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REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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USA WASTE SERVICES, INC.
(Exact name of Registrant as specified in its charter)
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OKLAHOMA 4953 73-1309529
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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EARL E. DEFRATES
USA WASTE SERVICES, INC.
5000 QUORUM DRIVE, SUITE 300 5000 QUORUM DRIVE, SUITE 300
DALLAS, TEXAS 75240 DALLAS, TEXAS 75240
(214) 383-7900 (214) 383-7900
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including area code, of Registrant's telephone
principal executive offices) number, including area code, of agent for
service)
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Copies to:
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DAVID J. GRAHAM RICHARD R. HOWE
ANDREWS & KURTH L.L.P. SULLIVAN & CROMWELL
4200 TEXAS COMMERCE TOWER 125 BROAD STREET
HOUSTON, TEXAS 77002 NEW YORK, NEW YORK 10004
(713) 220-4200 (212) 558-4000
JOHN T. UNGER RICHARD D. ROSE
SNELL & SMITH, P.C. THORP, REED & ARMSTRONG
1000 LOUISIANA, SUITE 3650 ONE RIVERFRONT CENTER
HOUSTON, TEXAS 77002 PITTSBURGH, PENNSYLVANIA 15222
(713) 652-3300 (412) 394-7711
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective and the
conditions to consummation of the Merger have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE FEE
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Common Stock, par value $.01 28,368,614
per share.................. shares(1) (1) $390,960,711.88(1) $134,814.06(1)(2)
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(1) Up to 28,368,614 shares of Common Stock, par value $.01 per share, of the
Registrant are to be offered in exchange for shares of Common Stock, par
value $.50 per share ("Chambers Common Stock") and shares of Class A Common
Stock, par value $.50 per share ("Chambers Class A Common Stock") of
Chambers Development Company, Inc. upon consummation of the merger
described herein. Pursuant to Rule 457(f), the registration fee was
computed on the basis of the high and low prices reported in the
consolidated reporting system on May 8, 1995 of the Chambers Common Stock
and Chambers Class A Common Stock.
(2) $60,876.00 of this fee has been previously paid in connection with the
filing of the Joint Proxy Statement and Prospectus of USA Waste Services,
Inc. and Chambers Development Company, Inc. pursuant to Rule 14a-6 of the
Securities Exchange Act of 1934.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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USA WASTE SERVICES, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
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FORM S-4 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
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1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................. Facing Page of Registration
Statement; Cross-Reference Sheet;
Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Available Information;
Incorporation of Certain
Information by Reference; Table
of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................... Prospectus Summary; The Merger
and Related Transactions;
Description of USA Waste;
Description of Chambers;
Financial Statements
4. Terms of the Transaction............................... Prospectus Summary; The Merger
and Related Transactions; The
Plan of Merger and Terms of the
Merger; Comparative Rights of
Stockholders of USA Waste and
Chambers
5. Pro Forma Financial Information........................ Prospectus Summary; USA Waste and
Chambers Combined Historical
Unaudited Pro Forma Condensed
Financial Statements;
Supplemental Information Relating
to Pro Forma Statement of
Operations for the Year Ended
December 31, 1994
6. Material Contacts with the Company Being Acquired...... The Merger and Related
Transactions
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters........ *
8. Interests of Named Experts and Counsel................. *
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... *
10. Information with Respect to S-3 Registrants............ Outside Front Cover Page;
Incorporation of Certain
Information by Reference; The
Merger and Related Transactions;
The Plan of Merger and Terms of
the Merger; Comparative Rights of
Stockholders of USA Waste and
Chambers; Market Price Data;
Description of USA Waste;
Management's Discussion and
Analysis of USA Waste's Financial
Condition and Results of
Operations; Description of USA
Waste Capital Stock; Principal
Stockholders of USA Waste and
Chambers; USA Waste and Chambers
Combined Historical Unaudited Pro
Forma Condensed Financial
Statements; Supplemental
Information Relating to Pro Forma
Statement of Operations for the
Year Ended December 31, 1994;
Financial Statements
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FORM S-4 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
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11. Incorporation of Certain Information by Reference...... Incorporation of Certain
Information by Reference
12. Information with Respect to S-2 or S-3 Registrants..... *
13. Incorporation of Certain Information by Reference...... *
14. Information with Respect to Registrants Other Than S-2
or S-3 Registrants................................... *
15. Information with Respect to S-3 Companies.............. Outside Front Cover Page;
Incorporation of Certain
Information by Reference;
Prospectus Summary; The Merger
and Related Transactions; The
Plan of Merger and Terms of the
Merger; Comparative Rights of
Stockholders of USA Waste and
Chambers; Market Price Data;
Description of Chambers;
Management's Discussion and
Analysis of Chambers Financial
Condition and Results of
Operations; Description of USA
Waste Capital Stock; Principal
Stockholders of USA Waste and
Chambers; USA Waste and Chambers
Combined Historical Unaudited Pro
Forma Condensed Financial
Statements; Supplemental
Information Relating to Pro Forma
Statement of Operations for the
Year Ended December 31, 1994;
Financial Statements
16. Information with Respect to S-2 or S-3 Companies....... *
17. Information with Respect to Companies Other Than S-2 or
S-3 Companies........................................ *
18. Information if Proxies, Consents or Authorizations are
to be Solicited...................................... Prospectus Summary; The Meetings;
The Merger and Related
Transactions; The Plan of Merger
and Terms of the Merger; Election
of USA Waste Directors; Principal
Stockholders of USA Waste and
Chambers
19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer.......... *
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*Not Applicable
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USA WASTE SERVICES, INC.
5000 QUORUM DRIVE, SUITE 300
DALLAS, TEXAS 75240
May 13, 1995
Dear Shareholder of USA Waste Services, Inc.:
You are invited to attend the 1995 Annual Meeting of Shareholders of USA
Waste Services, Inc. ("USA Waste") to be held June 22, 1995 at 2:00 p.m.,
Dallas, Texas time. The Annual Meeting will be held at The Grand
Kempinski-Dallas Hotel, 15201 Dallas Parkway, in Dallas, Texas.
At the Annual Meeting you will be asked to consider and vote upon seven
proposals, including a proposal to approve and adopt the Amended and Restated
Agreement and Plan of Merger dated as of November 28, 1994 (the "Merger
Agreement"), by and among USA Waste, Chambers Acquisition Corporation
("Acquisition"), a wholly owned subsidiary of USA Waste, and Chambers
Development Company, Inc. ("Chambers"). The other proposals include the election
of directors for the ensuing year, a proposal to effect certain corporate
changes, including changing the domicile of USA Waste from Oklahoma to Delaware,
classifying the Board of Directors into three classes with staggered terms,
increasing the number of authorized shares, increasing the number of shares that
may be issued under the USA Waste 1993 Stock Incentive Plan and ratifying the
appointment of USA Waste's auditors. Approval of the proposal to adopt the
Merger Agreement is conditioned upon approval of the increase in authorized
shares of USA Waste common stock.
The Merger Agreement provides, among other things, for the merger of
Acquisition with and into Chambers (the "Merger"), pursuant to which Chambers
would become a wholly owned subsidiary of USA Waste and each outstanding share
of common stock and Class A common stock of Chambers would be converted into
.41667 of a share of common stock of USA Waste (the "Exchange Ratio"). Upon
consummation of the Merger, USA Waste would issue approximately 27.8 million
shares of its common stock to the stockholders of Chambers. These shares would
represent approximately 54.8% of the total shares of USA Waste's common stock
outstanding immediately after the Merger. The Merger is subject to a number of
conditions, including obtaining the approval of the shareholders of USA Waste
and the stockholders of Chambers, final settlement of certain pending
stockholder litigation and certain other proceedings involving Chambers, and
obtaining any necessary regulatory waivers or approvals. A summary of the basic
terms and conditions of the Merger, certain financial and other information
relating to USA Waste and Chambers and a copy of the Merger Agreement are set
forth in the accompanying Joint Proxy Statement and Prospectus. Please review
and consider the enclosed materials carefully.
Your Board of Directors has unanimously approved the Merger Agreement. In
addition, the Board of Directors has received an opinion from Donaldson, Lufkin
& Jenrette Securities Corporation (a copy of which is included in the
accompanying Joint Proxy Statement and Prospectus) that the Exchange Ratio is
fair to the shareholders of USA Waste from a financial point of view. THE BOARD
OF DIRECTORS OF USA WASTE BELIEVES THAT THE PROPOSED MERGER AND THE OTHER
PROPOSALS DESCRIBED ABOVE ARE IN THE BEST INTERESTS OF USA WASTE AND ITS
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT AND THE OTHER PROPOSALS SET FORTH IN THE JOINT PROXY
STATEMENT AND PROSPECTUS.
Regardless of the number of shares you hold or whether you plan to attend
the Annual Meeting, we urge you to complete, sign, date, and return the enclosed
proxy card immediately. If you attend the Annual Meeting, you may vote in person
if you wish, even if you have previously returned your proxy card.
Sincerely,
/s/ DONALD F. MOOREHEAD, JR.
Donald F. Moorehead, Jr.
Chairman of the Board
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CHAMBERS DEVELOPMENT COMPANY, INC.
10700 FRANKSTOWN ROAD
PITTSBURGH, PENNSYLVANIA 15235
May 13, 1995
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Chambers Development Company, Inc. ("Chambers") to be held June 22, 1995 at
10:00 a.m. Dallas, Texas time at The Grand Kempinski-Dallas Hotel, 15201 Dallas
Parkway in Dallas, Texas. The sole purpose of the Special Meeting will be to
consider and vote upon a proposal to approve and adopt the Amended and Restated
Agreement and Plan of Merger, dated as of November 28, 1994 (the "Merger
Agreement"), by and among USA Waste Services, Inc. ("USA Waste"), Chambers
Acquisition Corporation ("Acquisition"), a wholly owned subsidiary of USA Waste,
and Chambers.
The Merger Agreement provides, among other things, for the merger of
Acquisition with and into Chambers (the "Merger") pursuant to which Chambers
will become a wholly owned subsidiary of USA Waste and each outstanding share of
Chambers Common Stock and Chambers Class A Common Stock will be converted into
.41667 of a share of USA Waste's common stock. Based upon the 15,439,668 shares
of Chambers Common Stock and the 51,349,459 shares of Chambers Class A Common
Stock outstanding as of May 8, 1995, Chambers stockholders will collectively be
issued approximately 27.8 million shares of common stock of USA Waste,
representing approximately 54.8% of the total issued and outstanding shares of
common stock of USA Waste after the Merger.
The Merger Agreement contains a number of conditions and other terms, all
of which are summarized, along with certain financial and other information, in
the accompanying Joint Proxy Statement and Prospectus. PLEASE READ AND CONSIDER
THE JOINT PROXY STATEMENT AND PROSPECTUS CAREFULLY.
Your Board of Directors has unanimously approved the Merger Agreement. In
addition, the Board of Directors has received the written opinion from its
investment advisor, J.P. Morgan Securities Inc. (a copy of which is included
with the accompanying Joint Proxy Statement and Prospectus), that the
consideration to be received by Chambers' stockholders in the Merger is fair,
from a financial point of view, to Chambers' stockholders. YOUR BOARD OF
DIRECTORS BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST INTERESTS OF CHAMBERS
AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT.
Regardless of the number of shares you hold or whether you plan to attend
the Special Meeting, you are urged to complete, sign, date and return the
enclosed proxy card immediately. If you attend the Special Meeting, you may vote
in person, if you wish, and revoke any previously returned proxy card.
On behalf of your Board of Directors, I thank you for your support and look
forward to the future together with USA Waste.
Sincerely,
/s/ JOHN G. RANGOS, SR.
John G. Rangos, Sr.
Chairman and Chief Executive Officer
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USA WASTE SERVICES, INC.
5000 QUORUM DRIVE, SUITE 300
DALLAS, TEXAS 75240
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 1995
To the Shareholders of
USA Waste Services, Inc.:
Notice is hereby given that the 1995 Annual Meeting of Shareholders of USA
Waste Services, Inc. ("USA Waste") will be held at The Grand Kempinski-Dallas
Hotel, 15201 Dallas Parkway, Dallas, Texas 75248, on June 22, 1995, at 2:00
p.m., Dallas, Texas time, to consider and act upon the following proposals:
1. To approve and adopt the Amended and Restated Agreement and Plan of
Merger dated as of November 28, 1994 (the "Merger Agreement"), by and among
USA Waste, Chambers Acquisition Corporation ("Acquisition"), a wholly owned
subsidiary of USA Waste, and Chambers Development Company, Inc.
("Chambers") providing for, among other things, the merger of Acquisition
with and into Chambers (the "Merger") and the conversion of each
outstanding share of Chambers common stock, par value $.50 per share, and
each outstanding share of Chambers Class A common stock, par value $.50 per
share, into .41667 of a share of USA Waste common stock, par value $.01 per
share ("USA Waste Common Stock").
2. To elect nine members to the Board of Directors of USA Waste for
the ensuing year; provided, however, that if the Merger is consummated,
four members of such Board will resign and four new members will fill the
resulting vacancies as more fully described in the accompanying Joint Proxy
Statement and Prospectus.
3. To change the domicile of USA Waste from Oklahoma to Delaware by
merging USA Waste into USA Waste Services, Inc., a Delaware corporation and
a wholly owned subsidiary of USA Waste ("USA Delaware").
4. To amend the Certificate of Incorporation of USA Waste to provide
for a classified Board of Directors with three classes having staggered
terms of three years each; the filling of vacancies on the Board of
Directors; the removal of directors; and the establishment of a 66 2/3%
voting requirement for shareholders to amend, alter or repeal the foregoing
provisions.
5. To amend the Certificate of Incorporation of USA Waste to increase
the authorized shares of USA Waste Common Stock from 50,000,000 to
150,000,000 shares.
6. To amend the USA Waste 1993 Stock Incentive Plan to increase the
aggregate number of shares of USA Waste Common Stock that may be issued
under such Plan from 1,000,000 to 4,000,000.
7. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent auditors for the ensuing year.
8. To transact such other business as may be properly brought before
the meeting or any adjournments thereof.
The implementation of Proposals No. 1 and No. 5 is conditioned on the
approval of both such proposals.
The meeting may be recessed from time to time, and at any reconvened
meeting actions with respect to the matters specified in this notice may be
taken without further notice to shareholders unless required by the Bylaws of
USA Waste.
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Only shareholders of record at the close of business on May 5, 1995, are
entitled to notice of and to vote on all matters at the meeting and any
adjournments thereof. A list of all shareholders will be available at the Annual
Meeting and, during the 10-day period prior to the Annual Meeting, at the
offices of USA Waste, 5000 Quorum Drive, Suite 300, Dallas, Texas 75240, during
ordinary business hours.
By Order of the Board of Directors,
/s/ GREGORY T. SANGALIS
Gregory T. Sangalis
Corporate Secretary
Dallas, Texas
May 13, 1995
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND
THE ANNUAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
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CHAMBERS DEVELOPMENT COMPANY, INC.
10700 FRANKSTOWN ROAD
PITTSBURGH, PENNSYLVANIA 15235
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 22, 1995
To the Stockholders of
Chambers Development Company, Inc.:
Notice is hereby given that a Special Meeting of Stockholders of Chambers
Development Company, Inc. ("Chambers") will be held at The Grand
Kempinski-Dallas Hotel, 15201 Dallas Parkway, in Dallas, Texas 75248, on June
22, 1995, at 10:00 a.m., Dallas, Texas time, to consider and act upon the
following matter:
To consider and vote upon a proposal to approve and adopt the Amended
and Restated Agreement and Plan of Merger dated as of November 28, 1994
(the "Merger Agreement"), among USA Waste Services, Inc. ("USA Waste"),
Chambers Acquisition Corporation ("Acquisition"), and Chambers,
providing for, among other things, the merger of Acquisition with and
into Chambers (the "Merger"), and the conversion of each outstanding
share of Chambers Common Stock, par value $.50 per share, and Chambers
Class A Common Stock, par value $.50 per share, into .41667 of a share
of USA Waste's common stock, par value $.01 per share, all as more fully
described in the accompanying Joint Proxy Statement and Prospectus.
The meeting may be recessed from time to time, and at any reconvened
meeting actions with respect to the matter specified in this notice may be taken
without further notice to stockholders unless required by the Bylaws of
Chambers.
Only stockholders of record at the close of business on May 5, 1995, are
entitled to notice of and to vote on all matters at the meeting and any
adjournments thereof. A list of all stockholders will be available at the
Special Meeting and, during the 10-day period prior to the Special Meeting, at
the offices of Chambers, 10700 Frankstown Road, Pittsburgh, Pennsylvania 15235,
and also at the offices of USA Waste, 5000 Quorum Drive, Suite 300, Dallas,
Texas 75240, during ordinary business hours.
By Order of the Board of Directors,
/s/ JOHN G. RANGOS, JR.
John G. Rangos, Jr.
Secretary
Pittsburgh, Pennsylvania
May 13, 1995
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND
THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
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JOINT PROXY STATEMENT AND PROSPECTUS
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PROXY STATEMENT, ANNUAL REPORT PROXY STATEMENT AND ANNUAL REPORT
AND PROSPECTUS ----------------------------------
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USA WASTE SERVICES, INC. COMPANY, INC.
5000 QUORUM DRIVE, SUITE 300 10700 FRANKSTOWN ROAD
DALLAS, TEXAS 75240 PITTSBURGH, PENNSYLVANIA 15235
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This Joint Proxy Statement and Prospectus is being furnished to the
shareholders of USA Waste Services, Inc., an Oklahoma corporation ("USA Waste"),
in connection with the solicitation of proxies by its Board of Directors to be
voted at the Annual Meeting of Shareholders of USA Waste (the "USA Waste Annual
Meeting") scheduled to be held on Thursday, June 22, 1995, at 2:00 p.m., Dallas,
Texas time, at The Grand Kempinski-Dallas Hotel, 15201 Dallas Parkway, Dallas,
Texas 75248, and at any adjournment or postponement thereof, and to the
stockholders of Chambers Development Company, Inc., a Delaware corporation
("Chambers"), in connection with the solicitation of proxies by its Board of
Directors to be voted at the Special Meeting of Stockholders of Chambers (the
"Chambers Special Meeting") scheduled to be held on Thursday, June 22, 1995, at
10:00 a.m., Dallas, Texas time, at The Grand Kempinski -- Dallas Hotel, 15201
Dallas Parkway, Dallas, Texas 75248, and at any adjournment or postponement
thereof.
At the USA Waste Annual Meeting and the Chambers Special Meeting, the
holders of common stock, par value $.01 per share ("USA Waste Common Stock"), of
USA Waste and the holders of Common Stock, par value $.50 per share ("Chambers
Common Stock"), and Class A Common Stock, par value $.50 per share ("Chambers
Class A Common Stock"), respectively, of Chambers will be asked to consider and
vote upon a proposal to approve and adopt the Amended and Restated Agreement and
Plan of Merger dated as of November 28, 1994 (the "Merger Agreement"), among USA
Waste, Chambers Acquisition Corporation, a wholly owned subsidiary of USA Waste
("Acquisition"), and Chambers providing for the merger of Acquisition with and
into Chambers (the "Merger"). Such approvals are a condition to consummating the
Merger. Upon consummation of the Merger, Chambers will become a wholly owned
subsidiary of USA Waste and the holders of the issued and outstanding shares of
Chambers Common Stock and Chambers Class A Common Stock will receive, at the
effective time of the Merger, .41667 of a share of USA Waste Common Stock for
each share of Chambers Common Stock or Chambers Class A Common Stock held by
them. See "The Plan of Merger and Terms of the Merger." A copy of the Merger
Agreement is attached hereto as Appendix A and incorporated herein by reference.
On May 8, 1995, the closing sale price of USA Waste Common Stock on the New
York Stock Exchange was $15.50 per share. Based on such closing price, the
consideration to be received by stockholders of Chambers pursuant to the Merger
would be approximately $6.46 per share of Chambers Common Stock and Chambers
Class A Common Stock. Approximately 50.8 million shares of USA Waste Common
Stock will be outstanding after the Merger is consummated, of which
approximately 54.8% will be owned by former stockholders of Chambers and
approximately 45.2% will be owned by current shareholders of USA Waste. This
Joint Proxy Statement and Prospectus also constitutes the prospectus of USA
Waste that is a part of the Registration Statement of USA Waste filed with the
Securities and Exchange Commission with respect to the issuance and exchange of
up to approximately 27.8 million shares of USA Waste Common Stock to be issued
pursuant to the Merger. This Joint Proxy Statement and Prospectus is first being
mailed to the shareholders of USA Waste and the stockholders of Chambers on or
about May 13, 1995.
THE SHARES OF USA WASTE COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT AND
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT AND PROSPECTUS IS MAY 13, 1995
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No person has been authorized to give any information or to make any
representation not contained in this Joint Proxy Statement and Prospectus, and,
if given or made, such information or representation must not be relied upon as
having been authorized by USA Waste or Chambers. This Joint Proxy Statement and
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, USA Waste Common Stock, or a solicitation of a proxy, in any
jurisdiction where, or to any person to whom, it is unlawful to make such an
offer or solicitation. Neither the delivery of this Joint Proxy Statement and
Prospectus nor any distribution of securities made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of USA Waste or Chambers since the date hereof or that the information
in this Joint Proxy Statement and Prospectus is correct as of any time
subsequent to the date hereof. All information herein with respect to USA Waste
and Acquisition has been furnished by USA Waste, and all information herein with
respect to Chambers has been furnished by Chambers.
AVAILABLE INFORMATION
USA Waste and Chambers are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information may be inspected and copied at the offices of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and the Regional Offices of the Commission in Chicago, Illinois at
Northwestern Atrium Center, 500 W. Madison, Suite 1400, Chicago, Illinois
60661-2511 and in New York, New York at 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such materials may be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Furthermore, USA Waste's securities
are listed on the New York Stock Exchange (the "NYSE") and the reports, proxy
statements, and other information of USA Waste described above may also be
inspected at the NYSE at 20 Broad Street, New York, New York 10005. Chambers'
securities are listed on the American Stock Exchange (the "AMEX") and the
reports, proxy statements, and other information of Chambers described above may
also be inspected at the AMEX at 86 Trinity Place, New York, New York 10006.
Upon consummation of the Merger, listing of the Chambers' securities on the AMEX
will be terminated.
USA Waste has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") on Form S-4 with respect to the securities offered hereby.
This Joint Proxy Statement and Prospectus also constitutes the Prospectus of USA
Waste filed as part of the Registration Statement and does not contain all of
the information set forth in the Registration Statement and the exhibits
thereto, certain parts of which are omitted in accordance with the rules of the
Commission. Statements made in this Joint Proxy Statement and Prospectus as to
the contents of any contract, agreement, or other document referred to are not
necessarily complete; with respect to each such contract, agreement, or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be qualified in its entirety by such reference. The
Registration Statement and any amendments thereto, including exhibits filed as
part thereof, are available for inspection and copying at the Commission's
offices as described above. After the Merger, registration of the Chambers
Common Stock and Chambers Class A Common Stock under the Exchange Act will be
terminated.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
USA Waste incorporates herein by reference the following documents filed by
it with the Commission (File No. 1-12154) pursuant to the Exchange Act: (i) its
Annual Report on Form 10-K for the year ended December 31, 1994, (ii) the
description of USA Waste Common Stock contained in USA Waste's Registration
Statement on Form 8-A dated July 1, 1993 and (iii) the Current Report on Form
8-K dated February 28, 1994 as filed by Envirofil Inc. ("Envirofil") and as
amended by Form 8-K/A dated May 11, 1994, including the combined financial
statements of the Acquired New Jersey Solid Waste Companies as of December 31,
1992 and 1993 and for each of the three years in the period ended December 31,
1993.
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<PAGE> 11
Chambers incorporates herein by reference its Annual Report or Form 10-K
for the year ended December 31, 1994.
All documents filed by USA Waste and Chambers pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement and Prospectus and prior to the date of the USA Waste Annual
Meeting and the Chambers Special Meeting shall be deemed to be incorporated by
reference in this Joint Proxy Statement and Prospectus and to be part hereof
from the date of filing of such documents. All information appearing in this
Joint Proxy Statement and Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated by reference herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded, for purposes
of this Joint Proxy Statement and Prospectus, to the extent that a statement
contained herein or in any subsequently filed document that is deemed to be
incorporated herein modifies or supersedes any such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Joint Proxy Statement and Prospectus.
THIS JOINT PROXY STATEMENT AND PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. USA WASTE AND
CHAMBERS HEREBY UNDERTAKE TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS JOINT PROXY STATEMENT AND
PROSPECTUS HAS BEEN DELIVERED, ON WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED TO ABOVE THAT HAVE BEEN OR MAY BE
INCORPORATED INTO THIS JOINT PROXY STATEMENT AND PROSPECTUS BY REFERENCE, OTHER
THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). DOCUMENTS RELATING TO USA WASTE
ARE AVAILABLE UPON REQUEST FROM USA WASTE SERVICES, INC., 5000 QUORUM DRIVE,
SUITE 300, DALLAS, TEXAS 75240, ATTENTION: EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER, TELEPHONE NUMBER 214-383-7900. DOCUMENTS RELATING TO CHAMBERS
ARE AVAILABLE UPON REQUEST FROM CHAMBERS DEVELOPMENT COMPANY, INC., 10700
FRANKSTOWN ROAD, PITTSBURGH, PENNSYLVANIA 15235, ATTENTION: SENIOR VICE
PRESIDENT AND CHIEF FINANCIAL OFFICER, TELEPHONE NUMBER 412-242-6237. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED BY
JUNE 15, 1995.
iii
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TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION.......................... ii
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE.................................... ii
SUMMARY........................................ 1
The Companies................................ 1
The Shareholders' Meetings................... 1
The Merger................................... 2
Stockholders' Comparative Rights............. 7
Market Price Data............................ 8
Summary Financial Information................ 9
Other Proposals to be Presented at the USA
Waste Annual Meeting....................... 13
RISK FACTORS................................... 14
Reliance on Future Acquisitions for Growth... 14
Limitation on Use of Net Operating Loss
Carryforwards.............................. 14
High Degree of Leverage...................... 14
Operations Could be Adversely Affected by
Government Regulation and Potential
Litigation................................. 14
Potential Liability for Environmental
Damage..................................... 14
Profitability May be Affected by
Competition................................ 15
Expected Benefits of Combined Business May
Not be Achieved............................ 15
Exchange Ratio Will Not Reflect Any Change in
Stock Prices............................... 15
Chambers' Existing Financing Requirements.... 15
THE MEETINGS................................... 16
Date, Time, and Place of the Meetings........ 16
Purpose of the Meetings...................... 16
Record Date and Outstanding Shares........... 16
Voting and Revocation of Proxies............. 17
Vote Required for Approval................... 17
Solicitation of Proxies...................... 18
Other Matters................................ 18
THE MERGER AND RELATED
TRANSACTIONS................................. 18
General Description of the Merger............ 18
Background of the Merger..................... 19
USA Waste's Reasons for the Merger........... 22
Recommendation of the Board of Directors of
USA Waste.................................. 23
Chambers' Reasons for the Merger............. 23
Recommendation of the Board of Directors of
Chambers................................... 24
Opinion of Financial Advisor to USA Waste.... 24
Opinion of Financial Advisor to Chambers..... 29
Conflicts of Interests....................... 33
Shareholders Agreement....................... 35
Financing Arrangements....................... 35
Certain Federal Income Tax Consequences...... 36
Net Operating Loss Carryforwards............. 38
Accounting Treatment......................... 39
Government and Regulatory Approvals.......... 39
Settlement of Certain Chambers Litigation.... 40
Restrictions on Resales by Affiliates........ 40
ELECTION OF USA WASTE DIRECTORS................ 41
Nominees for Election as Directors........... 41
Board of Directors After the Merger.......... 44
Meetings, Committees and Compensation........ 45
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Beneficial Ownership of USA Waste
Common Stock............................... 46
Executive Compensation....................... 47
Compensation Committee Interlocks and Insider
Participation in Compensation Decisions.... 52
Certain Relationships and Related
Transactions............................... 52
Filing of Reports of Stock Ownership......... 54
THE REINCORPORATION............................ 54
Principal Reason for Reincorporation......... 56
Director Liability........................... 56
Indemnification of Directors, Officers and
Other Agents............................... 56
Consents for Corporate Control............... 57
Possible Negative Considerations............. 58
Other Concerns............................... 59
CLASSIFICATION OF THE USA WASTE BOARD AND
RELATED MATTERS.............................. 60
Classified Board............................. 60
Filling Vacancies............................ 61
Removal of Directors......................... 61
Amendment, Alteration or Repeal of These
Provisions................................. 61
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED
SHARES....................................... 62
AMENDMENT OF THE USA WASTE 1993 STOCK INCENTIVE
PLAN......................................... 63
RATIFICATION OF APPOINTMENT OF AUDITORS........ 64
THE PLAN OF MERGER AND TERMS OF THE MERGER..... 64
Effective Time of the Merger................. 64
Manner and Basis for Converting Shares....... 64
Chambers Options............................. 65
Conditions to the Merger..................... 65
Representations and Warranties of USA Waste
and Chambers............................... 67
Conduct of the Business of USA Waste and
Chambers Prior to the Merger............... 68
No Solicitation of Acquisition
Transactions............................... 69
Conduct of the Business of the Combined
Companies Following the Merger............. 70
Termination or Amendment..................... 71
Termination Fees............................. 71
Expenses..................................... 72
Indemnification.............................. 72
Arrangements with Certain Individuals........ 72
COMPARATIVE RIGHTS OF STOCKHOLDERS OF USA WASTE
AND CHAMBERS................................. 73
USA WASTE AND CHAMBERS COMBINED HISTORICAL
UNAUDITED PRO FORMA CONDENSED FINANCIAL
STATEMENTS................................... 74
Notes to Combined Historical Unaudited Pro
Forma Condensed Financial Statements....... 79
SUPPLEMENTAL INFORMATION RELATING TO PRO FORMA
STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1994............................ 81
PRINCIPAL STOCKHOLDERS OF USA WASTE AND
CHAMBERS..................................... 82
</TABLE>
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<TABLE>
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MARKET PRICE DATA.............................. 83
Market Information........................... 83
Dividend Information......................... 84
DESCRIPTION OF USA WASTE....................... 85
Industry Background.......................... 85
Strategy..................................... 85
Operations................................... 86
Marketing and Sales.......................... 89
Competition.................................. 89
Pricing...................................... 90
Employees.................................... 90
Insurance and Performance Bonds.............. 90
Regulation................................... 91
Properties................................... 95
Legal Matters................................ 95
Selected Historical Consolidated Financial
Data of USA Waste.......................... 97
MANAGEMENT'S DISCUSSION AND ANALYSIS OF USA
WASTE'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................... 98
Introduction................................. 98
Results of Operations for the Three Years
Ended December 31, 1994.................... 100
Liquidity and Capital Resources.............. 102
Environmental Matters........................ 103
Seasonality and Inflation.................... 104
DESCRIPTION OF CHAMBERS........................ 105
Operations................................... 105
Competition.................................. 108
Marketing.................................... 109
Regulation................................... 109
Bonding and Insurance........................ 111
Employees.................................... 111
Properties................................... 112
Legal Proceedings............................ 112
Selected Historical Consolidated Financial
Data of Chambers........................... 118
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CHAMBERS' FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................... 119
Results of Operations for the Three Years
Ended December 31, 1994.................... 119
Liquidity and Capital Resources.............. 124
Capital Expenditures......................... 127
Environmental Matters........................ 128
DESCRIPTION OF USA WASTE CAPITAL STOCK......... 129
Common Stock................................. 129
Preferred Stock.............................. 129
Authorized But Unissued Shares............... 130
Transfer Agent and Registrar................. 130
Limited Liability and Indemnification of
Officers and Directors..................... 130
LEGAL MATTERS.................................. 131
EXPERTS........................................ 131
PROPOSALS OF SHAREHOLDERS FOR ANNUAL
MEETINGS..................................... 131
OTHER MATTERS.................................. 132
INDEX TO FINANCIAL STATEMENTS.................. F-1
APPENDIX A -- Amended and Restated Agreement
and Plan of Merger........................... AA-1
APPENDIX B -- Fairness Opinion of Donaldson,
Lufkin & Jenrette Securities Corporation..... BB-1
APPENDIX C -- Fairness Opinion of J.P. Morgan
Securities Inc............................... CC-1
APPENDIX D -- Reincorporation Merger
Agreement.................................... DD-1
APPENDIX E -- Certificate of Incorporation of
USA Delaware................................. EE-1
APPENDIX F -- Bylaws of USA Delaware........... FF-1
APPENDIX G -- Articles of Amendment of USA
Waste........................................ GG-1
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<PAGE> 14
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement and Prospectus. The information contained in this
summary is qualified in its entirety by, and should be read in conjunction with,
the more detailed information appearing elsewhere in this Joint Proxy Statement
and Prospectus and the documents incorporated herein by reference.
THE COMPANIES
USA WASTE SERVICES, INC.
USA Waste Services, Inc. ("USA Waste") is an integrated solid waste
management company operating in the non-hazardous segment of the industry,
including collection, transfer, recycling, disposal and soil remediation. USA
Waste provides solid waste management services to the full spectrum of
municipal, commercial, industrial and residential customers with operations in
California, Illinois, Indiana, Missouri, New Jersey, North Dakota, Ohio,
Oklahoma, Pennsylvania, Texas, Washington and West Virginia. Based on 1994
revenues, USA Waste is currently the sixth largest publicly traded non-hazardous
solid waste management company in the United States and Chambers Development
Company, Inc. is the fourth. Upon consummation of the Merger, USA Waste will
become the third largest such company, based on information currently available
to management. Chambers Acquisition Corporation ("Acquisition") is a wholly
owned subsidiary of USA Waste organized for the purpose of effecting the Merger
pursuant to the Merger Agreement. Acquisition has no material assets and has not
engaged in any activities except in connection with the Merger.
The principal executive offices of USA Waste and Acquisition are located at
5000 Quorum Drive, Suite 300, Dallas, Texas 75240, and the telephone number is
(214) 383-7900. References to USA Waste at the time of consummation of the
Merger and thereafter shall mean the surviving Delaware corporation into which
USA Waste merges for purposes of changing the domicile of USA Waste from
Oklahoma to Delaware. See "The Reincorporation."
CHAMBERS DEVELOPMENT COMPANY, INC.
Chambers Development Company, Inc. ("Chambers") provides integrated solid
waste services in the United States, with operations or properties at the end of
1994 in selected areas of Florida, Georgia, Illinois, Maryland, Mississippi, New
Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia,
and West Virginia. Major elements of the business include the operation,
management, construction and engineering of solid waste sanitary landfills,
transfer stations, recycling facilities, and related operations. Chambers also
provides the services of collecting, hauling and recycling solid waste for
municipal, commercial, industrial and residential customers. The principal
executive offices of Chambers are located at 10700 Frankstown Road, Pittsburgh,
Pennsylvania 15235, and the telephone number is (412) 242-6237. See "Description
of Chambers."
THE SHAREHOLDERS' MEETINGS
The USA Waste Annual Meeting will be held at 2:00 p.m., Dallas, Texas time
on June 22, 1995, at The Grand Kempinski-Dallas Hotel, 15201 Dallas Parkway,
Dallas, Texas, for the purpose of considering and acting upon proposals to (i)
approve and adopt the Merger Agreement, (ii) elect directors for the ensuing
year, (iii) change the domicile of USA Waste from Oklahoma to Delaware, (iv)
provide for a classified Board of Directors, (v) increase the number of
authorized shares of USA Waste Common Stock, (vi) increase the number of shares
that may be issued under the USA Waste 1993 Stock Incentive Plan and (vii)
ratify the appointment of USA Waste's auditors for the ensuing year. The
Chambers Special Meeting will be held at 10:00 a.m., Dallas, Texas time on June
22, 1995, at The Grand Kempinski-Dallas Hotel, 15201 Dallas Parkway, Dallas,
Texas, for the sole purpose of approving and adopting the Merger Agreement.
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<PAGE> 15
Only those shareholders of USA Waste and stockholders of Chambers of record
at the close of business on May 5, 1995 (the "Record Date"), are entitled to
notice of, and to vote at, the USA Waste Annual Meeting and the Chambers Special
Meeting, respectively.
Pursuant to the rules of the NYSE, approval and adoption of the Merger
Agreement require the affirmative vote of the holders of a majority of the
shares of USA Waste Common Stock voted, in person or by proxy, at the USA Waste
Annual Meeting, provided that the total vote cast on the proposal represents a
majority of the shares entitled to vote thereon. At the close of business on the
Record Date, there were 22,967,256 shares of USA Waste Common Stock outstanding
and entitled to vote at the USA Waste Annual Meeting. All executive officers and
directors of USA Waste who are shareholders of USA Waste, who collectively have
the right to vote approximately 2,958,500 shares of USA Common Stock,
representing approximately 12.9% of the shares outstanding as of the Record
Date, have indicated to USA Waste that they intend to vote the shares of USA
Waste Common Stock over which they have voting control in favor of the Merger
Agreement. See "The Meetings -- Vote Required for Approval."
Pursuant to Delaware law and the terms of the Certificate of Incorporation
of Chambers, approval and adoption of the Merger Agreement require the
affirmative vote of a majority of the votes to which holders of shares of
Chambers Common Stock and Chambers Class A Common Stock outstanding on the
Record Date are entitled, voting together as a single class. At the close of
business on the Record Date, there were 15,439,668 shares of Chambers Common
Stock and 51,349,459 shares of Chambers Class A Common Stock outstanding and
entitled to vote at the Chambers Special Meeting. Holders of Chambers Common
Stock are entitled to ten votes per share and holders of Chambers Class A Common
Stock are entitled to one vote per share. The executive officers and directors
of Chambers who are stockholders of Chambers and certain principal stockholders
of Chambers, who collectively have the right to vote approximately 13,478,850
shares of Chambers Common Stock and 11,706,980 shares of Chambers Class A Common
Stock, representing approximately 71.2% of the votes outstanding as of the
Record Date, have indicated to Chambers that they intend to vote such shares in
favor of the Merger Agreement. The affirmative vote of such persons would be
sufficient to approve the Merger Agreement. See "The Meetings -- Vote Required
for Approval."
THE MERGER
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Board of Directors of USA Waste has approved the Merger Agreement and
has directed that it be submitted to the shareholders of USA Waste. The Board of
Directors of USA Waste unanimously recommends that the shareholders of USA Waste
approve and adopt the Merger Agreement. See "The Merger and Related
Transactions -- Background of the Merger," "-- USA Waste's Reasons for the
Merger" and "-- Recommendation of the Board of Directors of USA Waste." In
considering the recommendation of the USA Waste Board of Directors with respect
to the Merger, USA Waste shareholders should be aware that certain officers and
directors of USA Waste have employment agreements that may require severance
payments upon a change of control such as the Merger. See "The Merger and
Related Transactions -- Conflicts of Interest."
The Board of Directors of Chambers has approved the Merger Agreement and
has directed that it be submitted to the stockholders of Chambers. The Board of
Directors of Chambers unanimously recommends that the stockholders of Chambers
approve and adopt the Merger Agreement. See "The Merger and Related
Transactions -- Background of the Merger," "-- Chambers' Reasons for the Merger"
and "-- Recommendation of the Board of Directors of Chambers." In considering
the recommendation of the Chambers' Board of Directors with respect to the
Merger, Chambers stockholders should be aware that certain officers and
directors of Chambers have direct or indirect interests in recommending the
Merger, apart from their interests as stockholders of Chambers, which are not
identical to those of unaffiliated stockholders of Chambers. See "The Merger and
Related Transactions -- Conflicts of Interest."
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<PAGE> 16
CONFLICTS OF INTEREST
Certain members of the Board of Directors and management of USA Waste and
Chambers have certain interests separate from their interests as stockholders.
Such conflicts of interest include: (i) certain officers of Chambers will become
directors and/or officers of USA Waste upon consummation of the Merger, (ii)
certain officers of Chambers and USA Waste have employment agreements that may
require severance payments in the event of a "change of control" such as the
Merger, (iii) upon consummation of the Merger, USA Waste has agreed to exercise
an option to purchase certain land from John G. Rangos, Sr. and certain other
affiliated persons, (iv) upon settlement of the Chambers shareholder litigation,
certain officers of Chambers, doing business as Synergy Associates, have agreed
to contribute a building, currently used as Chambers' headquarters, to Chambers,
resulting in the extinguishment of future lease obligations of Chambers and the
assumption by Chambers of the loan obligation of Synergy Associates as to which
Chambers is guarantor, and (v) certain executive officers of Chambers hold
options to acquire Chambers Class A Common Stock, which will become fully vested
and exercisable immediately into shares of USA Waste Common Stock upon
consummation of the Merger. For more information on such conflicts of interest,
see "The Merger and Related Transactions -- Conflicts of Interest."
OPINIONS OF FINANCIAL ADVISORS
On December 19, 1994, the Board of Directors of USA Waste received a verbal
opinion from Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to the
effect that the Exchange Ratio (as hereinafter defined) is fair to the
shareholders of USA Waste from a financial point of view, and on the date hereof
received a written opinion to such effect. On December 19, 1994, the Board of
Directors of Chambers received a written opinion from J.P. Morgan Securities
Inc. ("J.P. Morgan") to the effect that the consideration to be received by the
stockholders of Chambers in the Merger is fair from a financial point of view.
J.P. Morgan confirmed, as of the date hereof, its opinion of December 19, 1994.
The full text of the written opinions of DLJ and J.P. Morgan are attached to
this Joint Proxy Statement and Prospectus as Appendices B and C, respectively.
See "The Merger and Related Transactions -- Opinions of Financial Advisors."
CERTAIN TERMS OF THE MERGER
Exchange Ratio. At the Effective Time (as hereinafter defined),
Acquisition will merge with and into Chambers and Chambers will become a wholly
owned subsidiary of USA Waste. In the Merger, each outstanding share of Chambers
Common Stock and Chambers Class A Common Stock will be converted into .41667 of
a share of USA Waste Common Stock (the "Exchange Ratio").
Based upon the number of shares of common stock of USA Waste and Chambers
outstanding as of the Record Date, approximately 50.8 million shares of USA
Waste Common Stock will be outstanding immediately after the Effective Time, of
which approximately 27.8 million shares, representing 54.8% of the total, will
be held by former holders of Chambers Common Stock and Chambers Class A Common
Stock.
Fractional Shares. No fractional shares of USA Waste Common Stock will be
issued pursuant to the Merger. In lieu of such fractional shares, each holder
who would otherwise receive a fractional share will receive cash (without
interest) in an amount equal to the product of such fractional part of a share
of USA Waste Common Stock multiplied by the closing price of the USA Waste
Common Stock on the last trading day preceding the Effective Time.
Effective Time of the Merger. The Merger will become effective upon the
issuance of a certificate of merger by the Secretary of State of Delaware (the
"Effective Time"). Assuming the requisite shareholder approval of the Merger
Agreement is obtained, it is anticipated that the Effective Time of the Merger
will occur as soon as practicable following the Meetings. If all other
conditions to the Merger have not been satisfied prior to the Meetings, however,
it is expected that the Merger will occur as soon as practicable after such
conditions have been satisfied or waived.
Exchange of Chambers Common Stock Certificates. Promptly after
consummation of the Merger, The First National Bank of Boston (the "Exchange
Agent") will mail a letter of transmittal with instructions to
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<PAGE> 17
each holder of record of Chambers Common Stock and Chambers Class A Common Stock
for use in exchanging certificates representing shares of Chambers Common Stock
and Chambers Class A Common Stock for certificates representing shares of USA
Waste Common Stock and cash in lieu of any fractional shares. CERTIFICATES
SHOULD NOT BE SURRENDERED BY THE HOLDERS OF CHAMBERS COMMON STOCK AND CHAMBERS
CLASS A COMMON STOCK UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL FROM THE
EXCHANGE AGENT. See "The Plan of Merger and Terms of the Merger -- Manner and
Basis for Converting Shares."
Assumption of Chambers Options. Pursuant to the Merger Agreement and
immediately after the Effective Time, USA Waste will assume the obligations
under each outstanding option to purchase Chambers Class A Common Stock (a
"Chambers Option") that remains unexercised in whole or in part. Accordingly,
each Chambers Option will remain outstanding as an option to purchase, in place
of the shares of Chambers Class A Common Stock previously subject to such
Chambers Option, that number of shares of USA Waste Common Stock equal to the
product of the number of shares of Chambers Class A Common Stock subject to the
Chambers Option multiplied by the Exchange Ratio. The exercise price per share
of USA Waste Common Stock will be equal to the previous exercise price per share
under the Chambers Option divided by the Exchange Ratio. See "The Plan of Merger
and Terms of the Merger -- Chambers Options." Ten of the executive officers of
Chambers hold options to acquire 860,600 shares of Chambers Class A Common Stock
pursuant to the terms of certain stock option agreements, at exercise prices
ranging from $2.25 to $17.44. See "The Merger and Related
Transactions -- Conflicts of Interest."
Indemnification. The Merger Agreement provides that the officers,
directors, employees and agents of Chambers will be indemnified against certain
liabilities and costs, including those arising out of, relating to or in
connection with any action or omission occurring prior to the Effective Time or
arising out of or pertaining to the transactions contemplated by the Merger
Agreement. See "The Plan of Merger and Terms of the Merger -- Indemnification."
CONDITIONS TO THE MERGER
Certain Federal Income Tax Consequences. USA Waste has received an opinion
of its counsel to the effect that no gain or loss will be recognized by USA
Waste or Acquisition for federal income tax purposes as a result of consummation
of the Merger. Chambers has received an opinion of its counsel to the effect
that no gain or loss will be recognized for federal income tax purposes by
Chambers or holders of Chambers Common Stock or Chambers Class A Common Stock as
a result of consummation of the Merger, except for gain or loss attributable to
cash received in lieu of fractional shares. Receipt of these opinions is a
condition precedent to the consummation of the Merger. See "The Merger and
Related Transactions -- Certain Federal Income Tax Consequences."
Accounting Treatment. It is a condition precedent to the closing of the
Merger that USA Waste will receive a letter from Coopers & Lybrand L.L.P.,
independent public accountants, that the Merger will qualify as a "pooling of
interests" for accounting and financial reporting purposes. See "The Merger and
Related Transactions -- Accounting Treatment."
Certain Chambers Litigation. In 1992, Chambers and its affiliates became
defendants in a number of federal and state lawsuits arising from an
announcement of a change in Chambers' accounting method in March 1992 and a
subsequent $362 million reduction in retained earnings as of December 31, 1991.
In addition, in 1992, the Commission initiated an investigation with respect to
Chambers' accounting method and the accuracy of its financial statements and
into the possibility that persons or entities had traded in Chambers' securities
on the basis of inside information prior to the announcement of the change in
accounting policies. On February 24, 1995, Chambers and shareholder
representatives executed definitive agreements providing for the settlement and
dismissal of the shareholder litigation and the payment of up to $85.9 million
by Chambers. On March 22, 1995, the court granted preliminary approval of the
settlements and the distribution of notices to Chambers' stockholders and the
plaintiff class members regarding the settlements. A hearing upon the fairness,
reasonableness and adequacy of the proposed settlements has been scheduled for
May 19, 1995. In connection with the Commission investigation, on May 9, 1995,
the Commission announced the filing of a complaint against Chambers alleging
that Chambers violated the antifraud provisions of the
4
<PAGE> 18
Securities Act and the antifraud, reporting, internal controls and recordkeeping
provisions of the Exchange Act. Chambers simultaneously consented, without
admitting or denying the allegations, to the entry of an order enjoining it from
violating certain provisions of the Securities Act and the Exchange Act and
requiring Chambers to pay a civil penalty of $500,000. For a description of the
lawsuits, the settlement agreements and the Commission investigation, see
"Description of Chambers -- Legal Proceedings." Consummation of the Merger is
conditioned upon the shareholder litigation having been fully and irrevocably
settled and receipt of approval of the Commission to a consent order with
respect to the Commission's investigation as to Chambers' accounting method and
the accuracy of its financial statements upon terms and conditions satisfactory
to USA Waste. See "The Merger and Related Transactions -- Settlement of Certain
Chambers Litigation."
Governmental and Regulatory Approvals. Consummation of the Merger is
conditioned upon the expiration or termination of the waiting period applicable
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). On March 1, 1995, and March 10, 1995, USA Waste and Chambers,
respectively, filed notification reports under the HSR Act with the Federal
Trade Commission and the Antitrust Division of the Department of Justice. The
waiting period expired on April 9, 1995. See "The Merger and Related
Transactions -- Government and Regulatory Approvals." USA Waste and Chambers are
aware of no other governmental or regulatory approvals required for consummation
of the Merger, other than as required to comply with applicable federal and
state securities laws.
No Injunction Preventing Merger. Consummation of the Merger is subject to
the condition that no injunction or decree by any federal or state court that
prevents the consummation of the Merger shall have been issued and remain in
effect. Between December 1994 and February 1995, three class action lawsuits
naming Chambers and its officers and directors and USA Waste and Envirofil, Inc.
("Envirofil"), a subsidiary of USA Waste, which was originally a party to the
Merger Agreement in place of Acquisition, as defendants were filed in the State
of Delaware seeking an injunction to the consummation of the Merger. Counsel for
the parties have engaged in settlement discussions and, based thereon, USA Waste
and Chambers anticipate a definitive agreement, subject to court approval, will
be finalized before the USA Waste Annual Meeting and the Chambers Special
Meeting. See "Description of USA Waste -- Legal Proceedings" and "Description of
Chambers -- Legal Proceedings."
Other Conditions to the Merger. In addition to the approval and adoption of
the Merger Agreement by the requisite votes of USA Waste shareholders and
Chambers stockholders and the satisfaction of the conditions described above,
the respective obligations of USA Waste and Chambers to effect the Merger are
subject to the satisfaction or waiver, where permissible, of certain other
conditions, including, without limitation, (i) the shares of USA Waste Common
Stock issuable in the Merger shall have been authorized for listing on the NYSE,
subject to official notice of issuance; (ii) receipt of letters from each of
Coopers & Lybrand L.L.P. and Deloitte & Touche LLP, certified public
accountants, to USA Waste and Chambers' respectively, with respect to certain
financial information included in this Joint Proxy Statement and Prospectus;
(iii) the consents of lenders of USA Waste and Chambers or the refinancing of
Chambers' outstanding bank indebtedness; and (iv) the opinions of the financial
advisors shall not have been withdrawn. With respect to the required consents of
lenders or refinancing, USA Waste and Chambers currently intend to obtain a new
credit facility effective upon consummation of the Merger pursuant to which the
outstanding indebtedness of each company would be refinanced. There can be no
assurance that such a facility will be obtained or that all of the conditions
set forth in the Merger Agreement will be satisfied. See "The Plan of Merger and
Terms of the Merger -- Conditions to the Merger."
NO SOLICITATION
The Merger Agreement provides that neither Chambers nor USA Waste will
initiate, solicit, negotiate, encourage, or provide confidential information to
facilitate, and each of Chambers and USA Waste will (i) cause any officer,
director, or employee of, or any attorney, accountant, or other agent retained
by it and (ii) use its reasonable best efforts to cause any financial advisor or
investment banker retained by it, not to initiate, solicit, negotiate,
encourage, or provide non-public or confidential information to facilitate, any
proposal or offer to acquire all or any substantial part of the business and
properties or any capital stock of Chambers or USA Waste. Notwithstanding the
foregoing, Chambers or USA Waste may, under certain
5
<PAGE> 19
circumstances, furnish confidential or non-public information concerning its
business, properties, or assets in response to an unsolicited request therefor.
Chambers or USA Waste may enter into a definitive agreement for such acquisition
with a potential acquiror with which it is permitted to negotiate, but only if
(i) its board of directors has duly determined that such transaction would yield
a materially higher value to its stockholders than the Merger and that execution
of such definitive agreement is in the best interests of its stockholders, (ii)
at least ten business days prior to the execution of such definitive agreement,
it has furnished the other party with a copy of such definitive agreement, and
(iii) such other party has failed within such ten-day period to offer to amend
the terms of the Merger Agreement in order that the Merger would yield a value
to such party's stockholders at least equal to the third party acquisition
transaction. See "The Merger Agreement and Terms of the Merger -- No
Solicitation of Acquisition Transactions."
TERMINATION OR AMENDMENT OF MERGER AGREEMENT
Termination. The Merger Agreement may be terminated under certain
circumstances, including (a) with the mutual consent of USA Waste and Chambers
or (b) either by USA Waste or Chambers at any time prior to the consummation of
the Merger (i) if the Merger is not completed by July 31, 1995 for reasons other
than delay on the part of the party requesting termination (the "Terminating
Party") or any of its 5% stockholders or any of their affiliates or associates,
(ii) if the Merger is enjoined by a final, unappealable court order not entered
into at the request or with the support of the Terminating Party or any of its
5% stockholders or any of their affiliates or associates, (iii) if (x) the
Terminating Party receives an offer from any third party with respect to a
merger, sale of substantial assets or other business combination, (y) the Board
of Directors of the Terminating Party determines, in good faith and after
consultation with an independent financial advisor, that such offer would yield
a materially higher value for the Terminating Party or its stockholders than the
Merger, and (z) the other party fails, within ten business days after notice, to
match such offer, (iv) if (x) a tender offer or exchange offer is commenced by a
third party for all of the outstanding shares of the Terminating Party's stock,
(y) the Board of Directors of the Terminating Party determines, in good faith
and after consultation with an independent financial advisor, that such offer
would yield a materially higher value for the Terminating Party or its
stockholders than the Merger, and (z) the other party fails, within ten business
days after notice of such determination and of the terms of the offer, to match
such offer; or (v) if the party other than the Terminating Party (x) fails to
perform any material covenant contained in the Merger Agreement in any material
respect and (y) does not so perform within 30 days after the Terminating Party
delivers written notice of the alleged failure. As of the date of this Joint
Proxy Statement and Prospectus, neither party has received an acquisition offer
of the nature described in clause (iii) above nor is either party aware of the
commencement of a tender offer or exchange offer of the nature described in
clause (iv) above.
Amendment. The Merger Agreement may be amended or supplemented by an
instrument in writing signed on behalf of each party and in compliance with
applicable law. Such amendment may occur at any time, including after the Merger
Agreement has been approved by the shareholders of USA Waste and the
stockholders of Chambers at the Meetings. See "The Plan of Merger and Terms of
the Merger -- Termination or Amendment."
Termination Fees; Expenses. Under certain circumstances, USA Waste or
Chambers may be required to pay the other a fee and to reimburse the other for
its expenses upon termination of the Merger Agreement. Certain expenses incurred
in connection with this Joint Proxy Statement and Prospectus will be shared
equally by USA Waste and Chambers. All other costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such expenses, whether or not the Merger is
consummated. See "The Plan of Merger and Terms of the Merger -- Termination
Fees" and " -- Expenses."
SHAREHOLDERS AGREEMENT
Certain of the principal shareholders of USA Waste and Chambers will enter
into a Shareholders Agreement (the "Shareholders Agreement") at the Effective
Time of the Merger. The Shareholders Agreement will provide, among other things,
for certain matters to require the approval of a two-thirds vote of the Board of
Directors and for certain members of the Rangos family, principal shareholders
of Chambers
6
<PAGE> 20
("Rangos Shareholders"), to participate in the naming of members of USA Waste's
Board of Directors and Executive Committee. The Shareholders Agreement will
remain in effect until the aggregate number of shares of USA Waste Common Stock
beneficially held by the Rangos Shareholders and their affiliates is less than
5% of the outstanding shares of USA Waste Common Stock. Pursuant to the
Shareholders Agreement, USA Waste and Messrs. Moorehead and Drury will agree to
use their best efforts to cause two representatives of the Rangos Shareholders
(who initially will be John G. Rangos, Sr. and Alexander W. Rangos) to be
appointed as directors of USA Waste. In addition, during the term of the
Shareholders Agreement, USA Waste, Messrs. Moorehead and Drury, and the Rangos
Shareholders will use their best efforts to cause the Board of Directors to
include at all times (in addition to the two directors designated by the Rangos
Shareholders) four independent directors who are approved by at least four
members of the Executive Committee of the Board of Directors. The Shareholders
Agreement will also provide that USA Waste and Messrs. Moorehead and Drury will
use their best efforts to establish and maintain an Executive Committee of the
Board of Directors consisting of five directors and to cause the Executive
Committee to include the two directors designated by the Rangos Shareholders. It
is currently anticipated that the four independent directors to be approved by
the Executive Committee will be George L. Ball, Richard J. Heckmann, William E.
Moffett and Peter J. Gibbons. See "Election of USA Waste Directors -- Nominees
for Election as Directors."
Following the Merger, John E. Drury will be Chairman of USA Waste, Donald
F. Moorehead, Jr. and John G. Rangos, Sr. will become Vice Chairmen, and
Alexander W. Rangos will become Executive Vice President for Landfill
Development. See "The Plan of Merger and Terms of the Merger -- Conduct of the
Business of the Combined Companies Following the Merger."
NO APPRAISAL RIGHTS
Neither Oklahoma law nor Delaware law requires that holders of USA Waste
Common Stock or Chambers Common Stock or Chambers Class A Common Stock who
object to the Merger and who vote against or abstain from voting in favor of the
Merger be afforded any appraisal rights or the right to receive cash for their
shares. Neither USA Waste nor Chambers intends to make available any such rights
to its shareholders or stockholders.
CONDITIONS TO ADOPTION OF THE MERGER PROPOSAL
In addition to the Merger proposal, shareholders of USA Waste are being
asked to approve several other proposals, including an increase in authorized
shares of USA Waste Common Stock from 50,000,000 to 150,000,000. Adoption of the
Merger proposal is conditioned upon approval of the increase in authorized
shares of USA Waste Common Stock by the USA Waste shareholders. See "-- Other
Proposals to be Presented at the USA Waste Annual Meeting." Adoption of the
proposal approving an increase in authorized shares is also conditioned upon
approval of the Merger.
STOCKHOLDERS' COMPARATIVE RIGHTS
The rights of stockholders of Chambers are currently governed by Delaware
law, Chambers' Certificate of Incorporation, as amended, and Chambers' Bylaws,
as amended. Approval of the reincorporation proposal by USA Waste shareholders
will change USA Waste's domicile from Oklahoma to Delaware through a merger (the
"Reincorporation Merger") of USA Waste into USA Delaware. The merger agreement
governing the Reincorporation Merger permits the Board of Directors of USA Waste
or USA Delaware to abandon the Reincorporation Merger. Assuming that the
Reincorporation Merger is consummated, the rights of USA Waste's shareholders
after the Merger (including those persons who were stockholders in Chambers
prior to the Merger) will be governed by Delaware law and the Certificate of
Incorporation and Bylaws of USA Delaware. If the Reincorporation Merger is not
approved or is abandoned, the rights of USA Waste's shareholders after the
Merger (including those persons who were stockholders in Chambers prior to the
Merger) will be governed by Oklahoma law, and USA Waste's Certificate of
Incorporation and USA Waste's Bylaws, as amended. In addition, all holders of
USA Waste's Common Stock hold shares of a single class, whereas Chambers
maintains a two class equity structure. As a result, holders of Chambers Class A
Common Stock will lose their preferential dividend rights and the exclusive
right to elect one-fourth of the number (or
7
<PAGE> 21
next higher whole number) of directors while participating in the election of
the remaining directors; holders of Chambers Common Stock will lose their
preferential voting rights upon consummation of the Merger. See "Comparative
Rights of Stockholders of USA Waste and Chambers."
MARKET PRICE DATA
USA Waste Common Stock is traded on the NYSE under the symbol "UW." Prior
to July 20, 1993, USA Waste Common Stock was quoted on the Nasdaq National
Market ("Nasdaq"). Chambers Common Stock and Chambers Class A Common Stock are
traded on the AMEX under the symbols "CDVB" and "CDVA," respectively. The
following table sets forth the range of high and low closing sale prices for USA
Waste Common Stock as reported on the NYSE and Chambers Common Stock and
Chambers Class A Common Stock as reported on the AMEX for the calendar quarters
indicated. For periods prior to July 20, 1993, prices indicated for USA Waste
Common Stock reflect high and low closing sales prices as quoted on the Nasdaq.
<TABLE>
<CAPTION>
CHAMBERS
---------------------------------------
CLASS A COMMON
USA WASTE COMMON STOCK STOCK
--------------- --------------- -------------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1993
First Quarter........................ $14.50 $13.25 $ 7.38 $ 4.69 $ 7.25 $ 4.69
Second Quarter....................... 13.75 11.75 5.00 3.19 4.81 3.13
Third Quarter........................ 15.00 11.50 5.25 3.69 5.38 3.75
Fourth Quarter....................... 12.50 9.75 4.50 3.69 4.50 3.56
1994
First Quarter........................ $15.00 $11.38 $ 5.50 $ 3.50 $ 5.50 $ 3.50
Second Quarter....................... 13.38 10.58 4.00 2.50 4.13 2.00
Third Quarter........................ 15.13 11.50 2.88 2.06 2.75 1.81
Fourth Quarter....................... 15.13 11.00 4.25 2.00 4.25 1.81
1995
First Quarter........................ $12.25 $10.13 $ 4.69 $ 3.63 $ 4.75 $ 3.63
Second Quarter (through May 8)....... 15.50 11.50 5.75 4.44 5.88 4.44
</TABLE>
On November 25, 1994, the last trading day prior to announcement by USA
Waste and Chambers that they had reached an agreement concerning the Merger, the
closing sale price of USA Waste Common Stock as reported on the NYSE was $14.00
per share and the closing sale prices of Chambers Common Stock and Chambers
Class A Common Stock as reported on the AMEX were $3.13 and $3.00 per share,
respectively. The equivalent per share price of Chambers Common Stock and
Chambers Class A Common Stock on November 25, 1994, calculated by multiplying
the closing sale price of USA Waste Common Stock on the same date by the
Exchange Ratio, was $5.83.
On May 8, 1995, the closing sale price of USA Waste Common Stock as
reported on the NYSE was $15.50 per share; and the closing sale prices of
Chambers Common Stock and Chambers Class A Common Stock on the AMEX were $5.72
and $5.75, respectively. Following the Merger, USA Waste Common Stock will
continue to be traded on the NYSE under the symbol "UW", and the listing of
Chambers Common Stock and Chambers Class A Common Stock on the AMEX will be
terminated.
8
<PAGE> 22
SUMMARY FINANCIAL INFORMATION
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following summary historical consolidated financial data of USA Waste
and Chambers for each of the three years in the period ended December 31, 1994,
have been derived from their respective historical audited consolidated
financial statements. The historical financial data is not necessarily
indicative of results to be expected after the Merger is consummated. The
financial data should be read in conjunction with the separate audited
consolidated financial statements and the notes thereto and with Management's
Discussion and Analysis of Financial Condition and Results of Operations of USA
Waste and Chambers located elsewhere herein.
USA WASTE SERVICES, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1992 1993 1994
-------- -------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Operating revenues.................................................... $ 57,049 $ 93,753 $176,235
-------- -------- --------
Costs and expenses:
Operating........................................................... 28,128 49,251 101,069
General and administrative.......................................... 11,612 17,497 23,463
Nonrecurring charges................................................ 6,756 923 3,782
Depreciation and amortization....................................... 5,776 10,588 18,785
-------- -------- --------
52,272 78,229 147,099
-------- -------- --------
Income from operations................................................ 4,777 15,524 29,136
-------- -------- --------
Other income (expense):
Interest expense.................................................... (4,212) (6,856) (10,385)
Interest income..................................................... 610 1,113 591
Other, net.......................................................... 15 822 2,249
-------- -------- --------
(3,587) (4,921) (7,545)
-------- -------- --------
Income before income taxes............................................ 1,190 10,603 21,591
Income tax provision.................................................. 3,955 5,413 7,760
-------- -------- --------
Income (loss) from continuing operations.............................. (2,765) 5,190 13,831
Gain on discontinued operations, net of income taxes.................. 897 -- --
Extraordinary income from debt forgiveness, net of income taxes....... 10,066 -- --
-------- -------- --------
Net income............................................................ 8,198 5,190 13,831
Preferred dividends................................................... 152 582 565
-------- -------- --------
Income available to common shareholders............................... $ 8,046 $ 4,608 $ 13,266
======== ======== ========
Income (loss) from continuing operations per common share............. $ (0.20) $ 0.26 $ 0.61
======== ======== ========
Income per common share............................................... $ 0.54 $ 0.26 $ 0.61
======== ======== ========
Weighted average number of common and common equivalent shares........ 14,878 18,056 21,842
======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD)(1):
Working capital (deficit)............................................. $ 8,828 $ (635) $ 8,619
Intangible assets, net................................................ 26,645 49,631 87,680
Total assets.......................................................... 141,466 238,819 323,167
Long-term debt, including current maturities.......................... 58,505 115,174 155,733
Stockholders' equity.................................................. 56,677 78,081 107,986
</TABLE>
- ---------------
(1) Certain statement of operations and balance sheet data have been restated
to include certain acquisitions accounted for as poolings of interests. See
Note 2 to the Consolidated Financial Statements of USA Waste, located
elsewhere herein.
9
<PAGE> 23
CHAMBERS DEVELOPMENT COMPANY, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1992 1993 1994
-------- -------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues............................................................. $294,310 $288,481 $257,989
-------- -------- --------
Costs and expenses:
Operating.......................................................... 206,761 194,355 179,542
General and administrative......................................... 37,853 23,210 24,796
Depreciation and amortization...................................... 38,363 41,764 37,568
Unusual items -- operations........................................ 44,291 (11,851) 8,863
-------- -------- --------
327,268 247,478 250,769
-------- -------- --------
Income (loss) from operations........................................ (32,958) 41,003 7,220
-------- -------- --------
Other income (expense):
Unusual items -- shareholder litigation settlement and other
litigation
related costs.................................................... (10,853) (5,500) (79,400)
Interest expense................................................... (31,628) (29,163) (23,843)
Interest income.................................................... 6,132 2,663 2,220
Other, net......................................................... 377 900 (372)
-------- -------- --------
(35,972) (31,100) (101,395)
-------- -------- --------
Income (loss) before income taxes.................................... (68,930) 9,903 (94,175)
Income tax provision (benefit)....................................... 1,325 1,600 (3,931)
-------- -------- --------
Income (loss) from continuing operations............................. (70,255) 8,303 (90,244)
Discontinued operations:
Loss from operations............................................... (1,407) -- --
Gain on sale of assets............................................. 939 -- --
-------- -------- --------
Net income (loss).................................................... $(70,723) $ 8,303 $(90,244)
======== ======== ========
Income (loss) from continuing operations per common share............ $ (1.05) $ .12 $ (1.35)
======== ======== ========
Income (loss) per common share....................................... $ (1.06) $ .12 $ (1.35)
======== ======== ========
Weighted average number of common and common equivalent shares....... 66,788 66,788 66,789
======== ======== ========
BALANCE SHEET DATA (at end of period):
Working capital (deficit)............................................ $ 52,631 $ 30,067 $(12,220)
Intangible assets, net............................................... 18,404 21,995 15,811
Total assets......................................................... 592,790 533,622 488,498
Long-term debt, including current maturities......................... 352,836 291,551 257,481
Stockholders' equity................................................. 145,870 154,173 63,932
</TABLE>
- ---------------
(1) Certain reclassifications have been made to the historical financial
statements of Chambers to conform to 1994 classifications.
10
<PAGE> 24
SUMMARY COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following summary combined historical unaudited pro forma condensed
financial information of USA Waste and Chambers gives effect to the Merger under
the "pooling of interests" method of accounting as if the Merger had been
consummated as of the beginning of the periods presented. This pro forma
information is not necessarily indicative of the results that would have been
obtained if the Merger had been consummated at the beginning of the periods
presented and should not be construed as representative of future operating
results, nor does it give effect to adjustments for certain nonrecurring and
other items considered by USA Waste and Chambers in evaluating the Merger. For a
description of such adjustments and their impact on the pro forma data, see
"Supplemental Information Relating to Pro Forma Statement of Operations for the
Year Ended December 31, 1994."
USA WASTE AND CHAMBERS COMBINED HISTORICAL
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1992 1993 1994
-------- -------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATIONS DATA:
Operating revenues........................................ $351,359 $382,234 $ 434,224
-------- -------- ---------
Costs and expenses:
Operating............................................... 208,928 217,345 257,370
General and administrative.............................. 75,426 66,968 71,500
Merger costs............................................ -- -- 3,782
Nonrecurring expenses................................... 6,756 923 --
Unusual items -- operations............................. 44,291 1,749 8,863
Depreciation and amortization........................... 44,139 52,222 56,139
-------- -------- ---------
379,540 339,207 397,654
-------- -------- ---------
Income (loss) from operations............................. (28,181) 43,027 36,570 (1)
-------- -------- ---------
Other income (expense):
Unusual items -- shareholder litigation settlement and
other litigation related costs....................... (10,853) (5,500) (79,400)
Interest expense........................................ (35,840) (35,975) (34,058)
Interest income......................................... 6,742 3,732 2,641
Other, net.............................................. 392 1,722 1,877
-------- -------- ---------
(39,559) (36,021) (108,940)
-------- -------- ---------
Income (loss) before income tax provision................. (67,740) 7,006 (72,370)
Income tax provision...................................... 479 6,018 3,908
-------- -------- ---------
Income (loss) from continuing operations.................. $(68,219) $ 988 $ (76,278)(1)
======== ======== =========
Income (loss) from continuing operations per common
share................................................... $ (1.60) $ 0.01 $ (1.55)(1)
======== ======== =========
Weighted average number of common and common equivalent
shares.................................................. 42,707 45,885 49,671
======== ======== =========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)................................. $ (6,101)
Intangible assets, net.................................... 93,416
Total assets.............................................. 785,616
Long-term debt, including current maturities.............. 410,714
Stockholders' equity...................................... 164,349
</TABLE>
- ---------------
(1) See "Supplemental Information Relating to Pro Forma Statement of Operations
for the Year Ended December 31, 1994" for the effect of adjustments for
certain nonrecurring and other items.
11
<PAGE> 25
SUPPLEMENTAL INFORMATION RELATING TO PRO FORMA STATEMENT OF OPERATIONS
The combined historical unaudited pro forma condensed financial information
for the year ended December 31, 1994 included elsewhere herein gives effect to
certain pro forma adjustments as described in the notes to such information. In
evaluating the Merger, the respective managements of USA Waste and Chambers
considered the impact of certain cost and expense savings and other economic
benefits that are expected to be realized as a result of the Merger. These
adjustments do not include additional cost reductions relating to landfill and
collection operations or additional revenues that may result from volume or
price increases.
Application of the supplemental adjustments described below to the combined
historical unaudited pro forma statement of operations for the year ended
December 31, 1994 would result in the following (in thousands, except per share
amount):
<TABLE>
<S> <C>
Operating revenues........................................................ $434,224
Income from operations.................................................... 69,097
Income from continuing operations......................................... 36,976
Income from continuing operations per common share........................ 0.73
</TABLE>
The adjustments to the pro forma financial information give effect to the
following:
- Certain cost savings and efficiencies of approximately $16 million that
may have been achieved if the combination of USA Waste and Chambers had
occurred as of January 1, 1994. These cost savings and efficiencies are
directly attributable or related to the Merger and are expected to have a
continuing impact on the combined company.
- Removal of shareholder litigation settlement and other litigation related
costs of approximately $79.4 million.
- Removal of approximately $3.8 million in costs incurred in connection
with the merger of USA Waste and Envirofil on May 26, 1994.
- Reduction of (i) interest expense as a result of the assumed reduction in
long-term debt offset by additional interest expense on the $79.4 million
shareholder litigation settlement and other litigation related costs,
(ii) interest income as a result of using available cash and investment
balances to reduce outstanding debt, and (iii) letter of credit fees and
interest costs due to the enhanced credit terms that are expected to be
available to the combined company.
- Removal of other unusual and nonrecurring charges in Chambers' operations
of approximately $12.7 million.
- Reduction of the provision for income taxes to reflect the benefit from
expected utilization of the Chambers' net operating loss carryforwards.
As of January 1, 1995, USA Waste changed the useful life of the excess of
cost over net assets of acquired businesses from 25 years to 40 years to more
appropriately reflect the estimated periods during which the benefit of the
assets will be realized. This change in accounting estimate is expected to have
the effect of reducing amortization expense by approximately $1,350,000 in 1995
on a combined basis.
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth (a) the historical income (loss) from
continuing operations per common share and the historical book value per share
of USA Waste Common Stock; (b) the historical income (loss) from continuing
operations per common share and the historical book value per share of Chambers
Common Stock and Chambers Class A Common Stock; (c) the combined historical
unaudited pro forma income (loss) from continuing operations per common share
and the unaudited pro forma book value per share data of USA Waste Common Stock
after giving effect to the Merger on a pooling of interests basis with Chambers;
and (d) the Chambers equivalent combined historical unaudited pro forma income
(loss) from continuing operations per common share and the unaudited pro forma
book value per share attributable to .41667 of a share of USA Waste Common Stock
that will be received by Chambers stockholders for each share of Chambers Common
Stock and Chambers Class A Common Stock. The information presented in the table
should be read in conjunction with the combined historical unaudited pro forma
financial statements and the
12
<PAGE> 26
separate historical consolidated financial statements of USA Waste and Chambers
and the notes thereto appearing elsewhere herein. See "USA Waste and Chambers
Combined Historical Unaudited Pro Forma Condensed Financial Statements."
<TABLE>
<CAPTION>
PRO FORMA
----------------------
CHAMBERS
USA WASTE CHAMBERS COMBINED EQUIVALENT
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
Income (loss) from continuing operations per common
share for the years ended December 31:
1994.......................................... $ 0.61 $(1.35) $(1.55)(1) $(0.65)
1993.......................................... 0.26 0.12 0.01 0.00
1992.......................................... (0.20) (1.05) (1.60) (0.67)
Book value per share at December 31, 1994.......... 4.78 0.96 3.26 1.36
</TABLE>
- ---------------
(1) Does not give effect to adjustments for certain nonrecurring and other items
described elsewhere herein. See "Supplemental Information Relating to Pro
Forma Statement of Operations for the Year Ended December 31, 1994." If
such adjustments were applied to the combined pro forma information
reflected above, income from continuing operations per common share for the
year ended December 31, 1994 would have been $0.73.
OTHER PROPOSALS TO BE PRESENTED AT THE USA WASTE ANNUAL MEETING
At the USA Waste Annual Meeting, shareholders of USA Waste will also be
asked to consider and act upon the following proposals:
Proposal No. 2. To elect nine members to the Board of Directors of USA
Waste for the ensuing year; provided, however, that if the Merger is approved,
upon consummation of the Merger, four members of such Board will resign and four
new members currently serving on the Chambers Board of Directors will fill such
vacancies. See "Election of USA Waste Directors -- Nominees for Election as
Directors". THE BOARD OF DIRECTORS OF USA WASTE UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF USA WASTE VOTE FOR THE NOMINEES FOR DIRECTORS DESCRIBED HEREIN.
