources. Liability extends to owners and operators of waste
disposal facilities (and waste transportation vehicles) from which a release
occurs, persons who owned or operated such facilities at the time the hazardous
substances were disposed, persons who arranged for disposal or treatment of a
hazardous substance at or transportation of a hazardous substance to such a
facility, and waste transporters who selected such facilities for treatment or
disposal of hazardous substances, as well as to generators of such substances.
Liability may be trebled if the responsible party fails to perform a removal or
remedial action ordered under the law. See Item 3.
18
<PAGE>
Superfund created a revolving fund to be used by the federal government to
pay for the cleanup efforts. In late 1990, federal Superfund spending through
the end of the government's 1994 fiscal year was authorized up to a maximum of
$5.1 billion.
The U. S. Congress is expected to reauthorize and revise the Superfund
statute in 1994 or 1995. In addition to possible changes in the statute's
funding mechanisms and provisions for allocating cleanup responsibility, it is
possible that Congress also will fundamentally alter the statute's provisions
governing the selection of appropriate site cleanup remedies. For example,
Congress is expected to consider whether to continue Superfund's current
reliance on stringent technology standards issued under other statutes (such as
RCRA) to govern removal and treatment of remediation wastes or to adopt new
approaches such as national or site-specific risk based standards. This and
other potential policy changes could significantly affect the stringency and
extent of site remediation, the types of remediation techniques that will be
employed, and the degree to which permitted hazardous waste management
facilities will be used for remediation wastes.
RADIOACTIVE WASTE
The radioactive waste services of the Company are also subject to extensive
governmental regulation. Due to the extensive geological and hydrological
testing and environmental data required, and the complex political environment,
it is difficult to obtain permits for radioactive waste disposal facilities.
Various phases of the Company's radioactive waste management services are
regulated by various state agencies, the NRC and the DOT. Regulations
applicable to the Company's operations include those dealing with packaging,
handling, labelling and routing of radioactive materials, and prescribe detailed
safety and equipment standards and requirements for training, quality control
and insurance, among other matters. Employee safety and health standards under
OSHA are also applicable.
ENGINEERING, CONSTRUCTION AND RELATED SERVICES
RCRA, state law analogues, TSCA, which regulates PCB treatment, storage and
disposal, and other environmental statutes and regulations impose strict
operational requirements on the performance of certain aspects of remedial work.
See Regulation -- Chemical Waste. These requirements specify complex methods
for identification, storage, treatment and disposal of wastes generated during a
project. Failure to meet these requirements could result in termination of
contracts, substantial fines and other penalties. The cost and complexity of
permit or license applications for remedial work can be considerable.
Furthermore, Rust may not receive necessary permits at the end of the
application process, for any of a variety of reasons such as perceived
compliance problems, the permitting authority's judgment that the application,
even if complete, fails to meet technical or regulatory requirements and
community opposition to the project. Any of these reasons can also cause
significant delays in the issuance of necessary permits.
The practice of engineering and architecture is regulated by state
statutes. All states require architects and engineers to be registered by their
respective state registration boards as a condition to offering or rendering
professional services. Many states also require companies offering or rendering
professional services, such as Rust, to obtain certificates of authority.
Employee safety and health standards under OSHA are also applicable to
Rust's businesses. Rust's utility services business is also subject to NRC
regulations concerning rerack services and service related products, such as
fire prevention seals, provided to nuclear power plants.
ITEM 2. PROPERTIES.
The principal fixed assets of the Company consist of its network of
transportation, treatment, storage and disposal facilities and its fleet of
transportation vehicles. At December 31, 1993, vehicles and equipment
represented approximately 24% of the Company's hazardous waste management and
related assets. Rust's
19
<PAGE>
principal fixed assets consist of its headquarters buildings, vehicles,
equipment and scaffolding inventory, which as of December 31, 1993 represented
approximately 20% of Rust's total assets as reflected in its consolidated
balance sheet.
At December 31, 1993, the Company's chemical waste facilities with secure
land disposal sites (as set forth in the table below) aggregated approximately
10,500 acres, including approximately 3,050 permitted acres. The Company
believes that, at current rates of utilization, the permitted and other
potentially usable acres included in such total have sufficient capacity to
enable the Company to continue to conduct secure land disposal operations for
more than 30 years, although not all of the Company's facilities have such
capacity.
The Company's corporate headquarters are located at 3001 Butterfield Road,
Oak Brook, Illinois in premises leased from WMX on a month to month basis.
Rust's corporate headquarters are located in Birmingham, Alabama and consist of
three office buildings owned by Rust.
As of December 31, 1993, the Company's real estate holdings represented
approximately 31% of the Company's hazardous waste management and related
assets, and the aggregate annual rental payments on real estate (excluding Rust)
approximated $4,951,000. Rust's real estate holdings do not represent a
material portion of its assets, as its operations are conducted principally from
leased office and warehouse space. Rust's aggregate 1993 rental payments on
real estate approximated $19,000,000.
The following table sets forth certain information regarding the principal
treatment, resource recovery or disposal facilities owned or leased by the
Company:
<TABLE>
<CAPTION>
Location Principal Uses Status
- ------------------------- ------------------------- ----------------------
<S> <C> <C>
Emelle, Alabama Treatment, secure land Owned
disposal (PCB permitted),
resource recovery
Azusa, California Treatment, resource Owned
recovery
Kettleman Hills, Treatment, secure land Owned
California disposal (PCB permitted),
resource recovery
Henderson, Colorado Treatment, resource Owned
recovery
Morrow, Georgia Treatment, resource Owned
recovery
Calumet City, Treatment, secure land Leased (treatment and
Illinois disposal disposal operations
suspended)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Chicago, Illinois High temperature Leased through
incinerator (PCB December 31,
permitted) 2000, with one
10-year renewal
option (incineration
operations
suspended)
<S> <C> <C>
Sauget, Illinois High temperature Owned
incinerators
Fort Wayne, Indiana Treatment, secure Owned
land disposal
Carlyss, Louisiana Treatment, secure land Owned
disposal, resource
recovery
Newark, New Jersey Treatment, resource Leased through
recovery December 31, 2002, with
option to acquire
Model City, New York Treatment, secure land Owned
disposal (PCB permitted),
resource recovery
Vickery, Ohio Treatment, deep well Owned
injection
West Carrollton, Ohio Treatment, resource Owned
recovery
Arlington, Oregon Treatment, secure land Owned
disposal (PCB permitted)
Barnwell, Low-level radioactive Owned in part,
South Carolina waste disposal and leased in
part through 2075
Kingston, Tennessee Mixed waste treatment Owned
Port Arthur, Texas High temperature incinerator, Owned
(PCB permitted), treatment, (disposal
deep well injection, secure land operations
disposal suspended)
Corpus Christi, Texas Treatment, deep well Owned
injection
Menominee Falls, Wisconsin Treatment Leased through
October 1, 2085
</TABLE>
21
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The business in which the Company is engaged is intrinsically connected with
the protection of the environment and the potential for the unintended or
unpermitted discharge of materials into the environment. In the ordinary course
of conducting its business activities, the Company becomes involved in judicial
and administrative proceedings involving governmental authorities at the
federal, state and local levels (including, in certain instances, proceedings
instituted by citizens or local governmental authorities seeking to overturn
governmental action where governmental officials or agencies are named as
defendants together with the Company or one or more of its subsidiaries, or
both). In the majority of the situations where regulatory enforcement
proceedings are commenced by governmental authorities, the matters involved
relate to alleged technical violations of licenses or permits pursuant to which
the Company operates or is seeking to operate, or of laws or regulations to
which its operations are subject, or are the result of different interpretations
of the applicable requirements. From time to time, the Company pays fines or
penalties in environmental proceedings relating primarily to waste treatment,
storage or disposal facilities. At December 31, 1993, the Company was involved
in four governmental proceedings (other than those described below) relating to
operations of the Company or one of its subsidiaries where the Company believes
sanctions may exceed $100,000.
On November 12, 1993, the Supreme Court of the State of Louisiana denied the
Company's application for a writ of review of an opinion of the Louisiana First
Circuit Court of Appeal affirming an administrative order that imposed a fine of
approximately $262,000 for certain incidents occurring in 1987 and 1988 at the
Company's Lake Charles, Louisiana facility, including alleged unpermitted
storage of waste and alleged failures to mark the accumulation date on two
containers, to remove or overpack waste from a container in poor condition, to
keep hazardous waste containers closed, to properly design and operate the
containment system in a fuels loading and unloading area, to provide an adequate
number of warning signs, and to take certain actions to prevent fires.
On December 30, 1993, a subsidiary of the Company entered into a stipulation
of settlement with the New Jersey Department of Environmental Protection and
Energy in connection with certain matters occurring in 1992 and 1993 at the
Company's Newark, New Jersey facility, including alleged failures to follow
required procedures for rejecting hazardous wastes, to comply with certain
requirements for managing incompatible wastes and to prepare a manifest before
transporting certain waste, and the alleged shipment of waste to an unauthorized
facility. The Company's subsidiary agreed to pay civil penalties aggregating
approximately $218,000. In settling these matters, the Company's subsidiary did
not admit violations of law.
The Company has been identified as a potentially responsible party in a
number of governmental investigations and actions relating to waste disposal
facilities which may be subject to remedial action under Superfund. Generally
these proceedings are based on allegations that the Company or certain of its
subsidiaries (or their predecessors) transported hazardous substances to the
facilities in question, often prior to acquisition of such subsidiaries by the
Company. Such proceedings arising under Superfund typically involve numerous
waste generators and other waste transportation and disposal companies, and seek
to allocate or recover costs associated with site investigation and cleanup,
which costs could be substantial.
As of December 31, 1993, the Company or its subsidiaries had been notified
that they are potentially responsible parties in connection with 22 locations
listed on the Superfund National Priority List (the "NPL"). The 22 NPL sites
at which claims have been made against the Company are at different procedural
stages under Superfund. At some, the Company's liability is well defined as a
consequence of a governmental decision as to the appropriate remedy and an
agreement among liable parties as to the share each will pay for implementing
that remedy. At others, where no remedy has been selected and the liable
parties have been unable to agree on an appropriate allocation, the Company's
future costs are substantially uncertain.
The Company periodically reviews its role, if any, with respect to each
such location, giving consideration to the nature of the Company's alleged
connection to the location (e.g., owner, operator, transporter or generator),
the extent of the Company's alleged connection to the location (e.g., amount and
nature of waste hauled to the location, number of years of site
22
<PAGE>
operation by the Company or other relevant factors), the accuracy and strength
of evidence connecting the Company to the location, the number, connection and
financial ability of other named and unnamed potentially responsible parties at
the location, and the nature and estimated cost of the likely remedy. Where the
Company concludes that it is probable that a liability has been incurred, a
provision is made in the Company's financial statements for the Company's best
estimate of the liability based on management's judgment and experience,
information available from regulatory agencies and the number, financial
resources and relative degree of responsibility of other potentially responsible
parties who are jointly and severally liable for remediation of a specific site,
as well as the typical allocation of costs among such parties. If a range of
possible outcomes is estimated and no amount within the range appears to be a
better estimate than any other, then the Company provides for the minimum amount
within the range, in accordance with generally accepted accounting principles.
Sites subject to state action under state laws similar to the federal superfund
statute are treated by the Company in the same way as NPL sites.
The Company's estimates are subsequently revised, as deemed necessary, as
additional information becomes available. While the Company does not anticipate
that the amount of any such revisions will have a material adverse effect on the
Company's operations or financial condition, the measurement of environmental
liabilities is inherently difficult and the possibility remains that
technological, regulatory or enforcement developments, the results of
environmental studies or other factors could materially alter this expectation
at any time. Such matters could have a material adverse impact on financial
condition or earnings for one or more fiscal quarters or years.
The Company and certain of its subsidiaries are currently involved in civil
litigation and governmental proceedings relating to the conduct of their
business. While the outcome of any particular lawsuit or governmental
investigation cannot be predicted with certainty, the Company believes that
these matters will not have a material adverse effect on its results of
operations or financial condition.
On September 17, 1993, H. Peter Kriendler, a stockholder of the Company,
filed suit in the U. S. District Court for the Northern District of Illinois,
Eastern Division, alleging that the Company had violated Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Two similar suits
were filed in that Court on September 30, 1993 and October 13, 1993, and on
October 29, 1993 the Court and the parties agreed to consolidate them with the
first action. These lawsuits allege that the Company violated federal
securities laws by engaging in misrepresentations of, or failures to disclose,
material information concerning primarily (i) alleged overvaluation of certain
of the Company's assets, principally its incineration facilities, (ii) alleged
overstatement of the Company's earnings for 1992 and the first quarter of 1993
due to failure to write down the value of such assets and other matters and
(iii) the alleged existence of certain adverse hazardous waste treatment and
disposal industry conditions and trends. The lawsuits also allege, among other
things, liability on the part of WMX for the above-described alleged violations.
The lawsuits seek to represent a class of persons consisting of all purchasers
of the Company's common stock during the period of February 4, 1993 through
September 3, 1993 and to recover compensation for damages allegedly suffered by
such class due to the above-described alleged violations. The Company and WMX
believe that they have meritorious defenses to these lawsuits and intend to
contest the lawsuits vigorously.
The Company and WMX have brought suit against a substantial number of
insurance carriers in an action entitled Waste Management, Inc. et al. v. The
Admiral Insurance Company, et al. pending in the Superior court in Hudson
County, New Jersey. In this action the Company is seeking a declaratory
judgment that environmental liabilities asserted against the Company or its
subsidiaries, or that may be asserted in the future, are covered by insurance
policies purchased by the Company or its affiliates. The Company is also
seeking to recover defense costs and other damages incurred as a result of the
assertion of environmental liabilities against the Company or its subsidiaries
and the defendant insurance carriers' denial of coverage of such liabilities
over several years at approximately 34 sites. The defendants have denied
liability to the Company and have asserted various defenses, including that
environmental liabilities of the type for which the Company is seeking relief
are not risks covered by the insurance policies in question. The defendants have
indicated that they intend to contest these claims vigorously. Discovery is
currently underway in this proceeding and is expected to continue for several
years. No trial date has been set. The Company is unable at this time to
predict the outcome of this proceeding. No amounts have been recognized in the
Company's financial statements for any potential recoveries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the Company's security holders during the
fourth quarter of 1993.
23
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below are the names and ages of the Company's executive officers
(as defined by regulations of the Securities and Exchange Commission), the
positions they hold with the Company, their terms as officers and summaries of
their business experience. Executive officers are elected by the Board of
Directors and serve at the discretion of the Board.
D. P. Payne, age 51, has served as President and Chief Executive Officer and
a director of the Company since September 1991. From August 1990 to May 1993,
he also served as a Senior Vice President of WMX. Prior thereto, Mr. Payne had
been Vice President and Area General Manager of the Midwestern Area of
International Business Machines Corporation since prior to 1987. Mr. Payne is
also a director of Rust.
Brian J. Clarke, age 34, has served as Vice President and General Counsel of
the Company since January 1994. From July 1992 to January 1994 he served as
Regional Vice President and General Counsel of the Company's Thermal Operations
Group. Prior thereto he served as Counsel to the Company for more than the past
five years.
Jerome D. Girsch, age 48, has been Executive Vice President, Treasurer and
Controller and Chief Financial Officer and a director of the Company since March
1993. Mr. Girsch served as Vice President of WMX from 1981 to May 1993, as
Controller of WMX from 1986 to 1990 and as principal accounting officer of WMX
from April 1988 to 1990. From August 1992 until March 1993, Mr. Girsch served
as President of the Midwest Group of Waste Management, Inc., a wholly owned
subsidiary of WMX ("WMI"). From January 1990 until August 1992, Mr. Girsch
served as Executive Vice President of WMI.
Dr. Rodger D. Henson, age 50, has served as Vice President of the Company
and as President of its Treatment and Land Disposal Operations Group, since
December 1992. From July 1992 until December 1992, he served as Vice President-
- -Central Region of the Company. From November 1990 until July 1992, he served
as Vice President--Southern Region and from January 1990 until November 1990, he
served as Vice President--Regional Operations of the Company. Prior thereto he
served as General Manager of the Company's Emelle, Alabama facility for more
than the past five years.
Richard C. Scherr, age 47, has served as Vice President--Environment, Health
and Safety of the Company since August 1992. From September 1990 through August
1992, he served as Vice President of the Southern Region of ENSR Consulting and
Engineering/American NuKem Corporation, an environmental and engineering
consulting firm ("ENSR"). From April 1990 to September 1990, he served as Vice
President and General Manager of ENSR. From March 1989 until April 1990, he
served as General Manager of the Houston office of ENSR. Prior thereto, he
served as Associate Director, Packaged Soap and Detergents Product Supply for
The Procter & Gamble Company for more than the past five years.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is traded on the New York Stock Exchange and the
Chicago Stock Exchange under the symbol "CHW." The following table sets forth
by quarter for the last two years the high and low sale prices of the Company's
common stock on the New York Stock Exchange Composite Tape, as reported by The
Wall Street Journal (Midwest Edition), and the dividends declared by the
Company's Board of Directors on its common stock.
24
<PAGE>
1992 Quarterly Summary
----------------------
<TABLE>
<CAPTION>
Cash Dividends
High Low Declared Per Share
------ ------ ------------------
<S> <C> <C> <C>
First 23-1/2 18-1/2 $.05
Second 20-1/4 16-3/8 .05
Third 18-3/4 16-3/8 .05
Fourth 22 17-5/8 .05
</TABLE>
1993 Quarterly Summary
----------------------
<TABLE>
<CAPTION>
Cash Dividends
High Low Declared Per Share
------ ------ ------------------
<S> <C> <C> <C>
First 21-3/8 15-5/8 $.05
Second 15-3/4 9 .05
Third 10 7-3/8 -
Fourth 9-3/8 7 -
</TABLE>
At March 23, 1994, the Company had approximately 5,107 stockholders of record.
In August 1993, the Board of Directors suspended indefinitely the payment of
quarterly cash dividends on the Company's common stock. Future cash dividends,
if any, will be considered by the Board of Directors based upon the Company's
earnings and financial position and such other factors as the Board of Directors
considers relevant.
Due in part to the high level of public awareness of the business in which
the Company is engaged, regulatory enforcement proceedings or other unfavorable
developments involving the Company's operations or facilities, including those
in the ordinary course of business, may be expected to engender substantial
publicity which could from time to time have an adverse impact upon the market
price for the Company's common stock.
In November 1992, the Company announced a 24-month extension of its
authorization to purchase up to an aggregate of 10,000,000 shares of its common
stock from time to time in the open market or in privately negotiated
transactions. During 1991, 1992 and 1993, the Company purchased 2,610,700
shares, 1,451,100 shares and 3,300,300 shares, respectively.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial information for each of the
five years in the period ended December 31, 1993 is derived from the Company's
Consolidated Financial Statements, which have been audited by Arthur Andersen &
Co., independent public accountants, whose report thereon is incorporated by
reference in this report. The information below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements, and the related
Notes, and the other financial information which are filed as exhibits to this
report and incorporated herein by reference.
25
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries
Selected Consolidated Financial Data for the Years Ended December 31
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993/1/
---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue............................ $ 846,778 $1,146,972 $1,358,344 $1,518,603 $2,129,791
Income (loss) before cumulative
effect of change in
accounting principle/2/ /3/...... $ 144,243 $ 175,591 $ 100,806 $ 129,735 $ (300,316)
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)
Total assets....................... $1,105,154 $1,606,460 $2,025,512 $2,442,379 $3,124,044
Due to WMX Technologies, Inc....... $ 104,162 $ 53,230 $ 326,593 $ 626,712 $1,134,596
Other long-term debt............... $ 3,515 $ 190,319 $ 373,680 $ 138,338 $ 58,318
Redeemable preferred stock......... $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ --
Dividends per share/4/............. $ 0.11 $ 0.15 $ 0.19 $ 0.20 $ 0.10
- -------------------
</TABLE>
/1/ Results for 1993 reflect the consolidation of Rust. See Note 1 to the
Company's Consolidated Financial Statements filed as an exhibit to this report
and incorporated herein by reference.
/2/ Includes special charges of $36 million in 1991, $111.2 million in 1992, and
$550 million in 1993. See Note 17 to the Company's Consolidated Financial
Statements filed as an exhibit to this report and incorporated herein by
reference.
/3/ Includes non-taxable gains of $10.7 million in 1991, $47 million in 1992,
and $10.5 million in 1993 resulting from issuance of stock by subsidiary and
equity investee. See Note 2 to the Company's Consolidated Financial Statements
filed as an exhibit to this report and incorporated herein by reference.
/4/ In August 1993, the Board of Directors suspended indefinitely the payment
of quarterly cash dividends on the Company's common stock.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations set forth on pages 7 to 14 of the Company's
1993 Annual Report to Stockholders (the "Annual Report"), which discussion is
filed as an exhibit to this report and incorporated herein by reference.
26
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
(a) The Consolidated Balance Sheets as of December 31, 1992 and 1993,
Consolidated Statements of Income, Stockholders' Equity and Cash Flows for each
of the years in the three-year period ended December 31, 1993, and Notes to
Consolidated Financial Statements set forth on pages 15 to 35 of the Annual
Report, and the Report of Arthur Andersen & Co. on page 36 of the Annual Report
are filed as an exhibit to this report and incorporated herein by reference.
(b) Selected Quarterly Financial Data (unaudited) are set forth in
Note 19 to the Consolidated Financial Statements filed as an exhibit to this
report and incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the information set forth in the first 12
paragraphs under the caption "Election of Directors" beginning on page 2 of the
Company's proxy statement for the annual meeting scheduled for May 5, 1994
("Proxy Statement"), incorporated herein by reference, for a description of the
directors of the Company, and in the fourth footnote to the table captioned
"Ownership of Company Common Stock" on page 5 of the Proxy Statement,
incorporated herein by reference, for information with respect to compliance
with Section 16(a) of the Securities Exchange Act of 1934. Information
concerning the executive officers of the Company is set forth above under
"Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the information set forth under the caption
"Compensation" on pages 8 through 13 of the Proxy Statement, which information,
except for the Report of the Compensation and Stock Option Committee and the
graph and table of Company Stock Performance included therein, is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to information set forth in the paragraph under the
caption "Information With Respect to Certain Stockholder" on pages 1 and 2 of
the Proxy Statement and in the tables, including the respective footnotes
thereto, set forth under the caption "Securities Ownership of Management," on
pages 4, 5 and 6 of the Proxy Statement, for certain information respecting
ownership of common stock of the Company, WMX and Rust, which paragraph, tables
and footnotes are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the information set forth under the caption
"Certain Transactions" on pages 19 through 23 of the Proxy Statement for
information with respect to certain relationships and related transactions,
which information is incorporated herein by reference.
27
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements, Schedules and Exhibits.
I. Financial Statements--filed as an exhibit hereto and incorporated
herein by reference.
(i) Report of Independent Public Accountants;
(ii) Consolidated Balance Sheets--December 31, 1992 and 1993;
(iii) Consolidated Statements of Income for the Three Years Ended
December 31, 1993;
(iv) Consolidated Statements of Stockholders' Equity for the
Three Years Ended December 31, 1993;
(v) Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1993; and
(vi) Notes to Consolidated Financial Statements.
II. Schedules.
(i) Report of Independent Public Accountants on Schedules;
(ii) Schedule II--Amounts Receivable from Officers, Employees
and Related Parties;
(iii) Schedule V--Property and Equipment;
(iv) Schedule VI--Accumulated Depreciation and Amortization of
Property and Equipment;
(v) Schedule VIII--Reserves;
(vi) Schedule IX--Short-Term Borrowings; and
(vii) Schedule X--Supplementary Income Statement Information.
All other schedules have been omitted since the required
information is not significant or is included in the financial
statements or the notes thereto, or is not applicable.
III. Exhibits.
The exhibits to this report are listed in the Exhibit Index
elsewhere herein. Included in the exhibits listed therein are the
following exhibits which constitute management contracts or
compensatory plans or arrangements:
(i) 1986 Stock Option Plan, as amended, of registrant (Exhibit
10.1 to registrant's report on form 10-K for the year ended
December 31, 1989)*
(ii) 1986 Stock Option Plan for Non-Employee Directors of
registrant (Exhibit 10.2 to the registration statement (no.
33-8509) on form S-1 filed by the registrant under the
Securities Act of 1933)*
(iii) Corporate Incentive Bonus Plan of registrant**
(iv) Chemical Waste Management, Inc. Amended and Restated Long
Term Incentive Bonus Plan**
28
<PAGE>
(v) Deferred Director's Fee Plan of registrant (Exhibit 10.5
to the registration statement (no. 33-8509) on form S-1
filed by the registrant under the Securities Act of 1933)*
(vi) WMX Technologies, Inc. Amended and Restated Supplemental
Executive Retirement Plan (Exhibit 10.9 to the report on
form 10-K filed by WMX Technologies, Inc. for the year
ended December 31, 1993)*
(vii) Chemical Waste Management, Inc. Supplemental Executive
Retirement Plan**
(viii) Director's Charitable Endowment Plan (Exhibit 10.16 to
registrant's report on form 10-K for the year ended
December 31, 1990)*
(ix) Rust International Inc. 1993 Stock Option Plan (Exhibit
10.41 to the report on form 10-K filed by WMX
Technologies, Inc. for the year ended December 31, 1992)*
(x) Rust International Inc. Stock Option Plan for Non-Employee
Directors (Exhibit 10.42 to the report on form 10-K filed
by WMX Technologies, Inc. for the year ended December 31,
1992)*
(xi) 1992 Stock Option Plan of registrant (Exhibit 10.19 to
registrant's report on form 10-K for the year ended
December 31, 1991)*
(xii) 1992 Stock Option Plan for Non-Employee Directors of
registrant (Exhibit 10.20 to registrant's report on form
10-K for the year ended December 31, 1991)*
(xiii) Consulting agreement dated May 1, 1993 between registrant
and Kay Hahn Harrell**
(b) Reports on Form 8-K.
The registrant did not file any reports on Form 8-K during the fiscal
quarter ended December 31, 1993.
- -----------------
* Incorporated by reference to the indicated exhibit and document; in the
case of references to documents filed under the Securities Exchange Act
of 1934, the registrant's file number under that Act is 1-9253, and
WMX Technologies, Inc.'s is 1-7327.
** Filed with this report.
29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To the Stockholders and the Board of Directors of Chemical Waste Management,
Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Chemical Waste Management,
Inc.'s Annual Report to Stockholders for 1993 incorporated by reference in this
Form 10-K, and have issued our report thereon dated February 7, 1994. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedules listed in the index above are the responsibility of the
Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
consolidated financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
February 7, 1994
30
<PAGE>
CHEMICAL WASTE MANAGEMENT, INC. AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM OFFICERS, EMPLOYEES AND RELATED PARTIES
($000'S OMITTED)
<TABLE>
<CAPTION>
=======================================================================
DEDUCTIONS
BALANCE ----------------------- BALANCE
BEGINNING AMOUNTS AMOUNTS END OF
NAME OF DEBTOR OF YEAR ADDITIONS COLLECTED WRITTEN OFF YEAR
- -------------- --------- --------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
1991
- ----
D. Buntrock $625 $146 $(625) $--- $146
B. Tobecksen $133 $ 54 $ --- $--- $187
T. Wright/1/ $--- $780 $ --- $--- $780
1992
- ----
D. Buntrock $146 $--- $(146) $--- $---
D. Flynn $--- $248 $ --- $--- $248
B. Tobecksen $187 $--- $(187) $--- $---
T. Wright/1/ $780 $--- $(780) $--- $---
1993
- ----
D. Flynn $248 $--- $(248) $--- $---
J. Dempsey $--- $310 $(310) $--- $---
</TABLE>
The Company's general policy is not to advance monies to officers or employees
except for relocation or temporary situations. It has, however, adopted a
policy of making interest-free loans available to employees whose exercise of
non-qualified stock options results in ordinary income to them in excess of
$10,000 at the time of such exercise. These receivables are due on or before
April 15 of the year following such exercise (extended to November 30, 1992 for
loans made during 1991 and to May 31, 1993 for loans made during 1992).
Sufficient shares are withheld from the shares issued to the debtor to fully
secure the loan at the time it is made.
/1/ Interest-free loan related to an acquisition
================================================================================
31
<PAGE>
CHEMICAL WASTE MANAGEMENT, INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTY AND EQUIPMENT
($000'S OMITTED)
<TABLE>
<CAPTION>
=================================================================================================
BALANCE ASSETS OF BALANCE
BEGINNING PURCHASED ADDITIONS RETIREMENTS END OF
OF YEAR COMPANIES AT COST OR SALES(1) OTHER(2) YEAR
---------- --------- --------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1991
- ----
Land and improvements... $ 274,978 $ 656 $ 38,378 $ (163) $ 2,689 $ 316,538
Buildings............... 101,070 2,525 30,872 (118) 14,286 148,635
Vehicles and equipment.. 698,684 17,294 133,658 (11,405) (22,786) 815,445
Leasehold improvements.. 9,828 427 2,026 (667) 2,521 14,135
---------- ------- -------- --------- -------- ----------
Total................... $1,084,560 $20,902 $204,934 $ (12,353) $ (3,290) $1,294,753
========== ======= ======== ========= ======== ==========
1992
- ----
Land and improvements... $ 316,538 $ 642 $ 43,537 $ (4,325) $ 115 $ 356,507
Buildings............... 148,635 1,213 16,396 (301) 262 166,205
Vehicles and equipment.. 815,445 38,857 157,076 (24,582) (9,753) 977,043
Leasehold improvements.. 14,135 397 1,738 (305) 4,701 20,666
---------- ------- -------- --------- -------- ----------
Total................... $1,294,753 $41,109 $218,747 $ (29,513) $ (4,675) $1,520,421
========== ======= ======== ========= ======== ==========
1993
- ----
Land and improvements... $ 356,507 $ 3,920 $ 77,116 $ (42,473) $ 7,884 $ 402,954
Buildings............... 166,205 14,925 26,965 (10,894) 37,636 234,837
Vehicles and equipment.. 977,043 58,677 125,629 (309,299) 46,212 898,262
Leasehold improvements.. 20,666 645 4,070 (11,981) (368) 13,032
---------- ------- -------- --------- -------- ----------
Total................... $1,520,421 $78,167 $233,780 $(374,647) $ 91,364 $1,549,085
========== ======= ======== ========= ======== ==========
</TABLE>
- --------------
(1) Includes writedown of assets relating to special charges in 1992 and 1993.
See Note 17 to the Company's Consolidated Financial Statements filed as an
exhibit to this report and incorporated herein by reference.
(2) Transfers between the Company and WMX Technologies, Inc. and its
affiliates, reclassifications and assets contributed by Wheelabrator
Technologies Inc. in the 1/1/93 formation of Rust International Inc.