Proposal No. 3. To approve a change in the domicile of USA Waste from
Oklahoma to Delaware (the "Reincorporation") by means of a merger of USA Waste
into USA Delaware. THE BOARD OF DIRECTORS OF USA WASTE UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF USA WASTE VOTE FOR THE REINCORPORATION.
Proposal No. 4. To approve an amendment to the Certificate of
Incorporation of USA Waste that provides (i) for a classified Board of Directors
consisting of three classes, as nearly equal in number as possible; (ii) for
vacancies in the Board of Directors to be filled by a majority vote of directors
then in office; (iii) for removal of directors with or without cause only by the
affirmative vote of either a majority of the Board of Directors or holders of at
least 66 2/3% of USA Waste's outstanding voting shares; and (iv) that the
foregoing provisions may be amended, altered or repealed only by the affirmative
vote of the holders of at least 66 2/3% of USA Waste's outstanding voting shares
(collectively, the "Board Classification Proposals"). THE BOARD OF DIRECTORS OF
USA WASTE UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF USA WASTE VOTE FOR THE
BOARD CLASSIFICATION PROPOSALS.
Proposal No. 5. To approve an amendment to the Certificate of
Incorporation of USA Waste to increase the number of authorized shares of USA
Waste Common Stock from 50,000,000 shares to 150,000,000 shares. THE BOARD OF
DIRECTORS OF USA WASTE UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF USA WASTE
VOTE FOR THE INCREASE IN AUTHORIZED SHARES.
Proposal No. 6. To approve an amendment to the 1993 Stock Incentive Plan
of USA Waste to increase the aggregate number of shares of USA Waste Common
Stock that may be issued under such Plan from 1,000,000 to 4,000,000. THE BOARD
OF DIRECTORS OF USA WASTE UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF USA
WASTE VOTE FOR THE INCREASE.
Proposal No. 7. To ratify the appointment of Coopers & Lybrand L.L.P. as
certified public accountants to audit USA Waste's financial statements for
fiscal 1995. See "Ratification of Appointment of Auditors." THE BOARD OF
DIRECTORS OF USA WASTE UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF USA WASTE
VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P.
13
<PAGE> 27
RISK FACTORS
In addition to the other information set forth in this Joint Proxy
Statement and Prospectus, the following factors should be considered by the USA
Waste shareholders and the Chambers stockholders before voting on the proposals
herein.
RELIANCE ON FUTURE ACQUISITIONS FOR GROWTH
USA Waste's strategy envisions that a significant part of its future growth
will come from businesses yet to be acquired. There can be no assurance that USA
Waste will be able to successfully identify suitable acquisition candidates,
successfully negotiate the acquisition of such businesses, or obtain any
necessary financing.
LIMITATION ON USE OF NET OPERATING LOSS CARRYFORWARDS
After consummation of the Merger, USA Waste intends to utilize Chambers'
net operating loss carryforwards to offset future income for tax purposes. USA
Waste and Chambers believe that there will be no "ownership change" within the
meaning of Section 382 of the Code in connection with the Merger; however, there
can be no assurance in this matter. Furthermore, the Merger will result in a
significant shift among Chambers' 5% stockholders, which increases the risk that
utilization of the net operating loss carryforwards may be limited on an annual
basis in the future. If an ownership change is deemed to have occurred in
connection with the Merger, or in the future, the ability of the combined
companies to utilize net operating loss carryforwards may be subject to yearly
limitations. See "The Merger and Related Transactions -- Net Operating Loss
Carryforwards."
HIGH DEGREE OF LEVERAGE
After the Merger, USA Waste will have a substantial amount of debt in its
capital structure. The long-term debt of the combined entity on a pro forma
basis as of December 31, 1994 would have been $410.7 million. Future unforeseen
events may prevent USA Waste from fulfilling its obligations under its various
debt agreements or may limit USA Waste's ability to incur additional
indebtedness. See "Management's Discussion and Analysis of USA Waste's Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
OPERATIONS COULD BE ADVERSELY AFFECTED BY GOVERNMENT REGULATION AND POTENTIAL
LITIGATION
USA Waste's operations are subject to, and substantially affected by,
extensive federal, state and local laws, regulations, orders, and permits, which
govern environmental protection, health and safety, zoning and other matters.
These regulations may impose restrictions on USA Waste's operations that could
limit or reduce USA Waste's revenues and earnings, such as limiting the
expansion of disposal facilities, limiting or banning the disposal of
out-of-state waste or certain categories of waste, or mandating the disposal of
local refuse. Because of heightened public concern, companies in the waste
management services business, including USA Waste, in the normal course of
business may be expected to become subject to judicial and administrative
proceedings involving federal, state or local agencies. These governmental
agencies may seek to impose fines on USA Waste or to revoke or deny renewal of
USA Waste's operating permits or licenses for violations of environmental laws
or regulations or to require USA Waste to remediate environmental problems at
its sites relating to waste disposed of by USA Waste or its predecessors, or
resulting from its transportation and collection operations, all of which could
have a material adverse effect on USA Waste. USA Waste may also be subject to
actions brought by individuals or community groups in connection with the
permitting or licensing of its operations, any alleged violations of such
permits and licenses, or other matters. See "Description of USA
Waste -- Regulation."
POTENTIAL LIABILITY FOR ENVIRONMENTAL DAMAGE
USA Waste is subject to liability for any environmental damage its
landfills, transfer stations, and collection operations may cause to adjacent
landowners, particularly as a result of the contamination of
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drinking water sources or the soil, including damage resulting from conditions
existing prior to the acquisition of such operations by USA Waste. Subsequent to
the Merger, USA Waste may be subject to liability for such conditions or events
associated with Chambers or Chambers' assets and operations. USA Waste may also
be subject to liability for any off-site environmental contamination caused by
pollutants or hazardous substances whose transportation, treatment, or disposal
was arranged for by USA Waste, Chambers or their predecessors. If USA Waste were
to incur a substantial liability for environmental damage, its financial
condition could be materially adversely affected. See "Description of USA
Waste -- Regulation."
PROFITABILITY MAY BE AFFECTED BY COMPETITION
The waste management industry is highly competitive and requires
substantial capital resources. The industry is characterized by two large
national waste management companies as well as numerous local and regional
companies of varying sizes and financial resources. The largest national waste
management companies have significantly greater financial resources than USA
Waste. In addition, many municipalities operate collection and disposal
operations. Competition may also be affected by the increasing national emphasis
on recycling, composting, incineration, and other waste reduction programs that
could reduce the volume of refuse and garbage collected or deposited in
landfills. See "Description of USA Waste -- Competition."
EXPECTED BENEFITS OF COMBINED BUSINESS MAY NOT BE ACHIEVED
There can be no assurance that the expected benefits of the Merger relative
to the combined business as described under "The Merger and Related
Transactions -- USA Waste's Reasons for the Merger" will be achieved.
EXCHANGE RATIO WILL NOT REFLECT ANY CHANGE IN STOCK PRICES
The relative stock prices of the USA Waste Common Stock and the Chambers
Common Stock and Chambers Class A Common Stock at the Effective Time may vary
significantly from the prices as of the date of execution of the Merger
Agreement or the date hereof or the date on which stockholders vote on the
Merger due to, among other factors, changes in the business, operations and
prospects of USA Waste or Chambers, market assessments of the likelihood that
the Merger will be consummated and the timing thereof and general market and
economic conditions. The Exchange Ratio is fixed and will not be adjusted based
on changes in the relative stock prices of the USA Waste Common Stock and the
Chambers Common Stock and Chambers Class A Common Stock.
CHAMBERS' EXISTING FINANCING REQUIREMENTS
Chambers' existing credit facilities require Chambers to reduce the amounts
outstanding thereunder by December 31, 1995. However, Chambers must incur
additional indebtedness in order to be able to pay the cost of the settlement of
certain federal class and derivative actions. If the Merger becomes effective,
Chambers anticipates that the combined company will be able to refinance the
outstanding indebtedness and enable it to make the payments which are required.
However, if the Merger does not become effective, there can be no assurance that
Chambers will be able to refinance its outstanding indebtedness and make the
payments which are required by the litigation settlement without significant
dilution to the stockholders of Chambers. See "Management's Discussion and
Analysis of Chambers' Financial Condition and Results of Operations -- Liquidity
and Capital Resources -- Credit Facilities and Refinancing."
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THE MEETINGS
DATE, TIME, AND PLACE OF THE MEETINGS
The USA Waste Annual Meeting will be held at 2:00 p.m., Dallas, Texas time,
on June 22, 1995, at The Grand Kempinski -- Dallas Hotel, 15201 Dallas Parkway,
Dallas, Texas. The Chambers Special Meeting will be held at 10:00 a.m., Dallas,
Texas time, on June 22, 1995, at The Grand Kempinski-Dallas Hotel, 15201 Dallas
Parkway, Dallas, Texas.
PURPOSE OF THE MEETINGS
The purposes of the USA Waste Annual Meeting are to consider and act upon
the following proposals: (i) to approve and adopt the Merger Agreement, (ii) to
elect nine members to the USA Waste Board of Directors, (iii) to approve the
Reincorporation, (iv) to approve the Board Classification Proposals, (v) to
approve an increase in authorized shares of USA Waste Common Stock from
50,000,000 shares to 150,000,000 shares or (vi) to increase the number of shares
that may be issued under the USA Waste 1993 Stock Incentive Plan and (vii) to
ratify the appointment of Coopers & Lybrand L.L.P. as independent auditors of
USA Waste for the year ending December 31, 1995. Any other proper business may
be transacted at the USA Waste Annual Meeting or any adjournments thereof. USA
Waste shareholder approval of the Merger is required in accordance with the
rules of the NYSE since the USA Waste Common Stock to be issued in connection
with the Merger will be in excess of 20% of the number of shares of USA Waste
Common Stock outstanding before such issuance.
The sole purpose of the Chambers Special Meeting is to consider and act
upon a proposal to approve and adopt the Merger Agreement.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of USA Waste Common Stock, and holders of record of
Chambers Common Stock and Chambers Class A Common Stock at the close of business
on the Record Date are entitled to notice of, and to vote at, the USA Waste
Annual Meeting and the Chambers Special Meeting, respectively.
On the Record Date, there were 858 holders of record of USA Waste Common
Stock with 22,967,256 shares of USA Waste Common Stock issued and outstanding.
Each share of USA Waste Common Stock entitles the holder thereof to one vote on
each matter submitted for shareholder approval. See "Principal Stockholders of
USA Waste and Chambers" for information regarding persons known to management of
USA Waste to be the beneficial owners of more than 5% of the outstanding USA
Waste Common Stock.
On the Record Date, there were 521 holders of record of Chambers Common
Stock and 3,400 holders of record of Chambers Class A Common Stock with
15,592,068 shares and 51,197,059 shares, respectively, issued and outstanding.
Each share of Chambers Common Stock entitles the holder thereof to ten votes on
each matter submitted for stockholder approval and each share of Chambers Class
A Common Stock entitles the holder to one vote on each matter submitted for
stockholder approval. Shares of Chambers Common Stock and Chambers Class A
Common Stock vote together as one class. See "Principal Stockholders of USA
Waste and Chambers" for information regarding persons known to management of
Chambers to be the beneficial owners of more than 5% of the outstanding Chambers
Common Stock or Chambers Class A Common Stock.
If a share is represented for any purpose at a Meeting, it is deemed to be
present for all other matters. Abstentions and shares held of record by a broker
or its nominee ("Broker Shares") that are voted on any matter are included in
determining the number of votes present. Broker Shares that are not voted on any
matter will not be included in determining whether a quorum is present. In all
cases, shares with respect to which authority to vote is withheld, abstentions,
and Broker Shares, which are not voted, will not be included in determining the
number of votes cast.
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VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the USA
Waste Annual Meeting and the Chambers Special Meeting, as applicable, in
accordance with the instructions contained therein. If a holder of USA Waste
Common Stock executes and returns a proxy and does not specify otherwise, the
shares represented by such proxy will be voted FOR (i) approval and adoption of
the Merger Agreement, (ii) election of the USA Waste Board's nominees for
directors, (iii) approval of the Reincorporation, (iv) approval of the Board
Classification Proposals, (v) approval of an increase in the number of
authorized shares of USA Waste Common Stock from 50,000,000 to 150,000,000, (vi)
approval of an increase in the number of shares of USA Waste Common Stock that
may be issued under the USA Waste 1993 Stock Incentive Plan from 1,000,000 to
4,000,000 and (vii) ratification of the appointment of Coopers & Lybrand L.L.P.
as USA Waste's independent auditors. If a holder of Chambers Common Stock or
Chambers Class A Common Stock executes and returns a proxy and does not specify
otherwise, the shares represented by such proxy will be voted FOR approval and
adoption of the Merger Agreement in accordance with the recommendation of the
Board of Directors of Chambers. A shareholder of USA Waste or a stockholder of
Chambers who has executed and returned a proxy may revoke it at any time before
it is voted at the respective meeting by (a) executing and returning a proxy
bearing a later date, (b) filing a written notice of such revocation with the
Secretary of USA Waste or Chambers, as appropriate, stating that the proxy is
revoked, or (c) attending the meeting and voting in person. Neither Oklahoma law
nor Delaware law requires that holders of USA Waste Common Stock or Chambers
Common Stock or Chambers Class A Common Stock who object to the Merger and who
vote against or abstain from voting in favor of the Merger be afforded any
appraisal rights or the right to receive cash for their shares. Neither USA
Waste nor Chambers intends to make available any such rights to its shareholders
or stockholders.
VOTE REQUIRED FOR APPROVAL
USA Waste. USA Waste's Bylaws provide that the presence at the USA Waste
Annual Meeting, in person or by proxy, of holders of a majority of the
outstanding shares of USA Waste Common Stock entitled to vote at the meeting
will constitute a quorum for the transaction of business. Under the rules of the
NYSE, approval of the Merger requires the affirmative vote of the holders of a
majority of the shares of USA Waste Common Stock voted, in person or by proxy,
at the USA Waste Annual Meeting provided that the total vote cast on the
proposal represents over 50% in interest of all shares entitled to vote on the
proposal. At the close of business on the Record Date, there were 22,967,256
shares of USA Waste Common Stock outstanding and entitled to vote at the USA
Waste Annual Meeting. On the Record Date, the directors and officers of USA
Waste and their affiliates held 2,958,558 shares of USA Waste Common Stock,
representing approximately 12.9% of the outstanding shares. Such persons have
indicated to USA Waste that they intend to vote their shares in favor of the
Merger and the other proposals described under "-- Purpose of the Meetings"
above. See "Election of USA Waste Directors -- Beneficial Ownership of USA Waste
Common Stock."
Under Oklahoma law, the Reincorporation (Proposal No. 3) and the amendments
to USA Waste's Certificate of Incorporation (Proposal Nos. 4 and 5) require the
affirmative vote of the holders of a majority of the shares of USA Waste Common
Stock outstanding on the Record Date, or 11,483,629 votes.
With respect to the election of USA Waste directors (Proposal No. 2),
assuming the Board Classification Proposals are approved, the three nominees in
each class receiving the highest number of affirmative votes will be elected to
the Board of Directors of USA Waste. If the Board Classification Proposals are
not approved, the nine nominees receiving the highest number of affirmative
votes will be elected to the Board. Proxies given to the persons named in the
USA Waste form of proxy will be voted FOR the election of the nominees listed
under Election of USA Waste Directors unless authority to vote is withheld. With
respect to the election of directors, should any of the USA Waste nominees
become unavailable, the proxies will be voted for the remainder of the listed
USA Waste nominees and for such other USA Waste nominees as may be designated by
the Board of Directors of USA Waste as replacements for those who become
unavailable. Discretionary authority for such replacement is included in the
proxy. This Joint Proxy Statement and Prospectus also constitutes the annual
report to security holders of USA Waste.
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The amendment of the USA Waste 1993 Stock Incentive Plan (Proposal No. 6)
and the ratification of the appointment of Coopers & Lybrand L.L.P. (Proposal
No. 7) require the affirmative vote of the holders of a majority of the shares
of USA Waste Common Stock present or represented by proxy and entitled to vote
at the USA Waste Annual Meeting.
Chambers. The presence at the Chambers Special Meeting, in person or by
proxy, of holders of the issued and outstanding shares of Chambers Common Stock
and Chambers Class A Common Stock entitled to vote and representing a majority
for the voting power of Chambers will constitute a quorum for the transaction of
business. At the close of business on the Record Date, there were 15,439,668
shares of Chambers Common Stock (each of which is entitled to ten votes per
share) and 51,349,459 shares of Chambers Class A Common Stock (each of which is
entitled to one vote per share), outstanding and entitled to vote at the
Chambers Special Meeting. Pursuant to Delaware law and the provisions of the
Certificate of Incorporation of Chambers, approval and adoption of the Merger
Agreement requires the affirmative vote of the holders of a majority of the
shares of Chambers Common Stock and Chambers Class A Common Stock outstanding on
the Record Date, voting as a single class, or approximately 102,873,070 votes.
On the Record Date, the directors and officers of Chambers and their affiliates
held 13,478,850 shares of Chambers Common Stock and 11,706,980 shares of Class A
Common Stock, representing approximately 71.2% of the outstanding voting power.
Such persons have indicated to Chambers that they intend to vote their shares in
favor of the Merger Agreement. The affirmative vote of such persons would be
sufficient to approve the Merger Agreement. See "Principal Stockholders of USA
Waste and Chambers."
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, and employees
of each of USA Waste and Chambers may solicit proxies from their respective
stockholders by personal interview, telephone, telegram, facsimile, or
otherwise. USA Waste and Chambers will each bear the costs of the solicitation
of proxies from their respective stockholders, except that USA Waste and
Chambers will share equally the cost of printing this Joint Proxy Statement and
Prospectus. Arrangements will be made with brokerage firms and other custodians,
nominees, and fiduciaries who hold the voting securities of record for the
forwarding of solicitation materials to the beneficial owners thereof. USA Waste
and Chambers will reimburse brokers, custodians, nominees, and fiduciaries for
the reasonable out-of-pocket expenses incurred by them in connection therewith.
OTHER MATTERS
At the date of this Joint Proxy Statement and Prospectus, the Boards of
Directors of USA Waste and Chambers do not know of any business to be presented
at their respective meetings other than as set forth in the notices accompanying
this Joint Proxy Statement and Prospectus. Under Delaware law, no other matters
may come before the Chambers Special Meeting. If any other matter should
properly come before the USA Waste Annual Meeting, it is intended that the
shares represented by proxies will be voted with respect to such matters in
accordance with the judgment of the persons voting such proxies.
THE MERGER AND RELATED TRANSACTIONS
The detailed terms and conditions to the consummation of the Merger are
contained in the Merger Agreement, which is attached hereto as Appendix A and
incorporated herein by reference. The following discussion sets forth a
description of certain material terms and conditions of the Merger Agreement.
The description in this Joint Proxy Statement and Prospectus of the terms and
conditions to the consummation of the Merger is qualified in its entirety by
reference to the Merger Agreement.
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that, at the Effective Time, Acquisition will
merge with and into Chambers, whereupon Chambers will become a wholly owned
subsidiary of USA Waste and each outstanding share of Chambers Common Stock and
Chambers Class A Common Stock will be converted into .41667 of a share of USA
Waste Common Stock.
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Based upon the number of shares of USA Waste Common Stock and Chambers
Common Stock and Chambers Class A Common Stock outstanding as of the Record
Date, approximately 50.4 million shares of USA Waste Common Stock will be
outstanding immediately following the Effective Time, of which approximately
27.8 million shares, representing 55.2% of the total, will be held by former
holders of Chambers Common Stock and Chambers Class A Common Stock.
BACKGROUND OF THE MERGER
An initial meeting between management of USA Waste and Chambers occurred in
mid-1993. At that time, USA Waste was pursuing as a part of its strategy the
expansion of its waste management services through selective acquisitions of
waste management operations that complemented existing operations or otherwise
contributed to USA Waste's participation in the consolidation trend within the
solid waste management industry. Chambers, on the other hand, was implementing a
strategic program to increase cash flow and asset utilization by maximizing
waste flow volumes into its existing network of landfill operations and to
divest operations that were geographically removed from its core operations in
the Mid-Atlantic region. On September 30, 1993, following meetings taking place
during the summer and early fall of 1993, USA Waste purchased Chambers hauling
and landfill operations in Indiana. While in the process of completing this
transaction, the principal officers of Chambers and USA Waste became familiar
with the respective business philosophies and operational strategies of each
company. In early 1994, officers of Chambers and USA Waste held additional
discussions with respect to the potential purchase by USA Waste of other
operations of Chambers targeted for divestiture. During these discussions, the
trend toward consolidation of the solid waste industry and existing industry
conditions were topics addressed, with the representatives of Chambers and USA
Waste expressing similar views on the strategic direction of the industry.
Throughout this period, USA Waste was also engaged in pursuing other acquisition
opportunities and in January 1994 announced its acquisition of Envirofil. Upon
this announcement, discussions between USA Waste and Chambers were discontinued.
In connection with its strategic plan to increase utilization of existing
landfills, Chambers held several discussions during 1993 with Attwoods, PLC
("Attwoods"). Attwoods maintained a major hauling presence in the Florida and
Maryland regions, and these discussions focused on long-term agreements for
waste disposal by Attwoods into Chambers' sites in Okeechobee County, Florida
and Amelia and Charles City Counties, Virginia. In addition, the respective
officers of Attwoods and Chambers discussed various strategic "fits" between
Chambers and Attwoods. On September 18, 1994, Browning-Ferris Industries, Inc.
("BFI") announced a hostile tender offer for all of Attwoods issued and
outstanding shares. Given the proximity of Chambers' disposal capacity to
Attwoods' hauling operations, Chambers was approached by various solid waste
industry participants, including USA Waste, during this period with respect to
potential competing offers for Attwoods.
At the time of the initial meeting between USA Waste and Chambers, Chambers
had been engaged in shareholder class action litigation precipitated by the
revision in March 1992 of Chambers' financial results for prior periods and the
ensuing decline in market value of Chambers Common Stock and Chambers Class A
Common Stock. The core strategic program being implemented by Chambers at that
time was in accordance with a restructuring of Chambers' financing arrangements
in 1992 following instigation of the class action litigation. The restructured
financing agreements entered into in 1992 and the pendency of the class action
litigation had the effect of substantially restricting Chambers' capital
resources and its access to capital markets. Chambers sought further
restructuring and extension of its financing agreements throughout 1994 with the
objective of reaching agreement with its lenders during the third quarter of
1994. Efforts were also undertaken to resolve the litigation with the class
action plaintiffs throughout 1994, and were intensified during early September
1994. At that time Chambers believed that the direction of its divestiture
program, coupled with operating cash flow improvements and refinancing
alternatives, created the potential to fund an acceptable settlement.
During October 1994, the negotiations for a restructuring and extension of
Chambers' financing agreements resulted in the request by the lending groups for
increased financing fees during 1995 and 1996 and for the grant, for nominal
consideration, of options covering 4% of Chambers' issued and outstanding
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equity in each of October 1995 and April 1996, unless replacement financing had
been obtained. Chambers' simultaneous discussions with new financing sources
indicated that replacement financing would require the resolution of the
litigation issues, the payment of high-yield interest rates upon replacement
borrowings, and the issuance by Chambers of equity on a preferred basis to new
financing sources which would be dilutive to Chambers' existing stockholders.
On October 13, 1994, Alexander W. Rangos, President and Chief Operating
Officer, and William Rodgers, Jr., Senior Vice President and Chief Financial
Officer, as representatives of Chambers, met with John E. Drury, Chief Executive
Officer, and David Sutherland-Yoest, President and Chief Operating Officer, as
representatives of USA Waste. The meeting initially provided an opportunity for
the respective executives to become acquainted and to discuss industry
conditions and general business and operational philosophies. Chambers' interest
in providing disposal capacity for the operations of Attwoods in the Florida and
Maryland markets and the potential participation by Chambers in joint ventures
or other arrangements with Attwoods were also discussed in conjunction with the
status of the hostile tender offer made by BFI for the acquisition of Attwoods.
The nature of the contingent liabilities of Chambers relating to shareholder
litigation was also generally discussed. The meeting concluded with a general
expression of interest from the respective companies in exploring the potential
for a business combination or other affiliation.
Following the October 13 meeting, Chambers and USA Waste entered into a
confidentiality agreement, executed on October 18, 1994, with respect to the
exchange of financial and operational information for purposes of evaluating a
potential merger transaction. USA Waste made clear that a final settlement of
the shareholder litigation would be necessary for it to consider seriously any
kind of affiliation with Chambers. During these discussions, Chambers and USA
Waste also explored a potential joint transaction with Attwoods. In early
November 1994, Chambers and USA Waste recognized the need to accelerate
discussions with respect to a business combination if the parties intended to
consider a transaction with Attwoods, as the hostile tender offer made by BFI
for Attwoods was scheduled to close on December 2, 1994.
In November 1994, USA Waste engaged DLJ and Kidder, Peabody & Co.
Incorporated ("Kidder, Peabody") to act as its financial advisors with respect
to the possible acquisition of Chambers and subsequently executed an engagement
letter with DLJ and Kidder, Peabody on November 30, 1994. J.P. Morgan had
initially been retained as a financial advisor to Chambers by retention
agreement of August 6, 1992, and thereafter assisted Chambers in the divestiture
of its security services business in December 1992. Subsequently, J.P. Morgan
was retained to serve as Chambers' financial advisor under a letter agreement of
March 10, 1993, with the scope of services to include assistance with respect to
potential settlement of the shareholder litigation and advice with respect to
any sale, merger, consolidation or similar transaction. By an engagement letter
dated November 17, 1994, the prior retention agreement between J.P. Morgan and
Chambers was modified to address the negotiation of a potential merger or
similar transaction with USA Waste. Although DLJ and J.P. Morgan were present at
numerous meetings that took place in November 1994 between USA Waste and
Chambers, neither financial advisor was actively involved in the negotiations of
the terms of the Merger or in the determination of the Exchange Ratio except
with respect to the fairness opinions to be delivered by DLJ and J.P. Morgan.
J.P. Morgan made a preliminary presentation to the Board of Directors of
Chambers on November 26, 1994. In addition, DLJ and J.P. Morgan made
presentations to the Board of Directors of USA Waste and Chambers, respectively,
on December 19, 1994, as described below.
Chambers achieved conceptual resolution on the settlement of the
shareholder class action and related litigation on November 8, 1994, with the
Board of Directors approving the terms and conditions, subject to final
documentation, on November 9, 1994. Memoranda of Understanding with respect to
the settlement of the class action and related litigation were ultimately
executed on November 18, 1994.
On November 13, 1994, representatives of USA Waste and Chambers met in
Austin, Texas to further discuss a merger transaction. This meeting included
Alexander W. Rangos and Peter V. Morse, Senior Vice President of Marketing and
Development of Chambers, and Donald F. Moorehead, Jr., John E. Drury and David
Sutherland-Yoest of USA Waste. Discussions between these parties continued on
November 14. A subsequent meeting was held on November 17 in Dallas which
involved Messrs. Alexander W. Rangos and
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Rodgers, accompanied by representatives of Chambers' financial advisor, and
Messrs. Moorehead, Drury and Earl E. DeFrates. On Monday, November 22, 1994,
negotiations were continued in Pittsburgh, Pennsylvania with respect to various
legal, accounting, structuring and valuation issues. Messrs. John G. Rangos,
Sr., John G. Rangos, Jr., Alexander W. Rangos, Rodgers and Morse of Chambers
were present at various times during the negotiations, together with Chambers'
legal and financial advisors. Messrs. Moorehead and DeFrates of USA Waste
attended these negotiations, together with USA Waste's legal and financial
advisors. Thereafter, with the exception of Thanksgiving Day, discussions with
respect to valuation and structuring of a merger of Chambers and USA Waste were
held continuously through November 28, 1994.
During such discussions the Exchange Ratio was determined through arms'
length negotiations which involved exchanges of views concerning the business,
operations, financial position, strategic goals and future prospects of each of
USA Waste and Chambers as well as the relative contribution of each company to
the combined entity and the relative ownership of the combined entity by the
current USA Waste shareholders and the Chambers stockholders, respectively. The
Exchange Ratio was calculated based on agreed upon relative per share values of
the USA Waste and Chambers common shares. Initially, the parties negotiated a
"collar" such that the Exchange Ratio would be adjusted downward in the event
that the average market price of USA Waste Common Stock over a certain ten-day
period preceding the closing date of the Merger (the "Average Market Price")
exceeded $18.00 per share or would be adjusted upward in the event that the
Average Market Price was less than $10.80 per share. The parties also negotiated
a provision permitting USA Waste to terminate the Merger Agreement in the event
that the Average Market Price fell below $9.60 per share. As described below,
the collar and the termination provision were subsequently eliminated.
On November 28, 1994, the respective Boards of Directors of USA Waste and
Chambers considered and approved the Merger Agreement and the Merger Agreement
was executed on such date. Simultaneous discussions were held during this period
among representatives of USA Waste, Chambers and Attwoods with respect to a
possible affiliation in the event that BFI's hostile tender offer, which was to
expire on December 2, 1994, was unsuccessful. In their negotiations, Chambers
and USA Waste initially considered the effect of a combination of the two
companies as well as a combination of both with Attwoods, concluding that a USA
Waste and Chambers transaction was desirable irrespective of the Attwoods
possibility. On December 2, 1994, BFI announced the successful completion of its
tender offer for Attwoods.
Simultaneously with the execution of the Merger Agreement, the members of
the Rangos family (John G. Rangos, Sr., John G. Rangos, Jr. and Alexander W.
Rangos), the controlling stockholders of Chambers who held stock representing
approximately 70% of the outstanding voting rights, and certain stockholders of
USA Waste (Donald F. Moorehead, Jr. and John E. Drury) who held approximately
11% of USA Waste's stock, gave proxies to the other company permitting it to
vote the stock held and controlled by them in favor of the Merger Agreement in
the event that a competing offer for either company was made. Each of the
proxies subsequently expired and has not been renewed. As noted above in "The
Meetings -- Vote Required for Approval," all of these stockholders have
indicated their intention to vote in favor of the Merger Agreement.
Pursuant to the terms of the Merger Agreement each party had the right to
terminate the Merger Agreement if, within 21 days after the date of the Merger
Agreement, its Board of Directors (a) did not receive an opinion from its
financial advisor that the Exchange Ratio or the consideration to be received by
the Chambers stockholders was fair, from a financial point of view, to the
party's shareholders or stockholders, (b) reasonably determined that the
representations and warranties of the other party were not true and correct in
any material respect, (c) reasonably determined, after consultation with its
accountant, that the Merger would not qualify as a "pooling of interests"
transaction, or (d) reasonably determined that all required governmental
approvals could not be obtained prior to the closing date of the Merger, or if
the parties were unable to reach a mutual agreement concerning the development
of a financing plan for certain obligations of Chambers. During that 21-day
period, USA Waste and Chambers each performed due diligence inquiries on the
other.
A term sheet amending certain provisions of the Class Action Memorandum of
Understanding was circulated by letter dated December 16, 1994 (the "December 16
Amendment"). The December 16
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Amendment provided that payment to the class members would be increased by $5
million plus an amount consisting of $16,000 for each penny above $4.50 of
Merger consideration received by Chambers' stockholders per share of Chambers
Common Stock or Chambers Class A Common Stock, payable only in the event that
the Merger or a comparable transaction is consummated. The December 16 Amendment
also contained provisions relating to, among other things, the dates of payments
to the class members and period of notice to the class members. The terms of the
December 16 Amendment, with subsequent modifications and clarifications, were
incorporated in the final settlement agreements relating to the class action
litigation. See "Description of Chambers -- Legal Proceedings."
On December 19, 1994, the Board of Directors of Chambers met to consider
the Merger Agreement. At that meeting, Chambers' management, legal counsel and
independent accountants presented to the Board the results of their respective
due diligence inquiries of USA Waste and its affiliates. In addition,
representatives of J.P. Morgan presented to the Board the results of its due
diligence inquiry of USA Waste and its affiliates as well as its forecast and
valuation of Chambers and its analysis of the Merger. Also, Chambers' management
and representatives of USA Waste presented a summary of a proposed financing
plan with respect to the funding of certain obligations of Chambers.
During the December 19 meeting, in connection with the evaluation by USA
Waste of the December 16 Amendment to the terms of the proposed settlement of
the shareholder litigation, USA Waste's representatives presented a proposed
amendment to the Merger Agreement to either reduce the Exchange Ratio or adjust
or eliminate the "collar" on the Exchange Ratio. After lengthy discussions and
negotiations, the parties agreed to amend the Merger Agreement by deleting the
"collar" on the Exchange Ratio and the termination provision in favor of USA
Waste, and accepted the amendments to the terms of the proposed settlement of
the shareholder litigation. The Exchange Ratio was not adjusted.
At the December 19 meeting, J.P. Morgan delivered its written opinion that
the consideration to be received in the Merger is fair, from a financial point
of view, to the stockholders of Chambers. Based upon the receipt of J.P.
Morgan's fairness opinion, the review of the financing plan, and after hearing
the results of the due diligence inquiries, the Board of Directors of Chambers
determined not to exercise its right to terminate the Merger Agreement.
On December 19, 1994, USA Waste's management presented the Merger Agreement
and the terms of the Merger to the USA Waste Board of Directors, including the
amendment to the Merger Agreement that was agreed to by the Chambers Board, as
well as a potential increase in the payments that would be made by Chambers
pursuant to the litigation settlement. USA Waste's management reviewed with the
Board the results of its due diligence inquiries of Chambers and the results of
the due diligence inquiries of USA Waste's counsel and accountants.
Representatives of DLJ then reviewed with the USA Waste Board of Directors
certain financial and operating data relating to Chambers and other publicly
held solid waste companies, as well as certain pro forma financial information
reflecting the Merger. After making this presentation and responding to
questions, the DLJ representatives advised the Board that, in DLJ's opinion, the
Exchange Ratio was fair, from a financial point of view, to the holders of USA
Waste Common Stock. Following such review and discussion, the USA Waste Board of
Directors reaffirmed the Merger Agreement and voted to recommend to USA Waste's
shareholders the approval of the Merger Agreement.
USA WASTE'S REASONS FOR THE MERGER
In evaluating the Merger, the management and the Board of Directors of USA
Waste considered a variety of factors in the context of USA Waste's strategic
objectives. A key element of USA Waste's strategy is to expand solid waste
management services through the acquisition of additional solid waste collection
operations, landfills, and collection, transfer and recycling operations, with
the objective of becoming a national integrated solid waste management company
with a broad geographic base of operations. USA Waste anticipates that added
service requirements, increased regulation and heightened public concern over
the environment, all of which have contributed to dramatically higher costs
associated with providing waste management services generally, will cause
continued industry consolidation as well as increased privatization of municipal
services, affording attractive future opportunities for growth. In evaluating
the Merger, USA
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Waste's Board considered the desirability of adding the significant airspace
capacity offered by Chambers' landfills to USA Waste's existing base of
operations, the large capital investment made by Chambers to construct its new
landfills in compliance with strict regulatory requirements and the ability of
USA Waste to increase utilization of Chambers' landfills by focusing on
additional waste flows and improving economic efficiencies of Chambers'
collection and landfill operations. USA Waste's Board concluded that by
combining operations of USA Waste and Chambers, USA Waste would further its
strategic objectives and that the combined entity could participate more
effectively in the ongoing consolidation of the solid waste services industry.
In addition, the USA Waste Board of Directors and management concluded that a
larger asset and revenue base resulting from the Merger would provide USA Waste
better access to capital to pursue its strategic objectives and achieve
economies of scale associated with a larger base of operations, with an ultimate
goal of increasing shareholder value.
USA Waste's management considered the impact of certain general and
administrative cost savings that could be realized following the Merger and
evaluated the pro forma financial impact of the Merger, giving effect to certain
adjustments for nonrecurring items that appear in the historical and combined
pro forma financial information. For a description of such adjustments, and the
impact of such adjustments on the pro forma financial information, see
"Supplemental Information Relating to Pro Forma Statement of Operations for the
Year Ended December 31, 1994."
At the December 19, 1994 meeting, the USA Waste Board of Directors received
an oral opinion from DLJ that the Exchange Ratio was fair, from a financial
point of view, to the holders of USA Waste Common Stock. The USA Waste Board
received a written opinion to such effect dated the date hereof. See "-- Opinion
of Financial Advisor to USA Waste."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF USA WASTE
For the reasons set forth under "USA Waste's Reasons for the Merger," the
Board of Directors of USA Waste believes that the terms of the Merger Agreement
and the Merger are fair to, and in the best interests of, USA Waste and the
holders of USA Waste Common Stock. All members of the Board of Directors present
at the meetings held on November 28, 1994 and December 19, 1994, approved the
Merger Agreement and the Merger and recommend that the holders of USA Waste
Common Stock vote FOR adoption and approval of the Merger Agreement and the
Merger. In considering the recommendation of the USA Waste Board of Directors
with respect to the Merger, USA Waste shareholders should be aware that certain
officers and directors of USA Waste have employment agreements that may require
severance payments in the event of a change of control such as the Merger. See
"The Merger and Related Transactions--Conflicts of Interest."
CHAMBERS' REASONS FOR THE MERGER
The matters considered by management and the Board of Directors of Chambers
in evaluating the Merger included the primary concern that Chambers is in need
of significant capital in order to refinance its existing debt and in order to
fund a settlement with respect to the shareholder litigation. Chambers'
management believes that such capital would not be available to Chambers on a
stand-alone basis without significant dilution to the equity stockholders of
Chambers. In addition, due to the restricted liquidity of Chambers in the near
term, it is believed that Chambers alone is not able to take advantage of the
trend toward consolidation in the waste management industry and thus cannot
participate in any upside potential inherent in such consolidation trend.
Chambers' management believes that the Merger will provide the combined entities
with access to capital sufficient both to meet Chambers' existing obligations
and to permit participation in the industry consolidation.
Chambers' management believes, based on the market price of USA Waste
Common Stock immediately prior to announcement of the Merger ($14.00 per share
on November 25, 1994), that the Merger will result in a premium to the
stockholders of Chambers over the market price of Chambers' stock immediately
prior to announcement of the Merger ($3.13 per share of Chambers Common Stock
and $3.00 per share of Chambers Class A Common Stock on November 25, 1994) and
permitting Chambers stockholders who become shareholders of USA Waste the
opportunity to participate in any potential future appreciation in value of USA
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Waste Common Stock. The equivalent per share price of Chambers Common Stock and
Chambers Class A Common Stock on November 25, 1994, calculated by multiplying
the closing price of USA Waste Common Stock on the same date by the Exchange
Ratio, was $5.83. There is no guarantee that the stockholders of Chambers will
receive a premium if the Merger is approved.
Chambers' management considered the impact of certain general and
administrative cost savings that could be realized following the Merger and
evaluated the pro forma financial impact of the Merger, giving effect to certain
adjustments for nonrecurring items that appear in the historical and combined
pro forma financial information. For a description of such adjustments, and the
impact of such adjustments on the pro forma financial information, see
"Supplemental Information Relating to Pro Forma Statement of Operations for the
Year Ended December 31, 1994."
At the December 19, 1994 meeting, the Board of Directors of Chambers
received a written opinion from J.P. Morgan stating that the consideration to be
received by the stockholders of Chambers pursuant to the Merger was fair, from a
financial point of view, to the holders of Chambers Common Stock and Chambers
Class A Common Stock. J.P. Morgan confirmed such opinion as of the date hereof.
See " -- Opinion of Financial Advisor to Chambers."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF CHAMBERS
For the reasons set forth under "Background of the Merger" and "Chambers'
Reasons for the Merger," the Board of Directors of Chambers believes that the
Merger Agreement is fair to, and in the best interests of, Chambers and the
holders of Chambers Common Stock and Chambers Class A Common Stock. All members
of the Board of Directors approved the Merger Agreement and recommended that the
holders of Chambers Common Stock and Chambers Class A Common Stock vote FOR
adoption and approval of the Merger Agreement. In considering the recommendation
of the Chambers Board of Directors with respect to the Merger, Chambers
stockholders should be aware that certain officers and directors of Chambers
have direct and indirect interests in the consummation of the Merger, apart from
their interests as stockholders of Chambers, which are not identical to those of
unaffiliated stockholders of Chambers. See "The Merger and Related
Transactions -- Conflicts of Interest."
OPINION OF FINANCIAL ADVISOR TO USA WASTE
In its role as financial advisor to USA Waste, DLJ was asked by USA Waste
to render an opinion (the "DLJ Opinion") to the Board of Directors of USA Waste
as to the fairness to the shareholders of USA Waste, from a financial point of
view, of the Exchange Ratio pursuant to the Merger Agreement. On December 19,
1994, DLJ orally advised the USA Waste Board of Directors that DLJ would be
prepared to deliver a written opinion to the USA Waste Board of Directors that
the Exchange Ratio was fair to the shareholders of USA Waste from a financial
point of view as of that date, subject to DLJ's review of the final terms and
conditions of the Merger Agreement. On the date hereof, DLJ issued to the USA
Waste Board of Directors its written opinion that, based upon and subject to the
provisions set forth in such opinion, the Exchange Ratio is fair to the
shareholders of USA Waste from a financial point of view.
THE FULL TEXT OF THE WRITTEN OPINION OF DLJ, DATED THE DATE HEREOF, IS
ATTACHED HERETO AS APPENDIX B. USA WASTE SHAREHOLDERS ARE URGED TO READ THE DLJ
OPINION CAREFULLY IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED,
SCOPE AND LIMITS OF THE REVIEW AND PROCEDURES FOLLOWED BY DLJ IN CONNECTION WITH
SUCH OPINION.
The USA Waste Board of Directors selected DLJ as its financial advisor
because it is a nationally recognized investment banking firm and the principals
of DLJ have substantial experience in the solid waste industry and are familiar
with USA Waste and its businesses. As part of its investment banking business,
DLJ is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions.
The DLJ Opinion does not constitute a recommendation to any shareholder as
to how such shareholder should vote at either the USA Waste Annual Meeting or
the Chambers Special Meeting. DLJ did not, and
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was not requested by the USA Waste Board to, make any recommendation as to the
form or amount of consideration to be paid to holders of Chambers Common Stock
and Chambers Class A Common Stock in the Merger, which issues were resolved in
arm's-length negotiations between USA Waste and Chambers, in which negotiations
DLJ advised USA Waste. DLJ's opinion does not constitute an opinion as to the
price at which the USA Waste Common Stock will actually trade at any time. See
"Market Price Data." No restrictions or limitations were imposed by USA Waste
upon DLJ with respect to the investigations made or the procedures followed by
DLJ in rendering its opinion. USA Waste did not authorize DLJ to solicit, and
DLJ did not solicit, any third party indications of interest in a purchase of,
or business combination with, USA Waste or Chambers (other than the discussions
regarding a possible business combination with Attwoods). See " -- Background of
the Merger."
In arriving at its opinion, DLJ reviewed the Merger Agreement. DLJ also
reviewed financial and other information that was publicly available or
furnished to it by or on behalf of USA Waste and Chambers including information
provided during discussions with their respective managements, including
consolidated financial statements and other information of USA Waste and
Chambers for the fiscal years 1991 through 1993 and for the interim periods for
the fiscal years 1993 and 1994. Included in the information provided were
certain financial projections for USA Waste and Chambers for the fiscal years
1994 to 1999 prepared by the managements of USA Waste and Chambers,
respectively. In addition, DLJ examined the impact of the Merger on earnings per
share of USA Waste given certain cost reductions contemplated to result from the
Merger and the applicability of a net operating loss carryforward of Chambers,
each as reflected in the financial projections prepared by the respective
managements of USA Waste and Chambers; compared the relative contribution of
both USA Waste's and Chambers' revenues, gross profit, operating profit,
operating cash flow and other measures to USA Waste's and Chambers' relative
ownership of the combined companies upon giving effect to the Merger; compared
certain financial and securities data of USA Waste and Chambers with selected
companies whose securities are traded in public markets; reviewed the historical
stock prices and trading volumes of USA Waste Common Stock and Chambers Common
Stock and Chambers Class A Common Stock; reviewed prices and premiums paid in
certain other selected business combinations and performed a discounted cash
flow analysis of Chambers. DLJ also discussed the past and current operations,
financial condition and prospects of USA Waste and Chambers with the respective
managements of USA Waste and Chambers and conducted such other financial
studies, analyses and investigations as DLJ deemed appropriate for purposes of
rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed, without independent
verification, the accuracy, completeness and fairness of all of the financial
and other information that was available to it from public sources, that was
provided to it by USA Waste and Chambers or their representatives, or that was
otherwise reviewed by it. DLJ also assumed that the financial projections
supplied to it were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of USA Waste and
Chambers as to the future operating and financial performance of USA Waste and
Chambers, respectively. DLJ relied, without independent investigation, upon the
respective estimates of USA Waste and Chambers of certain cost reductions
contemplated to result from the Merger and upon its discussion of such cost
reductions with the respective managements of USA Waste and Chambers. DLJ did
not make any independent evaluation of the assets, liabilities or operations of
USA Waste or Chambers, nor did DLJ verify the information reviewed by it. DLJ
made no independent investigation of any legal matters affecting USA Waste or
Chambers and assumed the correctness of all legal advice given to the Board of
Directors of USA Waste by its counsel.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to it
as of, the date of the DLJ Opinion. It should be understood that, although
subsequent developments may affect its opinion, DLJ does not have any obligation
to update, revise or reaffirm the DLJ Opinion.
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The following is a summary of the material factors considered and principal
financial analyses performed by DLJ in connection with the DLJ Opinion. DLJ
performed certain procedures, including each of the financial analyses described
below, and reviewed with the managements of USA Waste and Chambers the
assumptions on which such analyses were based and other factors, including the
current and projected financial results of such companies.
Pro Forma Merger Analysis. DLJ analyzed certain pro forma effects
resulting from the Merger. DLJ reviewed, without independent verification,
certain cost reductions contemplated to result from the Merger in 1995 and 1996
by combining the operations of Chambers and USA Waste as projected by the
managements of Chambers and USA Waste. DLJ analyzed the pro forma effect of such
cost reductions on net income and earnings per share for USA Waste. The analysis
indicated that the pro forma earnings per share of USA Waste, assuming the
annual cost reductions contemplated to result from the Merger and assuming
utilization of the Chambers net operating loss carryforward (subject to the net
operating loss carryforward limitation set forth in Section 382 of the Internal
Revenue Code of 1986, as amended (the "Code")), would be 21% higher in the
fiscal year ending 1995 and 20% higher in the fiscal year ending 1996 than
comparable projections for USA Waste as a stand-alone company during the same
periods. The analysis also indicated that the pro forma earnings per share of
USA Waste, assuming the annual cost reductions contemplated to result from the
Merger and assuming full utilization of the Chambers net operating loss
carryforward (not subject to the net operating loss carryforward limitation set
forth in Section 382 of the Code), would be 64% higher in the fiscal year ending
1995 and 23% higher in the fiscal year 1996 than comparable projections for USA
Waste as a stand-alone company during the same periods. The analysis also
indicated that the pro forma earnings per share of USA Waste, assuming the
annual cost reductions contemplated to result from the Merger, but assuming no
utilization of the Chambers net operating loss carryforward, would be 1% higher
in the fiscal year ending 1995 and 3% higher in the fiscal year ending 1996 than
comparable projections for USA Waste as a stand-alone company during the same
periods. The results of the pro forma combination analysis are not necessarily
indicative of future operating results or financial position.
Contribution Analysis. DLJ analyzed USA Waste's and Chambers' relative
contribution to the combined company with respect to revenues; gross profit;
earnings before interest, taxes, depreciation and amortization ("EBITDA"); and
earnings before interest and taxes ("EBIT"). Such analysis was considered in
both absolute dollar terms and on a percentage basis and was made, for the year
ended December 31, 1994, based on actual results for the first three quarters of
1994 and the projected results (projections by the respective managements of USA
Waste and Chambers) for the fourth quarter of 1994. As a result of the Merger,
shareholders of USA Waste will own 49.0% of the combined companies, assuming
conversion of USA Waste's 8.5% convertible subordinated debentures, due 2002.
This compares with USA Waste's contribution to the combined company's pro forma
results for the period ended December 31, 1994 (prior to taking into account any
operating synergies which may result from the Merger) of 41% of revenues, 48% of
gross profit, 47% of EBITDA and 60% of EBIT.
Analysis of Certain Other Publicly Traded Companies. To provide contextual
data and comparative market information, DLJ compared selected historical share
price, earnings, and operating and financial ratios for Chambers to the
corresponding data and ratios of certain other companies whose securities are
publicly traded (collectively, the "Public Companies"). The Public Companies
were chosen because they possess general business, operating and financial
characteristics representative of companies in the industry in which USA Waste
and Chambers operate. The Public Companies selected consisted of: Attwoods; BFI;
Laidlaw Inc.; MidAmerican Waste Systems, Inc.; Sanifill, Inc.; United Waste
Systems, Inc.; Western Waste Industries, Inc.; and WMX Technologies, Inc. Such
data and ratios included Enterprise Value ("Enterprise Value" is defined as the
product of the stock price and total shares outstanding plus Net Debt (i.e. debt
and preferred stock less cash and cash equivalents)) as a multiple of revenues,
EBITDA and EBIT for the latest reported twelve months and the growth rates of
each of such items for the three most recent fiscal years. To establish a
relationship between the Adjusted Purchase Price (as hereinafter defined) for
Chambers and certain other publicly traded companies' market multiples, a 40%
control premium was applied to the market multiples for certain other publicly
traded companies. The average multiple of Enterprise Value to revenues for the
companies reviewed was 2.7 times, with a high of 4.2 times and a low of 1.5
times. The average
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multiple of revenues was then multiplied by Chambers' fiscal 1994 estimated
revenues to arrive at an implied total Enterprise Value for Chambers of $705.0
million. The implied Enterprise Value for Chambers was then adjusted for Net
Debt of $275.0 million to yield an implied equity value, which was then divided
by Chambers shares and stock options outstanding on December 13, 1994 to arrive
at an implied price of $6.44 per fully diluted share. The average multiple of
Enterprise Value to EBITDA for the companies reviewed was 9.4 times, with a high
of 11.2 times, and a low of 7.2 times. The average EBITDA multiple was then
multiplied by Chambers' fiscal 1994 estimated EBITDA to arrive at an implied
total Enterprise Value for Chambers of $568.7 million. The implied Enterprise
Value for Chambers was then adjusted for Net Debt of $275.0 million to yield an
implied equity value, which was then divided by Chambers shares and stock
options outstanding on December 13, 1994 to arrive at an implied price of $4.40
per fully diluted share. The average EBITDA multiple of 9.4 times was also
applied to: (i) Chambers' fiscal 1994 pro forma EBITDA to arrive at an implied
total Enterprise Value for Chambers of $658.0 million and an implied price of
$5.73 per fully diluted share; and (ii) Chambers' fiscal 1994 pro forma EBITDA
with expected cost reductions to arrive at an implied total Enterprise Value for
Chambers of $990.8 million and an implied price of $10.72 per fully diluted
share. The average multiple of Enterprise Value to EBIT for the companies
reviewed was 16.5 times, with a high of 20.9 times and a low of 11.5 times. The
average EBIT multiple was then multiplied by Chambers fiscal 1994 estimated EBIT
to arrive at an implied total Enterprise Value for Chambers of $374.6 million.
The implied Enterprise Value for Chambers was then adjusted for Net Debt of
$275.0 million to yield an implied equity value, which was then divided by
Chambers shares outstanding on December 13, 1994 to arrive at an implied price
of $1.49 per fully diluted share. The average EBIT multiple of 16.5 times was
also applied to Chambers' fiscal 1994 EBIT with cost reductions contemplated to
result from the Merger to arrive at an implied total Enterprise Value for
Chambers of $958.7 million and an implied price of $10.24 per fully diluted
share.
In addition, DLJ examined the ratios of current stock prices to earnings
per share ("EPS") for the latest twelve-month period ended September 30, 1994,
estimated fiscal year 1994 EPS (as estimated by Institutional Brokers Estimate
System, "IBES"), and estimated fiscal year 1995 EPS (as estimated by IBES), and
current stock prices to book value for these companies and compared such ratios
with those of Chambers. To establish a relationship between the Equity Purchase
Price (as hereinafter defined) for Chambers and certain other publicly traded
companies' market multiples, a 40% control premium was applied to the market
multiples for certain other publicly traded companies. The average multiple of
stock price to latest twelve-month EPS for the certain other publicly traded
companies was 28.3 times, with a high of 39.6 times and a low of 13.7 times. The
multiple for Chambers was not meaningful due to negative earnings of Chambers
during this period. The average multiple of stock price to estimated 1994 EPS
for the certain other publicly traded companies was 24.7 times with a high of
28.2 times and a low of 21.0 times, which compares to a 66.8 times multiple for
Chambers. The certain other publicly traded companies average multiple was then
applied to the Chambers fiscal 1994 estimated EPS (as estimated by IBES) to
arrive at an implied price of $1.97 per fully diluted share. The average
multiple of stock price to estimated 1995 EPS for the certain other publicly
traded companies was 20.9 times with a high of 23.4 times and a low of 17.6
times, which compares to a 31.4 times multiple for Chambers. The average
multiple was then applied to Chambers' fiscal 1995 EPS (as estimated by IBES) to
arrive at an implied price of $3.55 per fully diluted share. The average
multiple of stock price to Book Value for the certain other publicly traded
companies was 2.8 times with a high of 4.0 times and a low of 0.9 times. The
average multiple was then applied to Chambers' book value as of September 30,
1994 to arrive at an implied price of $3.37 per fully diluted share. This
compares to an implied Equity Purchase Price of the Merger of $4.79 on December
13, 1994.
Transaction Analysis. DLJ reviewed publicly available information for four
selected transactions involving the combination of selected solid waste
management companies. The four transactions reviewed (the "Comparative
Transactions") included: (i) BFI/Attwoods; (ii) USA Waste/Envirofil; (iii)
Envirofil/Environmental Waste of America; and (iv) WMX Technologies,
Inc./Wheelabrator Technologies, Inc. The four transactions selected are not
intended to represent the complete list of solid waste management transactions
which have occurred during the last five years; rather, they include only
transactions involving combinations of companies with operating characteristics,
size or financial performance characteristics believed to be comparable to such
characteristics of Chambers and USA Waste. DLJ reviewed the consideration paid
in such transactions in terms of the Equity Purchase Price plus total debt less
cash and cash
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equivalents ("Adjusted Purchase Price") as a multiple of revenues, EBITDA and
EBIT for the latest reported twelve months prior to the announcement of such
transaction. The Adjusted Purchase Price for the Merger was computed by taking
the product of the USA Waste Common Stock price at December 13, 1994 and the
Exchange Ratio multiplied by Chambers shares outstanding at December 13, 1994
plus total debt less cash and cash equivalents. The ratio of Adjusted Purchase
Price to revenues, computed for the selected transactions announced since
September 1990, averaged 1.6 times and ranged from 1.2 times to 2.0 times
compared to 2.4 times revenues for the Merger based on Chambers operating
performance for 1994 estimated fiscal year results. The multiple of Adjusted
Purchase Price to EBITDA, computed based on the Comparative Transactions
announced since September 1990, averaged 12.9 times and ranged from 8.0 times to
17.1 times compared to 10.2 times EBITDA and 8.8 times Pro Forma EBITDA ("Pro
Forma EBITDA" assumes all acquisitions/divestitures made during 1994 occurred on
January 1, 1994) for the Merger based on the operating performance of Chambers
for 1994 estimated fiscal year results. The multiple of Adjusted Purchase Price
to EBIT, computed for the Comparative Transactions announced since September
1990, averaged 21.8 times and ranged from 13.7 times to 35.2 times compared to
27.2 times EBIT for the Merger, based on the operating performance of Chambers
for 1994 estimated fiscal year results.
DLJ also reviewed the consideration paid in such transactions in terms of
equity cost (offer price per share multiplied by total common shares
outstanding; the "Equity Purchase Price") as a multiple of the book value at the
close of the last fiscal quarter prior to the date of announcement of the
transaction. The Equity Purchase Price of the Merger was computed by taking the
product of the USA Waste Common Stock price at December 13, 1994 and the
Exchange Ratio multiplied by Chambers shares outstanding at December 13, 1994.
The ratio of Equity Purchase Price to book value, computed for the selected
Comparative Transactions announced since September 1990, averaged 3.7 times and
ranged from 2.4 times to 5.0 times. This compares to the 3.9 times book value
attributable to Chambers based upon a book value for Chambers at September 30,
1994.
DLJ's analysis also determined the percentage increase of the offer prices
(represented by the purchase price per share in cash transactions and the stock
price of the constituent securities times the exchange ratio in the case of
stock-for-stock mergers) over the trading prices one day, one week and one month
prior to the announcement date of transactions in two general categories, (i)
selected merger and acquisition transactions since January 1, 1993 with a
transaction value in excess of $100 million, and (ii) 110 stock for stock
transactions completed since January 1, 1993. The percentage amount by which
offer prices exceeded the closing stock prices one day, one week and one month
prior to the announcement date of all completed merger and acquisition
transactions since January 1, 1993 with a transaction value in excess of $100
million averaged 36.1%, 38.6% and 41.9%, respectively. The percentage amount by
which offer prices exceeded the closing stock prices one day, one week and one
month prior to the announcement date of stock for stock transactions completed
since January 1, 1993 averaged 31.4%, 33.8% and 38.0%, respectively, compared to
a premium of 53.0%, 130.0% and 130.0%, respectively, over the Chambers Common
Stock and Chambers Class A Common Stock prices one day, one week and one month
prior to December 13, 1994 based on the price of the USA Waste Common Stock at
December 13, 1994.
Stock Trading History. To provide perspective on current public market
valuations and stock price performance of USA Waste, Chambers and the Public
Companies relative to selected market indices, DLJ examined the history of the
trading prices and their relative relationships for both USA Waste Common Stock
and Chambers Common Stock and Chambers Class A Common Stock for the latest 12
month period ended December 2, 1994. DLJ also reviewed the daily closing prices
of USA Waste Common Stock and Chambers Common Stock and Chambers Class A Common
Stock and compared the Chambers closing stock prices with the Public Companies
and selected market indices. In addition, DLJ reviewed and analyzed the
historical changes in the ratio of the stock price of USA Waste Common Stock to
the stock price of Chambers Common Stock and Chambers Class A Common Stock for
the twelve months ended December 2, 1994. The ratio of the stock price of
Chambers Common Stock and Chambers Class A Common Stock to the stock price of
USA Waste Common Stock ranged from 0.45 times to 0.14 times for the twelve
months ended December 2, 1994. This compares to the Exchange Ratio of 0.41667
times.
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Discounted Cash Flow Analysis. DLJ also performed a discounted cash flow
analysis to evaluate the consideration to be paid in the Merger. In conducting
its analysis, DLJ relied on certain assumptions, financial forecasts and other
information provided by Chambers and USA Waste management. Using the information
set forth in the Chambers forecast, DLJ calculated the estimated "Free Cash
Flow" based on projected unleveraged operating income adjusted for: (i) taxes,
which in this analysis assumed no limitation on utilization of net operating
loss carryforwards; (ii) certain projected non-cash items (i.e., depreciation
and amortization); (iii) projected changes in non-cash working capital; and (iv)
projected capital expenditures. DLJ analyzed the Chambers forecast and
discounted the stream of free cash flows from fiscal 1995 to fiscal 1999
provided in such projections back to December 31, 1994 using discount rates
ranging from 10% to 18%. To estimate the residual value of Chambers at the end
of the forecast period, DLJ applied terminal multiples ranging from 5.0 times to
9.0 times to the projected fiscal 1999 EBITDA and discounted such value
estimates back to December 31, 1994 using discount rates ranging from 10% to
18%. DLJ then summed the present values of the free cash flows and the present
values of the residual values to derive a range of implied enterprise values for
Chambers. The range of implied enterprise values of Chambers was then adjusted
for non-operating assets and liabilities including: (i) estimated debt of $231.2
million; (ii) cash and cash equivalents of $26.2 million on December 31, 1994;
and (iii) a litigation settlement of $70.0 million, to yield implied equity
values of Chambers ranging from $78.2 million to $448.6 million. The range of
implied equity values of Chambers was then divided by 66.8 million shares of
Chambers stock outstanding as of December 13, 1994 to yield implied values
ranging from $1.17 to $6.72 per fully diluted share. This compares to an implied
Equity Purchase Price of the Merger of $4.79 on December 13, 1994.
The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, notwithstanding the separate factors
summarized above, DLJ believes that its analyses must be considered as a whole
and that selecting portions of its analysis and the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinions. In performing its analyses, DLJ
made numerous assumptions with respect to industry performance, business and
economic conditions and other matters. The analyses performed by DLJ are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Pursuant to the terms of an engagement letter dated November 20, 1994 among
USA Waste, DLJ and Kidder, Peabody, DLJ and Kidder, Peabody agreed to provide
certain financial advisory services to USA Waste and USA Waste agreed to pay a
retainer fee of $100,000 (divided equally between DLJ and Kidder, Peabody). USA
Waste also agreed to pay an additional $1,000,000 to DLJ upon mailing of the
Joint Proxy Statement and Prospectus. Under the engagement letter, an additional
fee of $2,900,000 will be payable by USA Waste upon consummation of the Merger,
of which DLJ will be entitled to 80% and Kidder, Peabody will be entitled to
20%. USA Waste also agreed to reimburse DLJ and Kidder, Peabody for their
out-of-pocket expenses and to indemnify them against certain liabilities and
expenses.
In the ordinary course of business, DLJ actively trades the securities of
both USA Waste and Chambers for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. DLJ, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
OPINION OF FINANCIAL ADVISOR TO CHAMBERS
In connection with the Merger, Chambers engaged J.P. Morgan to render its
opinion to the Board of Directors as to the fairness, from a financial point of
view, of the consideration to be received by the holders of Chambers Common
Stock and Chambers Class A Common Stock, based on the Exchange Ratio, as set
forth in the Merger Agreement. No limitations were imposed on J.P. Morgan by the
Board of Directors or management of Chambers with respect to the investigations
made or procedures followed by J.P. Morgan in
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preparing and rendering its opinion, and Chambers and its management cooperated
fully with J.P. Morgan in connection therewith. J.P. Morgan rendered to the
Board of Directors of Chambers on December 19, 1994, and confirmed on the date
hereof, its opinion that such consideration is fair, from a financial point of
view, to the holders of the Chambers Common Stock and Chambers Class A Common
Stock.
A copy of J.P. Morgan's opinion, dated December 19, 1994, which sets forth
the assumptions made, factors considered and limitations on the review
undertaken by J.P. Morgan, is attached hereto as Appendix C. Holders of Chambers
Common Stock and Chambers Class A Common Stock should read carefully the
attached J.P. Morgan written opinion in its entirety and the discussion set
forth herein concerning the scope and limitations of J.P. Morgan's review. J.P.
Morgan's opinion is directed only to the consideration payable to holders of
Chambers Common Stock and Chambers Class A Common Stock under the Merger
Agreement and does not constitute a recommendation to any holder of Chambers
Common Stock or Chambers Class A Common Stock as to how such holder should vote
at the Chambers Special Meeting.
In connection with its opinion, J.P. Morgan reviewed certain publicly
available information concerning Chambers and USA Waste and certain internal
financial analyses and other information furnished to it by the companies. J.P.
Morgan also held discussions with members of the senior managements of Chambers
and USA Waste regarding the business and prospects of both companies and of the
combined company. In addition, J.P. Morgan: (i) reviewed historical prices and
trading activity for the common stock of Chambers and USA Waste; (ii) compared
certain financial and stock market information for Chambers and USA Waste with
similar information for certain selected companies within the solid waste
industry whose securities are publicly traded; (iii) reviewed the financial
terms of certain recent business combinations which were deemed comparable in
whole or in part; and (iv) performed such other studies and analyses and
considered such other factors as were deemed appropriate (all such material
studies and analyses are summarized below). J.P. Morgan also reviewed the Merger
Agreement.
As described in its opinion, J.P. Morgan relied upon and assumed, without
independent verification, the accuracy and completeness of the information that
was publicly available or was furnished by Chambers or otherwise reviewed by
J.P. Morgan for purposes of rendering its opinion, and J.P. Morgan has not
assumed any responsibility or liability therefor. J.P. Morgan assumed that the
information relating to the prospects of Chambers and USA Waste reflects the
best currently available estimates and judgments of the managements of the
respective companies as to the likely future financial performance of Chambers
and USA Waste. In addition, J.P. Morgan has not made an independent evaluation
or appraisal of the assets of Chambers or USA Waste, nor has it been furnished
with any evaluation or appraisal. J.P. Morgan's opinion states that it was based
on market, economic, and other conditions as they existed and could be evaluated
as of the date of the opinion. Subsequent developments may affect its opinion,
and J.P. Morgan does not have any obligation to update, revise or reaffirm the
opinion.
The following is a brief summary of all material analyses that J.P. Morgan
used in arriving at its opinion.
Analysis of the Combined Company. J.P. Morgan analyzed certain pro forma
effects resulting from the Merger, assuming the Exchange Ratio, for the fiscal
years 1995, 1996 and 1997. This analysis was based on the respective projections
of the managements of Chambers and USA Waste, and suggested that the Merger
would be highly accretive to Chambers stockholders. The analysis indicated that
pro forma earnings per share of Chambers would be significantly higher in 1995,
1996 and 1997 than comparable projections for Chambers as a stand-alone company
during the same period. J.P. Morgan also analyzed the implied credit ratings for
Chambers on a stand-alone basis versus those of the combined company, based on
financial factors, including (i) revenues, (ii) EBIT divided by interest
expense, (iii) net income plus non-cash charges divided by total borrowed funds,
(iv) total borrowed funds less cash ("Net Debt") divided by market value of debt
plus equity, and (v) Net Debt divided by book value of equity. J.P. Morgan
concluded that the Merger could well result in a higher credit rating for the
combined company than for Chambers on a stand-alone basis.
Contribution Analysis. J.P. Morgan compared the post-Merger percentage
ownership of the combined company by the Chambers stockholders with the expected
financial contribution percentage of Chambers to the pro forma results of the
combined company using various measures of financial performance and condition,
including revenues, EBIT, EBITDA, net income, total assets, and book equity. The
income
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statement analysis was performed on the basis of management's projected results
for year end 1994 and 1995. The balance sheet analysis was also performed on the
basis of management's projections. Such analysis was considered in both absolute
dollar terms and on a percentage basis for the year ended December 31, 1994. As
a result of the Merger, Chambers stockholders will own approximately 55% of the
combined company. The analysis indicated that Chambers' contribution to the
combined company's pro forma results for the period ended December 31, 1994
(prior to taking into account operating synergies that may result from the
Merger) would have been 55% of sales, 51% EBITDA, 39% EBIT and 24% Net Income.
Comparison of Historical Stock Price Performance. To provide perspective
on current public market valuations and stock price performance of USA Waste and
Chambers relative to selected market indices, J.P. Morgan examined the history
of the trading prices and their relative relationships for Chambers Common Stock
and Chambers Class A Common Stock and USA Waste Common Stock for the latest 12
month period ended December 10, 1994. J.P. Morgan also reviewed the daily
closing prices of Chambers Common Stock, Chambers Class A Common Stock and USA
Waste Common Stock and compared these closing stock prices with selected market
indices. During this twelve month period, Chambers Common Stock price ranged
from a high of $5.375 per share to a low of $2.00 per share. Chambers Class A
Common Stock price ranged from a high of $5.375 per share to a low of $1.875 per
share. During this twelve month period, USA Waste Common Stock price ranged from
a high of $15.00 per share to a low of $10.75 per share. By applying an Exchange
Ratio of 0.41667 to the USA Waste historical trading range, J.P. Morgan arrived
at an implied value per Chambers share ranging from $4.48 to $6.25.
Discounted Cash Flow Valuation Analysis. J.P. Morgan analyzed the
projected cash flows of Chambers and the combined company based on the
management's forecasts and actual financial results. Using the information
provided, J.P. Morgan calculated estimates of base case, upside and downside
case "Free Cash Flows" based on projected unlevered operating income, adjusted
for: (i) taxes, which in this analysis assumed no limitation on utilization of
net operating loss carryforwards; (ii) certain projected non-cash items (i.e.,
depreciation and amortization); (iii) projected changes in non-cash working
capital; and (iv) projected capital expenditures. J.P. Morgan analyzed the
Chambers forecast and discounted the streams of cash flows from fiscal 1995 to
1999 provided in such projections back to December 31, 1994 using a discount
rate of 11.02%. To estimate the residual value at the end of the forecast
period, J.P. Morgan applied similar discount rates to the terminal period
values, calculated by growing terminal year free cash flows in perpetuity at
growth rates ranging from 2.5% to 4.5%. J.P. Morgan then summed the present
values of the free cash flows and the present value of the residual values to
derive a range of implied Enterprise Values ("Enterprise Value" is defined as
the product of the stock price and total shares outstanding plus Net Debt (i.e.,
debt and preferred stock less cash and cash equivalents)) for Chambers. The
Enterprise Value was then adjusted for nonoperating assets and liabilities
including (i) debt of $198 million for Chambers; (ii) cash and cash equivalents
of $48 million for Chambers; and (iii) a litigation settlement of $76 million to
yield implied equity values of Chambers ranging from $126 million to $509
million. The range of implied equity values of Chambers was then divided by
66.788 million shares of Chambers stock outstanding as of December 18, 1994 to
yield implied values ranging from $1.45 to $5.87 per fully diluted share. J.P.
Morgan noted that, based on the Exchange Ratio, the Merger results in a
discounted cash flow ("DCF") value for the combined company which exceeded the
base case DCF for Chambers. The Discounted Cash Flow analysis of the combined
company yielded implied values of $4.77 to $10.11 per Chambers share.
Comparison With Selected Publicly Traded Companies. J.P. Morgan compared
selected financial data of Chambers and USA Waste with certain data from
publicly traded companies engaged in business considered by J.P. Morgan to be
comparable to Chambers and USA Waste. Specifically, J.P. Morgan included in its
review Allied Waste Industries, Inc., BFI, Integrated Waste Systems, Inc.,
Laidlaw, Inc., Mid-American Waste Systems, Inc., Republic Waste Industries,
Inc., Sanifill, Inc., Western Waste Industries, Inc. and WMX Technologies, Inc.
Such financial information included market valuation, the implied multiples
based on the ratio of firm value to EBIT, EBITDA and projected EBITDA, and the
implied multiples based on the ratio of current stock price to earnings per
share and 1995 and 1996 projected earnings per share. The median multiple of
firm value to EBIT for the companies was 11.62 times, with a high of 15.13
times, and a low of 9.87 times. The median EBIT multiple of 11.62 times was
applied to Chambers' fiscal 1994 pro forma
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EBIT to arrive at an implied firm value for Chambers of $289.3 million and an
implied price of $0.73 per fully diluted share. The median multiple of firm
value to EBITDA for the companies reviewed was 6.97 times, with a high of 12.8
times and a low of 6.07 times. The median EBITDA multiple of 6.97 times was
applied to Chambers' fiscal 1994 pro forma EBITDA to arrive at an implied firm
value for Chambers of $437.5 million and an implied price of $2.44 per fully
diluted share. The median EBITDA multiple of 6.97 times was also applied to
Chambers' fiscal 1995 pro forma EBITDA and discounted to present value using a
weighted average cost of capital of 11.02% to arrive at an implied firm value
for Chambers of $443.7 million and an implied price of $2.51 per fully diluted
share. The median multiple of market value to net income was 15.77 times, with a
high of 18.65 times and a low of 13.23 times. The median multiple of market
value of net income of 15.77 times was applied to Chambers' fiscal 1994 pro
forma net income to arrive at an implied market value of $199 million and an
implied share price of $2.29. The median multiple of market value to projected
fiscal year ended 1995 net income was 15.77 times, with a high of 18.65 times
and a low of 13.23 times. The median multiple of market value to net income of
15.77 times was applied to Chambers' fiscal 1995 pro forma net income to arrive
at an implied market value of $108 million and an implied share price of $1.25.
The median multiple of market value to net income of 15.77 times was also
applied to Chambers' fiscal 1997 pro forma net income and discounted to present
value using a cost of equity of 14.09% to arrive at an implied market value of
$186.5 million and an implied share price of $2.15.
Analysis of Selected Mergers and Acquisitions. J.P. Morgan also reviewed
selected recent mergers and acquisitions. The twelve transactions reviewed
included: (i) WMX/SCA; (ii) Leigh/HT Hughes; (iii) Attwoods/Ebeneezer Mears;
(iv) Severn Trent/Biffa Holdings; (v) Wessex Waste/Wimpey Waste; (vi) WMX/SPAT;
(vii) Wessex Waste/WMX; (viii) South West Waste/HaulWaste; (ix) Hanson/
Econowaste; (x) BFI/Otto Waste; (xi) USA Waste/Envirofil; and (xii)
BFI/Attwoods. In performing its analysis, J.P. Morgan compared selected
financial data, including equity purchase price as a multiple of latest twelve
months ("LTM") net income and book value, and aggregate purchase price (equity
purchase price adjusted for long-term debt and cash) as a multiple of LTM
revenues; EBIT; EBITDA; and operating income for 12 selected transactions in the
solid waste industry. The median multiple of equity purchase price to net income
was 30.05 times, with a high of 38.9 times and a low of 22.5 times, compared to
31.91 times net income for the Merger based on Chambers' operating performance
for 1994 estimated fiscal year results and an Exchange Ratio of .41667. The
median multiple of aggregate purchase price to LTM revenues was 1.98 times, with
a high of 2.99 times and a low of 1.35 times, compared to 2.41 times net income
for the Merger based on Chambers' operating performance for 1994 estimated
fiscal year results and an Exchange Ratio of .41667. The median multiple of
aggregate purchase price to LTM EBIT was 21.1 times, with a high of 37.07 times
and a low of 16.29 times, compared to 25.24 times net income for the Merger
based on Chambers' operating performance for 1994 estimated fiscal year results
and an Exchange Ratio of .41667. The median multiple of aggregate purchase price
to LTM EBITDA was 8.02 times, with a high of 8.7 times and a low of 7.34 times,
compared to 10 times net income for the Merger based on Chambers' operating
performance for 1994 estimated fiscal year results and an Exchange Ratio of
.41667. J.P. Morgan noted that, based on the Exchange Ratio, the Merger results
in multiples to LTM revenues, EBIT, EBITDA and operating income that are within
the range of multiples for the 12 selected transactions, which are based on LTM
financial performance. The transaction multiples were compared with those
resulting from the Merger, which were found on an overall basis to be within the
range of multiples for the comparable transactions. In addition, J.P. Morgan
analyzed the premiums paid one day prior to announcement of 116 stock-for-stock
merger transactions from 1991 through 1994, and concluded that the Chambers'
implied premium compares favorably to other public mergers.
The summary set forth above does not purport to be a complete description
of the analyses of data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that the summary set forth
above and their analyses must be considered as a whole and that selecting
portions thereof, without considering all of their analyses, could create an
incomplete view of the processes underlying its analyses and opinion. J.P.
Morgan based its analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions and
industry-specific factors. The other principal assumptions upon which J.P.
Morgan based its analyses are set forth above under the description of each such
analysis.
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J.P. Morgan's analyses are not necessarily indicative of actual values or actual
future results that might be achieved, which values may be higher or lower than
those indicated. Moreover, J.P. Morgan's analyses are not and do not purport to
be appraisals or otherwise reflective of the prices at which businesses actually
could be bought or sold.
As part of its investment banking business, J.P. Morgan and its affiliates
are continually engaged in valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuation for estate, corporate,
and other purposes.
In connection with the Merger, Chambers entered into an engagement letter
with J.P. Morgan, pursuant to which Chambers retained J.P. Morgan to provide a
fairness opinion in connection with the Merger. Pursuant to the engagement
letter, Chambers agreed to pay J.P. Morgan $100,000 upon execution thereof and
agreed to pay J.P. Morgan an additional fee upon the closing of the Merger equal
to: (A) the product of (i) .0075, (ii) the last sales price of USA Waste's
Common Stock on the last trading day prior to the closing date of the Merger
that USA Waste's Common Stock is traded on the NYSE, (iii) 0.41667, and (iv) the
total number of shares of Chambers Common Stock and Chambers Class A Common
Stock outstanding on the closing date of the Merger; plus (B) the product of
.0075 and all outstanding indebtedness of Chambers as of the closing date; less
(C) $600,000. Chambers has also agreed to reimburse J.P. Morgan for reasonable
expenses incurred by J.P. Morgan and to indemnify J.P. Morgan against certain
liabilities, including liabilities under the federal securities laws.
CONFLICTS OF INTERESTS
In considering the recommendation of the Boards of Directors of USA Waste
and Chambers with respect to the Merger, holders of common stock of USA Waste
and Chambers should be aware that certain members of the Boards of Directors and
management have certain interests separate from their interests as stockholders,
including those referred to below.
After the Merger is consummated, John G. Rangos, Sr., Chairman and Chief
Executive Officer of Chambers, will become a Director and a non-executive Vice
Chairman of USA Waste. Alexander W. Rangos, President and Chief Operating
Officer of Chambers, will become a Director and Executive Vice President for
Landfill Development of USA Waste for a five-year term at a base salary of
$275,000 per year. In addition, at the Effective Time, USA Waste will enter into
a consulting and non-compete agreement with each of John G. Rangos, Sr. and John
G. Rangos, Jr., Vice Chairman and Secretary of Chambers, providing for annual
compensation of $450,000 and $250,000, respectively, for a term of five years
each.
In February 1993, Chambers entered into employment agreements with certain
of its key executives that provide such executives with rights to severance
benefits if employment with Chambers ceases under specified circumstances in
connection with a "change of control" of Chambers such as the Merger. Such
agreements were replaced effective as of February 1995 with agreements
substantially similar to the prior agreements except with respect to certain
termination provisions unrelated to the change of control termination
provisions. If such severance payments were triggered, Chambers would be
obligated to pay a total of approximately $7,600,000 to such executives. The
term of each of these agreements ends on February 2, 1996. Discussions are
ongoing with respect to continuing service to the combined company by certain
executive officers of Chambers under either continuing employment agreements or
consulting agreements.
USA Waste has entered into employment agreements with certain of its
executive officers and directors. The agreements contain non-compete and
confidentiality clauses which are generally effective for a period of five years
after termination of the executive's employment. In consideration for these
clauses, USA Waste has agreed to pay an amount equal to a multiple of defined
compensation upon the occurrence of a change in control of USA Waste if,
following such change in control, USA Waste seeks to terminate such officers
without cause or takes any action adverse to such officers without their
consent. In the event of termination of all executives and directors with
employment agreements upon a change in control, USA Waste would be required to
make payments of approximately $3,484,000. See "Election of USA Waste
Directors -- Executive Compensation." The employment agreements entered into by
Messrs. Drury, Moorehead, Sutherland-Yoest
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and Wilcox specifically exclude from a change in control transaction a
transaction approved by 75% of the USA Waste Board of Directors.
On July 8, 1993, Chambers entered into a purchase option with John G.
Rangos, Sr., to acquire approximately 68.45 acres of land which are contiguous
to Chambers' Monroeville landfill in Pennsylvania. The option, which extends
through December 31, 1996, and for which Mr. Rangos was paid $87,000, grants to
Chambers the right to purchase the property for $2,982,000, which is the fair
market value indicated by an independent appraisal of the property in June 1993.
Mr. Rangos currently owns an undivided 70% interest in the property and holds an
option to acquire the remaining 30% undivided interest from, among others,
Michael J. Peretto, a director of Chambers, for $894,600. USA Waste has agreed
that at the Effective Time it will cause Chambers to exercise its right to
acquire such property pursuant to the option agreement.
On November 14, 1985, John G. Rangos, Sr., John G. Rangos, Jr. and
Alexander W. Rangos, doing business as Synergy Associates, completed the private
placement of a $3,000,000 Allegheny County Industrial Development Variable Rate
Demand Note, initially bearing interest at a floating rate equal to 63% of the
prime interest rate of PNC Bank, to finance the conversion of existing property
into the current headquarters of Chambers. The outstanding principal balance of
such note as of December 31, 1994 was $1,945,000. The lender has agreed not to
exercise its rights to demand payment before November 1, 1995. Synergy
Associates is directly liable on the instrument, which is secured by the
property, but Chambers, as the tenant of the facility, was required by the
lender to guarantee the financing. Under the lease, which was entered into in
December 1986, Synergy Associates passed through to Chambers certain federal
income tax credits. Through March 1987, it was determined that the amount of
such tax credits passed through to Chambers exceeded $500,000. Because the
amount of these tax credits substantially exceeded the expectations of the
parties at the time the lease was entered into, Chambers agreed to modify the
lease to provide to Synergy Associates the option, exercisable at any time, to
have Chambers prepay the twentieth year's rent in an amount equal to the rent
that is due in the year in which the option is exercised. This option was
exercised in April 1988, and Chambers made the aforementioned prepayment in an
amount of approximately $752,000. The lease provides for a renewal term of ten
years following the expiration of the initial twenty-year term. This long-term
leasing arrangement and guarantee by Chambers of the financing discussed above
were approved by a majority of the disinterested directors of Chambers on
November 1, 1985. The cost to Chambers as lessee, including the cost of
construction paid for by Chambers, is approximately $19.47 per square foot per
year, based upon 57,238 square feet of rented space. Aggregate payments under
the lease during 1994 were approximately $1,018,000. The lease provides for
annual rent increases based upon inflation, increases in insurance costs and
real estate taxes, and changes in the debt service costs to Synergy Associates.
Pursuant to the terms of the settlement agreement executed by counsel to the
certain derivative litigation affecting Chambers (see "The Merger and Related
Transactions -- Financing Arrangements" and "Description of Chambers -- Legal
Proceedings"), the Rangos family has agreed to cause Synergy Associates to
contribute the building, subject to the existing mortgage, to Chambers, which
will result in the extinguishment of future lease obligations which, as of
December 31, 1994, totaled approximately $11,140,000. A third party independent
appraiser has assigned such future lease obligations a present value of
approximately $7,380,000. In anticipation of the transfer of the building,
Synergy Associates and Chambers intend to address certain claims made by Synergy
Associates for rental adjustments of approximately $300,000.
USA Waste has also agreed to use its reasonable efforts to have John G.
Rangos, Sr. removed, as promptly as possible after the Effective Time, as a
guarantor of certain performance bonds (in a face amount of approximately $14.7
million) naming Chambers as an insured. USA Waste has agreed that, until Mr.
Rangos is relieved from all liability under such performance bonds, it will
indemnify and hold Mr. Rangos harmless against any costs or expenses incurred by
Mr. Rangos in connection with such bonds.
Ten of the executive officers of Chambers hold options to acquire an
aggregate of 860,600 shares of Chambers Class A Common Stock pursuant to the
terms of certain stock option agreements, at exercise prices ranging from $2.25
to $17.44. Of such options, 418,550 are currently exercisable and 442,050 will
become fully vested and exercisable immediately upon a "change in control" such
as the Merger. Included in such options are options held by Alexander W. Rangos
and John G. Rangos, Jr., each to acquire 38,700 shares at an
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exercise price of $2.25 per share. At the Effective Time, all of these options
will be automatically converted into options to purchase a number of shares of
USA Waste Common Stock equal to the number of Chambers shares underlying such
options multiplied by the Exchange Ratio, at an exercise price equal to the
exercise price of the Chambers Option divided by the Exchange Ratio. All other
terms and conditions of the options will be the same as before the Effective
Time. As a result, the options exercisable by the executive officers of Chambers
for 860,600 shares of Chambers Class A Common Stock will be converted into
options to acquire 358,856 shares of USA Waste Common Stock. The price will be
converted from $2.25 to $17.44 per share of Chambers Class A Common Stock to
$5.40 to $41.85 per share of USA Waste Common Stock. Each of Alexander W. Rangos
and John G. Rangos, Jr. will have their options converted into options to
acquire 16,125 shares of USA Waste Common Stock at $5.40 per share. Based upon
the closing sale price of $15.10 per share of USA Waste Common Stock on the
Record Date, the total value based upon the excess of the market price of the
stock over the exercise price of the options that would become exercisable upon
consummation of the Merger is $1,294,486, with approximately $156,413
attributable to the options held by each of Alexander W. Rangos and John G.
Rangos, Jr. See "The Plan of Merger and Terms of the Merger -- Chambers
Options."
The Merger Agreement provides for indemnification of the officers and
directors of Chambers against all costs or expenses (including reasonable
attorney's fees), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative, or
investigative, arising out of, relating to, or in connection with any action or
omission occurring prior to the Effective Time (including acts or omissions in
connection with such persons serving as an officer, director, or other fiduciary
in any entity if such service was at the request of Chambers) or arising out of
or pertaining to the transactions contemplated by the Merger Agreement. See "The
Plan of Merger and Terms of the Merger -- Indemnification."
SHAREHOLDERS AGREEMENT
At the Effective Time of the Merger, USA Waste, Donald F. Moorehead, Jr.,
and John E. Drury will enter into the Shareholders Agreement with John G.
Rangos, Sr., John G. Rangos, Jr., Alexander W. Rangos and John Rangos
Development Corporation, Inc. (who comprise the Rangos Shareholders) that, among
other things, will provide certain rights to the Rangos Shareholders to name or
participate in the naming of certain members to the Board of Directors of USA
Waste and to name certain members of the Executive Committee of the Board of
Directors of USA Waste. In addition, the Shareholders Agreement will require the
affirmative vote of at least two-thirds of the members of the USA Waste Board of
Directors to take certain actions. The Shareholders Agreement will remain in
effect until the aggregate number of shares of USA Waste Common Stock
beneficially held by the Rangos Shareholders and their affiliates is less than
five percent of the outstanding shares of USA Waste Common Stock. Immediately
after the Effective Time, the Rangos Shareholders will control approximately
20.8% of the voting stock of USA Waste, and Donald F. Moorehead, Jr. and John E.
Drury will collectively control approximately 5.0% of such stock.
Pursuant to the Shareholders Agreement, USA Waste and Messrs. Moorehead and
Drury will be obligated, immediately after the Effective Time, to use their best
efforts to cause John G. Rangos, Sr. and Alexander W. Rangos to be appointed as
directors of USA Waste. In addition, during the term of the Shareholders
Agreement, USA Waste, Messrs. Moorehead and Drury, and the Rangos Shareholders
will use their best efforts to cause the Board of Directors to include at all
times (in addition to the two directors designated by the Rangos Shareholders)
four persons who are approved by at least four members of an Executive Committee
of the Board of Directors and none of whom is an officer or employee of USA
Waste or Chambers. The Shareholders Agreement also provides that USA Waste and
Messrs. Moorehead and Drury will use their best efforts to establish and
maintain an Executive Committee of the Board of Directors consisting of five
directors and to cause the Executive Committee to include the two directors
designated by the Rangos Shareholders.
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FINANCING ARRANGEMENTS
Pursuant to requirements negotiated in connection with the Merger
Agreement, USA Waste and Chambers developed a plan for the financing of certain
of Chambers' obligations, including a $6,800,000 obligation that was due in
January 1995 and $70,000,000 in payments required pursuant to the settlement
agreements with respect to the shareholder litigation (the "Settlement
Agreements"). See "Description of Chambers -- Legal Proceedings." The purpose of
the financing plan, the requirements for which were imposed by Chambers as a
condition to proceeding with the negotiation and execution of the Merger
Agreement, was to provide Chambers with the ability to fund these payment
obligations pending the Merger and in the event that the parties were
subsequently unable or unwilling to proceed with the Merger. The financing plan
was set forth in a letter agreement executed on December 19, 1994. To provide
for the payment of the $6,800,000 obligation, USA Waste agreed (i) to accelerate
to January 30, 1995 the payment of $2,500,000 on certain promissory notes owing
by USA Waste to Chambers with respect to a previous transaction and (ii) to
enter into a letter of intent pursuant to which USA Waste would agree to acquire
certain assets from Chambers and make a deposit of $4,300,000 to be applied
against the purchase price for such assets. These payments were made and a
letter of intent was executed providing for the purchase of certain assets,
including a hauling company in Charlotte, North Carolina and a landfill and a
collection facility in Lake, Mississippi, for a total purchase price of
$7,600,000. The letter of intent will expire upon the Merger. In the event the
Merger Agreement is terminated, the closing of the asset purchase will occur
within 75 days after such termination. To provide for the funding of the initial
$25,000,000 settlement payment due upon final approval of the settlement of the
shareholder litigation, USA Waste agreed to make an advance purchase of airspace
rights at certain of Chambers' landfills in the aggregate amount of $25,000,000.
Such payment would be made within 30 days after final approval of the Settlement
Agreement and expiration of the applicable appeal period. To provide for the
payment of the $45,000,000 settlement payment on the shareholder litigation, USA
Waste and Chambers have agreed to negotiate an agreement for the purchase by USA
Waste from Chambers of an asset or group of assets or airspace rights mutually
selected by USA Waste and Chambers and having a fair market value of not less
than $45,000,000. Payment of such amount is required not later than one year
from the date of final approval of the Settlement Agreements and expiration of
the applicable appeal period. In the event Chambers completes a refinancing of
its current indebtedness, including amounts due with respect to the shareholder
litigation, USA Waste's obligation to finance the $45,000,000 payment will lapse
and USA Waste will have an option to require Chambers to repurchase, and
Chambers will have an option to require USA Waste to sell, any unused airspace
purchased in advance by USA Waste.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain material Federal income tax
consequences of the Merger to holders of Chambers Common Stock under the Code,
but does not deal with all tax consequences of the Merger that may be relevant
to Chambers stockholders in light of their particular circumstances, such as the
tax consequences to Chambers stockholders who do not hold their Chambers Common
Stock or Chambers Class A Common Stock as a capital asset, foreign persons, or
persons who acquired their shares in compensatory transactions. Furthermore, no
foreign, state, or local tax considerations are addressed herein.
THIS SUMMARY SHOULD NOT BE REGARDED AS A SUBSTITUTE FOR AN INDIVIDUAL
ANALYSIS OF THE TAX CONSEQUENCES OF THE MERGER TO A CHAMBERS STOCKHOLDER. EACH
CHAMBERS STOCKHOLDER SHOULD CONSULT A TAX ADVISOR REGARDING THE PARTICULAR
FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO SUCH
STOCKHOLDER'S OWN SITUATION.
Chambers has received from its counsel, Thorp, Reed & Armstrong, an opinion
(the "Opinion") to the effect that neither Chambers nor its stockholders will
recognize any gain or loss for federal income tax purposes as a result of
consummation of the Merger, except to the extent that such stockholders receive
cash in lieu of a fractional share of USA Waste Common Stock. In addition,
Thorp, Reed & Armstrong has opined, based upon representations from USA Waste,
that implementation of the Reincorporation will not alter its Opinion. Thorp,
Reed & Armstrong shall confirm the Opinion as of the Effective Time. The Opinion
is subject to certain qualifications and assumptions as noted therein and is
based on certain representations of USA Waste, Acquisition, Chambers, and
affiliates of Chambers. Included among these representations is a
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<PAGE> 50
representation by Chambers that following the Merger it will hold at least 90%
of the fair market value of its net assets, at least 70% of the fair market
value of its gross assets, at least 90% of the fair market value of
Acquisition's net assets and at least 70% of the fair market value of
Acquisition's gross assets held immediately prior to the Merger. Chambers
stockholders should be aware that this discussion and the Opinion is based upon
counsel's interpretation of the Code, applicable Treasury regulations, judicial
authority, and administrative rulings and practice, all as of the date hereof.
There can be no assurance that future legislative, judicial, or administrative
changes or interpretations will not adversely affect the accuracy of the
statements and conclusions set forth herein. Any such changes or interpretations
could be applied retroactively and could affect the tax consequences of the
Merger. Chambers stockholders should be aware that the Opinions will not be
binding upon the Internal Revenue Service (the "Service") and the Service will
not be precluded from adopting a contrary position.
Assuming the Merger qualifies as a reorganization under Section 368(a) of
the Code, the following Federal income tax consequences will occur:
(a) no gain or loss will be recognized by USA Waste, Acquisition or
Chambers in connection with the Merger;
(b) no gain or loss will be recognized by a holder of Chambers Common
Stock or Chambers Class A Common Stock who exchanges all of his shares of
Chambers Common Stock or Chambers Class A Common Stock solely for shares of
USA Waste Common Stock in the Merger;
(c) the aggregate tax basis of the shares of USA Waste Common Stock
received by a Chambers stockholder in the Merger (including any fractional
share not actually received) will be the same as the aggregate tax basis of
the Chambers Common Stock or Chambers Class A Common Stock surrendered in
exchange therefor;
(d) the holding period of the shares of USA Waste Common Stock
received by a Chambers stockholder in the Merger will include the holding
period of the shares of Chambers Common Stock or Chambers Class A Common
Stock surrendered in exchange therefor, provided that such shares of
Chambers Common Stock or Chambers Class A Common Stock are held as capital
assets at the Effective Time; and
(e) a Chambers stockholder receiving cash in lieu of a fractional
share will recognize gain or loss upon such payment equal to the
difference, if any, between such stockholder's basis in the fractional
share (as described in paragraph (c) above) and the amount of cash
received. Such gain or loss will be a capital gain or loss if the Chambers
Common Stock or Chambers Class A Common Stock is held as a capital asset at
the Effective Time.
Even if the Merger qualifies as a tax-free reorganization, a recipient of
USA Waste Common Stock could recognize gain to the extent that such shares were
considered by the Service to be received in exchange for consideration other
than Chambers Common Stock or Chambers Class A Common Stock. All or a portion of
such gain may be taxable as ordinary income. Gain would be recognized to the
extent that a Chambers stockholder was treated by the Service as receiving
(directly or indirectly) consideration other than USA Waste Common Stock in
exchange for his or her Chambers Common Stock or Chambers Class A Common Stock.
A successful challenge by the Service to the tax-free reorganization status
of the Merger would result in a Chambers stockholder recognizing taxable gain or
loss with respect to the difference between the stockholder's basis in his or
her shares and the fair market value, as of the Effective Date, of the USA Waste
Common Stock received in exchange therefor. In such event, a stockholder's basis
in the USA Waste Common Stock so received would equal its fair market value and
the holding period for such stock would begin on the Effective Date.
The Federal income tax consequences summarized above are for general
information only. Each Chambers stockholder should consult a tax advisor as to
the particular consequences of the Merger that may apply to such stockholder,
including the application of the state inheritance and gift tax laws and of
state, local, and foreign laws.
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<PAGE> 51
NET OPERATING LOSS CARRYFORWARDS
Chambers' federal income tax returns for 1988 through 1992 are currently
under examination by the Service. Chambers has reached tentative agreement with
the Service regarding the tax treatment of certain costs and expenses deducted
for financial statement purposes in these open tax years. That agreement is
subject to the approval of the Joint Committee on Taxation. Based on this
tentative agreement, Chambers estimates its consolidated tax net operating loss
carryforwards to be approximately $232 million at December 31, 1994, the
majority of which expire in 2007.
The net operating loss carryforwards will be adjusted for the effect of the
proposed settlement of the Chambers' shareholder litigation. The amount of the
net operating loss will be subject to adjustment as actual shareholder claims
are paid in accordance with the proposed settlement. For a description of the
shareholder litigation and the proposed settlement, see "Description of
Chambers -- Legal Proceedings."
Section 382 of the Code generally provides that following an "ownership
change," a corporation's (the "Loss Corporation") ability to utilize net
operating loss carryforwards will be subject to an annual limitation ("the
Section 382 Limitation") equal to the product of (i) the fair market value of
the Loss Corporation's stock at the time of the ownership change and (ii) the
long-term tax-exempt rate published by the Service at the time of the ownership
change (currently 6.21%). In determining the fair market value of a Loss
Corporation's stock, any capital contributions received by the Loss Corporation
as part of a plan a principal purpose of which is to avoid or increase the
Section 382 Limitation is disregarded. Any capital contribution made to the Loss
Corporation within the two years preceding the ownership change is generally
treated as part of a plan to avoid or reduce the Section 382 Limitation.
Under Section 382 the determination of whether an "ownership change" has
occurred is based on ownership shifts involving persons or groups that are or
are deemed to be "5-percent shareholders" of a Loss Corporation as defined in
Section 382 and the regulations thereunder that have occurred during the three
years preceding any ownership shift. While the Merger represents an ownership
shift under Section 382 and although a complete analysis has not been made,
Chambers does not expect to experience an ownership change as defined in Section
382 as a result of the Merger after considering other ownership shifts involving
5-percent shareholders of Chambers that have occurred during the three years
prior to the Effective Time.
While Chambers does not expect to experience an ownership change as a
result of the Merger, certain future ownership shifts involving persons or
groups that are or are deemed to be 5-percent shareholders of Chambers that
occur during the three years subsequent to the Effective Time (the "NOL Testing
Period") may result in an ownership change under Section 382 and limit USA
Waste's ability on an annual basis to utilize Chambers' net operating loss
carryforwards after the date of such ownership change. Ownership shifts that
may, individually or collectively, result in an ownership change include, but
are not limited to: (i) the acquisition by a person or group of 5% or more of
the outstanding shares of USA Waste Common Stock, (ii) certain dispositions by
John G. Rangos, Sr., a 5-percent shareholder of Chambers within the meaning of
Section 382, of shares of USA Waste Common Stock, (iii) certain acquisitions by
John G. Rangos, Sr. or Robert F. Smith, who would become a 5-percent shareholder
of Chambers within the meaning of Section 382, of shares of USA Waste Common
Stock, or (iv) the issuance by USA Waste of a relatively small number of shares
of USA Waste Common Stock (including upon exercise of currently outstanding
warrants or conversion of currently outstanding warrants or conversion of
currently outstanding convertible debentures) in any taxable year.
Since USA Waste can control neither the ownership shifts identified in
clauses (i), (ii), and (iii) of the preceding sentence nor certain transactions
that fall within clause (iv), no assurance can be given that an ownership change
will not occur during the NOL Testing Period. Because of the number of ownership
shifts that will have occurred relating to Chambers as of the Effective Time,
the amount of collective ownership shifts that must occur during the NOL Testing
Period in order to trigger an ownership change could involve as little as
approximately two percent of the outstanding shares of USA Waste Common Stock.
In addition, USA Waste may decide that it is advisable to undertake an equity
offering during the NOL Testing Period of a number of shares that individually,
or collectively with other ownership shifts that have occurred subsequent to the
Effective Time, results in an ownership change.
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The actual Section 382 Limitation will depend on the fair market value of
USA Waste Common Stock and the applicable long-term tax-exempt rate at the time
of the ownership change. Assuming a market value of $15.50 per share, which was
the closing price of USA Waste Common Stock on May 8, 1995, and applying the
current long-term tax-exempt rate published by the Service of 6.21%, the Section
382 Limitation (assuming no adjustment for any built-in-gain) for any taxable
year ending after the ownership change would be approximately $26.7 million. Any
unused net operating loss carryforwards may be carried forward on a cumulative
basis for up to 15 years from the year in which the loss was generated. In
addition, if Chambers has a net built-in-gain as defined in Section 382 of the
Code and if built-in-gains are recognized for tax purposes over the next five
years, the Section 382 Limitation may be increased by the amount of recognized
built-in-gain. On the other hand, if Chambers has a net built-in-loss, then
certain items which would otherwise be deductible for tax purposes over the next
five years would not be deductible to the extent they exceed the Section 382
Limitation. Chambers cannot definitively determine if a built-in-gain or
built-in-loss exists subject to the final settlement of the audit by the
Service.
Regulations governing the filing of consolidated returns by affiliated
groups of corporations also may limit the use of net operating loss
carryforwards of a corporation. Subject to certain regulations discussed below,
if an acquired company is a member of an affiliated group filing consolidated
returns, any of the acquired corporation's pre-acquisition net operating loss
carryforwards which continue to be usable by the acquired corporation will
become "separate return limitation year" ("SRLY") net operating losses and hence
will be usable only against the acquired corporation's profits, not against the
acquiring corporation's profits or the profits of other members of the acquiring
corporation's consolidated group. If, however, the shareholders of the acquired
corporation receive in the acquisition more than 50% of the fair market value of
the stock of the acquiring corporation (as a result of owning stock in the
acquired corporation) and a consolidated return is filed for the first year
ending after the acquisition, then the transaction is a reverse acquisition
under the consolidated return rules. Proposed regulations would clarify the
application of the reverse acquisition rules to certain transactions (such as a
reorganization described in Section 368(a)(2)(E)). Under such regulations, the
acquired corporation's consolidated group is treated as remaining in existence
(with the acquiring company as the new parent) and the acquiring corporation's
consolidated group is treated as terminating for purposes of the consolidated
return regulations. Chambers has advised that its pre-acquisition stockholders
will receive more than 50 percent of the fair market value of USA Waste's stock
in the acquisition as a result of owning Chambers' stock. Thus, assuming that
the former stockholders of Chambers receive more than 50 percent of the fair
market value of the stock of USA Waste in the exchange, there should be a
reverse acquisition and pursuant to such regulations, the Chambers consolidated
group would remain in existence. If the Merger is treated as a reverse
acquisition, Chambers' net operating loss carryforwards would not be SRLY net
operating losses and hence would generally be usable (subject to any other
limitation, including the Section 382 Limitation discussed above) against the
profits of USA Waste or any other member of the Chambers-USA Waste consolidated
group.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for using the "pooling
of interests" method of accounting pursuant to Opinion No. 16 of the Accounting
Principles Board. The pooling of interests method of accounting assumes that the
combining companies have been merged from inception, and the historical
financial statements for periods prior to consummation of the Merger are
restated as though the companies have been combined from inception.
One of the conditions to the Merger is the receipt by USA Waste of a letter
from its independent accountants, Coopers & Lybrand L.L.P., that the Merger will
qualify as a "pooling of interests" for accounting and financial reporting
purposes.
GOVERNMENT AND REGULATORY APPROVALS
Transactions such as the Merger are reviewed by the Antitrust Division of
the Department of Justice (the "Department of Justice") and the Federal Trade
Commission (the "FTC") to determine whether they comply with applicable
antitrust laws. Under the provisions of the HSR Act, the Merger may not be
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consummated until such time as the specified waiting period requirements of the
HSR Act have been satisfied. USA Waste and Chambers filed notification reports
with the Department of Justice and FTC under the HSR Act on March 1, 1995, and
March 10, 1995, respectively, and the waiting period expired on April 9, 1995.
At any time before or after the Effective Time, the Department of Justice
and FTC or a private person or entity could seek under the antitrust laws, among
other things, to enjoin the Merger or to cause USA Waste to divest itself, in
whole or in part, of Chambers or of other businesses conducted by USA Waste.
There can be no assurance that a challenge to the Merger will not be made or
that, if such a challenge is made, USA Waste and Chambers will prevail.
USA Waste and Chambers are not aware of any other governmental or
regulatory approvals required for consummation of the Merger, other than
compliance with applicable federal and state securities laws.
SETTLEMENT OF CERTAIN CHAMBERS LITIGATION
Chambers and its affiliates became defendants in a number of federal and
state lawsuits arising from an announcement of a change in Chambers' accounting
method in March 1992 and a subsequent $362 million reduction in retained
earnings as of December 31, 1991. In addition, in 1992, the Commission initiated
an investigation with respect to Chambers' accounting method and the accuracy of
its financial statements and into the possibility that persons or entities had
traded in Chambers' securities on the basis of inside information prior to the
announcement of the change in accounting method. On February 24, 1995, Chambers
and shareholder representatives executed definitive agreements providing for the
settlement and dismissal of the shareholder litigation and the payment of
approximately $80,000,000 by Chambers. Such payment may be increased upon
consummation of the Merger or a comparable transaction, with the size of such
increase depending upon the amount of consideration received by the Chambers
stockholders. On March 22, 1995, the court granted preliminary approval of the
settlements and the distribution of notices to Chambers' stockholders and the
plaintiff class members regarding the settlements. A hearing upon the fairness,
reasonableness and adequacy of the proposed settlements has been scheduled for
May 19, 1995. In connection with the Commission investigation, on May 9, 1995,
the Commission announced the filing of a complaint against Chambers alleging
that Chambers violated the antifraud provisions of the Securities Act and the
antifraud, reporting, internal controls and recordkeeping provisions of the
Exchange Act. Chambers simultaneously consented, without admitting or denying
the allegations, to the entry of an order enjoining it from violating certain
provisions of the Securities Act and the Exchange Act and requiring Chambers to
pay a civil penalty of $500,000. For a description of the lawsuits, the
settlement agreements and the Commission investigation, see "Description of
Chambers -- Legal Proceedings." Consummation of the Merger is conditioned upon
the shareholder litigation having been fully and irrevocably settled and upon
agreement of the Commission to a consent order with respect to the Commission's
investigation as to Chambers accounting method and the accuracy of its financial
statements upon terms and conditions satisfactory to USA Waste.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of USA Waste Common Stock received by Chambers stockholders in
connection with the Merger have been registered under the Securities Act and,
except as set forth below, may be traded without restriction. The shares of USA
Waste Common Stock issued in the Merger and received by persons who are deemed
to be "affiliates" (as that term is defined in Rule 144 under the Securities
Act) of Chambers prior to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 under the Securities Act (or, in
the case of persons who become affiliates of USA Waste, Rule 144 under the
Securities Act) or as otherwise permitted under the Securities Act. The Merger
Agreement provides that Chambers and USA Waste will use their best efforts to
cause each of their principal executive officers, directors, and affiliates to
deliver to USA Waste and/or Chambers on or prior to the Effective Time a written
agreement to the effect that such persons will not offer to sell, sell, or
otherwise dispose of any shares of USA Waste Common Stock issued in the Merger
except, in each case, pursuant to an effective registration statement or in
compliance with Rule 145 or in a transaction which, in the opinion of legal
counsel satisfactory to USA Waste, is exempt from the registration requirements
of the Securities Act and, in any case, until after
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the results covering 30 days of post-Merger combined operations of USA Waste and
Chambers have been filed with the Commission, sent to shareholders of USA Waste,
or otherwise publicly issued.
Under Commission guidelines interpreting generally accepted accounting
principles, the sale of USA Waste Common Stock or Chambers Common Stock and
Chambers Class A Common Stock by an affiliate of either USA Waste or Chambers
generally within 30 days prior to the Effective Time or thereafter prior to the
publication of financial statements that include a minimum of at least 30 days
of combined operations of USA Waste and Chambers after the Effective Time could
preclude "pooling of interests" accounting treatment for the Merger.
ELECTION OF USA WASTE DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
The following nine current directors of USA Waste have been nominated for
election as directors at the USA Waste Annual Meeting: Donald F. Moorehead, Jr.,
John E. Drury, David Sutherland-Yoest, Earl E. DeFrates, George L. Ball, Robert
A. Mosley, John D. Spellman, Gene A. Meredith, and Richard J. Heckmann.
If the Board Classification Proposals are approved, (i) Messrs.
Sutherland-Yoest, Mosley, and Heckmann will be designated Class I directors and
elected for a term of one year expiring at the 1996 annual meeting of
shareholders and until their successors are elected and qualified, (ii) Messrs.
Moorehead, Spellman, and Meredith will be designated Class II directors and
elected for a term of two years expiring at the 1997 annual meeting of
shareholders and until their successors are elected and qualified, and (iii)
Messrs. Drury, DeFrates, and Ball will be designated Class III directors and
elected for a term of three years expiring at the 1998 annual meeting of
shareholders and until their successors are elected and qualified. If the Board
Classification Proposals are not approved, the nine directors elected will serve
as Directors until the next annual meeting and until their successors are
elected and qualified.
At the Effective Time, USA Waste, Donald F. Moorehead, Jr. and John E.
Drury will enter into the Shareholders Agreement with the Rangos Shareholders
that, among other things, will provide certain rights to the Rangos Shareholders
to name or participate in the naming of members to the Board of Directors of USA
Waste and to name certain members of the Executive Committee of the Board of
Directors of USA Waste. See "The Merger and Related Transactions -- Shareholders
Agreement." Accordingly, at the Effective Time, Messrs. DeFrates, Spellman,
Mosley, and Meredith have indicated that they would resign from their respective
seats on the USA Waste Board of Directors and the resulting vacancies would be
filled by John G. Rangos, Sr. and Alexander W. Rangos, the two directors
designated by the Rangos Shareholders, and William E. Moffett and Peter J.
Gibbons, who would be approved by the Executive Committee of the Board of
Directors. Mr. Gibbons would become a Class I director, John G. Rangos, Sr. and
Mr. Moffett would become Class II directors, and Alexander W. Rangos would
become a Class III director. The Shareholders Agreement will remain in effect
until the aggregate number of shares of USA Waste Common Stock beneficially held
by the Rangos Shareholders and their affiliates is less than five percent of the
outstanding shares of USA Waste Common Stock. Immediately after the Effective
Time, the Rangos Shareholders will control approximately 20.8% of the voting
stock of USA Waste, and Donald F. Moorehead, Jr. and John E. Drury will
collectively control approximately 5.0% of such stock.
Unless a shareholder requests that voting of his proxy be withheld for any
one or more of the nominees for directors by so directing on the proxy card, the
shares represented by the proxy will be voted FOR election of the nine nominees
described below. If any nominee becomes unavailable for any reason, then the
shares represented by proxy will be voted FOR the remainder of the listed
nominees and for such other nominees as may be designated by the Board of
Directors of USA Waste as replacements for those who become unavailable. The
three nominees in each class receiving the highest number of affirmative votes
will be elected to the Board of Directors of USA Waste.
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The following table sets forth certain information concerning the persons
who have been nominated for election to the Board of Directors of USA Waste and
the executive officers of USA Waste.
<TABLE>
<CAPTION>
DIRECTOR DIRECTOR
NAME POSITION WITH USA WASTE AGE SINCE CLASS(5)
- ----------------------------------- ----------------------------------- --- -------- --------
<S> <C> <C> <C> <C>
Donald F. Moorehead, Jr.(1)(2)..... Chairman of the Board, Chief 44 1990 II
Development Officer and Director
John E. Drury(1)................... Chief Executive Officer and 51 1994 III
Director
David Sutherland-Yoest(1).......... President, Chief Operating Officer 38 1994 I
and Director
Earl E. DeFrates(1)(6)............. Executive Vice President, Chief 51 1990 III
Financial Officer, Treasurer and
Director
George L. Ball(2)(3)(4)............ Director 56 1991 III
Robert A. Mosley(2)(3)(4)(6)....... Director 60 1987 I
John D. Spellman(3)(4)(6).......... Director 68 1994 II
Gene A. Meredith(6)................ Director 53 1994 II
Richard J. Heckmann................ Director 51 1994 I
Charles A. Wilcox.................. Executive Vice 42
President -- Operations
Gregory T. Sangalis................ Vice President, General Counsel and 39
Secretary
Bruce E. Snyder.................... Vice President, Corporate 39
Controller, and Chief Accounting
Officer
Hubert J. Bourque.................. Vice President -- Environmental 45
Affairs and Chief Compliance
Officer
James R. Jones..................... Vice President -- Engineering 50
Services
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
(4) Member of 1993 Stock Incentive Plan Committee.
(5) Assuming the Board Classification Proposals are approved.
(6) Messrs. DeFrates, Mosley, Spellman and Meredith will resign as directors and
committee members at the Effective Time.
Donald F. Moorehead, Jr. has been Chairman of the Board since October 1,
1990 and Chief Development Officer since May 27, 1994. From October 1, 1990 to
May 27, 1994, he was also Chief Executive Officer. Mr. Moorehead was Chairman of
the Board and Chief Executive Officer of Mid-American Waste Systems Inc.
("Mid-American") from the inception of Mid-American in December 1985 until
August 1990 and continued as a director until February 1991. From 1977 until
1984, Mr. Moorehead served in various management positions with Waste Management
Inc.
John E. Drury has been Chief Executive Officer since May 27, 1994. From
1992 to May 1994, Mr. Drury served as a Managing Director of Sanders Morris
Mundy Inc. ("SMMI"), a Houston based investment banking firm. Mr. Drury served
as President and Chief Operating Officer of BFI from 1982 to 1991, during which
time he had chief responsibility for worldwide operations.
David Sutherland-Yoest has been President, Chief Operating Officer since
May 27, 1994. Prior to joining USA Waste, he was President, Chief Executive
Officer and a director of Envirofil. He joined Envirofil in January 1993 and was
elected a director in March 1993. From September 1989 to June 1992, Mr.
Sutherland-Yoest served as President of Browning-Ferris Industries, Ltd. ("BFI
Ltd."), the Canadian subsidiary of BFI. From January through September 1989, Mr.
Sutherland-Yoest served as Vice-President, Corporate Develop-
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<PAGE> 56
ment, for Laidlaw Waste Systems, Inc. From 1987 to September 1989, Mr.
Sutherland-Yoest was Laidlaw's Regional Vice-President -- Atlantic Region,
located in Columbus, Ohio. From 1981 to 1987, Mr. Sutherland-Yoest served as
District Manager -- Vancouver and District Manager -- Calgary for BFI Ltd.
Earl E. DeFrates has been Chief Financial Officer and Treasurer since
October 1990. Mr. DeFrates joined USA Waste as Vice President Finance in October
1990 and was elected Executive Vice President in May 1994. Prior thereto, Mr.
DeFrates was employed by Acadiana Energy Inc. (formerly Tatham Oil & Gas, Inc.),
serving in various officer capacities including the company's Chief Financial
Officer, since 1980.
George L. Ball has been nonexecutive Chairman of the Board and a director
of SMMI since May 1992. From September 1992 to January 1994, Mr. Ball was a
Senior Executive Vice President of Smith Barney Shearson Inc. From September
1991 to September 1992, Mr. Ball was a consultant to J. & W. Seligman & Co.
Incorporated. In 1982, Mr. Ball was elected President and Chief Executive
Officer of Prudential-Bache Securities, Inc. and in 1986 was elected Chairman of
the Board, serving in such position until his resignation in 1991. He also
served as a member of the Executive Office of Prudential Insurance Company of
America. Prior to joining Prudential, Mr. Ball served as President of E.F.
Hutton Group, Inc. Mr. Ball is also a director of American Ecology Corporation,
Leviathan Gas Pipeline Company, L.P., and BioMedical Waste Systems, Inc. Mr.
Ball is a trustee emeritus of Brown University, a director of the National
Symphony Orchestra, a trustee of the Joint Council on Economic Education, and a
director of the Jefferson Awards.
Robert A. Mosley has been a certified public accountant in Moore, Oklahoma,
since 1960, currently owns Trailers, Unlimited in Moore, Oklahoma, and serves as
President and a director of West Avionics, Inc., Moore, Oklahoma, a company
overseeing bids on government contracts. Mr. Mosley has also served as a
director of First National Bank of Bethany, Bethany, Oklahoma, since 1971.
John D. Spellman has been Of Counsel to the firm of Carney, Badley, Smith &
Spellman, A Professional Corporation, and an Adjunct Professor in Administrative
Law at the Institute of Public Service at Seattle University since 1985. From
1981 to 1985, Mr. Spellman was Governor of the State of Washington. From 1969 to
1981, he served as Executive of King County (Seattle), Washington.
Gene A. Meredith was a Director of Envirofil from March 1993 to May 1994.
From 1989 to the present, he has been active as an investor, as well as a
co-founder, officer and director of two floor trading member firms of the AMEX.
From 1974 to 1989, Mr. Meredith served as BFI's Regional Vice President for the
Pacific Region.
Richard J. Heckmann is Chairman, President, and Chief Executive Officer of
United States Filter Corporation ("U.S. Filter"), a position he assumed in July
1990. Prior to joining U.S. Filter, Mr. Heckmann was a Senior Vice
President -- Investments and Branch Manager of Prudential-Bache Securities in
Rancho Mirage, California. Mr. Heckmann is also a director of The Earth
Technology Corporation and Air Cure, Inc.
Charles A. Wilcox has been Executive Vice President -- Operations of USA
Waste since December 1994. From April 1981 until November 1994, Mr. Wilcox held
positions with BFI including Managing Director of B.F.S.A. LTD (October 1984 to
December 1987) and Regional Vice President, Pacific Region (October 1988 to June
1993). Other assignments with BFI included District Manager, New Orleans;
President -- Special Services, Corporate; and Division Vice
President -- Northern Florida.
Gregory T. Sangalis has been Vice President, General Counsel and Secretary
since April 4, 1995. Prior to joining USA Waste, Mr. Sangalis was employed by
the solid waste subsidiary of WMX Technologies, Inc. serving in various legal
capacities since 1986 and including Group Vice President and General Counsel
from August 1992 to April 1995. Prior to joining WMX, he was general counsel for
Peavey Company.
Bruce E. Snyder has been Vice President, Corporate Controller, and Chief
Accounting Officer since July 1, 1992. Prior to joining USA Waste, Mr. Snyder
was employed by the international accounting firm of Coopers & Lybrand L.L.P.,
serving since 1989 as an audit manager. From 1985 to 1989, Mr. Snyder held
various financial positions with a privately held real estate development and
management company in
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Oklahoma City, Oklahoma, and its affiliated companies, ultimately serving as
Senior Vice President. Mr. Snyder is a certified public accountant in the State
of Oklahoma.
Hubert J. Bourque has been Vice President -- Environmental Affairs and
Chief Compliance Officer since May 1994. From January 1993 to May 1994, Mr.
Bourque was Chief Compliance Officer and Senior Vice President of Environmental
Affairs for Envirofil. From June 1990 to December 1992, Mr. Bourque was
Divisional Vice President -- Environmental Affairs for BFI Ltd. From 1984 to
1990, Mr. Bourque was responsible for the direction of a technical group of 15
consulting professionals whose work involved solid waste planning, landfill and
transfer station design, and hazardous waste management for clients in North
America, the Middle East, the Caribbean and Southeast Asia.
James R. Jones has been Vice President -- Engineering Services since August
1994. From September 1992 through May 1994, Mr. Jones served as Vice President,
Operations Manager for the Kansas City area of Woodward-Clyde Consultants. He
joined Woodward-Clyde in January 1992 as Vice President, National Practice
Manager -- Solid Waste. From 1990 to August 1991, Mr. Jones participated in the
start-up of Equivest Waste Solutions, Inc., which merged with Geowaste, Inc. in
August 1991. From January 1974 to February 1990, he served in various positions
with BFI, including Divisional Vice President, Engineering from 1980 to 1990.
BOARD OF DIRECTORS AFTER THE MERGER
At the Effective Time, Messrs. DeFrates, Spellman, Mosley and Meredith will
resign as directors of USA Waste. At such time, Mr. Drury will become Chairman
of the Board, Mr. Moorehead and John G. Rangos, Sr. will become Vice Chairmen of
the Board, Alexander W. Rangos will become a director and Executive Vice
President for Landfill Development of USA Waste, and Mr. Moffett and Mr. Gibbons
will become directors.
A brief biographical summary of the proposed new directors is presented
below.
John G. Rangos, Sr., age 65, has served as Chairman and Chief Executive
Officer of Chambers since January 1994. Prior thereto, he served as President
and Chief Executive Officer of Chambers from 1973 to January 1994. Mr. Rangos
has been a director of Chambers since 1973, and is the father of John G. Rangos,
Jr., Vice Chairman -- Administration and Technology and Secretary of Chambers,
and Alexander W. Rangos, President and Chief Operating Officer of Chambers. In
connection with the settlement of the Commission's investigation with respect to
Chambers' accounting method and the accuracy of its financial statements, on May
9, 1995, the Commission instituted administrative proceedings against John G.
Rangos, Sr. and three other present and former officers of Chambers. The
Commission found, inter alia, that Mr. Rangos was a cause of Chambers'
violations of the reporting, internal controls and recordkeeping provisions of
the Exchange Act. Mr. Rangos consented to the issuance of a cease and desist
order without admitting or denying the Commission's findings.
Alexander W. Rangos, age 34, has served as President and Chief Operating
Officer of Chambers since January 1994. Prior thereto, he served with Chambers
as Executive Vice President -- Operations and Corporate Development from 1990 to
1994, as Executive Vice President -- Corporate Development from 1985 to 1990,
and as Manager of the Southern Region from 1984 to 1985. Mr. Rangos has been a
director of Chambers since 1985, and is a son of John G. Rangos, Sr., Chairman
and Chief Executive Officer of Chambers, and the brother of John G. Rangos, Jr.,
Vice Chairman -- Administration and Technology, and Secretary of Chambers.
William E. Moffett, age 64, has served as a director of Chambers since
January 1987. In 1992, Mr. Moffett retired as Chairman of the Board and Chief
Executive Officer of Chatham Enterprises, Inc. (real estate development) and
Hazmed, Inc. (environmental services). In May 1985, he retired as President of
Gulf Oil Foundation and as Vice President -- Public Affairs of Gulf Oil
Corporation, having joined Gulf Oil Corporation in 1969 and served in a number
of managerial assignments for that company and its subsidiaries. Mr. Moffett
also serves as a director of Calvin Exploration Company, Inc.
44
<PAGE> 58
Peter J. Gibbons, age 59, has served as a director of Chambers since August
1993. Prior thereto, he was affiliated with the accounting firm of Price
Waterhouse from 1961 until his retirement in July 1993.
MEETINGS, COMMITTEES AND COMPENSATION
The USA Waste Board of Directors held six meetings in 1994. None of the
directors attended fewer than 75% of the Board of Directors' meetings in 1994.
During 1994, USA Waste paid directors who are not employed by USA Waste an
annual fee of $6,000, payable in equal monthly installments. In addition, USA
Waste reimburses directors for their travel and out-of-pocket expenses incurred
in attending Board or committee meetings. Non-employee directors are also
entitled to receive an automatic stock grant each year. See "Executive
Compensation -- Stock Incentive Plans."
The USA Waste Board of Directors has four committees: an Audit Committee, a
Compensation Committee, a Stock Incentive Plan Committee and an Executive
Committee. The Audit Committee reviews external and internal audit plans and
activities, annual financial statements, and the system of internal financial
controls, and approves all significant fees for audit, audit-related and
non-audit services provided by independent auditors. The Audit Committee met
once during 1994. The Compensation Committee reviews and recommends compensation
for USA Waste officers and employees and recommends to the Board of Directors
changes in USA Waste's incentive compensation plans. The Compensation Committee
met once in 1994. The Stock Incentive Plan Committee administers the 1990 Stock
Option Plan and the 1993 Stock Incentive Plan. The Stock Incentive Plan
Committee met once in 1994. The Executive Committee may act for the Board of
Directors when action is required between Board meetings. The Executive
Committee may act on behalf of the Board on all but major corporate matters. All
actions taken by the Executive Committee must be reported at the Board's next
meeting. All of the directors attended all committee meetings of the committees
of which they are members.
Pursuant to the terms of the Shareholders Agreement to be entered into
between USA Waste and the Rangos Shareholders upon consummation of the Merger,
USA Waste and Messrs. Moorehead and Drury are required to use their best efforts
after the Effective Time to establish and maintain an Executive Committee
consisting of five directors and to cause the Executive Committee to include two
directors designated by the Rangos Shareholders. Upon consummation of the
Merger, the Executive Committee will be comprised of Messrs. Moorehead, Drury,
Sutherland-Yoest, John G. Rangos, Sr., and Alexander W. Rangos.
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<PAGE> 59
BENEFICIAL OWNERSHIP OF USA WASTE COMMON STOCK
The following table sets forth information as of May 5, 1995 with respect
to the beneficial ownership of USA Waste Common Stock as of the Record Date by
(1) each owner of more than 5% of USA Waste Common Stock, (2) each director of
USA Waste, (3) certain executive officers of USA Waste, including the Chief
Executive Officer and USA Waste's four most highly compensated officers other
than the Chief Executive Officer who were serving as officers at December 31,
1994, and (4) all executive officers and directors of USA Waste as a group.
Except as otherwise indicated below, each of the entities and persons named in
the table has sole voting and investment power with respect to all shares of
Common Stock beneficially owned.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
----------------------------------------------
OPTIONS OR
WARRANTS
EXERCISABLE OTHER
SOLE VOTING AND WITHIN BENEFICIAL PERCENT
NAME AND ADDRESS INVESTMENT POWER 60 DAYS(1) OWNERSHIP OF CLASS
- -------------------------------------------- ---------------- ----------- --------- --------
<S> <C> <C> <C> <C>
Robert F. Smith............................. 2,506,607 338,500 -- 12.2%
31725 North Route 83
Grayslake, Illinois 62030
Donald F. Moorehead, Jr..................... 1,497,658 505,000 126,369(2) 9.1%
5000 Quorum Dr., Suite 300
Dallas, Texas 75240
John E. Drury............................... 1,054,938 241,500 5,176(3) 5.6%
David Sutherland-Yoest...................... 312,984 115,352 2,000(4) 1.9%
Earl E. DeFrates............................ 7,000 78,000 754(5) *
Bruce E. Snyder............................. 500 8,000 -- *
George L. Ball.............................. 27,196 29,000 36,000(6) *
Robert A. Mosley............................ 21,076 2,000 -- *
John D. Spellman............................ 8,593 40 -- *
Richard J. Heckmann......................... 5,439 -- -- *
Gene A. Meredith............................ 23,174 -- -- *
All directors and officers
as a group (13 persons)................... 2,958,558 984,892 170,299 17.2%
</TABLE>
- ---------------
* Less than 1%.
(1) Any shares issuable to a shareholder upon the exercise of options or
warrants exercisable within 60 days are considered to be outstanding for
purposes of calculating beneficial ownership and the percentage of class
owned by such shareholder and, to the extent such holder is a director or
officer, the percentage of class owned by the directors and officers as a
group.
(2) Includes an aggregate of 122,974 shares owned by Shelley Moorehead, Mr.
Moorehead's spouse, and Mr. Moorehead's children, and an aggregate of 3,394
shares issuable upon conversion of convertible subordinated debentures
owned by Mrs. Moorehead and Mr. Moorehead's children.
(3) Includes 5,176 shares owned by Tanya Drury, Mr. Drury's spouse.
(4) Includes 2,000 shares owned by Mr. Sutherland-Yoest's daughter.
(5) Includes 754 shares issuable upon conversion of convertible subordinated
debentures.
(6) Includes 32,400 shares owned by Susan H. Ball, Mr. Ball's spouse, and an
investment partnership for her children and 3,600 shares owned by Mr.
Ball's stepdaughter.
46
<PAGE> 60
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation. The following is
a report from the Compensation Committee of USA Waste describing the policies
pursuant to which compensation was paid to executive officers of USA Waste
during 1994.
Compensation Policies Applicable to Executive Officers. It is USA Waste's
mission to steadfastly raise USA Waste to a leading position in the solid waste
management industry, with a strong focus on steadily improving earnings and
increasing shareholder value. The Compensation Committee believes USA Waste's
compensation policies should support USA Waste's mission. As outlined below, USA
Waste's executive compensation programs are designed to enable USA Waste to
attract, retain, and motivate the high caliber of executives required in order
to achieve its objective.
In this respect, USA Waste has entered into employment agreements with
Messrs. Moorehead, Drury, Sutherland-Yoest, DeFrates, and Wilcox, pursuant to
which each executive agreed to serve as a full-time employee of USA Waste for
continuous terms of three to five years. A high level of individual and
cooperative performance is encouraged for these and other senior executives who
have contributed to the attainment of the goals of USA Waste by the granting of
annual awards comprised of bonuses, salary adjustments, and the issuance of
stock options under the 1993 Stock Incentive Plan ("Annual Awards").
In the granting of Annual Awards, the Compensation Committee considers the
financial performance and growth of USA Waste, USA Waste's performance relative
to others in its industry, as well as the long-term soundness and financial
integrity of USA Waste. In reviewing USA Waste's financial performance, the
Compensation Committee considers such items as return on equity, earnings per
share improvements, results compared to competitors, business acquisitions and
new markets entered, the assimilation of new acquisitions into USA Waste, and
progress made in projects that will benefit USA Waste in the future. To date,
such Annual Awards for USA Waste's senior executives have been granted on a
discretionary basis.
During 1992, USA Waste commissioned a compensation plan study that remains
under review and consideration by the Compensation Committee. The study's basic
proposal encompasses the concept of an "Annual Award Pool" for senior executives
based on a formula, the key ingredient of which adjusts net income for the
implicit cost of equity capital to arrive at "economic net income." This is an
approximation of the value added, by the senior management, relative to the risk
inherent in the business. Although not a precise measure, it is believed this
guideline correctly aligns the interests of USA Waste's shareholders and
management. A percentage of the calculated economic net income would then be
available for awards to senior executives. Although the granting of Annual
Awards has been discretionary up to now, all previous grants would have been
within the parameters of the compensation plan study had the proposals from such
study been in effect.
Compensation Policy Applicable to the Chief Executive Officer. The
compensation policies applicable to Mr. Drury, Chief Executive Officer of USA
Waste, are the same as noted for other executive officers. The Compensation
Committee considers Mr. Drury's experience and knowledge of the solid waste
management industry to be important to USA Waste's continued growth and
prosperity. Mr. Drury became associated with USA Waste in May 1994 following the
acquisition of Envirofil. At the time of his employment with USA Waste, Mr.
Drury's annual base salary was set at $500,000 following negotiations between
Mr. Moorehead, on behalf of the USA Waste Board of Directors, and Mr. Drury. No
change in Mr. Drury's annual base salary was made in 1994. As part of his
compensation package Mr. Drury was granted a warrant to purchase 850,000 shares
of USA Waste Common Stock at $11.375 per share, the market price of USA Waste
Common Stock at the time of his employment. Such warrant vests 25% a year
commencing on June 1, 1995. Through his investment in Envirofil and previous
investments in USA Waste, Mr. Drury has acquired a significant investment in USA
Waste Common Stock. Although the Compensation Committee believes that Mr. Drury
is compensated fairly, it recognizes that, in addition to his compensation, Mr.
Drury has great incentive for the
47
<PAGE> 61
continued prosperity of USA Waste by reason of his substantial personal
investment in USA Waste Common Stock and the warrant issued to Mr. Drury upon
his employment with USA Waste.
Compensation Committee
George L. Ball
Donald F. Moorehead, Jr.
Robert A. Mosley
Performance Graph. The following performance graph compares the
performance of USA Waste Common Stock to the New York Stock Exchange Composite
Index and to the Smith Barney Shearson Solid Waste Index ("Peer Group Index")
for the period of five years commencing December 31, 1989, and ending December
31, 1994. The graph assumes that $100 was invested on December 31, 1989, in USA
Waste Common Stock and each index and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SBS SOLID NYSE
(FISCAL YEAR COVERED) USA WASTE WASTE INDEX COMPOSITE
--------------------- --------- ----------- ---------
<S> <C> <C> <C>
1989 100 100 100
1990 260 90 93
1991 1007 96 118
1992 828 88 123
1993 628 67 133
1994 628 69 129
</TABLE>
48
<PAGE> 62
Summary Compensation Table. The following table sets forth information
with respect to persons serving as USA Waste's Chief Executive Officer during
1994 and the four most highly compensated executive officers other than the
Chief Executive Officer whose total annual salary and bonus for 1994 exceeded
$100,000 ("named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- -------------------------
OTHER STOCK
NAME AND ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) (SHARES) COMPENSATION
- ------------------------------- ---- -------- -------- ---------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
John E. Drury
Chief Executive Officer(2) 1994 $290,217 $ -- $ -- 850,000(3) $ --
Donald F. Moorehead, Jr. 1994 260,000 110,000 -- 25,000 --
Chairman of the Board and 1993 220,000 100,000 -- 25,000 --
Chief Development Officer(4) 1992 175,000 75,000 -- -- --
David Sutherland-Yoest 1994 251,597 125,000 -- -- --
President and Chief 1993 106,154 100,000 -- 576,652 130,048(6)
Operating Officer(5)
Earl E. DeFrates 1994 155,000 70,000 -- 25,000 --
Executive Vice President, 1993 135,000 72,500 -- 25,000 --
Chief Financial Officer, 1992 120,000 45,000 -- -- --
Secretary and Treasurer
Hubert Bourque 1994 125,000 50,000 -- -- --
Vice President -- Chief 1993 66,346 30,000 35,000 15,000 43,370(8)
Compliance Officer(7)
Norman E. Shepard 1994 85,000 320,000(10) -- 95,000(11) --
President and Chief 1993 150,000 -- -- 70,000 --
Operating Officer(9)
</TABLE>
- ---------------
(1) Includes other annual compensation not properly characterized as salary or
bonus, and excludes the cost to USA Waste of perquisites and other personal
benefits, securities or property the aggregate amount of which, with
respect to any named individual, does not exceed 10% of their total annual
salary and bonus.
(2) Mr. Drury joined USA Waste on May 27, 1994.
(3) Mr. Drury was granted a warrant to purchase 850,000 shares of USA Waste
Common Stock at the time of the Envirofil acquisition to induce Mr. Drury
to join USA Waste.
(4) Mr. Moorehead was Chief Executive Officer until May 27, 1994.
(5) Mr. Sutherland-Yoest joined USA Waste in May 1994. From January 1993 to May
1994, he was the President and Chief Executive Officer of Envirofil.
(6) Includes $85,048 to compensate Mr. Sutherland-Yoest for loss of salary
under an agreement with his previous employer resulting from his employment
with Envirofil, and $45,000, which represents a signing bonus received upon
commencement of his employment.
(7) Mr. Bourque joined USA Waste in May 1994. From January 1993 to May 1994, he
was Senior Vice President -- Environmental Affairs and Chief Compliance
Officer of Envirofil.
(8) Includes $23,730 to compensate Mr. Bourque for loss of salary with his
previous employer and $20,000 which represents a signing bonus received
upon commencement of his employment.
(9) Mr. Shepard was President and Chief Operating Officer of USA Waste from
August 1993 to May 27, 1994.
(10) Mr. Shepard entered into a termination agreement whereby upon his
termination with USA Waste, he received $320,000.
(11) Stock options granted on July 1, 1994, under USA Waste's 1993 Stock
Incentive Plan to replace an equivalent number of options previously
granted to Mr. Shepard.
Employment Agreements. Messrs. Drury and Moorehead are each parties to
employment agreements with USA Waste, which have continuously renewing five-year
terms until age 65 and which provide for the payment of minimum annual base
salaries and for the participation by the employee in all USA Waste benefit
plans and programs. Messrs. Sutherland-Yoest, Wilcox and Sangalis are parties to
similar agreements with USA Waste, but which have continuously renewing three
year terms. In addition, Mr. Drury's employment
49
<PAGE> 63
agreement provides that USA Waste will purchase his residence in Houston, Texas
for $1,375,000, the fair market value of such residence at June 1, 1994.
The employment agreements include provisions governing compensation and
severance benefits upon termination of employment with USA Waste and upon
certain changes of control of USA Waste (which term specifically excludes the
Merger). The agreements may be terminated by USA Waste other than for cause (as
defined in the agreements) on the date five years (three years in the case of
Messrs. Sutherland-Yoest, Wilcox, and Sangalis) after such notice is given.
During that ensuing period, the employee would continue his employment on a
part-time basis and be available to consult with USA Waste. Generally, the
employee's compensation while on part-time status would be 75% of the average of
the employee's compensation (including salary and bonus) for the two highest of
the three years prior to the employee going on part-time status.
In the event of a change of control of USA Waste, the employee may elect to
receive a lump sum payment equal to three times the employee's average
annualized base compensation includable in gross income over the five taxable
years preceding the tax year in which the change of control occurs if, following
such change in control, USA Waste seeks to terminate such officers without cause
or takes any action adverse to such officers without their consent with respect
to, among other things, their duties, level of compensation, or benefits. The
election by the employee to take the change of control payment would be in lieu
of other benefits and rights under such employee's agreement except, generally,
amounts payable under pension, insurance, and similar plans, reimbursement for
legal and other advisory expenses and certain stock option and indemnification
rights.
Mr. DeFrates also currently has an employment agreement with USA Waste.
Pursuant to the terms of his agreement, Mr. DeFrates has agreed to serve as a
full-time employee of USA Waste for a period of three years (until September 26,
1997) with automatic three-year extensions thereafter unless the agreement is
terminated by either party. The agreement provides for a minimum annual salary
and for the participation by Mr. DeFrates in all USA Waste benefit programs. The
employment agreement includes provisions governing termination and changes in
control of USA Waste.
The employment agreement entered into by Mr. DeFrates provides that if Mr.
DeFrates voluntarily terminates his employment with USA Waste, USA Waste will
pay him severance pay equal to 70% of his base salary in effect at termination
for a period of three years. In addition, in the event there is a change in
control of USA Waste after which USA Waste seeks to terminate him without cause
or takes any action adverse to him without his consent with respect to, among
other things, his duties, level of compensation, or benefits, USA Waste is
required to pay Mr. DeFrates a lump sum equal to three times the sum of his base
salary in effect at termination and the highest bonus he received in the
three-year period prior to termination.
Mr. Bourque also currently has an employment agreement with USA Waste.
Pursuant to the terms of his agreement, Mr. Bourque has agreed to serve as a
full-time employee of USA Waste for a period of two years (until June 1, 1996)
with automatic one-year extensions thereafter unless the agreement is terminated
by either party. The agreement provides for a minimum annual salary and for the
participation by Mr. Bourque in all USA Waste benefit programs. If Mr. Bourque
is terminated without cause, USA Waste is obligated to pay him a lump-sum
payment equal to his base salary for the greater of the remaining term of his
agreement or 12 months.
In the event that Messrs. Drury, Moorehead, Sutherland-Yoest, DeFrates,
Wilcox, Sangalis, or Bourque were terminated without cause during 1995 (or if
Mr. DeFrates elected to terminate his agreement), the annual compensation on
part-time status or severance payment would be approximately $375,000, $258,750,
$218,531, $122,500, $14,063, $0, and $125,000, respectively, subject to a
cost-of-living adjustment. If a change in control were to occur in 1995 and
Messrs. Drury, Moorehead, Sutherland-Yoest, DeFrates, Wilcox or Sangalis elected
to take the change in control payment, they would receive approximately
$870,651, $940,000, $874,127, $742,500, $56,250, and $0, respectively.
The current annual salaries of Messrs. Drury, Moorehead, Sutherland-Yoest,
DeFrates, Wilcox, Sangalis, and Bourque are $500,000, $300,000, $300,000,
$175,000, $225,000, $175,000, and $125,000, respectively.
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<PAGE> 64
Upon consummation of the Merger, USA Waste will enter into an employment
agreement with Alexander W. Rangos similar to the employment agreements with
Messrs. Moorehead and Drury, and into consulting agreements with John W. Rangos,
Sr. and John W. Rangos, Jr. See "The Merger and Related
Transactions -- Conflicts of Interest."
Stock Incentive Plans. At USA Waste's 1990 Annual Meeting of Shareholders,
the shareholders
approved USA Waste's 1990 Stock Option Plan (the "1990 Plan") pursuant to which
stock options, incentive stock options, and stock appreciation rights to
purchase up to 900,000 shares of USA Waste Common Stock could be granted to
officers, directors, and key management employees of USA Waste and its
subsidiaries. No stock appreciation rights were issued pursuant to the 1990
Plan. At USA Waste's 1993 Annual Meeting of Shareholders, the shareholders
approved USA Waste's 1993 Stock Incentive Plan (the "1993 Plan") pursuant to
which stock options, incentive stock options, reload options, alternate
appreciation rights, limited rights, automatic stock awards, and stock bonus
awards to purchase up to 1,000,000 shares of Common Stock may be granted to
officers, directors, and key management employees of USA Waste and its
subsidiaries. The 1993 Plan is administered by the Compensation Committee. In
connection with the acquisition of Envirofil, USA Waste assumed all of the
outstanding options under the Envirofil 1993 Stock Option Plan (the "Envirofil
Plan"), which options were converted to options to purchase USA Waste Common
Stock on the basis of .20 shares of USA Waste Common Stock for each share of
Envirofil common stock at a price equal to five times the stated option price.
No additional options have been granted under the Envirofil Plan.
During 1994, options to purchase an aggregate of 324,000 shares of USA
Waste Common Stock were granted at an average price of $12.28 per share. No
options have been granted at less than fair market value on the date of grant.
As of December 31, 1994, options to purchase a total of 1,504,628 shares
have been granted under the 1990 and 1993 Plans and the Envirofil Plan at
exercise prices ranging from $2.50 to $19.39 per share, with a weighted average
exercise price per share of $13.35. Of the options outstanding at December 31,
1994, 605,382 are held by current executive officers and directors and 183,676
are currently exercisable, with the remaining outstanding options exercisable in
various annual increments over the next five years.
Under the 1993 Plan, directors of USA Waste who are not officers or
employees of USA Waste automatically are granted on January 1 of each year in
which they are a director a stock bonus equal to the number of shares of USA
Waste Common Stock determined by dividing $5,000 by the closing price for USA
Waste Common Stock on December 31 of the previous year.
The following table sets forth information concerning the grant of stock
options during 1994 to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATE OF STOCK
SHARES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME GRANTED FISCAL 1994 (PER SHARE) DATE 5% 10%
- ----------------------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
John E. Drury.......... 850,000(1) 72.4% $11.38 5/31/2002 $4,616,395 $11,050,074
Donald F. Moorehead,
Jr................... 25,000(2) 2.1 12.52 1/03/2004 150,217 424,596
David
Sutherland-Yoest..... -- -- -- -- -- --
Earl E. DeFrates....... 25,000(2) 2.1 11.38 1/03/2004 178,842 453,221
Hubert Bourque......... -- -- -- -- -- --
Norman E. Shepard...... 95,000(3) 8.1 11.25 7/01/2004 672,131 1,703,312
</TABLE>
- ---------------
(1) Warrant granted on June 1, 1994, in connection with Mr. Drury's employment
as Chief Executive Officer. Such warrant becomes exercisable as to 25% of
the shares covered thereby on each anniversary.
51
<PAGE> 65
(2) Stock options granted on January 3, 1994, under USA Waste's 1993 Stock
Incentive Plan. Twenty percent of each option became exercisable on January
3, 1995, and, subject to acceleration provisions, an additional 20% becomes
exercisable each year thereafter.
(3) Stock options granted on July 1, 1994, under USA Waste's 1993 Stock
Incentive Plan to replace an equivalent number of options previously
granted to Mr. Shepard. Such options were fully vested upon grant.
(4) The potential realizable value of each grant of options assuming that the
market price of the underlying security appreciates in value from the date
of grant to the end of the option term at the rates of 5% and 10%
compounded annually.
The following table sets forth information concerning the exercise of stock
options during 1994 by USA Waste's named executive officers:
OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
DECEMBER 31, 1994 OPTIONS AT
(SHARES) DECEMBER 31, 1994(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Drury................... -- -- -- 850,000 $ -- $ --
Donald F. Moorehead, Jr......... -- -- 38,000 67,000 49,875 33,250
David Sutherland-Yoest.......... -- -- 346,057 230,705 2,919,858 --
Earl E. DeFrates................ -- -- 71,000 69,000 241,125 33,250
Hubert Bourque.................. -- -- 3,000 12,000 -- --
Norman E. Shepard............... -- -- 95,000 -- 11,875 --
</TABLE>
- ---------------
(1) Computed based upon the difference between aggregate fair market value based
on NYSE closing price less the aggregate exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During 1994, Messrs. Ball, Mosley, and Moorehead served on the Compensation
Committee of the Board of Directors. Mr. Moorehead was the only member of the
Compensation Committee who has ever served as an officer or employee of USA
Waste. During 1994, no executive officer of USA Waste served as (i) a member of
the compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served on the
Compensation Committee, (ii) a director of another entity, one of whose
executive officers served on the Compensation Committee, or (iii) a member of
the compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of USA Waste.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1993, Terry W. Patrick resigned as the President and Chief
Operating Officer of USA Waste to become the President and a director of EDM
Corporation, a newly formed Texas corporation ("EDM"). EDM was organized for the
purpose of acquiring and developing landfills and solid waste collection and
transfer operations that do not meet the acquisition requirements of USA Waste.
USA Waste has invested $400,000 in EDM in return for a 15% equity interest and
agreed to provide a line of credit of up to $5,600,000 to EDM at an interest
rate equal to the greater of 8 1/2% or the prime rate plus two percent. USA
Waste has a right of first refusal to acquire any landfills, collection, or
other operations that EDM wishes to sell. In June 1994, Norman E. Shepard,
formerly President of USA Waste, replaced Mr. Patrick as President of EDM.
In February 1993, USA Waste purchased a 19% equity interest in WPP, Inc.,
an Ohio corporation ("WPP"), for $190,000. WPP was engaged in the development of
landfill projects and provided consulting, engineering, and permit acquisition
services in connection with the development of landfills. In connection
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with such acquisition, USA Waste hired William J. Kozuh as Vice
President-Landfill Operations and WPP agreed to pay USA Waste a management fee
of $10,000 per month. Mr. Kozuh was a founder and Vice President of WPP and
owned a 35% equity interest. Mr. Moorehead and Mr. Patrick each purchased from
the existing shareholders of WPP a 5% equity interest in WPP contemporaneously
with USA Waste for $50,000 each. In October 1993, Mr. Patrick sold one-half of
his interest to Mr. Moorehead for $50,000 and one-half to Timothy J. Salopak,
President and co-founder of WPP, for $25,000. On March 30, 1994, Mr. Moorehead
sold his 7 1/2% interest to Mr. Salopak for $70,000. On March 30, 1994, USA
Waste purchased 81% of the outstanding capital stock of WPP for $810,000 from
Mr. Salopak.
Following its acquisition of WPP, USA Waste sold WPP's landfill development
projects to third parties. These sales included a landfill project in Gila Bend,
Arizona. In connection with such sales, USA Waste entered into an agreement
pursuant to which (i) the purchaser of the Gila Bend project may require USA
Waste to repurchase the Gila Bend project, following its completion and
permitting and if it meets certain standards, for $5,000,000 or (ii) if the
purchaser sells the project to a third party, USA Waste is entitled to a share
of any proceeds in excess of $5,000,000. USA Waste has entered into an agreement
to assign its rights and obligations under such agreement to EDM. USA Waste and
EDM believe that the Gila Bend project if and when completed and permitted will
have a value significantly greater than $5,000,000.
In February 1992, Donald F. Moorehead, Jr. and Robert F. Smith each loaned
50,000 shares of USA Waste Common Stock to George O. Moorehead, brother of
Donald F. Moorehead, Jr. George O. Moorehead exchanged such shares for all of
the outstanding shares of the Class A Common Stock of Custom Disposal Services,
Inc., an Arizona corporation ("Custom"). George O. Moorehead also loaned
$2,000,000 to Custom to be used to retire certain loans to Custom's former
shareholders. In addition, Custom executed a $700,000 note to its former
shareholders. In April 1992, Donald F. Moorehead, Jr. purchased the $2,000,000
debt from George O. Moorehead for $2,000,000 and in June he loaned Custom
$700,000 to pay the shareholder note. In July 1992, Custom executed a $2,700,000
note to Donald F. Moorehead, Jr. to memorialize the debt restructuring. In
September 1992, Custom acquired Cactus Disposal, Inc., an Arizona corporation
("Cactus"), from an unaffiliated party for 142,231 shares of Class B Non-Voting
Stock of Custom. Contemporaneously, USA Waste entered into (i) a management
agreement with Custom and its shareholders pursuant to which USA Waste agreed to
provide Custom with certain management services for a fee of $70,000 per month
and (ii) an option agreement to acquire all of the outstanding shares of Custom
in exchange for 242,231 shares (subsequently increased to 262,231 shares) of USA
Waste Common Stock. At the same time, USA Waste loaned $4,320,000 to Custom, a
portion of which was used to repay the note in full to Donald F. Moorehead, Jr.
In May 1993, USA Waste exercised its option and acquired the 100,000 shares of
Class A Common Stock of Custom from George O. Moorehead and the 142,231 shares
of Class B Non-Voting Stock of Custom from the former owner of Cactus in
exchange for 262,231 shares of USA Waste Common Stock.
In May 1993, Donald F. Moorehead, Jr. acquired an approximate 3% interest
in Empire Metals, Inc. ("Empire"), another company owned by the former owner of
Cactus. In May 1993, USA Waste entered into a management agreement with Empire
pursuant to which USA Waste agreed to provide certain administrative,
operational, and managerial services to Empire and Empire agreed to pay USA
Waste a management fee of $70,000 per month. Such agreement expired at December
31, 1993.
In June 1993, Donald F. Moorehead, Jr. acquired approximately a 5%
ownership interest in EMCO Metals & Recycling Corporation ("EMCO"), a company
engaged in scrap metal recycling in Phoenix and owned by the former owner of
Cactus. In October 1993, Custom acquired certain trucks from EMCO for a purchase
price of $191,000 and entered into a three-year service agreement to transport
scrap metal for EMCO on the basis of $80 per haul and $1 per mile.
Contemporaneously, Custom acquired certain trucks, trailers, and roll-off
containers used in the collection and transportation of scrap metal from Capital
Recycling, Inc., an unaffiliated entity, for $998,000. During 1994, Custom, in
the ordinary course of business, also sold scrap metal to EMCO. In connection
with its decision to leave the Phoenix market in October 1994, Custom sold all
of the foregoing vehicles and containers to EMCO for $100,000 in cash and a note
for $895,000 bearing interest at a rate of 9% per annum and payable in eleven
monthly installments of principal and interest of $18,567 and a balloon payment
of $765,083.
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On February 28, 1992, USA Waste borrowed $3,500,000 from George L. Ball, a
director of USA Waste, and two other individuals to complete financing for the
acquisition of Best Pak Disposal, Inc. In connection with this financing, USA
Waste issued an unsecured Subordinated Note due June 30, 1994. In connection
with such loan, USA Waste also issued to the foregoing individuals a warrant to
purchase 252,000 shares of Common Stock at a price of $16.00 per share. On April
14, 1992, the foregoing Subordinated Note was repaid in connection with the
refinancing of the $3,500,000 debt with an unaffiliated party. In connection
with such refinancing, the number of warrants held by the original note holders
was reduced to 89,000 and the exercise price was adjusted to $13.50. The holders
of such warrants have an option to sell such warrant to Messrs. Moorehead and
Smith at a price of $7.00 per share for a 30-day period commencing on April 14,
1995.