================================================================================
32
<PAGE>
CHEMICAL WASTE MANAGEMENT, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY
AND EQUIPMENT
($000'S OMITTED)
<TABLE>
<CAPTION>
===================================================================================
BALANCE PROVISION BALANCE
BEGINNING CHARGED RETIREMENTS END OF
OF YEAR TO INCOME OR SALES (1) OTHER (2) YEAR
--------- --------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
1991
Land and improvements... $ 51,224 $10,019 $ (156) $(1,235) $ 59,852
Buildings............... 14,423 5,782 (47) (11) 20,147
Vehicles and equipment.. 152,354 56,260 (8,214) (817) 199,583
Leasehold improvements.. 3,295 1,444 (231) 148 4,656
-------- ------- -------- ------- --------
Total............ $221,296 $73,505 $ (8,648) $(1,915) $284,238
======== ======= ======== ======= ========
1992
Land and improvements... $ 59,852 $ 7,908 $ (699) $ --- $ 67,061
Buildings............... 20,147 7,160 (138) (16) 27,153
Vehicles and equipment.. 199,583 60,367 (10,441) (1,483) 248,026
Leasehold improvements.. 4,656 1,613 (191) (167) 5,911
-------- ------- -------- ------- --------
Total............ $284,238 $77,048 $(11,469) $(1,666) $348,151
======== ======= ======== ======= ========
1993
Land and improvements... $ 67,061 $ 7,169 $ (8,488) $ (87) $ 65,655
Buildings............... 27,153 9,645 (4,374) 1,855 34,279
Vehicles and equipment.. 248,026 79,332 (77,273) 25,336 275,421
Leasehold improvements.. 5,911 3,603 (2,348) (364) 6,802
-------- ------- -------- ------- --------
Total............ $348,151 $99,749 $(92,483) $26,740 $382,157
======== ======= ======== ======= ========
</TABLE>
- ---------------------
(1) Includes writedown of assets relating to special charges in 1992 and 1993.
See Note 17 to the Company's Consolidated Financial Statements filed as an
exhibit to this report and incorporated herein by reference.
(2) Transfers between the Company and WMX Technologies, Inc. and its affiliates,
reclassifications and accumulated depreciation of the businesses contributed
by Wheelabrator Technologies Inc. in the 1/1/93 formation of Rust
International Inc.
================================================================================
33
<PAGE>
CHEMICAL WASTE MANAGEMENT, INC. AND SUBSIDIARIES
SCHEDULE VIII--RESERVES
($000'S OMITTED)
<TABLE>
<CAPTION>
=======================================================================================
BALANCE CHARGED ACCOUNTS BALANCE
BEGINNING TO WRITTEN END OF
OF YEAR INCOME OFF OTHER (1) YEAR
--------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
1991
Reserve for doubtful accounts.. $4,859 $1,975 $(2,038) $ 559 $ 5,355
1992
Reserve for doubtful accounts.. $5,355 $2,142 $(2,394) $ 1,455 $ 6,558
1993
Reserve for doubtful accounts.. $6,558 $3,662 $(8,295) $12,115 $14,040
</TABLE>
- ---------------
(1) Reserves of purchased companies, transfers between the Company and WMX
Technologies, Inc. and its affiliates, and reserves of the businesses
contributed by Wheelabrator Technologies Inc. in the 1/1/93 formation of
Rust International Inc.
================================================================================
34
<PAGE>
CHEMICAL WASTE MANAGEMENT, INC. AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
($000'S OMITTED)
================================================================================
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Repairs and maintenance.. $49,632 $54,716 $50,485
Royalties................ $12,847 $15,538 $ 5,630
</TABLE>
================================================================================
35
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN OAK BROOK, ILLINOIS
ON THE 25TH DAY OF MARCH, 1994.
CHEMICAL WASTE MANAGEMENT, INC.
By: /s/ D. P. Payne
--------------------------------------
D. P. Payne,
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
----- ----
<S> <C> <C>
/s/ D. P. Payne Director, President and Chief )
- --------------------------------- )
D. P. Payne Executive Officer (Principal )
Executive Officer) )
)
/s/ Dean L. Buntrock Director )
- --------------------------------- )
Dean L. Buntrock )
)
)
/s/ James B. Edwards Director )
- --------------------------------- )
James B. Edwards )
)
)
/s/ Donald F. Flynn Director )
- --------------------------------- )
Donald F. Flynn )
)
)
/s/ Jerome D. Girsch Director, Executive Vice )
- --------------------------------- )
Jerome D. Girsch President and Chief Financial )
Officer, Treasurer and ) March 25, 1994
Controller (Principal Financial )
and Accounting Officer) )
)
/s/ Kay Hahn Harrell Director )
- --------------------------------- )
Kay Hahn Harrell )
)
)
/s/ Peter H. Huizenga Director )
- --------------------------------- )
Peter H. Huizenga )
)
)
/s/ James E. Koenig Director )
- --------------------------------- )
James E. Koenig )
)
)
/s/ Peer Pedersen Director )
- --------------------------------- )
Peer Pedersen )
)
)
/s/ Phillip B. Rooney Director )
- --------------------------------- )
Phillip B. Rooney )
</TABLE>
36
<PAGE>
CHEMICAL WASTE MANAGEMENT, INC.
EXHIBIT INDEX
Number and Description of Exhibit
---------------------------------
1. Inapplicable
2. Inapplicable
3.1 Restated certificate of incorporation of registrant* and amendments
thereto (Exhibit 4.1 to registrant's report on form 10-Q for the quarter
ended June 30, 1990)**
3.2 Bylaws of registrant (Exhibit 3.2 to registrant's report on form 10-K
for the year ended December 31, 1991)**
4.1 Trust Indenture for Liquid Yield Option Notes due 2010 (Exhibit 4.1 to
the registration statement (no. 33-36212) on form S-3 filed by the
registrant under the Securities Act of 1933)**
5. Inapplicable
6. Inapplicable
7. Inapplicable
8. Inapplicable
9. None
10.1 1986 Stock Option Plan, as amended, of registrant (Exhibit 10.1 to
registrant's report on form 10-K for the year ended December 31, 1989)**
10.2 1986 Stock Option Plan for Non-Employee Directors of registrant*
10.3 Corporate Incentive Bonus Plan of registrant
10.4 Chemical Waste Management, Inc. Amended and Restated Long Term Incentive
Plan
10.5 Deferred Director's Fee Plan of registrant*
10.6 Intercorporate Agreement dated as of September 3, 1986 between
registrant and WMX Technologies, Inc.*
10.7 Second Amended and Restated Corporate and Administrative Services
Agreement dated as of May 17, 1993 between registrant and WMX
Technologies, Inc.
10.8 Tax Sharing Agreement dated as of September 30, 1986 between registrant
and WMX Technologies, Inc.*
- --------
* Incorporated by reference to the correspondingly numbered exhibit to the
registration statement (no. 33-8509) on form S-1 filed by the registrant
under the Securities Act of 1933.
** Incorporated by reference to the indicated exhibit and document; in the case
of references to documents filed under the Securities Exchange Act of 1934,
the registrant's file number under the Act is 1-9253, and WMX Technologies,
Inc.'s is 1-7327.
EX-1
<PAGE>
Number and Description of Exhibit
---------------------------------
10.9 Registration Rights Agreement dated as of September 30, 1986 between
registrant and WMX Technologies, Inc.*
10.10 Lease agreement dated April 6, 1976 between the State of South Carolina
and Chem-Nuclear Systems, Inc., and four amendments thereto*
10.11 Lease agreement dated as of November 16, 1990 between the Chicago
Regional Port District and a subsidiary of registrant (Exhibit 10.12 to
registrant's report on form 10-K for the year ended December 31, 1990)**
10.12 Amendment No. 1 dated as of January 1, 1992 to Intercorporate Agreement
dated as of September 3, 1986 between WMX Technologies, Inc. and
registrant (Exhibit 10.7(b) to the report on form 10-K filed by WMX
Technologies, Inc. for the year ended December 31, 1991)**
10.13 WMX Technologies, Inc. Amended and Restated Supplemental Executive
Retirement Plan (Exhibit 10.9 to the report on form 10-K filed by WMX
Technologies, Inc. for the year ended December 31, 1993)**
10.14 Chemical Waste Management, Inc. Supplemental Executive Retirement Plan
10.15 Directors' Charitable Endowment Plan (Exhibit 10.16 to registrant's
report on form 10-K for the year ended December 31, 1990)**
10.16 Rust International Inc. 1993 Stock Option Plan (Exhibit 10.41 to the
report on form 10-K filed by WMX Technologies, Inc. for the year ended
December 31, 1992)**
10.17 Rust International Inc. 1993 Stock Option Plan for Non-Employee
Directors (Exhibit 10.42 to the report on form 10-K filed by WMX
Technologies, Inc. for the year ended December 31, 1992)**
10.18 First Amended and Restated International Business Opportunities
Agreement dated as of January 1, 1993 among registrant, WMX
Technologies, Inc., Wheelabrator Technologies Inc., Waste Management
International, Inc., Waste Management International plc and Rust
International Inc. (Exhibit 28 to the registration statement (no. 33-
59606) on form S-3 filed by Wheelabrator Technologies Inc.)**
10.19 Amendment dated as of January 28, 1994 to First Amended and Restated
International Business Opportunities Agreement dated as of January 1,
1993 among registrant, WMX Technologies, Inc., Wheelabrator Technologies
Inc., Waste Management International, Inc., Waste Management
International plc and Rust International Inc.
10.20 Rust Intercorporate Services Agreement dated as of January 1, 1993 among
registrant, WMX Technologies, Inc., Wheelabrator Technologies Inc. and
Rust International Inc. (Exhibit 10.18 to registrant's report on form
10-K for the year ended December 31, 1992)**
10.21 Amendment No. 1 dated as of August 10, 1993 to Rust Intercorporate
Services Agreement dated as of January 1, 1993 among registrant, WMX
Technologies, Inc., Wheelabrator Technologies Inc. and Rust
International Inc.
- --------
* Incorporated by reference to the correspondingly numbered exhibit to the
registration statement (no. 33-8509) on form S-1 filed by the registrant
under the Securities Act of 1933.
** Incorporated by reference to the indicated exhibit and document; in the case
of references to documents filed under the Securities Exchange Act of 1934,
the registrant's file number under the Act is 1-9253, and WMX Technologies,
Inc.'s is 1-7327.
EX-2
<PAGE>
Number and Description of Exhibit
---------------------------------
10.22 1992 Stock Option Plan of registrant (Exhibit 10.19 to registrant's
report on form 10-K for the year ended December 31, 1991)**
10.23 1992 Stock Option Plan for Non-Employee Directors of registrant (Exhibit
10.20 to registrant's report on form 10-K for the year ended December
31, 1991)**
10.24 Organizational Agreement dated as of December 31, 1992 among registrant,
The Brand Companies, Inc. and Wheelabrator Technologies Inc. (Exhibit 7
to Amendment No. 6 to Statement on Schedule 13D filed on January 5, 1993
by WMX Technologies, Inc., the registrant and Wheelabrator Technologies
Inc. relating to securities of The Brand Companies, Inc.)**
10.25 Consulting agreement dated May 1, 1993 between registrant and Kay Hahn
Harrell
11. None
12. None
13.1 Management's Discussion and Analysis of Financial Condition and Results
of Operations
13.2 Financial Statements and Supplementary Data
14. Inapplicable
15. Inapplicable
16. None
17. Inapplicable
18. None
19. Inapplicable
20. Inapplicable
21. List of subsidiaries of registrant
22. Inapplicable
23. Consent of independent public accountants
24. None
25. Inapplicable
26. Inapplicable
- --------
* Incorporated by reference to the correspondingly numbered exhibit to the
registration statement (no. 33-8509) on form S-1 filed by the registrant
under the Securities Act of 1933.
** Incorporated by reference to the indicated exhibit and document; in the case
of references to documents filed under the Securities Exchange Act of 1934,
the registrant's file number under the Act is 1-9253, and WMX Technologies,
Inc.'s is 1-7327.
EX-3
<PAGE>
Number and Description of Exhibit
---------------------------------
27. Inapplicable
28. None
- --------
* Incorporated by reference to the correspondingly numbered exhibit to the
registration statement (no. 33-8509) on form S-1 filed by the registrant
under the Securities Act of 1933.
** Incorporated by reference to the indicated exhibit and document; in the case
of references to documents filed under the Securities Exchange Act of 1934,
the registrant's file number under the Act is 1-9253, and WMX Technologies,
Inc.'s is 1-7327.
EX-4
<PAGE>
EXHIBIT 10.3
CHEMICAL WASTE MANAGEMENT, INC.
CORPORATE INCENTIVE BONUS PLAN
1. PURPOSE. The purpose of the Chemical Waste Management, Inc. Corporate
Incentive Bonus Plan (the "Plan") is to advance the interests of Chemical Waste
Management, Inc. (the "Company") by providing for annual bonuses for officers
of the Company so as to attract and retain such officers, make their
compensation competitive with other opportunities, and to the extent provided
herein provide them with an incentive to strive to increase the Company's
earnings by focusing on the Company's Expanded Management System ("EMS").
2. ADMINISTRATION. With respect to participation by individuals who are
executive officers of the Company, the Plan shall be administered by the
Compensation and Stock Option Committee (the "Committee") of the Board of
Directors of the Company (the "Board"). The Board may in its discretion
designate the Board or a committee other than the Committee to administer the
Plan, in which event the Board or such other committee shall be deemed the
"Committee" hereunder. Notwithstanding the foregoing, with respect to
participation in the Plan by individuals who are not executive officers of the
Company, the Plan shall be administered by a committee composed of the Chairman
of the Board, the Chief Executive Officer and the Chief Financial Officer of the
Company (or one or more persons designated by them), and all references herein
to the "Committee" shall be deemed to mean such committee as to matters
involving the participation of such officers in the Plan.
3. PARTICIPANTS; TERMINATION OF EMPLOYMENT.
(a) Participants in the Plan shall be selected by the Committee on an
annual basis. Participation shall be limited to officers of the Company.
(b) Officers who become eligible to participate in the Plan after the
beginning of a calendar year (a "Plan Year") shall, subject to selection and
approval by the Committee, be entitled to a bonus prorated to reflect such
participant's actual number of full months of participation during the Plan
Year.
(c) If, during the Plan Year, a participant's job assignment is modified
such that the participant's target bonus (as described below) is no longer
representative of the participant's position, the participant's target bonus
shall be adjusted, subject to Committee approval, as of the first day of the
month following the change in position to a target bonus commensurate with the
participant's new position. Thereafter, the participant shall be entitled to a
performance award under the Plan prorated between the target bonus categories to
reflect the number of months during the Plan Year during which the participant
participated under each such category.
<PAGE>
(d) A participant whose employment with the Company terminates during the
Plan Year shall not be entitled to the payment of a bonus under the Plan, except
as the Committee may otherwise determine in its sole discretion. Nothing
contained in the Plan shall confer upon any participant any right to be
continued in the employ of the Company or interfere in any way with the right of
the Company to terminate a participant's employment at any time.
4. BONUSES.
(A) DEFINITIONS.
As used in this Plan:
(i) "Targeted Attainment Percentage" shall mean the EPS Targeted
Attainment Percentage, the Core Business Targeted Attainment Percentage and
the Business Unit Targeted Attainment Percentage, as the context shall
require.
(ii) "EPS Targeted Attainment Percentage" shall mean a percentage of
the budgeted earnings per share of the Company's common stock, as
designated by the Committee.
(iii) "Core Business Targeted Attainment Percentage" shall mean a
percentage of the budgeted pre-tax earnings of the Company exclusive of the
results of the Company's Rust International Inc. subsidiary, as designated
by the Committtee.
(iv) "Business Unit Targeted Attainment Percentage" shall mean a
percentage of the budgeted pre-tax earnings of a particular business unit
of the Company, as designated by the Committee.
(B) PERFORMANCE CRITERIA AND TARGET BONUS.
(i) Each participant in the Plan shall be eligible to receive such bonus,
if any, for each Plan Year as may be payable pursuant to the applicable
performance criteria described below. The Committee shall, on an annual basis,
establish a "target bonus" for each participant equal to a percentage of base
salary of such participant paid for such Plan Year.
(ii) Participants in the Plan shall have their bonuses, if any, for a Plan
Year determined on the basis of:
(A) the EPS Targeted Attainment Percentage achieved for the Plan Year;
(B) the Core Business Targeted Attainment Percentage achieved for the
Plan Year;
2
<PAGE>
(C) the Business Unit Targeted Attainment Percentage applicable to a
Business Unit of the Company for which such participant has substantial
management responsibility achieved for the Plan Year; or
(D) a weighted average of two or more of (A), (B) and (C) above.
The Committee shall for each Plan Year establish (x) the criteria from (A)
through (D) above to apply to each participant, (y) as to participants to whom
the criteria specified in (A), (B) or (C) above are applicable (but not (D)),
the percentage of target bonus earned at various levels of the relevant Targeted
Attainment Percentage, including the minimum relevant Targeted Attainment
Percentage below which no portion of target bonus shall be earned and (z) in the
case of the criterion specified in (D) above, the portion of the participant's
target bonus which is to be determined by reference to each of the relevant
Targeted Attainment Percentages listed in clauses (A), (B) and (C) above, and
the percentages of target bonus earned at various levels of the relevant
Targeted Attainment Percentages listed in (A), (B) and (C) above, including the
minimum relevant Targeted Attainment Percentage below which no portion of target
bonus shall be earned as to such Targeted Attainment Percentage.
(iii) Notwithstanding the foregoing, (A) no bonus shall be payable to the
Chief Executive Officer of the Company if the Committee shall have determined
that he has not established programs and systems which are adequate to further
the implementation of each of the Principles in the Chemical Waste Management,
Inc. Environmental Policy, and (B) no bonus shall be payable to any other
participant unless his or her individual performance for the Plan Year as
evaluated pursuant to EMS shall have been satisfactory.
(C) ACCOUNTING.
The earnings per share of the Common Stock for any year shall be as
determined by the Company's independent public accountants on a primary, rather
than fully-diluted, basis. In the event that there are recorded special items
in income or expense, or changes in generally accepted accounting principles or
accounting methods are implemented, which render the earnings per share or pre-
tax earnings data not comparable between years or the targeted objectives
specified above incompatible with the purpose and intent of the Plan, the
Committee may in its sole discretion make appropriate adjustments to the
earnings per share or pre-tax earnings data or such objectives.
(d) EVALUATION OF EMS PERFORMANCE.
The EMS performance of each participant (other than the Chief Executive
Officer) during the Plan Year shall be determined by the participant's immediate
supervisor (who, if other than the Chief Executive Officer, will do so in
consultation with the Chief Executive Officer of the Company).
3
<PAGE>
5. PAYMENT. Payment of bonuses for any Plan Year shall be in cash and made as
promptly as practicable following completion of the Company's consolidated
financial statements for such Plan Year.
6. ADJUSTMENTS FOR CHANGES IN STOCK, MERGERS, ETC. In the event of dividends
payable in Common Stock or in the case of the subdivision or combination of
Common Stock, appropriate revision shall be made in the earnings per share
objectives set forth in Section 4 above. In the event of a Change in Control
(as such term is defined in the Chemical Waste Management, Inc. 1992 Stock
Option Plan, as amended from time to time) of the Company (i) the Plan Year
shall end as of the end of the calendar quarter coincident with or next
following the date of such Change in Control (or such other date as established
by the Committee), (ii) the Committee shall cause the bonuses payable to
participants to be promptly calculated and (iii) the Company shall pay such
bonuses to participants as promptly as practicable following the Committee's
determination, notwithstanding any Plan provision to the contrary. In
calculating the bonuses payable to participants in connection with a Change in
Control, the Committee is authorized to take into consideration such factors as
the shortened Plan Year, and any other equitable adjustments to the formulae
established by the Committee pursuant to Section 4 as it deems appropriate.
7. PARTICIPANT'S INTERESTS. A participant's benefits hereunder shall at all
times be reflected on the Company's books as a general unsecured and unfunded
obligation of the Company and the Plan shall not give any person any right or
security interest in any asset of the Company nor shall it imply any trust or
segregation of assets by the Company.
8. NON-ALIENATION OF BENEFITS. All rights and benefits under the Plan are
personal to the participant and neither the Plan nor any right or interest of a
participant or any person arising under the Plan is subject to voluntary or
involuntary alienation, sale, transfer, or assignment without the Company's
consent.
9. WITHHOLDING FOR TAXES. Notwithstanding any other provisions of this Plan,
the Company may withhold from any payment made by it under the Plan such amount
or amounts as may be required for purposes of complying with the tax withholding
or other provisions of the Internal Revenue Code or the Social Security Act or
any state's income tax act or for purposes of paying any estate, inheritance or
other tax attributable to any amounts payable hereunder.
10. NO EMPLOYMENT RIGHTS. The Plan is not a contract of employment and
participation in the Plan will not cause any participant to have any rights to
continue as an employee of the Company, or any right or claim to any benefit
under the Plan, except as specifically provided herein.
11. GENDER AND NUMBER. Where the context admits, words denoting men include
women, the plural includes the singular, and the singular includes the plural.
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<PAGE>
12. COMMITTEE OR COMPANY DETERMINATIONS FINAL. Each determination provided for
in the Plan shall be made by the Committee or the Company, as the case may be,
under such procedures as may from time to time be prescribed by the Committee or
the Company and shall be made in the sole discretion of the Committee or the
Company as the case may be. Any such determination shall be conclusive.
13. AMENDMENT OR TERMINATION. The Committee may in its sole discretion
terminate or amend the Plan from time to time. No such termination or amendment
shall alter a participant's right to receive a distribution as previously
awarded to such participant.
14. SUCCESSORS. The Plan is binding on and will inure to the benefit of any
successor to the Company, whether by way of merger, consolidation, purchase or
otherwise.
15. CONTROLLING LAW. The Plan shall be construed in accordance with the
internal laws of the State of Illinois.
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<PAGE>
EXHIBIT 10.4
CHEMICAL WASTE MANAGEMENT, INC.
LONG TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED AS OF JANUARY 27, 1994)
1. PURPOSE. The purpose of the Chemical Waste Management, Inc. Long Term
Incentive Plan (the "Plan") is to advance the interests of Chemical Waste
Management, Inc. (the "Company") by providing for long-term performance awards
for officers of the Company or one or more of its subsidiaries so as to attract
and retain such officers, make their compensation competitive with other
opportunities, and cause them to strive to increase the Company's cumulative
returns to its stockholders.
2. ADMINISTRATION. With respect to participation by individuals who are
executive officers of the Company, the Plan shall be administered by the
Compensation and Stock Option Committee (the "Committee") of the Board of
Directors of the Company (the "Board"). The Board may in its discretion
designate the Board or another Committee thereof to administer the Plan, in
which event the Board or such other Committee shall be deemed the "Committee"
hereunder. Notwithstanding the foregoing, with respect to participation in the
Plan by individuals who are not executive officers of the Company, the Plan
shall be administered by a committee composed of the Chairman of the Board, the
Chief Executive Officer and the Chief Financial Officer of the Company (or one
or more persons designated by them), and all references herein to the
"Committee" shall be deemed to mean such committee as to matters involving the
participation of such officers in the Plan.
3. PARTICIPANTS; PERFORMANCE PERIODS; PRORATION OF AWARDS.
(a) Participants in the Plan shall be selected by the Committee.
Participation shall be limited to employees who are officers of the Company or
one or more of its subsidiaries.
(b) Such officers who become participants in the Plan after June 1, 1993
shall, subject to selection and approval by the Committee, be entitled to target
and performance awards pursuant to Section 4 hereof for each Performance Period
(as hereinafter defined) determined pursuant hereto. For purposes hereof, each
"Performance Period" during the term of the Plan shall begin on a January 1 and
shall terminate on the December 31 of the third calendar year ending thereafter;
provided that the first Performance Period pursuant to the Plan shall begin on
June 1, 1993 and shall end on December 31, 1995.
(c) If an officer of the Company or one or more of its subsidiaries
becomes a participant in the Plan during any Performance Period, the
participant's award for such Performance Period shall be prorated to reflect
such participant's actual number of full months of participation. If, during
any Performance Period, a participant's job assignment is modified such that the
participant's target award (as described below) is no longer representative of
the participant's position, the participant's target award shall be adjusted,
subject to Committee approval, as of the first day of the month following the
change in position to a target award commensurate with the participant's new
position. Thereafter, the participant shall be entitled to a performance award
under the Plan prorated between the target award categories to reflect the
number of months during the Performance Period during which the participant
participated under each such category.
<PAGE>
4. TARGET AND PERFORMANCE AWARDS.
(a) The Committee shall establish a percentage of each participant's
annual base salary as of the last day of each Performance Period as a "target
award" for such Performance Period.
(b) Each participant in the Plan shall be entitled to a performance award
for each Performance Period based on the percentile rank of the Company's Total
Stockholder Return (as hereinafter defined) among the Total Stockholder Returns
of the companies that comprise the Standard & Poors 500 Stock Index (the "S&P
500") during such Performance Period. The Committee shall determine a target
percentile rank applicable to each Performance Period and shall for each
Performance Period establish percentages of target awards earned at various
percentile rankings of the Company in relation to the S&P 500 companies for such
Performance Period, including the percentile rank below which no portion of a
target award shall be earned. For purposes hereof, "Total Stockholder Return"
of the Company shall mean the cumulative return on its common stock, $.01 par
value ("Common Stock"), expressed as a percentage, determined by dividing (i)
the sum of (a) the cumulative amount of dividends paid for the applicable
Performance Period, assuming dividend reinvestment, and (b) the difference
between the average of the closing sales prices of Common Stock on the last five
trading days of such Performance Period and the last five trading days preceding
the first day of such Performance Period, by (ii) the average of the closing
sales prices of Common Stock on the last five trading days preceding the first
day of such Performance Period. The "Total Stockholder Return" of any of the
companies that comprise the S&P 500 shall mean the cumulative return on its
common stock expressed as a percentage, determined by dividing (i) the sum of
(a) the cumulative amount of dividends paid for the applicable Performance
Period, assuming dividend reinvestment, and (b) the difference between the
closing sales price of such common stock on the last trading day of such
Performance Period and the last trading day preceding the first day of such
Performance Period, by (ii) the closing sales price of such common stock on the
last trading day preceding the first day of such Performance Period.
(c) The Committee may determine, in its sole discretion, that a
participant's award for any Performance Period shall be calculated, in whole or
in part, based upon the formula established with respect to a long term
incentive plan of any subsidiary of the Company.
5. CASH AND DEFERRED AWARDS.
(a) Performance awards for each Performance Period shall be payable as
follows:
(i) An amount equal to 50% of the performance award (the "Cash Award")
shall be paid in cash as soon as practicable after the end of the Performance
Period; and
(ii) An amount equal to 50% of the performance award (the "Deferred
Award"), adjusted as set forth in Section 6 hereof, shall be paid in cash as
soon as practicable after the date of vesting, determined pursuant to Section 7
hereof.
(b) The maximum amount of a performance award that may be awarded pursuant
to Section 4(b) hereof to a participant with respect to any Performance Period
pursuant to this Plan shall be limited to 250% of the participant's base salary
as of the last day of the
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<PAGE>
Performance Period. The Deferred Award portion of each performance award shall
be subject to adjustment as contemplated by Section 6 hereof.
6. DEFERRED AWARD GRANT AND PAYMENT. (a) An amount equal to the Deferred
Award granted to each participant pursuant hereto shall be credited to a
bookkeeping account maintained by the Company in the name of each participant (a
"Deferred Account") as of the last day of each Performance Period with respect
to which a Deferred Award is payable. Each amount so credited shall be deemed
to have been invested in shares of Common Stock as of the last trading day of
such Performance Period. During the period that any part or all of a
participant's Deferred Account is deemed to have been invested in shares of
Common Stock, such Deferred Account shall be deemed to receive all dividends
(whether in the form of stock or cash) and stock splits which would be received
with respect to such shares as if such investment had actually been made and
such amounts shall be deemed to be reinvested in shares of Common Stock as of
the date of receipt, and appropriate credit shall be made to the participant's
Deferred Account to reflect such deemed receipts and reinvestments. The
investments described above shall be deemed to have been made at a price equal
to the average of the closing sales prices of the Common Stock on the New York
Stock Exchange Composite Tape (as reported in The Wall Street Journal, Midwest
Edition), on each of the five trading days immediately preceding the date as of
which a deemed investment is made.
(b) As soon as practicable following the date of vesting of a Deferred
Award pursuant to Section 7 hereof, the shares of Common Stock deemed reflected
in each participant's Deferred Account shall be deemed to have been sold at a
price equal to the average of the closing sales prices of the Common Stock on
the New York Stock Exchange Composite Tape (as reported in The Wall Street
Journal, Midwest Edition), on each of the five trading days immediately
preceding the date of such vesting, and the proceeds thereof shall be
distributed as soon as practicable to each participant or designated beneficiary
in cash.
(c) Subject to Section 8 hereof, in the event of a merger, consolidation,
exchange of shares or recapitalization of the Company, a similar event affecting
the Common Stock, or any other event determined by the Committee in its sole
discretion, the Common Stock deemed reflected by a participant's Deferred
Account may be deemed by the Committee, in its sole discretion, to be sold,
exchanged or otherwise disposed of, and the Committee may make appropriate
adjustments in each participant's Deferred Account to recognize such event, and
the assumed proceeds of any such disposition may be deemed to be reinvested in
any security which the Committee in its sole discretion determines is an
appropriate replacement security, or, alternatively, paid to the participant in
cash, in the discretion of the Committee.
7. VESTING.
(a) Unless the Committee shall otherwise determine, in its sole
discretion, a participant whose employment as an officer of the Company or one
of its subsidiaries is terminated during any Performance Period shall not be
entitled to the payment of a performance award under the Plan for such
Performance Period.
(b) A participant's right to receive a Cash Award or any portion thereof
for any Performance Period shall not vest until the close of business on the
last day of such
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<PAGE>
Performance Period; provided that if the participant is not an officer of the
Company or one of its subsidiaries on such date, such award or any portion
thereof shall not vest unless the Committee shall otherwise determine, in its
sole discretion.
(c) A participant's right to receive a Deferred Award or any portion
thereof for any Performance Period shall not vest until the close of business on
the date three years after the last day of such Performance Period; provided
that if the participant is not an officer of the Company or one of its
subsidiaries on such date, then such award or any portion thereof shall not
vest, except as hereinafter provided, or as the Committee shall otherwise
determine, in its sole discretion. If the participant is not an officer of the
Company or one of its subsidiaries on such date as a result of the participant's
normal retirement at or after age 65, death or total disability, the participant
or his beneficiary designated pursuant to Section 10 hereof shall be entitled to
payment of such Deferred Award as soon as practicable after such normal
retirement, death or total disability, in an amount equal to the value of such
Deferred Account as of the last day of the month in which such normal
retirement, death or total disability occurs.
8. CHANGE IN CONTROL. In the event of a Change in Control (as such term is
defined in the Company's 1992 Stock Option Plan, as amended from time to time)
of the Company, (i) each Performance Period which has not yet ended shall end as
of the calendar quarter coincident with or next following the date of such
Change in Control (or such other date as established by the Committee), (ii)
each unpaid Cash Award from such Performance Periods and each unpaid Deferred
Award from such Performance Periods and from prior Performance Periods shall
vest as of the close of business on the last day of each such Performance Period
(or such other date established by the Committee), (iii) the Committee shall
cause the performance awards payable to participants to be promptly calculated,
and (iv) the Company shall pay such performance awards to participants as
promptly as practicable following the Committee's determination, notwithstanding
any Plan provision to the contrary. In calculating the performance awards
payable to participants in connection with a Change in Control, the Committee is
authorized to take into consideration and make adjustments for such factors as
it deems appropriate.
9. PARTICIPANTS' INTERESTS. Although Deferred Awards payable to a participant
hereunder are measured by the value of and income derived from the investments
deemed made in Common Stock, the Company will not issue any such shares or make
any such investment on behalf of a participant. A participant's benefits
hereunder shall at all times be reflected on the Company's books as a general
unsecured and unfunded obligation of the Company and the Plan shall not give any
person any right or security interest in any asset of the Company nor shall it
imply any trust or segregation of assets by the Company.