In connection with the acquisition of Envirofil in May 1994, SMMI, in its
capacity as financial advisor to Envirofil received a fee of $850,000. Prior to
joining USA Waste, Mr. Drury was a Managing Director and shareholder of SMMI and
remains a director. Mr. Ball is Chairman of the Board and a director of SMMI. In
1992, USA Waste sold $46,000,000 of its 8 1/2% Convertible Subordinated
Debentures Due 2002 in a public offering underwritten by Dillon Read & Co., Inc.
and SMMI. In connection with such offering, USA Waste paid the underwriters
commissions aggregating $1,995,000.
FILING OF REPORTS OF STOCK OWNERSHIP
Under the federal securities laws, USA Waste's directors, executive (and
certain other) officers, and any person holding more than ten percent of USA
Waste Common Stock are required to report their ownership to USA Waste and the
Commission. Specific due dates for these reports have been established by
regulation and USA Waste is required to report in this Joint Proxy Statement and
Prospectus any failure to file by these dates during 1994. All of these filings
were satisfied by USA Waste's director's, officers, and ten percent holders,
except that James R. Jones failed to file on a timely basis his initial report
of ownership on becoming an executive officer of USA Waste, George L. Ball
failed to file on a timely basis one report concerning six transactions (all of
which arose out of the acquisition of Envirofil), Gene A. Meredith failed to
file on a timely basis two reports concerning five transactions, and Donald F.
Moorehead, Jr. failed to file on a timely basis two reports concerning five
transactions.
As of March 1, 1995, USA Waste believes that all directors, officers, and
ten percent holders are current in their filings. In making these statements,
USA Waste has relied on the written representations of its directors, officers,
and ten percent holders and copies of reports that they have filed with the
Commission.
THE REINCORPORATION
The USA Waste Board of Directors has approved and, for the reasons set
forth below, recommends that the shareholders of USA Waste approve a change in
the domicile of USA Waste from Oklahoma to Delaware by means of a merger. The
USA Waste Board of Directors believes that the best interests of USA Waste and
its shareholders will be served by the Reincorporation. The general effect of
the Reincorporation, if consummated, upon the rights of USA Waste's shareholders
will be that USA Waste in the future will be governed by the corporation laws of
Delaware as opposed to the corporation laws of Oklahoma. The effect of the
Reincorporation on the rights of the shareholders is set forth below.
Shareholders are urged to read carefully the following sections of this
Joint Proxy Statement and Prospectus, including the related exhibits, before
voting on the Reincorporation. In this discussion of the Reincorporation
proposal, the term "USA Oklahoma" refers to the existing Oklahoma corporation
and the term "USA Delaware" refers to the new Delaware corporation.
The Reincorporation will be effected by the Reincorporation Merger of USA
Oklahoma into USA Delaware, a wholly owned subsidiary of USA Oklahoma, which was
recently formed for purposes of the Reincorporation. USA Delaware will be the
surviving corporation and its only business immediately after the
Reincorporation will be USA Waste's business. Upon completion of the
Reincorporation Merger, the name of USA Waste will remain "USA Waste Services,
Inc."
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Pursuant to the Agreement and Plan of Merger, a form of which is attached
hereto as Appendix D (the "Reincorporation Merger Agreement"), upon the
effective date of the Reincorporation, each outstanding share of USA Oklahoma
Common Stock will automatically be converted into one share of USA Delaware
common stock, par value $.01 per share ("USA Delaware Common Stock"). Each
certificate representing issued and outstanding shares of USA Oklahoma Common
Stock will continue to represent the same number of shares of Common Stock of
USA Delaware. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF USA OKLAHOMA TO
EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF USA
DELAWARE. However, shareholders may exchange their certificates if they so
choose. Adoption of the proposed amendments will not affect the listing of
shares of the USA Waste Common Stock on the NYSE. After the Reincorporation, the
shares of USA Delaware Common Stock will be traded on the NYSE without
interruption under the symbol "UW", the same symbol under which the shares of
USA Waste Common Stock are presently traded.
Under Oklahoma law, the affirmative vote of a majority of the outstanding
shares of the USA Oklahoma Common Stock is required for approval of the
Reincorporation. The Reincorporation proposal has been approved by each of USA
Oklahoma's and USA Delaware's Board of Directors. The Board of Directors of USA
Delaware is and, following the election of directors at the USA Waste Annual
Meeting will be, comprised of the members of the Board of Directors of USA
Oklahoma.
The Board of Directors of USA Oklahoma recommends a vote in favor of the
Reincorporation proposal at the USA Waste Annual Meeting. If approved by the
shareholders, it is anticipated that the Reincorporation proposal will become
effective as soon as practicable after the meeting, upon the filing of
appropriate documents with appropriate state offices of Oklahoma and Delaware.
However, the Reincorporation Merger may be delayed or abandoned or the
Reincorporation Merger Agreement may be amended (except that the principal terms
may not be amended without shareholder approval) either before or after
shareholder approval has been obtained and prior to the effective date of the
Reincorporation Merger if, in the opinion of the Board of Directors of either
USA Oklahoma or USA Delaware, circumstances arise that make it inadvisable to
proceed.
The discussion contained herein is qualified in its entirety by reference
to the Reincorporation Merger Agreement, the Certificate of Incorporation of USA
Delaware (the "Delaware Certificate of Incorporation") and the Bylaws of USA
Delaware, copies of which are attached hereto as Appendices D, E, and F,
respectively. The Delaware Certificate of Incorporation has been filed with the
Secretary of State of the State of Delaware.
APPROVAL BY USA WASTE SHAREHOLDERS OF THE REINCORPORATION PROPOSAL WILL
CONSTITUTE APPROVAL OF THE REINCORPORATION MERGER AGREEMENT, A COPY OF WHICH IS
SET FORTH AS APPENDIX D TO THIS JOINT PROXY STATEMENT AND PROSPECTUS, AND THE
DELAWARE CERTIFICATE OF INCORPORATION, A COPY OF WHICH IS SET FORTH AS APPENDIX
E TO THIS JOINT PROXY STATEMENT AND PROSPECTUS.
The Reincorporation will effect only a change in the legal domicile of USA
Waste and other changes of a legal nature, certain of which are described in
this Joint Proxy Statement and Prospectus. The Reincorporation will NOT result
in any significant change in the name, business, operations, management, fiscal
year, location of the principal executive offices, assets, or liabilities of USA
Waste. If the Reincorporation proposal is approved, USA Waste expects that the
officers of USA Delaware will be the current officers of USA Oklahoma (except
for the addition of Alexander W. Rangos as Executive Vice President for Landfill
Development). All employee benefit plans (including USA Waste's 1993 Stock
Incentive Plan) will be continued by USA Delaware, and each share of USA Waste
Common Stock outstanding or option issued pursuant to such plans, as the case
may be, will automatically be converted into the same number of shares of USA
Delaware Common Stock or an option to purchase the same number of shares of USA
Delaware Common Stock at the same option price per share, upon the same terms
and subject to the same conditions as set forth in such Plans. Shareholders
should note that approval of the Reincorporation proposal will also constitute
approval of the assumption of the foregoing plans by USA Delaware. USA
Oklahoma's other
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employee benefit plans and arrangements will be continued by USA Delaware upon
the terms and subject to the conditions currently in effect.
If the Reincorporation is completed USA Delaware will be a foreign
corporation transacting business in Oklahoma. Under Oklahoma law, USA Delaware
would be required to obtain a certificate of authority by application to the
Secretary of State of Oklahoma in order to lawfully continue the transacting of
its business in Oklahoma. The management of USA Waste foresees no difficulty in
obtaining such certificate of authority.
PRINCIPAL REASON FOR REINCORPORATION
For many years Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy, has long been a leader in
adopting, construing, and implementing comprehensive, flexible corporate laws
responsive to the legal and business needs of corporations organized under its
laws. The Delaware General Corporation Law is widely regarded as the most
extensive and well-defined body of corporate law in the United States. Because
of Delaware's prominence as the state of incorporation for many major
corporations, both the legislature and courts in Delaware have demonstrated an
ability and a willingness to act quickly and effectively to meet changing
business needs. Moreover, the Delaware courts have rendered a substantial number
of decisions interpreting and explaining Delaware law and public policies with
respect to corporate issues. This is especially true in the areas of (i)
director liability and (ii) contests for corporate control and the related
issues of a board's fiduciary duties in responding to unsolicited tender offers,
aggressive market buying programs, proxy contests and other types of efforts to
acquire control of a corporation or otherwise influence decisions of USA Waste
in a manner that is not in the best interests of USA Waste or its shareholders.
As a result, many corporations have initially chosen Delaware for their state of
incorporation or have subsequently changed their corporate domicile to Delaware
in a manner similar to that proposed by the Board of Directors of USA Oklahoma.
Although the Oklahoma General Corporation Act enacted in 1986 is substantially
similar to and based upon the Delaware General Corporation Law, the Oklahoma
courts have issued few decisions interpreting or explaining the Oklahoma law.
DIRECTOR LIABILITY
Under both Oklahoma and Delaware law corporations may adopt provisions in
their charter documents reducing or eliminating the liability of a director to
the corporation or its shareholders or stockholders for monetary damages for
breach of fiduciary duty as a director. Both USA Oklahoma and USA Delaware
currently have such a provision in their charter documents. However, the courts
of Delaware have more frequently interpreted statutory and charter provisions
regarding the liability of directors and, as a result, may offer more guidance
than the courts of Oklahoma with respect to such provisions. USA Waste believes
that these Delaware provisions, and the case law that has been developed by the
Delaware courts with respect thereto, may enhance its ability to attract and
retain qualified directors.
It should be noted that, in accordance with Delaware law, the Delaware
Certificate of Incorporation does not limit or eliminate liability based on the
following types of claims: (1) liability based on a breach of the director's
duty of loyalty to USA Delaware or its shareholders; (2) liability based on the
payment of an improper dividend or an improper repurchase of USA Delaware's
stock under Section 174 of the Delaware General Corporation Law; (3) liability
for actions or failure to act which the director knew were in violation of law;
(4) liability arising out of intentional misconduct by the director; (5)
liability arising out of any transaction pursuant to which the director received
some improper personal benefit; or (6) liability for actions taken, or a failure
to act, by the director not in good faith.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER AGENTS
Oklahoma law and Delaware Law have substantially similar provisions and
limitations regarding indemnification by a corporation of its officers,
directors, employees and other agents.
The Bylaws of USA Delaware have implemented the applicable statutory
framework. They require that indemnity must be provided to officers and
directors where permitted by statute and provide procedural
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mechanisms for directors and officers to enforce these rights. The protection
afforded by these Bylaws may be extended by the Board of Directors to employees
and other agents of USA Waste.
Other than as described in "Description of USA Waste -- Legal Proceedings,"
there is no pending litigation or proceeding involving a director or officer of
USA Waste where indemnification would be required or permitted. USA Waste is not
aware of any threatened litigation or proceeding which may result in a claim for
indemnification by any director or officer.
CONTESTS FOR CORPORATE CONTROL
Under Section 203 of the Delaware General Corporation Law and Section
1090.3 of the Oklahoma General Corporation Act certain "business combinations"
with an "interested stockholder" of a Delaware corporation (an "interested
shareholder" of an Oklahoma corporation) are prohibited for a period of three
years following the date that such person or entity becomes an "interested
stockholder." Generally, an "interested stockholder" is a person or entity
which, together with its affiliates, (i) owns 15% or more of the outstanding
voting stock of a corporation or (ii) which is an affiliate or associate of the
corporation and was, at any time within the previous three years, the owner of
15% or more of the outstanding voting stock of the corporation.
The term "business combination" is defined broadly to include mergers with
or caused by an interested stockholder, sales or other dispositions of assets of
the corporation or a subsidiary equal to 10% or more of the value of the
corporation's consolidated assets or its outstanding stock to an interested
stockholder, transfer of stock of the corporation or a subsidiary to an
interested stockholder (except for transfers in a conversion or exchange or a
pro rata distribution which does not increase the interested stockholder's
proportionate ownership of a class or series) or any receipt by an interested
stockholder (except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial benefits.
The three-year moratorium imposed on business combinations by Sections 203
and 1090.3 do not apply if (i) prior to a person's becoming an interested
stockholder, the board of directors approves the business combination or the
transaction which resulted in such person becoming an interested stockholder,
(ii) the interested stockholder owns 85% of the corporation's voting stock upon
consummation of the transaction which makes him an interested stockholder
(excluding from the 85% calculation shares owned by directors who are also
officers and shares held by employee stock plans which do not permit employees
to decide confidentially whether to accept a tender offer), or (iii) on or after
the date a person becomes an interested stockholder, the business combination is
approved by the board of directors of the corporation and by two-thirds of the
voting stock not owned by the interested stockholder. Section 203 also permits
an interested stockholder to compete with a tender or exchange offer made by an
unaffiliated third party and approved, or not opposed, by the board of
directors, or with a management sponsored or approved purchase, or certain other
transactions.
The restrictions of Sections 203 and 1090.3 do not apply to any person who
inadvertently becomes an interested stockholder and who, as soon as practicable,
sells sufficient shares to no longer be a 15% stockholder.
The Reincorporation proposal does not reflect knowledge on the part of the
USA Waste Board of Directors or management of any proposed or threatened
takeover or other attempt to acquire control of USA Waste. The USA Waste Board
of Directors is not aware of any tender offer, leveraged buyout, proxy contest,
or other similar transaction involving a change in control of USA Waste that is
now pending or under consideration, except for the Merger. The USA Waste Board
may consider from time to time other plans which could have an anti-takeover
effect. Such plans could include adoption of a shareholder rights plan although
no proposal for a rights plan has been presented to or considered by the Board.
In the event the Merger is consummated, any such rights plan would be considered
by the Board as constituted after the Merger. Other than as described,
management of USA Waste does not currently have under consideration, and does
not have any current intention to propose or adopt any other measures which
might discourage takeovers apart from those proposed in this Joint Proxy
Statement and Prospectus. The Board of Directors
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may, however, adopt or approve such measures in the future, and shareholder
approval may or may not be required at that time.
POSSIBLE NEGATIVE CONSIDERATIONS
The effects of the Reincorporation proposal should be examined in
connection with other measures that have already been or are proposed to be
adopted by USA Waste and that also may have a deterrent effect on unsolicited
overtures for control of USA Waste. USA Waste has proposed that its Certificate
of Incorporation be amended to provide for a classified Board of Directors. The
Certificate of Incorporation of USA Oklahoma has, since its initial organization
in 1987, provided for directors' discretion relating to the issuance of
preferred stock, which provision has also been provided for in the Delaware
Certificate of Incorporation as described below.
The Delaware Certificate of Incorporation provides for classification of
the Board of Directors into three classes of directors. The term of office of
the directors in each class is three years. As a result, at future USA Waste
annual meetings, shareholders will generally vote only for the election of
directors in one class. The charter documents of USA Oklahoma and USA Delaware
prohibit cumulative voting for Directors.
A classified Board of Directors gives the Board of Directors of USA Waste a
greater likelihood of continuity, experience, and stability of leadership and
policy. The Board of Directors of USA Waste therefore believes that
classification of the Board benefits USA Waste. See "Classification of the USA
Waste Board and Related Matters." It should be noted, however, that the
classified Board of Directors may also extend the time required to elect a
majority of the Board even if the majority of shareholders are dissatisfied with
the current Board. The USA Waste Board of Directors believes, however, that on
balance the shareholders are better served by the inclusion of the classified
Board.
The charter documents of both USA Delaware and USA Oklahoma authorize the
respective Boards of Directors to issue 10,000,000 shares of preferred stock,
par value $.01 per share ("Preferred Stock"). The Preferred Stock may be issued
from time to time in one or more series, and each series will have such
designations, rates of dividends, redemption prices, liquidation payments,
voting rights, sinking fund provisions, conversion or exchange rights, and other
special rights as the USA Waste Board of Directors may establish at the time of
issuance. The Preferred Stock may be issued from time to time upon authorization
of the USA Waste Board of Directors, without further approval by the
shareholders unless required by applicable law, and for such consideration as
the Board of Directors may determine and as may be permitted by applicable law.
The Preferred Stock may be used as a means of preventing or dissuading a change
in control or takeover of USA Waste. For example, shares could be issued with a
voting power greater than that of the Common Stock in an effort to dilute the
voting power of persons seeking to obtain control of USA Waste or could be
issued to purchasers who would support the USA Waste Board of Directors in
opposing a takeover proposal.
USA Waste has also proposed that the number of authorized shares of USA
Waste Common Stock be increased from 50,000,000 shares to 150,000,000 shares.
See "Amendment to Increase the Number of Authorized Shares." If approved, this
authorized but unissued USA Waste Common Stock could also be used by USA Waste
to deter an unfriendly takeover by issuing a large number of shares to persons
or entities who support the incumbent management of USA Waste.
Notwithstanding the belief of the USA Waste Board of Directors that the
Reincorporation is in the best interests of the shareholders, shareholders
should consider that one of the effects of Reincorporation may be to discourage
a future transaction. Shareholders should recognize that negotiation does not
assure results that would be superior to a direct approach made to the
shareholders by means of a tender offer, exchange offer, or proxy contest that
is not presented to and approved by the Board. It is possible that unsolicited
and unapproved tender offers and takeover attempts might be made at a time and
in circumstances which are beneficial to and in the interest of shareholders.
Such a transaction might provide shareholders with a substantial premium for
their shares over the then current market prices or provide other substantial
value which a majority of shareholders might believe to be in their best
interests.
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Despite the belief of the USA Waste Board of Directors that the
Reincorporation is in the best interest of USA Oklahoma and its shareholders,
shareholders should also be aware that Delaware law has been publicly criticized
on the grounds that it does not afford minority shareholders the same
substantive rights and protections as are available in a number of other states.
However, there are no material differences between Oklahoma law and Delaware law
with respect to (1) shareholder approval of corporate transactions, (2)
shareholder approval of amendments to charter documents, (3) newly created
directorships, (4) removal of directors, (5) elimination of shareholder power to
call special shareholders' meeting, (6) inspection of books, records and
shareholder lists, (7) appraisal rights, (8) dissolution, (9) dividends, (10)
shareholder action without a meeting, (11) repurchase or redemption of shares,
or (12) proxies.
OTHER CONCERNS
Federal Income Tax Consequences of the Reincorporation. Set forth below is
a summary of certain Federal income tax consequence to USA Oklahoma shareholders
who become holders of USA Delaware Common stock in exchange for USA Oklahoma
Common Stock as a result of the Reincorporation. The statement does not deal
with all aspects of Federal taxation that may be relevant to particular USA
Oklahoma shareholders, such as dealers in securities and certain holders of
stock options or shares acquired upon exercise of stock options. In view of the
individual nature of tax consequences, shareholders are urged to consult their
own tax advisors as to the specific tax consequences to them of the
Reincorporation, including the applicability of federal, state, local and
foreign tax laws.
USA Oklahoma has not requested a ruling from the Service with respect to
the Federal income tax consequences of the Reincorporation under the Code. USA
Oklahoma will, however, receive an opinion from its legal counsel, Snell &
Smith, P.C., substantially to the effect that: (i) the Reincorporation will
constitute a tax-free reorganization under Section 368(a) of the Code; (ii) no
gain or loss will be recognized by holders of Common Stock of USA Oklahoma upon
receipt of Common Stock of USA Delaware pursuant to the Reincorporation; (iii)
the aggregate tax basis of the Common Stock of USA Delaware received by each
shareholder will be the same as the aggregate tax basis of the Common Stock of
USA Oklahoma held by such shareholder at the time of the Reincorporation, and
(iv) the holding period of the Common Stock of USA Delaware received by each
shareholder of USA Oklahoma will include the period for which such shareholder
held the Common Stock of USA Oklahoma surrendered in exchange therefor, provided
that such USA Oklahoma Common Stock was held by such shareholder as a capital
asset at the time of the Reincorporation.
USA Waste will not recognize gain or loss for federal income tax purposes
as a result of the Reincorporation. USA Delaware will succeed, without
adjustment, to the federal income tax attributes of USA Waste.
Accounting Treatment of the Reincorporation. The Reincorporation will be
accounted for as a reorganization of companies under common control in a manner
similar to pooling of interests accounting. Therefore, the historical financial
statements will be carried forward as if the merging companies had been one
company.
Federal and State Regulatory Requirements in Connection with the
Reincorporation. This Joint Proxy Statement and Prospectus has been filed with
the Commission. In addition, if the Reincorporation is approved by the
shareholders and the Reincorporation Merger is consummated, merger documents
will be filed with the appropriate authorities in the State of Oklahoma and
Delaware.
No Dissenters' Rights of Appraisal. Shareholders of USA Oklahoma who
dissent from the Reincorporation proposal and the Reincorporation Merger
Agreement will not have any right to exercise dissenters' rights of appraisal.
Recommendation of the Board of Directors. THE USA WASTE BOARD OF DIRECTORS
RECOMMENDS THAT USA WASTE'S SHAREHOLDERS VOTE FOR THE REINCORPORATION, which
affirmative vote will also constitute approval of the Reincorporation Merger
Agreement and the Delaware Certificate of Incorporation.
Vote Required for Approval. The affirmative vote of a majority of the
outstanding USA Waste Common Stock is required for the approval of the
Reincorporation, the Reincorporation Merger Agreement, and the Delaware
Certificate of Incorporation.
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CLASSIFICATION OF THE USA WASTE BOARD AND RELATED MATTERS
The shareholders of USA Waste are being asked to approve an amendment to
the Certificate of Incorporation of USA Waste whereby: (1) the Board of
Directors shall be divided into three classes, as nearly equal in number as
possible; (2) vacancies in the Board of Directors shall be filled by a majority
vote of the directors then in office; (3) directors may be removed, with or
without cause, only by the affirmative vote of either a majority of the Board of
Directors or the holders of at least 66 2/3% of USA Waste's outstanding voting
shares; and (4) that the foregoing provisions may be amended, altered or
repealed only by the affirmative vote of the holders of at least 66 2/3% of USA
Waste's outstanding voting shares (collectively, the "Board Classification
Proposals"). The provisions of the proposed Board Classification Proposals are
set forth in their entirety in the Articles of Amendment included in Appendix G
attached hereto.
The USA Waste Board of Directors believes that the proposed Board
Classification Proposals would, if adopted, reduce the possibility that a third
party could utilize certain tactics to effect a sudden or surprise change in
control of the Board of Directors of USA Waste without the support of incumbent
directors. However, adoption of the Board Classification Proposals may have
significant effects on the ability of shareholders of USA Waste to change the
composition of the Board of Directors, to affect its policies generally, and to
benefit from transactions that are opposed by incumbent directors. If the Board
Classification Proposals and the Reincorporation are both approved, the Delaware
Certificate of Incorporation will reflect the Board Classification Proposals.
The following comments highlight some specific effects of the Board
Classification Proposals.
CLASSIFIED BOARD
Directors of USA Waste currently are elected annually by USA Waste's
shareholders to serve until the next annual meeting and until their successors
are elected and qualified.
Both Oklahoma and Delaware law permit provisions in a certificate of
incorporation or a by-law approved by shareholders that provide for a classified
board of directors. The Board Classification Proposals provide that directors
shall be classified, with respect to the time for which they individually hold
office, into three classes, as nearly equal in number as possible. One class
would hold office initially for a term expiring at USA Waste's 1996 annual
meeting of shareholders, another class would hold office initially for a term
expiring at the 1997 annual meeting, and another class would hold office
initially for a term expiring at the 1998 annual meeting, with the members of
each class holding office until their successors have been duly elected and
qualified. At each annual meeting following this initial classification and
election, the successors to the class of directors whose terms expire at that
meeting would be elected for a term of office to expire at the third succeeding
annual meeting after their election and until their successors have been duly
elected and qualified. See "Election of USA Waste Directors" as to the
composition of each class of directors if the Board Classification Proposals are
adopted.
The classification of the USA Waste Board of Directors will have the effect
of making it more difficult to change the composition of the Board of Directors.
At least two annual shareholders' meetings, instead of one, will generally be
required for shareholders to effect a change in control of the Board of
Directors, because only a minority of the directors will be elected at each
meeting. Although USA Waste has experienced no problems with respect to the
continuity and stability of its Board of Directors, the Board of Directors
believes that requiring a longer period of time to elect a majority of directors
will help to assure continuity and stability of USA Waste's affairs and policies
in the future since a majority of directors at any given time will have prior
experience as directors of USA Waste. The Board of Directors also believes that
board classification is desirable to help discourage hostile attempts to take
control of USA Waste. However, it should also be noted that the classification
provision of the Board Classification Proposals will apply to every election of
directors, whether or not a change in the Board of Directors would be desirable
in the opinion of some or a majority of the USA Waste's shareholders.
The Board Classification Proposals would also allow the Board of Directors
to increase the number of directors and to fill the resulting vacancies as a
means of preventing a takeover of USA Waste or of diluting the vote of Board
members opposed by a majority of the Board of Directors.
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The USA Waste Board of Directors has also proposed that the USA Waste's
Delaware Bylaws provide for a classified Board and to otherwise conform such
Bylaws with the changes effected by the Board Classification Proposals.
Neither the Oklahoma Certificate of Incorporation nor the Delaware
Certificate of Incorporation permits cumulative voting in the election of
directors. Accordingly, the holders of a majority of the shares of USA Waste
Common Stock can elect all of the directors being elected at any annual meeting
of shareholders for the election of directors.
FILLING VACANCIES
The Board Classification Proposals also provide for the Bylaws of USA
Delaware to (i) require the directors then in office to fill vacancies and newly
created directorships; and (ii) have the appointed directors hold office until
the next annual meeting of shareholders at which the term of the class to which
they have been elected expires. In addition, the Bylaw provisions provide that
no decrease in the number of directors shall shorten the term of an incumbent
director.
Both Oklahoma and Delaware law currently provide that if, at the time of
filling any vacancies or newly created directorships, the directors then in
office constitute less than a majority of the whole Board of Directors, certain
shareholders may apply to a court for an order to hold an election to fill such
vacancies or newly-created directorships, or to replace the directors chosen by
the directors then in office.
The provisions of the Board Classification Proposals relating to the
removal of directors (see "Removal of Directors" below) and the filling of
vacancies are designed to protect the classified Board structure by precluding
the holders of less than 66 2/3% of the shares of USA Waste's stock entitled to
vote generally in the election of directors from removing incumbent directors
and simultaneously gaining control of the Board of Directors by filling the
vacancies created by removal with their own nominees. Moreover, the provision
that newly created directorships are to be filled only by the Board of Directors
would, except as otherwise provided by Oklahoma and Delaware law, prevent any
person seeking majority representation on the Board of Directors from obtaining
such representation simply by enlarging the Board of Directors and filling the
new directorships created thereby with his own nominees.
REMOVAL OF DIRECTORS
USA Waste's Bylaws currently do not address the removal of directors. Both
Oklahoma and Delaware law provide that, unless the Certificate of Incorporation
provides otherwise, shareholders of a corporation with a classified board may
effect the removal of a director only for cause. Although neither Oklahoma nor
Delaware law defines "cause," malfeasance in office, gross misconduct or
neglect, false or fraudulent misrepresentations inducing the director's
appointment, willful conversion of corporate funds, a breach of the obligation
to make full disclosure, incompetency, gross inefficiency, and moral turpitude
generally have been held to constitute cause for removal. The Board
Classification Proposals provide, in general, that any director or directors may
be removed from office at any time, with or without cause, by the affirmative
vote of either 66 2/3% or more of the Board of Directors or the holders of at
least 66 2/3% of the outstanding shares entitled to vote generally in election
of directors.
The provisions relating to the removal of directors and the filling of
vacancies (see "Filling Vacancies" above) would preclude the holders of less
than 66 2/3% of the shares of USA Waste's stock entitled to vote generally in
the election of directors from removing incumbent directors and simultaneously
gaining control of the Board of Directors by filling the vacancies created by
removal with their own nominees.
AMENDMENT, ALTERATION OR REPEAL OF THESE PROVISIONS
Under Oklahoma and Delaware law, amendments to a certificate of
incorporation require the approval of the holders of a majority of the shares of
common stock and a majority of the outstanding shares of each class entitled to
vote thereon as a class. Both Oklahoma and Delaware law also permit provisions
in a certificate of incorporation that require a greater vote than the vote
otherwise required by law for any corporate action. With
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respect to such super-majority provisions, both Oklahoma and Delaware law
require that any amendment, alteration, or repeal thereof be approved by an
equally large super-majority vote. As permitted by these provisions of both
Oklahoma and Delaware law, the Board Classification Proposals would require the
affirmative vote of the holders of at least 66 2/3% of the then outstanding
shares of capital stock of USA Waste entitled to vote generally in the election
of directors, voting together as a single class, to amend, alter, or repeal the
these provisions. Accordingly, in the event that the Board Classification
Proposals are adopted by less than a 66 2/3% vote, shareholders having the same
percentage of voting power as those who voted in favor of its adoption will not
have sufficient voting power to amend, alter, or repeal such amendments at a
later date. The requirement of an increased shareholder vote may prevent a
shareholder or shareholders controlling a majority of USA Waste's Common Stock
from avoiding the requirements of these provisions simply by repealing them.
Thus, the holders of 33 1/3% or more of the shares of stock entitled to vote
could block their future repeal or modification even if such repeal or
modification was deemed beneficial to the holders of more than a majority
(although less than 66 2/3%) of such stock.
Effect of Shareholders Agreement. The filling of vacancies and the removal
of directors may be affected by the Shareholders Agreement. In addition, the
Shareholders Agreement will provide that any amendment to the Certificate of
Incorporation or Bylaws of USA Waste must be approved by at least 66 2/3% of the
Board of Directors. See "The Merger and Related Transactions -- Shareholders
Agreement."
Recommendation of the Board of Directors. The Board Classification
Proposals are being presented to shareholders for their approval as a single
proposal and will either be adopted or rejected in their entirety based on the
vote of shareholders. THE USA WASTE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
DIRECTORSHIP AMENDMENTS.
Vote Required for Approval. The affirmative vote of a majority of the
outstanding shares of USA Waste Common Stock is required for approval of the
Board Classification Proposals.
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES
The authorized capital stock of USA Waste currently consists of 50,000,000
shares of Common Stock, par value $.01 per share, and 10,000,000 shares of
Preferred Stock, par value $.01 per share. On the Record Date, 22,967,256 shares
of USA Waste Common Stock were issued and outstanding, and 7,609,828 shares were
reserved for issuance upon exercise of outstanding options, warrants, and
convertible securities. As of the date of this Joint Proxy Statement and
Prospectus, no shares of Preferred Stock have been issued or are outstanding.
The Preferred Stock may be issued from time to time in one or more series, and
each series will have such designations, rates of dividends, redemptions prices,
liquidation payments, voting rights, sinking fund provisions, conversion or
exchange rights, and other special rights as the Board of Directors of USA Waste
may establish at the time of issuance.
The Merger will require the issuance of approximately 27.8 million shares
of USA Waste Common Stock. In addition to the shares to be issued in connection
with the Merger, the USA Waste Board of Directors believes that it is in the
best interests of USA Waste to have additional shares of USA Waste Common Stock
available for issuance at its discretion for future acquisitions, stock splits,
stock dividends, equity financings, employee benefit plans, and other corporate
purposes. Accordingly, the USA Waste Board of Directors has proposed an
amendment to the Certificate of Incorporation of USA Waste to increase the
number of shares of USA Waste Common Stock available for issuance from
50,000,000 to 150,000,000.
If the proposal is approved by the shareholders of USA Waste as described
below, the additional shares of USA Waste Common Stock may be issued from time
to time upon authorization of the Board of Directors, without further approval
by the stockholders unless required by applicable law or NYSE rules, which
generally require the approval of a majority of USA Waste's shareholders when
USA Waste Common Stock is to be issued if such USA Waste Common Stock has voting
power equal to or in excess of 20% of the voting power outstanding, and for such
consideration as the USA Waste Board of Directors may determine and as may be
permitted by applicable law. The availability of additional shares of USA Waste
Common Stock for issuance will afford USA Waste greater flexibility in acting
upon proposed transactions.
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The increase in authorized shares is not being proposed as a means of
preventing or dissuading a change in control or takeover of USA Waste. However,
use of these shares for such a purpose is possible. Shares of authorized but
unissued or unreserved USA Waste Common Stock and Preferred Stock, for example,
could be issued in an effort to dilute the stock ownership and voting power of
persons seeking to obtain control of USA Waste or could be issued to purchasers
who would support the Board of Directors in opposing a takeover proposal. In
addition, the increase in authorized shares, if approved, may have the effect of
discouraging a challenge for control or making it less likely that such a
challenge, if attempted, would be successful.
The proposed amendment does not change the terms of the USA Waste Common
Stock, which does not have preemptive rights. The additional shares of USA Waste
Common Stock for which authorization is sought will have the same voting rights,
the same rights to dividends and distribution and will be identical in all other
respects to the shares of USA Waste Common Stock now authorized.
Recommendation of the Board of Directors. THE USA WASTE BOARD OF DIRECTORS
RECOMMENDS THAT USA WASTE'S SHAREHOLDERS VOTE FOR THE INCREASE OF THE AUTHORIZED
SHARES OF USA WASTE COMMON STOCK FROM 50,000,000 SHARES TO 150,000,000 SHARES.
Vote Required for Approval. The affirmative vote of a majority of the
outstanding shares of USA Waste Common Stock is required for approval of the
proposed amendment to the Certificate of Incorporation.
AMENDMENT OF THE USA WASTE 1993 STOCK INCENTIVE PLAN
USA Waste has for many years utilized stock incentives as part of its
overall compensation program. The Board of Directors of USA Waste believes stock
options and stock-based incentives play an important role in attracting and
retaining the services of outstanding personnel and in encouraging such
employees to have a greater personal financial investment in USA Waste.
Since 1987, USA Waste has had a stock option plan. The USA Waste
shareholders approved the 1993 Stock Incentive Plan (the "1993 Plan") at the
1993 annual meeting. See "Election of USA Waste Directors -- Executive
Compensation -- Stock Incentive Plans."
The 1993 Plan permits the granting, either alone or in combination, of
"nonqualified" stock options that do not qualify for beneficial treatment under
the Code, incentive stock options under Section 422A of the Code, reload
options, alternate appreciation rights, limited rights, and stock bonuses.
Grants may be made to non-employee directors, officers, and other employees of
USA Waste who are responsible for or contribute to the management, growth,
success, and profitability of USA Waste and who are designated by the committee
that administers the 1993 Plan. Messrs. Ball, Mosley, and Spellman are the
current members of such committee.
Stock options permit the recipient to purchase shares of USA Waste Common
Stock at a fixed price, determined on the date of grant, regardless of the fair
market value on the date of exercise. The holder of an alternative appreciation
right is entitled to receive the excess of the fair market value on the date of
exercise over the grant price of the right. Stock bonuses may provide the
recipient all of the rights of a USA Waste shareholder, including the right to
vote the shares and receive dividends; however the stock may not be transferred
by the recipient until certain restrictions (as determined by the committee)
lapse.
The Board of Directors of USA Waste desires to amend the 1993 Plan to
increase the number of shares of USA Waste Common Stock authorized for granting
of awards under the 1993 Plan from 1,000,000 to 4,000,000, which requires
shareholder approval. As of March 31, 1995, options to acquire and stock bonuses
covering approximately 698,000 shares of USA Waste Common Stock had been granted
under the 1993 Plan and 302,000 shares remained available for future awards. At
the time of the original approval of the 1993 Plan, USA Waste had approximately
10.6 million shares outstanding. USA Waste currently has approximately 23.0
million shares outstanding and if the Merger is approved, will have
approximately 50.8 million shares outstanding. The Board of Directors of USA
Waste believes this amendment is necessary to assure that an adequate number of
shares of USA Waste Common Stock will be available for future award grants in
order to
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provide appropriate incentives to employees of USA Waste (and current employees
of Chambers upon consummation of the Merger).
Recommendation of the Board of Directors. THE USA WASTE BOARD OF DIRECTORS
RECOMMENDS THAT USA WASTE SHAREHOLDERS VOTE FOR THE INCREASE IN THE NUMBER OF
SHARES OF USA WASTE COMMON STOCK THAT MAY BE ISSUED UNDER THE 1993 PLAN FROM
1,000,000 TO 4,000,000.
Vote Required for Approval. The affirmative vote of the holders of a
majority of the shares of USA Waste Common Stock present or represented by proxy
and entitled to vote at the USA Waste Annual Meeting is required for approval of
the proposed amendment to the 1993 Plan.
RATIFICATION OF APPOINTMENT OF AUDITORS
The firm of Coopers & Lybrand L.L.P. was engaged in 1994 to audit USA
Waste's financial statements. The Board of Directors of USA Waste proposes to
continue the services of this firm as certified public accountants to audit USA
Waste's financial statement for 1995. If the appointment of Coopers & Lybrand
L.L.P. is ratified by the shareholders, the firm will audit the financial
statements of USA Waste and its subsidiaries for the current fiscal year and
perform other appropriate accounting services as requested. Coopers & Lybrand
L.L.P. has advised USA Waste that no member of the firm has any financial
interest, direct or indirect, in USA Waste or any of its subsidiaries in any
capacity other than that of public accountants. Representatives of Coopers &
Lybrand L.L.P. will be present at the USA Waste Annual Meeting and available to
answer appropriate questions from shareholders.
Recommendation of the Board of Directors. THE USA WASTE BOARD OF DIRECTORS
RECOMMENDS THAT USA WASTE SHAREHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT
OF COOPERS & LYBRAND L.L.P. AS CERTIFIED PUBLIC ACCOUNTANTS TO AUDIT USA WASTE'S
FINANCIAL STATEMENTS FOR FISCAL 1995.
Vote Required for Approval. The affirmative vote of a majority of the
outstanding shares of USA Waste Common Stock present or represented by proxy and
entitled to vote at the USA Waste Annual Meeting is required for the
ratification of the appointment of Coopers & Lybrand L.L.P. as certified public
accountants to audit USA Waste's financial statements for fiscal 1995.
THE PLAN OF MERGER AND TERMS OF THE MERGER
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that the Merger will become effective at such
time as shall be stated in a Certificate of Merger to be filed with the
Secretary of State of Delaware. It is anticipated that if the Merger Agreement
is approved at the USA Waste Annual Meeting and the Chambers Special Meeting and
all other conditions to the Merger have been satisfied or waived, the Effective
Time will occur within five business days after the date on which the last of
the conditions to closing contained in the Merger Agreement is fulfilled or
waived or at such other time as USA Waste and Chambers shall agree. See
"-- Conditions to the Merger."
MANNER AND BASIS FOR CONVERTING SHARES
At the Effective Time, each outstanding share of Chambers Common Stock and
Chambers Class A Common Stock will be converted into .41667 of a share of USA
Waste Common Stock.
Promptly after the Effective Time, USA Waste will cause The First National
Bank of Boston, which will act as exchange agent (the "Exchange Agent"), to mail
to each record holder of Chambers Common Stock and Chambers Class A Common Stock
immediately prior to the Effective Time, a letter of transmittal and other
information advising such holder of the consummation of the Merger and
instructions for use in effecting the surrender of Chambers Common Stock and
Chambers Class A Common Stock certificates in exchange for USA Waste Common
Stock certificates and cash in lieu of fractional shares. Letters of transmittal
will also be available following the Effective Time at the offices of the
Exchange Agent. After the Effective Time, there will be no further registration
of transfers on the stock transfer books of Chambers of shares of
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Chambers Common Stock and Chambers Class A Common Stock that were outstanding
immediately prior to the Effective Time. SHARE CERTIFICATES SHOULD NOT BE
SURRENDERED FOR EXCHANGE BY STOCKHOLDERS OF CHAMBERS PRIOR TO APPROVAL OF THE
MERGER AND THE RECEIPT OF A LETTER OF TRANSMITTAL.
No fractional shares of USA Waste Common Stock will be issued in the
Merger. Each stockholder of Chambers otherwise entitled to a fractional share
will receive an amount in cash equal to the value of such fractional share based
upon the closing sale price of USA Waste Common Stock on the NYSE composite tape
on the last trading day preceding the Effective Time. No interest will be paid
on such amount, and all shares of Chambers Common Stock held by a record holder
will be aggregated for purposes of computing the number of shares of USA Waste
Common Stock to be issued in the Merger.
Until such time as a holder of Chambers Common Stock or Chambers Class A
Common Stock surrenders his outstanding stock certificate to the Exchange Agent,
together with the letter of transmittal, the shares of Chambers Common Stock or
Chambers Class A Common Stock represented thereby will be deemed from and after
the Effective Time, for all corporate purposes, to evidence the ownership of the
number of full shares of USA Waste Common Stock into which such shares shall
have been converted. Unless and until such outstanding certificates are
surrendered, no dividends payable to the holders of USA Waste Common Stock, as
of any time on and after the Effective Time, will be paid to the holders of such
outstanding certificates. Upon surrender of the certificates previously
representing shares of Chambers Common Stock or Chambers Class A Common Stock,
the holder thereof will receive certificates representing the whole number of
shares of USA Waste Common Stock to which he or she is entitled, cash in lieu of
fractional shares, and the amount of any dividends payable which theretofore
became payable to holders of USA Waste Common Stock on or after the Effective
Time with respect to such shares, without interest thereon.
CHAMBERS OPTIONS
The Merger Agreement provides that USA Waste and Chambers will take such
actions as may be necessary to cause each unexpired and unexercised Chambers
Option to be automatically converted at the Effective Time into an option to
purchase a number of shares of USA Waste Common Stock equal to the number of
Chambers Class A Common Stock that could have been purchased under the Chambers
Option multiplied by the Exchange Ratio, at a price per share of USA Waste
Common Stock equal to the option exercise price determined pursuant to the
Chambers Option divided by the Exchange Ratio, and subject to the same terms and
conditions as the Chambers Option. USA Waste will assume all of Chambers'
obligations with respect to the Chambers Options as so amended and shall, from
and after the Effective Time, make available for issuance upon exercise of any
such options all shares of USA Waste Common Stock covered thereby and amend its
Registration Statement on Form S-8 covering its 1993 Stock Incentive Plan, if
necessary, to cover the additional shares of USA Waste Common Stock subject to
such options granted in replacement of the Chambers Options.
CONDITIONS TO THE MERGER
The respective obligations of USA Waste and Chambers to consummate the
Merger are subject to the satisfaction of the following conditions: (a) the
Merger Agreement and the Merger shall have been approved and adopted by the
requisite vote of the shareholders of USA Waste and the stockholders of Chambers
under applicable law and applicable listing requirements; (b) the USA Waste
Common Stock issuable in the Merger shall have been authorized for listing on
the NYSE subject to official notice of issuance; (c) the waiting period
applicable to consummation of the Merger under the HSR Act shall have expired or
been terminated; (d) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect and no
proceeding for that purpose shall have been instituted by the Commission or any
state regulatory authorities; (e) no preliminary or permanent injunction or
other order or decree by any federal or state court which prevents the
consummation of the Merger shall have been issued and remain in effect (each
party agreeing to use its reasonable efforts to have any injunction, order, or
decree lifted); (f) no action shall have been taken, and no statute, rule, or
regulation shall have been enacted, by any state or federal government or
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governmental agency in the United States which would prevent the consummation of
the Merger or make the consummation of the Merger illegal; (g) all governmental
waivers, consents, orders, and approvals legally required for the consummation
of the Merger and the transactions contemplated hereby, and all consents from
lenders required to consummate the Merger, shall have been obtained and be in
effect at the Effective Time; and (h) Coopers & Lybrand L.L.P., certified public
accountants for USA Waste, shall have delivered a letter, dated the Closing Date
(as hereinafter defined), in form and substance satisfactory to USA Waste and
Chambers, stating that the Merger will qualify as a pooling of interests
transaction under Accounting Principles Board Opinion No. 16.
The obligation of Chambers to effect the Merger is further subject to the
fulfillment of the following additional conditions: (a) USA Waste and
Acquisition shall have performed in all material respects their agreements in
the Merger Agreement required to be performed on or prior to the date on which
the transactions contemplated by the Merger Agreement are consummated (the
"Closing Date") and the representations and warranties of USA Waste and
Acquisition contained in the Merger Agreement shall be true and correct in all
material respects on and as of the date made and on and as of the Closing Date
as if made at and as of such date, and Chambers shall have received a
certificate of the Chairman of the Board and Chief Executive Officer, the
President or a Vice President of USA Waste and of the President and Chief
Executive Officer or a Vice President of Acquisition to that effect; (b)
Chambers shall have received an opinion of its legal counsel, Thorp, Reed &
Armstrong, in form and substance reasonably satisfactory to Chambers, dated the
Closing Date, to the effect that Chambers and the holders of Chambers Common
Stock and Chambers Class A Common Stock (except to the extent any stockholders
receive cash in lieu of fractional shares) will recognize no gain or loss for
federal income tax purposes as a result of consummation of the Merger; (c)
Chambers shall have received an opinion from Andrews & Kurth L.L.P. and/or Snell
& Smith, P.C., counsel to USA Waste and Acquisition, dated the Closing Date,
reasonably satisfactory to Chambers and covering the due incorporation of USA
Waste and Acquisition, the binding nature of the Merger Agreement, the
effectiveness of the Merger, the validity of the USA Waste Common Stock to be
issued in connection with the Merger and such other matters as may be reasonably
requested by Chambers; (d) Chambers shall have received a letter from Coopers &
Lybrand L.L.P., certified public accountants for USA Waste and Acquisition,
dated the date of this Joint Proxy Statement and Prospectus, the effective date
of the Registration Statement, and the Closing Date (or such other date
reasonably acceptable to Chambers) with respect to certain financial information
included in the Registration Statement; (e) since November 28, 1994, (i) there
shall have been no changes that constitute, and (ii) no event or events shall
have occurred which have resulted in or constitute, a material adverse change in
the business, operations, properties, assets, condition (financial or other),
results of operations, or prospects of USA Waste and its subsidiaries, taken as
a whole; (f) all governmental waivers, consents, orders, and approvals legally
required for the consummation of the Merger and the transactions contemplated by
the Merger Agreement shall have been obtained and be in effect at the Closing
Date, and no governmental authority shall have promulgated any statute, rule, or
regulation which, when taken together with all promulgations, would materially
impair the value to USA Waste of the Merger; (g) Chambers shall have received
from J.P. Morgan (or other nationally recognized investment banking firm
reasonably acceptable to USA Waste) an opinion, dated as of the date on which
this Joint Proxy Statement and Prospectus is first distributed to the
stockholders of Chambers, to the effect that the consideration to be received by
the stockholders of Chambers in the Merger is fair, from a financial point of
view, to the holders of Chambers Common Stock and Chambers Class A Common Stock,
and such opinion shall not have been withdrawn.
The obligation of USA Waste to effect the Merger is further subject to the
fulfillment of the following additional conditions: (a) Chambers shall have
performed in all material respects its agreements in the Merger Agreement
required to be performed on or prior to the Closing Date and the representations
and warranties of Chambers contained in the Merger Agreement shall be true and
correct in all material respects on and as of the date made and on and as of the
Closing Date as if made at and as of such date, and USA Waste shall have
received a certificate of the President and Chief Executive Officer or of a Vice
President of Chambers to that effect; (b) USA Waste shall have received an
opinion of its special counsel, Andrews & Kurth L.L.P., in form and substance
satisfactory to USA Waste, dated the Closing Date, to the effect that
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USA Waste and Acquisition will recognize no gain or loss for federal income tax
purposes as a result of consummation of the Merger; (c) USA Waste shall have
received an opinion from Sullivan & Cromwell and/or Thorp, Reed & Armstrong,
special counsel to Chambers, dated the Closing Date, reasonably satisfactory to
USA Waste and covering the due incorporation of Chambers, the binding nature of
the Merger Agreement, the effectiveness of the Merger, and such other matters as
may be reasonably requested by USA Waste; (d) USA Waste shall have received a
letter from Deloitte & Touche LLP, certified public accountants for Chambers,
dated the date hereof, the effective date of the Registration Statement, and the
Closing Date (or such other date reasonably acceptable to USA Waste) with
respect to certain financial information included in the Registration Statement;
(e) USA Waste shall have received from each principal executive officer, each
director, and each other person who is an "affiliate," as that term is defined
in paragraphs (c) and (d) of Rule 145 under the Securities Act, of Chambers
written agreements to the effect that such person will not offer to sell, sell,
or otherwise dispose of any shares of USA Waste Common Stock issued in the
Merger, except, in each case, pursuant to an effective registration statement or
in compliance with Rule 145, or in a transaction which is exempt from the
registration requirements of the Securities Act and, in any case, until after
the results covering 30 days of post-Merger combined operations of USA Waste and
Chambers have been filed with the Commission, sent to shareholders of USA Waste,
or otherwise publicly issued; (f) since November 28, 1994, (i) there shall have
been no changes that constitute, and (ii) no event or events shall have occurred
which have resulted in or constitute, a material adverse change in the business,
operations, properties, assets, condition (financial or other), results of
operations, or prospects of Chambers and its subsidiaries, taken as a whole; (g)
all governmental waivers, consents, orders, and approvals legally required for
the consummation of the Merger and the transactions contemplated by the Merger
Agreement shall have been obtained and be in effect at the Closing Date, and no
governmental authority shall have promulgated and statute, rule, or regulation
which, when taken together with all promulgations, would materially impair the
value to USA Waste of the Merger; (h) certain shareholder litigation and
proceedings involving Chambers shall have been fully and irrevocably settled, a
final, nonappealable order shall have been entered and all claims, demands, and
causes of action pertaining in any way to such litigation or proceedings shall
have been fully and irrevocably released and discharged, all substantially upon
the terms and conditions agreed upon by USA Waste and Chambers or otherwise upon
terms and conditions satisfactory to USA Waste in its sole discretion; (i) the
Commission shall have agreed to a consent order as to a certain investigation of
Chambers and USA Waste shall have determined within 15 business days after being
notified of the terms and conditions thereof that such consent decree is
satisfactory to USA Waste in its sole discretion; and (j) USA Waste shall have
received from DLJ (or other nationally recognized investment banking firm
reasonably acceptable to USA Waste), an opinion reasonably acceptable to USA
Waste, dated as of the date this Joint Proxy Statement and Prospectus is first
distributed to the shareholders of USA Waste, to the effect that the Exchange
Ratio is fair, from a financial point of view to USA Waste's holders of USA
Waste Common Stock, and such opinion shall have not been withdrawn.
Neither USA Waste nor Acquisition has any obligation to consummate the
Merger if any condition to its obligation to consummate the Merger is not
satisfied on or prior to the Closing Date of the Merger, and Chambers has no
obligation to consummate the Merger if any condition to its obligation to
consummate the Merger is not satisfied on or prior to the Closing Date of the
Merger. However, termination of the Merger Agreement will not relieve either
party from liability for any breach of the Merger Agreement. Any of the
conditions to the obligations of USA Waste, Acquisition, or Chambers to
consummate the Merger may be waived by the party that is, or whose shareholders
are, entitled to the benefits thereof.
REPRESENTATIONS AND WARRANTIES OF USA WASTE AND CHAMBERS
In the Merger Agreement, USA Waste and Chambers have made various
representations and warranties relating to, among other things, their respective
businesses and financial condition, the accuracy of their various filings with
the Commission, the satisfaction of certain legal requirements for the Merger,
and the absence of undisclosed liabilities or material litigation matters. The
representations and warranties of each of the parties to the Merger Agreement
will expire upon consummation of the Merger.
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CONDUCT OF THE BUSINESS OF USA WASTE AND CHAMBERS PRIOR TO THE MERGER
Pursuant to the Merger Agreement, Chambers has agreed that, prior to the
Effective Time, and except as otherwise agreed to in writing by USA Waste, it
shall, and shall cause each of its subsidiaries to: (a) conduct their respective
businesses in the ordinary and usual course of business and consistent with past
practice; (b) not (i) amend or propose to amend their respective charter or
bylaws, (ii) split, combine, or reclassify their outstanding capital stock, or
(iii) declare, set aside, or pay any dividend or distribution payable in cash,
stock, property, or otherwise, except for the payment of dividends or
distributions by a wholly owned subsidiary of Chambers; (c) not issue, sell,
pledge, or dispose of, or agree to issue, sell, pledge, or dispose of, any
additional shares of, or options, warrants, or rights of any kind to acquire any
shares of their capital stock of any class or any debt or equity securities
convertible into or exchangeable for such capital stock, except that Chambers
may issue shares upon conversion of convertible securities and exercise of
options outstanding on the date hereof; (d) not (i) incur or become contingently
liable with respect to any indebtedness for borrowed money other than (A)
borrowings in the ordinary course of business or (B) borrowings to refinance
existing indebtedness, (ii) redeem, purchase, acquire, or offer to purchase or
acquire any shares of their capital stock or any options, warrants, or rights to
acquire any of their capital stock or any security convertible into or
exchangeable for their capital stock, (iii) take any action which would
jeopardize the treatment of the Merger as a pooling of interests, (iv) take or
fail to take any action which action or failure to take action would cause
Chambers or its stockholders (except to the extent that any stockholders receive
cash in lieu of fractional shares) to recognize gain or loss for federal income
tax purposes as a result of the consummation of the Merger, (v) make any
acquisition of any assets or businesses other than expenditures for fixed or
capital assets in the ordinary course of business, (vi) sell, pledge, dispose of
or encumber any assets or businesses other than sales in the ordinary course of
business, or (vii) enter into any contract, agreement, commitment, or
arrangement with respect to any of the foregoing; (e) use all reasonable efforts
to preserve intact their respective business organizations and goodwill, keep
available the services of their respective present officers and key employees,
and preserve the goodwill and business relationships with customers, and others
having business relationships with them and not engage in any action, directly
or indirectly, with the intent to adversely impact the transaction contemplated
by the Merger Agreement; (f) confer on a regular and frequent basis with one or
more representatives of USA Waste to report material operational matters and the
general status of ongoing operations; (g) not enter into or amend any
employment, severance, special pay arrangement with respect to termination of
employment, or other similar arrangements or agreements with any directors,
officers, or key employees, except in the ordinary course and consistent with
past practice; provided, however, that Chambers and its subsidiaries shall in no
event enter into any written employment agreement which provides for an annual
base salary in excess of $125,000 and has a term in excess of one year or enter
into or amend any severance or termination arrangement; (h) not adopt, enter
into, or amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, health care, employment, or other employee
benefit plan, agreement, trust, fund, or arrangement for the benefit or welfare
of any employee or retiree, except as required to comply with changes in
applicable law; and (i) maintain with financially responsible insurance
companies insurance on their tangible assets and their businesses in such
amounts and against such risks and losses as are consistent with past practice.
Pursuant to the Merger Agreement, USA Waste has agreed that, prior to the
Effective Time, and except as otherwise agreed to in writing by Chambers, it
shall, and shall cause each of its subsidiaries to: (a) conduct their respective
businesses in the ordinary and usual course of business and consistent with past
practice; (b) not (i) amend or propose to amend their respective charters or
bylaws, (ii) split, combine, or reclassify (whether by stock dividend or
otherwise) their outstanding capital stock, (iii) declare, set aside, or pay any
dividend or distribution payable in cash, stock, property, or otherwise, except
for the payment of dividends or distributions by a wholly owned subsidiary of
USA Waste; (c) not issue, sell, pledge, or dispose of, or agree to issue, sell,
pledge, or dispose of, any shares of USA Waste Common Stock, or any options,
warrants, or rights of any kind to acquire any shares of their capital stock of
any class or any debt or equity securities convertible into or exchangeable for
such capital stock, except for the issuance and sale of shares issuable upon
conversion of convertible securities and exercise of options outstanding on the
date hereof; (d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary course
of business or (B) borrowings to refinance existing indebtedness, (ii) redeem,
purchase,
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acquire, or offer to purchase or acquire any shares of their capital stock or
any options, warrants, or rights to acquire any of their capital stock or any
security convertible into or exchangeable for their capital stock, (iii) take
any action which would jeopardize the treatment of the Merger as a pooling of
interests, (iv) take or fail to take any action which action or failure to take
action would cause USA Waste or its shareholders (except to the extent that any
shareholders receive cash in lieu of fractional shares) to recognize gain or
loss for federal income tax purposes as a result of the consummation of the
Merger, (v) make any acquisition of any assets or businesses other than
expenditures for fixed or capital assets in the ordinary course of business,
(vi) sell, pledge, dispose of or encumber any assets or businesses other than
sales in the ordinary course of business, or (vii) enter into any contract,
agreement, commitment, or arrangement with respect to any of the foregoing; (e)
use all reasonable efforts to preserve intact their respective business
organizations and goodwill, keep available the services of their respective
present officers and key employees, and preserve the goodwill and business
relationships with customers and others having business relationships with them
and not engage in any action, directly or indirectly, with the intent to
adversely impact the transactions contemplated by the Merger Agreement; (f)
confer on a regular and frequent basis with one or more representatives of
Chambers to report material operational matters and the general status of
ongoing operations; (g) not enter into or amend any employment, severance,
special pay arrangement with respect to termination of employment, or other
similar arrangements or agreements with any directors, officers, or key
employees, except in the ordinary course and consistent with past practice;
provided, however, that USA Waste and its subsidiaries shall in no event enter
into in excess of $125,000 and has a term in excess of one year or enter into or
amend any severance or termination arrangement; (h) not adopt, enter into, or
amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, health care, employment, or other employee
benefit plan, agreement, trust, fund, or arrangement for the benefit or welfare
of any employee or retiree, except as required to comply with changes in
applicable law; and (i) maintain with financially responsible insurance
companies insurance on their tangible assets and their businesses in such
amounts and against such risks and losses as are consistent with past practice.
NO SOLICITATION OF ACQUISITION TRANSACTIONS
The Merger Agreement further provides that neither Chambers nor USA Waste
shall, and shall not permit any of its subsidiaries to, initiate, solicit,
negotiate, encourage, or provide confidential information to facilitate, and
each of Chambers and USA Waste shall, and shall cause each of its subsidiaries
to, (i) cause any officer, director, or employee of, or any attorney,
accountant, or other agent retained by it and (ii) use its reasonable best
efforts to cause any financial adviser or investment banker retained by it, not
to initiate, solicit, negotiate, encourage, or provide non-public or
confidential information to facilitate, any proposal or offer to acquire all or
any substantial part of the business and properties of Chambers or USA Waste, or
any capital stock of Chambers or USA Waste, whether by merger, purchase of
assets, tender offer, or otherwise, whether for cash, securities, or any other
consideration or combination thereof ("Acquisition Transactions"); provided,
however, that either Chambers or USA Waste may, in response to an unsolicited
written proposal with respect to an Acquisition Transaction, which proposal
(insofar as it relates to the consideration to be paid to Chambers and its
stockholders) is not subject to a financing condition, furnish (subject to a
confidentiality agreement reasonably acceptable to USA Waste and Chambers)
confidential or non-public information concerning its business, properties, or
assets to a financially capable corporation, partnership, person, or other
entity or group (a "Potential Acquiror") if (i) it shall have given not less
than five business days advance written notice of its intention to do so to the
other party, (ii) its board of directors is advised by one or more of its
independent financial advisors that providing confidential or non-public
information to the Potential Acquiror is likely to lead to an Acquisition
Transaction on terms that would yield a materially higher value to its
stockholders than the Merger, and (iii) based upon advice of its independent
legal counsel, its Board of Directors determines in good faith that there is a
significant risk that the failure to provide such confidential or non-public
information would constitute a breach of its fiduciary duty to its stockholders.
In the event either Chambers or USA Waste shall determine to provide information
or negotiate as described above, or shall receive any offer of the type referred
to above, it shall promptly inform the other party that information is to be
provided, that negotiations are to take place, or that an offer has been
received and shall furnish to the other party the identity of the person
receiving such information or the proponent of the offer, if applicable, and, if
an offer has been received, a description of the material terms thereof.
Chambers or USA Waste may enter
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into a definitive agreement for an Acquisition Transaction which meets the
requirements above with a Potential Acquiror with which it is permitted to
negotiate pursuant to the Merger Agreement, but only if (i) its Board of
Directors shall have duly determined that such Acquisition Transaction would
yield a materially higher value to its stockholders than the Merger and that
execution of such definitive agreement is in the best interests of its
stockholders, (ii) at least ten business days prior to the execution of such
definitive agreement, it shall have furnished the other party with a copy of
such definitive agreement, and (iii) the other party shall have failed within
such ten-day period to offer to amend the terms of the Merger Agreement in order
that the Merger would yield a value to such party's stockholders at least equal
to the Acquisition Transaction. In making the determination required by clause
(i) of the foregoing sentence, the Board of Directors referred to therein shall
consider all relevant considerations, the extent to which the economic benefits
of the Acquisition Transaction differ from the economic benefits contemplated by
the Merger Agreement, the likelihood the Potential Acquiror will be able to
obtain financing to consummate the Acquisition Transaction, the proposed closing
date, the certainty of consummation, antitrust issues, and closing conditions.
USA Waste and Chambers have agreed that the foregoing agreements shall be
specifically enforceable and that specific enforcement and injunctive relief
shall be a remedy properly available to the other party for a breach of such
agreements.
CONDUCT OF THE BUSINESS OF THE COMBINED COMPANIES FOLLOWING THE MERGER
Following the Merger, Chambers will be a wholly owned subsidiary of USA
Waste. Pursuant to the Merger Agreement, the Certificate of Incorporation and
the Bylaws of Acquisition, as in effect immediately prior to the Effective Time,
will be the Certificate of Incorporation and Bylaws of the surviving corporation
until amended as provided therein and under the Delaware General Corporation
Law. Except as otherwise agreed to by Chambers and USA Waste, the officers of
the surviving corporation immediately following the Effective Time shall be the
officers of Chambers in office immediately prior to the Effective Time.
At the Effective Time of the Merger, USA Waste, Donald F. Moorehead, Jr.
and John E. Drury will enter into the Shareholders Agreement with the Rangos
Shareholders that will provide certain rights to the Rangos Shareholders to name
or participate in the naming of members to the Board of Directors of USA Waste,
to name certain members of the Executive Committee of the Board of Directors of
USA Waste, and to require certain matters to be approved by a two-thirds vote of
the Board of Directors. Pursuant to the Shareholders Agreement, USA Waste and
Messrs. Moorehead and Drury will be obligated after the Effective Time, to use
their best efforts to cause John G. Rangos, Sr. and Alexander W. Rangos to be
appointed as directors of USA Waste. In addition, during the term of the
Shareholders Agreement, USA Waste, Messrs. Moorehead and Drury, and the Rangos
Shareholders will use their best efforts to cause the Board of Directors to
include at all times (in addition to the two directors designated by the Rangos
Shareholders) four persons who are approved by at least four members of the
Executive Committee of the Board of Directors and none of whom is an officer or
employee of USA Waste or Chambers. The Shareholders Agreement will also provide
that USA Waste and Messrs. Moorehead and Drury will use their best efforts to
establish and maintain an Executive Committee of the Board of Directors
consisting of five directors and to cause the Executive Committee to include the
two directors designated by the Rangos Shareholders. The Shareholders Agreement
will remain in effect until the aggregate number of shares of USA Waste Common
Stock beneficially held by the Rangos Shareholders and their affiliates is less
than 5% of the outstanding shares of USA Waste Common Stock.
The Shareholders Agreement will also provide that certain actions taken by
USA Waste must be approved by a two-thirds majority of the Board of Directors
including future mergers of USA Waste, the transfer of all or substantially all
of the assets of USA Waste, the issuance of any shares of, or rights to acquire
shares of, the capital stock of USA Waste, any acquisition transaction involving
consideration of more than $5,000,000, any disposition transaction involving
assets having a value of more than $1,000,000, any amendment to the Certificate
of Incorporation, incurrence of debt in excess of $5,000,000, a lease of real or
personal property involving annual payments of more than $1,000,000, and the
approval or modification of annual operating and capital budgets of USA Waste.
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Upon consummation of the Merger, John E. Drury will be Chairman of the
Board of USA Waste, Donald F. Moorehead, Jr. and John G. Rangos, Sr. will become
Vice Chairmen, and Alexander W. Rangos will become Executive Vice President for
Landfill Development. The other executive officers of USA Waste will remain the
same as prior to the Merger.
TERMINATION OR AMENDMENT
The Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after approval by the shareholders of USA Waste and the
stockholders of Chambers, as follows: (a) by the mutual consent of USA Waste and
Chambers, (b) by either USA Waste or Chambers if(i) the Merger is not completed
by July 31, 1995, otherwise than on account of delay on the part of the
Terminating Party or any of its 5% stockholders or any of their affiliates or
associates, (ii) if the Merger is enjoined by a final unappealable court order
not entered at the request of either party or any of its 5% stockholders or any
of their affiliates or associates; (iii) if (x) the Terminating Party receives
an offer from any third party (excluding any affiliate of the Terminating Party
or any group of which any affiliate of the party is a member) with respect to a
merger, sale of substantial assets or other business combination involving the
Terminating Party, (y) the Board of Directors of the Terminating Party
determines, in good faith and after consultation with an independent financial
advisor, that such offer would yield a materially higher value to such party or
its stockholders than the Merger, and (z) the other party fails, within ten
business days after it is notified of such determination and of the terms and
conditions of such offer, to make an offer which is substantially equivalent to,
or more favorable than, such offer, (iv) if (x) a tender/exchange offer is
commenced by a third party (excluding any affiliate of the Terminating Party or
any group of which any affiliate of the Terminating Party is a member) for all
outstanding shares of the Terminating Party, (y) the Board of Directors of the
Terminating Party determines, in good faith and after consultation with an
independent financial advisor, that such offer would yield a materially higher
value for such party or its stockholders than the Merger, and (z) the other
party fails, within 10 business days after it is notified of such
determination,to make an offer which is substantially equivalent to, or more
favorable than, such tender/exchange offer, or (v) if the party other than the
Terminating Party (x) fails to perform in any material respect any material
covenant in the Merger Agreement and (y) does not cure such default in all
material respects within 30 days after written notice of such default is given
by the Terminating Party. However, termination of the Merger Agreement will not
relieve either party from liability for any breach of the Merger Agreement.
The Merger Agreement may only be amended by action taken by the respective
Boards of Directors of the parties or duly authorized committees thereof and
then only by an instrument in writing signed on behalf of each party and in
compliance with applicable law. Such amendment may occur at any time, including
after approval of the Merger Agreement by the shareholders of USA Waste and the
stockholders of Chambers at the Meetings.
TERMINATION FEES
Chambers and USA Waste have each agreed to pay a termination fee to the
other party should certain of the termination rights described in
"-- Termination or Amendment" above be exercised under certain circumstances.
Chambers has agreed to pay USA Waste a fee of $28,000,000, plus the reasonable
out-of-pocket expenses incurred by USA Waste in connection with the Merger
Agreement and the transactions contemplated thereby, if (a) Chambers terminates
the Merger Agreement as described in clauses (b)(iii) or (b)(iv) of
"-- Termination or Amendment" above, or (b) USA Waste terminates the Merger
Agreement as described in clause (b)(iv) of "-- Termination or Amendment" above,
and, prior to one year after such Termination, one or more of the following
events occurs: (i) Chambers is acquired by merger or otherwise by another person
under terms which provide for Chambers and/or its stockholders to receive
consideration having a fair value on the date of the first public announcement
of such merger or other acquisition transaction equal to or greater than that
provided for under the terms of the Merger Agreement; (ii) Chambers enters into
a merger or other agreement which contemplates the acquisition of Chambers by
another person under terms which provide for Chambers and/or its stockholders to
receive consideration having a fair value on the date of the first public
announcement of such merger or other agreement equal to or greater than that
provided for
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under the terms of the Merger Agreement; (iii) another person acquires or
becomes the beneficial owner of more than 50% of the outstanding shares of
Chambers Common Stock and Chambers Class A Common Stock for consideration having
a fair value on the date of such acquisition greater than that provided for
under the terms of the Merger Agreement; (iv) another person acquires all or any
substantial portion of Chambers' assets under terms which provide for Chambers
and/or its stockholders to receive consideration having a fair value on the date
of the first public announcement of such acquisition transaction equal to or
greater than that provided for under the terms of the Merger Agreement; or (v)
Chambers adopts a plan of liquidation relating to all or a substantial portion
of its assets or declares a distribution to its stockholders of all or a
substantial portion of its assets and in connection therewith the stockholders
receive consideration having a fair value on the date of the first public
announcement of such plan of liquidation or dividend declaration equal to or
greater than that provided for under the terms of the Merger Agreement. USA
Waste has agreed to pay Chambers a fee of $21,000,000, plus the reasonable
out-of-pocket expenses incurred by Chambers in connection with the Merger
Agreement and the transactions contemplated thereby, if USA Waste terminates the
Merger Agreement as described in clauses (b)(iii) or (b)(iv) of "-- Termination
or Amendment" above.
EXPENSES
The Merger Agreement provides that, except as described in "-- Termination
Fees" above, all costs and expenses incurred in connection with the Merger
Agreement and the Transactions contemplated thereby shall be paid by the party
incurring such expenses, except that those expenses incurred in connection with
printing this Joint Proxy Statement and Prospectus shall be shared equally by
USA Waste and Chambers.
INDEMNIFICATION
The Merger Agreement provides for the indemnification, to the fullest
extent permitted under applicable law, of the present and former directors,
officers, employees, and agents of Chambers or any of its subsidiaries against
any costs or expenses (including attorneys fees), judgments, fines, losses,
claims, damages, liabilities, and amounts paid in settlement in connection with
any claim, action, suit, proceeding, investigation, whether civil or criminal,
administrative, or investigative, arising out of, relating to, or in connection
with any action or omission occurring prior to the Effective Time (including,
without limitation, acts or omissions in connection with such persons serving as
an officer, director, or other fiduciary in any entity if such service was at
the request or for the benefit of Chambers) or arising out of or pertaining to
the transactions contemplated by the Merger Agreement.
ARRANGEMENTS WITH CERTAIN INDIVIDUALS
Pursuant to the Merger Agreement, Alexander W. Rangos, President and Chief
Operating Officer of Chambers will become a director and Executive Vice
President for Landfill Development of USA Waste following the Merger. USA Waste
has agreed to enter into an employment agreement with Mr. Rangos for a five-year
term at a base salary of $275,000 per year. In addition, at the Effective Time,
USA Waste will enter into a Consulting and Non-Compete Agreement with each of
John G. Rangos, Sr. and John G. Rangos, Jr. providing for annual compensation of
$450,000 and $250,000, respectively, and terms of five years each. See "The
Merger and Related Transactions -- Conflicts of Interest."
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COMPARATIVE RIGHTS OF STOCKHOLDERS OF USA WASTE AND CHAMBERS
The rights of holders of Chambers Common Stock and Chambers Class A Common
Stock are currently governed by Delaware law, Chambers' Certificate of
Incorporation, and Chambers' Bylaws. If the Reincorporation is approved and
becomes effective, the rights of USA Waste's shareholders after the Merger
(including those persons who were stockholders in Chambers prior to the Merger)
will be governed by Delaware law, and the Certificate of Incorporation and
Bylaws of USA Delaware. If the Reincorporation Merger is not approved or is
abandoned, the rights of USA Waste's shareholders after the Merger (including
those persons who were stockholders in Chambers prior to the Merger) will be
governed by Oklahoma law, and USA Waste's Certificate of Incorporation and USA
Waste's Bylaws, as amended.
The Oklahoma General Corporation Act (the "OGCA") is modeled after and
based on the DGCL and is generally amended from time to time to conform to
amendments made in the DGCL. Accordingly, the general corporate law applicable
to holders of Chambers Common Stock and Chambers Class A Common Stock and USA
Waste Common Stock is similar. See "The Reincorporation." The OGCA and the DGCL
contain similar provisions with respect to (i) amendments to the Certificates of
Incorporation and Bylaws of USA Waste and Chambers, (ii) mergers, exchanges,
consolidations, and dissolutions, (iii) the disposition of assets, (iv) newly
created directorships, (v) the removal of directors, (vi) the power to call
special meetings of shareholders, (vii) shareholders' action without a meeting,
(viii) the declaration of dividends, and (ix) dissenters' rights. Neither the
Certificates of Incorporation nor Bylaws of Chambers and USA Waste contain any
special provisions pertaining to business combinations.
The Certificates of Incorporation and Bylaws of USA Waste and Chambers do
not contain any substantial differences with respect to shareholders meetings,
boards of directors, or officers except that the Chambers Certificate of
Incorporation provides for a classified board of directors. If the Board
Classification Proposals are approved, the USA Waste Certificate of
Incorporation will be amended to provide for a classified board of directors
substantially similar to the classified board provided in the Chambers
Certificate of Incorporation. The Chambers Certificate of Incorporation provides
for two classes of Common Stock, the Chambers Common Stock and Chambers Class A
Common Stock, with different voting rights and dividend preferences. The USA
Waste Certificate of Incorporation and the USA Delaware Certificate of
Incorporation provide for one class of common stock. As a result of the Merger,
holders of Chambers Class A Common Stock will lose their preferential dividend
rights and the exclusive rights to elect one-fourth of the number (or the next
higher whole number) of directors while participating in the election of the
remaining directors; holders of Chambers Common Stock will lose their
preferential voting rights.
Moreover, although the Certificates of Incorporation of USA Waste and
Chambers do not contain any provision concerning shareholders' written consent
in lieu of a shareholder meeting, the effect of the absence of such a provision
on each company is different because of dissimilarities in the DGCL and the
OGCA. Thus, with respect to USA Waste, any action required or permitted to be
taken by its shareholders may be taken by shareholders' written consents without
a meeting, without prior notice and without a vote only if such consent is
unanimous; with respect to Chambers, such consent must only be signed by the
same minimum number of stockholders necessary to authorize such action at a
stockholder meeting at which all shares entitled to vote thereon were present
and voted. If the Merger is consummated and the Reincorporation is not approved,
any written consent in lieu of a meeting must be unanimous.
This summary is not intended to be relied upon as an exclusive list of
material rights of shareholders of USA Waste and stockholders of Chambers or a
detailed description and analysis of the provisions discussed and is qualified
in its entirety by the DGCL and the OGCA, and the Certificates of Incorporation
and Bylaws of USA Waste, USA Delaware and Chambers. See "The Reincorporation"
and "Classification of the USA Waste Board and Related Matters."
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USA WASTE AND CHAMBERS
COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following combined historical unaudited pro forma condensed financial
statements are based upon the historical consolidated financial statements of
USA Waste and Chambers included elsewhere in this Joint Proxy Statement and
Prospectus and should be read in conjunction with those consolidated financial
statements and related notes. These combined historical unaudited pro forma
condensed financial statements are not necessarily indicative of the operating
results that would have been achieved had the Merger been consummated as of the
beginning of the periods presented and should not be construed as representative
of future operating results. These combined historical unaudited pro forma
condensed financial statements give effect to the Merger by combining the
results of operations of USA Waste and Chambers using the "pooling of interests"
method of accounting as if the companies had been combined since their
inception.