10. DESIGNATION OF BENEFICIARIES. A participant from time to time may name in
writing any person or persons (who may be named concurrently, contingently or
successively) to whom his or her benefits are to be paid if he or she dies
before complete payment of such benefits. Each such beneficiary designation
will revoke all prior designations by the participant with respect to the Plan,
shall not require the consent of any previously named beneficiary, shall be in a
form prescribed by the Committee, and will be effective only when filed with the
Committee during the participant's lifetime. If the participant fails to
designate a beneficiary before his or her death, as provided above, or if the
beneficiary designated by the participant dies before the date of the
participant's death or before complete payment of the participant's benefits,
the Company, in its discretion, may pay the
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<PAGE>
remaining unpaid portion of the participant's benefits to either (i) one or more
of the participant's relatives by blood, adoption or marriage and in such
proportion as the Company determines; or (ii) the legal representative or
representatives of the estate of the last to die of the participant and his or
her designated beneficiary.
11. FACILITY OF PAYMENT. If a participant or his or her beneficiary is
entitled to payments under the Plan and in the Company's opinion such person
becomes in any way incapacitated so as to be unable to manage his or her
financial affairs, the Company may make payments to the participant's or
beneficiary's legal representative, or to a relative or friend of the
participant or beneficiary for such person's benefit, or the Company may make
payments for the benefits of the participant or beneficiary in any manner that
it considers advisable. Any payment made in accordance with the preceding
sentence shall be a full and complete discharge of any liability for such
payment hereunder.
12. NON-ALIENATION OF BENEFITS. All rights and benefits under the Plan are
personal to the participant and neither the Plan nor any right or interest of a
participant or any person arising under the Plan is subject to voluntary or
involuntary alienation, sale, transfer, or assignment without the Company's
consent.
13. WITHHOLDING FOR TAXES. Notwithstanding any other provisions of this Plan,
the Company may withhold from any payment made by it under the Plan such amount
or amounts as may be required for purposes of complying with the tax withholding
or other provisions of the Internal Revenue Code or the Social Security Act or
any state's income tax act or for purposes of paying any estate, inheritance or
other tax attributable to any amounts payable hereunder.
14. NO EMPLOYMENT RIGHTS. The Plan is not a contract of employment and
participation in the Plan will not cause any participant to have any rights to
continue as an employee of the Company (or any affiliated entity), or any right
or claim to any benefit under the Plan, unless the right or claim has
specifically vested under the Plan.
15. COMMITTEE OR COMPANY DETERMINATIONS FINAL. Each determination provided for
in the Plan shall be made by the Committee or the Company, as the case may be,
under such procedures as may from time to time be prescribed by the Committee or
the Company and shall be made in the absolute discretion of the Committee or the
Company, as the case may be. Any such determination shall be conclusive.
16. AMENDMENT OR TERMINATION. The Committee may in its sole discretion
terminate or amend the Plan from time to time. No such termination or amendment
shall alter a participant's right to receive a vested award under the Plan.
17. SUCCESSORS. Unless otherwise agreed to, the Plan is binding on and will
inure to the benefit of any successor to the Company, whether by way of merger,
consolidation, purchase or otherwise.
18. CONTROLLING LAW. The Plan shall be construed in accordance with the
internal laws of the State of Illinois.
5
<PAGE>
EXHIBIT 10.7
_______________________________________________________________________________
SECOND AMENDED AND RESTATED
CORPORATE AND ADMINISTRATIVE SERVICES AGREEMENT
By and Between
WMX TECHNOLOGIES, INC.
and
CHEMICAL WASTE MANAGEMENT, INC.
Dated as of May 17, 1993 and
Effective as of January 1, 1993
Superseding the
Amended and Restated Corporate and Administrative Service Agreement,
Dated as of January 1, 1992,
As Amended
______________________________________________________________________________
<PAGE>
SECOND AMENDED AND RESTATED CORPORATE AND ADMINISTRATIVE
SERVICES AGREEMENT
This SECOND AMENDED AND RESTATED CORPORATE AND ADMINISTRATIVE SERVICES
AGREEMENT (the "Agreement") is made as of May 17, 1993, by and between WMX
Technologies, Inc., a Delaware corporation ("WMX"), and Chemical Waste
Management, Inc., a Delaware corporation and, as of the date hereof, an
approximately 77%-owned subsidiary of WMX ("CWM").
RECITALS
WHEREAS, WMX and CWM entered into an Intercorporate Agreement dated as of
September 3, 1986 (the "Intercorporate Agreement") providing for a transfer of
certain assets between WMX and CWM and a public offering of Common Stock of CWM,
and in connection therewith entered into a Corporate and Administrative Services
Agreement dated as of September 30, 1986, which was amended by Amendment No. 1
thereto dated as of October 24, 1988 (such agreement, as amended, being referred
to herein as the "Old Agreement");
WHEREAS, WMX and CWM entered into an Amended and Restated Intercorporate
Agreement dated as of January 1, 1992, as amended by Amendment No. 1 to Amended
and Restated Corporate and Administrative Services Agreement dated as of
November 10, 1992 (referred to herein collectively as the "First Amended
Agreement"), which superseded the Old Agreement in its entirety; and
WHEREAS, WMX and CWM desire to amend and restate the First Amended
Agreement in its entirety and to provide for certain new matters, as set forth
herein;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows
(terms capitalized herein to have the meanings specified herein or in the
Intercorporate Agreement):
AGREEMENTS
1. Modification of First Amended Agreement. The First Amended Agreement
is hereby amended and restated in its entirety to read as provided herein.
Notwithstanding the execution and delivery of this Agreement, all other
agreements between the parties in
<PAGE>
effect immediately prior to the execution and delivery of this Agreement (other
than the First Amended Agreement) shall remain in effect in accordance with
their terms.
2. Definitions. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined), and other capitalized terms
shall have the meanings ascribed to them elsewhere in this Agreement:
(a) "Aggregate WMX Exposure" shall have the meaning set forth in Section
4(c) hereof.
(b) "Back-Up Lines" shall have the meaning set forth in Section 5(b)(ii)
hereof.
(c) "Business Day" shall mean each Monday through Friday, other than any
day on which banks in either New York City or Pittsburgh, Pennsylvania are
authorized not to be open for business generally.
(d) "Code" shall mean the United States Internal Revenue Code of 1984, as
amended.
(e) "Commission" shall mean the Securities and Exchange Commission.
(f) "Cut-Off Date" shall mean September 30, 1986.
(g) "CWM Plans" shall have the meaning set forth in Section 8(c) hereof.
(h) "CWM Employee" shall have the meaning set forth in the Intercorporate
Agreement.
(i) "CWM Shares" shall have the meaning set forth in Section 9(a) hereof.
(j) "CWM Registration Statement" shall have the meaning set forth in
Section 9(b) hereof.
(k) "Effective Date" shall mean January 1, 1993.
(l) "Escrow Agent" shall have the meaning set forth in Section 9(a)
hereof.
(m) "Excess Cash" shall have the meaning set forth in Section 5(d) hereof.
(n) "Event of Default" shall have the meaning set forth in Section 13(a)
hereof.
(o) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(p) "Indebtedness" of a specified Person or Persons shall mean all amounts
owing by such Person or Persons to another specified Person or Persons,
including, without limitation, amounts owing with respect to loans made on open
account or otherwise, whether before, on or after the Effective Date, including,
without limitation, principal thereof and
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<PAGE>
premium, if any, and interest thereon, and all amounts properly charged to an
intercompany account of such first specified Person or Persons.
(q) "Indemnified WMX Partner" shall have the meaning set forth in Section
12(a) hereof.
(r) "Insurance Subsidiary" shall mean National Guaranty Insurance Company
and Mountain Indemnity Insurance Company, each a Subsidiary of WMX, and any
future Subsidiary of WMX engaged in substantially the same business as such
Subsidiaries.
(s) "Laboratory" shall have the meaning set forth in Section 7 hereof.
(t) "LYONs" shall have the meaning set forth in Section 9 hereof.
(u) "Mechanisms" shall have the meaning set forth in Section 4(d) hereof.
(v) "Open Account Indebtedness" shall mean with respect to a party all
Indebtedness of such party incurred on or prior to the Effective Date on open
account to the other or any one or more Subsidiaries of such other, all
Indebtedness of such party to the other or any one or more Subsidiaries of such
other incurred pursuant to Section 5(b) of Section 11 hereof and all other
amounts now or at any time hereafter owing by such party to such other or any
one or more of its Subsidiaries (other than term loans).
(w) "Person" shall mean any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
(x) "Promissory Note" shall mean a promissory note executed by a party
hereto pursuant to Section 5(e) hereof.
(y) "Providing Party" shall mean a party providing services pursuant
hereto.
(z) "QA/QC" shall have the meaning set forth in Section 7 hereof.
(aa) "RCRA" shall mean the United States Resource Conservation and
Recovery Act of 1976, as amended.
(bb) "Receiving Party" shall mean a party receiving services pursuant
hereto.
(cc) "Rust" shall mean Rust International Inc.
(dd) "Securities Act" shall mean the Securities Act of 1933, as amended.
(ee) "Subsidiary" shall mean for any Person, another Person directly or
indirectly controlled by such Person; provided, however, that for purposes of
this Agreement, neither CWM nor any Person controlled by it shall be deemed to
be a Subsidiary of WMX or any
3
<PAGE>
Person controlled by WMX, and provided further, that notwithstanding the
foregoing, (i) each Person controlled by CWM (other than Rust and Persons
controlled by it) shall be deemed to be a Subsidiary of CWM, and each Person
controlled by a Subsidiary of CWM (other than Rust and Persons controlled by it)
shall be deemed to be a Subsidiary of such Subsidiary of CWM and (ii) Rust and
Persons controlled by it shall be deemed to be Subsidiaries of WMX.
(ff) "TSCA" shall mean the United States Toxic Substances Control Act.
(gg) "WMX Registration Statement" shall have the meaning set forth in
Section 9(c)(ii) hereof.
(hh) "WMX Welfare Plans" shall have the meaning set forth in Section 8(a)
hereof.
3. General Services Provided to or by CWM and its Subsidiaries. (a) WMX
Corporate Services. The parties agree that for the term of this Agreement, CWM
will from and after the date hereof be responsible for all aspects of conducting
and administering the business and operations of CWM and its Subsidiaries. In
addition to the specific services addressed elsewhere herein, WMX or its
Subsidiaries will, during the term of this Agreement, make available to CWM and
its Subsidiaries such corporate and administrative services of the types
available or being provided to WMX's less-than-wholly owned Subsidiaries by
personnel of WMX or its Subsidiaries as of the date hereof, as CWM or its
Subsidiaries may from time to time request, including, but not limited to, the
following services (it being acknowledged that CWM and its Subsidiaries will
provide varying portions of such services for themselves and that the role of
WMX and its Subsidiaries in providing such services will primarily be that of
advice, consultation and support):
Administration
Benefits and compensation (subject to Section 8 hereof)
Corporate and public affairs
Corporate communications
Corporate Secretarial
Employee/labor relations
Environmental management (excluding landfill design)
Environmental audit
Finance
4
<PAGE>
Government affairs (excluding state and local)
Internal audit
Investor relations
Legal
Planning and financial services
Purchasing
Risk management
Stock option and stockholder services
System support and development
Tax services
(b) Additional Services. WMX agrees that from time to time during the
term of this Agreement, at the request of CWM, it will discuss with CWM the
types of services other than those specified herein which WMX or its
Subsidiaries may be able to provide to CWM and its Subsidiaries. If CWM desires
to obtain such additional services, WMX and CWM agree to negotiate in good faith
with respect to the terms under which WMX or its Subsidiaries will provide such
services, including, without limitation, the payment of compensation and
expenses to WMX.
(c) Services by CWM. CWM and its Subsidiaries will, during the term of
this Agreement, make available to WMX and its Subsidiaries such corporate and
administrative services of the type performed by CWM or its Subsidiaries with
respect to their respective businesses as WMX or its Subsidiaries may from time
to time request (it being acknowledged that the role of CWM and its Subsidiaries
in providing such services will primarily be that of advice, consultation and
support).
(d) Limitations. Notwithstanding any other provision of this Agreement,
the parties hereto acknowledge and agree that under no circumstances shall this
Agreement obligate any party to provide or to cause its Subsidiaries to provide
any services which are of a type that such party or its Subsidiaries offer
commercially to non-affiliated third parties in the ordinary course of business.
(e) Receiving Party's Option; Disruption. No Receiving Party shall be
obligated to use or to cause its Subsidiaries to use any services made available
by a Providing Party or its Subsidiaries pursuant to this Agreement, and a
Receiving Party may provide any such
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services by itself or obtain them from its Subsidiaries or any other Person. In
the event that a Receiving Party requests a level of services pursuant to this
Section 3 that a Providing Party or one or more if its Subsidiaries is unable to
provide without material disruption of, or material adverse impact upon, the
conduct of the Providing Party's or its relevant Subsidiary's respective
businesses or operations, the Providing Party or its relevant Subsidiaries shall
be entitled to reduce the volume of services provided to the Receiving Party or
its Subsidiaries to such level as will not have such effects or to terminate
such services, if reasonably necessary to avoid such effects. In such event the
Providing Party will use its reasonable good faith efforts to overcome such
effects so as to be able to provide, or cause its Subsidiaries to provide, the
services requested by the Receiving Party or its Subsidiaries.
4. Insurance, Bonding and Financial Assurances. (a) Coverage. WMX will
continue to provide CWM with all appropriate insurance and bonding coverages, to
the extent reasonably available from underwriters and surety companies,
including bid and performance bonds. All costs incurred by WMX or any of its
Subsidiaries to unaffiliated third parties for insurance coverage (including,
without limitation, allocations from WMX as provided below) provided or procured
by WMX or its Subsidiaries on behalf of CWM or its Subsidiaries shall be paid by
CWM. The cost of insurance coverage which benefits both CWM or its
Subsidiaries, on the one hand, and WMX or its Subsidiaries, on the other,
including, without limitation, retrospective premiums and self-insurance cost
allocations, shall be allocated so as to apportion such costs fairly between CWM
and its Subsidiaries, on the one hand, and WMX and its Subsidiaries, on the
other, on the basis of relative loss experience, total insurance costs, relative
extent of coverage, relative loss exposure and other appropriate factors, and
will be allocated to CWM and its Subsidiaries on a basis no less favorable to
them than that generally accorded WMX's less-than-wholly owned Subsidiaries. In
the event of any refund of any insurance premium to WMX with respect to any
insurance coverage applicable to CWM or its Subsidiaries, WMX shall pay, or
credit against other amounts due to WMX from CWM or its Subsidiaries, such
portion of such refund as is reasonably allocable to CWM and its Subsidiaries.
CWM shall compensate WMX for the procurement or provision of surety bonds for or
on behalf of CWM and its Subsidiaries on such basis (including, without
limitation, an averaging of all costs incurred by WMX or any
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of its Subsidiaries to unaffiliated third parties in procuring or providing
surety bonds for or on behalf of all Persons controlled by it) as WMX may from
time to time reasonably determine, provided, that in any calendar year the
aggregate amount of such compensation for all surety bonds procured or provided
by WMX or its Subsidiaries for CWM and its Subsidiaries in such year shall not
exceed the aggregate annual cost which CWM would have incurred in procuring
surety bonds of the same type and amount from unaffiliated third parties during
such year.
(b) Captive Insurance. WMX shall, subject to the requirements of all
applicable laws and regulations and subject to the limits of Section 4(c) below,
cause the Insurance Subsidiaries to offer CWM and its Subsidiaries insurance and
surety bond products and services at prices and on terms substantially the same
as those offered from time to time to WMX's less-than-wholly owned Subsidiaries,
provided, that, subject to the requirements of all applicable laws and
regulations, the prices for any product or service or related group of products
or services which CWM has requested shall not exceed the prices then currently
available from non-affiliated providers of substantially the same products and
services or related group of products or services; and provided further that if
the risk of loss to an Insurance Subsidiary from making products and services
available to CWM is not comparable to the risk of loss with respect to WMX's
less-than-wholly owned Subsidiaries, the prices and terms of any such product or
service which is offered to CWM may, in WMX's sole discretion, reflect such
different risk of loss. WMX will use its reasonable good faith efforts to cause
such products and services to be priced at a discount to comparable products
offered by providers thereof not affiliated with WMX. CWM hereby acknowledges
that the Insurance Subsidiaries issue bonds and insurance policies in favor of
third parties on behalf of Subsidiaries of WMX subject to the requirement that
such Subsidiaries reimburse the Insurance Subsidiaries for all payments by the
Insurance Subsidiaries to third parties pursuant to such bonds or policies.
(c) Exposure Limitation. In no event shall WMX be obligated to provide,
or cause any Insurance Subsidiary or any of WMX's other Subsidiaries to provide,
any agreement, product or services contemplated under this Section 4, if doing
so would cause the Aggregate WMX Exposure to exceed an amount equal to 30% of
CWM's stockholders' equity, as shown on CWM's most recently available annual or
quarterly balance sheet
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prepared in accordance with generally accepted accounting principles. As used
herein, the term "Aggregate WMX Exposure" shall mean the sum of:
(i) the aggregate penal sum of all outstanding surety bonds procured
by WMX or its Subsidiaries (including those procured from
Insurance Subsidiaries) for or on behalf of CWM or its
Subsidiaries;
(ii) the aggregate face amount of all guarantees issued by WMX or its
Subsidiaries for or on behalf of CWM or its Subsidiaries for the
purpose of facilitating CWM's or its Subsidiaries' obtaining
surety bonds;
(iii) the aggregate face amount of all letters of credit procured by
WMX or its Subsidiaries for or on behalf of CWM or its
Subsidiaries; and
(iv) the aggregate amount of the policy limits under insurance
policies issued by Insurance Subsidiaries for the benefit of CWM
or its Subsidiaries.
(d) Existing Mechanisms. WMX will use all reasonable efforts while
this Section 4 remains in effect to maintain all current WMX guarantees, letters
of credit and bonds relating to RCRA financial assurances of CWM and its
Subsidiaries in effect on the Effective Date ("Mechanisms"), provided that WMX
may change the form of current Mechanisms, to the extent permitted by law or
regulation. Costs of Mechanisms allocable to CWM or its Subsidiaries shall be
paid by it. CWM shall use all reasonable efforts to reduce the levels of or
replace the Mechanisms provided by WMX with respect to CWM's and its
Subsidiaries' operations.
(e) Letters of Credit. WMX will continue to use its reasonable good faith
efforts to procure letters of credit from financial institutions for the benefit
of CWM and CWM Subsidiaries to the same extent and on substantially the same
terms as WMX procures letters of credit on behalf of itself or its Subsidiaries,
provided that doing so does not materially adversely affect WMX's
creditworthiness. CWM will compensate WMX for the procurement and maintenance
of letters of credit whether heretofore or hereafter issued for or on behalf of
CWM or its Subsidiaries, on such basis (including, without limitation, an
averaging of all costs incurred by WMX in procuring letters of credit for or on
behalf of all Persons controlled by WMX) as WMX may from time to time determine,
provided, that
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such compensation shall not exceed the cost which CWM would incur in procuring a
letter of credit of the same type and amount from unaffiliated third parties at
the time of issuance of the letter of credit.
(f) Guarantees. WMX and CWM may agree from time to time to WMX's issuance
of guarantees of obligations of CWM or CWM Subsidiaries. WMX and CWM shall
agree in each such instance on the terms and conditions of each such guarantee,
including, without limitation, any compensation to be paid to WMX with respect
thereto, which compensation shall be based on the expense CWM would have to bear
in procuring a similar guarantee or other performance or financial assurance
from a third party.
5. Cash Management, Indebtedness and Cash Requirements.
(a) Funding Commitment. WMX agrees as provided in this Section 5 to fund
CWM's cash requirements, up to a maximum aggregate amount of Indebtedness from
CWM to WMX outstanding at any time (including, without limitation, that
outstanding as of the Effective Date and that incurred by CWM pursuant to
paragraph (b) or (c) below) of (i) $750,000,000 plus (ii) the aggregate
principal amount (including the original issue price plus accrued discount, in
the case of discount loans) of all Indebtedness of WMX to CWM outstanding at the
time, until the earlier of the date of termination of this Section 5 or such
time as CWM obtains its own financing, at which time WMX's financing commitment
pursuant to this Section 5 shall terminate and all net CWM Indebtedness to WMX
shall be paid in full. For purposes of this Section 5, the Indebtedness of CWM
and its Subsidiaries to WMX and its Subsidiaries shall include, without
limitation, (i) all Indebtedness of CWM and its Subsidiaries to WMX and its
Subsidiaries, whether incurred before, on or after the Effective Date, whether
as intercompany advances, Open Account Indebtedness, term loans or otherwise,
(ii) all Indebtedness of CWM and its Subsidiaries guaranteed by WMX or any of
its Subsidiaries, whether before, on or after the Effective Date and (iii) all
unpaid amounts properly charged by WMX or any of its Subsidiaries to any
intercompany account maintained with CWM or any of its Subsidiaries, whether
before, on or after the Effective Date, including without limitation amounts
charged pursuant to Section 10 or 11 of this Agreement.
(b) Open Account Funding. (i) During the term of this Agreement, WMX
shall continue to manage CWM's cash under the advance account system currently
in effect, and
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WMX shall, at CWM's request, advance funds to CWM on open account, subject to
the limit specified in Section 5(a) above and subject to Sections 12 and 13
hereof, whereupon the amount of such advance shall constitute Open Account
Indebtedness. Subject to Section 5(k) hereof, all Open Account Indebtedness
shall be due and payable on demand made at any time on or after the date of the
termination of this Section 5 pursuant to Section 14 or otherwise; provided,
however, that if at any time prior to the termination of this Agreement the
outstanding balance of Open Account Indebtedness of CWM and its Subsidiaries to
WMX and its Subsidiaries, together with the outstanding aggregate balance of
all other Indebtedness of CWM and its Subsidiaries to WMX and its Subsidiaries,
exceeds the limit set forth in Section 5(a) hereof, then the lesser of the
amount of such excess or the entire balance of such Open Account Indebtedness
shall be due and payable on demand by WMX. CWM shall be entitled to pay any or
all Open Account Indebtedness at any time prior to its maturity without payment
of any premium or penalty.
(ii) Interest shall accrue on each day's balance of Open Account
Indebtedness at a rate per annum that would be payable by WMX (inclusive of
underwriters', dealers' or agents' commissions, fees or charges) with respect to
30-day commercial paper issued by WMX, on the first business day of each month
in which any Open Account Indebtedness of CWM to WMX is outstanding, plus such
number of basis points as is necessary and appropriate to effectively reimburse
WMX for any expense (other than WMX's effective rate for borrowing funds) of
obtaining funds incurred by it, including without limitation, WMX's cost of
procuring or maintaining back-up credit lines sufficient to enable WMX to
reclassify such Indebtedness from short-term to long-term ("Back-up Lines").
(iii) If such balance as of any day shows a positive cash position with
WMX, CWM shall be entitled to interest on such balance for such day, at a rate
per annum equal to (A) the effective rate (inclusive of underwriters', dealers'
or agents' commissions, charges or fees) that would be payable by WMX with
respect to 30-day commercial paper issued by WMX on the first business day of
each month in which such balance shows CWM to be in a positive cash position
with WMX, minus (B) such number of basis points as WMX and CWM agree as
representing one-half of the spread between (1) the rate determined pursuant to
Section 5(b)(iii)(A) above, and (2) the effective interest rate per annum which
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would normally be receivable by CWM in investments in commercial paper on the
date and of the type specified in Section (5)(b)(iii)(A) above.
(iv) To the extent CWM can demonstrate the availability to it of lower
comparable short-term borrowing rates or higher rates of return on short-term
investments of comparable risk, maturity and amount, as the case may be, it
shall be entitled to such rates from WMX. Interest on Open Account Indebtedness
outstanding during any month (including previously charged interest) of CWM to
WMX or WMX to CWM, as the case may be, determined as provided above, shall be
charged or credited, as the case may be, monthly as of the first day of the next
following month to CWM's advance account with WMX, whereupon, such interest
shall constitute Open Account Indebtedness.
(c) WMX Term Loans to CWM. In the event that CWM requires funds for the
conduct of its business and operations which CWM does not wish to procure as
Open Account Indebtedness, CWM may borrow from WMX, and WMX shall lend to CWM,
subject to the limit specified in Section 5(a) above, such funds as CWM may
reasonably require on a term loan basis pursuant to the provisions of Section
5(e)-(j) hereof.
(d) CWM Term Loans to WMX. In the event that WMX wishes to borrow funds
other than through the borrowing arrangements contemplated by Section 5(b) above
and CWM has funds which it determines, in its sole discretion, will not be
required for the conduct of CWM's business during the term for which WMX wishes
to borrow ("Excess Cash"), WMX may borrow from CWM and CWM shall lend to WMX for
a fixed period of time selected by WMX the amount of Excess Cash desired by WMX,
other than that which CWM shall be prohibited by law or contract from lending to
WMX; provided, however, that CWM shall not be required to lend funds to WMX
pursuant to this Section 5(d) if doing so would materially adversely affect
CWM's creditworthiness.
(e) Promissory Note and Maturity. At the time of a party's first
borrowing of funds from the other pursuant to Section 5(c) or 5(d) above, the
borrowing party shall execute and deliver to the lending party a promissory note
substantially in the form of Exhibit A attached hereto. Such note shall bear
such restrictive legends as are necessary for the purpose of compliance with the
Securities Act. Unless the parties otherwise agree in writing at the time of
the making of a loan, and subject to Section 5(k) hereof each loan represented
by such a promissory note shall be due on such date, not to exceed ten (10)
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years from the date of the loan, as the borrowing party may select. Each loan
shall, as the borrowing party may choose at the time of the making of the loan,
either bear such stated rate of interest as is determined as provided in Section
5(f) or (g) below or be made on a floating rate basis, determined as provided in
Section 5(h) below.
(f) CWM Term Indebtedness. CWM shall pay interest to WMX on each
borrowing by CWM pursuant to Section 5(c) above (other than any borrowing which
is to bear a floating rate of interest) at a rate per annum equal to (i) the
then-current effective rate, inclusive of underwriters' or dealers' commissions,
charges or fees or similar charges, which would be payable by WMX on commercial
paper (in the case of a borrowing by CWM having a maturity date of 270 or fewer
days from the date of the making of the loan) or on medium-term notes (in the
case of a borrowing by CWM having a maturity date more than 270 days from the
date of the making of the loan) sold to an unaffiliated purchaser through
underwriters or agents and having a maturity date corresponding to the maturity
date of such borrowing by CWM plus (ii) such number of basis points as is
necessary and appropriate to effectively reimburse WMX for any expense (other
than WMX's effective rate for borrowing funds) of obtaining funds incurred by
it, including, without limitation, WMX's cost of procuring or maintaining Back-
Up Lines, provided, that if CWM can demonstrate the availability of a lower
borrowing rate at the time of such borrowing, it shall be entitled to pay such
lower rate.
(g) WMX Term Indebtedness. WMX shall pay interest to CWM on each
borrowing by WMX pursuant to Section 5(d) above (other than any borrowing which
is to bear a floating rate of interest) at a rate of interest per annum equal to
(i) the effective interest rate which WMX would be required to pay (inclusive of
underwriters', dealers' or agents' commissions, charges or fees) in the issuance
to an unaffiliated purchaser of WMX commercial paper or medium term notes, as
the case may be, of equal amount and maturity date, minus (ii) such number of
basis points as WMX and CWM agree at the time of the making of the loan
represents one-half of the spread between (A) the rate determined pursuant to
clause i of this Section 5(g) and (B) the stated interest rate which would
normally be receivable by CWM in an investment in commercial paper or medium-
term notes, as the case may be, of amount, maturity, and risk equal to the same
instruments issued by WMX, issued by an unaffiliated party. To the extent that
CWM can demonstrate
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the availability to it at the time of the making of a loan to WMX of higher
rates of return on investments of equal amount, risk and maturity, it shall be
entitled to receive such rates from WMX with respect to such loan.
(h) Floating Rate. The parties may agree at the time of making any loan
that the loan shall bear a floating interest rate determined on the basis of
such reference interest rate or other basis as the parties may at the time
agree, in which event the interest rate on such loan shall automatically adjust
as such reference rate or other basis adjusts. With respect to any borrowing by
CWM on a floating rate basis hereunder, the reference interest rate or other
basis to be agreed upon by the parties, together with the amount of any increase
thereto or decrease therefrom, shall not exceed that which would be charged CWM
for a comparable loan by an unaffiliated Person lending on an arms-length basis.
(i) Interest Payment Dates. If the maturity date of a loan pursuant to
Section 5(c) or 5(d) above is less than or equal to three months from the date
of the making of the loan, interest shall be due and payable in arrears at the
maturity date of the loan. If the maturity date of such loan is later than
three months from the date of the making of the loan, interest shall be due and
payable in arrears at the end of each calendar quarter following the date of the
making of such loan (or where a floating rate loan uses a basis involving other
payment dates, on such other payment dates), with a final payment on the date
payment of such loan is due, whether by acceleration or otherwise. Interest
shall be based on the actual number of days elapsed based on a 360 day year.
(j) Manner of Payment. All payments of Indebtedness of CWM or WMX, as the
case may be, shall be made when and as due at such place as the receiving party
may from time to time designate.
(k) Set-Off. In the event that CWM or WMX, as the case may be, fails to
pay when due and payable any payment of principal or interest with respect to
any Indebtedness or other sum owed by it, whether or not pursuant to this
Agreement, the party entitled to receive such payment, or any of its
Subsidiaries, may upon written notice to the party obligated on such
Indebtedness or other sum set-off the amount of such payment against any or all
sums due and payable by it to the party or its Subsidiary obligated on such
Indebtedness or other sum.
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(l) Securities Representations. Each party hereto (i) represents to the
other that any Promissory Note to be acquired by it pursuant to this Agreement
will be acquired for investment purposes only and not with a view toward any
public distribution and (ii) agrees not to sell or otherwise dispose of such
Promissory Note except in accordance with the Securities Act and all applicable
foreign and state securities laws.
(m) Waiver. Each of CWM, as to all Indebtedness of CWM to WMX incurred
pursuant to this Section 5, and WMX, as to all Indebtedness of WMX to CWM
incurred pursuant to this Section 5, hereby waives presentment, demand, protest,
notice of dishonor and any and all other notices, except as expressly set forth
in this Agreement.
6. WMX Computer Facilities. CWM shall be entitled to use the WMX Lombard,
Illinois central computer facilities and WMX systems department personnel on the
same basis as WMX's Subsidiaries, and shall pay such fees with respect to the
use of such facilities as are charged generally to such Subsidiaries.
7. Environmental Monitoring Laboratory. WMX has constructed an
environmental monitoring laboratory (the "Laboratory") which primarily
analyzes samples of groundwater and surface water from waste treatment, storage
and disposal sites. CWM agrees to submit to the Laboratory 100% of CWM's
groundwater and surface water sample analysis requirements as required (and
permitted) by its RCRA or TSCA permits or other regulatory authorities, other
than those of its low-level radioactive waste operations, and WMX agrees to
submit to the Laboratory 100% of the groundwater and surface water analysis
requirements of its Waste Management, Inc. operations as required (and
permitted) by its RCRA or TSCA permits or other regulatory authorities, and WMX
agrees that the Laboratory shall accept such submissions. WMX and CWM also
agree to submit to the Laboratory any special ground water or surface water
sample analysis requirements not covered by RCRA or TSCA permits or other
regulatory authorities, which the Laboratory may, but is not required to,
accept. The services deliverable by the Laboratory to CWM shall be as specified
in separate Addenda to be agreed upon by WMX and CWM. Subject to the provisions
of the next sentence, charges to CWM for services of the Laboratory shall be on
the basis of rate schedules to be agreed upon, shall not exceed those charged to
its Waste Management, Inc. operations, and shall be adjusted at least annually
to provide for CWM's paying its proportionate share of WMX's fully-absorbed
costs of the Laboratory.