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USA WASTE AND CHAMBERS
COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1994
The following combined historical unaudited pro forma condensed balance
sheet presents the combined financial position of USA Waste and Chambers as of
December 31, 1994. Such combined unaudited pro forma information is based upon
information derived from the historical balance sheets of USA Waste and Chambers
as of that date, after giving effect to the Merger using the pooling of
interests method of accounting and to the pro forma adjustments described in the
notes to combined historical unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA COMBINED
USA WASTE CHAMBERS ADJUSTMENTS HISTORICAL
--------- --------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 6,613 $ 23,548 $ -- $ 30,161
Accounts receivable, net.................... 19,992 28,961 (188)(a) 48,765
Net assets held for sale.................... -- 9,298 -- 9,298
Notes and other receivables................. 8,072 13,673 (2,500)(a) 19,245
Prepaid expenses and other.................. 2,361 9,286 -- 11,647
-------- --------- --------- ---------
Total current assets................ 37,038 84,766 (2,688) 119,116
Notes and other receivables................... 2,462 5,159 -- 7,621
Property and equipment, net................... 182,415 354,428 (13,286)(a,e) 523,557
Excess of cost over net assets of acquired
businesses, net............................. 73,305 5,934 (10,075)(e) 69,164
Intangible assets............................. 14,375 9,877 -- 24,252
Funds held for escrow requirements and
construction................................ -- 23,506 -- 23,506
Other assets.................................. 13,572 4,828 -- 18,400
-------- --------- --------- ---------
Total assets........................ $323,167 $ 488,498 $ (26,049) $ 785,616
======== ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................ $ 12,023 $ 10,889 $ -- $ 22,912
Accrued liabilities......................... 12,783 34,751 (188)(a) 47,346
Deferred revenues........................... 1,783 4,881 -- 6,664
Current maturities of long-term debt........ 1,830 46,465 -- 48,295
-------- --------- --------- ---------
Total current liabilities........... 28,419 96,986 (188) 125,217
Revolving credit facility..................... 98,000 -- 98,000
Convertible subordinated debentures........... 49,000 -- 49,000
Other long-term debt.......................... 6,903 211,016 (2,500)(a) 215,419
Accrued shareholder litigation settlement..... -- 75,300 -- 75,300
Closure, post-closure and other liabilities... 17,067 41,264 -- 58,331
Deferred income taxes......................... 15,792 (15,792)(e) --
-------- --------- --------- ---------
Total liabilities................... 215,181 424,566 (18,480) 621,267
-------- --------- --------- ---------
Commitments and contingencies................. -- -- -- --
Stockholders' equity:
Preferred stock............................. -- -- -- --
Common stock................................ 227 33,580 (33,302)(c) 505
Additional paid-in capital.................. 95,758 395,121 29,152 (c) 520,031
Retained earnings (deficit)................. 13,962 (360,619) (7,569)(a,e) (354,226)
Less treasury stock, at cost................ (1,961) (4,150) 4,150 (c) (1,961)
-------- --------- --------- ---------
Total stockholders' equity.......... 107,986 63,932 (7,569) 164,349
-------- --------- --------- ---------
Total liabilities and stockholders'
equity............................ $323,167 $ 488,498 $ (26,049) $ 785,616
======== ========= ========= =========
</TABLE>
See notes to combined historical unaudited pro forma condensed financial
statements.
75
<PAGE> 89
USA WASTE AND CHAMBERS
COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
The following combined historical unaudited pro forma condensed statement
of operations for the year ended December 31, 1994, was prepared based upon
information derived from the historical statements of operations of USA Waste
and Chambers for such period, after giving effect to the Merger using the
"'pooling of interests" method of accounting and to the pro forma adjustments
described in the notes to combined historical unaudited pro forma condensed
financial statements.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA COMBINED
USA WASTE CHAMBERS ADJUSTMENTS HISTORICAL
--------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues........................ $176,235 $ 257,989 $ -- $ 434,224
-------- --------- --------- ---------
Costs and expenses:
Operating............................... 101,069 179,542 (23,241)(b) 257,370
General and administrative.............. 23,463 24,796 23,241 (b) 71,500
Merger costs............................ 3,782 -- -- 3,782
Unusual items -- operations............. -- 8,863 -- 8,863
Depreciation and amortization........... 18,785 37,568 (214)(a) 56,139
-------- --------- --------- ---------
147,099 250,769 (214) 397,654
-------- --------- --------- ---------
Income from operations.................... 29,136 7,220 214 36,570
-------- --------- --------- ---------
Other income (expense):
Unusual items -- shareholders litigation
settlement and other litigation
related costs........................ -- (79,400) -- (79,400)
Interest expense........................ (10,385) (23,843) 170 (a) (34,058)
Interest income......................... 591 2,220 (170)(a) 2,641
Other income (expense), net............. 2,249 (372) -- 1,877
-------- --------- --------- ---------
(7,545) (101,395) -- (108,940)
-------- --------- --------- ---------
Income (loss) before income tax provision
(benefit)............................... 21,591 (94,175) 214 (72,370)
Income tax provision (benefit)............ 7,760 (3,931) 79 (e) 3,908
-------- --------- --------- ---------
Income (loss) from continuing
operations.............................. $ 13,831 $ (90,244) $ 135 $ (76,278)
======== ========= ========= =========
Income (loss) per common share from
continuing operations................... $ 0.61 (d) $ (1.35) $ (1.55)(d)
======== ========= =========
Weighted average number of common and
common equivalent shares outstanding.... 21,842 66,789 (38,960)(d) 49,671
======== ========= ========= =========
</TABLE>
See notes to combined historical unaudited pro forma condensed financial
statements.
76
<PAGE> 90
USA WASTE AND CHAMBERS
COMBINED HISTORICAL UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
The following combined historical unaudited pro forma condensed statement
of operations for the year ended December 31, 1993, was prepared based upon
information derived from the historical statements of operations of USA Waste
and Chambers for such year, after giving effect to the Merger using the "pooling
of interests" method of accounting and to the pro forma adjustments described in
the notes to combined historical unaudited pro forma condensed financial
statements.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA COMBINED
USA WASTE CHAMBERS ADJUSTMENTS HISTORICAL
--------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues...................... $93,753 $288,481 $ -- $ 382,234
------- -------- --------- ---------
Costs and expenses:
Operating............................. 49,251 194,355 (26,261)(b) 217,345
General and administrative............ 17,497 23,210 26,261 (b) 66,968
Nonrecurring expenses................. 923 -- -- 923
Unusual items -- operations........... -- (11,851) 13,600 (a) 1,749
Depreciation and amortization......... 10,558 41,764 (100)(a) 52,222
------- -------- --------- ---------
78,229 247,478 13,500 339,207
------- -------- --------- ---------
Income from operations.................. 15,524 41,003 (13,500) 43,027
------- -------- --------- ---------
Other income (expense):
Unusual item -- shareholder litigation
related costs...................... -- (5,500) -- (5,500)
Interest expense...................... (6,856) (29,163) 44 (a) (35,975)
Interest income....................... 1,113 2,663 (44)(a) 3,732
Other income, net..................... 822 900 -- 1,722
------- -------- --------- ---------
(4,921) (31,100) -- (36,021)
------- -------- --------- ---------
Income before income tax provision...... 10,603 9,903 (13,500) 7,006
Income tax provision.................... 5,413 1,600 (995)(e) 6,018
------- -------- --------- ---------
Income from continuing operations....... $ 5,190 $ 8,303 $ (12,505) $ 988
======= ======== ========= =========
Income from continuing operations per
common share.......................... $ 0.26 (d) $ 0.12 $ 0.01 (d)
======= ======== =========
Weighted average number of common and
common equivalent shares
outstanding........................... 18,056 66,788 (38,959)(d) 45,885
======= ======== ========= =========
</TABLE>
See notes to combined historical unaudited pro forma condensed financial
statements.
77
<PAGE> 91
USA WASTE AND CHAMBERS
COMBINED HISTORICAL UNAUDITED PRO FORMA
CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1992
The following combined historical unaudited pro forma condensed statement
of operations for the year ended December 31, 1992, was prepared based upon
information derived from the historical statements of operations of USA Waste
and Chambers for such year, after giving effect to the Merger using the "pooling
of interests" method of accounting and to the pro forma adjustments described in
the notes to combined historical unaudited pro forma condensed financial
statements.
<TABLE>
<CAPTION>
PRO
FORMA
USA PRO FORMA COMBINED
WASTE CHAMBERS ADJUSTMENTS HISTORICAL
------- -------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues.............................. $57,049 $294,310 $ -- $351,359
------- -------- --------- --------
Costs and expenses:
Operating.................................. 28,128 206,761 (25,961)(b) 208,928
General and administrative................. 11,612 37,853 25,961 (b) 75,426
Nonrecurring expenses...................... 6,756 -- -- 6,756
Unusual items -- operations................ -- 44,291 -- 44,291
Depreciation and amortization.............. 5,776 38,363 -- 44,139
------- -------- --------- --------
52,272 327,268 -- 379,540
------- -------- --------- --------
Income (loss) from operations................... 4,777 (32,958) -- (28,181)
------- -------- --------- --------
Other income (expense):
Unusual item -- shareholder litigation
related costs............................ -- (10,853) -- (10,853)
Interest expense........................... (4,212) (31,628) -- (35,840)
Interest income............................ 610 6,132 -- 6,742
Other income, net.......................... 15 377 -- 392
------- -------- --------- --------
(3,587) (35,972) -- (39,559)
------- -------- --------- --------
Income (loss) before income tax provision....... 1,190 (68,930) -- (67,740)
Income tax provision............................ 3,955 1,325 (4,801)(e) 479
------- -------- --------- --------
Loss from continuing operations................. $(2,765) $(70,255) $ 4,801 $(68,219)
======= ======== ========= ========
Loss from continuing operations per common
share......................................... $ (0.20)(d) $ (1.05) $ (1.60)(d)
======= ======== ========
Weighted average number of common and common
equivalent shares outstanding................. 14,878 66,788 (38,959)(d) 42,707
======= ======== ========= ========
</TABLE>
See notes to combined historical unaudited pro forma condensed financial
statements.
78
<PAGE> 92
NOTES TO COMBINED HISTORICAL UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The combined historical unaudited pro forma condensed financial statements
assume the issuance of USA Waste Common Stock in exchange for all outstanding
Chambers Common Stock and Chambers Class A Common Stock. Such statements also
assume that the Merger will be accounted for using the "pooling of interests"
method of accounting pursuant to Opinion No. 16 of the Accounting Principles
Board. The pooling of interests method of accounting assumes that the combining
companies have been merged from their inception, and the historical financial
statements for periods prior to consummation of the Merger are restated as
though the companies have been combined from their inception.
Pursuant to the rules and regulations of the Commission, the combined
historical unaudited pro forma condensed statements of operations exclude the
results of operations associated with discontinued businesses, extraordinary
items and cumulative effects of accounting changes. In addition, the combined
historical unaudited pro forma condensed financial statements do not include an
adjustment for approximately $25 million in estimated nonrecurring costs related
to the Merger which are estimated and expected to be incurred within 12 months
of the transaction date. These Merger related costs consist of approximately $12
million of transaction costs, $11 million of severance and other termination
benefits, and $2 million of nonrecurring costs relating to the integration of
the operations of the combined company.
Certain reclassifications have been made to the historical financial
statements of USA Waste and Chambers to conform to the pro forma presentation.
Such reclassifications are not material to the combined unaudited pro forma
condensed financial statements.
PRO FORMA ADJUSTMENTS
(a) All significant intercompany balance sheet and statement of operations
items between USA Waste and Chambers have been eliminated in the combined
historical unaudited pro forma condensed financial statements. In September
1993, Chambers sold certain of its collection and landfill operations to USA
Waste and, as a result of such sale, Chambers recorded a gain of approximately
$13.6 million. USA Waste accounted for the transaction as a purchase and
allocated the purchase price to the assets acquired. Assuming that USA Waste and
Chambers had been combined from their inception, the gain recorded by Chambers
in 1993 has been removed from the combined historical unaudited pro forma
condensed statement of operations for that year and the assets have been reduced
by that amount, net of related amortization, in the combined historical
unaudited pro forma condensed balance sheet. In addition, the combined
historical unaudited pro forma condensed statements of operations for the years
ended December 31, 1994 and 1993 have been adjusted for the effect of lower
amortization as a result of the reduction in the asset amounts.
(b) Adjustments have been made to reclassify certain Chambers' operating
expenses as general and administrative expenses in the combined historical
unaudited pro forma condensed statements of operations to conform to the pro
forma presentation of USA Waste as if the companies had been combined since
their inception.
(c) The stockholders' equity accounts of Chambers as of December 31, 1994
have been adjusted to reflect the assumed issuance of approximately 27.8 million
shares of USA Waste Common Stock in exchange for all of the outstanding shares
of Chambers Common Stock and Chambers Class A Common Stock (based on the
Exchange Ratio of .41667 of a share of USA Waste Common Stock for each share of
Chambers Common Stock and Chambers Class A Common Stock). The actual number of
shares of USA Waste Common Stock to be issued pursuant to the Merger will be
based upon the number of shares of Chambers Common Stock and Chambers Class A
Common Stock issued and outstanding immediately prior to the consummation of the
Merger.
(d) Pro forma income (loss) from continuing operations per share for each
period is based on the combined weighted average number of shares outstanding,
after giving effect to the issuance of .41667 of a
79
<PAGE> 93
share of USA Waste Common Stock for each share of Chambers Common Stock and
Chambers Class A Common Stock and to preferred stock dividends paid by USA Waste
of $152,000, $582,000 and $565,000 for the years ended December 31, 1992, 1993
and 1994, respectively. The historical USA Waste income from continuing
operations per share has also been adjusted for the preferred stock dividends.
Fully diluted earnings (loss) per share are considered equal to primary earnings
(loss) per share for all periods presented because the addition of potentially
dilutive securities that are not common stock equivalents would have been either
antidilutive or immaterial.
(e) The combined unaudited pro forma condensed financial statements assume
that the Merger qualifies as a "tax-free" reorganization for federal income tax
purposes. As a result of the Merger, certain tax net operating loss
carryforwards will become available to offset future taxable income of the
combined company. Chambers has not recognized any benefit with respect to these
tax net operating loss carryforwards in prior years; however, this pro forma
presentation assumes the recognition of certain of these benefits in the
combined historical unaudited condensed statements of operations only to the
extent that deferred tax liabilities are available to offset the benefit. There
can be no assurance that the tax net operating loss carryforwards will be
utilized or that they will not be subject to limitations See "The Merger and
Related Transactions -- Net Operating Loss Carryforwards."
80
<PAGE> 94
SUPPLEMENTAL INFORMATION RELATING
TO PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
The combined historical unaudited pro forma condensed financial information
for the year ended December 31, 1994 included elsewhere herein gives effect to
certain pro forma adjustments as described in the notes to such information. In
evaluating the Merger, the respective managements of USA Waste and Chambers
considered the impact of certain cost and expense savings and other economic
benefits that are expected to be realized as a result of the Merger. These
adjustments do not include additional cost reductions relating to landfill and
collection operations or additional revenues that may result from volume or
price increases.
Application of the supplemental adjustments described below to the combined
historical unaudited pro forma statement of operations for the year ended
December 31, 1994 would result in the following (in thousands, except per share
amount):
<TABLE>
<S> <C>
Operating revenues........................................................ $434,224
Income from operations.................................................... 69,097
Income from continuing operations......................................... 36,976
Income from continuing operations per common share........................ 0.73
</TABLE>
The adjustments to the pro forma financial information give effect to the
following:
- Certain cost savings and efficiencies of approximately $16 million that
may have been achieved if the combination of USA Waste and Chambers had
occurred as of January 1, 1994. These cost savings and efficiencies are
directly attributable or related to the Merger and are expected to have a
continuing impact on the combined company.
- Removal of shareholder litigation settlement and other litigation related
costs of approximately $79.4 million.
- Removal of approximately $3.8 million in costs incurred in connection
with the merger of USA Waste and Envirofil on May 26, 1994.
- Reduction of (i) interest expense as a result of the assumed reduction in
long-term debt offset by additional interest expense on the $79.4 million
shareholder litigation settlement and other litigation related costs, (ii)
interest income as a result of using available cash and investment
balances to reduce outstanding debt, and (iii) letter of credit fees and
interest costs due to the enhanced credit terms that are expected to be
available to the combined company.
- Removal of other unusual and nonrecurring charges in Chambers' operations
of approximately $12.7 million.
- Reduction of the provision for income taxes to reflect the benefit from
expected utilization of the Chambers' net operating loss carryforwards.
As of January 1, 1995, USA Waste changed the useful life of the excess of
cost over net assets of acquired businesses from 25 years to 40 years to more
appropriately reflect the estimated periods during which the benefit of the
assets will be realized. This change in accounting estimate is expected to have
the effect of reducing amortization expense by approximately $1,350,000 in 1995
on a combined basis.
81
<PAGE> 95
PRINCIPAL STOCKHOLDERS OF USA WASTE AND CHAMBERS
The following table sets forth information with respect to the beneficial
ownership of USA Waste Common Stock as of the Record Date by each owner of more
than 5% of the outstanding USA Waste Common Stock, and the percentage of USA
Waste Common Stock after consummation of the Merger.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
AMOUNT OF ------------------------------
BENEFICIAL BEFORE THE AFTER THE
NAME AND ADDRESS OWNERSHIP MERGER MERGER(1)
------------------------------------- --------- ---------- -------------
<S> <C> <C> <C>
Robert F. Smith...................... 2,845,107(2) 12.2% 5.6%
31725 North Route 83
Grayslake, Illinois 62030
Donald F. Moorehead, Jr.............. 2,129,027(3) 9.1% 4.2%
5000 Quorum Drive, Suite 300
Dallas, Texas 75240
John E. Drury........................ 1,301,614(4) 5.6% 2.6%
500 Quorum Drive, Suite 300
Dallas, Texas 75240
</TABLE>
- ---------------
(1) Upon consummation of the Merger, assuming no change occurs in shares owned
as of the indicated date and that 50,796,281 shares of USA Waste Common
Stock are outstanding on the Effective Time.
(2) Includes 338,500 shares of USA Waste Common Stock that may be acquired by
Mr. Smith pursuant to warrants and stock options exercisable currently or
within 60 days.
(3) Includes 505,000 shares of USA Waste Common Stock that may be acquired by
Mr. Moorehead pursuant to warrants and stock options exercisable currently
or within 60 days, 122,974 shares owned by Mr. Moorehead's spouse and
children, and an aggregate of 3,394 shares issuable upon conversion of
convertible subordinated debentures owned by Mr. Moorehead's spouse and
children.
(4) Includes 241,500 shares of USA Waste Common Stock that may be acquired by
Mr. Drury pursuant to warrants exercisable currently or within 60 days, and
5,176 shares owned by Mr. Drury's spouse.
The following table sets forth information with respect to the beneficial
ownership of Chambers Common Stock and Chambers Class A Common Stock as of
December 31, 1994, by each owner of more than 5% of the outstanding shares of
each said class and the percentage of USA Waste Common Stock after consummation
of the Merger.
<TABLE>
<CAPTION>
TITLE OF CLASS AND PERCENTAGE OF CLASS
AMOUNT --------------------------------
OF BENEFICIAL OWNERSHIP USA WASTE
----------------------- COMMON
CLASS A CLASS A STOCK
NAME AND ADDRESS OF COMMON COMMON COMMON COMMON AFTER THE
BENEFICIAL OWNER STOCK STOCK STOCK STOCK MERGER(1)
- ------------------------------------ --------- --------- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
John G. Rangos, Sr.................. 8,963,120 9,598,120 17.5% 61.6% 15.2%
10700 Frankstown Road
Pittsburgh, PA 15235
John G. Rangos, Jr.(2)(3)........... 2,237,940 2,646,040 4.4% 17.0% 4.0%
10700 Frankstown Road
Pittsburgh, PA 15235
Alexander W. Rangos(2)(3)........... 2,148,340 2,666,040 4.2% 17.1% 4.0%
10700 Frankstown Road
Pittsburgh, PA 15235
Lindner Fund, Inc.(4)............... 4,699,800 -- 9.2% -- 3.9%
7711 Carondelet Avenue
Suite 700
St. Louis, MO 63105
</TABLE>
- ---------------
(1) Upon consummation of the Merger, assuming no change occurs in shares owned
as of the indicated date and that 50,507,848 shares of USA Waste Common
Stock are outstanding on the Effective Time.
82
<PAGE> 96
(2) The number of shares and percentages shown include the registered holdings
of such person and, in addition, 1,452,000 shares of each class
beneficially owned as a result of ownership of stock of John Rangos
Development Corporation, Inc., the sole stockholders of which are John G.
Rangos, Jr. and Alexander W. Rangos, individually and as trustees for
Jenica A. Rangos, daughter of John G. Rangos, Sr. As a result, for both
Chambers Common Stock and Chambers Class A Common Stock, the same 1,452,000
shares are included above for each of John G. Rangos, Jr. and Alexander W.
Rangos.
(3) Includes 107,000 shares of Class A Common Stock that may be acquired by each
of John G. Rangos, Jr. and Alexander W. Rangos pursuant to stock options
exercisable currently or within 60 days of this report.
(4) Based upon a report on Schedule 13G received by Chambers on February 3,
1995. Lindner Fund, Inc. is an investment company.
As of the date of this Joint Proxy Statement and Prospectus, 4,817,167
shares of USA Waste Common Stock are eligible for sale pursuant to two effective
shelf registration statements covering shares held by seven shareholders of USA
Waste, including 2,531,607 shares of USA Waste Common Stock held by Robert F.
Smith, a principal shareholder. Future sales of substantial amounts of USA Waste
Common Stock in the public market could adversely affect market prices from time
to time.
MARKET PRICE DATA
MARKET INFORMATION
USA Waste Common Stock is traded on the NYSE under the symbol "UW." Prior
to July 20, 1993, USA Waste Common Stock was quoted on Nasdaq. Chambers Common
Stock and Chambers Class A Common Stock are traded on the AMEX under the symbols
"CDVB" and "CDVA," respectively. The following table sets forth the range of
high and low closing sale prices for the USA Waste Common Stock, as reported on
the NYSE, and the Chambers Common Stock and Chambers Class A Common Stock, as
reported on the AMEX. For periods prior to July 20, 1993, prices indicated for
USA Waste Common Stock reflect high and low sales prices as quoted on the
Nasdaq.
<TABLE>
<CAPTION>
CHAMBERS
---------------------------------------
CLASS A COMMON
USA WASTE COMMON STOCK STOCK
----------------- --------------- -------------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
1993
First Quarter...................... $14.50 $13.25 $7.38 $4.69 $7.25 $4.69
Second Quarter..................... 13.75 11.75 5.00 3.19 4.81 3.13
Third Quarter...................... 15.00 11.50 5.25 3.69 5.38 3.75
Fourth Quarter..................... 12.50 9.75 4.50 3.69 4.50 3.56
1994
First Quarter...................... $15.00 $11.38 $5.50 $3.50 $5.50 $3.50
Second Quarter..................... 13.38 10.58 4.00 2.50 4.13 2.00
Third Quarter...................... 15.13 11.50 2.88 2.06 2.75 1.81
Fourth Quarter..................... 15.13 11.00 4.25 2.00 4.25 1.81
1995
First Quarter...................... $12.25 $10.13 $4.69 $3.63 $4.75 $3.63
Second Quarter (through May 8,
1995)........................... 15.50 11.50 5.75 4.44 5.88 4.44
</TABLE>
On November 25, 1994, the last trading day prior to announcement by USA
Waste and Chambers that they had reached an agreement concerning the Merger, the
closing sale price of USA Waste Common Stock as reported on the NYSE was $14.00
per share; and the closing sale prices of Chambers Common Stock and Chambers
Class A Common Stock as reported by the AMEX were $3.13 and $3.00 per share,
respectively. The equivalent per share price of both Chambers Common Stock and
Chambers Class A Common Stock on November 25, 1994, calculated by multiplying
the closing sale price of USA Waste Common Stock on the same date by the
Exchange Ratio, was $5.83.
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<PAGE> 97
On May 8, 1995, the closing sale price of USA Waste Common Stock as
reported on the NYSE was $15.50 per share; and the closing sale prices of
Chambers Common Stock and Chambers Class A Common Stock as reported by the AMEX
were $5.72 and $5.75, respectively. The number of record holders of USA Waste
Common Stock, Chambers Common Stock and Chambers Class A Common Stock as of May
5, 1995, were 858, 521 and 3,396, respectively.
Following the Merger, USA Waste Common Stock will continue to trade on the
NYSE under the symbol "UW", and the listing of Chambers Common Stock and
Chambers Class A Common Stock on the AMEX will be terminated.
DIVIDEND INFORMATION
USA Waste has never paid cash dividends on its Common Stock. Envirofil paid
stock dividends on its preferred stock prior to its acquisition by USA Waste;
the holders of such preferred stock received USA Waste Common Stock in that
acquisition, and no dividends have been paid by USA Waste. The Board of
Directors of USA Waste presently intends to retain any earnings in the
foreseeable future for USA Waste's business. In addition, payment of dividends
on the USA Waste Common Stock is restricted by the terms of USA Waste's bank
credit agreement.
Chambers paid a cash dividend of $.01 per share on Chambers Class A Common
Stock on November 14, 1990, and has not paid any dividends since that date.
Chambers has not made any commitment to pay cash dividends on either Chambers
Class A Common Stock or Chambers Common Stock. Chambers is currently precluded
by the terms of its credit facility and senior note agreements from paying
dividends to stockholders. See "Management's Discussion and Analysis of
Chambers' Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
84
<PAGE> 98
DESCRIPTION OF USA WASTE
USA Waste is an integrated solid waste management company operating in the
non-hazardous segment of the industry. USA Waste provides integrated solid waste
management services consisting of solid waste collection, transfer, recycling,
disposal and soil remediation to the full spectrum of commercial, industrial,
municipal, and residential customers with operations in twelve states. Based on
revenues, USA Waste is currently the sixth largest publicly traded non-hazardous
solid waste management company in the United States.
USA Waste conducts operations in 19 operating districts in twelve states,
and employs approximately 1,200 persons. USA Waste has a diversified customer
base with no single customer accounting for more than 5% of USA Waste's revenues
or income from continuing operations during 1994.
INDUSTRY BACKGROUND
The non-hazardous solid waste segment of the waste management industry
accounts for an estimated $30 billion per year in revenues. Despite the sheer
size of the waste management industry, it has historically been a fragmented
industry, with a multitude of primarily local operators servicing relatively
small areas. In recent years, however, the industry has undergone a period of
significant consolidation.
One of the principal forces driving consolidation within the solid waste
management industry is increased regulation and enforcement of collection and
disposal activities. In October 1991, the Environmental Protection Agency
("EPA") adopted new regulations pursuant to Subtitle D of the Resource
Conservation and Recovery Act governing the disposal of solid waste. These
regulations led to a variety of requirements applicable to landfill disposal
sites, including the construction of liners and the installation of leachate
collection systems, groundwater monitoring systems and methane gas recovery
systems. The regulations also required enhanced control systems to monitor more
closely the waste streams being disposed of at the landfills, extensive
post-closure monitoring of sites and financial assurances that landfill
operators will be able to comply with the stringent regulations. The result of
these regulatory requirements has been increased costs throughout the various
segments of the industry, with particularly dramatic increases for landfill
operators.
Compliance with the regulations currently in effect for the non-hazardous
solid waste industry requires significant capital expenditures. Many industry
participants have found the increased costs difficult, if not impossible to
bear. A large number of smaller, independent operators have decided to either
close down their operations or sell them to stronger operators, and some
municipalities have chosen to discontinue or are considering discontinuing their
operations and turning the management of solid waste services over to private
concerns.
The rising costs associated with the new industry regulations have tended
to promote consolidation and acquisition activity within the industry. Larger
waste management companies, with sufficient financial resources to absorb the
initial costs of bringing operations into compliance, have taken advantage of
discontinuations and divestitures by acquiring those operations which either
complement existing businesses or otherwise increase overall strength and
flexibility. Second, compliance costs at the landfill/disposal level have
directly affected costs in the upstream, collection segment of the market as
landfill operators pass them on through higher fees for dumping or "tipping". In
addition, companies active in various segments of the industry continue to seek
vertical integration to enable them to become more cost effective and
competitive. Finally, the higher cost structure has also led to the merger of a
number of independent collection operations to enhance financial strength and
improve operating efficiencies.
STRATEGY
USA Waste seeks to capitalize on the trend of consolidation in the
non-hazardous solid waste industry in several ways. One of the key elements of
USA Waste's strategy involves expansion of USA Waste's integrated solid waste
management services in selected markets through the acquisition of additional
solid waste collection operations, landfills, transfer stations, and other
related businesses that can be effectively integrated with each other and with
USA Waste's existing operations to provide an overall improvement of operating
85
<PAGE> 99
results. In addition, acquisitions in new geographic areas will be pursued where
opportunities exist to strengthen USA Waste's competitive position or, where
opportunities exist, to apply USA Waste's operating and management expertise to
enhance the performance of acquired operations and better utilize an existing
base of assets. USA Waste also intends to expand its operations in the areas
that it serves through the development of landfills, collection, and transfer
station operations, and the development of or participation in recycling and
composting services where appropriate. USA Waste also focuses on growth of its
existing operations and growth of acquired businesses. During 1994, USA Waste
experienced both volume and price improvements which led to double digit
internal growth rates for its comparable 1993 operations.
Another key element of USA Waste's strategy is to implement a variety of
measures through which USA Waste is able to achieve administrative and operating
efficiencies and improve profitability of the businesses it acquires, with the
objective of becoming the low cost operator in each of its markets. These
measures include consolidating and implementing uniform administrative and
management systems, restructuring and consolidating collection route systems,
improving equipment utilization, and increasing employee productivity through
incentive compensation programs. USA Waste's management believes that its
ability to serve markets as a low cost operator is fundamental to achieving
sustainable internal growth.
Since August 1990, USA Waste has acquired nine landfills, 17 collection
operations, two transfer stations, a recycled materials brokerage operation, and
two soil remediation facilities and assumed operation of one municipal landfill.
As a result of the Merger, USA Waste will emerge as a national solid waste
management company, which, in the opinion of USA Waste's management, will enable
it to capitalize on Chambers' landfill ownership position and participate more
effectively in the consolidation of the solid waste industry.
OPERATIONS
USA Waste provides collection, transfer and recycling, disposal, and soil
remediation services to municipal, commercial, industrial and residential
customers in California, Illinois, Indiana, Missouri, New Jersey, North Dakota,
Ohio, Oklahoma, Pennsylvania, Texas, Washington and West Virginia.
Management of USA Waste's solid waste operations is achieved through a
divisional alignment that currently includes four divisions organized by
geographic area. Each division is headed by a divisional vice president. Each
divisional vice president is responsible for the oversight of the following
departments: sales and marketing, administration and financial, operations, and
maintenance. In addition, each divisional vice president typically has a small
staff that works interactively with the corporate office to ensure proper
regulatory compliance and reporting, engineering services, internal and external
development, and strategic planning. Geographically, a division generally may
encompass a multi-state area and may have a concentration of between five to
fifteen districts. Divisions are divided into districts headed by a district
manager. Each district manager is responsible for the day to day oversight of
the Company's field operations, with direct responsibility for customer
satisfaction, employee motivation, labor and equipment productivity, internal
growth, financial budgets, and profit and loss activity. A district generally
encompasses a city, county, or metropolitan area.
USA Waste's current strategy with respect to the acquisition of landfill
and collection operations calls for the retention or development of a locally
recognizable name and decentralized management controls. Each collection unit or
division maintains its own computer operations and collection service functions
utilizing uniform programs and systems. These local computer operations are
linked to USA Waste's corporate office and are integrated with a centralized
corporate financial reporting system.
Solid Waste Landfills. Municipal solid waste landfills are the primary
depository for solid waste in North America. These disposal facilities are
located on approved types of land (i.e., with geological and hydrological
properties that limit the possibility of water pollution and are operated under
prescribed procedures). A landfill must be maintained carefully to meet federal,
state, and local regulations. Maintenance includes excavation, continuous
spreading and compacting of waste, and covering of waste with earth or other
inert material at least once a day. The cost of transferring solid waste to a
disposal location places a geographic restriction on solid waste companies.
Access to a disposal facility, such as a landfill, is a requirement for all
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solid waste management companies. While access can be obtained to disposal
facilities owned or operated by unaffiliated parties, USA Waste believes that it
is generally preferable for collection companies to own or operate their own
disposal facilities so that access can be assured on favorable terms. Customers
are charged tipping fees or disposal charges based on the amount and type of
solid waste deposited and the type and size of vehicles used in the conveyance
of solid waste.
USA Waste currently owns and operates nine non-hazardous solid waste
landfills and operates one municipal landfill. The following table summarizes
certain information concerning the 10 landfills owned or operated by USA Waste.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
DATE PERMITTED TOTAL
LANDFILL NAME LOCATION ACQUIRED ACRES ACRES
- ------------------------- ------------------------------ -------- ----------- -----------
<S> <C> <C> <C> <C>
Pinecrest................ McLain County, Oklahoma 1987 73(1) 198
Ellis County............. Ellis County, Texas 1991 98 398
Countryside.............. Lake County, Illinois 1991 80(2) 345
Dakota................... Sargeant County, North Dakota 1991 32 320
Ellis Scott.............. Henry County, Missouri 1991 35 606
Leroy Brown.............. McDonough County, Illinois 1991 80 530
Earthmovers.............. Elkhart County, Indiana 1992 97 277
Olympic View............. Kitsap County, Washington 1993 65 420
Liberty.................. White County, Indiana 1993 88 88
Charleston............... Charleston, West Virginia 1994 50(3) 180
--- -----
Total.......... 698 3,362
=== =====
</TABLE>
- ---------------
(1) USA Waste owns approximately five acres of this site and leases the
remaining acreage. The lease expires in December 1996, but may be extended
at USA Waste's option for two additional five-year periods, each on the
same terms and conditions.
(2) In October 1994, USA Waste filed an application with the Illinois EPA to
expand the landfill permit to 145 acres.
(3) In February 1994, USA Waste entered into an agreement with the City of
Charleston to manage and operate the municipal landfill. The management
agreement is for a term of 25 years. The City has the option to terminate
the agreement at the end of the fifth and tenth years.
Of the 10 landfills owned or operated by USA Waste, the average remaining
life based on remaining permit capacity and current average monthly disposal
volumes is approximately 15 years. This average does not include recent local
approval of a vertical and horizontal site expansion for the Countryside
landfill which will extend the total life expectancy of such facility to in
excess of 20 years. An application has been filed with the Illinois
Environmental Protection Agency requesting state approval of the design and
other technical aspects of the Countryside expansion. The state approval process
is expected to be finalized in the next five to 12 months.
The ownership or lease of a landfill site enables USA Waste to dispose of
waste without payment of disposal fees to others. USA Waste does not own or
lease a landfill site in every metropolitan area in which it is engaged in waste
collection. To date, USA Waste has not experienced excessive difficulty securing
the use of disposal facilities owned or operated by others in those metropolitan
areas in which it does not own or operate its own landfill. USA Waste's
landfills are also used by other waste collection companies and government
agencies on a contract or noncontract basis.
Collection. Solid waste collection is provided under two primary types of
arrangement, depending on the customer being served. Commercial and industrial
collection services are generally performed under one to three-year service
agreements, and fees are determined by such factors as collection frequency,
type of collection equipment furnished by USA Waste, the type and volume or
weight of the waste collected and the distance to the disposal facility and cost
of disposal. Most residential solid waste collection services are
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performed under contracts with, or franchises granted by, municipalities or
regional authorities that give USA Waste exclusive rights to service all or a
portion of the homes in their respective jurisdictions. Such contracts or
franchises usually range in duration from one to five years. Recently, some
municipalities have bid their residential collection contracts based on the
volume of waste collected. Residential collection fees are either paid by the
municipalities out of tax revenues or service charges or are paid directly by
the residents receiving the service.
As part of its services, USA Waste provides steel containers to most of its
commercial and industrial customers to store solid waste. These containers,
ranging in size from one to 45 cubic yards, are designed to be lifted
mechanically and emptied into a collection vehicle's compaction hopper. The use
of containers enables USA Waste to service most of its commercial and industrial
customers with collection vehicles operated by a single employee.
USA Waste often obtains waste collection accounts through acquisitions,
including the purchase of customer lists, routes, and equipment. Once a
collection operation is acquired, programs designed to improve equipment
utilization, employee productivity, operating efficiencies, and overall
profitability are implemented. USA Waste also solicits commercial and industrial
customers in areas surrounding acquired residential collection markets as a
means of further improving operating efficiencies and increasing volumes of
solid waste collection.
USA Waste operates collection operations that are integrated with six of
its landfills. The landfills and metropolitan areas served are:
Countryside -- Lake County, Illinois and the North suburbs of Chicago; Olympic
View -- City of Bremerton and Kitsap, Skagit and Snohomish Counties, Washington;
Ellis County -- the Cities of Ennis and Corsicana and Ellis County, Texas;
Pinecrest -- the Cities of Moore and Norman and McClain County, Oklahoma;
Liberty -- City of Brookston and White County, Indiana; and Leroy Brown -- City
of Macomb and McDonough County, Illinois. The percentage of landfill volumes
derived from local collections operations in these areas ranges from 20% to 88%.
USA Waste also provides nonintegrated residential and/or commercial collection
services in the following seven metropolitan markets: Central New Jersey; San
Antonio, Houston, and Fort Worth, Texas; Chicago, Illinois; and Sacramento and
Stockton, California. Waste collected in these markets is delivered to a
municipal, county or privately owned, unaffiliated landfill or transfer station.
Transfer Stations. A transfer station is a facility where solid waste is
received from collection vehicles and then transferred to and compacted in
large, specially-constructed trailers for transportation to disposal facilities.
This consolidation reduces costs by improving utilization of collection
personnel and equipment, and is a standard procedure in the solid waste
industry. Fees are generally based upon such factors as the type and volume or
weight of the waste transferred and the transport distance involved. USA Waste
operates two transfer stations in connection with its Oklahoma operations and
two transfer stations in the Chicago area.
Recycling. In response to the increasing public environmental awareness
and expanding federal and state regulations pertaining to waste recycling, USA
Waste has developed recycling as a component of its environmentally responsible
integrated solid waste management plan. Curbside collection of recyclable
materials for residential customers, commercial and industrial collection of
recyclable materials, and material recovery/waste reduction facilities are
services in which USA Waste has become involved to complement its collection and
transfer operations, and additional opportunities for expansion in these areas
will continue to be evaluated.
Participating commercial and industrial operations use containers to
separate recyclable paper, glass, plastic, and metal wastes for collection,
processing, and sale. Curbside recycling services involve the use of specially
designed, compartmentalized vehicles to collect recyclable paper, glass,
plastic, and metal waste materials, which may be separated by residents into
different containers provided to them for such purpose. The recyclable materials
are then deposited at a local facility where they are sorted and processed for
resale. Fees are determined by such considerations as market factors, frequency
of collection, the type and volume or weight of recycled material, the distance
the recycled material must be transported, and the value of the recycled
material.
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USA Waste operates curbside recycling programs in connection with its
residential collection operations in six markets and its transfer station in
Crestwood, Illinois. USA Waste also owns a 25% interest in Automated Recycling
Technologies, which operates two recycling and sorting facilities in Ocean
County, New Jersey. Through its subsidiary Waste Recovery Corporation, USA Waste
also arranges for the sale of recycled materials in bulk by waste collection
companies, including USA Waste, to the end-users of such materials.
Soil Remediation. The owners of petroleum refineries and underground
petroleum storage tanks, such as gasoline service stations, are required to
dispose of soil that has been contaminated with oil, gasoline, or other
petroleum hydrocarbons from leaks and spills. Historically, such non-hazardous
contaminated soil has been disposed of, or used as a cover material, in
landfills. However, because of the need of owners of contaminated soil to
eliminate their continuing liability with respect to contaminated soil even if
disposed of in a landfill, and the high cost of disposal and the demand for
clean fill dirt in certain areas, the use of a thermal process to treat
contaminated soil in order to remove impurities has developed. For a fee
comparable to landfill tipping fees, contaminated soil is delivered to a
remediation facility and heated in a furnace under a carefully controlled
process to remove the impurities. The decontaminated soil is then picked up by
the owner or sold to third parties as a clean soil product for a variety of
uses.
USA Waste owns and operates soil remediation facilities in Philadelphia and
Fairless Hills, Pennsylvania. The Philadelphia facility began operations in 1992
and the Fairless Hills facility began operations in 1994. Both facilities serve
the greater Philadelphia metropolitan area, New Jersey, and southern New York.
Management Information System. USA Waste utilizes a sophisticated package
of computer software programs developed specifically for solid waste management
operations. The programs include billing and accounts receivable systems and a
customer service system that are integrated with a corporate financial reporting
system. The computer management information system can be especially valuable
when implemented in conjunction with an acquisition, enabling USA Waste to
improve operating efficiencies and profitability by: (1) consolidating and
implementing uniform administrative and management systems, (2) restructuring
and consolidating routing, (3) improving equipment utilization, and (4)
increasing employee productivity.
MARKETING AND SALES
USA Waste emphasizes providing quality services as well as customer
satisfaction and retention and believes that it will attract customers in the
future because of its reputation for quality service. USA Waste markets its
services principally through the direct efforts of its sales and marketing
personnel. Each of USA Waste's current service areas has from one to six
salespersons depending upon its size and customer mix.
COMPETITION
The solid waste industry is highly competitive and requires substantial
amounts of capital. The industry is comprised of two large national waste
management companies, WMX Technologies, Inc. (formerly Waste Management, Inc.)
and BFI, which currently account for approximately 23% of the estimated annual
market of $30 billion, as well as a number of regional companies and numerous
local companies, municipalities, and other local authorities and large
commercial and industrial companies handling their own waste collection or
disposal operations. The national waste management companies and some of the
regional companies have significantly larger operations and greater financial
resources than USA Waste. Municipalities and counties are often able to offer
lower direct charges to the customer for the same service by subsidizing the
cost of such services through the use of tax revenues and tax-exempt financing.
Generally, however, municipalities do not provide significant commercial and
industrial collection or waste disposal.
USA Waste competes for landfill business on the basis of tipping fees,
geographical location, and quality of operations. USA Waste's ability to obtain
landfill business may be limited by the fact that some major collection
companies also own or operate landfills, to which they send their waste. USA
Waste will compete for collection accounts primarily on the basis of price and
the quality of its services. From time to time, competitors may reduce the price
of their services in an effort to expand market share or to win competitively
bid contracts.
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USA Waste provides residential collection services under a number of
municipal contracts. As is the case in the industry, such contracts come up for
competitive bidding periodically and there is no assurance that USA Waste will
be the successful bidder and will be able to retain such contracts. If USA Waste
is unable to replace any contract lost through the competitive bidding process
with a comparable contract within a reasonable time period or to use any surplus
equipment in other service areas, the earnings of USA Waste could be adversely
affected. However, during 1994, no one commercial customer or municipal contract
accounted for more than 5% of the total revenue of USA Waste. As USA Waste
continues to grow, the loss of any one contract will have less of an impact on
USA Waste's operations as a whole.
Because of increasing costs for solid waste management services resulting
from increased regulation, reductions in federal revenue sharing, and the
developing ability of private firms to provide specialized services,
municipalities are increasingly "privatizing," or contracting with private
companies, their responsibility for residential, commercial, and industrial
collection services.
Increased public environmental awareness and certain mandated state
regulations have resulted in increased recycling efforts in many different areas
of the country that are currently and will in the future reduce the amount of
solid waste destined for landfills. The EPA estimates that the recovery of
municipal solid waste through recycling will increase as a percentage of
disposal volumes from approximately 13% in 1988 to between 20% and 28% by 1995.
In addition, USA Waste could face competition from waste management companies
engaged in incineration and other technologically advanced alternatives to
landfill disposal. Although USA Waste believes that landfills will continue to
be the primary depository for solid waste well into the future, there can be no
assurance that recycling, incineration, and waste reduction efforts will not
affect future landfill disposal volumes. The effect, if any, on such volumes
could also vary between different regions of the country as well as within
individual market areas in each region.
PRICING
Operating costs, disposal costs, and collection fees vary widely throughout
the geographic areas in which USA Waste operates. The prices that USA Waste
charges are determined locally, and typically by the volume or weight, and type
of waste collected, treatment requirements, risks involved in the handling or
disposing of waste, frequency of collections, costs of disposal, distance to
final disposal sites, amount and type of equipment furnished to the customer and
prices charged for similar services by competitors. Under contract periods of
one year or longer, USA Waste's ability to pass on cost increases is sometimes
limited by contract terms. Long-term solid waste collection contracts typically
contain a formula, generally based on published price indices, for automatic
adjustment of fees to cover increases in some, but not all, operating costs.
EMPLOYEES
At December 31, 1994, USA Waste had approximately 1,200 full-time
employees, of which 200 were employed in clerical, administrative, and sales
positions, 97 in management, and the balance in collection, transfer, and
disposal operations. Approximately 315 of USA Waste's employees at 6 operating
locations are covered by collective bargaining agreements. Management has not
experienced a work stoppage and considers its employee relations to be good.
INSURANCE AND PERFORMANCE BONDS
USA Waste carries a broad range of insurance coverage, which management
considers appropriate for the protection of USA Waste's assets and operations.
The coverage currently includes a $2,000,000 comprehensive general liability
policy, a $50,000,000 umbrella policy, and a property damage policy covering all
real and personal property, unlicensed contractor's equipment, automobile
physical damage (excluding collision as to which USA Waste is self-insured), and
electronic data processing hardware and software. USA Waste maintains workers'
compensation insurance in accordance with laws of the various states in which it
has employees. USA Waste also currently maintains an environmental impairment
liability insurance policy on certain of its landfills and transfer stations
that provides coverage against clean-up costs and bodily injury to nonemployees
and property damage caused by off-site pollution emanating from such landfills
or transfer
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stations. This policy provides $1,000,000 of coverage per incident with a
$2,000,000 aggregate limit. To date, USA Waste has not had any difficulty in
obtaining insurance. However, if USA Waste is unable to obtain adequate
insurance, or decides to operate without insurance, a partially or completely
uninsured claim against USA Waste, if successful and of sufficient magnitude,
could have a material adverse effect upon USA Waste's business or its financial
condition. Difficulty in obtaining insurance could also impair USA Waste's
ability to secure future contracts, which may be conditioned upon the
availability of adequate insurance coverage.
Municipal and governmental waste management contracts typically require
performance bonds or bank letters of credit to secure performance. In addition,
USA Waste is required to provide financial assurance to secure its closure and
post-closure obligations with respect to each landfill. USA Waste has not
experienced difficulty in obtaining performance bonds or letters of credit for
its current operations. At December 31, 1994, USA Waste had provided various
regulatory authorities with bonds of approximately $21,642,000 and letters of
credit of approximately $3,697,000 to secure its obligations. If USA Waste were
unable to obtain surety bonds or letters of credit in sufficient amounts or at
acceptable rates, it may be precluded from entering into additional municipal
collection contracts or obtaining or retaining landfill operating permits.
REGULATION
General. All of USA Waste's principal business activities are subject to
extensive and evolving environmental, health, safety, and transportation laws
and regulations at the state, local and, to a lesser degree, federal levels.
These regulations are administered by the EPA and various other federal, state,
and local environmental, zoning, health, and safety agencies, many of which
periodically examine USA Waste's operations to monitor compliance with such laws
and regulations.
The development, expansion, and operation of landfills, transfer stations,
and other disposal and remediation facilities generally are subject to extensive
regulations governing siting, design, operations, monitoring, site maintenance,
corrective actions, financial assurance, and closure and post-closure
obligations. In order to construct, expand, and operate a landfill, transfer
station or soil remediation facility, USA Waste must obtain and maintain one or
more construction or operating permits and licenses and, in certain instances,
applicable zoning approvals. Obtaining the necessary permits and approvals in
connection with the acquisition, development or expansion of a landfill,
transfer station, or soil remediation facility is difficult, time-consuming
(often taking two to three years or more), and expensive, and is frequently
opposed by local citizen and/or environmentalist groups. Once obtained,
operating permits are subject to modification and revocation by the issuing
agency. Compliance with current and future regulatory requirements may require
USA Waste, as well as others in the waste management industry, from time to
time, to make significant capital and operating expenditures.
In the collection segment of the industry, regulation takes such forms as
licensing collection vehicles, health and safety requirements, vehicular weight
limitations, and, in certain localities, limitations on weight, area, and time
and frequency of collection.
Governmental authorities have the power to enforce compliance with
regulations and permit conditions and to obtain injunctions or impose fines in
case of violations. During the ordinary course of its operations, USA Waste may
from time to time receive citations or notices from such authorities that a
facility is not in full compliance with applicable environmental or health and
safety regulations. Upon receipt of such citations or notices, USA Waste will
work with the authorities to attempt to resolve the issues raised. Failure to
correct the problems to the satisfaction of the authorities could lead to
monetary penalties, curtailed operations, criminal sanctions, facility closure,
permit modification or termination, or inability to obtain permits for
additional sites.
USA Waste believes that it is currently in material compliance with
applicable federal, state and local laws, permits, orders, and regulations. USA
Waste believes there will be increased regulation and legislation related to the
waste management industry, especially at the federal level. USA Waste attempts
to anticipate future regulatory requirements and plans accordingly to remain in
compliance with the regulatory framework.
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USA Waste expects to grow in part by acquiring existing landfills, transfer
stations, and collection operations. Although USA Waste conducts due diligence
investigations of the past waste management practices of the businesses that it
acquires, there can be no assurance that, through its investigation, it will
identify all potential environmental problems or risks. As a result, USA Waste
may have acquired, or may in the future acquire, landfills that have unknown
environmental problems and related liabilities. USA Waste will be subject to
similar risks and uncertainties in connection with the acquisition of closed
facilities that had been operated by businesses acquired by USA Waste. USA Waste
seeks to mitigate the foregoing risks by obtaining environmental representations
and indemnities from the sellers of the businesses that it acquires. However,
there can be no assurance that USA Waste will be able to realize on any such
indemnities if an environmental liability exists.
Federal, state, and local governments have also from time to time proposed
or adopted other types of laws, regulations, or initiatives with respect to the
environmental services industry, including laws, regulations, and initiatives to
ban or restrict the interstate or intrastate shipment of wastes, impose higher
taxes on out-of-site waste shipments than on in-site shipments, reclassify
certain categories of hazardous waste as non-hazardous, and regulate disposal
facilities as public utilities. Congress has from time to time considered
legislation that would enable or facilitate such bans, restrictions, taxes, and
regulations. USA Waste cannot predict the extent to which any legislation or
regulation that may be enacted or enforced in the future may affect its
operations.
As a result of changing government attitudes in the area of environmental
enforcement, management anticipates that continually changing requirements in
health, safety and environmental protection laws will require USA Waste and
others engaged in the solid waste management industry to continually modify or
replace various facilities and alter methods of operation at costs that may be
substantial. Most of USA Waste's expenditures incurred in the operation of its
landfills relate to complying with the requirements of laws concerning the
environment. The majority of these expenditures are made in the normal course of
USA Waste's business and neither materially adversely affect USA Waste's
earnings nor place USA Waste at any competitive disadvantage. While USA Waste
has not expended any material amount to remedy potential harm to the public or
the environment in 1994 or 1993 and USA Waste, to the best of its knowledge, is
currently in compliance in all material respects with all applicable state and
local permits, laws, regulations, and orders affecting its operations, there is
no assurance that USA Waste will not be required to expend substantial amounts
for such remedies in the future.
Environmental Matters. The landfill sites currently or previously owned or
operated by USA Waste are subject to regulation under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"). CERCLA, among other things, provides for the cleanup of sites from
which there is a release or threatened release of a hazardous substance into the
environment. CERCLA imposes joint and several liability for the costs of cleanup
and for damages to natural resources upon: (a) any person who currently owns or
operates a facility or site from which there is a release or threatened release
of hazardous substances; (b) any person who owned or operated such a facility or
site at the time hazardous substances were disposed of; (c) any person who by
contract, agreement or otherwise, arranged for the disposal or treatment (or for
transport for disposal or treatment) of hazardous substances owned or possessed
by such person at such facility or site; and (d) any person who accepts or
accepted hazardous substances for transport for treatment or disposal at such a
facility or site selected by such person (including a contract carrier who has
accepted a hazardous substance for transportation during such transportation).
Under the authority of CERCLA and its implementing regulations, detailed
requirements apply to the manner and degree of remediation of facilities and
sites where hazardous substances have been or are threatened to be released into
the environment.
Liability under CERCLA is not dependent upon the intentional disposal of
"hazardous wastes," as defined under RCRA. It can be founded upon the release or
threatened release, even as a result of lawful, unintentional and non-negligent
action, of any one of more than 700 "hazardous substances," including very small
quantities of such substances. CERCLA requires the EPA to establish a National
Priorities List ("NPL") of sites at which hazardous substances have been or are
threatened to be released and which require investigation or cleanup. More than
20% of the sites on the NPL are solid waste landfills that ostensibly never
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received any regulated "hazardous wastes." Thus, even if USA Waste's landfills
have never received "hazardous wastes" as such, it is likely that one or more
hazardous substances have come to be located at its landfills. Because of the
extremely broad definition of "hazardous substances," the same is true of other
industrial properties with which USA Waste or its predecessors has been, or with
which USA Waste may become, associated as an owner or operator. If this is the
case, and if there is a release or threatened release of such substances into
the environment, USA Waste could be liable under CERCLA for the cost of removing
such hazardous substances at the sites, remediation of impacted soil or
groundwater, and for damages to natural resources, even if those substances were
deposited at USA Waste's facilities before USA Waste acquired or operated them.
The costs of a CERCLA cleanup can be very substantial. Given the limited amount
of environmental impairment liability insurance maintained by USA Waste, a
finding of such liability could have a material adverse impact on USA Waste's
business and financial condition.
Although USA Waste would not be liable under CERCLA for the cleanup of a
disposal site containing hazardous wastes transported to such site by USA Waste
so long as the site was selected by the generator of such waste, USA Waste would
be responsible for any hazardous waste during actual transportation. Also, USA
Waste could be liable under CERCLA for off-site environmental contamination
caused by the release of pollutants or hazardous substances transported by USA
Waste, or a waste transporter acquired by USA Waste, where the transporter
selected the disposal site.
The EPA's primary way of determining whether a site is to be included on
the NPL is the Hazard Ranking System ("HRS"), which evaluates the relative
potential for uncontrolled hazardous substances to pose a threat to human health
or the environment pursuant to a scoring system based on factors grouped into
three factor categories: (1) likelihood of release, (2) waste characteristics,
and (3) targets. The EPA follows a three-step process prior to determining
whether a site should undergo an HRS evaluation: identification or discovery,
preliminary assessment, and site inspection, including soil sampling and ground
water testing. As of December 1989, the EPA has proposed or identified
approximately 30,000 sites for preliminary assessment (including approximately
6,500 solid waste landfills). These sites are compiled on the Comprehensive
Environmental Response, Compensation and Liability Information System
("CERCLIS") list. The identification of a site on the CERCLIS list indicates
only that the site has been brought to the attention of the EPA and does not
necessarily mean that an actual health or environmental threat currently exists
or has ever existed. As were many of the landfills in the State of Illinois,
both the Countryside and Leroy Brown landfills were placed on the CERCLIS list.
The Countryside landfill was proposed for preliminary assessment in 1979
and underwent a preliminary assessment in 1983 and a site inspection in 1986
under the EPA's program. Pending promulgation of the revised HRS, the EPA has
not taken any further action with respect to the evaluation of the Countryside
landfill since 1986. USA Waste was previously advised that the EPA expected to
complete a preliminary evaluation of the numerous sites located in the region
where the Countryside landfill is located prior to September 30, 1992. However,
USA Waste has not received any communications from the EPA concerning this
matter. The purpose of these preliminary evaluations is to determine whether any
further action is needed to resolve the status of such landfills under CERCLA.
This preliminary evaluation could result in a determination that no further
action is required, that additional studies should be conducted, or that
remedial or corrective action needs to be undertaken. Based on its review of the
wastes deposited at the Countryside landfill, the hydrogeological structure of
the site, the facility's design, and a report received by USA Waste from its
independent environmental consultant at the time USA Waste acquired the
landfill, USA Waste does not believe that the outcome of the EPA's evaluation of
the Countryside landfill will result in the Countryside landfill being proposed
for listing on the NPL or have any material adverse impact on the operation of
such landfill or USA Waste's financial condition.
Envirofil's records indicated that in 1977 and 1978, the Leroy Brown
landfill accepted 40 55-gallon drums of material which would now be classified
as hazardous waste, and a small quantity of hazardous waste was located at the
landfill between 1987 and 1989. A screening site inspection was performed by the
Illinois Environmental Protection Agency ("IEPA") in 1989. That inspection and
further testing disclosed the presence of minimal contamination of groundwater
beneath the landfill. The results of the screening site inspection were
forwarded to the EPA, which approved them without comment. At this time, neither
the EPA
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nor the IEPA has recommended or required any remedial action, beyond normal
closure and post-closure monitoring, on the part of USA Waste with respect to
any hazardous substance present at the disposal facility. However, because of
the acceptance of the drums and the location of the limited amount of hazardous
waste at the site, the IEPA could demand that USA Waste obtain a permit for a
hazardous waste facility. The process of securing this permit could take several
years and could result in significant expenditures, the extent of which are
uncertain at this time. Further, the IEPA could also require USA Waste to
develop and execute a closure and post-closure plan, which is separate and apart
from the closure and post-closure plan already approved by the IEPA for the
non-hazardous landfill. This requirement would not necessarily mean that the
landfill would be precluded from continuing to accept waste. The costs of
developing and executing a new closure and post-closure plan are dependent, in
part, on the area of the existing site that would be required to be closed and
monitored as a hazardous waste facility and are uncertain at this time.
In November 1993, Envirofil acquired Kitsap County Sanitary Landfill, Inc.
("KCSL"), which owns the Olympic View landfill. Landfill operations at the
Olympic View landfill began in the 1960s, at which time the site was known as
the "Barney White" site. The 20-acre Barney White site was closed in 1985 after
reaching its capacity. A flexible membrane liner was installed in late 1991, as
an enhancement to the existing natural soil cap, in order to minimize the
production of leachate following detection of a small amount of hazardous
materials in groundwater monitoring wells downgradient from the site. Samples
collected from the on-site monitoring wells at the Barney White site by the
previous owner of the Olympic View landfill show that the levels of
contamination found in the groundwater decrease significantly as the distance
from the old site increases and recent testing near the site boundary revealed
no contaminants above regulatory levels. USA Waste has implemented a groundwater
monitoring program and has commenced a program of institutional controls at the
site. USA Waste believes that these remedies are sufficient to mitigate
environmental risks and provide a long-term solution to costly remediation.
In addition, from May 1979 to May 1994 KCSL operated the Hansville County
landfill under a lease agreement with Kitsap County, Washington. Under the
agreement, KCSL was required to operate the landfill until 1989, when the
operation was replaced by a transfer station. The lease agreement does not
include provisions relating to closure costs and post-closure monitoring.
However, KCSL funded the closure costs and, at the request of the
landfill-permitting agency, implemented certain measures in response to minor
groundwater contamination detected near the site. USA Waste believes KCSL has
met its obligation by implementing such measures. There can be no assurance,
however, that state or federal environmental authorities will not require KCSL
to finance additional investigation of the site or remedial action at the site.
KCSL has been indemnified by its previous owner against costs in excess of
$500,000 that may be incurred by KCSL to mitigate any required action. Envirofil
placed $500,000 in escrow at the closing of its acquisition of KCSL to fund any
costs KCSL may be required to bear relating to the Hansville County landfill.
State and Local Regulation. The states in which USA Waste operates have
their own laws and regulations governing hazardous and non-hazardous solid waste
disposal, water and air pollution, and, in most cases, releases and cleanup of
hazardous substances and liability for such matters. The states also have
adopted regulations governing the siting, design, operation, maintenance,
closure, and post-closure maintenance of landfills and transfer stations. USA
Waste's facilities and operations are likely to be subject to many, if not all,
of these types of requirements. In addition, USA Waste's collection and landfill
operations may be affected by the trend in many states toward requiring the
development of waste reduction and recycling programs. For example, several
states recently have enacted laws that require counties to adopt comprehensive
plans to reduce, through waste planning, composting, recycling, or other
programs, the volume of solid waste deposited in landfills. Additionally, the
disposal of yard waste in solid waste landfills has recently been banned in
several states. Legislative and regulatory measures to mandate or encourage
waste reduction at the source and waste recycling have also been considered from
time to time by Congress and the EPA.
Various states have enacted, or are considering enacting, laws that
restrict the disposal within the state of hazardous and non-hazardous solid
wastes generated outside the state. While laws that overtly discriminate against
out-of-state waste have been found to be unconstitutional, some laws that are
less overtly discriminatory have been upheld in court. Certain state and local
governments have enacted "flow control" regulations, which attempt to require
that all waste generated within the state or local jurisdiction go to specific
disposal
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<PAGE> 108
sites. In May 1994, the U.S. Supreme Court ruled that a flow control ordinance
was unconstitutional. Challenges to other such laws are pending. The outcome of
pending litigation and the likelihood that other such laws will be passed and
will survive constitutional challenge are uncertain. In addition, Congress has
considered legislation authorizing states to adopt such restrictions. If state
laws restricting the interstate disposal of solid waste are passed and upheld,
USA Waste's ability to expand landfill operations acquired in certain areas
could be adversely affected.
Many states and local jurisdictions in which USA Waste operates have
enacted "fitness" laws that allow agencies having jurisdiction over waste
services contracts or site permits to decline to award such contracts or deny or
revoke such permits on the basis of an applicant's environmental and legal
compliance history. These laws authorize the agencies to make determinations of
an applicant's fitness to be awarded a contract or to operate a facility and to
deny or revoke a contract or permit because of unfitness absent a showing that
the applicant has been rehabilitated through the adoption of various operating
policies and procedures to assure future compliance with applicable laws and
regulations.
PROPERTIES
The principal property and equipment of USA Waste consists of land
(primarily landfill sites, transfer stations, and bases for collection
operations), buildings, soil remediation facilities, and vehicles and equipment.
The nine landfill operations owned by USA Waste are situated on sites owned by
USA Waste, with the exception of the Pinecrest landfill, which is partially
leased under a lease that expires in December 1996, but may be extended by USA
Waste until 2006.
USA Waste leases approximately 11,500 square feet of office space in Dallas
for its executive office under a five-year lease expiring in 1999. USA Waste
owns real estate, buildings, and other physical properties that it employs in
substantially all of its solid waste collection operations. USA Waste also
leases a portion of its transfer stations, offices, and garage and shop
facilities.
USA Waste owns approximately 640 items of equipment including waste
collection vehicles and related support vehicles, as well as bulldozers,
compactors, earth movers, and related heavy equipment and vehicles used in
landfill operations. USA Waste has more than 50,000 steel containers in use,
ranging from two to 40 cubic yards, and a number of stationary compactors and
self-dumping hoppers.
LEGAL MATTERS
USA Waste is a party to various litigation matters arising in the ordinary
course of business, including claims for personal injury and property damage
arising out of accidents involving its vehicles. Management believes that the
ultimate resolution of these matters will not have a material adverse impact on
USA Waste's financial condition. In the normal course of its business and as a
result of the extensive government regulation of the solid waste industry, USA
Waste periodically may become subject to various judicial and administrative
proceedings involving federal, state, or local agencies. To date, USA Waste has
not been required to pay any material fine or had a judgment entered against it
for violation of any environmental law. From time to time USA Waste also may be
subjected to actions brought by citizen's groups in connection with the
permitting of landfills or transfer stations, or alleging violations of the
permits pursuant to which USA Waste operates. A lawsuit, Elaine Manheimer, et
al. v. Port of Bremerton et al., cause no. 95-2-006661, has been filed in
Superior Court of Thurston County, Washington on March 10, 1995 and was served
on Kitsap County Sanitary Landfill ("KCSL") on April 11, 1995. The complaint is
styled as a class action for property damage, medical monitoring and injunctive
relief against all defendants. KCSL owns and operates the Olympic View Sanitary
Landfill. Plaintiffs claim that releases of contaminants from the landfill into
the air, water, or soil have decreased the value of their properties, caused
them to incur response costs under either the state Model Toxics Control Act or
the federal Comprehensive Environmental Response Compensation and Liability Act,
and necessitate medical monitoring for possible health action. No discovery has
been conducted to date with respect to this lawsuit. Accordingly, although USA
Waste does not believe that the existence or ultimate resolution of this suit
will have a material adverse effect on the financial condition of USA Waste, USA
Waste cannot predict the outcome of such suit.
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Since the announcement of the Merger, three cases have been filed in the
Court of Chancery of the State of Delaware in New Castle County against
Chambers, its officers and directors and USA Waste and Envirofil. These cases
include Smith v. Rangos et al., C. A. No. 13906, Krim v. Rangos et al., C. A.
No. 13985, and Adams v. Rangos et al., C. A. No. 13909. Each of these actions
relates to the Merger and all of them seek substantially similar relief.
Accordingly, a consolidation order was entered by the Court of Chancery on March
1, 1995. The cases have been consolidated for all purposes under Smith v.
Rangos, et al. at C. A. No. 13906 and the caption of the consolidated case is In
Re Chambers Development Company, Inc. Shareholders Litigation, Consolidated C.
A. No. 13906.
The complaint which will govern the consolidated action is the complaint
filed in the Krim action. The Krim complaint is brought as a purported class
action on behalf of the plaintiff and all similarly situated Chambers security
holders, excluding defendants and any person, firm, corporation or similar
entity related to or affiliated with any of the defendants. The complaint
alleges that the individual defendants, inter alia, engaged in unfair dealing to
the detriment of the putative class; the Merger is grossly unfair to the members
of the putative class; the members of the putative class would be irreparably
damaged if the Merger were to be consummated; and the defendants' conduct
constituted a breach of fiduciary and other common law duties allegedly owed to
the putative class. The complaint alleges that the Merger consideration is
inadequate for various reasons and that the individual defendants failed to
maximize shareholder value.
The complaint seeks a declaration that the Merger Agreement was the result
of a breach of fiduciary duty by the individual defendants, aided and abetted by
the USA Waste defendants, and is thus unlawful and unenforceable; an injunction
to enjoin defendants from proceeding with the Merger; an injunction to enjoin
defendants from consummating any merger or combination with a third party absent
procedures or processes such as an auction; an order invalidating certain proxy
arrangements; and an order awarding plaintiff and the class members damages,
costs and disbursements, including reasonable attorneys' and experts' fees.
Counsel for the parties have engaged in settlement discussions and, based
thereon, USA Waste and Chambers anticipate a definitive agreement, subject to
court approval, will be finalized before the USA Waste Annual Meeting and the
Chambers Special Meeting.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF USA WASTE
The following selected historical consolidated financial data for USA Waste
for each of the five years in the period ended December 31, 1994 has been
derived from its historical audited consolidated financial statements and should
be read in conjunction with the separate consolidated financial statements and
the notes thereto of USA Waste located elsewhere herein. The data set forth
below include the accounts of USA Waste and the businesses acquired in
transactions accounted for as poolings of interests as if such businesses had
always been members of the same operating group. Businesses acquired in
transactions accounted for under the purchase method of accounting are included
from their respective dates of acquisition.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1990 1991 1992 1993 1994
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA(1):
Operating revenues............................. $10,594 $20,653 $57,049 $ 93,753 $176,235
------- ------- ------- -------- --------
Costs and expenses:
Operating.................................... 3,794 8,564 28,128 49,251 101,069
General and administrative................... 3,737 5,424 11,612 17,497 23,463
Nonrecurring charges......................... -- 4,166 6,756 923 3,782
Depreciation and amortization................ 992 3,598 5,776 10,588 18,785
------- ------- ------- -------- --------
8,523 21,272 52,272 78,229 147,099
------- ------- ------- -------- --------
Income (loss) from operations.................. 2,071 (1,099) 4,777 15,524 29,136
------- ------- ------- -------- --------
Other income (expense):
Interest expense............................. (918) (2,899) (4,212) (6,856) (10,385)
Interest income.............................. 62 544 610 1,113 591
Other, net................................... 70 130 15 822 2,249
------- ------- ------- -------- --------
(786) (2,225) (3,587) (4,921) (7,545)
------- ------- ------- -------- --------
Income (loss) before income taxes.............. 1,285 (3,324) 1,190 10,603 21,591
Provision for income taxes..................... 466 1,313 3,955 5,413 7,760
------- ------- ------- -------- --------
Income (loss) from continuing operations....... 819 (4,637) (2,765) 5,190 13,831
Income (loss) from discontinued operations, net
of income taxes.............................. (2,751) (2,810) 897 -- --
Extraordinary income from forgiveness of debt,
net of income taxes.......................... -- -- 10,066 -- --
------- ------- ------- -------- --------
Net income (loss).............................. (1,932) (7,447) 8,198 5,190 13,831
Preferred dividends............................ 220 -- 152 582 565
------- ------- ------- -------- --------
Income (loss) available to common
shareholders................................. $(2,152) $(7,447) $ 8,046 $ 4,608 $ 13,266
======= ======= ======= ======== ========
Income (loss) from continuing operations per
common share................................. $ (0.10) $ 0.46 $ 0.20 $ 0.26 $ 0.61
======= ======= ======= ======== ========
Income (loss) per common share................. $ (0.26) $ (0.74) $ 0.54 $ 0.26 $ 0.61
======= ======= ======= ======== ========
Weighted average common and common equivalent
shares....................................... 8,164 10,051 14,878 18,056 21,842
======= ======= ======= ======== ========
BALANCE SHEET DATA (AT END OF PERIOD)(1):
Working capital (deficit)...................... $ 84 $ (642) $ 8,828 $ (635) $ 8,619
------- ------- ------- -------- --------
Total assets................................... 29,443 69,235 141,466 238,819 323,167
Long-term debt, including current
maturities................................... 11,523 37,694 58,505 115,174 155,733
Stockholders' equity........................... 11,802 22,939 56,677 78,081 107,986
</TABLE>
- ---------------
(1) Certain statement of operations and balance sheet data have been restated
to include certain acquisitions accounted for as poolings of interests. See
Note 2 to the Consolidated Financial Statements of USA Waste located
elsewhere herein.
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<PAGE> 111
MANAGEMENT'S DISCUSSION AND ANALYSIS OF USA WASTE'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion reviews USA Waste's operations for the three years
ended December 31, 1994, and should be read in conjunction with USA Waste's
Consolidated Financial Statements and related notes thereto and Selected
Consolidated Financial Data. USA Waste has restated its previously issued
financial statements to reflect the acquisition of Envirofil, Inc. ("Envirofil")
consummated on May 27, 1994, and accounted for using the pooling of interests
method of accounting.
INTRODUCTION
USA Waste's revenues consist primarily of fees charged for its collection
and disposal services. Revenues for collection services include fees from
residential, commercial, industrial, and municipal collection customers. A
portion of these fees are billed in advance; a liability for future service is
recorded upon receipt of payment and revenues are recognized as services are
actually provided. Fees for residential services are normally based on the type
and frequency of service, however, in a few instances, the fees are based on the
volume of waste collected. Fees for commercial and industrial services are
normally based on the type and frequency of service and the volume of solid
waste collected.
USA Waste's revenues from its landfill operations consist of disposal fees
(known as tipping fees) charged to third parties and are normally billed
monthly. Tipping fees are based on the volume or weight of solid waste being
disposed of at USA Waste's landfill sites. USA Waste also operates transfer
stations where solid waste is deposited by collection vehicles and then loaded
into larger trucks and transported to landfills for disposal. Fees are charged
at the transfer stations based on the volume of solid waste deposited, taking
into account USA Waste's cost of loading, trucking, and disposing of the solid
waste at its landfills. Intercompany revenues between USA Waste's landfill and
collection operations have been eliminated in the financial statements presented
herein.
Operating expenses include direct and indirect labor and the related taxes
and benefits, fuel, maintenance and repairs of equipment and facilities, tipping
fees paid to third party landfills, certain landfill fees and taxes, and
accruals for future landfill closure costs. Certain direct landfill development
expenses are capitalized and amortized over the estimated useful life of the
site as capacity is consumed, and include acquisition, engineering, upgrading,
construction, and permitting costs. All indirect development expenses, such as
administrative salaries and general corporate overhead, are expensed in the
period incurred.
General and administrative costs include management salaries, clerical, and
administrative costs, professional services, facility rentals, and related
insurance costs, as well as costs related to USA Waste's marketing and sales
force.
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The following table presents, for the periods indicated, the period to
period change in dollars (in thousands) and percent for the various Consolidated
Statements of Income items of USA Waste.
<TABLE>
<CAPTION>
PERIOD TO PERIOD CHANGE
---------------------------------------
FOR THE YEARS FOR THE YEARS
ENDED DECEMBER 31, ENDED DECEMBER 31,
1992 AND 1993 1993 AND 1994
----------------- -----------------
<S> <C> <C> <C> <C>
Operating revenues...................................... $36,704 64.3% $82,482 88.0%
------- -------
Costs and expenses:
Operating............................................. 21,123 75.1 51,818 105.2
General and administrative............................ 5,885 50.7 5,966 34.1
Nonrecurring charges.................................. (5,833) (86.3) 2,859 309.8
Depreciation and amortization......................... 4,782 82.8 8,227 77.9
------- -------
25,957 49.7 68,870 88.0
------- -------
Income from operations.................................. 10,747 225.0 13,612 87.7
------- -------
Other income (expense):
Interest expense, net................................. (2,644) (62.8) (3,529) (51.5)
Interest income....................................... 503 82.5 (522) (46.9)
Other, net............................................ 807 538.0 1,427 173.6
------- -------
(1,334) (37.2) (2,624) (53.3)
------- -------
Income before provision for income taxes................ 9,413 791.0 10,988 103.6
Provision for income taxes.............................. 1,458 36.9 2,347 43.4
------- -------
Income from continuing operations....................... $ 7,955 287.7 $ 8,641 166.5
======= =======
</TABLE>
The following table presents for the periods indicated, the percentage
relationship that the various Consolidated Statements of Income items of USA
Waste bear to operating revenues.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1992 1993 1994
----- ----- -----
<S> <C> <C> <C>
Operating revenues:
Disposal...................................................... 23.0% 23.2% 21.5%
Waste collection.............................................. 75.0 67.5 71.0
Other......................................................... 2.0 9.3 7.5
----- ----- -----
100.0 100.0 100.0
----- ----- -----
Costs and expenses:
Operating..................................................... 49.3 52.5 57.3
General and administrative.................................... 20.4 18.6 13.3
Nonrecurring charges.......................................... 11.8 1.0 2.2
Depreciation and amortization................................. 10.1 11.3 10.7
----- ----- -----
91.6 83.4 83.5
----- ----- -----
Income from operations.......................................... 8.4 16.6 16.5
----- ----- -----
Other income (expense):
Interest expense, net......................................... (7.4) (7.3) (5.9)
Interest income............................................... 1.1 1.2 0.3
Other, net.................................................... 0.0 0.9 1.3
----- ----- -----
(6.3) (5.2) (4.3)
----- ----- -----
Income before provision for income taxes........................ 2.1 11.4 12.2
Provision for income taxes...................................... 6.9 5.8 4.4
----- ----- -----
Income from continuing operations............................... (4.8)% 5.6% 7.8%
===== ===== =====
</TABLE>
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<PAGE> 113
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1994
Operating Revenues
Operating revenues for the year ended December 31, 1994, were $176,235,000,
representing an increase of $82,482,000, or 88.0% from 1993. New business made
during 1994 and the full year effect of acquisitions made during 1993 accounted
for an increase of 76.8% over 1993. Operating revenues for comparable operations
increased approximately 11.2% during 1994 compared to 1993, as a result of
increases of 3.8% and 7.4% in prices and volumes, respectively. Although
operating revenues increased during 1994, revenues were detrimentally impacted
at certain of USA Waste's more profitable markets due to severe weather
conditions experienced in such markets during the first quarter of 1994.