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Charges to CWM for services of the Laboratory shall not exceed those CWM
demonstrates are available for equivalent services from independent, bona fide
suppliers, based on the average of the prices quoted by at least five such
suppliers. CWM shall be provided the opportunity to review WMX's calculations
of fully-absorbed costs of the Laboratory, and CWM's proportionate share thereof
(which shall be based on relative dollar volume of usage), at least annually.
The Laboratory shall be operated at all times with a quality assurance/quality
control ("QA/QC") program meeting then current industry and regulatory agency
standard procedures. Should CWM require, for its purposes, a higher level of
QA/QC procedures for any sample or group of samples, the Laboratory shall
provide such QA/QC procedures to the extent requested and the additional cost
therefor shall be paid for by CWM. The provisions of this Section 7 regarding
use of the Laboratory shall continue until two years after written notice is
given by either party to the other that it terminates such provisions, provided
that such termination shall not be effective prior to December 31, 1998.
8. Pension and Profit Sharing Plans, ESOP and Welfare Plans.
(a) Generally. WMX shall permit CWM and the CWM Subsidiaries to continue
as or become participating employers under the Waste Management, Inc. Pension
Plan, the Waste Management, Inc. Profit Sharing and Savings Plan and the Waste
Management, Inc. 1988 Employee Stock Ownership Plan, as amended from time to
time (the "WMX Plans").
(b) Contributions. During such time as CWM and the CWM Subsidiaries
continue as participating employers under the WMX Plans, CWM and the CWM
Subsidiaries shall pay a share of the employer contributions under the WMX Plans
determined as follows:
(i) WMX Pension Plan. CWM and the CWM Subsidiaries shall pay in the
aggregate a share of each year's contribution under the WMX Pension Plan
determined as if:
(A) A separate and identical plan had been established for the
employees of CWM and the CWM Subsidiaries participating in the WMX
Pension Plan from time to time; and
(B) An allocable portion of the assets of the WMX Pension Plan
had been transferred to such separate plan in a spinoff.
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For purposes of clause (B), such allocable portion of the assets of the WMX
Pension Plan shall be an amount equal to the present value of the accrued
benefits from CWM Employees participating in the WMX Pension Plan on the
Cut-off Date, determined on a termination basis as of the Cut-off Date and
based on the actuarial methods and assumptions used in the most recent
actuarial valuation of the WMX Pension Plan. Notwithstanding the foregoing
the WMX Pension Plan shall continue to be operated as a single plan within
the meaning of the regulations of the U.S. Department of the Treasury under
section 414(1) of the Code, and on an ongoing basis all of the assets of
the WMX Pension Plan shall be available to pay benefits to participants in
that Plan and their beneficiaries without regard to the identity of any
participant's employer.
(ii) WMX Profit Sharing and Savings Plan and ESOP. Each of CWM and
the CWM Subsidiaries shall pay a share of the employer contributions under
the WMX Profit Sharing and Savings Plan and the WMX Employee Stock
Ownership Plan for each plan year in the amount of each such contribution
allocable pursuant to that Plan with respect to the participants in its
employ.
(c) Split-ups. If in the future CWM establishes separate pension, profit
sharing and savings plans or employee stock ownership plans for the benefit of
its employees and those of the CWM Subsidiaries (the "CWM Plans"), WMX shall
cause the trustees of each of the WMX Plans to transfer to the trustee or other
funding agent of the corresponding CWM Plan, in cash, securities, other property
or a combination thereof, as determined by WMX, subject to approval by CWM
(which approval shall not be unreasonably withheld):
(i) in the case of the WMX Pension Plan, an amount determined on the
same basis as above provided in Section 8(b)(i);
(ii) in the case of the WMX Profit Sharing and Savings Plan, an
amount equal to the aggregate account balances of the CWM Employees as of
the date of transfer; and
(iii) in the case of the WMX 1988 Employee Stock Ownership Plan, the
shares of WMX stock in the account balances of the CWM employees as of the
date of transfer;
(d) Welfare Plans.
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(i) To the extent that any WMX employee welfare plan is funded through
insurance contracts, CWM and the CWM Subsidiaries shall pay the premiums on
such insurance contracts with respect to employees of CWM and CWM
Subsidiaries (or in the case of post-employment welfare benefits, former
employees of CWM and CWM Subsidiaries who retire or otherwise terminate
employment on or after the Cut-off Date).
(ii) To the extent that any WMX employee welfare plan is funded
partly or wholly other than through insurance contracts CWM and the CWM
Subsidiaries shall be responsible for the satisfaction of all claims
brought by or in respect of employees of CWM and CWM Subsidiaries (or in
the case of post-employment welfare benefits, former employees of CWM and
CWM Subsidiaries who retire or otherwise terminate employment on or after
that date), whether such claims relate to events occurring before or after
the Cut-off Date, except to the extent such claims are covered by an
allocable portion of any claim reserve established for purposes of such
plan. For purposes of this clause (ii), such allocable share of the claim
reserve under such plan shall be in the proportion that the share of the
cost allocated to CWM and the CWM Subsidiaries between January 1, 1986 and
January 1, 1987, or such later date as may be agreed upon by WMX and CWM,
bear to the total cost of the plan during that period.
9. LYONs. (a) Issuance. WMX has issued Liquid Yield Option Notes
("LYONs") exchangeable at the option of the holders thereof, for certain CWM
shares of common stock, $.01 par value ("CWM Shares"), owned by WMX which have
been deposited in escrow by WMX with Harris Trust and Savings Bank, as Escrow
Agent (the "Escrow Agent").
(b) CWM Registration Statement. CWM has filed a registration statement
under the Securities Act covering the CWM Shares (the "CWM Registration
Statement") which has been declared effective by the Commission and will use its
best efforts to maintain a continuously effective and current registration
statement (which may be on a form other than Form S-1) and current prospectus
covering the CWM Shares for so long as may be required for the distribution and
exchange of the LYONs for the CWM Shares. CWM will comply with its undertakings
in the CWM Registration Statement required by Item 512(a)(1)
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of the Commission under the Commission's Regulation S-K. CWM will provide WMX
with a sufficient number of copies of a prospectus relating to the CWM Shares
which meets the requirement of Section 10(a) of the Securities Act. CWM will
use its best efforts to comply with applicable state securities or Blue Sky laws
in connection with the delivery of CWM Shares upon exchanges of LYONs.
(c) Indemnification. (i) CWM agrees to indemnify and hold harmless WMX,
its Affiliates and their respective officers and directors against any and all
losses, claims, damages or liabilities to which they or any of them may become
subject under the Securities Act or any other statute or common law, including
any amount paid in settlement of any litigation, commenced or threatened, if
such settlement is effected with the written consent of CWM, and to reimburse
them for any legal or other expenses incurred by them in connection with
investigating any claims and defending any actions, insofar as any such losses,
claims, damages, liabilities or actions arise out of or are based upon (A) any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement relating to the CWM shares and required to be maintained
pursuant to this Section 9, or any post-effective amendment thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading or (B)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
registration statement, or contained in the final prospectus required to be
maintained pursuant to this Section 9 (as amended or supplemented if CWM shall
have filed with the Commission any amendment thereof or supplement thereto) if
used within the period during which CWM is required to keep the registration
statement to which such prospectus relates current pursuant to the terms of this
Section 9, or the omission or alleged omission to state therein (if so used) a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the indemnification agreement contained in this Section 9(c)(i) shall not
apply to such losses, claims, damages, liabilities or actions arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with information furnished in writing to CWM by WMX for
use in connection
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with the preparation of the registration statement, any preliminary prospectus
or final prospectus contained in the registration statement, or any amendment or
supplement thereto.
(ii) WMX agrees to indemnify and hold harmless CWM, its Subsidiaries
and their respective officers and directors against any and all losses,
claims, damages or liabilities to which they or any of them may become
subject under the Securities Act or any other statute or common law,
including any amount paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the written consent of WMX,
and to reimburse them for any legal or other expenses incurred by them in
connection with investigating any claims and defending any actions, insofar
as any such losses, claims, damages, liabilities or actions arise out of or
are based upon (A) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement filed under the
Securities Act covering the LYONs (the "WMX Registration Statement"), or
any post-effective amendment thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading or (B) any untrue statement
or alleged untrue statement of a material fact contained in any preliminary
prospectus if used prior to the effective date of such registration
statement, or contained in the final prospectus (as amended or supplemented
if WMX shall have filed with the Commission any amendment thereof or
supplement thereto) if used within the period during which WMX is required
to keep the registration statement to which such prospectus relates
current, or the omission or alleged omission to state therein (if so used)
a material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading; provided,
however, that the indemnification agreement contained in this Section
9(c)(ii) shall not apply to such losses, claims, damages, liabilities or
actions arising out of, or based upon, any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such
statement or omission was contained in the CWM Registration Statement
(filed concurrently with the WMX Registration Statement and forming a part
thereof) or was otherwise made in reliance upon and in conformity with
information furnished in writing to
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WMX by CWM for use in connection with the preparation of the WMX
Registration Statement, any preliminary prospectus or final prospectus
contained in the WMX Registration Statement, or any amendment or supplement
thereto.
(iii) Each indemnified party shall, with reasonable promptness after
its receipt of written notice of the commencement of any action against
such indemnified party in respect of which indemnity may be sought from an
indemnifying party on account of an indemnity agreement contained in this
Section 9, notify the indemnifying party in writing of the commencement
thereof. In case any such action shall be brought against any indemnified
party and it shall so notify an indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein
and, to the extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The
indemnity agreements in this Section 9 shall be in addition to any
liabilities which the indemnifying parties may have pursuant to law.
(d) Term and Termination. This Section 9 shall remain in effect for so
long as any LYONs remain outstanding, provided that Section 9(c) hereof shall
continue in effect thereafter.
10. Fees for Services; Reimbursement. In consideration of the provision
of services by personnel of the Providing Party pursuant to this Agreement, the
Providing Party shall be entitled to reimbursement for its fully allocated costs
of providing services, in addition to all other payments to which it is entitled
pursuant to this Agreement, upon the presentation of invoices supported by (a)
time records (or other evidence reasonably satisfactory to the Receiving Party)
reasonably identifying the nature of the service performed, the period of
performance and the identity of the personnel involved or (b) reasonably
satisfactory evidence of designation of any employee whose services are
dedicated in whole or in substantial part to serving the Receiving Party and the
portion of
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such employee's efforts dedicated to the provision of services to the Receiving
Party. Such fully allocated cost to the Providing Party in providing services
shall include, without limitation, the salaries, incentive compensation,
employment taxes, benefits and overhead associated with employees of the
Providing Party for their time spent providing services to the Receiving Party.
The Providing Party shall also be entitled to receive reimbursement for such
disbursements and out-of-pocket expenses as may be reasonably incurred by the
Providing Party in providing such services, as specified in an invoice from the
Providing Party. All services for which WMX currently charges CWM an hourly
fee, including, but not limited to, corporate aircraft, shall continue to be
charged for on an hourly basis, but shall be furnished only as requested by CWM
and as available from WMX. The Providing Party may, if it is not reasonably
capable of providing the requested services or if such provision would
unreasonably disrupt any of its respective activities, obtain such services from
unaffiliated providers, and the fees and expenses therein incurred by the
Providing Party shall be reimbursable as provided above. Subject to Section 11
hereof, each payment obligation of the Receiving Party or its Subsidiaries
pursuant to this Section 10 shall be due and payable 30 days after the date on
which such obligation was incurred at such place or places as the Providing
Party may from time to time designate.
11. Payment Through Open Account. In the interests of administrative
convenience, either party hereto may, from time to time during the term of this
Agreement, utilize the WMX intercorporate advance account payment system (in
accordance with WMX's procedures for such system as they may exist from time to
time) to charge any amount owed pursuant to this Agreement by CWM or any of its
Subsidiaries, as well as any other amount otherwise owed to WMX or any of its
Subsidiaries by CWM or any of its Subsidiaries, to an account maintained by WMX
or such Subsidiary for such purpose, and upon each such amount's being so
charged it shall constitute Open Account Indebtedness for purposes of this
Agreement. WMX may likewise credit such an account for any amount due to CWM or
its Subsidiaries from WMX or its Subsidiaries. WMX or its Subsidiaries shall
from time to time be entitled to pay all or any portion of the balance of any
such account to CWM or any of its Subsidiaries at any time prior to its maturity
without payment of any premium or penalty.
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12. Indemnification of WMX. (a) CWM agrees to indemnify and hold harmless
WMX, each of its Subsidiaries and each of their respective directors, officers,
employees, agents, attorneys and representatives (the "Indemnified WMX Parties")
from and against any and all liabilities, claims, damages, obligations, costs
and expenses (including, without limitation, reasonable attorneys' fees and
court costs) asserted or made against any one or more Indemnified WMX Parties by
Persons other than one or more Indemnified WMX Parties and arising from or
relating to:
(i) WMX's, any Insurance Subsidiary's or any other WMX Subsidiary's
(A) having extended or procured coverage under any WMX insurance policy to
CWM, any of its Subsidiaries or their respective businesses or properties,
or having caused such coverage to be so extended, if either an Insurance
Subsidiary is the issuer of such policy or WMX or any of its Subsidiaries
is obligated to reimburse the issuer of such policy for payments made under
such policy, (B) having procured any surety bond or letter of credit for or
on behalf of CWM or any of its Subsidiaries or (C) having guaranteed or
otherwise assured the performance or payment of any obligation of CWM or
any of its Subsidiaries, whether before, on or after the Effective Date; or
(ii) the failure of CWM or any of its Subsidiaries to pay when and as
due any Indebtedness and other obligations of CWM or any of its
Subsidiaries to WMX or any of its Subsidiaries.
(b) WMX shall furnish an invoice to CWM for the amount of each payment
requested pursuant to this Section 12, and CWM shall pay each such invoice
within 30 days after receiving it, except to the extent that such invoice
includes any amount as to which WMX is not entitled to payment by the terms of
this Section 12. CWM may at its option offset any or all of the amount of such
invoice against any indebtedness owed by WMX or any of its Subsidiaries to CWM
or its Subsidiaries.
(c) CWM may at its option assume and control the defense, compromise,
settlement and discharge of each matter as to which any Person is or becomes
entitled to indemnification pursuant to this Section 12. WMX agrees not to
compromise, settle or dis-charge any such matter without CWM's written consent
unless an Event of Default shall have occurred (which consent shall not be
unreasonably withheld or delayed). CWM agrees
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not to compromise, settle or discharge any such matter without WMX's written
consent (which consent shall not be unreasonably withheld or delayed) if any
claim shall have been made or threatened against any Person entitled to
indemnification under this Section 12 in connection with any such matter unless
such compromise, settlement or discharge includes a valid, enforceable and
unconditional written release of each such Person. This Section 12 shall
survive any and all terminations of this Agreement.
13. Default. (a) Upon the occurrence of an Event of Default WMX may in
its sole and exclusive discretion suspend or terminate any or all of its
obligations hereunder and may declare all Open Account Indebtedness to be, and
such Open Account Indebtedness shall, subject to Section 5(k) hereof, thereupon
become, immediately due and payable without presentment, demand, protest, notice
of dishonor or notice of any kind, all of which are hereby waived by CWM. WMX's
or any of its Subsidiaries' exercise of any particular right or remedy shall not
be deemed a waiver of any other right or remedy or to preclude the exercise of
any other right or remedy. No failure or delay by WMX or any of its
Subsidiaries in exercising any right or remedy shall constitute a waiver of such
right or remedy or any other right or remedy. CWM shall give written notice to
WMX of the occurrence of any Event of Default within five Business Days of such
occurrence. For purposes hereof, each of the following shall constitute an
Event of Default:
(i) CWM fails to make when and as due any payment of any sums
required by the terms of this Agreement or any Promissory Note if either
the right of CWM to borrow funds pursuant to Section 5 hereof shall have
been terminated or suspended or the amount of such payment when added to
all outstanding Indebtedness of CWM to WMX and its Subsidiaries would
exceed the limit set forth in Section 5(a) above as to all Indebtedness of
CWM to WMX, provided, however, that no such failure shall constitute an
Event of Default unless CWM or its Subsidiary shall have failed to cure
such failure within five Business Days of the date the payment was due or
shall have failed to pay interest at the rate provided below on the amount
of the required payment from the date when due to the date of payment and
such failure continues for five Business Days from the date of WMX's
written demand for payment of such interest;
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(ii) CWM or any of its Subsidiaries fails to make when and as due any
payment of principal or interest in respect of any indebtedness of CWM for
borrowed money, the outstanding principal balance of which plus accrued and
unpaid interest exceeds an amount equal to five percent of the total
stockholders' equity of CWM and its Subsidiaries determined as of the end
of CWM's then most recently completed fiscal year on a consolidated basis
in accordance with generally accepted accounting principles (or its
equivalent in other currency in which such indebtedness is denominated),
whether such indebtedness is now existing or hereafter arising;
(iii) Any event or condition shall occur which (A) results in the
acceleration of the maturity of any indebtedness of CWM or any of its
Subsidiaries for borrowed money, the outstanding principal balance of which
plus accrued and unpaid interest exceeds an amount equal to five percent of
the total stockholders' equity of CWM and its Subsidiaries determined as of
the end of CWM's then most recently completed fiscal year on a consolidated
basis in accordance with generally accepted accounting principles (or its
equivalent in other currency in which such indebtedness is denominated),
whether such indebtedness is now existing or arises hereafter, or (B)
enables (or with the giving of notice or the passage of time or both would
enable) the holder of such indebtedness to accelerate the maturity thereof
(except, for purposes of this clause (B), any such indebtedness as to which
CWM or its relevant Subsidiary shall have a right to cure the event or
condition in question and shall be practically able to effect a cure);
(iv) CWM or any of its Subsidiaries shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action to
authorize any of the foregoing;
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<PAGE>
(v) An involuntary case or other proceeding shall be commenced against
CWM or any of its Subsidiaries seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days,
or an order for relief shall be entered against CWM or any of its
Subsidiaries under any applicable bankruptcy laws or similar laws as now or
hereafter in effect;
(vi) Any material obligation of CWM under Section 5 or 12 of this
Agreement fails for any reason to be in full force and effect and fully
enforceable against CWM; or
(vii) CWM shall fail in any material respect to perform each and
every material obligation of it hereunder in timely fashion and such
failure shall continue unremedied for a period of ten days from and after
WMX's giving of written notice of such failure.
(b) All payments due from CWM shall, if not paid when due and if their
failure to be paid constitutes an Event of Default, bear interest at a floating
rate equal to the rate per annum publicly announced by Mellon Bank, Pittsburgh,
Pennsylvania, as its prime rate, which rate shall change as such rate changes.
Such interest shall be due on demand and shall not duplicate any interest
charged pursuant to any Promissory Note.
14. Term and Termination. This Agreement and the parties' respective
rights and obligations hereunder shall be deemed effective as of the Effective
Date. Subject to Section 13 above and except to the extent otherwise expressly
provided herein, this Agreement will (unless terminated earlier pursuant to
other provisions of this Agreement) continue through December 31, 1993 and
thereafter on a year-to-year basis unless either party notifies the other of
termination of this Agreement by at least 30 days advance written notice given
between November 30 of a year and February 1 of the next year, such termination
to be effective 30 days after being given, provided, however, that CWM's
obligations pursuant to this Agreement to make any payments to WMX or its
Subsidiaries, and WMX's obligation to make any payments to CWM or its
Subsidiaries, of any Indebtedness, interest, cost,
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<PAGE>
expense, fee, charge, premium allocation or other amounts, the parties'
respective obligations pursuant to Sections 10, 11, 12 and 13 above and this
Section 14 shall survive any and all terminations.
15. Miscellaneous. The provisions of Sections 6.06, 6.07, 7.01, 7.03
through 7.08 and 7.10 of the Intercorporate Agreement shall apply to this
Agreement as if set forth verbatim herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
WMX TECHNOLOGIES, INC.
By: /s/ Thomas C. Hau
------------------------------------
Thomas C. Hau
Vice President and
Controller
CHEMICAL WASTE MANAGEMENT, INC.
By: /s/ Jerome D. Girsch
------------------------------------
Jerome D. Girsch
Executive Vice President,
Chief Financial Officer, Treasurer and
Controller
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EXHIBIT A
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD BY THE HOLDER HEREOF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENT OF THE ACT. BY ITS ACCEPTANCE OF THIS PROMISSORY NOTE,
THE HOLDER HEREOF REPRESENTS THAT THIS PROMISSORY NOTE IS BEING ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH,
ANY PUBLIC DISTRIBUTION HEREOF AND THAT ANY RESALE OF THIS PROMISSORY NOTE WILL
BE MADE ONLY PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE ACT.
[WMX TECHNOLOGIES, INC.]
[CHEMICAL WASTE MANAGEMENT, INC.]
PROMISSORY NOTE
_______________________, 199___ Oak Brook, Illinois
FOR VALUE RECEIVED, the undersigned [CHEMICAL WASTE MANAGEMENT, INC.] [WMX
TECHNOLOGIES, INC.] ("Payor") promises to pay to the order of [WMX TECHNOLOGIES,
INC.] [CHEMICAL WASTE MANAGEMENT, INC.] ("Payee") a sum equal to the amount of
each loan by Payee or Payor pursuant to Section 5 of the Second Amended and
Restated Corporate and Administrative Services Agreement dated May 17, 1993 by
and between Payor and Payee (the "Agreement") plus interest on the outstanding
principal balance of the loan at the rate determined pursuant to Section 5 of
the Agreement for the actual number of days elapsed from and inclusive of the
date of the making of the loan to, but exclusive of, the date of payment of the
amount due at maturity of such loan, based on a 360 day year. Contemporaneously
with the making of each loan by Payee to Payor pursuant to Section 5 of the
Agreement, Payor shall issue to Payee a written confirmation. Each confirmation
shall state the amount of funds loaned, the amount due at maturity (if different
from the amount of funds loaned), the maturity date of the loan and the rate of
interest or basis for determining interest, if any, applicable to such loan, all
determined as provided in Section 5 of the Agreement. The issuance of a
confirmation shall not be conclusive as to the accuracy of the information
contained therein, and failure of Payor to issue such confirmation shall not
affect Payor's obligations hereunder. Payee shall inform Payor with reasonable
promptness of any inaccuracy therein, but neither Payee's failure to do so nor
making any errors in so informing Payor shall affect Payor's obligations
hereunder.
1. All payments of principal and interest shall be due on the dates
determined pursuant to Section 5 of the Agreement and shall be made in
immediately available funds, at the principal office of _______________________
Bank in ______________________ or such other place, or in such other manner, as
Payee may from time to time designate by advance written notice to Payor. All
required payments of principal, interest or other amounts shall, if not paid
when due, bear interest at a floating rate equal to the rate per annum publicly
announced by Mellon Bank, Pittsburgh, Pennsylvania as its prime rate, which rate
shall change as such prime rate changes. Such interest shall be payable on
demand.
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<PAGE>
2. The Payor represents and warrants as follows, which representations
and warranties shall survive the execution and delivery of this Promissory Note
and each loan of funds to Payor pursuant hereto and shall be deemed made as of
the date hereof and as of the date of each borrowing by Payor pursuant to the
Agreement.
(a) Payor is a corporation duly organized and validly existing under the
laws of the State of Delaware, has full power and authority to execute, deliver
and perform its obligations under this Promissory Note and has taken all actions
required for the due execution and delivery of, and performance of its
obligations under, this Promissory Note.
(b) This Promissory Note is the valid and legally binding obligation of
Payor in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency and other similar laws affecting creditors' rights generally and to
general equitable principles.
(c) The execution and delivery of, and performance of its obligations
under, this Promissory Note will not constitute a violation or breach of or
default under Payor's certificate of incorporation or bylaws or any applicable
law, regulation or rule or any agreement or instrument to which Payor or any of
its Subsidiaries (as defined in the Agreement) is a party or by which it or any
of its property is bound.
(d) Payor has obtained all consents, approvals and authorizations and
effected all declarations, filings and registrations required to be obtained or
made by Payor in connection with the execution and delivery of, or performance
of its obligations under, this Promissory Note.
3. Upon the occurrence of an Event of Default (as defined below), Payee
may by written notice to Payor declare the principal amount of this Promissory
Note (together with accrued interest thereon) to be, and such principal amount
(together with such interest) shall thereupon become, immediately due and
payable without presentment, demand, protest, notice of dishonor or other notice
of any kind, all of which are hereby waived by Payor except as expressly set
forth herein. Payee's exercise of any right or remedy shall not be deemed a
waiver of any other right or remedy or to preclude the exercise of any right or
remedy. No failure or delay by Payee in exercising any right or remedy shall
constitute a waiver of such rights or remedy or any other right or remedy.
Payor shall give written notice to Payee of the occurrence of any Event of
Default within five Business Days (as defined in the Agreement) of such
occurrence.
4. For purposes hereof, each of the following shall constitute an Event
of Default:
(a) Payor fails to make when and as due any payment of principal, interest
or other amount required by the terms of this Promissory Note, by the terms of
any other Promissory Note (as defined in the Agreement) or by the terms of
Section 5 of the Agreement to be paid (a "Required Payment"), provided, however,
that no such failure shall constitute an Event of Default unless Payor shall
have failed to cure such failure within five Business Days of the date the
Required Payment was due or to pay interest on the amount of the Required
Payment from the date when due to the date of payment of the Required Payment
and such failure continues uncured for five Business Days from the date of
Payee's written demand for payment of such interest;
(b) Payor or any Subsidiary of Payor shall fail to make when and as due
any payment of principal or interest in respect of any indebtedness of Payor or
any of its Subsidiaries for borrowed money, the outstanding principal balance of
which exceeds, together with accrued interest thereon, an amount equal to five
percent of
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the total stockholders' equity of the Payor and its Subsidiaries determined as
of the end of the Payor's then most recently completed fiscal year on a
consolidated basis in accordance with generally accepted accounting principles
(or its equivalent in other currency in which such indebtedness is denominated),
whether such indebtedness is now existing or arises hereafter;
(c) any event or condition shall occur which (i) results in the
acceleration of the maturity of any indebtedness of Payor or any of its
Subsidiaries for borrowed money, the outstanding principal balance of which,
plus accrued and unpaid interest, exceeds an amount equal to five percent of the
total stockholders' equity of the Payor and its Subsidiaries determined as of
the end of the Payor's then most recently completed fiscal year on a
consolidated basis in accordance with generally accepted accounting principles
(or its equivalent in other currency in which such indebtedness is denominated),
whether such indebtedness is now existing or arises hereafter, or (ii) enables
(or with the giving of notice or the passage of time or both, would enable) the
holder of such indebtedness to accelerate the maturity thereof (except, for
purposes of this clause (ii), any such indebtedness as to which Payor or its
Subsidiaries shall have a right to cure the event or condition in question and
shall be practically able to effect a cure);
(d) Payor or any of its Subsidiaries shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(e) an involuntary case or other proceeding shall be commenced against the
Payor or any of its Subsidiaries seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against Payor or any of its Subsidiaries under any
applicable bankruptcy laws or similar laws as now or hereafter in effect;
(f) any representation, warranty, certification of statement made by Payor
hereunder shall prove to have been incorrect in any material respect when made
or deemed made; or
(g) this Promissory Note shall for any reason fail to be in full force and
effect and fully enforceable against Payor or Payor shall so assert.
5. Payor agrees to indemnify and hold harmless Payee, and all of Payee's
Subsidiaries and all of Payee's and Payee's Subsidiaries' respective directors,
officers, employees and agents, from and against any and all liability, loss,
cost, damage and expense (including, without limitation, reasonable attorney
fees and court costs) incurred by any of them in enforcing this Promissory Note
against Payor or in investigating, defending, settling or compromising any claim
or proceeding made or threatened against any of them in connection with this
Promissory Note or Payee's furnishing of funds to Payor pursuant hereto.
Payor's obligations with respect to this paragraph shall survive any payment of
principal and interest pursuant hereto and the fulfillment, satisfaction,
termination or cancellation of this Promissory Note or Payor's obligations
hereunder.
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<PAGE>
6. All payments made pursuant to this Promissory Note shall be made
without deduction for any present or future taxes, withholdings, deductions or
any other charges ("Taxes") imposed or required by any governmental authority,
it being understood that the net amount to be received by the Payee after
payment of the Taxes shall not be less than the payment provided for herein.
Payor covenants to make all payments necessary to ensure that Payee receives
such net amount. If Payor makes any such deduction and payment in respect of
Taxes and if Payee or any of its Subsidiaries, as the case may be, determines in
good faith that it has been granted by any relevant tax authority a credit
against Taxes due or a refund of Taxes paid, to the extent that it may do so
without prejudice to the retention of the amount of that credit or refund, Payee
or its relevant Subsidiary shall reimburse Payor or its relevant Subsidiary, as
the case may be, for such amount (if any) as Payee shall in good faith determine
to be the proportion of that credit or refund which is attributable (or, where
Payee is entitled to more than one credit or refund, which is reasonably
allocable) to the said deduction and payment.
7. The outstanding principal amount hereof may be prepaid by the Payor in
whole but not in part, provided, that at the time of making any pre-payment,
Payor shall also pay to Payee all accrued interest to such time and all
reasonable losses, costs and expenses incurred by Payee in the re-deployment by
Payee of the amount of such pre-payment.
8. Whenever any payment required to be made under this Promissory Note
shall be due on a day other than a Business Day (as defined in the Agreement),
such payment may be made on the next succeeding Business Day, and such
extensions of time shall in such case be included in the computation of
interest.
9. Payor waives presentment, demand, protest, notice of dishonor and any
and all other notices in connection with this Promissory Note except as set
forth herein.
10. Payment of principal and interest due from Payor pursuant hereto shall
be subject to offset by Payor of any payment of principal or interest due and
payable to Payor or any of its Subsidiaries from Payee pursuant to, or as
otherwise contemplated by, Section 5 of the Agreement.
11. All notices, consents, requests, demands and other communications
hereunder shall be in writing and shall be deemed given and effective five
Business Days after being mailed first class, certified or registered mail,
postage prepaid, return receipt requested, addressed as set forth below, or two
business days after being sent by overnight courier, telex or telecopy (by a
machine that indicates the telex or telecopy number of the machine to which such
communication is sent and the receipt by such machine of such communication) to
the address or telecopy number set forth below.
If to Payee:
___________________
___________________
___________________
If to Payor:
___________________
___________________
___________________
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or, in each case, at such other address or to such other person as may be
specified in writing.
12. This Promissory Note shall be interpreted and construed in accordance
with the internal laws (and not the conflicts of laws rules) of the State of
Illinois applicable to contracts made and to be performed in the State of
Illinois.
13. If any provision of this Promissory Note is prohibited by or held to
be invalid under applicable law, such provision will be ineffective to the
extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Promissory Note.
[CHEMICAL WASTE MANAGEMENT, INC.]
[WMX TECHNOLOGIES, INC.]
By:
__________________________
Its:
5
<PAGE>
EXHIBIT 10.14
CHEMICAL WASTE MANAGEMENT, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
(As Adopted as of May 14, 1993)
Chemical Waste Management, Inc., a Delaware corporation, hereby
established this Supplemental Executive Retirement Plan effective as of May 14,
1993.
1. Definitions. Wherever used in this Plan, the following terms
shall have the following meanings, unless a different meaning is clearly
required by the context:
(a) Code: The Internal Revenue Code of 1986, as amended from time to
time. Reference to a section of the Code shall include that section and
any corresponding provisions of any future legislation that amends,
supplements or supersedes that section.
(b) Committee: With respect to participation in the Plan by
individuals who are executive officers of the Company, the term "Committee"
shall mean the Compensation and Stock Option Committee of the Company's
Board of Directors. With respect to participation in the Plan by all other
individuals, but who are not officers of the Company, the term "Committee"
shall mean a management committee composed of the Company's Chief Executive
Officer and Chief Financial Officer (or one or more persons designated by
them).
(c) Company: Chemical Waste Management, Inc., a Delaware
corporation.
(d) Compensation: A Participant's "compensation" for any year is
such Participant's total salary as accrued in the consolidated financial
records of the Company and its subsidiaries and WMX Technologies, Inc. and
its wholly-owned subsidiaries for that year (without regard to any
reduction thereto under any salary reduction agreement entered into under
section 125 or 401(k) of the Code), but excluding any other form of
compensation such as bonuses under a long-term incentive bonus plan of the
Company, one of its subsidiary's or WMX Technolo-gies, Inc. or one of its
wholly-owned subsidiaries, income attributable to stock options or Company
contributions under pension, profit-sharing or other plans.
(e) Disability: A physical or mental disability as defined for
purposes of the Pension Plan.
(f) Final Average Compensation: The monthly average of a
Participant's Compensation with the Company or one of its subsidiaries or
WMX Technolo-
<PAGE>
gies, Inc. or one of its wholly-owned subsidiaries, Inc. for the three
consecutive calendar years in which such Participant's aggregate
Compensation was the highest out of the last ten calendar years ending on
or before such Participant's date of retirement or other termination of
employment.
(g) Inactive Participant: An individual who became a Participant
hereunder and thereafter ceased to be in the class of employees eligible to
participate in the Plan and (i) who is designated by the Committee as an
Inactive Participant and (ii) who is not a Transferred Participant. An
Inactive Participant shall continue to be a Participant for purposes of
continuing to accrue Eligibility Service hereunder, but not Benefit
Service. The benefits of an Inactive Participant shall be determined in
accordance with Section 5(d).
(h) Normal Retirement Date: The first day of the month coinciding
with or next following the Participant's 60th birthday.
(i) Participant: Any person who is eligible to participate in this
Plan as provided in Section 3 and who is designated as a Participant by the
Committee. A Participant shall remain a Participant for such period of
time as such person is designated as a Participant by the Committee.
Except where the context requires otherwise, the term "Participant" shall
also mean a Transferred Participant, an Inactive Participant or a retired
or terminated Participant who continues to be entitled to receive
retirement benefits under this Plan after retirement or other termination
of employment.
(j) Pension Plan: The Waste Management, Inc. Pension Plan, as
amended from time to time.
(k) Plan: This Chemical Waste Management, Inc. Supplemental
Executive Retirement Plan, as amended from time to time (commonly referred
to as the "SERP").
(l) Service: A Participant's service for purposes of eligibility for
benefits and amount of benefits, determined as follows:
(i) Benefit Service: A Participant's benefit service as determined
for purposes of the Pension Plan; provided, however, that the Benefit
Service of an Inactive Participant shall be determined on the date
immediately preceding the date the Participant became an Inactive
Participant.
(ii) Eligibility Service: A Participant's period of service from the
date the Participant commenced or recommenced participation in the
Plan or such earlier date as is approved by the Committee at the time
the Partici-pant is designated as such, and ending on the later of the
date the
2
<PAGE>
Participant ceases to be a Participant hereunder by reason of
retirement, death or termination of employment or the date the
Participant ceases to be a Transferred Participant or an Inactive
Participant.
Notwithstanding any provision contained herein to the contrary, but subject
to the break in service rules of the Pension Plan with respect to the
determination of Benefit Service, all periods of service shall be
aggregated.
(m) Transferred Participant: An individual who became a Participant
hereunder and thereafter ceased to be in the class of employees eligible to
participate in the Plan on account of a transfer of employment from the
Company or a subsidiary to WMX Technologies, Inc. or a wholly-owned
subsidiary thereof and (i) who continues to accrue benefit service under
the Pension Plan and (ii) who is designated as a Participant in the WMX
Technologies, Inc. Supplemental Executive Retirement Plan. The benefits of
a Transferred Participant shall be determined in accordance with Section
5(c).
All other terms used in both this Plan and the Pension Plan shall have the same
meaning as in the Pension Plan, and all actuarial calculations under this Plan
shall be made on the same basis as for the similar purpose under the Pension
Plan.
2. Purpose. The purpose of this Plan is to provide a retirement income to
eligible executives of the Company and its majority-owned subsidiaries to
supplement the pensions payable under the Pension Plan.
3. Eligibility. Any person who is a corporate, group or staff officer of
the Company or any of its majority-owned subsidiaries and who is a participant
in the Pension Plan shall be eligible to be designated as a participant in this
Plan by the Committee. In addition, the Committee may in its discretion from
time to time designate other key employees of the Company and its majority-owned
subsidiaries as eligible to participate, or to continue participating, in the
Plan.
4. Eligibility for Benefits. Benefits under this Plan shall be payable in
respect of a Participant only if the Participant's retirement, death, disability
or other termination of employment occurs on or after the date such Participant
has completed ten years of Eligibility Service, either as a Participant, a
Transferred Participant or an Inactive Participant, as evidenced in the records
of the Committee. No benefits shall be payable hereunder with respect to any
Participant whose employment termination, death or disability occurs prior to
completing ten years of Eligibility Service.
5. Amount of Benefits.
(a) Normal Retirement. If a Participant retires after having become
eligible for benefits hereunder and on or after such Participant's Normal
Retirement Date, the monthly amount of such Participant's benefits under the
Plan, commencing on or after Normal Retirement Date, shall be (i) 1-1/2% of
Final Average Compensation per year of Benefit Service, reduced by (ii) the
amount of such Participant's monthly benefit under the Pension Plan
3
<PAGE>
(determined without regard to any qualified domestic relations order to which
such Participant's benefit under the Pension Plan is or was subject).
(b) Early Retirement. If a Participant retires or terminates
employment after having become eligible for benefits hereunder, but before his
or her Normal Retirement Date, the monthly amount of such Participant's benefits
shall be determined in accordance with Section 5(a), except that if the
Participant has completed less than 30 years of Benefit Service such amount
shall be reduced at the rate of 2/10 of 1% for each of the first 60 months by
which the benefit commencement date precedes the Participant's Normal Retirement
Date, and for each additional month at such rate as is determined by the
Committee in its discretion. Notwithstand-ing the foregoing sentence, the
Committee in its discretion may determine with respect to any particular
Participant that any such reduction shall be at a lower rate or that no such
reduction shall apply.
(c) Transferred Participants. The benefit of a Participant who is a
Transferred Participant shall be determined in accordance with Section 5(a) or
(b) above, whichever is applicable, which amount shall be multiplied by a
fraction, the numerator of which is the Transferred Participant's years of
Benefit Service attributable to service with the Company or a subsidiary of the
Company and the denominator of which is the Transferred Participant's total
number of years of Benefit Service.
(d) Inactive Participants. The benefit of a Participant who is an
Inactive Participant at the time of retirement or termination of service with
the Company or an affiliated entity shall be determined as of the date
immediately preceding the date the Participant became an Inactive Participant,
based on Benefit Service, Final Average Compensation and the Participant's
accrued benefit under the Pension Plan as of such date.
6. Disability. If a Participant's, or Transferred Participant's,
employment is terminated because of Disability after having become eligible for
benefits hereunder, but before Normal Retirement Date, such Participant shall be
eligible to receive a benefit under the Plan beginning on his Normal Retirement
Date. The amount of benefit under this Plan to such a Participant shall be
determined in accordance with Section 5, but shall be reduced for any year by
any benefits payable to the Participant for that year under any long-term
disability program of maintained or contributed to by the Company or a majority-
owned subsidiary, or in the case of a Transferred Participant, WMX Technologies,
Inc. or a wholly-owned subsidiary thereof. In computing the Service of such a
Participant for purposes of determining the amount of such benefit, his Service
shall include the period of Disability determined in the same manner as for
purposes of the Pension Plan.
7. Payment of Benefits. Payment of a Participant's benefits under this
Plan shall begin as of the same date as such Participant's pension commencement
date under the Pension Plan, unless an earlier commencement date is specifically
approved by the Committee, in which case the Committee shall provide for such
adjustment in the amount of benefits as it determines in its discretion to be
appropriate. Payment of such benefits shall be in the form of a straight life
annuity and shall continue thereafter monthly for the Participant's life.
However, if payment of a Participant's pension under the Pension Plan is to be
made in the form of a qualified joint and survivor annuity or in any other
optional form, the benefits under this Plan shall be paid in
4
<PAGE>
that same form, in an amount actuarially equivalent to the straight life annuity
otherwise payable hereunder, and with the same contingent annuitant or
contingent beneficiary as under the Pension Plan.
8. Surviving Spouse Benefit.
(a) If a Participant dies (i) after having become eligible for
benefits hereunder and (ii) either (A) before termination of employment or (B)
after termination of employment and before the commencement of benefits under
the Plan, provided in case (B), the Participant and his or her spouse had not
effectively waived the qualified joint and survivor annuity under the Pension
Plan, the Participant's surviving spouse shall be eligible to receive a monthly
benefit for life.
(b) Such surviving spouse benefit shall be in the monthly amount that
would have been payable under this Plan to the Participant's surviving spouse
under the qualified joint and survivor annuity described in Section 7 if:
(i) in the case of a Participant who dies after attaining the
"earliest benefit commencement date" (as defined below), the Participant
had retired on the day before his or her death and elected to commence
receiving benefits under this Plan as of such date, or
(ii) in the case of a Participant who dies on or before the
earliest benefit commencement date, the Participant had lived and begun to
receive benefits under this Plan on the earliest benefit commencement date
and had died on the day after that date,
calculated in either case on the basis of the Participant's Final Average
Compensation and Benefit Service as of the date of death or termination of
employment, whichever is earlier, or the date the Participant became an Inactive
Participant, if applicable. For purposes of this Section 8(b), a Participant's
"earliest benefit commencement date" is the first day of the month coinciding
with or next following the later of (A) such Participant's 55th birthday or (B)
completion of ten years of participation hereunder.
(c) Payment of the surviving spouse benefit hereunder shall begin as
of the same date as the spouse's benefit payable to the surviving spouse under
the Pension Plan, unless an earlier commencement date is specifically approved
by the Committee, in which case the Committee shall provide for such adjustment
in the amount of benefit as it determines in its discretion to be appropriate.
Payment of such surviving spouse benefit shall continue thereafter monthly for
the spouse's life. However, if the payment of the surviving spouse's benefit
under the Pension Plan is to be made in some other form, the benefits under this
Plan shall be paid in that same form, in an amount actuarially equivalent to the
annuity otherwise payable hereunder, as under the Pension Plan.
9. Conditions on Benefits. If a Participant engages in competition with
the Company or any affiliated entity (without prior authorization in writing) or
is discharged for cause, or performs acts of willful malfeasance or gross
negligence in a matter of material importance to
5
<PAGE>
the Company or any affiliated entity, benefits payable thereafter to the
Participant or such Participant's surviving spouse shall be forfeited at the
discretion of the Company's Board of Directors and the Company shall have no
further obligation to the Participant or spouse under the Plan.
10. Re-employment. If a retired Participant is re-employed by the
Company, a majority-owned subsidiary of the Company or WMX Technologies, Inc. or
a wholly-owned subsidiary thereof, no benefits shall be payable during the
period of re-employment, and the benefits payable following subsequent
retirement shall be recalculated so as to take into account such Participant's
additional period of service and Final Average Compensation, with appropriate
actuarial adjustment for any benefits paid under the Plan following such
Participant's earlier retirement; provided, however, that the amount of such
benefit as recalculated, before taking into account any such actuarial
adjustment, shall not be less than such Participant's benefit immediately
following such Participant's earlier retirement.
11. Administration and Interpretation. The Committee shall be the Plan
administrator, within the meaning of the Employee Retirement Income Security Act
of 1974, as amended, and shall have the discretionary authority to construe and
interpret the Plan and control and manage the operation and administration of
the Plan. The Committee may adopt rules and regulations regarding the
administration of the Plan. Any determinations made by the Committee in the
administration of the Plan shall be final binding and conclusive on all
interested parties.
12. Claims Procedure.
(a) If a Participant or other person believes that such person is
entitled to benefits under the Plan, such person may file a claim for benefits
in writing with the Committee. If a claim for benefits is wholly or partially
denied, the Committee shall give the claimant written notice of the denial
within a reasonable period of time after receipt of the claim by the Committee.
Such notice shall set forth:
(i) the specific reason or reasons for the denial,
(ii) specific reference to pertinent provisions of the Plan on
which the denial is based,
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary, and
(iv) an explanation of the claim review procedure.
(b) A claimant whose claim is denied, or such claimant's duly
authorized representative, may submit a written request for review to the
Committee within 60 days after receiving notice of the denial. In connection
with such request, the claimant or his authorized representative may review
pertinent documents and may submit issues and comments in writing. If such a
request is made, the Committee shall make a full and fair review of the denial
of the claim and shall make a decision not later than 60 days after receipt of
the request, unless special
6
<PAGE>
circumstances (such as the need to hold a hearing) require an extension of time
for processing, in which case a decision shall be rendered as soon as possible,
but not later than 120 days after receipt of the request. The decision on
review shall be in writing and shall include specific reasons for the decision
and specific references to the pertinent provisions of the Plan on which the
decision is based.
13. Amendment and Termination. The Plan may be amended or terminated at
any time by action of the Company's Board of Directors or the Compensation and
Stock Option Committee thereof. However, no such action shall, without the
consent of the Participant, reduce or impair the benefits then currently payable
to a Participant or surviving spouse, nor divest a Participant of any benefits
such Participant would have been entitled to receive had such Participant
resigned from the Company's employ immediately before the effective date of the
amendment or termination.
14. Miscellaneous.
(a) No Assignment. The benefits payable to any person under the Plan
may not be voluntarily or involuntarily assigned or alienated and are not
subject to the claims of creditors.
(b) No Guarantee of Employment. Nothing in the Plan shall be
construed as a contract of employment or be deemed to confer upon any
Participant the right to be retained in the service of the Company or any
affiliated entity, nor shall it interfere with the right of the Company or any
affiliated entity to discharge or otherwise deal with any Participant without
regard to the existence of this Plan.
(c) No Funding. All benefits under the Plan are payable, as and when
they come due, solely from the general assets of the Company.
(d) Facility of Payment. When, in the Committee's opinion, a
Participant or surviving spouse is under a legal disability or is incapacitated
in any way so as to be unable to manage his or her affairs, the benefits
hereunder may be paid to the Participant or spouse, or to a duly appointed
guardian or conservator, custodian, adult relative, or directly for the benefit,
of the Participant or surviving spouse, as the Committee shall in its discretion
determine. Any such payments shall constitute a complete discharge therefor
with respect to the Plan, the Committee and the Company.
(e) Withholding for Taxes. Notwithstanding any other provisions of
this Plan, all payments hereunder shall be subject to any applicable withholding
for all federal, state and local taxes.
(f) Governing Law. The Plan shall be construed and administered
according to the laws of the State of Illinois to the extent that such laws are
not preempted by the laws of the United States of America.
(g) Number. In the Plan, wherever the context admits, words in the
singular include the plural and words in the plural include the singular.
7
<PAGE>
EXHIBIT 10.19
AMENDMENT AGREEMENT
THIS AMENDMENT (the "Amendment") is made as of the 28th day of January,
1994 by and among WMX TECHNOLOGIES, INC., CHEMICAL WASTE MANAGEMENT, INC.,
WHEELABRATOR TECHNOLOGIES INC., WASTE MANAGEMENT INTERNATIONAL, INC., WASTE
MANAGEMENT INTERNATIONAL plc and RUST INTERNATIONAL INC.
RECITALS
WHEREAS, the parties hereto are also party to a certain First Amended and
Restated International Business Opportunities Agreement dated as of January 1,
1993 (the "Agreement") pursuant to which they have allocated various business
opportunities among themselves.
WHEREAS, Chemical Waste Management, Inc. and Waste Management, Inc., a
wholly owned subsidiary of WMX Technologies, Inc., agree that it is in their
best interests to amend the Agreement with respect to the allocation set forth
therein of certain business opportunities in Mexico;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 3.2(b)(ii) of the Agreement is hereby deleted in its entirety
and the following is inserted in its stead:
(ii) opportunities in North America (other than opportunities
allocated to Rust under this Section 3.2(b)) relating to the storage,
processing, treatment or disposal of (A) radioactive wastes, (B)
hazardous wastes in the United States currently or in the future
regulated under the Resource Conservation and Recovery Act or wastes
the storage, treatment or disposal of which is currently regulated as
hazardous or toxic under the Toxic Substances Control Act in the
United States, (C) such wastes in Canada which would be so regulated
in the United States or (D) wastes in Mexico which are currently or in
the future regulated as hazardous or toxic under the general law of
Ecological Equilibrium and Protection to the Environment, as such law
now exists or in the future may be amended, modified, revised or
restated, or other applicable laws in Mexico, shall be allocated to
CWM;
2. Headings. The headings contained in this Amendment are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Amendment.
<PAGE>
3. Third Party Rights. This Amendment shall not provide any third parties
with any remedy, claim, liability, reimbursement, cause of action or other right
in excess of those existing without reference to this Amendment.
4. Affiliates. The parties hereto acknowledge that they often conduct
their business operations through controlled Affiliates (as defined in the
Agreement). The parties hereto therefore agree that they will cause their
respective direct and indirect controlled Affiliates to abide by the terms of
this Amendment as if they were parties hereto to the extent necessary to carry
out the purposes of this Amendment. Further, each party shall be entitled to
cause its obligations hereunder to be satisfied, and to cause its benefits
hereunder to be received, by its controlled Affiliates.
5. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
6. Choice of Law. This Amendment shall be interpreted and construed in
accordance with the internal laws (and not the conflicts of laws rules) of the
State of Illinois applicable to contracts made and to be performed in the State
of Illinois.
7. Assignment. This Amendment and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
permitted successors and assigns, but neither this Amendment nor any of the
rights, interests or obligations hereunder shall be assigned by any party
without the prior written consent of the other parties hereto.
8. Severability. If any provision of this Amendment is prohibited by or
held to be invalid under applicable law, such provision will be ineffective to
the extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Amendment. Each provision in this Amendment shall be read and
construed independently of the other provisions hereof. If any provision of this
Amendment, as applied to any party or to any circumstances, is adjudged by a
court to be invalid or unenforceable for any reason, such judgment shall in no
way affect any other provision of this Amendment, the application of such
provision in any other circumstances or to any other party or the validity or
enforceability of this Amendment. If any provision or part of a provision in
this Amendment is held to be unenforceable because of the duration of such
provision, the geographical area covered by such provision or the range of
activities covered by such provision, the parties agree that the court making
such determination will have the power to reduce the duration, area and scope of
such provisions and to delete specific words or phrases, if and as necessary
under law, and in its reduced form such provision will then be enforceable and
will be enforced.
9. Registration of Agreement. If there is any provision of this
Amendment, or of any agreement or arrangement of which this Amendment forms
part, which causes or would cause this Agreement or that agreement to be subject
to registration under the Restrictive Trade Practices Act 1976 of Great Britain,
then that provision shall not take effect until the day after particulars of
this Amendment or that agreement or arrangement
2
<PAGE>
(as the case may be) have been furnished to the Director General of Fair Trading
pursuant to Section 24 of that Act.
10. Ratification. Except as specifically amended hereby, the Agreement is
hereby ratified, confirmed and approved.
WMX TECHNOLOGIES, INC.
By: /s/ James E. Koenig
-------------------------------
Name: James E. Koenig
Title: Senior Vice Preident, Chief
Financial Officer and Treasurer
CHEMICAL WASTE MANAGEMENT, INC.
By: /s/ Jerome D. Girsch
-------------------------------
Name: Jerome D. Girsch
Title: Executive Vice President, Chief
Financial Officer, Treasurer and
Controller
WHEELABRATOR TECHNOLOGIES INC.
By: /s/ John D. Sanford
-------------------------------
Name: John D. Sanford
Title: Vice Preident, Chief Financial
Officer Treasurer and Principal
Accounting Officer
WASTE MANAGEMENT INTERNATIONAL, INC.
By: /s/ Herbert A. Getz
-------------------------------
Name: Herbert A. Getz
Title: Vice President
WASTE MANAGEMENT INTERNATIONAL PLC
By: /s/ Edwin G. Falkman
-------------------------------
Name: Edwin G. Falkman
Title: Chief Executive
RUST INTERNATIONAL INC.
By: /s/ Harold W. Ingalls
-------------------------------
Name: Harold W. Ingalls
Title: Vice President, Chief Financial
Officer and Treasurer
3
<PAGE>
EXHIBIT 10.21
AMENDMENT NO. 1 TO RUST INTERCORPORATE SERVICES AGREEMENT
This Amendment No. 1 (the "Amendment") to that certain Rust Intercorporate
Services Agreement (the "Services Agreement") dated as of January 1, 1993 by and
among WMX Technologies, Inc. (formerly known as Waste Management, Inc.) ("WMX"),
Chemical Waste Management, Inc. ("CWM"), Wheelabrator Technologies Inc., ("WTI")
and Rust International Inc. ("Rust"), all Delaware corporations, is made as of
August 10, 1993 by and among WMX, CWM, WTI and Rust.
RECITALS
WHEREAS, WMX, CWM, WTI and Rust desire to amend the Services Agreement as
set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereby agree as follows (terms capitalized
herein to have the meanings specified herein or in the Services Agreement):
AGREEMENTS
1. Modification of Services Agreement. (a) Section 4(a) of the Services
Agreement is hereby amended to substitute the words "$450 million through
December 31, 1993 and $350 million thereafter" for the words "$350 million" in
clause (i) thereof.
(b) Section 4(c) is hereby amended to read in its entirety as follows:
"(c) WMX Term Loans to the Company. In the event that the Company
requires funds for the conduct of its business and operations which it does
not wish to procure as Open Account Indebtedness, the Company may borrow
from WMX, and WMX shall lend to the Company, subject to a limit of $350
million plus the amount specified in Section 4(a)(ii) above, funds on a
term loan basis pursuant to the provisions of Sections 4(e), (f), and (h)-
(m) hereof in such amount as the Company may request."
2. Other Provisions. Except as expressly set forth in this Amendment,
all provisions of the Services Agreement in effect immediately prior to the
execution and delivery of this Amendment shall remain in full force and effect
in accordance with their terms.
3. Choice of Law. This Amendment shall be interpreted and construed in
accordance with the internal laws (and not the conflicts of laws rules) of the
State of Illinois applicable to contracts made and to be performed in the State
of Illinois.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date set forth above.
WMX TECHNOLOGIES, INC.
By: /s/ Thomas C. Hau
----------------------------------------
Thomas C. Hau
Vice President and Controller
CHEMICAL WASTE MANAGEMENT, INC.
By: /s/ Jerome D. Girsch
----------------------------------------
Jerome D. Girsch
Executive Vice President, Treasurer,
Controller and Chief Financial Officer
WHEELABRATOR TECHNOLOGIES INC.
By: /s/ John Sanford
----------------------------------------
John Sanford
Vice President, Chief Financial Officer
and Treasurer
RUST INTERNATIONAL INC.
By: /s/ Herbert A. Getz
----------------------------------------
Herbert A. Getz
Vice President
2
<PAGE>
EXHIBIT 10.25
CONSULTING SERVICES AGREEMENT
-----------------------------
THIS CONSULTING SERVICES AGREEMENT is entered into as of May 1, 1993
between CHEMICAL WASTE MANAGEMENT, INC., a Delaware corporation (the "Company"),
and KAY HAHN HARRELL (the "Consultant").
WHEREAS, Consultant has substantial experience and expertise in the fields
of investor relations, investment analysis and related matters, with particular
reference to the environmental services industry; and
WHEREAS, Consultant is willing to perform consulting services for the
Company;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, the Company and Consultant hereby agree as follows:
1. On the terms and conditions hereinafter set forth, the Company retains
Consultant and Consultant accepts such consulting arrangement.
2. The term of this Agreement shall be for a period of 12 months beginning
on the date hereof, subject to renewal for additional 12 month periods upon
mutual agreement in each case (the "Term of Consultation").
3. The general scope of Consultant's obligations hereunder shall be to
serve in a consultative capacity for the Company, and to perform at her
reasonable convenience such other duties in accordance therewith (including,
without limitation, making reports from time to time with respect to the status
of the project(s) assigned to Consultant), as the Company may request,
principally in the areas of investor relations, financial and investment
analysis and strategic planning.
4. During the Term of Consultation, for activities undertaken on behalf of
the Company, the Consultant shall use her best efforts to advance the business
and welfare of the Company and to discharge any other duties assigned to
Consultant hereafter. The Consultant shall not intentionally take any action
against the best interests of the Company and shall perform faithfully and
competently such duties as may be assigned to Consultant hereunder.
5. The Company agrees to pay Consultant during the Term of Consultation a
consulting fee at the rate of $60,000 per annum. The consulting fee shall be
payable monthly. The Company also agrees to reimburse Consultant for her
reasonable expenses incurred in rendering services hereunder upon presentation
to the Company of documentation thereof in reasonable detail. Consultant shall
be considered an independent contractor for purposes of this Agreement and shall
not be entitled to employee benefits normally associated with employment of
individuals by the Company.
<PAGE>
6. The rights and obligations of the Company hereunder shall inure to the
benefit of and shall be binding upon its successors and assigns. In no event
may this Agreement be assigned by Consultant, nor may Consultant's duties
hereunder be delegated or subcontracted to any other person or entity, without
the Company's prior written consent.
7. The Consultant agrees that:
a. She will keep Confidential Information (as defined below) of the
Company confidential, will not disclose such Confidential
Information, directly or indirectly, to any third party, and
shall not use such Confidential Information other than in
connection with the duties assigned to Consultant hereunder.
b. No license or other right in or to any of the Company's patents,
trademarks or other intellectual property is granted to
Consultant pursuant hereto. Consultant will deliver to the
Company all Confidential Information received pursuant hereto and
all copies, extracts or other embodiments of such Confidential
Information within 10 days after termination of this Agreement or
completion of the work assignment to which it pertains, whichever
is earlier.
c. In the event that Consultant becomes legally compelled to
disclose any Confidential Information, Consultant will provide
the Company with prompt notice so that the Company may seek a
protective order or other appropriate remedy. Should the Company
be unable to obtain such order or remedy, Consultant will use her
best efforts to obtain a protective order or other appropriate
remedy and, if unable to do so, will furnish only that portion of
the Confidential Information which is legally required to be
furnished and will use her best efforts to obtain assurances that
confidential treatment will be accorded to that portion of the
Confidential Information so furnished.
d. For purposes hereof, "Confidential Information" will include
information constituting trade secrets or other proprietary
business or technical information belonging to the Company (or an
affiliated company). Confidential Information will exclude
information which (A) is in Consultant's possession at the time
of disclosure, or is subsequently received by Consultant from
sources who obtained the information lawfully and without any
obligation of confidentiality to the Company, (B) has been
independently developed by Consultant without reference to
proprietary information of the Company, or (C) is or hereafter
becomes part of the public domain otherwise than through
disclosure by Consultant.
2
<PAGE>
8. In the event of a breach of any covenant contained in paragraph 7 of
this Agreement, the Company shall be entitled to an injunction restraining such
breach in addition to any other remedies provided by law.
9. Consultant shall be liable for all taxes, excises, assessments, and
other charges levied by any government agency on, or because of, the services
performed hereunder, and any materials, equipment, services, or supplies
furnished or used in the performance of services under this Agreement.
10. Any notice required or permitted hereunder shall be deemed to have
been duly given if the same shall have been sent via certified or registered
mail (return receipt requested), or by any commercial express delivery or
courier service, with postage and other charges prepaid, in an envelope
addressed to the party to whom notice is to be given, at the address shown
below:
If to Consultant:
Kay Hahn Harrell
P. O. Box 845
Wauconda, IL 60084
If to Company:
Chemical Waste Management, Inc.
3001 Butterfield Road
Oak Brook, IL 60521
Attention: General Counsel
11. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
and enforceability of the other provisions hereof. If any provision of this
Agreement is unenforceable for any reason whatsoever, such provision shall be
appropriately limited and given effect to the extent that it may be enforceable.
12. This Agreement shall be governed by the laws of the State of Illinois
without regard to any conflicts of laws principles.
CHEMICAL WASTE CONSULTANT
MANAGEMENT, INC.
By: /s/ D. P. Payne /s/ Kay Hahn Harrell
------------------------------ ----------------------------------
D.P. Payne, President Kay Hahn Harrell
3
<PAGE>
EXHIBIT 13.1
Chemical Waste Management, Inc. and Subsidiaries--Management's Discussion and
Analysis
- --------------------------------------------------------------------------------
Results of Operations
Operations
Pursuant to an agreement with Wheelabrator Technologies Inc. ("WTI") and
The Brand Companies, Inc. ("Brand"), effective January 1, 1993, the Company
contributed its remedial services group, its approximate 56% ownership in
Brand, its 12% ownership interest in Waste Management International plc ("WM
International") and certain other assets to Rust International Inc. ("Rust").
WTI contributed its engineering and construction business, its environmental
and infrastructure consulting services business and certain other assets.
Brand was merged into a wholly-owned Rust subsidiary on May 7, 1993. As a
result of these transactions, the Company had an approximate 56% ownership in
Rust at December 31, 1993.
Consolidated revenue for the Company in 1993 was $2.130 billion compared to
$1.519 billion in 1992 and $1.358 billion in 1991. The Company incurred a net
loss in 1993 of $300.3 million, or $1.43 per share compared to net income of
$126.7 million, or $.62 per share in 1992 and net income of $100.8 million, or
$.49 per share in 1991. Operating results were impacted by special charges and
gains from stock transactions of subsidiaries and investee in all three years;
changes in accounting policies in 1992; and gain from the sale of stock held for
investment and a change in the U.S. tax rate in 1993. The following table
reconciles reported earnings per share to earnings excluding such items:
<TABLE>
<CAPTION>
1991 1992 1993
----- ----- ------
<S> <C> <C> <C>
Reported earnings per share............................. $ .49 $ .62 $(1.43)
Gains on stock transactions of subsidiaries............. (.05) (.23) (.05)
Gain on sale of stock held for investment............... -- -- (.04)
Special charges (see Note 17 to Consolidated
Financial Statements)--
Provision for estimated environmental liabilities... .11 -- --
Reorganization and restructuring of asbestos
business and the formation of Rust................ -- .12 --
Write-down Chicago and Tijuana, Mexico
incinerator facilities............................ -- .16 --
Assets revaluation and restructuring................ -- -- 1.74
Adjustment to deferred income taxes resulting
from 1993 tax law change.............................. -- -- .02
Changes in accounting policies.......................... -- .01 --
----- ----- ------
Earnings per share excluding above items................ $ .55 $ .68 $ .24
===== ===== ======
</TABLE>
7
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Management's Discussion and
Analysis
- -------------------------------------------------------------------------------
Comparison of 1992 with 1991
Revenue in 1992 was $1.519 billion compared to $1.358 billion in 1991. The
11.8% increase in revenue in 1992 was attributable to: price 1.9%, volume 6.3%
and acquisitions 3.6%.