Operating revenues for the year ended December 31, 1993, were $93,753,000,
representing an increase of $36,704,000, or 64.3% from 1992. New business
acquisitions made during 1993 and the full year effect of acquisitions made
during 1992 accounted for an increase of 59.1% over 1992. Operating revenues for
comparable operations increased approximately 5.2% during 1993 compared to 1992,
principally resulting from increases in prices.
Operating Costs and Expenses
USA Waste's operating costs and expenses for the year ended December 31,
1994, of $101,069,000 represented an increase of $51,818,000, or 105.2%,
compared to 1993. New business acquisitions made during 1994 and the full-year
effect of acquisitions made during 1993 accounted for 92.6% of the increase in
operating costs and expenses over 1993. Operating costs and expenses for
comparable operations accounted for the remaining 12.6% increase. Operating
costs and expenses as a percentage of revenues increased from 52.5% for 1993 to
57.3% for 1994. This overall increase is a result of several factors. USA
Waste's operating costs and expenses were higher as a percentage of revenues due
to the weather conditions negatively impacting operating revenues at certain
more profitable market areas during the first quarter of 1994. In addition, this
increase results from a change in USA Waste's mix of revenues to a larger
percentage of the revenues being generated from collection operations. Waste
collection revenues were approximately 71.0% of total operating revenues for
1994 as compared to 67.5% for 1993. Generally, operating costs and expenses as a
percentage of operating revenues tend to be higher for collection operations
than for disposal operations and thermal remediation operations. USA Waste also
experienced higher operating costs in two of its larger collection operations
during the second quarter, principally from higher labor costs and certain
variable expenses, which were not offset by a corresponding increase in
revenues. In addition, several of USA Waste's businesses were recently acquired
and operating efficiencies and costs improvements are being implemented to
improve margins as these companies are being integrated into USA Waste's
operations.
USA Waste's operating costs and expenses for the year ended December 31,
1993, were $49,251,000, reflecting an increase of $21,123,000, or 75.1%,
compared to 1992. New business acquisitions made during 1993 and the full year
effect of acquisitions made during 1992 accounted for 69.2% of the increase in
operating costs and expenses over 1992. Operating costs and expenses for
comparable operations accounted for the remaining 5.9% increase. Operating costs
and expenses as a percent of revenues increased to 52.5% for 1993 as compared to
49.3% for 1992. In general, operating costs and expenses as a percentage of
operating revenues tend to be higher for collection operations than for disposal
and thermal remediation operations. Waste collection revenues for 1993 were
approximately 67.5% of operating revenues as compared to 75.0% for 1992, which
generally will result in a decrease in operating costs and expenses as a
percentage of operating revenues. Offsetting the decrease in operating costs and
expenses as a percentage of operating revenues was the effect of USA Waste's
entry into new market areas (Phoenix, Arizona; Seattle, Washington; and Northern
California), where operating costs and expenses are currently higher than in
other USA Waste markets.
General and Administrative
General and administrative expenses for the year ended December 31, 1994,
increased approximately $5,966,000, or 34.1%, over 1993. Business acquisitions
accounted for an increase in general and administrative expenses of
approximately $7,722,000, while comparable operations reflected a decrease of
$1,756,000.
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<PAGE> 114
General and administrative expenses as a percentage of operating revenues
decreased from approximately 18.6% in 1993 to 13.3% in 1994. The decrease in
general and administrative expenses attributable to comparable operations and
the decrease as a percentage of operating revenues is due to USA Waste's ability
to integrate new acquisition revenues without a corresponding increase in
general and administrative expenses and the cost savings resulting from the
merger with Envirofil.
General and administrative expenses for the year ended December 31, 1993,
increased approximately $5,885,000, or 50.7%, over the same period of 1992.
Business acquisitions accounted for 39.0% of the increase, while existing
operations reflected an increase of 11.7% due primarily to additional corporate
staff and expenses necessary manage the growth for the separate USA Waste and
Envirofil companies prior to their combination in May 1994.
Nonrecurring charges
Nonrecurring charges for the year ended December 31, 1994, consist of
approximately $3,782,000 for costs related to the Envirofil acquisition.
Nonrecurring charges in 1993 consist of approximately $923,000 of stock
compensation expenses incurred in connection with the issuance of stock warrants
at below market price to certain new officers of Envirofil prior to its
acquisition by USA Waste in May 1994. In 1992, the nonrecurring charges
consisted of approximately $5,249,000 of stock compensation expenses as a result
of granting stock warrants below market price and $1,507,000 of restructuring
charges in connection with the reorganization of Envirofil in December 1992.
Depreciation and Amortization
Depreciation and amortization expense increased from $10,558,000 for the
year ended December 31, 1993, to $18,785,000 for 1994, reflecting an increase of
approximately $8,227,000, or 77.9%. Business acquisitions accounted for
$7,417,000 of this increase, while existing operations reflected an increase of
$810,000, primarily resulting from additional equipment necessary to service USA
Waste's contracts. Depreciation and amortization expense as a percentage of
revenues decreased slightly from 11.3% in 1993 to 10.7% for 1994.
As of January 1, 1995, USA Waste changed the useful life of the excess of
cost over net assets of acquired businesses from 25 years to 40 years to more
appropriately reflect the estimated periods during which the benefit of the
assets will be realized. This change in accounting estimate is expected to have
the effect of reducing amortization expense by approximately $1,200,000 in 1995.
Depreciation and amortization expense increased to $10,558,000 in 1993 from
$5,776,000 in 1992, reflecting an increase of approximately $4,782,000, or
82.8%. Business acquisitions accounted for $4,295,000 of this increase, while
existing operations reflected an increase of $487,000, primarily resulting from
additional equipment necessary to service USA Waste's contracts. Depreciation
and amortization expense as a percentage of revenues increased from 10.1% in
1992 to 11.3% in 1993.
Income From Operations
For the reasons discussed above, income from operations increased
$13,612,000, or 87.7% during 1994 as compared to 1993, and $10,747,000, or 225%
during 1993 as compared to 1992. Income from operations was 16.5% of operating
revenues for 1994 (18.7%, exclusive of merger costs) as compared to 16.6% for
1993 and 8.4% for 1992.
Other Income and Expense
Other income and expense items consist primarily of interest expense,
interest income, and other income items, generally from the sale of assets.
Interest expense increased to $10,385,000 for the year ended December 31, 1994,
as compared to $6,856,000 for 1993, an increase of 51.5%. This increase resulted
from the growth in USA Waste's indebtedness incurred to finance USA Waste's
accelerated growth through business acquisitions and capital expenditures offset
by a decrease in USA Waste's effective average borrowing rates
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<PAGE> 115
from its bank revolving credit facility. Average outstanding indebtedness and
the average effective borrowing rate for 1994 were approximately $138,675,000
and 8.2%, respectively, as compared to approximately $78,837,000 and 8.7% for
1993.
Interest expense was $6,856,000 for the year ended December 31, 1993, as
compared to $4,212,000 in 1992, an increase of 62.8%. This increase also
resulted from the growth in USA Waste's indebtedness incurred to finance USA
Waste's growth through business acquisitions and capital expenditures offset by
a decrease in USA Waste's effective average borrowing rates from its bank
revolving credit facility and the 8 1/2% Convertible Subordinated Debentures due
2002.
Other income, net increased from $822,000 in 1993 to $2,249,000 in 1994.
The increase is primarily the result of 1994 transactions, which include the
sale of substantially all of USA Waste's operating assets in the Phoenix market,
the sale of certain routes and customer lists, and the sale of excess equipment.
Income Taxes
The provision for income taxes increased $2,347,000 for the year ended
December 31, 1994, as compared to 1993 and increased $1,458,000 for the year
ended December 31, 1993, as compared to 1992. The effective income tax rate
decreased from 332.4% in 1992, to 51.1% in 1993, and then to 35.9% in 1994. The
decrease in the effective tax rate and the unusual nature of the 1992 effective
tax rate is due to the fact that the restated periods prior to the Envirofil
acquisition reflect the historical provision for income taxes of the separate
companies and, therefore, those periods do not reflect the benefit of losses
incurred by Envirofil for financial reporting purposes.
Income (Loss) From Continuing Operations
For the reasons discussed above, income from continuing operations
increased $8,641,000, or 166.5% during 1994 as compared to 1993, and $7,955,000,
or 287.7%, during 1993 as compared to 1992.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1994, USA Waste had working capital of $8,619,000 and a
cash balance of $6,613,000, as compared to a working capital deficit of $635,000
and a cash balance of $4,626,000 as of December 31, 1993. For the year ended
December 31, 1994, cash flows provided by operating activities were $18,903,000,
which includes merger costs of $3,782,000. Cash flows used in investing
activities were $56,843,000, which included the funding of capital expenditures
of $40,876,000 and investments in other businesses and net advances to others of
$29,705,000, offset by the proceeds from asset sales of $13,738,000. Cash flows
provided by financing activities were $39,927,000, which was primarily a result
of the net borrowings under USA Waste's revolving credit facility.
USA Waste's capital expenditure and working capital requirements have
increased reflecting USA Waste's business strategy of growth through
acquisitions and development projects. As indicated above, USA Waste's capital
expenditures for 1994 were $40,876,000, which included approximately $12,000,000
in expenditures pertaining to expansion activities at the Countryside landfill.
USA Waste has financed its capital expenditures from its internally generated
cash flows and amounts available under its revolving credit facility. USA Waste
expects capital expenditures for 1995 to be approximately $40,000,000. USA Waste
intends to finance the remainder of its 1995 capital requirements through
internally generated cash flow and amounts available under its revolving credit
facility.
USA Waste is subject to extensive and evolving federal, state, and local
environmental laws and regulations that have been enacted in response to
technological advances and the public's increased concern over environmental
issues. See "Description of USA Waste -- Regulation." As a result of changing
governmental attitudes in this area, management anticipates that USA Waste will
continually modify or replace facilities and alter methods of operation. The
majority of the expenditures necessary to comply with the environmental laws and
regulations are made in the normal course of business as discussed below in
"-- Environmental Matters."
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USA Waste's revolving credit facility has been increased from $110,000,000
to $150,000,000 as a result of an amended agreement dated November 28, 1994,
which also extended the maturity date to November 30, 1997, and added three
participating banks. USA Waste anticipates that if additional acquisitions are
made, the cash portion of the consideration will be funded from its internally
generated cash and its revolving credit facility. At March 29, 1995, USA Waste
had approximately $33,200,000 available under such credit facility.
Under the terms of USA Waste's revolving credit facility, lender consent is
required to consummate the Merger. Chambers is subject to similar consent
requirements under its lending agreements. In connection with the Merger, USA
Waste anticipates refinancing certain of its and Chambers' outstanding
indebtedness, including USA Waste's revolving credit facility and the revolving
credit facility, senior notes, and letters of credit of Chambers. Amounts
outstanding under Chambers' debt instruments at December 31, 1994, were
approximately $364,000,000 in the aggregate. USA Waste is currently engaged in
discussions with financing sources regarding financial arrangements to be
entered into at or before the date the Merger is consummated.
In connection with the Merger, USA Waste and Chambers have developed a plan
for financing certain of Chambers' obligations, including a $6,800,000
obligation that was incurred in January 1995 and $70,000,000 in payments
required to fund the settlement of certain shareholder litigation of Chambers.
The purpose of the financing plan was to provide Chambers with the ability to
fund these payment obligations pending consummation of the Merger and in the
event the Merger was not consummated for any reason. To provide for the payment
of the $6,800,000 obligation, USA Waste paid $2,500,000 on certain promissory
notes owed to Chambers with respect to a previous transaction and entered into a
letter of intent providing for USA Waste's purchase of certain of Chambers'
assets, including a hauling company in Charlotte, North Carolina and a landfill
and a collection facility in Lake, Mississippi for $7,600,000 for which USA
Waste made a deposit of $4,300,000 to be applied against the purchase price. To
provide for the funding of the initial $25,000,000 settlement payment due upon
final approval of the settlement of the shareholder litigation, USA Waste agreed
to make an advance purchase of airspace rights at certain of Chambers' landfills
in the aggregate amount of $25,000,000. Such payment would be made within 30
days after final approval of the settlement and expiration of the applicable
appeal period. To provide for the payment of the balance of $45,000,000, USA
Waste and Chambers have agreed to negotiate an agreement for the purchase by USA
Waste from Chambers of an asset or group of assets or airspace rights mutually
selected by USA Waste and Chambers and having a fair market value of not less
than $45,000,000. Payment of such amount is required not later than one year
from the date of final approval of the settlement. In the event that Chambers
completes a refinancing of its current indebtedness, including amounts due with
respect to the shareholder litigation, USA Waste's obligation to finance the
$45,000,000 payment will lapse and USA Waste will have an option to require
Chambers, and Chambers will have an option to require USA Waste, to buy or sell,
as the case may be, any unused airspace purchased in advance by USA Waste.
USA Waste's business plan is to grow through acquisitions and development
projects. USA Waste has issued equity securities in business acquisitions where
appropriate and expects to do so in the future. Furthermore, USA Waste's future
growth will depend greatly upon its ability to raise additional capital.
Management believes that it can arrange the necessary financing required to
accomplish its business plan; however, to the extent USA Waste is not successful
in its future financing strategies, USA Waste's growth could be limited.
Although USA Waste regularly engages in discussions relating to potential
acquisitions and mergers and has identified several possible acquisition and
merger opportunities, other than the previously announced merger with Chambers,
USA Waste currently does not have any significant binding commitments or
agreements to acquire or merge with any such businesses; however, part of USA
Waste's strategy is to continue to participate in the industry consolidation,
and as a result, USA Waste will pursue acquisition and merger opportunities and
may announce an acquisition or merger transaction at any time.
ENVIRONMENTAL MATTERS
USA Waste also has material financial commitments for the costs associated
with its future closure and post-closure obligations with respect to the
landfills it operates or for which it is otherwise responsible.
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USA Waste bases accruals for these commitments on periodic management reviews,
performed at least annually, based on input from its engineers and
interpretations of current regulatory requirements and proposed regulatory
changes. The accrual for closure and post-closure costs includes a final cap and
cover for the site, methane gas control, leachate management and groundwater
monitoring, and other operational and maintenance costs to be incurred after
each site stops accepting waste.
USA Waste has estimated that the aggregate closure and post-closure costs
will be approximately $25,000,000, which, for each landfill, will be fully
accrued at the time the site stops accepting waste and is closed. As of December
31, 1994 and 1993, USA Waste has recorded liabilities of $13,343,000 and
$10,100,000, respectively, for closure and post-closure costs of disposal
facilities. The difference between the closure and post-closure costs accrued at
December 31, 1994, and the total estimated closure and post-closure costs to be
incurred will be accrued and charged to expense as airspace is consumed. USA
Waste also expects to incur approximately $40,000,000 related to capping
activities expected to occur during the operating lives of the disposal sites,
which are also being expensed over the useful lives of the disposal sites as
airspace is consumed. In addition, at December 31, 1994, USA Waste has recorded
a liability of $2,000,000, representing the estimated cost of certain minor
remediation activities expected to be incurred at certain of USA Waste's
facilities in the future.
Management believes that the ultimate disposition of these environmental
matters will not have a material adverse effect on the financial condition of
USA Waste. However, USA Waste's operation of landfills subjects it to certain
operational, monitoring, site maintenance, closure and post-closure obligations
that could give rise to increased costs for monitoring and corrective measures.
USA Waste cannot predict the effect of any regulations or legislation enacted in
the future on USA Waste's operations.
SEASONALITY AND INFLATION
Because the volumes of certain types of waste, such as yard clippings and
construction debris, tend to be higher in the spring and summer, USA Waste
experiences seasonal variations in its revenue. As a result, during spring and
summer, USA Waste's revenues tend to be higher than its revenues in fall and
winter. In addition, during the winter, harsh weather conditions often
temporarily affect USA Waste's ability to collect, transport, and dispose of
waste. The seasonal impact is often offset by revenues added through
acquisitions such that USA Waste's reported revenues have historically reflected
increases in period to period comparisons.
USA Waste believes that inflation and changing prices have not had, and are
not expected to have, any material adverse effect on the results of operations
in the near future.
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DESCRIPTION OF CHAMBERS
Chambers is a provider of integrated solid waste services in the United
States, with operations or properties at the end of 1994 in selected areas of
Florida, Georgia, Illinois, Maryland, Mississippi, New Jersey, North Carolina,
Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia. Major
elements of the business include the operation, management, construction and
engineering of solid waste sanitary landfills, transfer stations, recycling
facilities and related operations. Chambers also provides services for the
collection, hauling and recycling of solid waste for municipal, commercial,
industrial and residential customers. Chambers presently owns or operates 14
sanitary landfills, one construction and demolition debris landfill and one
medical, special and municipal waste incinerator. Chambers' landfills provide
long-term disposal capacity for a majority of its collection and hauling
operations.
In late 1992, Chambers began a program to divest certain businesses that no
longer met strategic and performance objectives. In that regard, in 1993 and
1994, Chambers sold one landfill, one recycling facility, three transfer
stations and six collection and hauling businesses, including all of its
operations in Rhode Island, Texas, Massachusetts and Indiana, and in 1992 also
sold its security services business.
Chambers was formed in 1971 as a Delaware corporation. Chambers' principal
executive offices are located at 10700 Frankstown Road, Pittsburgh, Pennsylvania
15235. Its telephone number is (412) 242-6237.
OPERATIONS
Chambers initially provided disposal services to public utilities and
various services to government subdivisions, including recycling, hauling and
sales of coal and steel by-products and the disposal of related wastes. After
developing the ability to engineer and operate disposal sites for the handling
of solid waste in compliance with environmental standards, Chambers expanded its
operations to include disposal of municipal solid waste and later to include
collection, recycling and hauling of commercial and residential waste and the
operation of solid waste transfer stations. Chambers has in past years devoted
considerable resources to the development and construction of landfills.
However, Chambers currently is focusing its efforts on improving operating
efficiencies, with particular emphasis on increasing the volume of waste
disposed of in its landfills, in order to achieve greater utilization of those
facilities.
Although Chambers' waste services business is described herein as five
separate operations -- landfills, transfer stations, collection and hauling,
recycling and medical waste -- these operations are in many respects integrated.
For example, Chambers' landfills generate revenues from third-party disposal and
also support Chambers' local collection and hauling operations; similarly,
Chambers' transfer stations and recycling facilities operate in conjunction with
both the landfill and collection operations.
Landfill Operations. Chambers owns or operates 14 sanitary landfills for
disposal of nonhazardous solid waste and one construction and demolition debris
landfill. Of the sanitary landfills, five are located in Pennsylvania, two each
in South Carolina and Virginia and one each in West Virginia, Maryland, Florida,
Mississippi and Georgia; all except the Mississippi site are either owned by
Chambers or held under long-term lease. The construction and demolition debris
landfill is located in Georgia. Chambers' landfills currently provide disposal
capacity for a majority of its collection and hauling operations. Most of the
landfills are located close to municipal areas served by Chambers' collection
operations or are accessible to transfer facilities where waste is consolidated
into trailers or rail containers to afford efficient transportation from remote
areas to the disposal sites.
Prior to 1992, Chambers' primary emphasis had been upon developing and
constructing new landfills ("greenfield sites"), either independently or in
cooperation with the municipal entity within which the property was located.
Chambers' management believes that the development and construction of new
landfills, while often time-consuming and requiring significant capital
expenditures and related indirect expenses, is usually preferable to the
acquisition of existing landfill sites, so that the environmental risks often
associated with acquired landfills can be avoided. In 1992, Chambers' management
reexamined its strategies in light of its financial condition and, recognizing
that it held permits to construct sufficient disposal capacity to service its
anticipated needs for a substantial period of time, decided to focus Chambers'
efforts on increasing the
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utilization of its existing landfills. In addition, Chambers' management
recognized that Chambers' ability to independently develop additional greenfield
sites would be limited in the near term as Chambers' access to the capital
markets would be restricted. See "Management's Discussion and Analysis of
Chambers' Financial Condition and Results of Operations."
Landfill Operational Activity. Fees from third-party solid waste collectors
and generators, consisting of landfill tipping fees and in certain instances
subcontracted hauling fees, accounted for approximately 23%, 28% and 32% of
Chambers' revenues in 1992, 1993 and 1994, respectively. Tipping fees are based
on the weight or volume and the type of waste disposed of at the landfills.
While Chambers' landfills are made available to numerous waste generators
and third-party solid waste collectors, Chambers has sought to obtain long-term
contracts principally with governmental entities in order to create a
predictable waste flow to its landfills. In this regard, for example, Chambers
has handled the disposal of the residential municipal solid waste from the City
of Richmond, Virginia, since 1989 (including the operation of two transfer
stations), and from Fort Pierce, Florida, since 1993.
Under an agreement entered into in early 1991 with Bergen County, New
Jersey, during 1993 Chambers transported and disposed of the ash generated by
the Essex County, New Jersey incinerator, as well as that portion of the Bergen
County solid waste which was not disposed of at the Essex County incinerator. In
March 1994, Chambers commenced performance under a new three-year contract for
the disposal of the municipal solid waste from Bergen County. The contract
provides the county with options for two one-year renewal periods. The Bergen
County contract produced $16.6 million, or 6%, of Chambers' 1994 revenues.
Commencing in 1989, Chambers had also provided disposal and transportation of
solid waste from Union County, New Jersey under contracts which were
renegotiated in early 1991 and were terminated pursuant to their terms in
December 1993. Chambers had also provided disposal of the municipal solid waste
from Passaic County, New Jersey, from December 1987 until December 1993. See
"Management's Discussion and Analysis of Chambers' Financial Conditions and
Results of Operations" regarding the impact of the expiration of these
contracts.
Chambers continues to place emphasis on the disposal of special wastes,
which consist of non-hazardous waste materials such as sewage sludges,
contaminated soils, incinerator ash and certain industrial residues. Following a
proposal process initiated by the New York City Department of Environmental
Protection, Chambers commenced service in January 1992 under a six and one-half
year contract to transport and dispose of sewage sludge. In 1994, amounts of
sewage sludge transported and disposed of pursuant to this contract ranged from
0 to 330 tons per day. The sewage sludge is being transported by truck in
intermodal containers designed for leakproof waste transportation to a Chambers
landfill.
Landfill Development and Construction Activity. Chambers has invested
substantial capital to develop landfills with strict environmental controls.
Development activities include site selection and site feasibility studies,
environmental assessments (including hydrological and geological reviews), land
acquisition, engineering and design work for the site as a whole, and the design
and construction of the landfill infrastructure. The infrastructure consists of
roadway or rail access systems, initial clearing and site preparation, leachate
and methane collection and treatment systems, and stormwater and surface water
management systems. A large portion of the infrastructure expenditures with
respect to each site is nonrecurring, required only at the initial phase in
order to prepare the site for the receipt of waste and to support the operation
of the landfill throughout its useful life.
As the operation of a landfill commences, site preparation, including
excavation and the installation of a liner system at the base elevation of the
site, requires significant capital expenditures, often exceeding $200,000 per
acre. However, once a particular area of the site has been lined, limited
additional investment is required with respect to overlaying waste on the lined
areas. The daily filling activities normally provide for the sequential deposit
of waste on the base liner system in adjacent areas within the site (typically
referred to as "cells"). The construction of adjacent cells permits the creation
of additional space over previously constructed cells, which provides Chambers
additional airspace to accept waste with limited additional investment. This
technique of overlaying waste materials on areas already lined reduces the
ongoing capital requirements for facilities which are currently operational.
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Chambers performs design and construction work in various phases of
landfill development, including excavation and compaction of soils, and
stormwater and surface water management. Chambers has found that performing
portions of its own landfill construction is cost effective in certain
instances. In order to maintain sanitary conditions at the landfills operated by
Chambers, heavy equipment is also used to spread, compact and cover the waste
daily with soil or other approved cover material. All currently required
groundwater monitoring devices and other environmental controls are in place at
all of the sanitary landfills operated by Chambers. Landfill operations are
subject to increasingly strict and costly environmental regulation, and to
numerous uncertainties resulting from legislative, regulatory and local land use
restrictions, as well as increasing public attention and market changes. See
"-- Regulation" for information concerning evolving environmental laws and
regulations and "Management's Discussion and Analysis of Chambers' Financial
Condition and Results of Operations" for a discussion of related capital
expenditures and constraints on expansion of landfill operations.
Transfer Station Operations. Transfer stations are facilities located in
areas which are not convenient to, or which do not have ready access to, solid
waste disposal sites. Residential and commercial collection vehicles operating
within such areas, including Chambers' vehicles in some cases, discharge their
solid waste loads at these facilities. The waste is then consolidated and loaded
into larger capacity transfer trailers or rail containers for more efficient
transportation to disposal sites, including landfills owned and operated by
Chambers. Transfer station operations accounted for approximately 20%, 19% and
20% of Chambers' revenues for 1992, 1993 and 1994, respectively.
Chambers owns or operates eight solid waste transfer stations, with four in
New Jersey, two in Virginia and one each in Pennsylvania and South Carolina. In
December 1993, Chambers sold its two transfer stations in Morris County, New
Jersey, to the Morris County Municipal Utilities Authority (the "MCMUA") but
continues to operate both transfer stations and provide transportation services
under a contract with the MCMUA until the county's long-term solid waste system
is in operation or December 31, 1996, if later.
Operations at the transfer stations in Morris County, New Jersey, began in
January 1988, and these facilities have processed an aggregate of approximately
325,000 tons of municipal solid waste annually. Under its contracts with Morris
County, during 1988 through 1994 Chambers operated the transfer stations and
provided long-distance transportation of waste from the transfer stations to
disposal sites. Commencing in January 1995, the contract for disposal of waste
has been awarded to a competitor of Chambers, but Chambers will continue to
operate the transfer stations in 1995 and, provided the county's solid waste
system is not yet in operation, in 1996. Chambers' rates and revenues from the
Morris County transfer station operations are subject to the ratemaking
authority of the New Jersey Department of Environmental Protection and Energy.
The two Morris County transfer station operations produced approximately 14% of
Chambers' 1994 revenues; however, revenues attributable to these operations are
expected to decline in 1995.
Collection and Hauling Operations. Waste collection and hauling generally
support Chambers' landfill and transfer station operations, although in certain
areas, operations involve disposal at commercial or municipal landfills. Fees
for collection and hauling services are based on such factors as the type and
frequency of service, the volume or weight of the waste, the type of waste,
disposal costs and the distance traveled.
Collection and hauling for residential, municipal, commercial and
industrial customers accounted for 52%, 47% and 41% of revenues in 1992, 1993
and 1994, respectively, which includes transportation revenues derived from
certain of Chambers' contracts. In the majority of areas, Chambers services
commercial and industrial accounts without the requirement of prior municipal
approval and, as such, competes with other operators and negotiates rates
directly with individual customers. Chambers typically contracts with commercial
customers for collection, hauling and disposal of solid waste for a multi-year
period. In limited areas, Chambers competes for municipally-awarded franchises
which include commercial and industrial accounts. Such contract awards may be in
the form of exclusive or nonexclusive franchises for several years. Residential
and municipal services are performed primarily under exclusive contracts granted
by municipalities on the basis of competitive bids.
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The competitive nature of the waste industry, the varying availability of
landfills and disposal capacity, and the financial condition of Chambers are
expected to affect the ability of Chambers to secure and maintain municipal
contracts in the future. See "-- Regulation" and "Management's Discussion and
Analysis of Chambers' Financial Condition and Results of Operations -- Liquidity
and Capital Resources."
In late 1992, Chambers began a program to divest certain businesses that no
longer met strategic and performance objectives, and in March 1993, as an
initial part of that program, sold substantially all of the assets of its
collection, hauling and transfer station operations in Rhode Island,
Massachusetts and Texas. Chambers sold its landfill and collection and hauling
operations in Indiana to USA Waste in September 1993, sold its collection and
hauling operations in Conway, South Carolina, in November 1993, and sold its
Columbus, Georgia, collection and hauling operations in December 1993.
Recycling Operations. Chambers recognizes the importance of recycling
materials recovered from solid waste streams where consistent with viable market
conditions. Chambers has engaged in recycling efforts in order to complement its
range of waste management services. While extensive recycling is likely to
reduce the size of the waste stream available for disposal in Chambers'
landfills, and although the market for recyclables is in many instances
depressed due to an excessive supply of recovered materials, recycling has aided
Chambers' efforts to market its other waste services. Recycling operations
accounted for 3% of revenues in each of the last three years. In August 1994,
Chambers sold its recycling facility in Pennsylvania, and it continues to own
and operate a recycling facility in Virginia.
Medical Waste Operations. Through its subsidiary, Chambers Medical
Technologies, Inc. ("CMTI"), Chambers owns and operates a medical, special and
municipal waste incineration facility in Hampton, South Carolina. The facility
is permitted to incinerate 200 tons per day of medical waste, municipal solid
waste and other approved non-hazardous special wastes. CMTI is implementing a
plan to maximize utilization of the facility in response to changing market
conditions. CMTI is currently focusing its marketing on higher priced, higher
fuel value special wastes such as pharmaceuticals, petrochemicals and scrap
tires. State legislation restricts the facility's permitted incineration
capacity to the greater of (i) 50 tons per day of medical waste or (ii) per
month, 1/12 of the estimated amount of medical waste generated within the State
of South Carolina within one year. CMTI has undertaken a constitutional
challenge to the state's imposition of the limitation, as well as to certain
provisions of the South Carolina Infectious Waste Management Act and the
regulations promulgated thereunder. At the trial level CMTI was successful in
its challenge to certain fee requirements under the regulations; however, CMTI
was not successful in having the volume limitation ruled unconstitutional. CMTI
filed a motion for a stay pending appeal of the implementation of the volume
limitation, which stay pending appeal was granted. The appellate court has
remanded the case to the trial court. CMTI accounted for 2%, 3% and 4% of
revenues for 1992, 1993 and 1994, respectively.
Research and Development. Chambers has explored technologies and related
business opportunities attendant to the disposal and recycling processes,
including but not limited to refuse derived fuel, landfill methane gas recovery
and related systems, and tire reclamation and recycling. Chambers has also
helped to develop, and holds an exclusive license to use, an intermodal
containerized transportation system for the economical and environmentally safe
transportation of solid waste by rail and truck.
COMPETITION
Solid waste management is a very competitive business which requires
substantial investment in labor and capital resources. The sources of
competition vary by locality and by the type of services provided, and originate
from national, regional and local companies. Several national waste management
companies are much larger and have far greater resources than Chambers. Major
competitors in the waste industry include WMX Technologies, Inc. and BFI, each
of which is substantially larger than Chambers. Chambers also competes with
municipalities and commercial facilities which provide their own waste hauling
and disposal services. Disposal operations compete primarily on the basis of
proximity to collection and hauling operations and on the basis of disposal
cost. To acquire new collection contracts and to retain old ones, Chambers
competes on the basis of price, service and disposal capacity. Chambers
anticipates that competition in the disposal business will increasingly include
an emphasis on safeguards with respect to the environment, and
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intends to continue its policy of constructing and operating landfills with high
levels of environmental protection and monitoring. Chambers has experienced
competition from incineration and other waste recovery processes. However, it
believes that its landfill operations can complement certain of these processes,
in that landfills serve as receptacles for incinerator ash and nonrecoverable
materials.
Chambers experiences intense competitive pressure on landfill prices in
many markets, partly due to increased landfill capacity in the marketplace and
partly as a result of the rapid use of existing capacity by many older landfills
which currently operate under less stringent standards of environmental
protection than those utilized by Chambers. As a result of revisions to
regulations under Subtitle D of the Resource Conservation and Recovery Act of
1976 ("RCRA") and to state regulations, Chambers expects that more stringent
governmental regulations will be mandated in these markets, with the initial
compliance dates under Subtitle D having become effective in late 1993. See
"-- Regulation." In the long term, Chambers anticipates that this strengthening
of environmental standards should have a positive effect on its business,
because Chambers has designed and constructed all of its landfills with the
intention of meeting these requirements.
MARKETING
Before entering a new solid waste management market, Chambers evaluates
potential business which would be compatible with current operations. Chambers
establishes new commercial and industrial accounts through direct solicitation.
New municipal business depends on identifying and winning competitive bids.
Price, service and disposal capacity are key factors in developing new business
and retaining customers. Marketing and operational efficiencies are achieved
through Chambers' consolidation of residential and commercial business on a
regional basis.
REGULATION
The operation of landfills, waste incinerators and transfer stations, the
collection and hauling of solid waste and the recycling of solid waste are
subject to various local, state and federal requirements which seek to regulate
and maintain health, safety, the environment, zoning and land use. Operating
permits are required for waste disposal facilities and certain collection
vehicles. Some of these permits could be subject to modification, renewal and/or
revocation if significant operational and environmental violations occur.
Chambers' operation of landfills subjects it to operational, closure,
post-closure, monitoring and site maintenance obligations. Governmental
authorities have the power to enforce compliance with these regulations and to
obtain injunctions and impose fines in the case of violations. While Chambers is
in substantial compliance with regulatory requirements, from time to time in the
ordinary course of its operations, Chambers receives citations or notices from
authorities that such operations may not be in strict specific compliance with
applicable environmental regulations. Upon such receipt, Chambers has and will
continue to make every effort to resolve amicably and quickly the issues raised
by such citations or notices.
Governmental authorities, including the EPA, various state agencies and
county and local authorities acting in conjunction with such federal and state
agencies, impose restrictions to control or prohibit air and water pollution
and, in most states, Chambers and other operators are required to post bonds or
provide other financial assurances covering closure, monitoring and potential
corrective measures for its landfills. While Chambers is in substantial
compliance with regulatory requirements applicable to its business, if
significant regulatory changes are made it may be required to increase capital
and/or operating expenditures in order to maintain operations or initiate new
operations. Depending on the degree of future regulatory changes, Chambers may
be required to curtail certain operations until a particular problem is
remedied.
The regulatory framework in the solid waste business, particularly as it
relates to the disposal of solid waste, varies substantially from jurisdiction
to jurisdiction, and is changing frequently and becoming increasingly complex in
nearly all locations. As a result, both current operations and development
projects involve certain risks and uncertainties inherent in the industry, as
discussed below. Amendments to current laws and regulations governing Chambers'
operations could have an adverse economic effect on Chambers or require
substantial capital expenditures to comply with such laws and regulations.
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In October 1991, the EPA promulgated revisions to regulations under RCRA.
In revisions to regulations under Subtitle D of RCRA, the EPA announced
comprehensive solid waste management standards including location standards,
facility design and operating criteria, closure and post-closure requirements,
financial assurance standards, methane gas and groundwater monitoring, and
corrective action standards which had not been historically required or enforced
at landfills. State standards can be, and in a majority of the states where
Chambers operates already are, more stringent than the federal requirements.
Because some portions of the revisions to regulations under Subtitle D of RCRA
are expected to be phased in over as many as five years, the full impact of the
revisions may not be felt until 1998. Current landfill design and construction
by Chambers has been performed in anticipation of those requirements. More
stringent regulation, while requiring greater expenditures by landfill
operators, is expected to increase opportunities for Chambers and others who
have landfills which comply with these regulations, as noncomplying landfills
will be required to close. The 1988 Pennsylvania regulations, which were similar
in scope to the revisions to regulations under Subtitle D of RCRA, had a
significant adverse impact on the operations of Chambers' Pennsylvania landfills
from 1988 through 1991. However, Chambers does not anticipate significant
disruption of any of its businesses as a result of the promulgation of the
revisions to Subtitle D. Pending development of state standards and evaluation
of those standards by the EPA, management of Chambers believes that most of its
landfills are currently designed and operated in material compliance with those
revisions.
While Chambers believes that the states in which it operates landfills have
revised or will revise their landfill regulations to meet or exceed the
requirements of the revisions to Subtitle D of RCRA, there can be no assurances
that the state regulations will be approved by the EPA. Although Chambers may
require additional capital expenditures to comply with potentially inconsistent
state and federal regulations applicable to the same facility, Chambers does not
believe such inconsistent regulations would have a material adverse effect on
Chambers' operations.
Revisions to health, safety and environmental protection laws will continue
to require Chambers and others in the industry to make substantial expenditures
to construct waste facilities in compliance with such laws. Substantial capital
and operating expenditures to develop landfills and maintain compliance with
environmental protection regulations are necessary for Chambers and any party in
the waste industry. These costs are incurred in the ordinary course of business,
but could increase as laws and regulations change. See "Management's Discussion
and Analysis of Chambers' Financial Condition and Results of Operations" for a
discussion of anticipated capital expenditures.
Proposed federal legislation and various proposed state laws include
provisions that would allow states to ban or impose differential fees on
interstate shipments of solid waste. Chambers cannot currently predict whether
such legislation will be enacted and, if enacted, the extent to which it may
affect Chambers' operations.
In addition to potentially costly and restrictive regulations, there are a
number of risks and factors, often having unforeseen ramifications, which could
result in increased costs to Chambers' waste management business or, in some
circumstances, delay or prevent certain operations or planned projects. These
factors include varying degrees of governmental and public opposition to the
siting and operation of landfills, which in many locations can contribute to a
shortage of sites and facilities; increased regulation aimed at reducing
dependence on landfilling and promoting other methods of disposal such as
incineration or recycling; and risks related to potential adverse environmental
effects attributable to landfill operations.
Complex regulatory requirements, together with potential community
opposition (often resulting in litigation), may make it increasingly difficult
to open new landfills or expand existing sites. While Chambers attempts to avail
itself of opportunities to acquire or expand landfills at reasonable cost, there
can be no assurance regarding the extent to which such opportunities will be
present in the future, nor can there be any assurance in the near term that
Chambers will be able to avail itself of such opportunities without the
generation of additional capital. Nevertheless, Chambers believes that, due to
the receipt during 1990, 1991 and 1992 of permits for landfill sites which had
been under development in prior periods, it now holds permits to construct
sufficient disposal capacity to meet its needs and those of its customers for a
substantial period of
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time. See "Management's Discussion and Analysis of Chambers' Financial Condition
and Results of Operations."
BONDING AND INSURANCE
Bid and Performance Bonds. In order to submit a bid to a governmental
entity for solid waste collection, hauling and disposal services, Chambers is
usually required to submit bonds, in the form of a bid bond and, upon contract
award, a bond to secure its performance of the contract. Commercial customers
contracting for collection, hauling and solid waste disposal services with
Chambers do not generally require either bid or performance bonds. Over the past
several years, Chambers' bonding requirements have increased as the size and
length of the contracts have increased. It is important for Chambers to bid
successfully on large multi-year contracts to ensure a consistent flow of waste
into its landfills.
Firms that provide such bonds to the solid waste disposal industry are
limited in number. Chambers has in the past relied on, and expects in the future
to rely on, a single outside source for its bid and performance bonding
requirements. Management believes that Chambers' current bid and performance
bond coverage and future capacity is adequate; however, there can be no
assurance that future bonding will be available when required by Chambers.
Closure and Post-Closure Financial Assurances. Most states have enacted
legislation that requires landfill operators and owners to guarantee minimum
financial capabilities to insure that a landfill is properly closed in
accordance with environmental requirements. The form of the guarantee varies
from state to state but generally consists of either trust funds, letters of
credit or surety bonds. Chambers has employed all of these options in various
locations. Management believes that its current financial position is adequate
to meet the closure and post-closure requirements of its current landfills.
However, there is no assurance that Chambers' financial position or the
availability of surety bonds or letters of credit in the future will be adequate
to meet this significant component of Chambers' business.
Insurance. Chambers carries a broad range of insurance coverages which
management considers sufficient to protect the assets and operations of Chambers
that could otherwise be negatively affected in the event of a loss. The
coverages are intended to provide Chambers with comprehensive financial
protection. Insurance coverages are currently in effect to protect Chambers from
financial losses resulting from bodily injury, personal injury and property
damage, including but not limited to workers' compensation, comprehensive
general liability, fire and casualty, vehicle and other related coverages.
Commercial excess liability coverage is maintained as well. Chambers has
determined that it is in its best interests to self-insure certain portions of
liability and workers' compensation risks, while in some instances maintaining
third-party coverage to protect against catastrophic loss. Chambers also
maintains directors' and officers' insurance coverage. Because of the litigation
arising out of the change in accounting method announced by Chambers in 1992 and
the subsequent restatement of its prior years' financial statements (see
"-- Legal Proceedings"), Chambers has incurred significantly higher costs with
respect to its directors' and officers' coverage.
As a result of limited availability in the insurance marketplace as well as
costly premium assessments, Chambers, along with most companies in the waste
industry, has experienced difficulty in obtaining environmental impairment
liability insurance. Chambers will continue to undertake efforts to obtain this
type of insurance coverage if such coverage is commercially available at premium
levels which are reasonable in light of the business and financial risks
involved. Chambers does not believe that the limited availability of
comprehensive environmental impairment liability insurance should have a
material adverse effect upon the operation of its business at this time.
EMPLOYEES
At December 31, 1994, Chambers had approximately 1,440 employees,
approximately 300 of whom were represented by unions under collective bargaining
agreements. Chambers is a party to union contracts at its Monroeville and
Washington locations in Pennsylvania, and at its Morris County, New Jersey,
locations. The employees at the remaining locations of Chambers are not
represented by unions. Chambers has not experienced any work stoppages.
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PROPERTIES
The principal fixed assets of Chambers consist of real property interests,
real property improvements, and vehicles and equipment. The vehicles and
equipment, which are owned and leased, included, at December 31, 1994,
approximately 430 collection and disposal vehicles, 160 light vehicles, 60
over-the-road tractors and 470 trailers, 80 rail trailers, 120 railcars and 580
rail containers, 67,000 waste collection containers and roll-off boxes, 51,000
recycling collection containers and 430 portable and stationary compactors, in
addition to approximately 300 pieces of heavy equipment used in landfill
construction and operations.
At December 31, 1994, Chambers owned 11,172 acres of land and leased 1,217
acres of land, 10,814 acres of which are or could be used for landfill
operations, 33 acres are used for recycling and transfer station operations and
1,542 acres of real property are or could be used for garages, offices and other
facilities for business operations. Chambers owns and leases facilities where it
provides complete maintenance, repair, fabrication, rebuilding and painting
services for its vehicles and equipment. In connection with the restructuring of
its financing agreements, Chambers has granted security interests in
substantially all of its assets as collateral for Chambers' long-term borrowings
and performance bonds. See "Management's Discussion and Analysis of Chambers'
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
LEGAL PROCEEDINGS
Between March 18, 1992 and May 7, 1992, various Chambers shareholders filed
twenty-three actions in the United States District Court for the Western
District of Pennsylvania asserting federal securities fraud claims and pendent
state law claims against Chambers, certain of its officers and directors, its
former auditors, and the underwriters of its securities (the "Federal Class
Action"). The significant part of these actions, as amended and consolidated on
November 4, 1992, under the caption In Re: Chambers Development Chambers, Inc.
Shareholders Litigation, Civil Action No. 92-0679, and brought on behalf of a
putative class of purchasers of Chambers' securities between March 18, 1988 and
October 20, 1992, is the allegation that the decrease in Chambers' stock price
during the period from Chambers' March 17, 1992 announcement of a change in
accounting method relating to capitalization of certain costs and expenses
through its October 20, 1992 announcement of a $362 million reduction in
retained earnings as of December 31, 1991, as compared to the amount previously
reported, and a restatement of its 1990 and 1989 consolidated financial
statements, was caused by Chambers' misrepresentation of its earnings and
financial condition. One of the original twenty-three complaints, Yeager v.
Rangos, et al., C.A. No. 92-1081, also asserts derivative claims on behalf of
Chambers (which is named as a nominal defendant) for breach of fiduciary duty
against certain of its officers and directors and for negligence against its
former auditors (the "Federal Derivative Action").
In addition, three parallel lawsuits have been filed in state courts. Two
derivative actions, asserting waste and mismanagement claims on behalf of
Chambers against certain of its officers and directors, have been filed in the
Delaware Court of Chancery for New Castle County (the "Delaware Derivative
Actions") and are pending under the caption In Re: Chambers Development Company,
Inc. Shareholders Litigation, Consolidated C. A. No. 12508. One purported class
action, alleging state securities law and common law claims, has been filed in
the Court of Common Pleas of Allegheny County, Commonwealth of Pennsylvania,
under the caption Integrated Investments, Inc., et al. v. Chambers Development
Company, Inc., et al., No. G.D. 92-7036 (the "State Class Action" and, together
with the Federal Class Action, the "Class Actions").
The complaints in the Class Actions allege that Chambers, in publicly
disseminated materials, intentionally or negligently misstated its earnings
during the class period, thereby deceiving Chambers' shareholders and others
with respect to its growth prospects and profitability. In particular, the
plaintiffs allege that Chambers' earnings were improperly increased by
capitalizing certain costs and expenses in violation of generally accepted
accounting principles, in part through the use of a formula which arbitrarily
allocated indirect costs and expenses to landfill and development activities. In
addition, the plaintiffs allege that Chambers had an inadequate information
system and failed to maintain the records necessary to support the
capitalization of such costs and expenses.
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The Federal Class Action claims assert violations of section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, section
11 of the Securities Act of 1933 and negligent misrepresentation against
Chambers. Claims under sections 12(2) and 20(a) of the Securities Act of 1933
have been asserted against Chambers' officers and directors who are named as
defendants, but not against Chambers. The State Class Action asserts similar
violations of the Pennsylvania securities laws. These actions seek to recover
damages in an unspecified amount which the class members allegedly sustained by
purchasing Chambers' securities at artificially inflated prices, as well as
related relief.
The section 11 claims relate to the sale in April 1989 of 2.85 million
shares of Chambers' Class A Common Stock at $25 per share (equivalent to 5.7
million shares of its Class A Common Stock at $12.50 per share after a
subsequent two-for-one stock split), the issuance in September 1989 of $110
million principal amount of Chambers' 6 3/4% Convertible Subordinated Debentures
Due September 15, 2004 (subsequently converted into Class A Common Stock on or
about September 16, 1991 at $21.125 per share), and the sale in June 1991 of 7
million shares of Chambers' Class A Common Stock at $24.875 per share, and may
be asserted by plaintiffs who, subject to certain conditions, are able to trace
their purchases to these offerings. The section 10(b) fraud and negligent
misrepresentation claims relate to these three offerings and open market
transactions, whether or not the plaintiffs are able to trace their purchases to
a specific offering. Chambers has been advised by its counsel that the
plaintiffs have alleged that the restatement of Chambers' 1990 and 1989
consolidated financial statements is an admission that they were materially
misstated. However, Chambers has also been advised by its counsel that Chambers'
former auditors and former chief financial officer have contended that Chambers'
prior consolidated financial statements were fairly presented in accordance with
generally accepted accounting principles. If a plaintiff were to establish that
Chambers' consolidated financial statements were materially misstated, Chambers
would be liable for statutorily prescribed damages under section 11 (subject to
a causation defense in which Chambers bears the burden of proving that some or
all of the loss resulted from factors other than the misstatement and subject to
the statute of limitations defense) and for damages established by case law
under section 10(b) and the common law claims if that plaintiff were able to
establish the remaining elements of those claims and Chambers had no affirmative
defense.
The Federal Derivative Action and the Delaware Derivative Actions assert,
inter alia, that Chambers' officers and directors committed acts of waste,
mismanagement and breach of fiduciary duty by allegedly instituting or approving
Chambers' accounting policies relating to capitalization of certain costs and
expenses for the purpose of increasing their salaries, fees, stock and other
benefits. These actions, which seek recovery of unspecified damages on behalf of
Chambers, allege that Chambers has been damaged because it has become exposed to
the risk of an adverse judgment or settlement in the class actions, that it has
incurred and will incur costs to defend the class actions, and that it has
suffered injury to its reputation.
On March 5, 1993, another state court action was filed in the Court of
Common Pleas in Allegheny County, Pennsylvania, under the caption Balaban v.
Rangos, et al. (the "Pennsylvania Derivative Action" and, together with the
Federal and Delaware Derivative Actions, the "Derivative Actions"). This action
asserts derivative claims on behalf of Chambers similar in nature to those
asserted in the Federal and Delaware Derivative Actions.
On November 18, 1994, Chambers and shareholder representatives executed
memoranda of understanding with respect to the settlement and dismissal of the
Class Actions and Derivative Actions. On February 24, 1995, representatives of
the plaintiffs in the Federal Class Action, representatives of the plaintiffs in
the Federal Derivative Action, Chambers and certain individual defendants
entered into a Class Action Stipulation and Agreement of Compromise and
Settlement (the "Class Action Settlement Agreement") and a Derivative Action
Stipulation and Agreement of Compromise and Settlement (the "Derivative Action
Settlement Agreement" and, together with the Class Action Settlement Agreement,
the "Settlement Agreements"), which are the definitive settlement documents for
the Class Actions and the Derivative Actions.
The Class Action Settlement Agreement provides that the sum of $8 million
will be paid by Chambers' directors and officers liability insurance carrier and
the sum of $70 million will be paid by Chambers in two installments following
final court approval of the settlement. The first installment of $25 million,
together with
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interest calculated from the Settlement Effective Date (as hereinafter defined)
to the date of payment, is to be made no later than the earlier of (i) 30 days
after the Settlement Effective Date or (ii) after the Settlement Effective Date
and two days after the Merger or any comparable transaction (as defined in the
Class Action Settlement Agreement) of Chambers with any other company has been
consummated. The second installment of $45 million, together with interest
calculated from the Settlement Effective Date to the date of payment (the
"Second Installment"), is to be made no later than the earlier of (i) one year
after the Settlement Effective Date or (ii) the date after the Settlement
Effective Date and five days after certain refinancing shall have been obtained
by the combined entity resulting from the Merger or a comparable transaction.
"Settlement Effective Date" is defined as that date upon which (i) the court has
finally approved the Class Action settlement after due notice and hearing, (ii)
final judgment dismissing the Class Actions as to the settling defendants has
been entered, (iii) all times for appeal or other direct attack on the adequacy
of the settlement have expired or any such direct attack shall have been finally
rejected, and (iv) all related actions (as defined in the Class Action
Settlement Agreement) have been dismissed with prejudice; provided, however,
that the dismissal of any such related actions may be conditioned upon the
subsequent approval of the settlement and the occurrence of the Settlement
Effective Date. If the Merger or a comparable transaction is consummated, the
total settlement payment will be adjusted by a base increase of $5 million,
which will be adjusted upward or downward by an amount consisting of $16,000 for
each penny above or below $4.50 of Merger consideration received by Chambers
stockholders per share of Chambers Common Stock or Chambers Class A Common
Stock, together with interest from the Settlement Effective Date to the payment
date (the base increase, together with any adjustment thereto, collectively
referred to as the "Adjustment"). Any amount by which the sum of the Second
Installment and the Adjustment exceed $50.6 million will be paid by John G.
Rangos, Sr., Chairman and Chief Executive Officer of Chambers. The Adjustment
shall be payable no later than the earlier of (i) one year after the Settlement
Effective Date or (ii) five days after certain refinancing shall have been
obtained by the combined entity in the Merger or a comparable transaction.
However, the Adjustment shall be payable only if (i) the Merger or a comparable
transaction shall have been consummated within one year after the Settlement
Effective Date or (ii) the Merger Agreement or an agreement for a comparable
transaction is in effect on the date one year after the Settlement Effective
Date and the Merger or such comparable transaction is consummated thereafter.
John G. Rangos, Sr. has also agreed to guarantee Chambers' obligations to make
certain payments in the Class Action settlement in an amount not to exceed $15
million.
The Derivative Action Settlement Agreement provides that the consideration
from the defendants to Chambers shall include the following: (i) payment of the
sum of $2 million from Chambers' directors and officers liability insurance
carrier; (ii) the continued implementation by Chambers, for a period of at least
two years after the effective date of the settlement, of certain corporate
governance measures; (iii) the contribution to Chambers by Synergy Associates of
the headquarters property currently leased to Chambers by Synergy Associates;
and (iv) the $15 million guarantee of John G. Rangos, Sr. with respect to
certain payments to be made by Chambers to the plaintiff class pursuant to the
Class Action settlement.
In addition, in order for the settlements to be effective, certain related
actions, as described in the Settlement Agreements, must be dismissed with
prejudice including the State Class Action and the Delaware and Pennsylvania
Derivative Actions. These related actions do not include the cases captioned
Option Resource Group, et al. v. Chambers Development Company, et al., and
Southeast Investments v. Chambers Development Co., et al., which are described
below; these matters may still be pending after the Class Action and Derivative
Action settlements.
The Settlement Agreements provide that Chambers and its present and former
officers, directors and employees will receive releases from the plaintiffs.
Under the Settlement Agreements, the plaintiffs' actions continued against
certain defendants other than Chambers. The terms of settlement also include a
right to terminate the settlements based on appeals or opt-outs with respect to
the Class Actions. After Chambers entered into the Settlement Agreements, the
class and derivative plaintiffs entered into settlements with Grant Thornton,
which previously served as Chambers' accountants. Chambers then entered into an
agreement with the class plaintiffs to settle their claims against a group of
underwriters of certain of Chambers' securities offerings. Chambers agreed to
pay $300,000 to the class plaintiffs to resolve these claims for which the
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underwriters sought indemnity from Chambers. The Settlement Agreements provide
for the seeking of bar orders and also have judgment reduction provisions that
are intended to protect Chambers and the settling individual defendants from
claims over by Grant Thornton and the underwriters in the event that their
settlements are not approved by the court or otherwise do not become final. On
March 22, 1995, the court granted preliminary approval of the settlements and
the distribution of notices to Chambers' stockholders and the plaintiff class
members regarding the settlements. A hearing upon the fairness, reasonableness
and adequacy of the proposed settlements has been scheduled for May 19, 1995.
Shortly after Chambers' March 17, 1992 announcement of a change in
accounting policies concerning capitalization, the Commission initiated an
informal investigation with respect to Chambers' accounting method and the
accuracy of its financial statements and into the possibility that persons or
entities had traded in Chambers' securities on the basis of inside information
prior to the announcement. On September 30, 1992, a formal order of
investigation was issued by the Commission with respect to potential violations
by Chambers and others of sections 10(b), 13(a) and (b) of the Exchange Act and
various rules promulgated thereunder. Chambers has cooperated with the
investigation through the production of documents and by providing witnesses
pursuant to the Commission's request. On May 9, 1995, the Commission filed a
complaint against Chambers in the United States District Court for the Western
District of Pennsylvania alleging that Chambers violated the antifraud
provisions of the Securities Act and the antifraud, reporting, internal controls
and recordkeeping provisions of the Exchange Act by issuing false and misleading
earnings announcements from 1989 through March 1992 and including false and
misleading financial statements in its reports on Forms 10-K and 10-Q and its
registration statements filed from 1989 through November 1991. Chambers
simultaneously consented, without admitting or denying the Commission's
allegations, to the entry of an order enjoining it from violating certain
provisions of the Securities Act and the Exchange Act and requiring it to pay a
civil penalty of $500,000.
The Commission also instituted administrative proceedings under Section 21C
of the Exchange Act against four present and former officers of Chambers,
including John G. Rangos, Sr., Chairman and Chief Executive Officer of Chambers,
two of Chambers' former corporate controllers and a former chief financial
officer of Chambers. The Commission found, among other things, that John G.
Rangos, Sr. and one of the former corporate controllers each were a cause of
Chambers' violations of the reporting, internal controls and recordkeeping
provisions of the Exchange Act. Each of these four persons consented to the
issuance of a cease and desist order without admitting or denying the
Commission's findings.
The AMEX and the Chicago Board of Options Exchange are conducting
investigations into trading activity on their respective exchanges in Chambers'
securities and in put options on Chambers' securities prior to the March 17,
1992 announcement.
On December 4, 1992, Chambers was served with a grand jury subpoena out of
the United States District Court for the Eastern District of New York seeking
production of public filings and reports disseminated to its shareholders,
documents referring to the preparation of its financial statements and other
materials. Chambers has responded to the subpoena by producing documents. The
grand jury investigation is ongoing and it appears to be focusing on issues
similar to those raised by the civil litigation and the Commission investigation
described above.
Chambers is cooperating with each of the investigations referred to in the
two preceding paragraphs.
On or about March 8, 1993, an action was filed in the United States
District Court for the Western District of Pennsylvania, captioned Option
Resource Group, et al. v. Chambers Development Company, Inc., et al., C.A. No.
93-354. This action was brought by a market maker in Chambers stock and two of
its general partners and asserts federal securities law and common law claims
similar to those alleged in the Class Actions against essentially the same group
of defendants. These plaintiffs allege that, as a result large amounts of put
options traded on the Chicago Board of Options Exchange between March 13 and
March 18, 1992, they bought Chambers stock and also sold it short to assure
fluidity in the market, resulting in approximately $2.1 million in losses. On
March 19, 1993, another action was filed in the United State District Court for
the Eastern District of Arkansas, captioned Southeast Investments, Inc. v.
Chambers Development Company, Inc., No. MDL-982 (the "Arkansas Action"). This
action was brought by an individual investor which claims to
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have purchased Chambers stock on March 20, 1992 in reliance on Chambers' March
17, 1992 announcement and suffered an alleged loss of approximately $75,000 upon
the subsequent sale of the stock. The complaint asserts federal securities law
and common law claims similar to those alleged in the Class Action. Chambers'
motion to the Judicial Panel on Multidistrict Litigation ("MDL") to transfer the
Arkansas Action to the Western District of Pennsylvania was granted by the MDL.
These actions are in discovery and Chambers is vigorously defending these
actions.
On August 31, 1992, Chambers and the Township of Conemaugh, Pennsylvania,
filed an action in the United States District Court for the Western District of
Pennsylvania seeking to enjoin the Passaic County Utilities Authority (the
"Authority") from entering into a long-term disposal contract with a third party
in breach of the Authority's long-term disposal contract with Chambers. The
Authority subsequently filed an action on the same issues in the Superior Court
of New Jersey in Passaic County. The District Court awarded Chambers summary
judgment on one count of its complaint, thereby directing the Authority
specifically to perform its obligations under its existing contract with
Chambers. However, the District Court in granting summary judgment recognized
that the New Jersey Department of Environmental Protection and Energy ("DEPE")
has ultimate approval authority regarding New Jersey public solid waste disposal
contracts and, therefore, the Authority could proceed with seeking approval from
the DEPE of its agreement with the third party. The DEPE subsequently directed
the Authority to continue to deliver Passaic County's waste to Chambers through
December 11, 1993, and later granted the Authority's request for approval of the
third party agreement. Chambers filed a motion for summary judgment for an award
of damages, but the District Court granted summary judgment to the Authority.
Chambers has filed an appeal of the District Court judgment to the Circuit Court
of Appeals.
In 1990, two actions were filed by the State of West Virginia, seeking to
require Chambers' LCS Landfill in West Virginia to obtain the approval of the
local county commission for continued operation of the landfill and for the
volume of waste which may be disposed of in the landfill, which cases were
consolidated under the caption State of West Virginia ex rel. Hamrick v. LCS
Services, Inc., et al. On July 29, 1993, the Circuit Court of Berkeley County,
West Virginia, issued an order requiring Chambers to obtain the approval of the
Berkeley County Commission in order to continue operation of its LCS landfill.
On December 16, 1994, the Supreme Court of Appeals of West Virginia affirmed the
lower court's decision in part and reversed that decision in part, holding that
the landfill does not require local county site approval, but continuing the
volume limitation which has applied to the facility since it commenced operation
in 1991.
A declaratory judgment action entitled Morel, et al. v. Chambers Waste
Systems of Florida, Inc. was filed on September 29, 1994 in the Circuit Court of
the Fifteenth Judicial Circuit of Florida in and for Palm Beach County, Florida.
The plaintiffs are asking the court to declare that they are entitled to royalty
payments from Chambers as calculated by a percentage of gross revenues derived
from Chambers' landfill located at Berman Road in Okeechobee County, Florida, as
well as from any landfill that may be sited in the future by Chambers on nearby
property. Chambers has responded by seeking, among other things, a declaration
that any writing or document that the plaintiffs contend such royalty
entitlement is based upon is void, voidable or otherwise of no effect or,
alternatively, that any royalty payments be solely based upon the nearby
property to Chambers' landfill, when a landfill is developed, if ever, on such
property. The outcome of this action is not presently determinable.
Since the announcement of the Merger, three cases have been filed in the
Court of Chancery of the State of Delaware in New Castle County against
Chambers, its officers and directors and USA Waste and Envirofil. These cases
include Smith v. Rangos et al., C. A. No. 13906, Krim v. Rangos et al., C. A.
No. 13985, and Adams v. Rangos et al., C. A. No. 13909. Each of these actions
relates to the Merger and all of them seek substantially similar relief.
Accordingly, a consolidation order was entered by the Court of Chancery on March
1, 1995. The cases have been consolidated for all purposes under Smith v.
Rangos, et al. at C. A. No. 13906 and the caption of the consolidated case is In
Re Chambers Development Company, Inc. Shareholders Litigation, Consolidated C.
A. No. 13906. The complaint which will govern the consolidated action is the
complaint filed in the Krim action. The Krim complaint is brought as a purported
class action on behalf of the plaintiff and all similarly situated Chambers
security holders, excluding defendants and any person, firm, corporation or
similar entity related to or affiliated with any of the defendants. The
complaint
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alleges that the individual defendants, inter alia, engaged in unfair dealing to
the detriment of the putative class; the Merger is grossly unfair to the members
of the putative class; the members of the putative class would be irreparably
damaged if the Merger were to be consummated; and the defendants' conduct
constituted a breach of fiduciary and other common law duties allegedly owed to
the putative class. The complaint alleges that the Merger consideration is
inadequate for various reasons and that the individual defendants failed to
maximize shareholder value. The complaint seeks a declaration that the Merger
Agreement was the result of a breach of fiduciary duty by the individual
defendants, aided and abetted by the USA Waste defendants, and is thus unlawful
and unenforceable; an injunction to enjoin defendants from proceeding with the
Merger; an injunction to enjoin defendants from consummating any merger or
combination with a third party absent procedures or processes such as an
auction; an order invalidating certain proxy arrangements; and an order awarding
plaintiff and the class members damages, costs and disbursements, including
reasonable attorneys' and experts' fees. Counsel for the parties have engaged in
settlement discussions and, based thereon, USA Waste and Chambers anticipate a
definitive agreement, subject to court approval, will be finalized before the
USA Waste Annual Meeting and the Chambers Special Meeting.
Due to the increasingly complex regulatory environment and heightened
public awareness of and community sensitivity toward waste management
operations, including particularly the siting or expansion of waste disposal
facilities, Chambers could become involved in a variety of potentially
significant legal proceedings, in addition to other more routine litigation
incidental to its business, including, for example, proceedings relating to
permit applications for proposed facilities, personal injury claims and other
proceedings.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CHAMBERS
The following selected historical consolidated financial data for Chambers
for each of the five years in the period ended December 31, 1994 has been
derived from its historical audited consolidated financial statements and should
be read in conjunction with the separate historical consolidated financial
statements and the notes thereto of Chambers located elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1990 1991 1992 1993 1994
-------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues................................... $214,052 $249,384 $294,310 $288,481 $ 257,989
-------- -------- -------- -------- ---------
Costs and expenses:
Operating................................ 175,669 196,565 206,761 194,355 179,542
General and administrative............... 38,131 42,908 37,853 23,210 24,796
Depreciation and amortization............ 22,863 35,611 38,363 41,764 37,568
Unusual items -- operations.............. -- 16,938 44,291 (11,851) 8,863
-------- -------- -------- -------- ---------
236,663 292,022 327,268 247,478 250,769
-------- -------- -------- -------- ---------
Income (loss) from operations.............. (22,611) (42,638) (32,958) 41,003 7,220
-------- -------- -------- -------- ---------
Other income (expense):
Unusual items -- shareholder litigation
settlement and other litigation
related costs.......................... -- -- (10,853) (5,500) (79,400)
Interest expense......................... (13,487) (30,514) (31,628) (29,163) (23,843)
Interest income.......................... 7,037 11,484 6,132 2,663 2,220
Other, net............................... (601) 786 377 900 (372)
-------- -------- -------- -------- ---------
(7,051) (18,244) (35,972) (31,100) (101,395)
-------- -------- -------- -------- ---------
Income (loss) before income taxes.......... (29,662) (60,882) (68,930) 9,903 (94,175)
Income tax provision (benefit)............. 6,300 3,600 1,325 1,600 (3,931)
-------- -------- -------- -------- ---------
Income (loss) from continuing operations... (35,962) (64,482) (70,255) 8,303 (90,244)
Discontinued operations:
Loss from operations..................... (4,609) (7,722) (1,407) -- --
Gain on sale of assets................... -- -- 939 -- --
-------- -------- -------- -------- ---------
Net income (loss).......................... $(40,571) $(72,204) $(70,723) $ 8,303 $ (90,244)
======== ======== ======== ======== =========
Income (loss) from continuing operations
per common share......................... $ (.66) $ (1.08) $ (1.05) $ .12 $ (1.35)
======== ======== ======== ======== =========
Income (loss) per common share............. $ (.74) $ (1.21) $ (1.06) $ .12 $ (1.35)
======== ======== ======== ======== =========
Weighted average common and common
equivalent shares........................ 54,645 59,895 66,788 66,788 66,789
======== ======== ======== ======== =========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit).................. $129,322 $142,487 $ 52,631 $ 30,067 $ (12,220)
Total assets............................... 516,017 699,859 592,790 533,622 488,498
Long-term debt, including current
maturities............................... 403,602 377,782 352,836 291,551 257,481
Stockholders' equity....................... 16,385 216,456 145,870 154,173 63,932
</TABLE>
- ---------------
(1) Certain reclassifications have been made to the historical financial
statements of Chambers to conform to 1994 classifications.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF CHAMBERS' FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1994
On December 11, 1992, Chambers completed the sale of its security services
business. The following discussion excludes the operational activity and results
of the security services business, which has been included in the accompanying
consolidated financial statements of Chambers as discontinued operations.
The following table sets forth the items in Chambers' consolidated
statements of operations related to continuing operations as a percentage of
revenues, and the percentage changes in dollar amounts of the items compared to
previous years.
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
(DECREASE)
YEAR ENDED ---------------------
DECEMBER 31, 1993 1994
------------------- COMPARED COMPARED
1992 1993 1994 TO 1992 TO 1993
--- --- --- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues........................................... 100% 100% 100% (2)% (11)%
Costs and expenses:
Operating........................................ 70 67 70 (6) (8)
General and administrative....................... 13 8 10 (39) 6
Depreciation and amortization.................... 13 14 15 9 (10)
Unusual items -- operations...................... 15 (4) 3 -- --
--- --- ---
Income (loss) from operations...................... (11) 15 2 -- --
Other income (expense):
Unusual items -- shareholder litigation
settlement and other litigation related
costs......................................... (4) (2) (31) (49) 1,344
Other income, primarily interest................. 2 1 1 (45) (48)
Interest expense................................. (10) (10) (9) (8) (18)
--- --- ---
Income (loss) from continuing operations before
income taxes..................................... (23) 4 (37) -- --
Income tax provision (benefit)..................... 1 1 (2) 21 --
--- --- ---
Income (loss) from continuing operations........... (24)% 3% (35)% -- --
=== === ===
</TABLE>
Revenues. The following table sets forth the components of revenue change
for Chambers during the years indicated.
<TABLE>
<CAPTION>
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Price............................................................... 2% (1)% (3)%
Volume.............................................................. 10 4 (3)
Acquisitions........................................................ 6 -- --
Divestitures........................................................ -- (5) (5)
---- ---- ----
Total............................................................... 18% (2)% (11)%
==== ==== ====
</TABLE>
The following table sets forth revenues of Chambers by each of the
principal lines of ongoing business and for divested businesses for each of the
three years in the period ended December 31, 1994 (dollar amounts in thousands):
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE (DECREASE)
--------------------
YEAR ENDED DECEMBER 31, 1993 1994
-------------------------------- COMPARED COMPARED
1992 1993 1994 TO 1992 TO 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Collection services...................... $126,726 $122,444 $106,206 (3)% (13)%
Disposal services (landfills)............ 66,705 78,992 83,526 18 6
Transfer stations........................ 56,404 55,316 50,882 (2) (8)
Incinerator.............................. 6,391 9,691 9,589 52 (1)
Recycling services....................... 6,214 6,117 6,463 (2) 6
Divested businesses...................... 31,870 15,921 1,323 (50) (92)
-------- -------- --------
Total.................................... $294,310 $288,481 $257,989 (2) (11)
======== ======== ========
</TABLE>
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1994. Revenues for 1994 decreased by $30.5 million to $258.0 million from
$288.5 million during 1993, due in part to the sale of businesses as part of
Chambers' divestiture program. During 1993 and 1994, Chambers sold six
collection and hauling operations, one transfer station, one recycling operation
and one landfill, with a resulting decrease in revenues attributable to those
operations of $14.6 million in 1994 from 1993.
In addition, both collection and disposal revenues for 1994 were reduced as
a result of contract renegotiations and terminations. Chambers' previous
contract with Bergen County, New Jersey, to dispose of that county's solid waste
either to a Chambers landfill or to the Essex County, New Jersey, incinerator
also included the transportation and disposal of ash generated by the Essex
County incinerator. In December 1993, Chambers was awarded a new three-year
agreement at a reduced rate from the prior contract for the disposal of the
municipal solid waste from Bergen County, New Jersey, commencing on March 1,
1994. The contract for the transportation and disposal of ash generated by the
Essex County incinerator was awarded to a competitor effective March 16, 1994.
Chambers also had provided disposal and transportation of solid waste from Union
County, New Jersey, under contracts which expired in December 1993. In addition,
in October 1993, the New Jersey Department of Environmental Protection and
Energy approved the Passaic County Utilities Authority's contract redirecting
the county's solid waste to a competitor's landfill for a two-year period
commencing on December 1, 1993. As a result, Chambers no longer receives waste
under its contract with the Passaic County Utilities Authority. As a result of
these contract renegotiations and terminations, Chambers' 1994 revenues related
to the New Jersey activities decreased to $16.6 million from $50.3 million for
1993, and the loss from operations related to these activities totaled $1.6
million in 1994 as compared to income from operations of $12.4 million for 1993.
Chambers' management believes that progress has been made in replacing a portion
of such waste streams, although at lower operating margins than the terminated
contracts, and efforts will continue toward increasing Chambers' customer base
and marketing of its special waste programs.
Landfill revenues for 1994 increased by $4.5 million, or 6%, which was
primarily attributable to increased volume at Chambers' landfill in Okeechobee
County, Florida, as a result of a transportation and disposal agreement with
Reuter Recycling of Florida, Inc. and new waste volume at Chambers' landfill in
Amelia County, Virginia, which opened in May 1993. Landfill revenues were
enhanced by additional special waste volume, which consists of nonhazardous
waste materials such as sewage sludges, contaminated soils, incinerator ash and
certain industrial residues. Due to intense competitive pressures within the
industry, landfill volume growth was partially offset by reducing pricing at
certain of Chambers' landfills.
Transfer station revenues decreased $4.4 million during 1994 to $50.9
million compared to $55.3 million during 1993, due primarily to rate reduction
resulting from the sale but continued operation of the two Morris County, New
Jersey, transfer stations on December 31, 1993, and partially offset by
increased revenues at the Columbia, South Carolina, and Hunterdon County, New
Jersey, transfer stations. The Morris County transfer station operations
generated revenues of $35.6 million, including $4.0 million in revenues deferred
from 1993, and income from operations of $12.2 million in 1994; however, it is
expected to generate annual revenues of approximately $11 million in each of
1995 and 1996, provided that the County's long-term solid waste system is not
yet in operation.
1993. Revenues for 1993 decreased by $5.8 million to $288.5 million from
$294.3 million for 1992, principally as a result of the sale of certain
businesses as part of Chambers' divestiture program. As discussed below,
Chambers sold its two transfer stations in Morris County, New Jersey, on
December 31, 1993. In addition, during 1993 Chambers sold six collection and
hauling operations, one transfer station and one landfill, with a resulting
decrease in revenues attributable to those operations of $15.4 million in 1993
from 1992.
Landfill revenues for 1993 increased by $12.3 million, or 18%, which was
primarily attributable to the full period operations and increased waste streams
at the newly constructed landfills in Amelia County, Virginia, which opened in
May 1993, in Allegany County, Maryland, which opened in February 1992, and in
Atlanta, Georgia, which opened in May 1992, and the acquisition of a landfill in
Okeechobee County, Florida, in
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<PAGE> 134
January 1992. Landfill revenues were also enhanced by additional special waste
volumes resulting from Chambers' increasing emphasis on the disposal of special
wastes.
Revenues for 1993 also reflect a $3.3 million, or 52%, increase in medical
and special waste revenues from the operation of the Hampton County, South
Carolina, incinerator, which also benefited from Chambers' increased emphasis on
the special waste market. See "Results of Operations for the Three Years Ended
December 31, 1994 -- Unusual Items -- Operations."
Revenues for 1993 were reduced by a decrease in waste volume from Chambers'
New York City sludge contract and a decrease in waste volume from Chambers' New
Jersey municipal customers, which redirected portions of their solid waste to
the Essex County, New Jersey, waste-to-energy incinerator and reduced their
solid waste volume as a result of the state's recycling program.
On December 31, 1993, Chambers sold its two transfer stations in Morris
County, New Jersey, to the Morris County Municipal Utilities Authority. As part
of the agreement of sale, Chambers will continue to operate the transfer
stations and provide transportation services until the county's long-term solid
waste system is in operation or December 31, 1996, if later. The county has an
option to extend the operation and transportation agreement for two six-month
periods beyond 1996, if its long-term solid waste system is not yet operational.
Operating Costs and Expenses. Operating costs and expenses, which decreased
by $14.8 million to $179.5 million in 1994 from $194.3 million in 1993,
increased as a percentage of revenues in 1994 to 70% as compared with 67% in
1993.
During 1993 and 1994, Chambers sold certain operations with a resulting
decrease in operating costs and expenses attributable to those operations of
$12.6 million in 1994. In addition, costs for disposal of waste at third-party
landfills and transportation expenses were reduced as a result of continued
emphasis on the utilization of internal disposal capacity and the decrease in
waste volume received by Chambers from the Essex County, New Jersey,
incinerator, as previously discussed, and Chambers' New York City sludge
contract. Further reductions in operating expenses resulted from lower landfill
closure and post-closure rates resulting from increases to projected airspace
for future expansions of existing landfill sites, partially offset by volume
increases at Chambers' landfills.
During 1993, Chambers experienced a reduction in costs for disposal of
waste at third-party landfills as compared with 1992. The reduction in these
costs, which reflects the increased emphasis on the utilization of internal
disposal capacity, was, however, partially offset by an increase in community
host fees resulting from the redirection of waste to landfills owned by
Chambers. In addition, operating costs and expenses for 1993 reflect an increase
in subcontract hauling expense resulting from increased special waste volume at
the Hampton County, South Carolina, incinerator.