During 1992, the Company's business continued to be affected by the
sluggish economy, but began to be aided in the latter part of the year by
lower hazardous waste taxes imposed in Alabama and Louisiana. Excluding Brand,
base business accounted for 68% of 1992 revenue and 71% of 1991 revenue and
event business, which consists of relatively larger, typically nonrecurring
projects, accounted for 32% of 1992 revenue and 29% of 1991 revenue. Base
business revenue increased 10% in 1992 when compared to 1991 and event
business revenue increased 22% when compared to 1991, although disposal
revenue was adversely impacted by a decline in waste volumes from cleanup
projects in the 1992 fourth quarter, a trend that continued into 1993. Revenue
during the first half of 1992 was aided by disposal volume accelerating ahead
of a regulatory land-ban of certain waste categories which became effective in
May of that year.
Operating expenses (excluding special charges) were 69.8% of revenue in
1992 compared to 70% of revenue in 1991. The slight improvement in margin in
1992 resulted from a shift in revenue mix to greater treatment, resource
recovery and disposal services, which have higher margins than on-site
remediation.
As a percentage of revenue, selling and administrative expenses decreased
to 13.6% in 1992 compared with 14.5% in 1991. This decrease resulted from
continued emphasis on cost reduction and from 1992 revenue growth providing a
greater base over which to spread the fixed portion of these costs.
Interest expense, net of capitalized interest, was $31.5 million in 1992
compared with $15.8 million in 1991. Capitalized interest in both years was
approximately $9 million. The increase in interest expense in 1992 resulted
from the significant increase in debt used for acquisitions and capital
expenditures.
Equity in earnings of affiliates increased $7.4 million in 1992 when
compared to 1991, reflecting equity in earnings of WM International for a full
year in 1992 compared to approximately six months in 1991.
Minority interest in 1992 decreased by $8.7 million when compared with 1991
because of lower income of Brand, which resulted primarily from the special
charge to reflect certain costs of reorganizing its asbestos abatement business
and a writedown of its investment in that business.
Provision for income taxes was 27.2% of income before income taxes in 1992
compared with 38.4% in 1991. The non-taxable gains on the issuance of stock by
subsidiary and equity investee and the non-taxable earnings of equity investee
were both higher in 1992, thereby reducing the tax provision as a percentage of
income before income taxes.
- --------------------------------------------------------------------------------
Comparison of 1993 with 1992
The discussion of the results of operations which follows compares the
pro forma results of the Company for 1992 to 1993, as if Rust had been formed
on January 1, 1992. See Note 1 to Consolidated Financial Statements for a
consolidating pro forma income statement of the Company for 1992 and a
consolidating income statement for 1993.
Core Business
Revenue for the core business (excludes Rust) was $661.9 million in 1993
compared to $755.1 million on a pro forma basis in 1992. The 12.3% decrease in
revenue in 1993 was attributable approximately .4% to price and 14.2% to volume,
partially offset by a 2.3% increase related to acquisitions. Price decreases in
chemical waste activities were partially offset by price increases in low-level
radioactive waste. Volume declines resulted from a significant reduction of
environmental cleanup projects generating hazardous waste for off-site
treatment and disposal at the Company's facilities, an uncertain regulatory
direction regarding hazardous waste management, Superfund and other special
cleanup requirements for industry, the effects of the sluggish economy on the
Company's customers, and softness in the commercial hazardous waste
incineration market leading to reduced pricing. The Company believes
8
<PAGE>
that the hazardous waste incineration market is currently characterized by
excess capacity and that this situation will continue for the foreseeable
future. The Company's results were also impacted by reduced activity resulting
from the change in Federal government administration and unusual weather in some
western and eastern states in the first quarter of 1993, as well as the
continuing efforts of American industry in reducing and managing waste on site.
Revenue during the first half of 1992 was aided by disposal volume accelerating
ahead of a regulatory land-ban of certain waste categories which became
effective in May of that year.
Base business revenue declined 7% and event business revenue declined 41%
in 1993. Base business accounted for 89.4% and 84.2% and event business
accounted for 10.6% and 15.8% of revenue in 1993 and 1992, respectively.
Operating expenses (excluding special charges) as a percentage of revenue
were 76.5% in 1993 compared to 56.3% in 1992. The shift in revenue mix toward
an increased percentage of treatment revenue, which has lower margins,
compared to direct disposal services revenue, which has higher margins,
increased operating expenses in dollars as well as a percentage of revenue in
1993. Also, a large component of the operating expenses in the core business
is fixed and, as 1993 revenue decreased, operating expenses as a percentage of
revenue increased.
Selling and administrative expenses as a percentage of revenue were 19.3%
in 1993 compared to 15.4% in 1992, due to the decline in 1993 revenue.
Low-Level Radioactive Waste Disposal Services
The Company's Barnwell, South Carolina facility is one of two licensed
commercial low-level radioactive waste disposal facilities in the United States.
South Carolina has adopted legislation allowing the Barnwell site to continue
operating until December 31, 1995, and to continue receiving waste generated
outside the eight states that comprise the Southeast Compact until June 30,
1994. In December, 1993, the North Carolina Low Level Radioactive Waste
Management Authority voted to select a site in that state for development by
the Company as a regional disposal facility for the Southeast Compact. The
Company expects the South Carolina legislature to consider extending to
December 31, 1995, the date the Barnwell site must stop accepting waste
generated outside the Southeast Compact, but there can be no assurances that
such an extension will be obtained. The Company is unable to predict the
effect such an extension might have upon its business. However, the Company's
earnings for one or more fiscal quarters or years could be adversely affected
if the Company is unable to open a new facility in North Carolina after the
closure of the Barnwell site.
Rust
Rust is an engineering and construction company with two broad lines of
business: engineering, construction and environmental and infrastructure
consulting services, and environmental remediation and other on-site industrial
services. Rust also operated an asbestos abatement business through the first
four months of 1993. This business was transferred to NSC Corporation ("NSC") on
May 3, 1993, in exchange for a 41% equity interest in NSC and NSC's ownership
interest in two industrial services businesses.
Excluding the effect of the asbestos abatement business, revenues increased
15.9% in 1993 compared to 1992. Revenue by line of business is shown in the
following tables (000's omitted):
<TABLE>
<CAPTION>
1992 1993
---------- ----------
<S> <C> <C>
Engineering,
construction
and consulting
services............. $ 619,096 $ 798,340
Remediation and
industrial services.. 677,444 704,360
Asbestos abatement..... 144,510 31,765
---------- ----------
Total.................. $1,441,050 $1,534,465
========== ==========
</TABLE>
Engineering, construction and consulting services revenue grew by 29% in
1993. Acquisitions accounted for 17%, the result of domestic and international
acquisitions completed in 1993 and the latter part of 1992. Price/volume
increases (12%) in 1993 were the result of the start-up of several large
projects, including one waste-to-energy plant and several
manufacturing/processing facilities. Backlog in this business line increased
by $219 million, to $719 million, at December 31, 1993.
9
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Management's Discussion and
Analysis
Remediation and industrial services revenue grew by 4% in 1993 compared
to 1992. A decline in revenue related to project delays and cancellations of
remedial projects by customers and prospective customers as a result of poor
economic conditions was more than offset by an increase in industrial services
revenues due to market share gains in existing businesses and acquisitions
completed in 1993 and the latter part of 1992. Backlog in this business line
at December 31, 1993, was $653 million, an increase of $251 million from
December 31, 1992.
Revenue from the WMX affiliated group of companies increased $117 million
in 1993, to $243 million for the year. Approximately $86 million of this
increase related to engineering design and construction projects, with the
balance coming from consulting services.
Operating expenses as a percentage of revenue were 81.5% in 1993 compared
to 85.3% in 1992. The improvement resulted from a shift in revenue mix in
favor of industrial services and environmental and infrastructure consulting
services and projects, which have relatively lower operating costs,
improvements in the profitability of the environmental and infrastructure
consulting businesses as a result of synergies realized by combining offices
with a resulting higher utilization of personnel, and improved operating
margins from Rust's international operations.
During 1992, Brand recorded a special pretax charge of approximately
$35.2 million to write down its investment in its asbestos abatement business
and provide for certain restructuring costs related to the formation of Rust.
Rust had no special charges in 1993.
Selling and administrative expenses were 10.2% of revenue in 1993
compared to 10.1% in 1992. The increase is primarily due to acquisitions,
particularly the acquisition of EnClean, Inc. ("EnClean") in the third quarter
of 1993. Acquisitions tend to increase selling and administrative expenses
initially but this reverses as the acquired businesses are integrated into
existing operations.
WM International
Rust owns a 12% equity interest in WM International, a leading provider
of waste management and related services which includes essentially all of the
waste management operations of WMX Technologies, Inc. ("WMX") outside North
America. It currently has operations in Europe, Asia/Pacific and Argentina.
WMX and WTI own 56% and 12%, respectively, of WM International. Selected
financial information for WM International is as follows (000's omitted):
<TABLE>
<CAPTION>
1992 1993
---------- ----------
<S> <C> <C>
Revenue............ $1,445,735 $1,411,211
Gross profit....... 412,472 402,065
Pre tax income..... 228,739 191,570
Minority interest.. 23,564 15,769
Net income......... $ 120,113 $ 114,246
</TABLE>
A significant portion of WM International's revenues arise in currencies
other than pounds sterling (its reporting currency) or U.S. dollars. As a
result, foreign currency movement has had and will continue to have an impact
on reported revenue, expenses and net income. Stated in pounds sterling, WM
International's revenue grew 15.3% and net income increased 20.6% in 1993
compared to 1992.
Consolidated Interest Expense and Sundry Income
Interest expense, net of capitalized interest, increased to $37.4 million
in 1993 from $31.5 million in 1992. The increase of $5.9 million was primarily
a result of Rust borrowing from WMX to fund several acquisitions, including
the cash purchase for approximately $130 millon of approximately 6.9 million
shares of Brand common stock at $18.75 per share under terms of the Brand
merger, and the acquisition of EnClean for $38.6 million in cash. Also
contributing to the increase in interest expense was an increase in borrowing
by the Company from WMX for its core business, and a reduction in capitalized
interest. These items were partially offset by WMX's conversion, on December
31, 1992, of a $169 million, 6% debenture into approximately 8 million shares
of the Company's common stock, and the Company's repurchase for $32.4 million
on June 30, 1993, of Liquid Yield Option Notes ("LYONs") in an aggregate
principal amount at maturity of $89.2 million.
Sundry income, net, increased $13.4 million in 1993 when compared to 1992
from a gain on the sale of stock of WTI held for investment. At December 31,
1993, the Company continued to hold approximately 1 million shares of WTI
stock.
10
<PAGE>
- --------------------------------------------------------------------------------
Special Charges
In the third quarter of 1993, the Company completed a study of its
business, announced a strategic reconfiguration of its operations to meet
current demand and recorded a special revaluation and restructuring charge of
$550 million ($363 million after tax) related primarily to a revaluation of
the Company's thermal treatment business, including incinerators and fuels
blending operations.
The special charge consisted of $381 million to write down assets,
primarily incinerators, and $169 million for the probable cash expenditures
(the majority of which will be made by the end of 1994 except for closure, post-
closure and related costs at facilities closed or to be closed) related to the
actions the Company has taken or plans to take as part of its program to
reduce costs, improve efficiency and structure the Company to meet current
market demand. The Company estimates that the full impact of the restructuring
will reduce overhead, including depreciation and amortization, by
approximately $60 million annually.
Among the actions the Company has taken or plans to take are elimination of
approximately 1,200 positions by year-end 1994, consolidation of operations in
its treatment and land disposal group, restructuring of its sales and service
regions, sale of selected service centers in marginal service lines and
geographies, efforts to obtain joint venture partners and a review of other
strategic alternatives for its Port Arthur, Texas incinerator and
centralization of several functions to improve efficiencies. The Company
expects that cash expenditures for these actions will be funded primarily by
cash flow from operations and income tax refunds, and should be substantially
completed by December 31, 1994. The Company is restructuring its operations on
the assumption that future base business revenue growth, if any, will not keep
pace with the recovery in the general economy, and it will not make investments
which are primarily supported by event business volumes.
During the second quarter of 1992, the Company recorded a special charge
of $51 million ($32 million after tax). The charge related in part to an
agreement with the Illinois Environmental Protection Agency concerning the
Chicago incinerator. The agreement included a $3 million settlement payment
and the continued suspension of operations at the facility until it is awarded
a new operating permit. The charge included the anticipated costs of ongoing
maintenance during the shut down period, severance pay for laid-off personnel,
unaccrued penalties under the agreement and other miscellaneous costs. The
Company also revised its plans for a mobile hazardous waste incinerator in
Tijuana following a decision by the Mexican government requiring the unit's
relocation. Although the facility was never operated, costs had been incurred
to develop site infrastructure and prepare for trial burns. During the fourth
quarter of 1992, the Company recorded a charge of approximately $25 million
($15 million after tax) to reflect certain restructuring costs incurred by the
Company related to the formation of Rust. Brand recorded special charges of
approximately $35.2 million ($21.5 million after tax) to reflect certain costs
of reorganizing its asbestos abatement business and closing certain offices, a
writedown of Brand's investment in that business and certain restructuring
costs related to the formation of Rust.
The Company recorded a special charge in the fourth quarter of 1991 of $36
million ($23 million after tax), primarily to reflect its then current estimate
of certain future environmental remediation costs at closed sites which the
Company or its subsidiaries had used but not owned or operated, as well as
additional reserves for pending enforcement actions.
- --------------------------------------------------------------------------------
Gains from Stock
Transactions of Subsidiary
and Equity Investee
Gains from stock transactions of subsidiary or equity investee arise when
common stock is issued by a subsidiary or equity investee of the Company for
acquisitions, public offerings, or the exercise of employee stock options.
Such gains amounted to $10.5 million in 1993, $47 million in 1992 and $10.7
million in 1991.
11
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Management's Discussion and
Analysis
Gains on stock transactions of subsidiary and equity investee may recur
in the future. However, the amount or timing of any future gains is largely
dependent upon the future market prices of the stock of the subsidiary or
equity investee. As such gains are recorded by the Company, the minority
interest in the subsidiary will increase and the equity investment percentage
in the investee will decrease.
- --------------------------------------------------------------------------------
Changes in Accounting
Principles
The Company adopted Statement of Financial Accounting Standards No. 109--
Accounting for Income Taxes ("FAS 109"), effective January 1, 1992. The
adoption of FAS 109 required a change in the method of accounting for income
taxes to an asset and liability approach and did not have a material effect on
the Company.
The Company also adopted Statement of Financial Accounting Standards No.
106--Employers' Accounting for Postretirement Benefits Other Than Pensions, on
the immediate recognition basis effective January 1, 1992. This new standard
required a change in accounting for postretirement benefits other than
pensions from a cash basis to an accrual basis. A one time cumulative after-
tax charge of $3 million is included in 1992 related to the change, but the
adoption of this standard did not otherwise have a significant effect on
earnings for 1992, nor is it expected to materially impact the Company's
future operating results.
The Financial Accounting Standards Board has issued Statements of Financial
Accounting Standards No. 112--Employers' Accounting for Postemployment
Benefits ("FAS 112") and No. 115--Accounting for Certain Investments in Debt
and Equity Securities ("FAS 115"). The Company is required to adopt both of
these new standards in 1994. Based upon its analysis to date, the Company does
not believe the adoption of FAS 112 will have a material impact on its
financial statements as its current accounting is substantially in compliance
with the new standard. The Company does not have and does not contemplate
acquiring significant investments of the type covered in FAS 115.
Environmental Matters
The majority of the businesses in which the Company is engaged are
intrinsically connected with the protection of the environment. As such, a
significant portion of the Company's operating costs and capital expenditures
could be characterized as costs of environmental protection. While the Company
is faced, in the normal course of its business, with the need to expend funds
for environmental protection and remediation, it does not expect such
expenditures to have a material adverse effect on its financial condition or
results of operations because its business is based on compliance with
environmental laws and regulations and its services are priced accordingly.
Such costs may increase in the future as a result of legislation or
regulation; however, the Company believes that it has the resources and
experience to manage environmental risk.
As part of its ongoing operations, the Company provides for estimated
closure and post-closure monitoring costs over the operating life of disposal
sites as air space is consumed. Such costs include a final cap and cover on
the site, leachate management and groundwater monitoring. The accrual for
closure and post-closure monitoring costs covers expenditures to be incurred
after a facility or unit ceases to accept waste; to the extent similar costs
are incurred during the active life of a site, they are expensed as incurred
as normal operating costs of a disposal site.
The Company has also established procedures to evaluate potential remedial
liabilities at closed sites which it owns or operated, or to which it
transported waste, including 22 sites listed on the Superfund National Priority
List ("NPL"). In the majority of situations, the Company's connection with NPL
sites relates to allegations that its subsidiaries (or their predecessors)
transported waste to the facilities in question, often prior to the
acquisition of such subsidiaries by the Company. The Company routinely reviews
and evaluates sites requiring remediation, including NPL sites, giving
consideration to the nature (e.g., owner, operator, transporter or generator),
and the extent (e.g., amount and nature of waste hauled to the location,
number of years of site operation by the Company, or other relevant factors)
of the Company's alleged
12
<PAGE>
connection with the site, the accuracy and strength of evidence connecting the
Company to the location, the number, connection and financial ability of other
named and unnamed potentially responsible parties ("PRPs") and the nature and
estimated cost of the likely remedy. Where the Company concludes that it is
probable that a liability has been incurred, provision is made in the financial
statements. Cost estimates are based upon management's experience in
remediating such sites for the Company as well as for unrelated parties,
information available from regulatory agencies as to costs of remediation, and
the number, financial resources and relative degree of responsibility of other
PRPs who are jointly and severally liable for remediation of a specific site, as
well as the typical allocation of costs among PRPs. These estimates sometimes
are a range of possible outcomes. In such cases, the Company provides for the
amount within the range which constitutes its best estimate. If no amount
within the range appears to be a better estimate than any other amount, then the
Company provides for the minimum amount within the range in accordance with
Statement of Financial Accounting Standards No. 5 ("FAS 5"). See Note 8 to the
Consolidated Financial Statements for additional details regarding the Company's
environmental liabilities.
Estimates of the extent of the Company's degree of responsibility for
remediation of a particular site and the method and ultimate cost of remediation
require a number of assumptions and are inherently difficult, and the ultimate
outcome may differ. However, the Company believes that its extensive experience
in the environmental services business, as well as its involvement as a
remediation services provider with a large number of sites, provides a
reasonable basis for estimating its aggregate liability. As additional
information becomes available, estimates are adjusted as necessary. While the
Company does not anticipate that any such adjustment would be material to its
financial statements, it is reasonably possible that technological, regulatory
or enforcement developments, the results of environmental studies or other
factors could alter this expectation and necessitate the recording of additional
liabilities which could be material. The impact of such future events cannot be
estimated at the current time.
The Company spent approximately $22 million in 1992 and $7.8 million in
1993 on remedial activities at closed sites, and anticipates expenditures of
$4.9 million in 1994.
In 1991, the Company recorded a special charge of $36 million primarily to
reflect its then-current estimate of certain future environmental remediation
costs at closed sites which the Company or its subsidiaries had used, but not
owned or operated. In most cases, the liabilities arose under the Comprehensive
Environmental Response, Compensation and Liability Act or similar state
statutes, and related to the activities of waste disposal and transportation
companies prior to their acquisition by the Company. Amounts charged to income
in 1992 and 1993 for such remediation liabilities were not material.
In addition, the Company becomes involved, in the normal course of
business, in judicial and administrative proceedings related to alleged
violations of licenses, permits, laws or regulations, or differing
interpretations of applicable requirements. From time to time, the Company
pays fines and penalties as a result of such proceedings. The Company paid
approximately $2 million in 1991, $7.4 million in 1992 and $.7 million in 1993
for such fines and penalties.
- --------------------------------------------------------------------------------
Financial Condition
Liquidity and Capital Resources
The Company is in a service industry and has neither significant
inventory nor seasonal variations in receivables. Cash flow from operating
activities is used primarily for capital expenditures and acquisitions of
businesses.
In 1993, the Company financed its business primarily with cash flow from
operating activities and by borrowing from WMX.
At December 31, 1993, the Company had working capital of $ 232.6 million
compared to working capital at December 31, 1992 of $276.4 million. The
Company believes that it has adequate liquidity and expects sufficient cash
flow from future operations to meet its capital needs.
13
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Management's Discussion and
Analysis
Capital Expenditures
Capital expenditures (exclusive of acquisitions) for 1991, 1992 and 1993
are summarized below (000's omitted):
<TABLE>
<CAPTION>
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Land (primarily disposal sites and improvements)....... $ 38,378 $ 43,537 $ 77,116
Buildings.............................................. 30,872 16,396 26,965
Vehicles and equipment................................. 133,658 157,076 125,629
Leasehold improvements................................. 2,026 1,738 4,070
-------- -------- --------
$204,934 $218,747 $233,780
======== ======== ========
</TABLE>
The Boards of Directors of the Company and Rust approved a combined capital
expenditure budget of $205 million, including acquisitions, for 1994. Of this
amount, $67 million has been budgeted for the core business.
Capital Structure
The Company and Rust each has an agreement with WMX under which WMX
provides a financing commitment up to $750 million for the Company and up to
$350 million for Rust. Any indebtedness of the Company or Rust may be converted,
at the option of each company, respectively, to a term loan with either a fixed
or floating interest rate. The interest rates and terms of such loans will
generally be WMX's costs of funds for loans of similar maturity. Accordingly,
borrowing under these agreements are classified as long-term debt. Interest on
other indebtedness is charged at a rate equal to WMX's effective 30-day
commercial paper rate plus a number of basis points sufficient to reimburse WMX
for its cost of obtaining funds. On December 31, 1993, Rust converted $50
million of its borrowings from WMX to a 5.75% term loan due December 31, 1998.
In addition to the above financing commitments, in August 1993, WMX increased
the amount of the credit facility for Rust by an additional $100 million which
has been converted to a five-year term loan providing for a lump-sum payment on
December 31, 1998 with interest at the rate of 6% per annum.
On June 30, 1993, the Company repurchased for $32.4 million LYONs due 2010
in an aggregate principal amount at maturity of $89.2 million. The holders of
the Company's remaining $485.8 million principal amount of LYONs may require the
Company to repurchase LYONs on each June 30 at a price equal to the issue price
plus accrued original issue discount to the repurchase date.
In August 1991, the Company issued $169 million aggregate principal amount
of a 6% Convertible Subordinated Debenture to WMX in connection with its
acquisition of a 15% interest in WM International. On December 31, 1992, the
debenture was converted by WMX into approximately 8 million shares of the
Company's common stock.
In November 1990, the Board of Directors of the Company authorized the
repurchase of up to 10 million shares of its common stock over a 24-month
period. The authorization was extended for an additional 24 months in November
1992. During 1993, the Company repurchased 3.3 million shares bringing total
shares repurchased to 7.4 million. Also, in August 1993, the Board of Directors
suspended indefinitely the payment of quarterly cash dividends on the Company's
common stock.
The debt to capitalization ratio at December 31, 1992 was 41.1% and
increased to 55.9% at December 31, 1993. This ratio includes minority interest
in subsidiaries as part of total capital. The increase in 1993 is attributable
to the impact of the special revaluation and restructuring charge,increased
borrowing from WMX to finance acquisitions (primarily made by Rust) and capital
expenditures. The Company expects to reduce this ratio in 1994 through a
combination of income tax refunds, reduced capital expenditures and cash flow
from operations.
14
<PAGE>
EXHIBIT 13.2
Consolidated Statements of Income
Chemical Waste Management, Inc. and Subsidiaries
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
For The Years Ended December 31
-----------------------------------
1991 1992 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenue.......................................................... $1,358,344 $1,518,603 $2,129,791
---------- ---------- ----------
Costs and Expenses:
Operating........................................................ $ 951,414 $1,060,599 $1,689,638
Special charges.................................................. 36,000 111,200 550,000
Selling and administrative....................................... 196,887 206,748 283,811
Interest expense................................................. 15,800 31,546 37,445
Equity in earnings of affiliates................................. (7,850) (15,224) (14,183)
Minority interest................................................ 9,886 1,165 38,143
Sundry expense (income), net..................................... 3,321 (8,595) (21,953)
Gains on issuance of stock by subsidiary
and equity investee............................................ (10,707) (47,000) (10,462)
--------- ---------- ----------
Income (Loss) Before Income Taxes and Cumulative
Effect of Change in Accounting Principle....................... $ 163,593 $ 178,164 $ (422,648)
Provision (Benefit) for Income Taxes............................. 62,787 48,429 (122,332)
--------- ---------- ----------
Income (Loss) Before Cumulative Effect of
Change in Accounting Principle................................. $ 100,806 $ 129,735 $ (300,316)
Cumulative Effect of Change in
Accounting for Postretirement Benefits
Other than Pensions, net of tax................................ -- 3,000 --
--------- ---------- ----------
Net Income (Loss) for the Year................................... $ 100,806 $ 126,735 $ (300,316)
========= ========== ==========
Average Shares and Equivalent Shares
Outstanding During the Year.................................... 206,917 204,967 210,700
========= ========== ==========
Earnings (Loss) per Common and Common
Equivalent Share:
Income (Loss) Before Cumulative Effect of
Change in Accounting Principle................................. $ 0.49 $ 0.63 $ (1.43)
Cumulative Effect of Change in
Accounting for Postretirement Benefits
Other than Pensions, net of tax................................ -- (0.01) --
--------- ---------- ----------
Net Income (Loss)................................................ $ 0.49 $ 0.62 $ (1.43)
========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE>
Consolidated Balance Sheets
Chemical Waste Management, Inc. and Subsidiaries
(000's omitted except share amounts)
<TABLE>
<CAPTION>
As of December 31
------------------------------
1992 1993
---------- ----------
<S> <C> <C>
Current Assets:
Cash...................................................... $ 3,552 $ 2,592
Short-term investments.................................... -- 1,906
Accounts receivable, less reserve of
$6,558 in 1992 and $14,040 in 1993...................... 381,725 512,986
Employee receivables...................................... 955 1,134
Costs and estimated earnings in excess of
billings on uncompleted contracts....................... 97,543 185,867
Refundable income taxes................................... 35,084 54,002
Prepaid expenses.......................................... 81,302 78,905
---------- ----------
Total Current Assets...................................... $ 600,161 $ 837,392
---------- ----------
Property and Equipment, at cost:
Land, primarily disposal sites............................ $ 356,507 $ 402,954
Buildings................................................. 166,205 234,837
Vehicles and equipment.................................... 977,043 898,262
Leasehold improvements.................................... 20,666 13,032
---------- ----------
$1,520,421 $1,549,085
Less--Accumulated depreciation and amortization........... (348,151) (382,157)
---------- ----------
Total Property and Equipment, net......................... $1,172,270 $1,166,928
---------- ----------
Other Assets:
Intangible assets relating to acquired businesses, net.... $ 354,050 $ 708,473
Investments............................................... 222,354 236,803
Sundry.................................................... 93,544 133,069
Deferred income taxes..................................... -- 41,379
---------- ----------
Total Other Assets........................................ $ 669,948 $1,119,724
---------- ----------
Total Assets.............................................. $2,442,379 $3,124,044
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
16
<PAGE>
<TABLE>
<CAPTION>
As of December 31
--------------------------
1992 1993
---------- ----------
<S> <C> <C>
Current Liabilities:
Portion of long-term debt payable within one year................. $ 88,520 $ 186,086
Accounts payable.................................................. 148,297 173,155
Billings in excess of costs and estimated
earnings on uncompleted contracts............................... 3,612 43,579
Accrued expenses.................................................. 83,308 201,932
---------- ----------
Total Current Liabilities......................................... $ 323,737 $ 604,752
---------- ----------
Deferred Items:
Income taxes...................................................... $ 71,478 $ --
Investment credit................................................. 857 405
Other............................................................. 52,609 238,338
---------- ----------
Total Deferred Items.............................................. $ 124,944 $ 238,743
---------- ----------
Long-Term Debt:
Due to WMX Technologies, Inc...................................... $ 626,712 $1,134,596
Other long-term debt, less portion
payable within one year......................................... 138,338 58,318
---------- ----------
Total Long-Term Debt.............................................. $ 765,050 $1,192,914
---------- ----------
Minority Interest in Subsidiaries................................. $ 77,067 $ 392,716
---------- ----------
Commitments and Contingencies..................................... $ $
---------- ----------
Redeemable Preferred Stock, $.01 par value;
50,000,000 shares authorized; 50 issued in 1992;
stated and redemption value $100,000 per share.................. $ 5,000 $ --
---------- ----------
Stockholders' Equity:
Common stock, $.01 par value; 500,000,000 shares authorized;
212,293,677 issued in 1992 and 212,422,463 in 1993.............. $ 2,123 $ 2,124
Additional paid-in capital........................................ 505,217 430,014
Cumulative translation adjustment................................. (19,198) (37,353)
Retained earnings................................................. 658,439 336,930
---------- ----------
$1,146,581 $ 731,715
Less--Treasury stock at cost; 3,291,170 shares in 1993............ -- 36,796
---------- ----------
Total Stockholders' Equity........................................ $1,146,581 $ 694,919
---------- ----------
Total Liabilities and Stockholders' Equity........................ $2,442,379 $3,124,044
========== ==========
</TABLE>
17
<PAGE>
Consolidated Statements of Stockholders' Equity
Chemical Waste Management, Inc. and Subsidiaries
For the Three Years Ended December 31, 1993
(000's omitted except share amounts)
<TABLE>
<CAPTION>
Additional Cumulative
Common Paid-In Translation Retained Treasury
Stock Capital Adjustment Earnings Stock
-------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1991............................... $ 2,070 $447,326 $ -- $511,246 $ --
Net income for the year.................................. -- -- -- 100,806 --
Cash dividends........................................... -- -- -- (39,357) --
Stock issued upon exercise of
stock options.......................................... 2 459 -- -- (2,916)
Tax benefit of non-qualified
stock options exercised................................ -- 1,708 -- -- --
Investment in WM International........................... -- (59,823) -- -- --
Stock repurchases (2,610,700 shares)..................... -- -- -- -- 45,950
-------- -------- -------- -------- --------
Balance at December 31, 1991............................. $ 2,072 $389,670 $ -- $572,695 $ 43,034
Net income for the year.................................. -- -- -- 126,735 --
Cash dividends........................................... -- -- -- (40,991) --
Stock issued upon
exercise of stock options.............................. -- (6,753) -- -- (16,842)
Tax benefit of non-qualified
stock options exercised................................ -- 3,956 -- -- --
Cumulative translation adjustment
of foreign currency statements......................... -- -- (19,198) -- --
Shares issued upon conversion
of debenture........................................... 51 118,344 -- -- (50,579)
Stock repurchases (1,451,100 shares)..................... -- -- -- -- 24,387
-------- -------- -------- -------- --------
Balance at December 31, 1992............................. $ 2,123 $505,217 $(19,198) $658,439 $ --
Net loss for the year.................................... -- -- -- (300,316) --
Cash dividends........................................... -- -- -- (21,193) --
Stock issued upon
exercise of stock options.............................. 1 1,410 -- -- (170)
Treasury stock received in connection
with exercise of stock options......................... -- -- -- -- 27
Tax benefit of non-qualified
stock options exercised................................ -- 453 -- -- --
Cumulative translation adjustment
of foreign currency statements......................... -- -- (18,155) -- --
Investment in Rust International Inc..................... -- (77,066) -- -- --
Stock repurchases (3,300,300 shares)..................... -- -- -- -- 36,939
-------- -------- -------- -------- --------
Balance at December 31, 1993............................. $ 2,124 $430,014 $(37,353) $336,930 $ 36,796
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE>
Consolidated Statements of Cash Flows
Chemical Waste Management, Inc. and Subsidiaries
(000's omitted)
<TABLE>
<CAPTION>
For The Years Ended December 31
---------------------------------------
1991 1992 1993
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities
Net income (loss)..................................................................... $ 100,806 $ 126,735 $(300,316)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization....................................................... 83,083 88,432 116,271
Interest on LYONs................................................................... 10,977 11,645 11,411
Undistributed earnings of equity investee........................................... (7,850) (15,224) (9,371)
Gains from stock transactions of subsidiary and equity investee..................... (9,673) (47,000) (10,462)
Asset writedown component of special charge......................................... -- 29,399 381,453
(Gain) loss on sale of property and equipment and investments....................... (406) 407 (13,962)
Changes in assets and liabilities net of effects of acquired companies:
Accounts receivable.............................................................. 3,586 (57,075) 16,282
Costs and estimated earnings in excess of billings on uncompleted contracts, net. (14,639) (17,527) (18,607)
Refundable income taxes and prepaid expenses..................................... (521) (40,228) (438)
Accounts payable................................................................. (2,775) 24,153 (28,088)
Accrued expenses................................................................. (9,762) (28,705) (33,843)
Accrued income taxes............................................................. (11,090) (1,866) --
Deferred other items............................................................. 7,727 (10,900) 50,545
Sundry........................................................................... (29,636) (52,562) (9,159)
Minority interest in subsidiaries................................................ 8,524 (4,513) 35,091
Deferred income taxes............................................................ 2,820 32,408 (104,171)
--------- --------- ---------
Net Cash from Operating Activities...................................................... $ 131,171 $ 37,579 $ 82,636
--------- --------- ---------
Investing Activities
Short-term investments................................................................ $ -- $ -- $ 4,786
Purchases of property and equipment................................................... (204,934) (218,747) (233,780)
Transfer of property and equipment net, with WMX and affiliates....................... 1,375 (268) 8,175
Purchases of companies, net of cash acquired.......................................... (30,979) (70,807) (300,922)
Purchase of equity interest in WM International....................................... (198,974) -- --
Proceeds from sale of property and equipment and investments.......................... 4,111 6,720 45,792
--------- --------- ---------
Net Cash Used for Investing Activities.................................................. $(429,401) $(283,102) $(475,949)
--------- --------- ---------
Financing Activities
Increase in borrowings from WMX....................................................... $ 273,363 $ 301,931 $ 507,884
Proceeds from issuance of indebtedness................................................ 169,989 9,596 --
Payments on debt...................................................................... (63,305) (13,051) (54,406)
Stock repurchases..................................................................... (45,950) (24,387) (36,939)
Preferred stock repurchase............................................................ -- -- (5,000)
Proceeds from exercise of stock options, net.......................................... 5,085 14,045 2,007
Dividends paid........................................................................ (39,357) (40,991) (21,193)
--------- --------- ---------
Net Cash from Financing Activities...................................................... $ 299,825 $ 247,143 $ 392,353
--------- --------- ---------
Net Increase (Decrease) in Cash......................................................... $ 1,595 $ 1,620 $ (960)
Cash at beginning of year............................................................. 337 1,932 3,552
--------- --------- ---------
Cash at end of year..................................................................... $ 1,932 $ 3,552 $ 2,592
========= ========= =========
Supplemental disclosure:
Acquisitions of businesses
Fair value of assets acquired........................................................ $ 52,333 $ 111,858 $ 603,150
Cash paid............................................................................ (30,983) (70,934) (313,980)
--------- --------- ---------
Liabilities assumed.................................................................. $ 21,350 $ 40,924 $ 289,170
========= ========= =========
Interest paid, net of amounts capitalized............................................. $ 4,823 $ 19,901 $ 24,691
========= ========= =========
Income taxes paid (refunds received), net............................................. $ 75,281 $ 18,982 $ (5,726)
========= ========= =========
Supplemental schedule of non-cash investing and financing activities:
Acquisition of subsidiaries in exchange for common stock.............................. $ 26,861 $ 697 $ --
========= ========= =========
Conversion of debenture into common stock of the Company.............................. $ -- $ 168,974 $ --
========= ========= =========
Net book value of contribution to Rust from Wheelabrator Technologies Inc............. $ -- $ -- $ 244,278
========= ========= =========
Net book value of assets received in NSC transaction.................................. $ -- $ -- $ 34,891
========= ========= =========
Fair market value of subsidiary's stock issued in Brand merger........................ $ -- $ -- $ 56,402
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Notes to Consolidated
Financial Statements
(000's omitted in all tables except share and per share amounts)
- --------------------------------------------------------------------------------
Note 1.
Reorganization
Chemical Waste Management, Inc.("CWM" or the "Company") is a Delaware
corporation and a majority-owned subsidiary of WMX Technologies, Inc. ("WMX").
Pursuant to an agreement with Wheelabrator Technologies Inc. ("WTI") and
The Brand Companies, Inc. ("Brand"), effective January 1, 1993, the Company
contributed its remedial services group, its approximate 56% ownership in
Brand, its 12% ownership interest in Waste Management International plc ("WM
International") and certain other assets to Rust International Inc. ("Rust").
WTI contributed its engineering and construction business, its environmental
and infrastructure consulting services business and certain other assets.
Brand was merged into a subsidiary of Rust on May 7, 1993. The terms of
the merger entitled the stockholders of Brand (other than Rust) to receive
shares of Rust for their Brand shares on a one-for-one basis, or to elect to
receive $18.75 per share in cash. Holders of approximately 6.9 million Brand
shares elected to receive cash for their shares. At December 31, 1993, Rust
was owned approximately 56% by the Company, 40% by WTI, and 4% by the public.
The issuance of shares by Rust to acquire the balance of the Brand shares
resulted in the Company recognizing a gain during the second quarter. The cost
(approximately $130 million) of acquiring the Brand shares exchanged for cash
was financed through a credit facility which Rust has with WMX.
The following consolidating statements of income show the Company's core
business and its Rust subsidiary for 1992 and 1993, as if the Rust transaction,
excluding the merger of Brand, had taken place on January 1, 1992.
- --------------------------------------------------------------------------------
Consolidating Pro Forma Statement of Income
For the Year Ended December 31, 1992
(Unaudited)
<TABLE>
<CAPTION>
Core
CWM Rust Eliminations Consolidated
--------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue.......................................... $ 755,088 $1,441,050 $(84,860) $2,111,278
--------- ---------- -------- ----------
Costs and Expenses:
Operating...................................... $ 425,359 $1,228,749 $(84,860) $1,569,248
Special charges................................ 76,000 35,200 -- 111,200
Selling and administrative..................... 115,913 145,405 -- 261,318
Interest expense............................... 28,040 4,069 -- 32,109
Equity in earnings of affiliate................ -- (15,224) -- (15,224)
Minority interest.............................. -- 1,576 34,585 36,161
Sundry income, net............................. (2,298) (6,662) -- (8,960)
Gains on issuance of stock
by equity investee........................... -- (47,000) -- (47,000)
--------- ---------- -------- ----------
Income before Income Taxes and Cumulative
Effect of Change in Accounting Principle....... $ 112,074 $ 94,937 $(34,585) $ 172,426
Provision for Income Taxes....................... 44,295 11,741 -- 56,036
--------- ---------- -------- ----------
Income before Cumulative Effect of Change
in Accounting Principle........................ $ 67,779 $ 83,196 $(34,585) $ 116,390
========= ========== ======== ==========
Average Shares and Equivalent Shares
Outstanding During the Year.................... 204,967
==========
Earnings Per Common and Common
Equivalent Share before Cumulative Effect
of Change in Accounting Principle.............. $ 0.57
==========
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
Consolidating Statement of Income
For the Year Ended December 31, 1993
(Unaudited)
<TABLE>
<CAPTION>
Core
CWM Rust Eliminations Consolidated
--------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue........................................... $ 661,860 $1,534,465 $(66,534) $2,129,791
--------- ---------- -------- ----------
Costs and Expenses:
Operating....................................... $ 506,264 $1,249,908 $(66,534) $1,689,638
Special charge.................................. 550,000 -- -- 550,000
Selling and administrative...................... 128,058 155,753 -- 283,811
Interest expense................................ 27,551 9,894 -- 37,445
Equity in earnings of affiliates................ -- (14,183) -- (14,183)
Minority interest............................... 328 3,252 34,563 38,143
Sundry income, net.............................. (17,222) (4,731) -- (21,953)
Gains on issuance of stock by subsidiary........ (10,462) -- -- (10,462)
--------- ---------- -------- ----------
Income (Loss) before Income Taxes................. $(522,657) $ 134,572 $(34,563) $ (422,648)
Provision (Benefit) for Income Taxes.............. (176,940) 54,608 -- (122,332)
--------- ---------- -------- ----------
Net Income (Loss)................................. $(345,717) $ 79,964 $(34,563) $ (300,316)
========= ========== ======== ==========
Average Shares and Equivalent Shares
Outstanding During the Year..................... 210,700
==========
(Loss) Per Common and
Common Equivalent Share......................... $ (1.43)
==========
</TABLE>
- --------------------------------------------------------------------------------
Note 2.
Summary of Accounting Policies
Principles of Consolidation--The Company's financial statements are
prepared on a consolidated basis and include the Company and its majority-owned
subsidiaries. All significant intercompany transactions are eliminated.
Income Recognition--The Company recognizes revenue upon the receipt and
acceptance of waste material at its treatment and disposal facilities.
Appropriate treatment and disposal costs are accrued. Revenues from long-term
contracts are generally recognized on the percentage of completion method as
measured primarily by a ratio of expended costs to anticipated final costs.
Revisions in revenues, costs and profit estimates occurring during the course of
the contracts are reflected in the accounting period in which the revisions are
determined. At the time a loss on a contract becomes probable, the amount of
the estimated loss is recognized. Billings are based upon specific terms of
each contract.
Property and Equipment--Property and equipment (including major repairs and
improvements) are capitalized and stated at cost. Items of an ordinary
maintenance or repair nature are charged directly to operations. Disposal sites
are carried at historical cost and to the extent this exceeds end use realizable
value, such excess is amortized over the estimated life of the disposal site.
Disposal site improvement costs are capitalized and charged to operations over
the shorter of the estimated useful life of the site, the term of the permit, or
the life of the improvement; operating costs are expensed as incurred.
Depreciation and Amortization--The cost, less estimated salvage value, of
property and equipment is depreciated over the estimated useful lives on the
straight-line method as follows: land improvements--over the life of the site;
buildings--10 to 40 years; vehicles and equipment--3 to 20 years; leasehold
improvements--over the life of the applicable lease.
Land Disposal Cells--Preparation costs for individual secure land disposal
cells are capitalized as land or prepaid expenses and amortized as the airspace
is filled. Unamortized prepaid cell construction cost, representing the
anticipated costs to be amortized over the following year, was $31.4 million and
$15.3 million at December 31, 1992 and 1993, respectively.
21
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Notes to Consolidated
Financial Statements
(000's omitted in all tables except share and per share amounts)
Environmental Liabilities--The Company provides for estimated closure and
post-closure monitoring costs over the operating life of disposal sites as air
space is consumed. Such costs are estimated based on the technical
requirements of the Subtitle C Regulations of the U.S. Environmental
Protection Agency or the applicable state requirements, whichever are
stricter, and the proposed air emissions standards under the Clean Air Act,
and include such items as a final cap and cover on the site, leachate
management and groundwater monitoring. The accrual for closure and post-
closure monitoring costs relates to expenditures to be incurred after a
facility or unit ceases to accept waste; to the extent similar costs are
incurred during the active life of a site, they are expensed as incurred.
The Company has also established procedures to evaluate potential remedial
liabilities at closed sites which it owns or operated, or to which it
transported waste, including 22 sites listed on the Superfund National Priority
List("NPL"). In the majority of situations, the Company's connection with NPL
sites relates to allegations that its subsidiaries (or their predecessors)
transported waste to the facilities in question, often prior to the acquisition
of such subsidiaries by the Company. The Company routinely reviews and
evaluates sites requiring remediation, including NPL sites, giving consideration
to the nature (e.g., owner, operator,transporter or generator), and the extent
(e.g., amount and nature of waste hauled to the location, number of years of
site operation by the Company, or other relevant factors) of the Company's
alleged connection with the site, the accuracy and strength of evidence
connecting the Company to the location, the number, connection and financial
ability of other named and unnamed potentially responsible parties, and the
nature and estimated cost of the likely remedy. Where the Company concludes
that it is probable that a liability has been incurred, a provision is made in
the financial statements, based upon management's judgment and prior experience,
for the Company's best estimate of the liability. Such estimates are
subsequently revised as deemed necessary as additional information becomes
available.
Intangible Assets--Intangible assets relating to acquired businesses
consist primarily of the cost of purchased businesses in excess of market
value of net assets acquired ("goodwill"). Intangible assets are being
amortized on a straight-line basis over a period not exceeding 40 years. The
accumulated amortization of intangible assets amounted to $53 million and
$69.5 million at December 31, 1992 and 1993, respectively. The provisions
charged to costs and expenses in 1991, 1992 and 1993 amounted to $9.6 million,
$11.3 million and $16.5 million, respectively. On an ongoing basis, the
Company measures realizability of goodwill by the ability of the acquired
business to generate current and expected future operating income in excess of
annual amortization. If such realizability is in doubt, an adjustment is made
to reduce the carrying value of the goodwill. There were no such adjustments
in 1991, 1992 and 1993.
Investments--At December 31, 1991, the Company owned a 15% interest in WM
International, which holds substantially all the waste management operations of
WMX outside of North America.
In April 1992, WM International sold previously unissued ordinary shares
in an initial public offering ("IPO"), reducing the Company's ownership
interest from 15% to 12%. Although the Company's share of WM International's
earnings decreased as a result, the IPO did not have a material adverse impact
on the Company's earnings from WM International in 1992. In connection with
the IPO, the Company recognized a $47 million non-taxable gain. On January 1,
1993 the Company contributed its 12% ownership interest in WM International to
Rust. As of December 31, 1993, WM International was owned approximately 12% by
Rust, 12% by WTI, 56% by WMX and 20% by the public.
The following is summarized financial information for WM International:
<TABLE>
<CAPTION>
December 31
-------------------------
1992 1993
---------- ----------
<S> <C> <C>
Current assets............ $ 688,869 $ 629,786
Noncurrent assets......... 2,103,934 2,694,489
Current liabilities....... 585,701 533,266
Noncurrent liabilities.... 429,100 904,007
Minority interest......... 147,329 270,640
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------
1991 1992 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenue......... $1,075,070 $1,445,735 $1,411,211
Gross profit.... 316,946 412,472 402,065
Net income...... 80,433 120,113 114,246
</TABLE>
22
<PAGE>
If valued at the December 31, 1993, closing price of publicly traded
ordinary shares, the calculated value of the Company's investment in WM
International would exceed the carrying value by approximately $200 million.
Gain Recognition on Sale of Subsidiaries' Stock--It is the Company's
policy to record as income gains from the sale or other issuance of previously
unissued stock by its subsidiaries or equity investees. During 1991, the
Company recorded non-taxable gains of $10.7 million resulting from the
issuance of stock by Brand. Most of this gain ($9.7 million) related to
Brand's acquisition of businesses in exchange for Brand's common stock. During
1992, the Company recorded a non-taxable gain of $47 million resulting from
the IPO of WM International. In 1993, the Company recorded a non-taxable gain
of $10.5 million related to the Brand merger. Because the Company intends to
control its investment in Rust, and Rust and WMX intend to control their
investment in WM International to maintain the non-taxable status of these
gains, deferred income taxes have not been provided on these gains.
Reclassification--Certain amounts in previously issued financial
statements have been reclassified to conform to 1993 classifications.
- --------------------------------------------------------------------------------
Note 3.
Income Taxes
The Company implemented Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" ("FAS 109"), effective January 1, 1992. The
adoption of FAS 109 required a change in the method of accounting for income
taxes to an asset and liability approach, and did not have a material effect
on the Company's 1992 operating results.
In August 1993, the Omnibus Budget Reconciliation Act of 1993 was passed
which, among other things, increased the U.S Federal income tax rate effective
January 1, 1993. Under FAS 109, deferred taxes were adjusted during 1993 to
reflect the new legislation, with a related charge to the tax provision.
The Company uses the "deferral method" of accounting for investment
credit. The deferred investment credit is recorded as a reduction of the
income tax provision over the composite life of equipment.
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
For The Years
Ended December 31
-------------------------------
1991 1992 1993
------- ------- ---------
<S> <C> <C> <C>
Currently Payable:
Federal........ $39,390 $10,179 $ (8,269)
State.......... 9,601 4,979 (3,598)
------- ------- ---------
$48,991 $15,158 $ (11,867)
------- ------- ---------
Deferred:
Federal........ $12,466 $28,660 $(105,590)
State.......... 1,914 5,195 (4,422)
------- ------- ---------
$14,380 $33,855 $(110,012)
------- ------- ---------
Amortization of
Deferred Investment
Credit......... $ (584) $ (584) $ (453)
------- ------- ---------
$62,787 $48,429 $(122,332)
------- ------- ---------
</TABLE>
For tax purposes, the Company generated a 1993 net operating loss
("NOL"). The entire 1993 tax NOL will be carried back to offset taxable income
reported in earlier tax years. The Company also has available a $2.1 million
Alternative Minimum Tax Credit carryforward which may be carried forward
indefinitely.
The federal statutory rate in 1991, 1992 and 1993 is reconciled to the
effective rate as follows:
<TABLE>
<CAPTION>
For The Years Ended
December 31
--------------------------
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal income
tax rate........................ 34.0% 34.0% (35.0%)
State and local taxes,
net of federal benefit.......... 4.3 3.8 (1.2)
Amortization of intangible
assets relating to
acquired businesses............. 2.0 1.9 1.2
Non-taxable gains on
issuance of
stock by subsidiary and
equity investee................. (2.5) (9.0) (.9)
Deferred tax revaluation
relating to Omnibus
Budget Reconciliation
Act of 1993..................... -- -- .6
Non-deductible minority
interest........................ 2.3 0.2 3.2
Valuation allowance............... -- -- 1.8
Non-taxable
undistributed earnings
of equity investee.............. (1.8) (3.3) (1.1)
Other............................. 0.1 (0.4) 2.5
---- ---- -----
38.4% 27.2% (28.9%)
==== ==== =====
</TABLE>
23
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Notes to Consolidated
Financial Statements
(000's omitted in all tables except share and per share amounts)
Deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and tax basis of assets and
liabilities given the provisions of the enacted tax laws. Valuation allowances
have been established due to the uncertainty of ultimately realizing certain
state and foreign tax benefits associated with the 1993 restructuring. Deferred
income taxes are not provided on undistributed earnings of affiliates because
these earnings are considered to be permanently reinvested. If the reinvested
earnings were to be remitted, the U.S. income taxes due under current law
would not be material.
The principal components of the 1992 and 1993 deferred tax (assets)
liabilities are as follows:
<TABLE>
<CAPTION>
December 31
-----------------------
1992 1993
-------- ---------
<S> <C> <C>
Reserves not deductible until paid................. $(22,146) $(135,417)
Alternative Minimum Tax Credit carryforward........ -- (2,089)
Other.............................................. (2,305) (4,995)
Valuation allowance................................ -- 7,353
-------- ---------
Subtotal......................................... $(24,451) $(135,148)
-------- ---------
Property and equipment............................. $ 87,385 $ 27,015
Costs deferred for financial statement reporting... 7,182 43,206
Income not currently taxable....................... -- 12,720
Other.............................................. 1,362 371
-------- ---------
Subtotal......................................... $ 95,929 $ 83,312
-------- ---------
Deferred Tax (Asset) Liability................. $ 71,478 $ (51,836)
======== =========
Current portion.................................... $ -- $ (10,457)
Long term portion.................................. 71,478 (41,379)
-------- ---------
Deferred Tax (Asset) Liability................. $ 71,478 $ (51,836)
======== =========
</TABLE>
- --------------------------------------------------------------------------------
Note 4.
Business Combinations
Excluding the formation of Rust, all businesses acquired by the Company
have been accounted for as purchases and are included in the financial
statements from the date of acquisition.
During 1991, the Company acquired nine businesses for $31 million in cash
and notes and approximately 1.4 million shares of Brand's common stock. In March
1991, the Company exercised an option to acquire an additional 661,000 shares of
Brand.
Assuming the Rust transaction had taken place on January 1, 1992, the
Company acquired 23 businesses during 1992, for $109.9 million in cash and notes
and approximately 35,000 shares of Brand's common stock.
During 1993, the Company acquired 17 businesses (including the minority
interest in Brand as a result of the Brand merger) for $314 million in cash and
notes and approximately 3.1 million shares of common stock of Rust.
The following summarizes the effect of businesses acquired and accounted
for as purchases in 1991, 1992 and 1993 as if they had been acquired as of
January 1 of the preceding year. Reported amounts for 1992 reflect the Rust
transaction as if it had taken place on January 1, 1992 (see Note 1--
Reorganization) (unaudited):
24
<PAGE>
<TABLE>
<CAPTION>
1991 1992 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenue as reported............................ $1,358,344 $2,111,278 $2,129,791
Revenue of purchased
businesses for period
prior to acquisition......................... 133,171 376,175 145,088
---------- ---------- ----------
Pro forma revenue.............................. $1,491,515 $2,487,453 $2,274,879
========== ========== ==========
Net income (loss) before cumulative effect of
change in accounting principle as reported... $ 100,806 $ 116,390 $ (300,316)
Net income (loss) of purchased businesses for
period prior to acquisition.................. 1,578 5,550 (189)
Adjustment for interest and amortization
of cost in excess of market value of
net assets acquired.......................... (3,404) (10,953) (3,421)
---------- ---------- ----------
Pro forma net income (loss) before
cumulative effect of change
in accounting principle...................... $ 98,980 $ 110,987 $ (303,926)
========== ========== ==========
Earnings (loss) per share before
cumulative effect of change in
accounting principle as reported............. $ .49 $ .57 $ (1.43)
Effect of purchased businesses
for periods prior to acquisition............. (.01) (.03) (.01)
---------- ---------- ----------
Pro forma earnings (loss) before
cumulative effect of change in
accounting principle per share............... $ .48 $ .54 $ (1.44)
========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
Note 5.
Contracts in Process
Comparative information with respect to contracts in process at December
31, 1992 and 1993, is as follows:
<TABLE>
<CAPTION>
1992 1993
--------- -----------
<S> <C> <C>
Costs and estimated earnings on uncompleted contracts.................. $ 740,734 $ 3,237,255
Less billings on uncompleted contracts................................. (646,803) (3,094,967)
--------- -----------
Total contracts in process............................................. $ 93,931 $ 142,288
========= ===========
Contracts in process are included in the consolidated balance sheets
under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts.................................... $ 97,543 $ 185,867
Billings in excess of costs and estimated
earnings on uncompleted contracts.................................... (3,612) (43,579)
--------- -----------
$ 93,931 $ 142,288
========= ===========
</TABLE>
At December 31, 1993, most contracts in process are expected to be billed
and collected within two years.
Accounts receivable includes retainage which has been billed, but which is
not due pursuant to contract provisions until completion. Such retainage at
December 31, 1993, is $30.8 million, including $4.8 million that is expected to
be collected after one year. At December 31, 1992, retainage was $14.4 million.
25
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Notes to Consolidated
Financial Statements
(000's omitted in all tables except share and per share amounts)
- --------------------------------------------------------------------------------
Note 6.
Debt
The details relating to debt (including capitalized leases which are not
material) as of December 31, 1992 and 1993, are as follows:
<TABLE>
<CAPTION>
1992 1993
-------- ----------
<S> <C> <C>
Due to WMX........................................................ $626,712 $ 984,596
Due to WMX-Term Loans, interest 5.75% and 6%, due 1998............ -- 150,000
Liquid Yield Option Notes, zero coupon, subordinated, due 2010.... 202,860 181,850
Subordinated Notes Payable, interest 7 1/2%, due 2001............. -- 44,319
5% to 12% debt payable through 2020, partially secured............ 21,428 15,945
Industrial revenue bonds, interest at 67% of prime, due 2001...... 2,570 2,290
-------- ----------
Total debt........................................................ $853,570 $1,379,000
Less-current portion.............................................. 88,520 186,086
-------- ----------
Long-term portion................................................. $765,050 $1,192,914
======== ==========
The long-term debt as of December 31, 1993, is due as follows:
Second year.................................................................. $ 2,109
Third year................................................................... 2,317
Fourth year.................................................................. 241,584
Fifth year................................................................... 150,632
Sixth year and thereafter.................................................... 796,272
----------
$1,192,914
==========
</TABLE>
In August 1990, the Company issued and sold Liquid Yield Option Notes
("LYONs") due 2010, in an aggregate principal amount at maturity of $575 million
with the Company receiving net proceeds of approximately $173 million. The
LYONs, which will yield 6% if held to maturity, were issued in a minimum face
amount of $1,000 and are convertible into 11.676 shares of the Company's common
stock per LYON, subject to adjustment. On June 30, 1993, the Company
repurchased, for $32.4 million, LYONs in an aggregate principal amount at
maturity of $89.2 million. The holders of the Company's remaining $485.8 million
principal amount at maturity of LYONs may require the Company to repurchase
LYONs on each June 30, or the Company may redeem the LYONs at any time, at a
price equal to the issue price plus accrued original issue discount to the
repurchase date.
The Company and Rust each has an agreement with WMX under which WMX
provides a financing commitment up to $750 million for the Company and up to
$350 million for Rust. Any indebtedness of the Company or Rust may be converted,
at the option of each company, respectively, to a term loan with either a fixed
or floating interest rate due after five years. Accordingly, borrowings under
these agreements are classified as long-term debt. The interest rates and terms
of such loans will generally be WMX's costs of funds for loans of similar
duration. Interest on indebtedness other than term loans is charged at a rate
equal to WMX's effective 30-day commercial paper rate plus a number of basis
points sufficient to reimburse WMX for its cost of obtaining funds. On December
31, 1993, Rust converted $50 million of its borrowings from WMX to a 5.75% term
loan due December 31, 1998.
In addition to the above financing commitments, in August 1993, WMX
increased the amount of the credit facility for Rust by an additional $100
million in the form of a five-year term loan providing for a lump-sum principal
payment on December 31, 1998, with interest at the rate of 6% per annum.
As a result of the acquisition of EnClean,Inc. in 1993, Rust acquired the
subordinated notes payable, due August 2001. Rust has the option, effective
September 1994, to redeem these notes at 105% of the principal amount. The
redemption premium decreases through maturity.
26
<PAGE>
Note 7.
Interest Expense
<TABLE>
<CAPTION>
For The Years Ended December 31
-------------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Interest expense to affiliates $11,998 $26,707 $29,541
Interest expense to third parties 1,810 1,786 2,907
Interest expense accrued on LYONs 10,977 11,645 11,411
Capitalized interest (8,985) (8,592) (6,414)
------- ------- -------
$15,800 $31,546 $37,445
======= ======= =======
</TABLE>
Interest has been capitalized on construction of significant land disposal
cells and projects under development in accordance with Financial Accounting
Standards Board Statement No. 34.
- --------------------------------------------------------------------------------
Note 8.
Environmental Costs
and Liabilities
The Company is in the environmental services industry and the majority of
its operations are involved with the protection of the environment. As a result,
a material portion of consolidated revenue, operating expenses and capital
expenditures are directly or indirectly related to such matters. While the
Company is faced, in the normal course of its business, with the need to expend
funds for environmental protection and remediation, it does not expect such
expenditures to have a material adverse effect on its financial condition or
results of operations because its business is based on compliance with
environmental laws and regulations and its services are priced accordingly.
The Company provides for closure and post-closure monitoring costs over the
operating life of disposal sites as air space is consumed. The accrual for
closure and post-closure costs relates to expenditures to be incurred after a
facility or unit ceases to accept waste. Similar costs incurred during the
active life of a site are charged to expense as incurred.
The Company also provides for its estimated share of the cost of necessary
remediation at sites which it owns or operated or to which it transported waste.
Cost estimates are based upon management's experience in remediating such sites
for the Company as well as for unrelated parties, information available from
regulatory agencies as to costs of remediation, and the number, financial
resources and relative degree of responsibility of other potentially responsible
parties ("PRP's") who are jointly and severally liable for remediation of a
specific site, as well as the typical allocation of costs among PRP's. These
estimates sometimes are a range of possible outcomes. In such cases, the Company
provides for the amount within the range which constitutes its best estimate. If
no amount within the range appears to be a better estimate than any other
amount, then the Company provides for the minimum amount within the range in
accordance with Statement of Financial Accounting Standards No. 5 ("FAS 5"). The
Company believes that, as that term is defined in FAS 5, it is "reasonably
possible" (more than remote, but less than likely) that its liability could be
at the high end of such ranges, which is $39.4 million higher in the aggregate
than the current estimate as of December 31, 1993.
Estimates of the extent of the Company's degree of responsibility for
remediation of a particular site and the method and ultimate cost of remediation
require a number of assumptions and are inherently difficult, and the ultimate
outcome may differ from current estimates. However, the Company believes that
its extensive experience in the environmental services business, as well as its
involvement as a remediation services provider with a large number of sites,
provides a reasonable basis for estimating its aggregate liability. As
additional information becomes available, estimates are adjusted as necessary.
While the Company does not anticipate that any such adjustment would be material
to its financial statements, it is reasonably possible that technological,
regulatory or enforcement developments, the results of environmental studies or
other factors could alter this expectation and necessitate the recording of
additional liabilities which could be material. The impact of such
27
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Notes to Consolidated
Financial Statements
(000's omitted in all tables except share and per share amounts)
future events cannot be estimated at the current time.
As of December 31, 1992 and 1993, the Company had recorded liabilities
for closure and post-closure monitoring and environmental remediation costs as
follows:
<TABLE>
<CAPTION>
1992 1993
------- -------
<S> <C> <C>
Current portion, included in Accrued
Expenses $16,398 $18,109
Non-current portion, included in Other Deferred Items 24,716 69,341
------- -------
Total $41,114 $87,450
======= =======
</TABLE>
Where both the amount of a particular environmental liability and the
timing of the payments are reliably determinable, the cost in current dollars
is inflated at 3% until expected time of payment and then discounted to
present value at 7%. Had the Company not discounted a portion of its liability
as discussed above, the amounts recorded would have been increased by
approximately $47.7 million at December 31, 1993.
The Company's active landfill sites have estimated remaining lives
ranging from twelve to over one hundred years based upon current site plans
and anticipated annual volumes of waste. During this remaining site life, the
Company will provide for an additional $284 million of closure and post-closure
costs, including accretion for the discount recognized to date.
The Company has filed several lawsuits against approximately 150
insurance carriers seeking reimbursement for past and future remedial, defense
and tort claims costs at approximately 34 sites. The carriers have denied
coverage and are vigorously defending these claims. No amounts have been
recognized in the financial statements for any potential insurance recoveries.
- --------------------------------------------------------------------------------
Note 9.
Stock Options
The Company has three stock option plans currently in effect: the 1992
Stock Option Plan (the "1992 Plan"), the 1992 Stock Option Plan for Non-
Employee Directors (the "Directors' Plan")and the 1990 ServiceShares Stock
Option Plan (the "ServiceShares Plan").
Options granted under the 1992 Plan and the ServiceShares Plan are
generally exercisable in equal cumulative installments over a three- or five-
year period, the first installment one year after the date of grant and at one-
year intervals thereafter. Options granted under the Directors' Plan become
exercisable with respect to 20% of the total number of shares subject to the
option six months after the date of grant and with respect to an additional
20% at the end of each twelve-month period thereafter on a cumulative basis
during the succeeding four years.