General and Administrative Expenses. General and administrative expenses
increased as a percentage of revenues to 10% for 1994 as compared to 8% during
1993, while increasing in dollar amount by $1.6 million. The dollar increase in
1994 principally reflects a $2.3 million charge for charitable contributions,
offset partially by the continued benefit of Chambers' reorganization efforts in
1992, 1993 and late 1994. Further reorganization efforts during 1995 are
expected to reduce general and administrative expenses in future periods. In the
fourth quarter of 1994, Chambers elected early adoption of Statement of
Financial Accounting Standards No. 116, "Accounting for Contributions Received
and Contributions Made." The new standard requires, among other things, the
recognition of the fair value of contributions made, including unconditional
promises to give, in the period in which the contribution is made or
unconditional promise is given. Prior to adoption, Chambers had recognized
contributions made or unconditional promises to give in the period the
contribution was paid. On December 29, 1994, Chambers made unconditional
promises to contribute $3 million to certain charitable organizations, payable
in annual installments of $0.5 million over the next six years; accordingly,
Chambers recorded a charge to general and administrative expense of $2.3
million, representing the present value of these obligations.
As anticipated, general and administrative expenses declined in 1993
compared with 1992, due largely to the full year benefit of Chambers'
reorganization efforts. During 1992, management implemented a
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<PAGE> 135
reorganization of its corporate and regional staffing levels, having determined
that the emphasis on internal growth through the utilization of disposal
capacity for which permits have been issued would not require the same levels of
administrative personnel that existed previously. These reduced expenses include
compensation as well as travel and professional fees.
Depreciation and Amortization. Depreciation and amortization increased as a
percentage of revenues to 15% in 1994 from 14% in 1993 and 13% in 1992, while
decreasing by $4.2 million in 1994 from 1993 and increasing by $3.4 million in
1993 from 1992. The 1994 dollar decrease reflects the sale of certain of
Chambers' operations and the effect of increases to projected airspace resulting
from future expansions of existing landfill sites, partially offset by higher
landfill construction cost amortization associated with volume increases at
Chambers' landfills. The increase in 1992 reflects higher landfill construction
cost amortization associated with volume increases at Chambers' landfills,
partially offset by the effects of increases to projected airspace resulting
from future expansions of existing landfill sites.
Unusual Items -- Operations. In 1992 and the first half of 1993, Chambers
was not in compliance with certain covenants of its various long-term borrowing
agreements and commenced the restructuring of its principal credit facilities
and surety arrangements. In addition, Chambers undertook significant steps to
reorganize its corporate and regional activities. Chambers also decided to
divest certain businesses that did not meet strategic and performance objectives
and not to pursue certain development activities.
In 1994, Chambers recorded charges of $3.4 million for losses on asset
divestitures including $1.1 million to adjust a prior year estimate of the loss
on divestiture of a hauling, recycling and transfer station operation, and $2.3
million related to the estimated future loss on a municipal contract. Effective
March 1, 1994, Chambers was awarded a three-year contract for the transportation
and disposal of municipal solid waste with, at the customer's option, two
one-year extension periods beyond February 28, 1997. The costs of operating the
contract have been greater than originally estimated and, since inception, the
contract has been generating an operating loss. Operational changes and
improvements implemented during 1994 did not sufficiently reduce operating
costs. As a result, Chambers has estimated it will incur operating losses of
approximately $2.3 million through the remaining two-year term of the contract,
and the two one-year extension periods, in order to satisfy the service
requirements of the contract and accordingly has accrued such amount. In 1994,
Chambers also reversed prior year provisions for losses on divestitures and
contractual commitments of $3.6 million, including $2.0 million previously
recorded for expected losses to be incurred on a municipal contract with respect
to which Chambers was able to negotiate an early termination and $1.0 million of
excess reserve related to the sale in 1994 of a recycling operation and certain
real estate.
In addition, in 1994 Chambers recorded net charges of $8.2 million for
asset impairments and abandoned projects. That amount included a fourth quarter
charge of $7.0 million to reduce the carrying value, as of December 31, 1994, of
Chambers' medical, special and municipal waste incinerator facility to its
estimated net realizable value. The amount of the charge was measured as the
difference between the carrying value of long-term assets, principally property,
plant and equipment and intangible assets, and the estimated fair value of the
assets based on the present value of future cash flows discounted at 12%. The
adjustment was based on a review conducted in the fourth quarter which
determined there had been a permanent decline in the value of the facility,
based on the conclusion that Chambers could not recover its investment through
future operations, given current and forecasted pricing, waste mix and capacity
trends as well as recently proposed regulations with respect to medical waste
incinerator facilities and general declines in the value of waste incinerator
businesses. During 1994, Chambers also reached a favorable settlement of
previously reported litigation related to certain contracts entered into with
respect to the purchase by Chambers of a landfill and the prior purchase of a
waste collection and hauling company. The settlement amount is included as a
credit to unusual items and includes receipt by Chambers of $1.2 million in cash
and the forgiveness of all remaining non-compete payments totalling $0.5 million
that were to have been paid by Chambers to various individuals in 1994, 1995 and
1996. The remaining charge of $3.0 million represents changes in prior year
estimates for certain asset impairments and abandoned projects. In addition,
Chambers recorded a charge of $0.8 million primarily relating to severance
benefits paid to employees terminated as part of Chambers' continued
reorganization. With the exception of the $1.2 million litigation settlement
received by Chambers and the $0.8 million payment of severance benefits, there
was no cash flow effect to these unusual charges.
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<PAGE> 136
During 1993, Chambers sold certain businesses as part of its divestiture
program, which resulted in a net gain of $20.7 million. Chambers also recorded
charges of $8.7 million for losses on asset divestitures and contractual
commitments including (i) $3.2 million related to the municipal contract
discussed above, (ii) $3.2 million related to the recycling operation and real
estate sold in 1994 and (iii) $2.1 million related to a hauling, recycling and
transfer station held for sale. In addition, Chambers reversed prior year
provisions of $6.6 million for losses on divestitures for businesses that were
subsequently retained.
In 1993, Chambers also recorded charges of $4.9 million, consisting of $2.0
million for impaired assets and $2.9 million for abandoned projects.
Additionally, there were charges in 1993 of $1.6 million for special directors
and officers insurance premiums and $0.3 million for severance benefits paid to
employees terminated in connection with the corporate and regional
restructuring.
In 1992, Chambers recorded a charge of $10.5 million for anticipated losses
on planned asset divestitures and contractual commitments and recorded a charge
of $12.4 million for asset impairments and abandoned projects. There was no cash
flow effect for these unusual charges.
In addition, Chambers recorded charges of $10.4 million in 1992 for
financing and professional fees primarily related to the restructuring of its
principal credit facilities and surety arrangements. Chambers also recorded a
charge of $7.1 million for special directors and officers insurance premiums as
a result of the shareholder litigation and charges of $3.8 million related to
the reorganization of its corporate and regional operations. The latter charges
were for employee severance, relocation and related transition costs, costs to
close certain facilities and other related costs.
Unusual Items -- Shareholder Litigation Settlement and Other Litigation
Related Costs. Other income (expense) includes charges of $79.4 million, $5.5
million and $10.9 million for the years ended December 31, 1994, 1993 and 1992,
respectively. The charge in 1994 consists of $75.3 million for the shareholder
litigation settlement and $4.1 million for legal and other related costs. The
charges in 1993 and 1992 are for legal and other costs related to the
shareholder litigation. See "Description of Chambers -- Legal Proceedings."
While Chambers believes these charges are adequate to provide for the
settlement, certain of these amounts are estimates, and actual amounts will
depend on the outcome of future events. If such estimated amounts are not
adequate, additional charges against income would be made when such
determinations are made.
Other Income. Other income, primarily interest, decreased to $1.8 million
in 1994 from $3.6 million in 1993 and $6.5 million in 1992, due primarily to the
use of funds for debt reductions and capital expenditures, as well as the
reduction in market interest rates during 1993.
Interest Expense. Interest expense decreased to $23.8 million in 1994 from
$29.2 million in 1993 and $31.6 million in 1992. Interest expense in each period
was less than total interest charges as a result of interest capitalization
related to Chambers' development of landfills. Capitalized interest totaled $3.0
million, $3.5 million and $6.7 million during 1994, 1993 and 1992, respectively.
Interest costs, excluding the effect of capitalized interest, decreased to $26.8
million during 1994 as compared with $32.6 million in 1993 and $38.3 million in
1992. The decrease in interest costs is attributable primarily to the reduced
level of debt outstanding.
Income Taxes. The income tax benefit for 1994 reflects the effect of a
tentative agreement with the Internal Revenue Service regarding the tax
treatment of certain costs and expenses deducted for financial statement
purposes in open tax years and results from an adjustment to the estimated tax
effect of Chambers' financial statement restatement in 1991. The provision for
income taxes for 1993 reflects the benefit of estimated temporary differences
and includes $0.5 million of additional state income tax related to the gain on
sale of the Company's collection, hauling and landfill operations in Indiana.
The provision for income taxes for 1992 results primarily from limitations
imposed on the net operating loss carrybacks for federal and state income tax
purposes. Chambers estimates its tax net operating loss carryforwards at
December 31, 1994 to be approximately $232 million, the majority of which expire
in 2007. The potential benefits of unused tax net operating loss carryforwards
have not been recognized in the accompanying financial statements because
management has not concluded that realization of such benefits is more likely
than not.
Effective January 1, 1993, Chambers adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," using an
asset and liability approach. That statement supersedes
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<PAGE> 137
SFAS No. 96 which was adopted by Chambers in 1988. There was no effect on
Chambers' financial statements upon adoption of the new standard using the
cumulative effect method.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows. Cash and cash equivalents decreased to $23.5 million at
December 31, 1994, as compared to $44.6 million and $45.9 million at December
31, 1993 and 1992, respectively. Chambers' working capital decreased to a
deficit of $12.2 million at the end of 1994 from a positive $30.1 million and
$52.6 million at the end of 1993 and 1992, respectively. The decrease in working
capital reflects, in part, significant reductions made to Chambers' long-term
obligations and increases in current maturities of long-term obligations.
Cash provided by operating activities was $32.1 million in 1994 and $35.9
million in 1993, representing a significant improvement from the $12.1 million
provided in 1992. Included in operating activities were $5.0 million, $17.3
million and $26.2 million of tax refunds for 1994, 1993 and 1992, respectively.
Investing activities include cash proceeds of $3.2 million in 1994, $53.1
million in 1993 and $35.5 million in 1992 realized from the disposition of
assets. In 1993 and 1994, Chambers completed a series of asset sales to various
parties in conjunction with its divestiture program and in 1992 sold its
security services business. (See Note E to Chambers' consolidated financial
statements). Investing activities in 1994 also reflect $17.9 million in net
escrow activity, primarily related to the receipt of $11.3 million in cash from
divestiture proceeds that were held in escrow at the end of 1993.
During 1994 and 1993, capital expenditures totaled $39.8 million and $38.1
million, respectively, a substantial reduction from the $132.8 million used for
capital and acquisition expenditures in 1992. Included in 1992 was $20.9 million
for the acquisition of eight hauling companies and property and permit rights
related to two landfills. In addition, 1992 included a higher level of landfill
construction activity as compared with 1993 and 1994, as a number of landfill
sites previously under development were constructed.
Cash used in financing activities included $35.3 million, $60.7 million and
$55.4 million of principal payments on long-term obligations in 1994, 1993 and
1992, respectively. In addition, 1993 included the receipt of $10.2 million
previously used in 1992 as cash collateral to support certain of Chambers'
business activities, which were collateralized in 1993 by letters of credit.
Credit Facilities and Refinancing. In July 1993, Chambers executed
comprehensive amendments to its bank credit facility (the "Credit Facility") and
its note purchase agreements under which Chambers issued senior notes (the
"Senior Notes"). The amendments to the Credit Facility and Senior Note
agreements (collectively, as amended, the "Amended Agreements") included
revisions to the terms and conditions of the original agreements and provided
for additional terms and conditions with respect to future periods. Chambers'
lenders and bonding company were granted security interests in substantially all
of the assets of Chambers, and an intercreditor agreement has been executed
among the Credit Facility banks, the Senior Note holders and the bonding company
with respect to priority of interests in collateral and access to assets.
In November 1994, Chambers executed additional amendments (the
"Amendments") to the Amended Agreements which included waivers (with respect to
noncompliance of consolidated working capital and consolidated tangible net
worth covenants attributable to the proposed settlement of the shareholder
litigation and financial statement delivery covenants) and revisions to the
terms and conditions of the Amended Agreements, principally with respect to
payment terms and compliance covenants.
The Amendments provide that 90% of the $74.4 million scheduled payments
previously due on July 1, 1995 may be deferred until July 1, 1996, with further
deferral to December 31, 1996, at Chambers' option, of up to 75% of the $95.5
million scheduled payments previously due on October 31, 1995 and December 30,
1995 and all of the $95.5 million scheduled payments due on October 31, 1996 and
December 30, 1996. Certain of such scheduled payments due in 1995 and 1996 will
be reduced by pro rata payments made prior to the scheduled payment dates. The
non-deferred portion of these scheduled payments will be applied to reduce
Senior Note obligations, industrial revenue bond obligations and letters of
credit issued under the Credit Facility. The Amendments also provide that the
remaining originally scheduled principal payments on the Senior Notes due after
1996 become due on December 31, 1996.
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<PAGE> 138
The Amendments require, however, that Chambers reduce Senior Note and
Credit Facility obligations by a total of $60 million, primarily through the
payment of the non-deferred portions of the scheduled payments discussed above
and other scheduled payments, between August 31, 1994 and December 31, 1995, of
which $20 million must occur by January 31, 1995. Of the $60 million, $23.7
million has been paid to date, with the January 1995 payment requirement having
been satisfied. Portions of the remaining required payments are expected to be
satisfied by currently available funds and operating cash flow; however, in the
absence of the Merger and related refinancing of the Senior Note and Credit
Facility obligations during 1995, Chambers will need to refinance the Senior
Note and Credit Facility obligations on a stand-alone basis or complete
significant divestitures to satisfy any remaining payments. Under the
Amendments, Chambers is also required to pay to the holders of the Senior Notes
and the Credit Facility banks the amount by which its daily average unrestricted
cash balance exceeds $40 million for any calendar month, and a minimum of 50% of
the net proceeds from specified divestitures as permitted by the Amendments,
which proceeds will be applied to the $60 million discussed above.
The Amendments also provide for the issuance to the Senior Note holders and
Credit Facility banks, at nominal consideration, of shares of Chambers Class A
Common Stock in the event Chambers has not refinanced the Senior Note and Credit
Facility obligations prior to October 1, 1995. On that date, additional shares
equal to 4% of Chambers Class A Common Stock then issued and outstanding would
become issuable. Additional shares equal to 4% of Chambers Class A Common Stock
then issued and outstanding issuable if Chambers has not refinanced prior to
April 1, 1996.
The Amendments contain financial covenants which require Chambers to
maintain minimum levels of tangible net worth, working capital and quarterly
cash flows from operations. The Amendments also prohibit the incurrence of
additional indebtedness and the payment of cash dividends and limit annual cash
capital expenditures.
Chambers anticipates that the combined company will refinance substantially
all of the indebtedness of Chambers and USA Waste, including the Senior Note and
Credit Facility obligations of Chambers, before or at the time of the Merger.
Upon any refinancing of the Senior Note and Credit Facility obligations,
Chambers expects to pay an early redemption premium to the Senior Note holders
(the "Premium") based on the difference between the interest rates on the Senior
Notes and an adjusted rate for U.S. Treasury securities having a similar
maturity. Based on interest rates on U.S. Treasury securities at December 31,
1994, if the refinancing were to occur on June 30, 1995, Chambers' management's
estimate of the approximate date of the Merger, the Premium would be
approximately $7.0 million.
The Amendments also require payment of escalating extension fees by
Chambers to the Senior Note holders and Credit Facility banks, based upon the
principal amounts outstanding as of the beginning of each calendar quarter,
until such time as the existing debt under these agreements has been retired.
Such extension fees are expected to aggregate approximately $0.7 million through
June 30, 1995.
The amount shown above for the Premium is an estimate, and the final amount
will depend on the date of the refinancing, the interest rate on U.S. Treasury
securities and the actual principal amounts outstanding under the Senior Notes
at the date of the refinancing. The estimated extension fees and the Premium are
being charged to interest expense through the period ending June 30, 1995. At
December 31, 1994, Chambers had accrued a total of $1.2 million related to the
Premium. In addition, a fee of approximately $0.7 million paid upon execution of
the Amendments was charged to interest expense in 1994.
In the event the Merger is not consummated, Chambers intends to seek
refinancing for its Senior Note and Credit Facility obligations. It is
anticipated that such refinancing could be completed by September 30, 1995;
however, management of Chambers believes that such refinancing would not be
available to Chambers on a stand-alone basis without significant dilution to the
stockholders of Chambers. If a refinancing were to occur on September 30, 1995,
the Premium amount would be approximately $5.5 million. In addition, $0.9
million of additional extension fees would be incurred.
In the event that the Merger is not consummated, Chambers would necessarily
undertake a series of actions to provide for liquidity and funding of the
Settlement Agreements. Chambers has the ability to
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<PAGE> 139
abandon the Settlement Agreements in the absence of funding sufficient to comply
with the payment obligations. However, it is the intention of Chambers, should
the Merger not be consummated, to seek a refinancing and to delay the funding of
the Settlement Agreements rather than abandon such agreements.
Chambers believes that a refinancing cannot be obtained in the absence of a
settlement of the shareholder litigation. While Chambers has, under certain
circumstances, alternate available financing through a funding agreement with
USA Waste as described in the following paragraph in an amount sufficient to
satisfy Chambers' obligations under the Settlement Agreements, actual payments
under such funding agreement remain subject to the consent of Chambers' current
lending group. In the alternative, Chambers could delay the implementation of
the shareholder litigation settlement until refinancing has been obtained.
Pursuant to requirements negotiated in connection with the Merger
Agreement, USA Waste and Chambers developed a plan for the financing of certain
of Chambers' obligations, including a $6.8 million obligation that was due in
January 1995 and $70 million of the $85.9 million in payments that may be
required pursuant to the Settlement Agreements with respect to the shareholder
litigation. The purpose of the financing plan, the requirements of which were
imposed by Chambers as a condition to proceeding with the negotiation and
execution of the Merger Agreement, was to provide Chambers with the ability to
fund these payment obligations pending the Merger and in the event that the
parties were subsequently unable or unwilling to proceed with the Merger. The
financing plan was set forth in a letter agreement executed on December 19,
1994. To provide for the payment of the $6.8 million obligation, USA Waste
agreed (i) to accelerate to January 30, 1995 the payment of $2.5 million on
certain promissory notes owing by USA Waste to Chambers with respect to a
previous transaction and (ii) to enter into a letter of intent pursuant to which
USA Waste would agree to acquire certain assets from Chambers and make a deposit
of $4.3 million to be applied against the purchase price for such assets. These
payments were made and a letter of intent was executed providing for the
purchase of certain assets, including a hauling company in Charlotte, North
Carolina, and a landfill and a waste collection facility in Lake, Mississippi.
The letter of intent will expire upon the Merger. In the event the Merger
Agreement is terminated, the closing of the asset purchase will occur within 75
days after such termination. To provide for the funding of the initial $25
million settlement payment due upon final approval of the settlement of the
shareholder litigation, USA Waste agreed to make an advance purchase of airspace
rights at certain of Chambers' landfills in the aggregate amount of $25 million.
Such payment would be made within 30 days after final court approval of the
Settlement Agreements and expiration of the applicable appeal period. To provide
for the payment of the subsequent $45 million settlement payment on the
shareholder litigation, USA Waste and Chambers have agreed to negotiate an
agreement for the purchase by USA Waste from Chambers of an asset or group of
assets or airspace rights mutually selected by USA Waste and Chambers and having
a fair market value of not less than $45 million. Payment of such amount is
required not later than one year from the date of final court approval of the
Settlement Agreements and the expiration of the applicable appeal period. In the
event Chambers completes a refinancing of its current indebtedness, including
amounts due with respect to the shareholder litigation, USA Waste's obligation
to finance the $45 million payment will lapse and USA Waste will have an option
to require Chambers to repurchase, and Chambers will have an option to require
USA Waste to sell, any unused airspace purchased in advance by USA Waste.
In the absence of a settlement of the shareholder litigation and a
refinancing of the Senior Note and Credit Facility obligations, Chambers would
be compelled to implement an action plan to ensure continuing liquidity. The
steps that would be necessary with respect to liquidity would include a
reduction in discretionary capital expenditures with respect to current transfer
station and methane recovery projects. Capital expenditures for vehicle and
heavy equipment purchases would be reduced to a maintenance level, or otherwise
deferred, and Chambers would employ lease financing programs, to the extent
available, for certain equipment, in substitution for capital expenditure
programs currently planned. Chambers would also resume and accelerate its
divestiture program with respect to non-core assets and operations. As an
additional step, Chambers would endeavor to accelerate remaining tax refunds and
to substitute surety bond programs where permitted, with respect to closure and
post-closure bond requirements, for cash collateral programs presently in place
in certain jurisdictions.
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Should the Merger not be consummated, management of Chambers believes that
the foregoing plan of action would be adequate to maintain compliance with the
covenants and payment obligations under its Senior Note and Credit Facility
obligations through December 31, 1995, and would provide a sufficient period of
time to achieve a refinancing, which in turn would permit the implementation of
the settlement of the shareholder litigation. As indicated above, the Amendments
provide that deferred payments previously due on July 1, 1995 may be deferred
until July 1, 1996, with other deferred payments becoming due in December 1996,
and with the remaining originally scheduled payments due after 1996 becoming due
on December 31, 1996. With the bulk of Chambers' long-term obligations becoming
due in the second half of 1996 under the Amendments, the liquidity of Chambers
would be adversely affected if the Merger were not consummated or a refinancing
or modification of the current lending agreements were not achieved in a timely
fashion.
CAPITAL EXPENDITURES
Landfill Expenditures, General. At the beginning of 1986, Chambers'
operations were limited to three landfill sites and related collection and
hauling activities. Since that time, Chambers has substantially expanded the
number of landfill sites which it has designed, permitted and constructed.
Currently Chambers owns or operates 14 sanitary landfills and one construction
and demolition debris landfill, having made the necessary capital investments
since 1986 to establish these landfill sites, and to develop the related
collection, hauling, transfer station and recycling operations.
Chambers has expended substantial amounts of capital to establish an
integrated waste services business, from waste collection enterprises to
disposal facilities, to meet the long-term needs of the communities and
customers it services. Historically, Chambers has also expended capital to
acquire additional waste services businesses, to fund property and equipment
needs for internal expansion and to develop the infrastructure of its landfills.
The infrastructure expenditures with respect to each site have been in major
part nonrecurring, being required at the initial phase at each site in order to
prepare the site for the receipt of waste and to support the operations of the
landfill throughout its useful life. However, Chambers will continue to incur
capital expenditures with respect to the construction of cells at existing sites
to accommodate the daily receipt of waste and to ensure compliance with
environmental and other regulations.
The liquidity of Chambers' operations is more heavily influenced by its
landfill operations than by its collection, hauling, transfer station and
recycling operations. Chambers' liquidity is adversely affected during periods
of increased construction activity involved in the establishment of new landfill
sites, with revenues commencing only upon opening the sites for the receipt of
waste and the delivery of waste to the sites. Liquidity is improved following
the opening of new sites, to the extent that landfill capital expenditures for
additional cell construction are substantially lower than the initial
construction costs.
However, additional cash is required later in the life cycle of a landfill
to fund closure and post-closure costs. Therefore, it is important for Chambers
to increase the volume received in each landfill as soon as possible after
commencement of operations.
Chambers' management believes that the operations of the existing sites
plus a combination of existing cash and asset sales will support the operational
requirements of Chambers, including the construction of additional cells for the
receipt of waste. Funds supporting those sites which Chambers has under
development have previously been generated from capital markets and through
project financing from industrial revenue bond sources. Over the past three
years, however, Chambers' access to capital markets for purposes of new
development has been restricted. Chambers' management believes the proposed
Merger with USA Waste will open capital markets that will enable new landfill
development as well as continued development of existing sites. However, should
the proposed Merger not be consummated, development of additional new landfill
sites will be limited.
Historical Capital Expenditures. Construction and development expenditures
of $26.9 million in 1994, $26.7 million in 1993, and $81.1 million in 1992 were
related principally to the various phases of the permitting, design and
construction of new landfill sites and the expansion of existing sites. During
1993, Chambers opened a landfill in Amelia County, Virginia. During 1992,
Chambers opened landfills in Atlanta,
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Georgia, and Allegany County, Maryland, and acquired a landfill in Okeechobee
County, Florida, having incurred expenditures with respect to such sites in 1992
and prior years.
Capital equipment additions of $10.9 million in 1994, $11.0 million in 1993
and $25.6 million in 1992 include the purchase of equipment for Chambers'
intermodal rail transportation system and the lease buyouts of vehicles and
equipment.
Other property and equipment additions of $2.0 million in 1994, $0.4
million in 1993 and $5.2 million in 1992 were made for buildings, building
improvements, furniture and fixtures, computer equipment and other assets.
Chambers also invested $20.9 million in the acquisition of waste services
businesses in 1992.
Capital Expenditures, 1995. Chambers anticipates that approximately $33
million will be expended in 1995 for construction and development activities.
The anticipated capital expenditures are principally for construction of
disposal capacity at existing landfills. Chambers anticipates that it will also
spend approximately $10 million for vehicles and equipment during 1995. However,
if Chambers is unable to generate the anticipated levels of proceeds from asset
sales and cash flow from operations, or if the proposed Merger with USA Waste is
not consummated, the level of 1995 capital expenditures will be limited.
ENVIRONMENTAL MATTERS
Revisions to regulations under Subtitle D of RCRA, which were promulgated
by the EPA in October 1991, established guidelines for the design, construction
and operation of environmentally sound waste disposal facilities. These
revisions generally became effective in October 1993, other than with respect to
groundwater monitoring requirements which will be phased in over a five-year
period, and financial responsibility requirements which become effective upon
application for a modification of a permit or a new permit. Chambers anticipates
that, in the near-term, it will continue to experience the discount pricing of
landfill airspace by competitors, as facilities that anticipate the cessation of
operations seek to maximize the utilization of current airspace prior to their
closure.
More stringent regulation, while requiring greater expenditures, is
expected to increase opportunities for Chambers and others who have landfills
that comply with these regulations, as noncomplying landfills have been and will
be required, under Chambers' interpretation of current legislation, to cease
operations. Chambers expects, however, that certain of the older, less
environmentally secure landfills operated by its competitors will continue to
operate in 1995 and beyond, depressing market prices for solid waste disposal in
the interim.
Chambers' principal development efforts from 1987 through 1994 have been in
the creation of permitted landfill disposal capacity, with the design, operation
and construction of environmentally sound facilities to serve its customers on a
long-term basis. Since 1987, Chambers had advanced its program of site
development, moving from a level of 10 million tons of permitted airspace
capacity in 1987 to 191 million tons of remaining permitted airspace capacity in
1994, which includes 60 million tons of permitted airspace related to two
permitted but undeveloped landfill projects. The strategic direction of
Chambers' efforts has been consistent with the industry trend of the closure of
landfill sites which do not provide adequate protection for the environment and
the creation of sound disposal facilities which minimize the risk to the
environment from contamination.
Chambers has made every effort to meet the numerous regulatory challenges
facing the waste services industry, and management believes that Chambers will
not experience a long-term negative impact from the implementation of the
regulations under Subtitle D of RCRA. Current landfill design and construction
by Chambers have been performed in compliance with state regulations and in
anticipation of the federal requirements. Chambers' South Carolina landfills
have permit expansion applications pending which will meet the revisions to
Subtitle D of RCRA but currently operate in disposal areas that comply with
current state regulations but which are not in compliance with Subtitle D.
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Chambers' operation within the environmental services industry also
subjects it to future financial obligations with regard to closure and
post-closure monitoring and site maintenance costs associated with the solid
waste landfills it operates. Chambers' engineers estimate such costs based on
the technical requirements of the U.S. Environmental Protection Agency's
Subtitle D regulations and the proposed air emissions standards under the Clean
Air Act, as they are being applied on a state-by-state basis.
Final closure and post-closure monitoring and site maintenance costs
represent the costs related to cash expenditures to be incurred after a landfill
ceases to accept waste and closes. Such costs include final capping of the site
and site inspections, groundwater monitoring, leachate management, methane gas
control and maintenance costs to be incurred for up to 30 years after the
facility closes. Final closure and post-closure monitoring and site maintenance
costs are estimated to be approximately $140 million at the time all Chambers
landfills have reached their respective capacity. The accrual for these costs is
recorded as airspace at the respective landfill site is consumed.
In addition, Chambers expects to incur other closure costs, principally
related to capping and methane gas control activities, during the operating
lives of the landfill sites. The accrual for these costs is also recorded as
airspace at the respective landfill site is consumed.
As of December 31, 1994, accrued liabilities for all closure and
post-closure monitoring and maintenance costs totaled $25.6 million, of which
$1.5 million is expected to be expended in 1995. Chambers periodically reviews
and updates the underlying assumptions used to determine such estimates and,
accordingly, the estimate of total projected costs is subject to periodic
revision and adjustment.
DESCRIPTION OF USA WASTE CAPITAL STOCK
USA Waste is currently authorized to issue 50,000,000 shares of Common
Stock, par value $.01 per share, of which 22,967,256 shares were outstanding on
the Record Date. If the proposed amendment to the Certificate of Incorporation
of USA Waste to increase the number of authorized shares of USA Waste Common
Stock is approved by the shareholders of USA Waste, USA Waste will be authorized
to issue 150,000,000 shares of USA Waste Common Stock. USA Waste is also
authorized to issue 10,000,000 shares of Preferred Stock, none of which are
outstanding. USA Waste has reserved for future issuance 3,698,113 shares
issuable upon conversion of its 8 1/2% Convertible Subordinated Debentures Due
2002, 2,407,087 shares upon exercise of outstanding warrants, and 1,504,628
shares issuable under its 1990 Stock Option Plan and 1993 Stock Incentive Plan.
COMMON STOCK
Each holder of USA Waste Common Stock is entitled to one vote per share
held of record on each matter submitted to shareholders. Cumulative voting for
the election of directors is not permitted, and the holders of a majority of
shares voting for the election of directors can elect all members of the USA
Waste Board of Directors.
Subject to the rights of any holders of Preferred Stock, holders of record
of shares of USA Waste Common Stock are entitled to receive ratably dividends
when and if declared by the USA Waste Board of Directors out of funds of USA
Waste legally available therefor. In the event of a voluntary or involuntary
winding up or dissolution, liquidation, or partial liquidation of USA Waste,
holders of USA Waste Common Stock are entitled to participate ratably in any
distribution of the assets of USA Waste, subject to any prior rights of holders
of any outstanding Preferred Stock.
Holders of USA Waste Common Stock have no conversion, redemption, or
preemptive rights. All outstanding shares of USA Waste Common Stock are validly
issued, fully paid, and nonassessable.
PREFERRED STOCK
The USA Waste Board of Directors is authorized, without further approval of
the shareholders, to issue the Preferred Stock in series and with respect to
each series, to fix its designations, relative rights (including
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voting, dividend, conversion, sinking fund, and redemption rights), preferences
(including with respect to dividends and upon liquidation), privileges, and
limitations. The Board of Directors of USA Waste, without shareholder approval,
may issue Preferred Stock with voting and conversion rights, both of which could
adversely affect the voting power of the holders of USA Waste Common Stock, and
dividend or liquidation preferences that would restrict Common Stock dividends
or adversely affect the assets available for distribution to holders of shares
of Common Stock upon USA Waste's dissolution.
AUTHORIZED BUT UNISSUED SHARES
Authorized but unissued shares of USA Waste Common Stock or Preferred Stock
can be reserved for issuance by the Board of Directors of USA Waste from time to
time without further shareholder action for proper corporate purposes, including
stock dividends or stock splits, raising equity capital, and structuring future
corporate transactions, including acquisitions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the USA Waste Common Stock is The
First National Bank of Boston, Boston, Massachusetts.
LIMITED LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Certificate of Incorporation of USA Waste provides that the directors
of USA Waste shall not be liable to USA Waste or its shareholders for monetary
damages for breach of fiduciary duty as a director to the fullest extent
permitted by the OGCA. The foregoing limitation does not eliminate or limit the
liability of a director for any breach of a director's duty of loyalty to USA
Waste or its shareholders, for acts or omissions not in good faith or which
involved intentional misconduct or a knowing violation of law, for any
transaction from which the director derived an improper personal benefit, or for
approval of the unlawful payment of a dividend or an unlawful stock purchase or
redemption. The Certificate of Incorporation of USA Waste also provides that USA
Waste shall indemnify, and advance litigation expenses to, its officers,
directors, employees, and agents to the fullest extent permitted by the OGCA and
all other laws of the State of Oklahoma.
The OGCA provides that USA Waste has the power to indemnify any person who
is sued or threatened to be made a named party in a proceeding, other than an
action by or in the right of USA Waste, because such person is or was a
director, officer, employee, or agent of USA Waste or is or was serving at the
request of USA Waste as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses actually and reasonably incurred by such person in connection with such
proceeding. In order to be indemnified, the person must have (1) acted in good
faith; (2) acted in a manner he reasonably believed to be in or not opposed to
the best interests of USA Waste, and (3) with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The indemnification includes attorneys' fees, judgments, fines, and
amounts paid in settlement.
The OGCA also provides that USA Waste may indemnify any person who is sued
or threatened to be made a named party in a proceeding by or in the right of USA
Waste to procure a judgment in its favor because such person is or was a
director, officer, employee, or agent of USA Waste, or is or was serving at the
request of USA Waste as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise. In order to
be indemnified, the person must have conducted himself or herself in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of USA Waste. No indemnification may be made, however, with
respect to any claim, issue, or matter as to which such person shall have been
judged to be liable to USA Waste unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnification for
such expenses which the court shall deem proper.
Indemnification by USA Waste is subject to a determination that the
director, officer, employee, or agent has met the applicable standard of
conduct. The determination must be made (1) by a majority vote of a
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quorum of the USA Waste Board of Directors, consisting only of directors who
were not parties to such action, suit or proceeding; (2) if such a quorum cannot
be obtained, or even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or (3) by the
shareholders of USA Waste.
USA Waste maintains an officers and directors liability insurance policy
insuring officers and directors of USA Waste and its subsidiaries against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. The effect of such policy is to indemnify the officers and directors of
USA Waste against losses incurred by them while acting in such capacities.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers, or persons controlling USA Waste pursuant to
the foregoing provisions, USA Waste had been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in such
Act and is therefore unenforceable.
LEGAL MATTERS
The validity of the USA Waste Common Stock to be issued in connection with
the Merger will be passed upon by Snell & Smith, P.C., Houston, Texas. Certain
legal issues and tax consequences of the Merger will be passed upon for USA
Waste by Andrews & Kurth L.L.P., Houston, Texas and for Chambers by Sullivan &
Cromwell, New York, New York and Thorp, Reed & Armstrong, Pittsburgh,
Pennsylvania.
EXPERTS
The consolidated financial statements of USA Waste at December 31, 1993 and
1994, and for each of the three years in the period ended December 31, 1994,
included and incorporated by reference in this Joint Proxy Statement and
Prospectus have been included and incorporated by reference herein in reliance
on the reports of Coopers & Lybrand L.L.P., independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Envirofil for the year ended June
30, 1993 referred to in this Joint Proxy Statement and Prospectus, and the
combined financial statements of the Acquired New Jersey Solid Waste Companies
as of December 31, 1992 and 1993 and for each of the three years in the period
ended December 31, 1993 incorporated into this Joint Proxy Statement and
Prospectus by reference to Envirofil, Inc.'s Form 8-K filed with the Commission
on February 28, 1994, as amended by Envirofil, Inc.'s Form 8-K/A filed with the
Commission on May 11, 1994, have been included in reliance upon the report of
Arthur Andersen LLP, independent public accountants, given on the authority of
that firm as experts in accounting and auditing in giving said report.
The consolidated financial statements of Chambers at December 31, 1993 and
1994, and for each of the three years in the period ended December 31, 1994,
included and incorporated by reference in this Joint Proxy Statement and
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are included and incorporated by reference
herein, and have been so included in reliance upon their authority as experts in
accounting and auditing.
PROPOSALS OF SHAREHOLDERS FOR ANNUAL MEETINGS
The Board of Directors of USA Waste will consider proposals of shareholders
intended to be presented for action at the 1996 Annual Meeting of Shareholders.
A shareholder proposal must be submitted in writing and be received at USA
Waste's principal executive offices, 5000 Quorum Drive, Suite 300, Dallas, Texas
75240 no later than January 14, 1996, to be considered for inclusion in USA
Waste's proxy statement and form of proxy relating to the 1996 Annual Meeting of
Shareholders. Submission of a shareholder proposal does not assure inclusion in
the proxy statement or form of proxy because proposals must meet certain
Commission rules.
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If the Merger is not consummated, it is presently anticipated that the 1995
Annual Meeting of Stockholders of Chambers will be held on October 18, 1995. If
such meeting is held, stockholder proposals intended to be presented at such
meeting must be received by Chambers, addressed to the Secretary at 10700
Frankstown Road, Pittsburgh, Pennsylvania 15235, no later than August 15, 1995,
to be considered for inclusion in the proxy statement and form of proxy relating
to that meeting.
OTHER MATTERS
The Boards of Directors of USA Waste and Chambers do not know of any other
matters to be presented for action at the USA Waste Annual Meeting or the
Chambers Special Meeting other than those listed in the Notice of Meeting and
referred to herein. Under Delaware law, no other matters may come before the
Chambers Special Meeting. If any other matter should properly come before the
USA Waste Annual Meeting or any adjournment thereof, it is intended that the
proxies solicited hereby be voted with respect to such matters in accordance
with the judgment of the persons voting such proxies.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
USA WASTE SERVICES, INC.
Report of Independent Accountants..................................................... F-2
Report of Independent Public Accountants.............................................. F-3
Consolidated Balance Sheets as of December 31, 1993 and 1994.......................... F-4
Consolidated Statements of Income for the Years Ended December 31, 1992, 1993 and
1994................................................................................ F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1992,
1993 and 1994....................................................................... F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1992, 1993 and
1994................................................................................ F-7
Notes to Consolidated Financial Statements............................................ F-8
CHAMBERS DEVELOPMENT COMPANY, INC.
Report of Independent Auditors........................................................ F-20
Consolidated Balance Sheets as of December 31, 1993 and 1994.......................... F-21
Consolidated Statements of Operations for the Years Ended December 31, 1992, 1993 and
1994................................................................................ F-22
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1992,
1993 and 1994....................................................................... F-23
Consolidated Statements of Cash Flows for the Years Ended December 31, 1992, 1993 and
1994................................................................................ F-24
Notes to Consolidated Financial Statements............................................ F-25
</TABLE>
F-1
<PAGE> 147
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
USA Waste Services, Inc.
We have audited the accompanying consolidated balance sheets of USA Waste
Services, Inc. (the "Company") as of December 31, 1993 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements of
Envirofil, Inc., which the Company acquired on May 27, 1994, through a
transaction accounted for under the pooling of interests method, which
statements reflect total revenues constituting 8 percent in 1992 of the related
consolidated totals. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Envirofil, Inc., is based solely on the report of the other
auditors.
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, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 1993
and 1994, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 10, 1995
F-2
<PAGE> 148
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Envirofil, Inc.:
We have audited the consolidated statements of operations, shareholders'
equity (deficit) and cash flows of Envirofil, Inc. (a Delaware corporation) and
subsidiaries for the year ended June 30, 1993 prior to the restatement (and,
therefore, are not presented herein) for the acquisition of Envirofil, Inc.
accounted for under the pooling of interests method of accounting as described
in Note 2 to the restated consolidated financial statement of USA Waste
Services, Inc. These financial statements and the schedules referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements and schedules based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations, shareholders' equity
(deficit) and cash flows of Envirofil, Inc. and subsidiaries for the year ended
June 30, 1993, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to the
Envirofil, Inc. financial statements prior to the restatement (and, therefore,
are not presented herein) as discussed above are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic 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 financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, PA.
September 22, 1993
F-3
<PAGE> 149
USA WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1993 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 4,626,000 $ 6,613,000
Accounts receivable, net of allowance for doubtful accounts of
$1,249,000 and $2,369,000.................................... 13,291,000 19,992,000
Notes and other receivables..................................... 2,016,000 8,072,000
Prepaid expenses and other...................................... 2,545,000 2,361,000
------------ ------------
Total current assets.................................... 22,478,000 37,038,000
Notes and other receivables....................................... 2,763,000 2,462,000
Property and equipment, net....................................... 149,097,000 182,415,000
Excess of cost over net assets of acquired business, net.......... 42,702,000 73,305,000
Other intangible assets, net...................................... 11,915,000 14,375,000
Other assets...................................................... 9,864,000 13,572,000
------------ ------------
Total assets............................................ $238,819,000 $323,167,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 8,382,000 $ 12,023,000
Accrued liabilities............................................. 9,691,000 12,783,000
Deferred revenues............................................... 1,481,000 1,783,000
Current maturities of long-term debt............................ 3,559,000 1,830,000
------------ ------------
Total current liabilities............................... 23,113,000 28,419,000
Revolving credit facility......................................... 55,500,000 98,000,000
Convertible subordinated debentures............................... 49,000,000 49,000,000
Other long-term debt.............................................. 7,115,000 6,903,000
Closure, post-closure and other liabilities....................... 14,168,000 17,067,000
Deferred income taxes............................................. 11,842,000 15,792,000
------------ ------------
Total liabilities....................................... 160,738,000 215,181,000
------------ ------------
Commitments and contingencies..................................... -- --
Stockholders' equity:
Preferred stock, $1.00 par value;
10,000,000 shares authorized;
none and 14,000 shares issued................................ 14,000 --
Common stock, $.01 par value;
50,000,000 shares authorized;
18,819,861 and 22,729,548 shares issued...................... 188,000 227,000
Additional paid-in capital...................................... 80,041,000 95,758,000
Retained earnings............................................... 696,000 13,962,000
Less treasury stock, 219,285 and 149,285 shares at cost......... (2,858,000) (1,961,000)
------------ ------------
Total stockholders' equity.............................. 78,081,000 107,986,000
------------ ------------
Total liabilities and stockholders' equity.............. $238,819,000 $323,167,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 150
USA WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
1992 1993 1994
---------- ---------- -----------
<S> <C> <C> <C>
Operating revenues............................ $57,049,000 $93,753,000 $176,235,000
----------- ----------- ------------
Costs and expenses:
Operating................................... 28,128,000 49,251,000 101,069,000
General and administrative.................. 11,612,000 17,497,000 23,463,000
Merger costs................................ -- -- 3,782,000
Stock compensation expense.................. 5,249,000 923,000 --
Restructuring charges....................... 1,507,000 -- --
Depreciation and amortization............... 5,776,000 10,558,000 18,785,000
----------- ----------- ------------
52,272,000 78,229,000 147,099,000
----------- ----------- ------------
Income from operations........................ 4,777,000 15,524,000 29,136,000
----------- ----------- ------------
Other income (expense):
Interest expense, net....................... (4,212,000) (6,856,000) (10,385,000)
Interest income............................. 610,000 1,113,000 591,000
Other, net.................................. 15,000 822,000 2,249,000
----------- ----------- ------------
(3,587,000) (4,921,000) (7,545,000)
----------- ----------- ------------
Income before provision for income taxes...... 1,190,000 10,603,000 21,591,000
Provision for income taxes.................... 3,955,000 5,413,000 7,760,000
----------- ----------- ------------
Income (loss) from continuing operations...... (2,765,000) 5,190,000 13,831,000
Gain on sale of discontinued operations,
net of income taxes......................... 897,000 -- --
----------- ----------- ------------
Income (loss) before extraordinary item....... (1,868,000) 5,190,000 13,831,000
Extraordinary income from forgiveness of debt,
net of income taxes......................... 10,066,000 -- --
----------- ----------- ------------
Net income.................................... 8,198,000 5,190,000 13,831,000
Preferred dividends........................... 152,000 582,000 565,000
----------- ----------- ------------
Income available to common shareholders....... $ 8,046,000 $ 4,608,000 $ 13,266,000
=========== =========== ============
Earnings (loss) per common share:
Continuing operations....................... $ (0.20) $ 0.26 $ 0.61
Discontinued operations..................... 0.06 -- --
Extraordinary income........................ 0.68 -- --
----------- ----------- ------------
Earnings per common share........... $ 0.54 $ 0.26 $ 0.61
=========== =========== ============
Weighted average number of common and common
equivalent shares outstanding............... 14,878,174 18,055,801 21,842,049
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 151
USA WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED TREASURY
STOCK STOCK CAPITAL EARNINGS STOCK
--------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991....................... $ 4,000 $106,000 $37,264,000 $(14,936,000) $ --
Stock options exercised........................ -- -- 157,000 -- --
Conversion of subordinated notes to common
stock....................................... -- 2,000 2,521,000 -- --
Shares issued in acquisitions.................. -- 5,000 5,660,000 -- --
Effect of SRI acquisition accounted for as a
pooling of interest......................... -- 8,000 2,000 (82,000) --
Conversion of preferred stock to subordinated
debenture................................... (2,000) -- (2,998,000) -- --
Redemption of preferred stock.................. (2,000) -- (1,995,000) -- --
Treasury stock purchased....................... -- -- -- -- (1,526,000)
Common stock subscriptions collected........... -- -- 77,000 -- --
Conversion of debt to preferred stock.......... 522,000 -- -- -- --
Conversion of preferred stock, debt and accrued
interest as part of reorganization to common
stock....................................... (522,000) 15,000 1,764,000 -- --
Private placement of common stock as part of
reorganization.............................. -- 32,000 3,355,000 -- --
Compensation charge for common stock warrants
granted..................................... -- -- 6,353,000 -- --
Private placement of common stock.............. -- 4,000 4,785,000 -- --
Series C Preferred Stock issued................ 9,000 -- 7,876,000 -- --
Preferred dividends, 10% Series B,
8% Series C................................. -- -- 173,000 (152,000) --
Net income..................................... -- -- -- 8,198,000 --
--------- -------- ---------- ----------- -----------
Balance, December 31, 1992....................... 9,000 172,000 64,994,000 (6,972,000) (1,526,000)
Stock options exercised........................ -- -- 30,000 -- --
Shares issued in acquisitions.................. -- 10,000 4,790,000 -- --
Treasury stock purchased....................... -- -- -- -- (1,332,000)
Preferred stock subscriptions collected........ -- -- 50,000 -- --
Private placement of common stock.............. -- 6,000 4,742,000 -- --
Series D Preferred Stock issued................ 5,000 -- 5,212,000 -- --
Compensation charge for common stock warrants
granted..................................... -- -- 69,000 -- --
Common stock issued for preferred stock
dividends................................... -- -- 154,000 (582,000) --
Change in Envirofil fiscal year................ -- -- -- 3,060,000 --
Net income..................................... -- -- -- 5,190,000 --
--------- -------- ---------- ----------- -----------
Balance, December 31, 1993....................... 14,000 188,000 80,041,000 696,000 (2,858,000)
70,000 shares of treasury stock issued upon
exercise of stock options................... -- -- (597,000) -- 897,000
Common stock issued for preferred stock
dividends................................... -- 1,000 1,390,000 (565,000) --
Shares issued in acquisitions.................. -- 16,000 14,506,000 -- --
Conversion of preferred stock to common
stock....................................... (14,000) 19,000 (5,000) -- --
Stock warrants exercised....................... -- 3,000 148,000 -- --
Compensation charge for common stock issued to
directors................................... -- -- 83,000 -- --
Stock options exercised........................ -- -- 192,000 -- --
Net income..................................... -- -- -- 13,831,000 --
--------- -------- ---------- ----------- -----------
Balance, December 31, 1994....................... $ -- $227,000 $95,758,000 $13,962,000 $(1,961,000)
========= ======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 152
USA WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................... $ 8,198,000 $ 5,190,000 $ 13,831,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................... 5,776,000 10,558,000 18,785,000
Deferred income taxes.................................................. 943,000 995,000 200,000
Minority interest...................................................... 340,000 6,000 --
Nonrecurring and other noncash items................................... 6,639,000 1,330,000 --
Gain on disposal of assets, net........................................ (1,898,000) (648,000) (1,588,000)
Adjustment for change in Envirofil fiscal year......................... -- (930,000) --
Discontinued operations................................................ 897,000 -- --
Extraordinary income................................................... (10,066,000) -- --
Change in assets and liabilities, net of effects of business
acquisitions:
(Increase) decrease in accounts receivable and other receivables..... (535,000) 655,000 (4,562,000)
(Increase) decrease in prepaid expenses and other.................... (440,000) 137,000 (27,000)
Increase in other assets............................................. (416,000) (3,038,000) (4,731,000)
Increase (decrease) in accounts payable and accrued liabilities...... 2,553,000 (3,827,000) (3,099,000)
Increase in deferred revenues and other liabilities.................. 276,000 549,000 94,000
------------ ------------ ------------
Net cash provided by operating activities.................................. 12,267,000 10,977,000 18,903,000
------------ ------------ ------------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired......................... (25,527,000) (64,709,000) (23,944,000)
Capital expenditures..................................................... (6,370,000) (23,324,000) (40,876,000)
Loans to others.......................................................... (4,320,000) (4,932,000) (7,504,000)
Collection of loans to others............................................ 980,000 1,607,000 1,743,000
Proceeds from sale of assets............................................. 872,000 3,787,000 13,738,000
------------ ------------ ------------
Net cash used in investing activities...................................... (34,365,000) (87,571,000) (56,843,000)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt................................. 50,292,000 55,922,000 44,260,000
Principal payments on long-term debt..................................... (30,393,000) (10,903,000) (4,976,000)
Redemption of preferred stock............................................ (1,997,000) -- --
Net proceeds from issuance of preferred stock............................ 7,889,000 9,537,000 --
Net proceeds from issuance of common stock............................... 8,177,000 13,106,000 --
Proceeds from exercise of warrants....................................... -- -- 151,000
Proceeds from exercise of stock options.................................. 157,000 30,000 492,000
Net proceeds from stock subscriptions.................................... 76,000 95,000 --
Purchases of treasury stock.............................................. (1,526,000) (1,332,000) --
------------ ------------ ------------
Net cash provided by financing activities.................................. 32,675,000 66,455,000 39,927,000
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents........................... 10,577,000 (10,139,000) 1,987,000
Cash and cash equivalents at beginning of year............................. 4,188,000 14,765,000 4,626,000
------------ ------------ ------------
Cash and cash equivalents at end of year................................... $ 14,765,000 $ 4,626,000 $ 6,613,000
============ ============ ============
Supplemental cash flow information:
Cash paid during the year for:
Interest............................................................... $ 2,140,000 $ 6,571,000 $ 10,837,000
Income taxes........................................................... 453,000 5,597,000 5,748,000
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of property and equipment through capital leases............. 30,000 62,000 --
Conversion of preferred stock............................................ 3,000,000 -- --
Conversion of subordinated notes......................................... 2,523,000 -- --
Issuance of common stock for preferred dividends......................... 173,000 327,000 1,391,000
Acquisitions of businesses:
Liabilities assumed.................................................... 13,823,000 21,495,000 10,085,000
Common stock issued.................................................... 5,665,000 4,800,000 14,522,000
Debt incurred.......................................................... 240,000 4,925,000 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 153
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization -- USA Waste Services, Inc., an Oklahoma corporation (the
"Company"), was incorporated in 1987. The Company is engaged in the
non-hazardous solid waste management business and provides solid waste
management services, consisting of collection, transfer, disposal, soil
remediation and recycling services to municipal, commercial, industrial and
residential customers. The Company conducts operations through subsidiaries in
multiple locations nationwide.
Principles of consolidation -- The consolidated financial statements
include the accounts of USA Waste Services, Inc. and its subsidiaries after
elimination of all material intercompany balances and transactions. Investments
in which the Company does not exercise control, the affiliated companies
operations are not consolidated and are accounted for under the equity method or
cost method, as appropriate. As discussed in Note 2, the Company has restated
its 1992 and 1993 financial statements to reflect the acquisition of Envirofil,
Inc. ("Envirofil") consummated on May 27, 1994 and accounted for under the
pooling of interests method of accounting.
Cash and cash equivalents -- The Company's cash and cash equivalents
consisted primarily of cash on deposit, certificates of deposit, money market
accounts and investment grade commercial paper purchased with original
maturities of three months or less.
Concentrations of credit risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
temporary cash investments and accounts receivable. Concentrations of credit
risk with respect to accounts receivable are limited due to the Company's large
number of customers and their dispersion across different geographic regions.
The Company does not generally require collateral for its accounts receivable.
The Company does not believe a material risk of loss exists with respect to its
financial position due to concentrations of credit risk as of December 31, 1994.
Property and equipment -- Property and equipment are recorded at cost.
Expenditures for major additions and improvements are capitalized, while minor
replacements, maintenance and repairs are charged to expense as incurred. When
property is retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in current operations. Depreciation is provided over the estimated
useful lives of the assets involved using the straight-line method. The
estimated useful lives are twenty to thirty years for buildings and
improvements, three to ten years for vehicles and machinery and equipment, three
to twelve years for containers, and three to ten years for furniture and
fixtures.
Disposal sites are stated at cost and amortized as airspace is consumed.
Disposal site costs include expenditures for acquisitions of land and related
airspace, engineering and permitting costs, and direct site improvement costs,
which management believes are recoverable. Interest cost is capitalized on
landfill construction projects and amortized as airspace is consumed. Interest
cost capitalized during 1994 was $1,011,000. Interest costs incurred during
1992, 1993 and 1994 were $4,212,000, $6,856,000 and $11,396,000, respectively.
Interest costs related to prior year landfill construction projects are not
significant.
Excess of cost over net assets of acquired businesses -- The excess of cost
over net assets of acquired businesses is being amortized on a straight-line
basis over twenty-five years from the dates of the respective acquisitions.
Accumulated amortization was $1,970,000 and $4,740,000 at December 31, 1993 and
1994, respectively. The net remaining balance of the excess of cost over net
assets acquired is assessed periodically based on the estimated recoverable
value related to the businesses acquired. No provision for any impairment of the
excess of cost over net assets of acquired businesses has been charged to
operations.
Accounting for acquisitions -- The Company assesses each acquisition to
determine whether the pooling of interests or the purchase method of accounting
for acquisitions is appropriate. For those acquisitions accounted for under the
pooling of interests method the reported financial statements of the acquired
company
F-8
<PAGE> 154
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
are combined with those of the Company at their historical amounts, and all
periods presented are restated to the combined amounts. For those acquisitions
accounted for using the purchase method of accounting, the Company allocates the
cost of an acquired business to the assets acquired and the liabilities assumed
based on the information available at the time of acquisition. Estimates are
revised during the allocation period as necessary when information regarding
contingencies becomes available to define and quantify assets acquired and
liabilities assumed. The allocation period will vary for each acquisition, but
generally does not exceed one year. To the extent contingencies such as
preacquisition environmental matters, litigation and related legal fees, and
preacquisition tax matters are resolved or settled during the allocation period,
they are included in the revised allocation of the purchase price. After the
allocation period, the effect of such contingencies is included in results of
operations in the period the adjustment is determined.
Other intangible assets -- Other intangible assets consist primarily of
customer lists, covenants not to compete, and licenses and permits. Other
intangible assets are recorded at cost and amortized on a straight-line basis
over three to ten years. Accumulated amortization was $2,940,000 and $3,600,000
at December 31, 1993 and 1994, respectively.
Other assets -- Other assets consist primarily of restricted closure funds
and debt issue costs. Debt issue costs are amortized on a straight-line basis
over the term of the related debt agreement.
Closure, post-closure and other liabilities -- The Company has material
financial commitments for the costs associated with its future obligations for
closure and post-closure costs of landfills it operates or for which it is
otherwise responsible. While the precise amount of these future costs cannot be
determined with absolute certainty, the Company has estimated that the aggregate
closure and post-closure costs will be approximately $25,000,000, which, for
each landfill will be fully accrued at the time the site stops accepting waste
and is closed. As of December 31, 1993 and 1994, the Company has accrued
$10,100,000 and $13,343,000, respectively, for final closure and post-closure
costs of disposal facilities. The difference between the closure and
post-closure costs accrued as of December 31, 1994 and the total estimated
closure and post-closure costs to be incurred will be accrued and charged to
expense as airspace is consumed. The Company also expects to incur approximately
$40,000,000 related to capping activities expected to occur during the operating
lives of these disposal sites. These costs are also being expensed over the
useful lives of the disposal sites as airspace is consumed.
The Company bases its estimates for these accruals on management's reviews
performed not less than annually including input from its engineers and
interpretations of current requirements and proposed regulatory changes. The
closure and post-closure requirements are established under the standards of the
U.S. Environmental Protection Agency's Subtitle D regulations as implemented and
applied on a state-by-state basis. Closure and post-closure accruals consider
estimates for the final cap and cover for the site, methane gas control,
leachate management and groundwater monitoring, and other operational and
maintenance costs to be incurred after the site stops accepting waste, which is
generally expected to be for a period of up to thirty years after final site
closure.
All of the Company's disposal sites were previously operated by others.
Accordingly, the Company assessed and recorded a closure and post-closure
liability at the time the Company assumed closure responsibility based upon the
estimated total closure and post-closure costs and the percentage of airspace
utilized as of such date. Thereafter, the difference between the closure and
post-closure costs accrued and the total estimated closure and post-closure
costs to be incurred are accrued and charged to expense as airspace is consumed.
Also in connection with the acquisition of certain businesses, the Company has
recorded a current liability of approximately $2,000,000 as of December 31,
1994, relating to minor remediation activities that exist at certain of the
Company's facilities.
F-9
<PAGE> 155
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Income taxes -- Deferred taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities.
Deferred tax expense represents the change in the deferred income tax balance.
Revenue recognition -- The Company recognizes revenues as services are
provided. Amounts billed and received prior to services being performed are
included in deferred revenue.
Earnings per share -- Earnings per share computations are based on the
weighted average number of shares of common stock outstanding and the dilutive
effect of stock options and warrants using the treasury stock method. The
dilutive effect between primary and fully-dilutive earnings per share is less
than 3% or is anti-dilutive for all periods presented and is therefore not
disclosed in the accompanying statements of income.
Reclassifications -- Certain amounts in prior year consolidated financial
statements have been reclassified to conform to the 1994 presentations.
2. ACQUISITIONS:
Since 1990, the Company has acquired several collection, transfer,
recycling, disposal, and soil remediation businesses. These acquisitions were
accounted for in accordance with the purchase or pooling of interests method of
accounting depending on the terms of each transaction as described below. The
most significant transaction has been the Company's acquisition of Envirofil
consummated May 27, 1994. As a result of this acquisition accounted for under
the pooling of interests method of accounting, the Company has restated its 1992
and 1993 financial statements to include Envirofil from the beginning of each
period presented.
Envirofil
In May 1994, approximately 9.7 million shares of Common Stock were issued
in exchange for all the outstanding common stock of Envirofil. The acquisition
has been accounted for as a pooling of interests, and accordingly, the
accompanying financial information has been restated to include the accounts of
Envirofil for all periods presented.
Combined and separate results of operations of the Company and Envirofil
are as follows:
<TABLE>
<CAPTION>
USA WASTE ENVIROFIL ADJUSTMENTS COMBINED
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Three months ended March 31,
1994 (unaudited):
Operating revenues......... $24,731,000 $ 13,473,000 $ -- $38,204,000
Net income................. 2,264,000 439,000 -- 2,703,000
Year ended December 31, 1993:
Operating revenues............ 78,137,000 15,616,000 -- 93,753,000
Net income (loss)............. 9,582,000 (4,392,000) -- 5,190,000
Year ended December 31, 1992
(Envirofil as of June 30,
1993):
Operating revenues......... 52,236,000 4,813,000 -- 57,049,000
Income (loss) from
continuing operations.... 7,344,000 (10,109,000) -- (2,765,000)
Extraordinary item......... -- 10,066,000 -- 10,066,000
Net income................. 7,344,000 854,000 -- 8,198,000
</TABLE>
F-10
<PAGE> 156
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In connection with the acquisition, Envirofil changed its fiscal year end
from June 30 to December 31 to conform with the Company's year end. Envirofil's
operating results for the six months ended June 30, 1993 were included in both
the statements of income for the years ended December 31, 1992 and 1993. The
following is a condensed consolidated statement of income for Envirofil for the
six months ended June 30, 1993:
<TABLE>
<S> <C>
Operating revenues...................................................... $ 3,482,000
Costs and expenses...................................................... 6,390,000
-----------
Net loss................................................................ (2,908,000)
Preferred dividends..................................................... (152,000)
-----------
Adjustment to change fiscal year end.................................... $(3,060,000)
===========
</TABLE>
The Company's consolidated financial statements for 1992 include
Envirofil's operating results for the year ended June 30, 1993, and have not
been restated for the change in fiscal year of Envirofil. Costs related to the
acquisition of $3,782,000 were charged to expense in the quarter the acquisition
was consummated.
Other Poolings of Interests
On September 30, 1993, the Company acquired Soil Remediation of
Philadelphia, Inc. ("SRI") in a transaction accounted for as a pooling of
interests. The Company acquired all the common stock of SRI in exchange for
800,000 shares of the Company's common stock and the assumption of approximately
$9,000,000 of SRI's indebtedness. SRI owns and operates a thermal remediation
facility in Pennsylvania. Since SRI commenced operations in the fall of 1992,
the combined results of operations for the Company for 1992 are not
significantly different than previously reported. Accordingly, the Company
restated its balance sheet to include SRI as of December 31, 1992, but the
related statements of income and cash flows relating to prior periods have not
been restated. The results of operations of SRI for the nine months prior to the
combination are -- Operating revenues $5,008,000; Net income $1,110,000.
As of May 1, 1993, the Company acquired all of the outstanding common stock
of Custom Disposal Services, Inc., ("Custom") in exchange for 262,231 shares of
its common stock. At the time of its acquisition, Custom was controlled by
affiliates of the Company. This transaction was accounted for in a manner
similar to a pooling of interests. The results of the combined operations for
the periods prior to the combination were not significantly different than
previously reported, and accordingly, were not restated for prior periods (see
Note 11). Effective September 30, 1994, the Company sold substantially all of
Custom's assets.
Purchases
During 1994, the Company made several acquisitions that were accounted for
under the purchase method of accounting. Results of operations of companies that
were acquired and subject to purchase accounting are included from the dates of
acquisition. The total costs related to the acquisitions accounted for under the
purchase method were $49,033,000 in 1994.
Of the 1994 purchases, the most significant transaction occurred on
February 28, 1994. The Company acquired businesses in New Jersey that provide
collection and recycling services to residential and commercial customers in
central New Jersey. The aggregate purchase price for the businesses acquired
consisted of approximately $15,930,000 in cash and 1,738,000 shares of Envirofil
common stock (347,600 shares of the Company's common stock).
The excess of the aggregate purchase price over the fair value of net
assets acquired for 1994 acquisitions was approximately $23,957,000 and is being
amortized over twenty-five years on a straight-line basis. The purchase price
allocations are subject to adjustment during the allocation period as necessary
when information becomes available to define and quantify assets acquired and
liabilities assumed.
F-11
<PAGE> 157
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pro Forma Results of Operations
The following summarized unaudited pro forma results of operations assumes
1993 and 1994 acquisitions had occurred at the beginning of 1993:
<TABLE>
<CAPTION>
1993 1994
------------ ------------
<S> <C> <C>
Operating revenues...................................... $160,568,000 $182,220,000
============ ============
Income from continuing operations....................... $ 10,228,000 $ 13,874,000
============ ============
Earnings per common share from continuing operations.... $ .50 $ .63
============ ============
</TABLE>
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1993 1994
------------ ------------
<S> <C> <C>
Disposal sites, including costs incurred for expansion
projects in process of $7,290,000 and $20,991,000....... $ 73,293,000 $100,446,000
Vehicles.................................................. 28,519,000 30,423,000
Machinery and equipment................................... 17,318,000 22,150,000
Containers................................................ 15,056,000 20,488,000
Buildings and improvements................................ 13,595,000 14,377,000
Furniture and fixtures.................................... 1,940,000 2,490,000
Land...................................................... 15,805,000 20,291,000
------------ ------------
165,526,000 210,665,000
Less accumulated depreciation and amortization............ 16,429,000 28,250,000
------------ ------------
$149,097,000 $182,415,000
============ ============
</TABLE>
4. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1993 1994
------------ ------------
<S> <C> <C>
Revolving credit facility............................... $ 55,500,000 $ 98,000,000
8 1/2% Convertible Subordinated Debentures.............. 49,000,000 49,000,000
Other, at an average rate of 7.97% due through 2001..... 10,674,000 8,733,000
------------ ------------
115,174,000 155,733,000
Less current maturities................................. 3,559,000 1,830,000
------------ ------------
$111,615,000 $153,903,000
============ ============
</TABLE>
On May 26, 1994, and in connection with the acquisition of Envirofil, the
Company entered into a new revolving credit facility with three major banks
providing for borrowings of up to $110,000,000 to replace two separate
facilities providing for combined borrowings of up to $65,000,000. On November
28, 1994, the Company renegotiated the revolving credit facility to provide for
borrowings of up to $150,000,000. At the Company's option, the interest rate on
any loan under the revolving credit facility will be based on an adjusted prime
rate or Eurodollar rate, as defined in the agreement. The facility matures on
November 30, 1997. The Company's borrowing rate was 7.74% as of December 31,
1994. The revolving credit facility, among other conditions, requires the
payment of a 3/8 of 1% commitment fee on the unused balance, payable in arrears,
and provides for certain restrictions on the ability of the Company to incur
borrowings, sell assets, or pay cash
F-12
<PAGE> 158
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
dividends. The facility also requires the maintenance of certain financial
ratios, including interest coverage ratios, minimum net worth requirements, and
profitable operations. The facility is collateralized by all the stock of the
Company's subsidiaries, whether now owned or hereafter acquired.
In September 1992, the Company issued $49,000,000 of 8 1/2% Convertible
Subordinated Debentures due October 15, 2002 in an underwritten public offering.
Interest on the bonds is payable semi-annually. The bonds are convertible into
the Company's Common Stock at any time on or before maturity, unless previously
redeemed, at $13.25 per share, subject to adjustment in certain events. The
bonds are redeemable at the option of the Company, in whole or in part, at any
time on or after October 15, 1995, at an original redemption price of 105.67% of
the principal amount, declining to par over the term of the bonds. The bonds are
subordinated to all existing and future indebtedness of the Company and do not
restrict the incurrence of additional senior debt. The proceeds from the
issuance of the bonds were used to retire existing indebtedness of approximately
$28,000,000, for acquisitions, and other general corporate purposes.
Long-term debt maturities in each of the five years subsequent to December
31, 1994, are: 1995 -- $1,830,000; 1996 -- $2,110,000; 1997 -- $101,420,000;
1998 -- $860,000; and 1999 -- $420,000.
5. PREFERRED STOCK:
The Board of Directors is authorized to provide for the issuance of the
preferred stock in series; and with respect to each series, to fix its
designation, relative rights (including voting, dividend, conversion, sinking
fund and redemption rights), preferences (including with respect to dividends
and upon liquidation) and limitations. The Company currently has no issued or
outstanding preferred stock.
In contemplation of the transaction between the Company and Envirofil, the
Envirofil preferred shareholders converted all of their preferred stock into
shares of Envirofil common stock, which were subsequently exchanged for shares
of the Company's common stock.
6. COMMON STOCK OPTIONS AND WARRANTS:
Options
In 1990, the Company's shareholders adopted the 1990 Stock Option Plan (the
"1990 Plan"). A total of 900,000 shares may be issued under the Plan. In 1993,
the Company adopted the 1993 Stock Option Incentive Plan (the "1993 Plan"),
which allows the Company to grant up to 1,000,000 options to officers, directors
and key employees. Stock options have been granted under the 1990 and 1993 Plans
at an exercise price which equals or exceeds the fair market value of the common
stock on the date of grant. No options are available for future grant under the
1990 Plan.
In March 1993, the stockholders of Envirofil approved the adoption of the
Envirofil Employees' 1993 Stock Option Plan (the "1993 Envirofil Plan"). Under
the 1993 Envirofil Plan, options may be granted to purchase up to an aggregate
of 600,000 shares of Common Stock of the Company. The 1993 Envirofil Plan will
terminate in January 2003. Under the terms of the 1993 Envirofil Plan, options
may be granted at an exercise price per share not less than the fair market
value of the Common Stock. On May 27, 1994, Envirofil had outstanding options to
purchase 443,182 shares under the 1993 Envirofil Plan. No additional options
will be issued under such plan.
F-13
<PAGE> 159
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes activity under the Company's stock option
plans:
<TABLE>
<CAPTION>
1992 1993 1994
------- --------- ---------
<S> <C> <C> <C>
Outstanding, beginning............................. 487,825 464,500 1,130,682
Granted............................................ 34,000 682,182 324,000
Exercised.......................................... (51,225) (5,000) (98,700)
Canceled........................................... (6,100) (11,000) (189,100)
------- --------- ---------
Outstanding, end of year........................... 464,500 1,130,682 1,166,882
======= ========= =========
</TABLE>
The option prices of shares exercised during 1992, 1993 and 1994 were from
$2.50 to $9.00 in 1992, $6.00 in 1993, and from $2.50 to $14.00 in 1994. As of
December 31, 1994, 472,556 of the options outstanding are exercisable at prices
ranging from $5.00 to $19.39 per share. The Company holds 149,285 shares of its
common stock in treasury as of December 31, 1994, for future distribution upon
exercise of options under the plans.
Warrants
The Company has issued 3,138,864 common stock warrants expiring through
2002 in connection with private placements of debt and equity securities,
acquisitions of businesses, bank borrowings, reorganizations, and certain
employment agreements. Transactions involving common stock warrants during each
of the two years ended December 31, 1994, are summarized as follows:
<TABLE>
<CAPTION>
EXERCISE
WARRANTS PRICE
--------- -------------
<S> <C> <C>
Outstanding at December 31, 1992.......................... 1,822,232 $ 0.55-$17.50
Issued.................................................. 406,632 $ 1.25-$10.00
---------
Outstanding at December 31, 1993.......................... 2,228,864 $ 0.55-$17.50
Issued.................................................. 910,000 $10.00-$12.88
Exercised............................................... (443,399) $ 0.55-$ 8.80
---------
Outstanding at December 31, 1994.......................... 2,695,465 $ 1.25-$17.50
=========
</TABLE>
Stock Compensation Expense
In 1992 and 1993, Envirofil granted certain options and warrants with
exercise prices that were less than the fair market value of Envirofil's common
stock at the date of the grant of the options or warrants or the renegotiation
of the exercise price of warrants previously granted. Stock compensation expense
has been recorded to the extent that the exercise prices of the vested options
or warrants were less than the fair market value of Envirofil's common stock at
the date of the renegotiation of the exercise price reduction or the granting of
the options or warrants. As a result, charges of $5,249,000 and $923,000 were
recorded as stock compensation expense in the consolidated statement of
operations for the years ended December 31, 1992 and 1993, respectively. The
offset to these charges was an increase in additional paid-in capital.
7. INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current........................................ $3,012,000 $4,418,000 $7,560,000
Deferred....................................... 943,000 995,000 200,000
---------- ---------- ----------
$3,955,000 $5,413,000 $7,760,000
========== ========== ==========
</TABLE>
F-14
<PAGE> 160
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred income taxes are primarily attributable to the temporary
differences in reporting depreciation and amortization for financial and tax
purposes. The difference in the federal income tax rate and the effective income
tax rate for the years presented above is as follows:
<TABLE>
<CAPTION>
1992 1993 1994
----- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate............................. 34.0% 34.0% 35.0%
Losses for which no tax benefit was provided.................. 288.8 13.9 --
State and local taxes......................................... 16.0 4.5 2.3
Other......................................................... (6.4) (1.3) (1.4)
----- ---- ----
Effective income tax rate..................................... 332.4% 51.1% 35.9%
===== ==== ====
</TABLE>
In 1993, the current provision for income taxes includes a distribution to
the former sole shareholder of SRI to fund the tax provision for the period
prior to SRI's acquisition by the Company.
As of December 31, 1994, the Company has approximately $8,200,000 of net
operating loss carryforwards that may be offset against future taxable income.
These carryforwards will begin to expire in 1998. The utilization of these net
operating loss carryforwards are subject to annual limitations due to ownership
changes upon the Company's acquisition of certain entities.
The components of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment, net........................... $11,136,000 $ 9,352,000
Excess of cost over net assets of acquired businesses,
net and other intangibles.......................... 4,725,000 8,540,000
Other................................................. 1,191,000 3,954,000
----------- -----------
Total deferred tax liabilities................ 17,052,000 21,846,000
----------- -----------
Deferred tax assets:
Net operating loss carryforwards...................... 4,048,000 3,125,000
Closure, post-closure and other liabilities........... 2,641,000 5,107,000
Other................................................. 1,032,000 458,000
----------- -----------
Total deferred tax assets..................... 7,721,000 8,690,000
Valuation allowance................................... (2,511,000) (2,636,000)
----------- -----------
Net deferred tax assets....................... 5,210,000 6,054,000
----------- -----------
Net deferred tax liability.............................. $11,842,000 $15,792,000
=========== ===========
</TABLE>
8. BUSINESS SEGMENT INFORMATION:
The Company operates in one business segment providing waste collection,
transfer, disposal, soil remediation and recycling services to municipal,
commercial, industrial, and residential customers.
During 1992, 1993 and 1994, there were no individual customers that
accounted for more than 10% of operating revenues.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following disclosures of the fair value of financial instruments are
presented in accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of
F-15
<PAGE> 161
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Financial Instruments." The estimated fair value amounts have been determined by
the Company using available market data and valuation methodologies.
As of December 31, 1994, the estimated fair value of the 8 1/2% Convertible
Subordinated Debentures due 2002 of $48,265,000 is based on a quoted market
price. The book values of the revolving credit facility and other notes payable
approximate their fair value.
The book values of cash, trade accounts receivable, trade accounts payable
and financial instruments included in notes and other receivables and other
assets approximate their fair values principally because of the short-term
maturities of these instruments.
In the normal course of business, the Company has letters of credit,
performance bonds, and other guarantees that are not reflected in the
accompanying consolidated balance sheets. In the past, no significant claims
have been made against these financial instruments. Management believes that the
likelihood of performance under these financial instruments is minimal and
expects no material losses to occur in connection with these financial
instruments.
10. ENVIROFIL REORGANIZATION AND DISCONTINUED OPERATIONS:
In December 1992, Envirofil completed a financial and management
reorganization that effectively recapitalized Envirofil and provided it with a
new management team. The reorganization included the following items:
- Envirofil completed a private placement of its common stock raising net
proceeds of $3,388,000 from the sale of 16,000,000 shares of Envirofil
common stock.