Under the 1992 Plan, non-qualified stock options may be granted at a
price equal to 100% of the market value on the date of grant, for a term of
not less than five years nor more than ten years. The number of shares of the
Company's common stock originally reserved for issuance under this plan was
7.5 million.
Pursuant to the Directors' Plan, 100,000 shares of the Company's common
stock were reserved. Options for 10,000 shares are to be granted, at the time
of election to the Board, to each person who is not an officer or full-time
employee of the Company, any of its subsidiaries or WMX.
Under the ServiceShares Plan, 3 million shares of the Company's common
stock have been reserved for issuance upon exercise of non-qualified options.
Options may be granted at a price equal to 100% of the market value on the
date of grant, for a term of not less than five years nor more than ten years.
Generally, full-time employees not represented by a bargaining unit who have
three years of service with the Company and are not covered by another Company
option plan are eligible to participate in this plan.
The status of the plans (including predecessor plans under which options
remained outstanding and exercisable) was as follows:
28
<PAGE>
<TABLE>
<CAPTION>
Shares Option Price
--------- -------------
<S> <C> <C>
January 1, 1991
Outstanding........................................ 4,284,717 $ 7.76-$24.38
Available for future grant......................... 5,932,769
1991-
Granted............................................ 1,747,758 $17.88-$21.56
Exercised.......................................... 443,607 $ 7.76-$21.50
Cancelled.......................................... 143,875 $ 7.76-$24.38
December 31, 1991
Outstanding........................................ 5,444,993 $ 7.76-$24.38
Available for future grant......................... 4,328,886
1992-
Granted............................................ 2,920,798 $16.90-$20.88
Exercised.......................................... 1,102,704 $ 7.76-$19.50
Cancelled.......................................... 165,618 $ 7.76-$21.56
Additional shares reserved for future grant........ 9,100,000
Shares cancelled upon expiration of
the 1986 plans................................... 2,030,290
December 31, 1992-
Outstanding........................................ 7,097,469 $ 7.76-$24.38
Available for future grant......................... 8,643,416
1993-
Granted............................................ 1,618,046 $ 8.40-$20.55
Exercised.......................................... 150,717 $ 7.76-$17.13
Cancelled-
1986 Plan........................................ 410,779 $12.56-$24.38
Current plans.................................... 246,049 $ 8.40-$20.88
December 31, 1993-
Outstanding........................................ 7,907,970 $ 7.76-$24.38
Available for future grant......................... 7,271,419
</TABLE>
As of December 31, 1993, options were exercisable with respect to
approximately 3.9 million shares.
On December 24, 1993, the Compensation and Stock Option Committee of the
Board of Directors approved a plan whereby holders (other than officers or
directors of the Company) of certain options currently outstanding may elect to
exchange those options on a 1-for-2 basis for new options with an exercise price
of $8.20, which was the fair market value of a share of common stock of the
Company as of the date of the option grant. It is not currently known how many
option-holders will decide to exchange their current options for new ones;
however, assuming that all eligible options were exchanged, the number of
outstanding options under all plans would be 5,576,396 and the number of options
available for future grant would be 7,126,986.
- --------------------------------------------------------------------------------
Note 10.
Capital Stock
In 1993, the Company repurchased all 50 outstanding shares of its Preferred
Stock at the stated value of $100,000 per share.
In November 1990, the Board of Directors of the Company authorized the
repurchase of up to 10 million shares of its common stock over a 24-month
period. The authorization was extended for an additional 24 months in November
1992. During 1993, the Company repurchased 3.3 million shares bringing total
shares repurchased to 7.4 million.
29
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Notes to Consolidated
Financial Statements
(000's omitted in all tables except share and per share amounts)
- --------------------------------------------------------------------------------
Note 11.
Earnings Per Share
Earnings per share are computed on the basis of the weighted average
number of common and common equivalent shares outstanding during each year.
Common stock equivalents relate to shares granted for issuance under the
Company's stock option plans. The computation of fully diluted earnings per
share does not materially differ from that presented in the consolidated
statements of income.
The following table reconciles the number of common shares shown as
outstanding in the consolidated balance sheets with the number of common
shares used in computing earnings (loss) per share (000's omitted):
<TABLE>
<CAPTION>
1992 1993
------- -------
<S> <C> <C>
Common shares net of treasury shares, per balance sheets.................................... 212,294 209,131
Effect of shares issuable under stock options after applying the "treasury stock method".... 568 122
Effect of using weighted average common shares outstanding during the year.................. (7,895) 1,447
------- -------
Common shares used in computing earnings (loss) per share................................... 204,967 210,700
======= =======
</TABLE>
- --------------------------------------------------------------------------------
Note 12.
Legal Matters
In the ordinary course of conducting its business, the Company becomes
involved in numerous lawsuits and administrative proceedings and governmental
investigations, including environmental matters. Some of these proceedings may
result in fines, penalties, or judgments being assessed against the Company
which, from time to time, may have a material impact on earnings for a
particular quarter or year. The Company is not aware of any current proceedings
that it believes are, individually or in the aggregate, material to its business
or financial condition.
There are various lawsuits and claims pending against Rust which have
arisen in the normal course of business and relate mainly to matters of
product liability and personal injury. In connection with the formation of
Rust, CWM and WTI agreed to indemnify Rust against such claims and suits for
matters which arose prior to January 1, 1993, and which relate to businesses
that each contributed (except for Brand). The outcome of these matters is not
presently determinable, but in the opinion of management, based on information
currently available to the Company, the ultimate resolution of these matters
will not have a material adverse effect on the financial position or results
of operations of the Company.
The Company is a party to a lawsuit that alleges that it and WMX violated
federal securities laws by engaging in misrepresentations of, or failing to
disclose, material information concerning primarily the overvaluation of
certain of the Company's assets, principally its incineration facilities, and
existence of certain adverse hazardous waste treatment and disposal industry
conditions and trends, and overstating the Company's earnings for 1992 and the
first quarter of 1993 due to failure to write down the value of such assets
and other matters. The suit seeks to represent a class of persons and to
recover compensation for damages suffered by those purchasing the Company's
common stock during the period February 4 through September 3, 1993 due to the
previously described alleged violations. The Company and WMX believe that they
have meritorious defenses to this lawsuit and intend to contest it vigorously.
- --------------------------------------------------------------------------------
Note 13.
Commitments and
Contingencies
The Company leases several of its operating and office facilities for
various terms. Rents and incidental costs charged to costs and expenses in the
consolidated statements of income amount to $31.5 million for 1991, $33.7
million for 1992 and $44.0 million for 1993. These amounts include rents under
long-term and short-term cancelable leases, but are exclusive of leases
capitalized for accounting purposes.
The long-term rental obligations as of December 31, 1993 are due as
follows:
<TABLE>
<S> <C>
First year..................... $ 24,660
Second year.................... 21,387
Third year..................... 16,856
Fourth year.................... 14,595
Fifth year..................... 11,853
Sixth year and thereafter...... 33,764
--------
$123,115
========
</TABLE>
30
<PAGE>
WMX obtains umbrella liability insurance coverage for the Company.
Additionally, in order to meet certain regulatory requirements, WMX has
secured environmental impairment liability insurance in amounts which the
Company believes comply with these requirements. Under this policy, the
Company through WMX must reimburse the carrier for losses paid. Large amounts
of risk transfer insurance coverage for environmental impairment liability
continue to be unavailable at reasonable rates. The Company's net income could
be adversely affected in the future if uninsured losses were to be incurred.
The Company has issued or is a party to approximately 473 bank letters of
credit, performance bonds and other direct or indirect guarantees. Such
guarantees (averaging $1.1 million each), including those provided for
affiliates, are given in the ordinary course of business. Management does not
expect these guarantees will have a material adverse effect on the consolidated
financial position or results of operations of the Company.
- --------------------------------------------------------------------------------
Note 14.
Benefit Plans
The Company participates in a defined benefit pension plan maintained by
WMX for all of its eligible non-union domestic employees. The benefits are
based on the employee's years of service and compensation during the highest
five consecutive years out of the last ten years of employment. WMX's funding
policy is to make the minimum required annual contribution determined by its
actuaries. The Company is unable to provide information with respect to its
share of the WMX plan assets and liabilities because on an ongoing basis all
of the WMX plan assets are available to pay benefits to plan participants
without regard to the identity of any participant's employer. Pension expense
was $2.7 million for 1991, and $2.8 million for 1992 and $3.4 million for
1993. These amounts were allocated to the Company by WMX based upon estimated
percentages of relative compensation.
Assumptions as of December 31, which are used to determine the funded
status of the WMX plan at the respective dates and to compute pension expense
for the following year, are as follows:
<TABLE>
<CAPTION>
1992 1993
---- ----
<S> <C> <C>
Discount rate................................ 8.5% 7.25%
Rate of increase in compensation levels...... 4.0% 4.0%
Expected long-term rate of return on assets.. 9.0% 9.0%
</TABLE>
The following table sets forth the projected benefit obligation of WMX's
plan and the fair value of the plan assets as of December 31, 1992 and 1993:
<TABLE>
<CAPTION>
As of December 31
----------------------
1992 1993
--------- ---------
<S> <C> <C>
Projected benefit obligation................................................ $(121,594) $(164,094)
Plan assets at fair value, primarily common stocks, bonds and real estate... 123,137 136,244
--------- ---------
Plan assets in excess of (less than) projected benefit obligation........... $ 1,543 $ (27,850)
========= =========
</TABLE>
Additionally, Brand in 1991 and 1992 and Rust in 1993 contributed to multi-
employer plans in accordance with various union agreements. Expense related to
these entities was $4.9 million in 1991, $3.5 million in 1992 and $4.2 million
in 1993.
The Company participates in the WMX Profit Sharing and Savings Plan
("PSSP"), which is available to certain employees. The terms of the PSSP call
for annual contributions by the Company as determined by a specific formula as
well as a match of employee contributions up to $500 per employee.
Contributions, including 401(k) matching, were $2 million, $6.8 million, and
$5.4 million in 1991, 1992 and 1993, respectively.
31
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Notes to Consolidated
Financial Statements
(000's omitted in all tables except share and per share amounts)
Rust is a participant in the Wheelabrator-Rust Savings and Retirement
Plan which is a qualified defined contribution plan consisting of a savings
account component (the "Savings Account") and a retirement account component
(the "Retirement Account"). Under the terms of the Savings Account, eligible
employees of Rust may elect to contribute a portion of their annual
compensation not to exceed 16%. Rust is required to match 30% of the first 6%
of salary contributed by an employee. Under the terms of the Retirement
Account, eligible employees receive an annual contribution equal to a maximum
of 3% of their eligible earnings. The terms of the Retirement Account also
provide that designated craft employees receive an annual contribution equal
to a minimum of 2% of their eligible earnings. Employees vest in Company
contributions and the associated earnings in the Savings Account at 20% per
year, in the Retirement Account after five years and with the craft employees,
immediately. Rust's contribution was $17.2 million in 1993.
The Company implemented Statement of Financial Accounting Standards No.
106,"Employers' Accounting for Postretirement Benefits Other Than Pensions," on
the immediate recognition basis effective January 1, 1992. This new standard
required a change from accounting for postretirement benefits other than
pensions on a cash basis to an accrual basis. The cumulative effect of this
accounting change was to decrease 1992 income by $3 million after tax. The
pro forma effect of the change on previously reported 1991 earnings and, except
for the one time charge, on 1992 earnings, was not significant, nor is it
expected to materially impact the Company's future operating results. The
liability for postretirement benefits other than pensions is not material to the
Company's balance sheet.
In November 1992, the Financial Accounting Standards Board issued
Standard No. 112, "Employers' Accounting for Postemployment Benefits" ("FAS
112"). This statement establishes accounting standards for employers who
provide benefits to former and inactive employees after employment but before
retirement. The Company is required to adopt the new standard in 1994. The
Company does not believe that the adoption of FAS 112 will have a material
impact on its financial statements as its current accounting is substantially in
compliance with the new standard.
- --------------------------------------------------------------------------------
Note 15.
Transactions with Affiliates
WMX has furnished financial, administrative, legal and certain other staff
functions and services to the Company. The Company has been charged for these
services based on an allocation of WMX costs, which the Company believes to be
reasonable. Such charges were $4.6 million in 1991, $5.2 million in 1992 and
$9.8 million in 1993. In addition, the Company has reimbursed WMX for third
party charges incurred by WMX for the benefit of the Company, such as letter of
credit fees, insurance and bonding costs, legal fees and office rental charges.
The Company from time to time provides services in the ordinary course of
business to various subsidiaries of WMX for transportation, disposal and/or
treatment services. Revenues earned from affiliates for such services were
$12.2 million in 1991, $19.6 million in 1992 and $217.4 million in 1993. The
increase in 1993 was due primarily to the formation and consolidation of Rust in
that year.
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 among the Company and the WMX affiliated
group of companies. Net transfers of such assets to (from) the WMX affiliated
group of companies, were $1.4 million in 1991; $(268,000) in 1992; and, $8.2
million in 1993.
In April 1993, the Company transferred certain assets and licensed certain
technology used in the bioremediation of oil contaminated soils to a subsidiary
of WMX for an aggregate of $2,500,000, the fair market value of such assets and
technology.
The Company also receives services in the ordinary course of business
from various subsidiaries of WMX. Charges by affiliates for such services were
$10 million in 1991, $21.3 million in 1992 and $16.8 million in 1993. The
terms of these transactions have generally been the same as the terms of
comparable transactions with unaffiliated third parties.
In order to comply with certain federal and state financial assurance
requirements, WMX provides corporate guarantees for the Company.
32
<PAGE>
- --------------------------------------------------------------------------------
Note 16.
Industry Segment Information
The core business of the Company is providing hazardous waste
transportation, treatment, resource recovery and disposal services. With the
acquisition of control of Brand in 1990, the Company began operating in the
specialty contracting industry segment. With the formation of Rust on January
1, 1993, the specialty contracting business of Brand, as well as the site
remediation business previously included in the hazardous waste segment,
became part of the engineering, construction, industrial and related services
segment. Information relating to the Company's industry segments is presented
in the following table:
<TABLE>
<CAPTION>
Hazardous Specialty Consoli-
1991 Waste Contracting dated
- ---- ---------- ----------- ----------
<S> <C> <C> <C>
Revenue........................ $ 949,526 $408,818 $1,358,344
========== ======== ==========
Income from Operations......... $ 137,627 $ 36,416 $ 174,043
========== ======== ==========
Identifiable Assets............ $1,699,397 $326,115 $2,025,512
========== ======== ==========
Depreciation and Amortization.. $ 69,932 $ 13,151 $ 83,083
========== ======== ==========
Capital Expenditures
(exclusive of acquisitions).. $ 176,892 $ 28,042 $ 204,934
========== ======== ==========
1992
- ----
Revenue........................ $1,078,650 $439,953 $1,518,603
========== ======== ==========
Income from Operations......... $ 133,769 $ 6,287 $ 140,056
========== ======== ==========
Identifiable Assets............ $2,015,570 $426,809 $2,442,379
========== ======== ==========
Depreciation and Amortization.. $ 69,516 $ 18,916 $ 88,432
========== ======== ==========
Capital Expenditures
(exclusive of acquisitions).. $ 192,922 $ 25,825 $ 218,747
========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Engineering,
Core Construction,
Hazardous Industrial
Waste and Related Consoli-
1993 Business Services Eliminations dated
- ---- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Revenue......................... $ 661,860 $ 1,534,465 $ (66,534) $2,129,791
========== ============ ============ ==========
Income (Loss) from Operations... $(522,462) $ 128,804 $ $ (393,658)
========== ============ ============ ==========
Identifiable Assets............. $1,498,631 $ 1,625,413 $ $3,124,044
========== ============ ============ ==========
Depreciation and Amortization... $ 63,971 $ 52,300 $ $ 116,271
========== ============ ============ ==========
Capital Expenditures
(exclusive of acquisitions)... $ 165,644 $ 68,136 $ $ 233,780
========== ========== ============ ==========
</TABLE>
Various departments and agencies of the U.S. Government accounted for 10%
of consolidated revenue in 1993. No single customer accounted for over 10% of
revenue in 1991 and 1992. Because of the nature of Rust's business, individual
contracts, and hence individual customers, may from time to time account for
over 10% of the Company's revenue in a given year. In addition, contracts with
departments and agencies of the U.S. Government are typically bid and awarded by
the particular department or agency. The Company does not consider its business
to be dependent on any single customer or group of customers.
33
<PAGE>
Chemical Waste Management, Inc. and Subsidiaries--Notes to Consolidated
Financial Statements
(000's omitted in all tables except share and per share amounts)
- --------------------------------------------------------------------------------
Note 17.
Special Charges
The Company's results for 1991 include a special charge of $36 million
primarily to reflect its then-current estimate of certain future environmental
remediation costs at closed sites which the Company or its subsidiaries had
used, but not owned or operated, as well as additional reserves for pending
enforcement actions. In most cases, the liabilities arose under the
Comprehensive Environmental Response, Compensation and Liability Act or
similar state statutes, and related to the activities of waste disposal and
transportation companies prior to their acquisition by the Company.
The Company's results for 1992 include special charges of $111.2 million.
Brand recorded special charges of $35.2 million relating to certain costs of
reorganizing its asbestos abatement business and closing certain offices, a
write-down of its investment in that business and certain restructuring costs
related to the formation of Rust.
The Company recognized a special charge of $51 million in the second
quarter of 1992 related to two incinerators in Chicago and Tijuana, Mexico.
The charge included the anticipated costs of ongoing maintenance of the
Chicago facility during its shut-down period, severance pay for the laid-off
personnel, unaccrued penalties imposed and other costs. The charge also
included costs related to the Company's revised plans for a mobile hazardous
waste incinerator following a decision by Mexican environmental authorities
requiring relocation of the unit. Although operation of the incinerator had
not commenced, costs had been incurred to develop the necessary infrastructure
and to prepare for trial burns. In the fourth quarter of 1992, the Company
recorded a special charge of $25 million as a result of the restructuring of
its business in connection with the formation of Rust.
In the third quarter of 1993, the Company completed a study of its
business, announced a strategic reconfiguration of its operations to meet
current demand and recorded a special revaluation and restructuring charge of
$550 million related primarily to a revaluation of the Company's thermal
treatment business, including incinerators and fuels blending operations.
The special charge consisted of $381 million to write down assets,
primarily incinerators, and $169 million for the probable cash expenditures
(the majority of which will be made by the end of 1994 except for closure,
post-closure and related costs at facilities closed or to be closed) related
to the actions the Company has taken or plans to take as part of its program
to reduce costs, improve efficiency and structure the Company to meet current
market demand. The Company estimates that the full impact of the restructuring
will reduce overhead, including depreciation and amortization, by
approximately $60 million annually.
Among the actions the Company has taken or plans to take are elimination of
approximately 1,200 positions by year-end 1994, consolidation of operations in
its treatment and land disposal group, restructuring of its sales and service
regions, sale of selected service centers in marginal service lines and
geographies, seeking of a joint venture partner or partners and consideration of
other strategic alternatives for its Port Arthur, Texas incinerator and
centralization of several functions to improve efficiencies. The Company expects
that cash expenditures for these actions will primarily be funded by cash flow
from operations and income tax refunds, and should be substantially completed by
December 31, 1994 except for closure, post-closure and related costs at
facilities closed or to be closed. The Company is restructuring its operations
on the assumption that future base business revenue growth, if any, will not
keep pace with the economic recovery and it will not make investments which are
primarily supported by event business volumes.
34
<PAGE>
- --------------------------------------------------------------------------------
Note 18.
Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1992 December 31, 1993
------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Other Assets.............................. $ 16,135 $ 14,037 $ 18,400 $ 17,191
======== ======== ========= ========
Preferred Stock........................... $ 5,000 $ 4,839 $ -- $ --
======== ======== ========= ========
Total Debt (excluding amounts due to WMX)
and Other Deferred Items................ $230,420 $227,120 $ 244,404 $247,161
======== ======== ========= ========
</TABLE>
Current Assets and Liabilities--The carrying amounts of certain current
assets and current liabilities approximate their fair values.
Other Assets and Liabilities--The fair value of some assets and debt are
based on quoted market prices. For other assets, debt, other deferred items and
preferred stock for which there are no quoted market prices, a reasonable
estimate of fair value was made by discounting future cash flows at the
estimated current rate applicable to the type of investment, debt or liability.
The carrying value of amounts due to WMX approximate their fair value.
- --------------------------------------------------------------------------------
Note 19.
Selected Quarterly
Financial Data
(Unaudited)
<TABLE>
<CAPTION>
Earnings
Income Per Share
Before Before
Cumulative Cumulative
Effect of Effect of
Gross Accounting Accounting
1992 Revenue Profit/1/ Change/1/ Change/1,2/
- ---- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
First Quarter........ $ 373,276 $ 104,503 $ 29,930 $ .15
Second Quarter....... 397,288 67,726 52,382 .26
Third Quarter........ 394,031 117,248 38,691 .19
Fourth Quarter....... 354,008 57,327 8,732 .04
---------- ----------- ----------- -------------
$1,518,603 $ 346,804 $ 129,735 $ .63
========== =========== =========== =============
</TABLE>
<TABLE>
<CAPTION>
Earnings
Gross Net Income (Loss)
1993 Revenue Profit/1/ (Loss)/1/ Per Share/1/
- ---- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
First Quarter........ $ 495,416 $ 105,215 $ 21,254 $ .10
Second Quarter....... 534,006 109,191 22,616 .11
Third Quarter........ 541,565 (443,631) (359,884) (1.72)
Fourth Quarter....... 558,804 119,378 15,698 .08
---------- ----------- ----------- -------------
$2,129,791 $ (109,847) $ (300,316) $ (1.43)
========== =========== =========== =============
</TABLE>
/1/See Note 17 "Special Charges"
/2/The sum of the 1992 quarterly per share amounts does not equal the annual
amount due to rounding.
35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF CHEMICAL WASTE MANAGEMENT,
INC.:
We have audited the accompanying consolidated balance sheets of Chemical
Waste Management, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1992 and 1993, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Chemical Waste Management,
Inc. and Subsidiaries as of December 31, 1992 and 1993 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in notes 3 and 14 to the consolidated financial statements,
effective January 1, 1992, the Company changed its methods of accounting for
income taxes and postretirement benefits other than pensions.
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
February 7, 1994
<PAGE>
Exhibit 21
SUBSIDIARIES OF REGISTRANT
Set forth below is a list of the subsidiaries of Chemical Waste Management,
Inc. as of December 31, 1993. Each subsidiary is organized under the laws of
the jurisdiction indicated in parentheses.
A & B Builders, Inc. (Texas)
ABC Holding GmbH (Germany)
Able Industrial Maintenance & Cleaning, Inc. (Illinois)
AeroMap U.S., Inc. (Alaska)
AeroMap U.S., Inc. (Florida)
Aero-Metric Engineering, Inc. (Wisconsin)
Allegheny Industrial Electrical Company, Inc. (Delaware)
Applied Geology (Central) (United Kingdom)
Applied Geology Limited (United Kingdom)
Applied Geology (South Wales) (United Kingdom)
Belpar Chemical Services, Inc. (West Virginia)
Belpar Environmental, Inc. (Illinois)
Belpar Environmental of Virginia, Inc. (Virginia)
Brand Air, Inc. (Delaware)
Brand Construction Services, Inc. (Delaware)
Brand Demolition Services, Inc. (Delaware)
Brand Environmental Services, Inc. (Delaware)
Brand Fire Protection Services, Inc. (Delaware)
Brand H & O, Inc. (New York)
Brand Industrial Transition, Inc. (Delaware)
Brand Insulations, Inc. (Illinois)
Brand Management Services Company, Inc. (Delaware)
Brand Marine Services, Inc. (Delaware)
Brand Marine/Utility Services, Inc. (Delaware)
Brand Merger Corp. (Delaware)
Brand MPC, Inc. (Delaware)
Brand Precision Blasting, Inc. (Delaware)
Brand Remediation Services, Inc. (Delaware)
Brand Scaffold Builders, Inc. (Delaware)
Brand Scaffold Rental & Erection, Inc. (Delaware)
Brand Scaffold Services of Canada, Ltd. (Alberta)
Brand Services, Inc. (Delaware)
Burton, Adams, Kemp & King, Inc. (North Carolina)
Cemtech L. P. (Delaware)
Cemtech Management, Inc. (Delaware)
Chem-Nuclear Systems, Inc. (Delaware)
Chemical Waste Management Clemson Technical Center, Inc. (South
Carolina)
Chemical Waste Management de Mexico, S. A. de C. V. (Mexico)
Chemical Waste Management of Baja California, Inc. (Delaware)
Chemical Waste Management of Indiana, Inc. (Indiana)
Chemical Waste Management of Kansas, Inc. (Kansas)
Chemical Waste Management of New Jersey, Inc. (New Jersey)
Chemical Waste Management of Pennsylvania, Inc. (Delaware)
Chemical Waste Management of the Northwest, Inc. (Washington)
Combined Plant Services Corp. (Delaware)
Controlled Waste Materials, Inc. (Illinois)
Correct Maintenance Corporation (Indiana)
1
<PAGE>
CWM Cement, Inc. (Delaware)
CWM Chemical Services, Inc. (Delaware)
CWM Chemical Waste Management of Canada, Inc. (British Columbia)
CWM Consolidation Sub, Inc. (Delaware)
CWM Holdings, Inc. (Delaware)
CWM Resource Management, Inc. (Georgia)
CWM Resource Recovery, Inc. (Ohio)
Dearborn Computer Company, Inc. (Illinois)
Dearborn Management Group, Inc. (Illinois)
Delta Building and Investment Co., Inc. (Texas)
Diversified Scientific Services, Inc. (Tennessee)
Donohue JRP Ltd. (Hong Kong)
Downfield Services Ltd. (United Kingdom)
Drakeshore Development Ltd. (United Kingdom)
Dunn Corporation (New York)
Dynastar, Inc. (Ohio)
ELP GmbH (Germany)
EnClean Environmental Services Group, Inc. (Delaware)
EnClean Specialty Chemicals, Inc. (Delaware)
Erco Tennessee, a general partnership (Tennessee)
Escandell Associates, Inc. (Delaware)
GCP Engineering Limited (Hong Kong)
General Nuclear Systems, Inc. (Delaware)
GMI Holdings Ltd. (United Kingdom)
Gundersen/Viking Corp. (Delaware)
H. S. Sizemore & Son Co. (Texas)
IGA Tabasaran GmbH (Germany)
Industrial Waste, Incorporated (Florida)
Ingenieuroboro Fur Verfahrentechnik Dr. Born & Dr. Ermel GmbH
(Germany)
IPU GmbH (Germany)
Johnson Filtration Systems Ltd. (United Kingdom)
J. Roger Preston & Partners (PNG) Pty Ltd. (New Guinea)
JRP Consultants (Malaysia) SDN BHD (Malaysia)
Matrix Construction, Incorporated (Texas)
Matrix Engineering, Inc. (Texas)
Miami Valley Pressure Cleaning, Inc. (Ohio)
MRM Health Ltd. (United Kingdom)
MRM Holdings Ltd. (United Kingdom)
MRM Leisure International Ltd. (United Kingdom)
MRM Leisure Ltd. (United Kingdom)
MRM Partnership (United Kingdom)
MRM Projecta GmbH & Co. (Germany)
MRM Sandow Ltd. (United Kingdom)
M.V. Industrial Services, Inc. (Ohio)
National Industrial Constructors Inc. (Delaware)
North Pacific Aerial Surveys, Inc. (Alaska)
Oil & Solvent Process Company (California)
Olshan Asbestos Removal Corporation (Texas)
Olshan Demolishing Company, Inc. (Texas)
Plant Control Services, Inc. (Texas)
PT J Roger Preston & Partners (Indonesia)
Pullman-Hoffman, Inc. (Ohio)
Pullman Plumbing, Pipefitting & Mechanical, Inc. (West Virginia)
Pullman Power Products of Canada Limited (Canada)
2
<PAGE>
RCCD Inc. (Delaware)
RCC Fiber Company, Inc. (Delaware)
RIH Inc. (Delaware)
Rust Capital Corporation (Delaware)
Rust CHDA Company (Delaware)
Rust China Ltd. (Delaware)
Rust Controladora, S.A. de C.V. (Mexico)
Rust Deutschland GmbH (Germany)
Rust Environmental Pty. Ltd. (New South Wales, Australia)
Rust Environment & Infrastructure Inc. (Wisconsin)
Rust Environment & Infrastructure of Canada Inc. (Alberta)
Rust Environment & Infrastructure of Michigan Inc. (Michigan)
Rust Environment & Infrastructure of North Carolina Inc. (North
Carolina)
Rust Environment & Infrastructure of Ohio Inc. (Ohio)
Rust Federal Environmental Services Inc. (Delaware)
Rust Federal Services Inc. (Delaware)
Rust Field Services, Inc. (Delaware)
Rust Geotech Inc. (Delaware)
Rust Industrial Cleaning Inc. (Delaware)
Rust Industrial Cleaning Specialists Inc. (Delaware)
Rust Industrial Services Inc. (Delaware)
Rust International Corporation (Delaware) (Delaware)
Rust International Holdings Inc. (Delaware)
Rust International of North Carolina, P.C. (North Carolina)
Rust JRP Ltd. (Hong Kong)
Rust JRP Pte. Ltd. (Singapore)
Rust JRP Pty. Ltd. (Australia)
Rust Leasing Corp. (Delaware)
Rust Limited (United Kingdom)
Rust MRM Limited (United Kingdom)
Rust North America Holdings Inc. (Delaware)
Rust Nuclear Remedial Services Inc. (Delaware)
Rust Overseas Inc. (Delaware)
Rust Plant Services Inc. (South Carolina)
Rust PPK Pty. Ltd. (New South Wales, Australia)
Rust Remedial Services East Inc. (Delaware)
Rust Remedial Services Inc. (Delaware)
Rust Remedial Services Midwest Inc. (Delaware)
Rust Remedial Services West Inc. (Delaware)
Rust Scaffold Services Inc. (Delaware)
Rust Servicios Ambientales e Infraestructura, S.A. de C.V.
(Mexico)
Rust Sweden Holdings AB (Sweden)
Rust Utility Services Inc. (Delaware)
Rust VA Projekt AB (Sweden)
S and P, Inc. (New York)
Sigma Associates, Inc. (Texas)
S. V. Farming Corp. (New Jersey)
Special Resource Management, Inc. (Montana)
Swindell Rust Associates Inc. (Delaware)
Swindell Rust Iran Inc. (Delaware)
TC, Inc. (Indiana)
The Rust Engineering Company (Delaware)
The Rust Engineering Company of Michigan (Michigan)
The Rust Engineering Company of New York (New York)
3
<PAGE>
The Standard Bridge Corporation (New York)
The Standard Engineering Corporation (New York)
Tijuana Equilibrio Ecologico, S. A. de C. V. (Mexico)
W-T Universal Engineering, Inc. (California)
Waste Management Anniston, Inc. (Delaware)
Waste Management Hanford, Inc. (Delaware)
Western Compliance Services, Inc. (Oregon)
Wheelabrator Incineration, Inc. (Delaware)
Wheelabrator-Rust Maintenance Services, Inc. (Delaware)
4
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our Reports included or incorporated by reference in this Form 10-K, into
Chemical Waste Management, Inc.'s previously filed Registration Statements on
Form S-8 (registration nos. 33-18266, 33-16280, 33-36578 and 33-35063) and
Registration Statements on Form S-3 (registration nos. 33-32117, 33-24615-01,
33-36212 and 33-38762).
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 25, 1994