- Envirofil converted $10,000,000 of Convertible Subordinated Notes and
$750,000 of Convertible Subordinated Bridge Notes together with accrued
interest into 7,188,956 shares of common stock of Envirofil at a
conversion rate of $1.60 per share. In addition, 521,644 shares of
Convertible Preferred Stock, Series B were converted into 332,638 shares
of common stock of the Company at a conversion rate of $1.60 per share.
The difference between the face value of these obligations and the fair
market value of the common stock issued, net of applicable deferred
financing costs, plus the debt forgiven by certain of Envirofil's
vendors, was recorded as extraordinary income in 1992 in the amount of
$10,066,000.
Effective June 30, 1991, Envirofil formally discontinued operations in all
non-landfill related businesses. As part of the December 1992 reorganization,
Envirofil sold the stock of its home medical equipment operations holding
company, Med-Care Corp., and its related subsidiaries for $10 to the former
Chairman, President and majority shareholder of Envirofil. Although sold for a
nominal amount, due to its net liability position on the date of sale, Envirofil
recorded a net gain of $897,000 on this sale. The disposition of these companies
completed Envirofil's plan to liquidate all non-landfill related businesses and
to concentrate on the acquisition, development and operation of non-hazardous
sanitary landfills. The Company believes that Envirofil has settled or satisfied
all claims and liabilities with respect to such discontinued operations,
however, there can be no assurance that claims and liabilities arising out of or
related to the home medical equipment business will not be made against
Envirofil and will not be significant.
As part of the December 1992 reorganization, Envirofil had restructuring
charges of $1,507,000. The restructuring costs primarily related to the granting
of warrants with exercise prices less than the fair market value of Envirofil
common stock at the date of the grant or the renegotiation of the exercise price
of warrants previously granted. See Note 6.
F-16
<PAGE> 162
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. RELATED PARTY TRANSACTIONS:
The Company has invested $400,000 in EDM Corporation ("EDM"), in return for
a 15% equity interest and agreed to provide a line of credit of up to $5,600,000
to EDM at an interest rate equal to the greater of 8 1/2% or the prime rate plus
two percent. The Company has a right of first refusal to acquire any landfills,
collection, or other operations that EDM wishes to sell.
In February 1993, the Company purchased a 19% equity interest in WPP, Inc.,
an Ohio corporation ("WPP"), for $190,000. WPP was engaged in the development of
landfill projects and provided consulting, engineering, and permit acquisition
services in connection with the development of landfills. On March 30, 1994, the
Company purchased the remaining 81% of the outstanding capital stock of WPP from
an unrelated party for $810,000. Following its acquisition of WPP, the Company
sold WPP's landfill development projects to third parties.
In June 1993, Donald F. Moorehead, Jr., Chairman of the Board of the
Company, acquired approximately a 5% ownership interest in EMCO Metals &
Recycling Corporation ("EMCO"), a company engaged in scrap metal recycling in
Phoenix. In October 1993, the Company acquired certain trucks from EMCO for
$191,000 and entered into a three-year service agreement to transport scrap
metal for EMCO. Contemporaneously, the Company acquired certain trucks,
trailers, and roll-off containers used in the collection and transportation of
scrap metal from an unaffiliated entity for $998,000. In connection with its
decision to leave the Phoenix market in October 1994, the Company sold the
foregoing vehicles and containers to EMCO for $100,000 in cash and a note for
$895,000 bearing interest at a rate of 9% per annum and payable in eleven
monthly installments of principal and interest of $18,567 and a balloon payment
of $765,083.
In connection with the acquisition of Envirofil in May 1994, Sanders Morris
Mundy Inc., ("SMMI"), in its capacity as financial advisor to Envirofil received
a fee of $850,000. Prior to joining the Company, John E. Drury, Chief Executive
Officer of the Company, was a Managing Director and shareholder of SMMI and
remains a director. George L. Ball, a director of the Company, is Chairman of
the Board and a director of SMMI. In 1992, the Company sold $46,000,000 of its
8 1/2% Convertible Subordinated Debentures due 2002 in a public offering
underwritten by Dillon Read & Co., Inc. and SMMI. In connection with such
offering, the Company paid the underwriters commissions aggregating $1,995,000.
12. COMMITMENTS AND CONTINGENCIES:
The Company is subject to extensive and evolving federal, state and local
environmental laws and regulations that have been enacted in response to
technological advances and the public's increased concern over environmental
issues. As a result of changing governmental attitudes in this area, management
anticipates that the Company will continually modify or replace facilities and
alter methods of operation. The majority of the expenditures necessary to comply
with the environmental laws and regulations are made in the normal course of
business. Although the Company, to the best of its knowledge, is in compliance
in all material respects with the laws and regulations affecting its operations,
there is no assurance that the Company will not have to expend substantial
amounts for compliance in the future.
The Company has obtained environmental impairment liability insurance
covering certain of its disposal sites and transfer stations. The Company is in
the process of securing coverage for those operations not yet insured. However,
if the Company should decide to operate without insurance, or should be unable
to obtain adequate insurance in the future, a partially or completely uninsured
claim against the Company, if successful and of sufficient magnitude, could have
a material adverse effect on the Company's business or its financial condition
and results of operations.
The Company has entered into employment agreements with certain of its
executives and officers. These employment agreements include provisions
governing compensation and benefits to be paid upon termination of employment
with the Company or certain changes in control of the Company. Under certain
conditions, the
F-17
<PAGE> 163
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
agreements can be terminated by the Company or the employee. Upon termination of
the agreement, the employee's compensation would continue at approximately 75%
of the employee's prior compensation for periods ranging from three to five
years. During the three to five year period the employee would be available to
the Company on a part-time basis for consulting and also would not be permitted
to engage in any activities in direct competition with the Company. If these
executives were to be terminated without cause during 1995 or if certain
executives elected to terminate their agreements, the annual compensation on a
part-time basis would be approximately $1,000,000. If a change in control were
to occur in 1995 and the executives elected to take the change in control
payments, they would receive approximately $4,000,000. As of December 31, 1994,
the Company has not recorded any accruals in the financial statements related to
these employment agreements.
The Company has entered into certain agreements with EDM and certain other
parties in which the Company has committed to advance or invest up to
approximately $20,000,000 for purchase commitments, investment obligations and
loans. Certain of these commitments are dependent upon the fulfillment of
certain conditions by the other party prior to the Company's outlay of funds.
These commitments, if ultimately fulfilled, are expected to occur over a period
of one to five years. The total amount invested and advanced under these
agreements amounted to $3,400,000 as of December 31, 1994.
The Company is a party to litigation (other than discussed in Note 13)
arising in the normal course of business. In addition, contingencies of an
environmental nature currently exist at certain of its disposal sites.
Management believes that the ultimate outcome of these matters will not have a
material effect on the Company's financial position and results of operations.
13. MERGER WITH CHAMBERS DEVELOPMENT COMPANY, INC.:
In December 1994, the Company entered an agreement to merge with Chambers
Development Company, Inc., ("Chambers"). The merger is subject to, among other
conditions, approval of both companies' boards of directors and shareholders.
Completion of the merger is expected by June 1995 and will be accounted for as a
pooling of interests. The agreement provides that on the effective date of the
merger the Company will issue 0.41667 of a share for each share of Chambers
common stock outstanding. The Company currently has 22,678,822 shares
outstanding and, after the merger, expects to have approximately 50,525,000
common shares outstanding. Following the merger, the Board of Directors will
include nominees of both the Company and Chambers. Subsequent to the merger,
John E. Drury will serve as Chairman of the Board and Chief Executive Officer.
Donald F. Moorehead, Jr. and John G. Rangos, Sr. will become Vice Chairmen and
Alexander W. Rangos will become Executive Vice President for Landfill
Development. David Sutherland-Yoest will continue as President and Chief
Operating Officer and Earl E. DeFrates will continue as Executive Vice President
and Chief Financial Officer.
In connection with the merger, the Company and Chambers have entered into a
financing agreement to provide for the financing of certain Chambers'
obligations. Under this financing agreement, the Company has agreed to
accelerate debt payments and acquire certain assets of Chambers for $35,100,000
in 1995 and $45,000,000 in 1996 in the event that the merger is not consummated
and Chamber is not successful in refinancing its obligations. Subsequent to
December 31, 1994, and in accordance with the financing agreement, the Company
has made payments to Chambers in the amount of $6,800,000.
Between November 30, 1994 and January 13, 1995, three lawsuits were filed
as class actions on behalf of all security holders of Chambers. The lawsuits
arise out of a proposed merger of a wholly-owned subsidiary of the Company with
and into Chambers whereby Chambers will become a wholly-owned subsidiary of the
Company. Named as defendants are the Company and its wholly-owned subsidiary,
Envirofil, Chambers and certain officers and directors of Chambers. The lawsuits
allege that the execution of the merger agreement constituted a breach of
fiduciary duties by the Chambers officers and directors and that the Company and
Envirofil aided and abetted those breaches. The lawsuits seek an order to enjoin
the defendants from
F-18
<PAGE> 164
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
proceeding with the merger agreement as well as compensatory damages. Counsel
for the parties have engaged in settlement discussions and, based thereon, USA
Waste and Chambers anticipate a definitive agreement, subject to court approval,
will be finalized before the USA Waste Annual Meeting and the Chambers Special
Meeting.
14. SELECTED QUARTERLY FINANCIAL DATA, UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating revenues
1992.............................................. $10,708 $14,146 $15,001 $17,194
======= ======= ======= =======
1993.............................................. $16,447 $21,130 $23,174 $33,002
======= ======= ======= =======
1994.............................................. $38,205 $44,870 $47,134 $46,026
======= ======= ======= =======
Income (loss) before provision for income taxes
1992.............................................. $ 1,685 $(3,679) $ 2,193 $ 991
======= ======= ======= =======
1993.............................................. $ 2,672 $ 1,754 $ 3,065 $ 3,112
======= ======= ======= =======
1994.............................................. $ 4,339 $ 1,515 $ 7,236 $ 8,501
======= ======= ======= =======
Income (loss) before extraordinary item
1992.............................................. $ 862 $(3,780) $ 1,142 $ (92)
======= ======= ======= =======
1993.............................................. $ 1,405 $ 327 $ 2,034 $ 1,424
======= ======= ======= =======
1994.............................................. $ 2,703 $ 1,021 $ 4,616 $ 5,491
======= ======= ======= =======
Extraordinary income from forgiveness of debt
1992.............................................. $ -- $10,066 $ -- $ --
======= ======= ======= =======
1993.............................................. $ -- $ -- $ -- $ --
======= ======= ======= =======
1994.............................................. $ -- $ -- $ -- $ --
======= ======= ======= =======
Net income (loss)
1992.............................................. $ 862 $ 6,286 $ 1,142 $ (92)
======= ======= ======= =======
1993.............................................. $ 1,405 $ 327 $ 2,034 $ 1,424
======= ======= ======= =======
1994.............................................. $ 2,703 $ 1,021 $ 4,616 $ 5,491
======= ======= ======= =======
Earnings (loss) per common share
1992.............................................. $ .07 $ .42 $ .07 $ (.02)
======= ======= ======= =======
1993.............................................. $ .08 $ .01 $ .10 $ .07
======= ======= ======= =======
1994.............................................. $ .12 $ .04 $ .21 $ .24
======= ======= ======= =======
</TABLE>
Amounts presented for all 1992 and 1993 quarters and the first quarter of 1994
are as restated for the pooling of interests discussed in Note 2, and are
different from amounts originally reported due to the business combination with
Envirofil.
F-19
<PAGE> 165
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CHAMBERS DEVELOPMENT COMPANY,
INC.:
We have audited the accompanying consolidated balance sheets of Chambers
Development Company, Inc. and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of Chambers' 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Chambers Development Company,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note B, Chambers changed its method of accounting for
contributions effective January 1, 1994.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
March 30, 1995
F-20
<PAGE> 166
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1994
--------- ---------
<S> <C> <C>
Current Assets
Cash and cash equivalents................................................................ $ 44,553 $ 23,548
Accounts receivable
Trade, less allowances of $1,062 and $1,383, respectively.............................. 28,573 28,961
Other.................................................................................. 2,977 13,673
Inventories and prepaid expenses......................................................... 4,751 5,281
Divestiture proceeds and other funds held in escrow...................................... 11,287 2,210
Net assets held for sale................................................................. 11,030 9,298
Other current assets..................................................................... 5,334 1,795
--------- ---------
Total current assets....................................................................... 108,505 84,766
--------- ---------
Property and Equipment
Land, primarily landfill sites........................................................... 312,886 345,900
Vehicles and equipment................................................................... 107,183 108,133
Other.................................................................................... 23,290 24,759
Construction in progress................................................................. 42,382 34,391
--------- ---------
485,741 513,183
Less accumulated depreciation and amortization........................................... 128,730 158,755
--------- ---------
Property and equipment -- net.............................................................. 357,011 354,428
--------- ---------
Other Assets
Funds held for escrow requirements and construction...................................... 31,954 23,506
Intangible assets........................................................................ 21,995 15,811
Other.................................................................................... 14,157 9,987
--------- ---------
Total other assets......................................................................... 68,106 49,304
--------- ---------
$ 533,622 $ 488,498
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term obligations.............................................. $ 29,748 $ 46,465
Trade accounts payable................................................................... 9,344 10,889
Accrued liabilities...................................................................... 30,709 34,751
Deferred revenues........................................................................ 8,637 4,881
--------- ---------
Total current liabilities.................................................................. 78,438 96,986
--------- ---------
Long-term Obligations, Less Current Maturities............................................. 261,803 211,016
Accrued Shareholder Litigation Settlement.................................................. -- 75,300
Other Noncurrent Liabilities............................................................... 39,208 41,264
Commitments and Contingencies.............................................................. -- --
Stockholders' Equity
Preferred Stock -- authorized 10,000,000 shares; no par value; no shares issued.......... -- --
Class A Common Stock -- authorized 100,000,000 shares; par value $.50 per share; issued
50,742,377 and 50,829,559 shares, respectively......................................... 25,371 25,415
Common Stock -- authorized 50,000,000 shares; par value $.50 per share; convertible into
Class A Common Stock; issued 16,415,750 and 16,329,168 shares, respectively............ 8,208 8,165
Additional paid-in capital............................................................... 395,119 395,121
Accumulated deficit...................................................................... (270,375) (360,619)
--------- ---------
158,323 68,082
Treasury stock, at cost -- Class A Common Stock, 400 shares; Common Stock, 369,200
shares................................................................................. (4,150) (4,150)
--------- ---------
Total stockholders' equity................................................................. 154,173 63,932
--------- ---------
$ 533,622 $ 488,498
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 167
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues..................................................... $294,310 $288,481 $257,989
Costs and Expenses
Operating.................................................. 206,761 194,355 179,542
General and administrative................................. 37,853 23,210 24,796
Depreciation and amortization.............................. 38,363 41,764 37,568
Unusual items -- operations................................ 44,291 (11,851) 8,863
-------- -------- --------
Income (Loss) from Operations................................ (32,958) 41,003 7,220
Other Income (Expense)
Unusual items -- shareholder litigation settlement and
other litigation related costs.......................... (10,853) (5,500) (79,400)
Other income, primarily interest........................... 6,509 3,563 1,848
Interest expense........................................... (31,628) (29,163) (23,843)
-------- -------- --------
Income (Loss) from Continuing Operations Before Income
Taxes...................................................... (68,930) 9,903 (94,175)
Income Tax Provision (Benefit)............................... 1,325 1,600 (3,931)
-------- -------- --------
Income (Loss) from Continuing Operations..................... (70,255) 8,303 (90,244)
Discontinued Operations
Loss from operations....................................... (1,407) -- --
Gain on sale of assets..................................... 939 -- --
-------- -------- --------
Net Income (Loss)............................................ $(70,723) $ 8,303 $(90,244)
======== ======== ========
Income (Loss) Per Common Share
Continuing operations...................................... $ (1.05) $ .12 $ (1.35)
Discontinued operations.................................... (.01) -- --
-------- -------- --------
Net Income (Loss).......................................... $ (1.06) $ .12 $ (1.35)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 168
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE YEARS ENDED DECEMBER 31, 1994
----------------------------------------------------------
CLASS A ADDITIONAL
COMMON COMMON PAID-IN ACCUMULATED TREASURY
STOCK STOCK CAPITAL DEFICIT STOCK
------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992................ $25,358 $8,217 $ 394,986 $(207,955) $ (4,150)
Exchange of Common Stock................ 4 (4) -- -- --
Exercise of stock options............... 4 -- 133 -- --
Net loss................................ -- -- -- (70,723) --
------- ------ ---------- ----------- --------
Balance at December 31, 1992.............. 25,366 8,213 395,119 (278,678) (4,150)
Exchange of Common Stock................ 5 (5) -- -- --
Net income.............................. -- -- -- 8,303 --
------- ------ ---------- ----------- --------
Balance at December 31, 1993.............. 25,371 8,208 395,119 (270,375) (4,150)
Exchange of Common Stock................ 43 (43) -- -- --
Exercise of stock options............... 1 -- 2 -- --
Net loss................................ -- -- -- (90,244) --
------- ------ ---------- ----------- --------
Balance at December 31, 1994.............. $25,415 $8,165 $ 395,121 $(360,619) $ (4,150)
======= ====== ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 169
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1992 1993 1994
--------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Income (loss) from continuing operations.................. $ (70,255) $ 8,303 $(90,244)
Adjustments to reconcile to net cash provided by
continuing operations
Depreciation and amortization........................... 38,363 41,764 37,568
Unusual items........................................... 42,112 (7,618) 88,580
Deferred income taxes................................... 12,000 -- --
Provision for doubtful accounts......................... 454 839 1,447
Interest earned on escrowed funds....................... (2,844) (878) (415)
Change in assets and liabilities, net of effects of
divestitures
Accounts receivable.................................. 749 (3,085) (11,629)
Refundable taxes..................................... 12,495 16,049 (659)
Accounts payable and accrued liabilities............. (13,608) (20,330) 1,622
Deferred revenue..................................... (9,018) (7,169) (3,756)
Other assets and liabilities......................... 4,008 9,476 8,285
Other................................................... 3,578 666 1,349
--------- -------- --------
Net cash provided by continuing operations................ 18,034 38,017 32,148
Net cash used in operating activities of discontinued
operations.............................................. (5,885) (2,148) --
--------- -------- --------
Net cash provided by operating activities................. 12,149 35,869 32,148
--------- -------- --------
Cash Flows From Investing Activities
Capital expenditures...................................... (111,869) (38,085) (39,802)
Acquisition of businesses................................. (20,916) -- --
Proceeds from disposition of assets....................... 12,575 48,595 3,249
Purchases of marketable securities........................ (18,491) -- --
Maturities and sales of marketable securities............. 68,840 -- --
Decrease (increase) in funds held in escrow............... 32,933 (404) 17,940
Other..................................................... 1,150 (603) 1,399
Proceeds from sale of discontinued operations............. 22,930 4,500 --
Other net investing activities of discontinued
operations.............................................. (3,258) -- --
--------- -------- --------
Net cash (used in) provided by investing activities....... (16,106) 14,003 (17,214)
--------- -------- --------
Cash Flows From Financing Activities
Short-term note payments.................................. (10,000) -- --
Principal payments on long-term obligations............... (55,388) (60,669) (35,312)
Proceeds from issuance of long-term obligations........... 21,100 -- --
Funds (used for) provided by replacement of letters of
credit.................................................. (10,243) 10,243 --
Other..................................................... (1,626) (792) (627)
Net financing activities of discontinued operations....... (506) -- --
--------- -------- --------
Net cash used in financing activities..................... (56,663) (51,218) (35,939)
--------- -------- --------
Net decrease in cash and cash equivalents................. (60,620) (1,346) (21,005)
Cash and cash equivalents at beginning of year............ 106,519 45,899 44,553
--------- -------- --------
Cash and cash equivalents at end of year.................. $ 45,899 $ 44,553 $ 23,548
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 170
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Chambers
Development Company, Inc. and its subsidiaries ("Chambers"), after appropriate
elimination of intercompany accounts and transactions.
Revenue Recognition
Chambers recognizes revenues as services are provided.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and on deposit and highly
liquid debt instruments purchased with original maturities of three months or
less.
Interest Rate Swap Agreements
Chambers has used interest rate swap agreements, the last of which expired
in November 1993, to minimize the impact of rate fluctuations on floating
interest rate long-term borrowings. The differential paid or received on
interest rate swap agreements is recognized as an adjustment to interest
expense.
Funds Held for Escrow Requirements and Construction
Funds held for escrow requirements and construction consist principally of
funds deposited in connection with landfill closure and post-closure
obligations, insurance escrow deposits and amounts held for landfill
construction arising from industrial revenue financings. Amounts are principally
invested in fixed income securities of federal, state and local governmental
entities and financial institutions. Chambers considers its landfill closure,
post-closure and construction escrow investments to be held to maturity. The
aggregate fair value of these investments approximates their amortized cost.
Substantially all of these investments mature within one year. Chambers'
insurance escrow funds are invested in pooled investment accounts that hold debt
and equity securities and are considered to be available for sale. The aggregate
cost and market value of those pooled accounts was approximately $11,043,000 and
$11,076,000, respectively, at December 31, 1994.
Inventories
Inventories, consisting of parts and supplies, are stated at the lower of
first-in, first-out cost or market.
Property and Equipment
Landfill sites, including land and related landfill preparation and
improvement costs, are stated at cost. Such costs, which include construction,
engineering, permitting, interest and other costs, are amortized as airspace is
consumed. Also included in the cost of landfill sites are acquisition,
engineering and other costs related to the permitting and development of planned
landfills and proposed expansions of existing landfills, which costs management
of Chambers believes are recoverable.
Other items of property and equipment are stated at cost. Depreciation of
such property and equipment is provided over the estimated useful lives of the
assets, on the straight-line method, as follows: buildings -- 7 to 25 years;
vehicles and equipment -- 3 to 20 years; and office furniture and fixtures -- 5
years.
Depreciation and amortization of property and equipment was $32,088,000,
$35,639,000 and $32,261,000 for the years ended December 31, 1992, 1993 and
1994, respectively.
Items of an ordinary maintenance or repair nature are charged directly to
operations, whereas betterments and major expenditures that extend the life of
the asset are capitalized.
F-25
<PAGE> 171
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intangible Assets
Intangible assets consist principally of the excess of cost over fair value
of the net assets of acquired businesses, which is being amortized on a
straight-line basis over 20 years, and covenants not to compete and customer
contracts and routes of acquired businesses, which are being amortized on a
straight-line basis over periods of up to 10 years. Accumulated amortization of
intangible assets was $15,631,000 and $18,490,000 at December 31, 1993 and 1994,
respectively, excluding $1,279,000 related to assets held for sale at December
31, 1993. Chambers assesses whether its goodwill and other intangible assets are
impaired based on the ability of the operation to which they relate to generate
cash flows in amounts adequate to cover the amortization of such assets. If an
impairment is determined, the amount of such impairment is calculated based on
the estimated fair value of the asset.
Environmental Costs and Liabilities
Environmental costs and liabilities primarily include accruals for closure
and post-closure monitoring and site maintenance costs associated with Chambers'
landfills. The accruals for these costs are recorded as airspace at the
respective landfill site is consumed. Chambers' engineers estimate landfill site
closure and post-closure costs and such estimates are reviewed on a periodic
basis; accordingly, the related accrual rates are subject to periodic revision
and adjustment.
Capitalized Interest
During the years ended December 31, 1992, 1993 and 1994, the interest costs
of continuing operations were $38,349,000, $32,613,000 and $26,809,000,
respectively, of which $6,721,000, $3,450,000 and $2,966,000 were capitalized
with respect to landfills and facilities under construction.
Income Taxes
Deferred income taxes are recorded based upon temporary differences between
the financial statement and tax bases of assets and liabilities and net
operating loss carryforwards available for income tax purposes.
Effective January 1, 1993, Chambers adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," using an asset and
liability approach. If it is more likely than not that some portion or all of a
deferred tax asset will not be realized, a valuation allowance is recognized.
There was no effect on Chambers' 1993 financial statements upon adoption of the
new standard using the cumulative effect method.
Income (Loss) per Common Share
Income (loss) per common share is computed using the weighted average
number of shares outstanding during the year. Common stock equivalents, which
consist of stock options outstanding, had an antidilutive effect on income
(loss) per common share for each of the years presented and, accordingly, have
not been included in the computation. The weighted average number of common
shares outstanding was 66,788,000 for each of the years ended December 31, 1992
and 1993 and 66,789,000 for the year ended December 31, 1994.
Reclassifications
Certain reclassifications have been made to prior years' financial
statements to conform to 1994 classifications.
F-26
<PAGE> 172
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B -- CHANGE IN ACCOUNTING PRINCIPLE
In the fourth quarter of 1994, Chambers elected early adoption of Statement
of Financial Accounting Standards No. 116, "Accounting for Contributions
Received and Contributions Made." The new standard requires, among other things,
the recognition of the fair value of contributions made, including unconditional
promises to give, in the period in which the contribution is made or
unconditional promise is given. Prior to adoption, Chambers had recognized
contributions made or unconditional promises to give in the period the
contribution was paid. On December 29, 1994, Chambers made unconditional
promises to contribute $3,000,000 to certain charitable organizations, payable
in annual installments of $500,000 over the next six years; accordingly,
Chambers has recorded a charge to general and administrative expense of
$2,269,000, representing the present value of these obligations. There was no
cumulative effect as of January 1, 1994 of adopting the new standard.
NOTE C -- PROPOSED MERGER
Chambers has entered into an Amended and Restated Agreement and Plan of
Merger dated as of November 28, 1994 (the "Merger Agreement"), pursuant to which
Chambers would become a wholly-owned subsidiary of USA Waste Services, Inc.
("USA Waste") through the merger of an existing wholly-owned subsidiary of USA
Waste with and into Chambers (the "Merger"). The Merger Agreement provides,
among other things, for each outstanding share of Chambers' Common Stock and
Class A Common Stock to be converted into .41667 of a share of USA Waste's
Common Stock. Based upon the 15,699,768 shares of Chambers' Common Stock and the
51,089,359 shares of Class A Common Stock outstanding as of March 1, 1995,
Chambers' stockholders will collectively be issued approximately 27,829,000
shares of USA Waste's Common Stock, representing approximately 55.2% of the
expected total issued and outstanding shares of USA Waste's Common Stock after
the Merger.
The Merger is subject to a number of conditions, including obtaining the
approval of the stockholders of Chambers and of USA Waste, final settlement of
the shareholder litigation discussed in Note D and certain other proceedings
involving Chambers, and obtaining any necessary regulatory waivers and
approvals. It is anticipated that the Merger will be completed by June 30, 1995.
NOTE D -- SETTLEMENT OF SHAREHOLDER LITIGATION
Between March 18, 1992 and May 7, 1992, various Chambers' shareholders
filed twenty-three actions in the United States District Court for the Western
District of Pennsylvania asserting federal securities fraud claims and pendent
state law claims against Chambers, certain of its officers and directors, its
former auditors, and the underwriters of its securities (the "Federal Class
Action"). The significant part of these actions, as amended and consolidated on
November 4, 1992, under the caption In Re: Chambers Development Company, Inc.
Shareholders Litigation, Civil Action No. 92-0679, and brought on behalf of a
putative class of purchasers of Chambers' securities between March 18, 1988 and
October 20, 1992, is the allegation that the decrease in Chambers' stock price
during the period from Chambers' March 17, 1992 announcement of a change in
accounting method relating to capitalization of certain costs and expenses
through its October 20, 1992 announcement of a $362,000,000 reduction in
retained earnings as of December 31, 1991, as compared to the amount previously
reported, and a restatement of its 1990 and 1989 consolidated financial
statements, was caused by Chambers' misrepresentation of its earnings and
financial condition. One of the original twenty-three complaints, Yeager v.
Rangos, et al., C.A. No. 92-1081, also asserts derivative claims on behalf of
Chambers (which is named as a nominal defendant) for breach of fiduciary duty
against certain of its officers and directors and negligence against its former
auditors (the "Federal Derivative Action"). Derivative claims were also filed in
state courts on behalf of Chambers (which was named as a nominal defendant) for
breach of fiduciary duty against certain of its officers and directors and for
negligence against its former auditors (the "Related Actions").
F-27
<PAGE> 173
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On February 24, 1995, representatives of the plaintiffs in the Federal
Class Action, representatives of the plaintiffs in the Federal Derivative
Action, Chambers and certain individual defendants entered into a Class Action
Stipulation and Agreement of Compromise and Settlement (the "Class Action
Settlement Agreement") and a Derivative Action Stipulation and Agreement of
Compromise and Settlement (the "Derivative Action Settlement Agreement" and,
together with the Class Action Settlement Agreement, the "Settlement
Agreements"), which are the definitive settlement documents for the class
actions and the derivative actions described above. Implementation of the
Settlement Agreements is conditioned upon the dismissal, with prejudice, of the
Related Actions referred to above. On March 22, 1995, the court granted
preliminary approval of the settlements and distribution of notices to Chambers'
stockholders and the plaintiff class members regarding the settlements. The
hearing upon the fairness, reasonableness and adequacy of the proposed
settlements has been scheduled for May 19, 1995.
The Settlement Agreements provide that the sum of $10,000,000 will be paid
by Chambers' directors and officers liability insurance carrier and the sum of
$70,000,000 will be paid by Chambers in two installments following final court
approval of the settlements. The first installment of $25,000,000 is to be paid
within thirty days after the settlement effective date (the date upon which the
court has finally approved the settlements of the class actions and derivative
actions described above, and all times for appeal have expired or all appeals
have been finally rejected) and the second installment of $45,000,000 (the
"Second Installment") is to be paid one year after the settlement effective date
subject to possible earlier payments based on the Merger and subsequent
refinancing. If the Merger or a comparable transaction is consummated, the total
settlement payment will be adjusted by a base increase of $5,000,000, which will
be adjusted upward or downward by an amount consisting of $16,000 for each penny
above or below $4.50 of merger consideration received in the transaction by
Chambers' stockholders per share of Chambers' Common Stock and Class A Common
Stock, together with interest from the settlement effective date to the payment
date (the base increase, together with any adjustment thereto, collectively
referred to as the "Adjustment"). Based on the market value of USA Waste Common
Stock on March 27, 1995, the Adjustment would be $5,800,000. Any amount by which
the sum of the Second Installment and the Adjustment exceeds $50,600,000 will be
paid by John G. Rangos, Sr., Chairman and Chief Executive Officer of Chambers.
John G. Rangos, Sr. has also agreed to guarantee Chambers' obligations to make
certain payments in the Class Action Settlement in an amount not to exceed
$15,000,000.
Synergy Associates has agreed, under the Derivative Action Settlement
Agreement, to contribute to Chambers the headquarters property presently leased
by Chambers from Synergy Associates, subject to assumption or discharge by
Chambers of an existing mortgage.
The Settlement Agreements will be subject to certain conditions, including
court approval, and to the refinancing of Chambers' principal borrowings. The
current lending agreements of Chambers restrict Chambers from making the
settlement payments without the consent of the lending groups. The terms of the
Class Action Settlement Agreement also include a right to terminate the
settlements based on appeals or opt-outs with respect to the Federal Class
Action.
After Chambers entered into the Settlement Agreements, the class and
derivative plaintiffs entered into settlements with Chambers' former independent
auditors. Chambers then entered into an agreement with the class plaintiffs to
settle their claims against a group of underwriters of certain of Chambers'
securities offerings. Chambers agreed to pay $300,000 to the class plaintiffs to
resolve these claims for which the underwriters sought indemnity from Chambers.
As a result of the foregoing, Chambers accrued $85,300,000 for the cost of
the settlements and $4,100,000 for other litigation related costs in 1994. Of
that total, $79,400,000 was recorded as a charge to unusual items as a component
of other income (expense) and $10,000,000 to be paid from the proceeds of
Chambers' directors and officers liability insurance policy was recorded as a
current asset and is included in accounts receivable-other at December 31, 1994.
At December 31, 1994, $75,300,000 of the amount accrued
F-28
<PAGE> 174
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
for settlement payments has been classified as a noncurrent liability based on
the expectation that such amount would be funded by long-term financing in
connection with the Merger. The $10,000,000 of settlement payments to be funded
by the proceeds of Chambers' directors and officers liability insurance policy
and the $4,100,000 of other litigation related costs are included in current
liabilities at December 31, 1994.
While Chambers believes the above-mentioned accruals and charges are
adequate to provide for the settlement and related costs, certain of these
amounts are estimates, and actual amounts will depend on the outcome of future
events. If such estimated amounts are not adequate, additional charges against
income would be made when such determinations are made.
NOTE E -- DIVESTITURES AND DISCONTINUED OPERATIONS
DIVESTITURES
In late 1992, Chambers initiated a program to divest certain businesses
that did not meet strategic and performance objectives and, in 1993 and 1994,
completed a series of asset sales to various parties. During 1993 Chambers sold
one landfill, one transfer station and six collection and hauling businesses for
total proceeds of $39,535,000, consisting of $35,479,000 in cash and $4,056,000
in notes and other receivables. These sales resulted in net gains of
$21,799,000. Chambers also sold land in Georgia for $1,284,000 in cash and
received $996,000 with respect to a development project in California, which
resulted in losses of $964,000 and $134,000, respectively.
Additionally, on December 31, 1993, Chambers sold its two transfer stations
in Morris County, New Jersey, to the Morris County Municipal Utilities Authority
("MCMUA") for $9,500,000 in cash, which resulted in a deferred gain of
$3,950,000. Simultaneous with entering into the agreement for the sale of these
transfer stations, Chambers and the MCMUA amended the agreement pursuant to
which Chambers operates the transfer stations and provides waste disposal
services, reducing the rates charged for such services in 1994. As a result of
the interrelationship of the sale of the transfer stations and the operating and
disposal service agreement, the gain on sale was deferred and recognized in 1994
as services were provided. As part of the agreement of sale, Chambers will
continue to operate the transfer stations and provide waste disposal services
until the county's long-term solid waste system is in operation or December 31,
1996, if later.
During 1994 Chambers sold a recycling operation, a building and a parcel of
land for a total of $2,089,000 in cash. The losses incurred as a result of these
sales have been charged to the previously established allowance for divestiture
losses.
Approximately $24,999,000 and $7,623,000 of the net proceeds from these
divestitures were applied to reduce long-term obligations of Chambers in 1993
and 1994, respectively.
The following are summarized operating results of the businesses that were
sold during 1993 and 1994 which are included in the results of continuing
operations. These results exclude the two transfer stations in Morris County,
New Jersey, that Chambers will continue to operate, and the net gain from
divestitures of $20,701,000 included in unusual items -- operations for the year
ended December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1992 1993 1994
------- -------- ------
<S> <C> <C> <C>
Revenues................................................. $31,870 $ 15,921 $1,323
Income (loss) from operations............................ (5,426) 377 (22)
</TABLE>
As a result of changes in Chambers' assessment of the marketability of one
of its operations intended for divestiture, in the second quarter of 1994
Chambers reclassified $1,309,000 of assets of that operation, net of a related
contract loss reserve, from assets held for sale to their respective balance
sheet classifications.
F-29
<PAGE> 175
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Additionally, in the fourth quarter of 1994, assets of $1,226,000, related to
undeveloped land that is permitted for use as a transfer station, were
reclassified to assets held for sale. The remaining assets held for sale at
December 31, 1994, include an undeveloped permitted landfill site and certain
assets of a hauling and transfer station operation discussed below.
During March 1995, Chambers entered into an asset purchase agreement
related to its hauling, recycling and transfer station operations in Atlantic
City, New Jersey, with Mid-Jersey Disposal, Inc. ("Mid-Jersey"), a wholly-owned
subsidiary of USA Waste, whereby Mid-Jersey agreed to purchase certain assets of
this operation. Terms of the purchase agreement provide for the sale of selected
assets, principally vehicles, equipment and containers, for $727,000, which
approximates their net book value. The asset purchase agreement is subject to
final approval from the New Jersey Department of Environmental Protection
("NJDEP"). In conjunction with the asset purchase agreement, Chambers also
entered into a separate management agreement, effective April 1, 1995, whereby
Chambers will discontinue operating the facility and Mid-Jersey will manage,
operate and service all facets of the business until the sale takes place, which
will occur after approval is received from the NJDEP. As a result of the
foregoing, in 1994 Chambers wrote off certain assets against previously recorded
divestiture loss reserves and recorded an additional divestiture loss provision
of $1,114,000 for the remaining assets of the Atlantic City operation, which
Chambers is attempting to sell or lease.
Included in the results of continuing operations are revenues for this
hauling, recycling and transfer operation of $6,551,000, $6,259,000 and
$4,222,000 for the years ended December 31, 1992, 1993 and 1994, respectively.
Operating losses for this operation of $690,000, $857,000 and $874,000 for the
respective years have been incurred and charged to the previously established
reserve for divestiture losses.
Chambers had recorded a provision of $10,466,000 in 1992 for estimated
losses on the disposition of certain of its businesses (see Note N). The
provision reflected the expected loss from the disposition of net assets,
anticipated operating losses from the measurement date through the expected
dates of disposal and estimated disposal costs. An aggregate of $2,299,000 in
operating losses incurred by these businesses during 1993 and 1994 and
$1,484,000 of losses on divestitures incurred in 1993 and 1994 have been charged
against the loss reserve. Approximately $3,689,000 was charged to the loss
reserve in 1993 and 1994 as a result of writing down assets to their net
realizable value. Accruals of $7,689,000, consisting principally of provisions
previously recorded for expected losses on the disposition of the businesses
subsequently retained, have been reversed and are included in unusual items in
1993 and 1994 (see Note N).
In 1993, Chambers also recorded a provision of $3,194,000 for estimated
losses on the disposition of additional businesses classified as assets held for
sale and in 1993 and 1994 recorded provisions of $2,321,000 and $1,114,000,
respectively, for changes to estimates for losses related to the remaining
assets held for sale.
Net assets held for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
-------- --------
<S> <C> <C>
Inventories and prepaid expenses................................. $ 724 $ 96
Property and equipment, net...................................... 16,260 11,222
Intangibles and other noncurrent assets.......................... 743 --
-------- --------
17,727 11,318
Less allowance for losses........................................ 6,697 2,020
-------- --------
Net assets held for sale......................................... $ 11,030 $ 9,298
======== ========
</TABLE>
F-30
<PAGE> 176
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DISCONTINUED OPERATIONS
On December 11, 1992, Chambers sold substantially all of the assets of its
security services business to Baker Industries, Inc./BPS Guard Services, Inc.
for approximately $27,430,000, of which $22,930,000 was received at closing with
the balance received in 1993.
Operating results of the security services business for the nine months
ended September 30, 1992, which have been classified in the consolidated
statements of operations as discontinued operations, include revenues of
$68,079,000 and a loss from operations of $1,407,000.
NOTE F -- BUSINESS COMBINATIONS
In 1991, Chambers acquired a medical, special and municipal waste
incineration facility. Included in the original purchase price was a promissory
note of $1,550,000 payable in May 1993 and a $4,000,000 contingent payment, net
of related discounts. At December 31, 1993, such obligations were included in
current maturities of long-term obligations and other noncurrent liabilities,
respectively.
In 1994, Chambers settled these obligations by the payment of $2,180,000 to
the sellers. The $3,370,000 excess of the recorded liability over the settlement
has been applied to reduce the net book value of the assets acquired, primarily
property and equipment.
NOTE G -- CURRENT ACCRUED LIABILITIES
Current accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
-------- --------
<S> <C> <C>
Shareholder litigation settlement................................ $ -- $ 10,000
Insurance........................................................ 7,308 4,098
Legal fees and other litigation related costs.................... 4,239 3,441
Taxes, other than income......................................... 3,979 2,983
Other............................................................ 15,183 14,229
-------- --------
$ 30,709 $ 34,751
======== ========
</TABLE>
F-31
<PAGE> 177
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H -- LONG-TERM OBLIGATIONS
Long-term obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1994
-------- --------
<S> <C> <C>
Senior notes, interest at 11.45%, principal payable in periodic
installments, maturing in 1996............................... $152,843 $133,501
Senior notes, interest at 11.95%, principal payable in periodic
installments, maturing in 1996............................... 20,525 17,929
Industrial revenue bonds, variable interest rates (5.8% to 6.0%
at December 31, 1994), principal payable in annual
installments, maturing in 2001-2007, collateralized by
letters of credit............................................ 95,200 88,800
Noninterest-bearing notes, principal payable in annual
installments, maturing in 2002, less unamortized discount of
$4,464 and $3,630, respectively, based on imputed interest
rate of 12%.................................................. 7,686 7,170
Other notes payable and equipment loans, various interest rates
(6.0% to 11.5% at December 31, 1994), maturities through
2000, collateralized by vehicles, equipment and other
assets....................................................... 12,979 7,885
Capital lease obligation on building (see Note I).............. 2,318 2,196
-------- --------
291,551 257,481
Less current maturities........................................ 29,748 46,465
-------- --------
$261,803 $211,016
======== ========
</TABLE>
The aggregate estimated payments, including scheduled minimum maturities,
of long-term obligations for the five years ending December 31, 1995 through
1999 are: 1995-$46,465,000; 1996-$202,150,000; 1997-$3,480,000; 1998-$1,968,000;
and 1999-$1,534,000.
In July 1993, Chambers executed comprehensive amendments to its bank credit
facility (the "Credit Facility") and note purchase agreements under which
Chambers issued senior notes (the "Senior Notes"). The amendments to the Credit
Facility and Senior Note agreements (collectively, as amended, the "Amended
Agreements") included revisions to the terms and conditions of the original
agreements and provided for additional terms and conditions with respect to
future periods. Chambers' lenders and bonding company were granted security
interests in substantially all of the assets of Chambers and an intercreditor
agreement was executed among the Credit Facility banks, the Senior Note holders
and the bonding company with respect to priority of interests in collateral and
access to assets. In November 1994, Chambers executed additional amendments (the
"Amendments") to its Credit Facility and Senior Note agreements which included
waivers (with respect to noncompliance of consolidated working capital and
consolidated tangible net worth covenants attributable to the proposed
settlement of the shareholder litigation and financial statement delivery
covenants) and revisions to the terms and conditions of the Amended Agreements,
principally with respect to payment terms and compliance covenants.
The Amendments provide that 90% of the $74,421,000 scheduled payments
previously due on July 1, 1995 may be deferred until July 1, 1996, with further
deferral to December 31, 1996, at Chambers' option, of up to 75% of the
$95,512,000 scheduled payments previously due on October 31, 1995 and December
30, 1995 and all of the $95,512,000 scheduled payments due on October 31, 1996
and December 30, 1996. Certain of such scheduled payments due in 1995 and 1996
will be reduced by pro rata payments made prior to the scheduled payment dates.
The non-deferred portion of these scheduled payments will be applied to reduce
Senior Note obligations, industrial revenue bond obligations and letters of
credit issued under the Credit
F-32
<PAGE> 178
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Facility. The Amendments also provide that the remaining originally scheduled
principal payments on the Senior Notes due after 1996 become due on December 31,
1996.
The Amendments require, however, that Chambers reduce Senior Note and
Credit Facility obligations by a total of $60,000,000, primarily through the
payment of the non-deferred portions of the scheduled payments discussed above
and other scheduled payments, between August 31, 1994 and December 31, 1995, of
which $20,000,000 was required to be paid by January 31, 1995. Of the
$60,000,000, $23,671,000 has been paid to date, with the January 1995 payment
requirement having been satisfied. Portions of the remaining required payments
are expected to be satisfied by currently available funds and operating cash
flow; however, in the absence of the Merger and related refinancing of the
Senior Note and Credit Facility obligations discussed below, Chambers will need
to refinance the Senior Note and Credit Facility obligations on a stand-alone
basis or complete significant divestitures to satisfy any remaining payments.
Under the Amendments, Chambers is also required to pay to the holders of the
Senior Notes and the Credit Facility banks, the amount by which its daily
average unrestricted cash balance exceeds $40,000,000 for any calendar month,
and a minimum of 50% of the net proceeds from specified divestitures as
permitted by the Amendments, which proceeds will be applied to the $60,000,000
discussed above.
The Amendments also provide for the issuance to the Senior Note holders and
Credit Facility banks, at nominal consideration, of shares of Chambers' Class A
Common Stock in the event Chambers has not refinanced the Senior Note and Credit
Facility obligations prior to October 1, 1995. On that date, additional shares
equal to 4% of Chambers' then issued and outstanding common stock would become
issuable. Additional shares equal to 4% of Chambers' then issued and outstanding
common stock would also become issuable if Chambers has not refinanced prior to
April 1, 1996.
The Amendments contain financial covenants which require Chambers to
maintain minimum levels of tangible net worth, working capital and quarterly
cash flows from operations. The Amendments also prohibit the incurrence of
additional indebtedness and the payment of cash dividends, and limit annual cash
capital expenditures.
Chambers anticipates that the combined company will refinance substantially
all of the indebtedness of Chambers and USA Waste, including the Senior Note and
Credit Facility obligations of Chambers, before or at the time of the Merger.
Upon any refinancing of the Senior Note and Credit Facility obligations,
Chambers expects to pay an early redemption premium to the Senior Note holders
(the "Premium") based on the difference between the interest rates on the Senior
Notes and an adjusted rate for U.S. Treasury securities having a similar
maturity. Based on interest rates on U.S. Treasury securities at December 31,
1994, if the refinancing were to occur on June 30, 1995, management's estimate
of the approximate date of the Merger, the Premium would be approximately
$6,962,000.
The Amendments also require payment of escalating extension fees by
Chambers to the Senior Note holders and Credit Facility banks, based upon the
principal amounts outstanding as of the beginning of each calendar quarter,
until such time as the existing debt under these agreements has been retired.
Such extension fees are expected to aggregate approximately $652,000 through
June 30, 1995.
The amounts shown above for the extension fees and the Premium are
estimates, and the final amounts will depend on the date of the refinancing and
the actual principal amounts outstanding under the Senior Notes during that
period. The estimated extension fees and the Premium are being charged to
interest expense through the period ending June 30, 1995. At December 31, 1994,
Chambers had accrued a total of $1,245,000 related to the Premium. Such accrual
is included in other noncurrent liabilities as the payment of the obligation is
expected to be funded by long-term financing by the combined company as
discussed above. In addition, a fee of approximately $673,000 paid upon
execution of the Amendments was charged to interest expense in 1994.
F-33
<PAGE> 179
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Credit Facility at December 31, 1994, provided for letters of credit
supporting Industrial Revenue Bonds (the "IRBs"), performance of landfill
closure and post-closure requirements, insurance and other contracts. Letters of
credit outstanding at December 31, 1994, aggregated $113,080,000, the maximum
amount then issuable under the Credit Facility. Chambers pays an annual
commission of 2% on the amount of letters of credit outstanding.
The IRBs outstanding at December 31, 1994, were collateralized by letters
of credit totalling $90,550,000. The terms of the IRBs provide that Chambers may
convert them to fixed interest rate obligations prior to the expiration of the
applicable letters of credit, at prevailing market interest rates. The holders
of such IRBs, upon giving notice, may tender them for redemption to the
designated agent who will either remarket the obligations or use the letters of
credit to fund their retirement. In the latter situation, Chambers would be
indebted to the Credit Facility banks for the amounts advanced, and the banks
could request cash collateral in the amount thereof.
In the event the Merger is not consummated, Chambers intends to seek
refinancing for its Senior Note and Credit Facility obligations. It is
anticipated that such refinancing could be completed by September 30, 1995;
however, management of Chambers believes that such refinancing would not be
available to Chambers on a stand-alone basis without significant dilution to the
stockholders of Chambers. If a refinancing were to occur on September 30, 1995,
the Premium amount would be approximately $5,500,000. In addition, $895,000 in
additional extension fees would be incurred.
In the event that the Merger is not consummated, Chambers would necessarily
undertake a series of actions to provide for liquidity and funding of the
Settlement Agreements. Chambers has the ability to abandon the Settlement
Agreements in the absence of funding sufficient to comply with the payment
obligations. However, it is the intention of Chambers, should the Merger not be
consummated, to seek a refinancing and to delay the funding of the Settlement
Agreements rather than abandon such agreements.
Chambers believes that a refinancing cannot be obtained in the absence of a
settlement of the shareholder litigation. While Chambers has, under certain
circumstances, alternate available financing through a funding agreement with
USA Waste in an amount sufficient to satisfy Chambers' obligations under the
Settlement Agreements, actual payments under such funding agreement remain
subject to the consent of Chambers' current lending group. In the alternative,
Chambers could delay the implementation of the shareholder litigation settlement
until refinancing has been obtained.
In the absence of a settlement of the shareholder litigation and a
refinancing of the Senior Note and Credit Facility obligations, Chambers would
be compelled to implement an action plan to ensure continuing liquidity. The
steps that would be necessary with respect to liquidity would include a
reduction in discretionary capital expenditures with respect to current transfer
station and methane recovery projects. Capital expenditures for vehicle and
heavy equipment purchases would be reduced to a maintenance level, or otherwise
deferred, and Chambers would employ lease financing programs, to the extent
available, for certain equipment, in substitution for capital expenditure
programs currently planned. Chambers would also resume and accelerate its
divestiture program with respect to non-core assets and operations. As an
additional step, Chambers would endeavor to accelerate remaining tax refunds and
to substitute surety bond programs where permitted, with respect to closure and
post-closure bond requirements, for cash collateral programs presently in place
in certain jurisdictions.
Should the Merger not be consummated, management of Chambers believes that
the foregoing plan of action would be adequate to maintain compliance with the
covenants and payment obligations under its Senior Note and Credit Facility
obligations through December 31, 1995 and would provide a sufficient period of
time to achieve a refinancing, which, in turn would permit the implementation of
the settlement of the shareholder litigation. As indicated above, the Amendments
provide that deferred payments previously due on July 1, 1995 may be deferred
until July 1, 1996, with other deferred payments becoming due in December 1996,
and with
F-34
<PAGE> 180
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the remaining originally scheduled payments due after 1996 becoming due on
December 31, 1996. With the bulk of Chambers' long-term obligations becoming due
in the second half of 1996 under the Amendments, the liquidity of Chambers would
be adversely affected if the Merger were not consummated or a refinancing or
modification of the current lending agreements were not achieved in a timely
fashion.
NOTE I -- COMMITMENTS
Capital Lease on Building
Chambers' headquarters facility is presently leased from the principal
stockholders of Chambers under a lease with an initial term expiring in October
2006 and which has a ten-year renewal option. The agreement provides for
aggregate lease payments of $1,012,000 during 1995, payable monthly, and for
rental increases based on increases in taxes and other costs. The rent may be
adjusted upward for increases in certain costs of the lessor on an annual basis.
As of December 31, 1994, future minimum payments for the initial term of the
lease based on the aforementioned annual lease obligation were $11,140,000,
including $918,000 representing interest and $8,026,000 representing executory
costs. Chambers has guaranteed the demand note borrowing by the lessor to
finance the building, which is collateral for such note. The outstanding balance
of the note was $1,945,000 at December 31, 1994. In 1988, Chambers prepaid
$752,000 on the lease payments due in the final year of the original lease term;
such prepayment has been deducted in arriving at the above-mentioned future
minimum payments.
As discussed in Note D, pursuant to the terms of the Derivative Action
Settlement Agreement, Chambers' headquarters facility will be contributed to
Chambers, subject to assumption or discharge by Chambers of the demand note
borrowing of the lessor.
Operating Leases
Chambers has entered into a number of noncancelable operating leases for
vehicles, equipment, offices and other facilities which expire through 2012.
Lease expense aggregated $12,027,000, $11,020,000 and $7,632,000 during 1992,
1993 and 1994, respectively. The following is a summary of the future minimum
lease payments under operating leases in effect at December 31, 1994 (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1995..................................................................... $ 4,032
1996..................................................................... 2,419
1997..................................................................... 1,269
1998..................................................................... 382
1999..................................................................... 159
Thereafter............................................................... 1,380
-------
$ 9,641
=======
</TABLE>
NOTE J -- ENVIRONMENTAL COSTS AND LIABILITIES
Chambers' operation within the environmental services industry subjects it
to future financial obligations with regard to closure and post-closure
monitoring and site maintenance costs associated with the solid waste landfills
it operates. Chambers' engineers estimate such costs based on the technical
requirements of the U.S. Environmental Protection Agency's Subtitle D
regulations and the proposed air emissions standards under the Clean Air Act, as
they are being applied on a state-by-state basis.
Final closure and post-closure monitoring and site maintenance costs
represent the costs related to cash expenditures to be incurred after a landfill
ceases to accept waste and closes. Such costs include final capping of the site
and site inspections, groundwater monitoring, leachate management, methane gas
control and
F-35
<PAGE> 181
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
maintenance costs to be incurred for up to 30 years after the facility closes.
Final closure and post-closure monitoring and site maintenance costs are
estimated to be approximately $140,000,000 at the time all Chambers landfills
have reached their respective capacity. The accrual for these costs is recorded
as airspace at the respective landfill site is consumed.
In addition, Chambers expects to incur other closure costs, principally
related to capping and methane gas control activities, during the operating
lives of the landfill sites. The accrual for these costs is also recorded as
airspace at the respective landfill site is consumed.
Accrued liabilities for all closure and post-closure monitoring and
maintenance costs are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
-------- --------
<S> <C> <C>
Current portion, included in accrued liabilities................. $ 1,858 $ 1,534
Noncurrent portion, included in other noncurrent liabilities..... 18,114 24,113
-------- --------
$ 19,972 $ 25,647
======== ========
</TABLE>
Chambers periodically reviews and updates the underlying assumptions used
to determine such estimates and, accordingly, the estimate of total projected
costs is subject to periodic revision and adjustment.
NOTE K -- CAPITAL STOCK
The Class A Common Stock is entitled to a noncumulative quarterly dividend
preference of $.003125 per share before any dividend may be paid on the Common
Stock. Additional dividends declared on the Class A Common Stock and the Common
Stock are shared equally on a per share basis. Holders of Class A Common Stock
are entitled to one vote per share, whereas holders of Common Stock have ten
votes per share. Common Stock is convertible into Class A Common Stock at the
option of the holder on a one-for-one basis.
At December 31, 1994, approximately 19,158,000 shares of Class A Common
Stock were reserved for issuance under Chambers' stock option plans and for the
conversion of Common Stock.
During the years ended December 31, 1992, 1993 and 1994, 8,700, 10,150 and
86,582 shares, respectively, of Chambers' Common Stock were exchanged for an
equal number of shares of Class A Common Stock. In addition, during 1992 and
1994, 8,366 and 600 shares, respectively, of Class A Common Stock were issued
upon the exercise of stock options.
NOTE L -- STOCK OPTION PLANS
Chambers has two plans under which stock options for the purchase of Class
A Common Stock currently may be granted: the 1993 Stock Incentive Plan (the
"1993 Plan") and the 1991 Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"). The 1990 Stock Option Plan for Consultants and Advisors was
terminated on March 16, 1994.
The maximum number of shares of Class A Common stock available for grant
under the 1993 Plan in each calendar year is equal to one percent of the total
number of outstanding shares of Class A Common Stock as of the beginning of the
year, plus any shares then reserved but not subject to grant under Chambers'
terminated 1988 Stock Option Plan. Any unused shares available for grant in any
calendar year are carried forward and available for award in succeeding calendar
years.
The 1993 Plan permits the granting to key officers and employees, including
directors who are employees, the following types of awards: (i) stock options
including incentive stock options, (ii) stock appreciation rights, (iii)
restricted stock, (iv) deferred stock, (v) performance awards, (vi) dividend
equivalents and
F-36
<PAGE> 182
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(vii) other stock-based awards. The type and number of awards to be granted, as
well as the terms, conditions and other provisions applicable to each award, are
determined by the Human Resource Committee of the Board of Directors.
Under the 1993 Plan, the exercise price of stock options granted may be
more or less than the fair market value of the stock on the date of grant, but
in no event may it be less than the par value of the stock. Stock appreciation
rights may be granted, either alone or in tandem with stock options. These
rights entitle the optionee to receive the excess of the fair market value of
the stock on the date of exercise over the grant price which generally may not
be less than the fair market value of the stock on the date of grant.
The Directors' Plan provides for the granting of options for the purchase
of a maximum of 150,000 shares of Class A Common Stock. Under the Directors'
Plan, each person serving as a director and who is not employed by Chambers will
automatically be granted options for the purchase of 2,000 shares of stock on
the third business day following each annual stockholders' meeting. In addition,
each nonemployee director at the effective date of the plan was granted options
to purchase 2,000 shares of stock for each year previously served on Chambers'
Board of Directors. Options granted under the Directors' Plan become fully
exercisable one year after the date of grant.
Provisions of the 1988 Plan continue with respect to stock options
previously granted. Options outstanding under the 1988 Plan become exercisable
(i) in cumulative annual increments of 25 percent each year, commencing one year
after the date of grant, or (ii) in cumulative annual increments of 50 percent
each year, commencing three years after the date of grant.
Information related to stock options under all plans is as follows (shares
in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1992 1993 1994
------------ ----------- -----------
<S> <C> <C> <C>
Outstanding at beginning of year........... 876 1,451 1,622
Granted.................................... 751 481 585
Cancelled.................................. (168) (310) (269)
Exercised.................................. (8) -- (1)
------------ ----------- -----------
Outstanding at end of year................. 1,451 1,622 1,937
=========== ========== ==========
Exercisable at end of year................. 372 572 779
Available for future grants at end of
year..................................... 662 934 892
Price range:
Granted.................................. $ 4.38 $ 4.03 $2.25- 3.88
Cancelled................................ 4.38-21.19 4.38-17.44 2.25-17.44
Exercised................................ 12.22-17.44 -- 4.38
Outstanding at end of year............... 4.38-24.63 4.03-24.63 2.25-24.63
</TABLE>
NOTE M -- REVENUES FROM MAJOR CUSTOMERS
Chambers operates in one industry segment, integrated waste management.
Revenues from the Bergen County Utilities Authority totaled $33,476,000 and
$33,870,000, or 11.4% and 11.7% of revenues from continuing operations, for the
years ended December 31, 1992 and 1993, respectively.
NOTE N -- UNUSUAL ITEMS
Unusual Items -- Operations
In 1992, Chambers became a defendant in shareholder litigation arising out
of financial statement revisions (see Note D) and, as a result of noncompliance
with certain covenants of its various long-term borrowing agreements, commenced
restructuring of its principal credit facilities and surety arrangements.
F-37
<PAGE> 183
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Chambers also initiated a major restructuring of its operations which included a
program to divest certain businesses that no longer met strategic and
performance objectives, the abandonment of various development activities and
the reorganization of its corporate and regional operations. In 1992, 1993 and
1994, Chambers has incurred substantial expenses related to these matters.
In 1992, Chambers recorded a charge of $10,525,000 for anticipated losses
on planned asset divestitures and contractual commitments and recorded a charge
of $12,425,000 for asset impairments and abandoned projects. There was no cash
flow effect for these unusual charges.
In addition, Chambers recorded charges of $10,388,000 in 1992 for financing
and professional fees primarily related to the restructuring of its principal
credit facilities and surety arrangements. Chambers also recorded a charge of
$7,134,000 for special directors and officers insurance premiums as a result of
the shareholder litigation and charges of $3,819,000 related to the
reorganization of its corporate and regional operations. The latter charges were
for employee severance, relocation and related transition costs, costs to close
certain facilities and other related costs.
During 1993, Chambers sold certain businesses as part of its divestiture
program, which resulted in a net gain of $20,701,000. Chambers also recorded
charges of $8,687,000 for losses on asset divestitures and contractual
commitments including (i) $3,172,000 related to the municipal contract discussed
below, (ii) $3,194,000 related to the recycling operation and real estate sold
in 1994 and (iii) $2,140,000 related to a hauling, recycling and transfer
station held for sale. In addition, Chambers reversed prior year provisions of
$6,636,000 for losses on divestitures for businesses that were subsequently
retained.
In 1993, Chambers also recorded charges of $4,929,000, consisting of
$2,028,000 for impaired assets and $2,901,000 for abandoned projects.
Additionally, there were charges in 1993 of $1,555,000 for special directors and
officers insurance premiums and $315,000 for severance benefits paid to
employees terminated in connection with the corporate and regional
restructuring.
In 1994, Chambers recorded charges of $3,400,000 for losses on asset
divestitures including $1,114,000 to adjust a prior year estimate of the loss on
divestiture of a hauling, recycling and transfer station operation, and
$2,300,000 related to the estimated future loss on a municipal contract.
Effective March 1, 1994, Chambers was awarded a three-year contract for the
transportation and disposal of municipal solid waste with, at the customer's
option, two one-year extension periods beyond February 28, 1997. The costs of
operating the contract have been greater than originally estimated and, since
inception, the contract has been generating an operating loss. Operational
changes and improvements implemented during 1994 did not sufficiently reduce
operating costs. As a result, Chambers has estimated it will incur operating
losses of approximately $2,300,000 through the remaining two-year term of the
contract, and the two one-year extension periods, in order to satisfy the
service requirements of the contract and accordingly has accrued such amount. In
1994, Chambers also reversed prior year provisions for losses on divestitures
and contractual commitments of $3,565,000, including $2,000,000 previously
recorded for expected losses to be incurred on a municipal contract with respect
to which Chambers was able to negotiate an early termination and $1,053,000 of
excess reserve related to the sale in 1994 of a recycling operation and certain
real estate.
In addition, in 1994 Chambers recorded net charges of $8,237,000 for asset
impairments and abandoned projects. That amount included a fourth quarter charge
of $6,978,000 to reduce the carrying value, as of December 31, 1994, of
Chambers' medical, special and municipal waste incinerator facility to its
estimated net realizable value. The amount of the charge was measured as the
difference between the carrying value of long-term assets, principally property,
plant and equipment and intangible assets, and the estimated fair value of the
assets based on the present value of future cash flows discounted at 12%. The
adjustment was based on a review conducted in the fourth quarter which
determined there had been a permanent decline in the value of the facility based
on the conclusion that Chambers could not recover its investment through future
operations, given current and forecasted pricing, waste mix and capacity trends
as well as recently proposed regulations
F-38
<PAGE> 184
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
with respect to medical waste incinerator facilities and general declines in the
value of waste incinerator businesses. During 1994, Chambers also reached a
favorable settlement of previously reported litigation related to certain
contracts entered into with respect to the purchase by Chambers of a landfill
and the prior purchase of a waste collection and hauling company. The settlement
amount is included as a credit to unusual items and includes receipt by Chambers
of $1,200,000 in cash and the forgiveness of all remaining non-compete payments
totalling $525,000 that were to have been paid by Chambers to various
individuals in 1994, 1995 and 1996. The remaining charge of $2,984,000
represents changes in prior year estimates for certain asset impairments and
abandoned projects. In addition, Chambers recorded a charge of $825,000
primarily relating to severance benefits paid to employees terminated as part of
Chambers' continued reorganization. With the exception of the $1,200,000
litigation settlement received by Chambers and the $825,000 payment of severance
benefits, there was no cash flow effect to these unusual charges.
UNUSUAL ITEMS -- SHAREHOLDER LITIGATION SETTLEMENT AND OTHER LITIGATION RELATED
COSTS
Other income (expense) includes charges of $10,853,000, $5,500,000 and
$79,400,000 for the years ended December 31, 1992, 1993 and 1994, respectively.
The charge in 1994 consists of $75,300,000 for the shareholder litigation
settlement and $4,100,000 for legal and other related costs (see Note D). The
charges in 1992 and 1993 are for legal and other costs related to the
shareholder litigation.
A summary of unusual items is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1992 1993 1994
-------- -------- -------
<S> <C> <C> <C>
Unusual items -- operations
Net gains on asset divestitures...................... $ -- $(20,701) $ --
Provision for loss on asset divestitures and
contractual commitments........................... 10,525 8,687 3,366
Reversal of prior provisions for loss and costs on
asset divestitures and contractual commitments.... -- (6,636) (3,565)
Asset impairments and abandoned projects............. 12,425 4,929 8,237
Financing and professional fees...................... 10,388 -- --
Directors and officers insurance..................... 7,134 1,555 --
Corporate and regional restructuring................. 3,819 315 825
-------- -------- -------
44,291 (11,851) 8,863
Unusual items -- shareholder litigation settlement and
other litigation related costs....................... 10,853 5,500 79,400
-------- -------- -------
$ 55,144 $ (6,351) $88,263
======== ======== =======
</TABLE>
F-39
<PAGE> 185
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O -- SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information related to the consolidated statements of cash
flows is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
------- ------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes........................................ $ 1,390 $ 563 $ 1,586
Interest (net of amount capitalized)................ 32,252 29,278 22,440
Noncash investing and financing activities:
Receivables from sales of businesses................ 4,500 4,056 --
Liabilities incurred or assumed in acquisitions of
businesses....................................... 8,025 -- --
Capital lease obligations........................... 776 -- 408
</TABLE>
NOTE P -- INCOME TAXES
The income tax provision (benefit) applicable to continuing operations,
consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
-------- ------ -------
<S> <C> <C> <C>
Current:
Federal............................................. $(12,000) $ -- $(4,300)
State and local..................................... 1,325 1,600 648
-------- ------ -------
(10,675) 1,600 (3,652)
Deferred provision.................................... 12,000 -- --
Utilization of state operating loss carryforwards..... -- -- (279)
-------- ------ -------
$ 1,325 $1,600 $(3,931)
======== ====== =======
</TABLE>
Deferred income taxes result from temporary differences in the timing of
recognition of costs and expenses for tax and financial reporting purposes and
relate principally to the capitalization of costs and expenses for income tax
purposes that were deducted for financial reporting purposes, partially offset
by the use of accelerated depreciation for income tax purposes.
The statute of limitations has expired for Chambers' federal income tax
returns for 1987 and prior years. The returns for 1988 through 1992 are
currently under examination by the Internal Revenue Service ("IRS"). Chambers
has reached tentative agreement with the IRS regarding the tax treatment of
certain costs and expenses deducted for financial statement purposes in these
open tax years. That agreement is subject to the approval of the Joint Committee
on Taxation. Based on the tentative agreement with the IRS, Chambers estimates
its tax net operating loss carryforwards at December 31, 1994 to be
approximately $232,000,000, the majority of which expire in 2007.
F-40
<PAGE> 186
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred income tax assets and (liabilities) are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1994
-------- ---------
<S> <C> <C>
Net operating loss carryforwards.............................. $ 77,555 $ 98,030
Accrued shareholder litigation settlement..................... -- 28,360
Accrued closure reserves...................................... 8,500 10,260
Other (principally asset impairments and losses from planned
asset divestitures)......................................... 6,765 15,700
-------- ---------
Gross deferred income tax assets.............................. 92,820 152,350
Property, equipment and intangibles assets.................... (6,400) (11,780)
Less valuation allowance...................................... (86,420) (140,570)
-------- ---------
Deferred income tax asset, net................................ $ -- $ --
======== =========
</TABLE>
A reconciliation of the income tax provision (benefit) applicable to
continuing operations computed using the statutory federal income tax rate to
the tax provision shown in the consolidated statements of operations is as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1992 1993 1994
-------- ------- --------
<S> <C> <C> <C>
Computed at federal statutory rate.................. $(23,400) $ 3,500 $(33,000)
Operating losses not utilized....................... 23,400 -- 28,520
Benefit of operating loss carryforwards............. -- (3,500) --
Prior year tax adjustment........................... -- -- (4,300)
State income taxes.................................. 1,325 1,600 369
Nondeductible expenses.............................. -- -- 4,480
-------- ------- --------
Income tax provision (benefit)...................... $ 1,325 $ 1,600 $ (3,931)
======== ======= ========
</TABLE>
NOTE Q -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions have been used by Chambers to
estimate the fair value of each class of financial instrument:
Cash and Cash Equivalents
The fair value approximates the carrying amount due to the short period to
maturity (three months or less) of the instruments.
Funds Held In Escrow
The estimated fair value of financial instruments that reprice or mature in
less than three months approximates the carrying amount due to the short
maturity of the instruments. The fair value of financial instruments with
maturities greater than three months are estimated based on quoted market prices
for the same or similar financial instruments.
Long-Term Obligations
The fair value of Chambers' debt maturing within one year approximates the
carrying amount due to the short-term maturities involved.
F-41
<PAGE> 187
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value of the Senior Note obligations approximates the carrying
amount for obligations of similar risk and duration. The interest rates on these
notes were established in December 1992 and remained unchanged when the
amendments to the agreements were executed in July 1993. Interest and periodic
fees on these notes were increased in November 1994.
The fair value of the industrial revenue bonds approximates the carrying
amount as the interest rates on the bonds are reset weekly based on the credit
quality of the letters of credit which collateralize the bonds.
The fair value of the noninterest bearing notes approximates the carrying
amount which represents the discounted value of the notes using an interest rate
considered market for a borrowing of similar credit quality and maturity.
The fair value of other notes payable and equipment loans, excluding
capital leases, is estimated by discounting future cash flows using an interest
rate considered market for borrowings of similar credit quality and maturity.
Letters of Credit
The fair value of letters of credit is based upon the fees paid to obtain
the obligation.
The carrying or notional amounts and estimated fair values of Chambers'
financial instruments are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance Sheet Instruments
Cash and cash equivalents.............. $ 44,553 $ 44,553 $ 23,548 $ 23,548
Funds held in escrow................... 43,241 43,231 25,716 25,744
Long-term obligations (including
current maturities)................. 286,104 285,853 253,306 253,152
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Off Balance Sheet Instruments
Letters of credit...................... $ 131,103 $ -- $ 113,080 $ --
</TABLE>
F-42
<PAGE> 188
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE R -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following information summarizes Chambers' quarterly financial results
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
NET
OPERATING NET INCOME
INCOME INCOME (LOSS)
REVENUES (LOSS) (LOSS) PER SHARE
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Year Ended December 31, 1993
First quarter..................................... $ 67,687 $ 9,111 $ 1,788 $ .03
Second quarter.................................... 75,878 8,332 1,503 .02
Third quarter..................................... 75,274 21,486 9,527 .14
Fourth quarter.................................... 69,642 2,074 (4,515) (.07)
--------- --------- -------- ---------
$ 288,481 $41,003 $ 8,303 $ .12
========= ======= ======== =======
Year Ended December 31, 1994
First quarter..................................... $ 59,766 $ 3,315 $ (1,975) $ (.03)
Second quarter.................................... 68,644 5,696 860 .01
Third quarter..................................... 67,136 6,597 (72,719) (1.09)
Fourth quarter.................................... 62,443 (8,388) (16,410) (.24)
--------- --------- -------- ---------
$ 257,989 $ 7,220 $(90,244) $ (1.35)
========= ======= ======== =======
</TABLE>
Certain reclassifications have been made to the 1993 quarterly financial
results previously reported primarily for the reclassification of shareholder
litigation related costs from unusual items -- operations to a component of
other income (expense).
Results for 1993 include net credits for unusual items of $4,563,000,
$758,000 and $6,532,000 for the first, second and third quarters, respectively,
and a net unusual charge of $5,502,000 for the fourth quarter (see Note N).
Results for 1994 include net charges for unusual items of $74,100,000 and
$14,163,000 for the third and fourth quarters, respectively (see Note N).
NOTE S -- COMMITMENTS AND CONTINGENCIES
Employment Agreements
In February 1993, Chambers entered into employment agreements with certain
of its key executives that provide such executives with rights to severance
benefits if employment with Chambers ceases under specified circumstances in
connection with a "change of control" of Chambers such as the Merger. Such
agreements were replaced effective as of February 1995 with agreements
substantially similar to the prior agreements except with respect to certain
termination provisions unrelated to the change of control termination
provisions. If all such rights were to be exercised, Chambers would be obligated
to pay a total of approximately $7,635,000 to such executives. The term of each
of these agreements ends on February 2, 1996.
Litigation and Investigations
Shortly after Chambers' March 17, 1992 announcement of a change in
accounting policies concerning capitalization, the Securities and Exchange
Commission (the "Commission") initiated an informal investigation with respect
to Chambers' accounting method and the accuracy of its financial statements and
into the possibility that persons or entities had traded in Chambers' securities
on the basis of inside information prior to the announcement. On September 30,
1992, a formal order of investigation was issued by the Commission with respect
to potential violations by Chambers and others of sections 10(b), 13(a) and
13(b) of the
F-43
<PAGE> 189
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Securities Exchange Act of 1934 and various rules promulgated thereunder.
Chambers has cooperated with the investigation through the production of
documents and by providing witnesses pursuant to the Commission's request. On
May 9, 1995, the Commission filed a complaint against Chambers in the United
States District Court for the Western District of Pennsylvania alleging that
Chambers violated the antifraud provisions of the Securities Act and the
antifraud, reporting, internal controls and recordkeeping provisions of the
Exchange Act by issuing false and misleading earnings announcements from 1989
through March 1992 and including false and misleading financial statements in
its reports on Forms 10-K and 10-Q and its registration statements filed from
1989 through November 1991. Chambers simultaneously consented, without admitting
or denying the Commission's allegations, to the entry of an order enjoining it
from violating certain provisions of the Securities Act and the Exchange Act and
requiring it to pay a civil penalty of $500,000.
The Commission also instituted administrative proceedings under Section 21C
of the Exchange Act against four present and former officers of Chambers,
including John G. Rangos, Sr., Chairman and Chief Executive Officer of Chambers,
two of Chambers' former corporate controllers and a former chief financial
officer of Chambers. The Commission found, among other things, that John G.
Rangos, Sr. and one of the former corporate controllers each were a cause of
Chambers' violations of the reporting, internal controls and recordkeeping
provisions of the Exchange Act. Each of these four persons consented to the
issuance of a cease and desist order without admitting or denying the
Commission's findings.
The American Stock Exchange and the Chicago Board of Options Exchange are
conducting investigations into trading activity on their respective exchanges in
Chambers' securities and in put options on Chambers' securities prior to the
March 17, 1992 announcement.
On December 4, 1992, Chambers was served with a grand jury subpoena out of
the United States District Court for the Eastern District of New York seeking
production of public filings and reports disseminated to its shareholders,
documents referring to the preparation of its financial statements and other
materials. Chambers has responded to the subpoena by producing documents. The
grand jury investigation is ongoing and it appears to be focusing on issues
similar to those raised by the civil litigation discussed in Note D and the
Commission's investigation described above.
Chambers is cooperating with each of the investigations referred to in the
two preceding paragraphs.
A declaratory judgement action entitled Morel, et al. v. Chambers Waste
Systems of Florida, Inc., was filed on September 29, 1994 in the Circuit Court
of the Fifteenth Judicial Circuit of Florida in and for Palm Beach County,
Florida. The plaintiffs are seeking a declaration that they are entitled to
royalty payments from Chambers as calculated by a percentage of gross revenues
derived from Chambers' landfill located at Berman Road in Okeechobee County,
Florida, as well as from any landfill that may be sited in the future by
Chambers on nearby property. Chambers has responded by seeking, among other
things, a declaration that any writing or document that the plaintiffs contend
such royalty entitlement is based upon is void, voidable or otherwise of no
effect or, alternatively, that any royalty payments be solely based upon the
nearby property to Chambers' landfill, when a landfill is developed, if ever, on
such property. The outcome of this action is not presently determinable.
Since the announcement of the Merger, three cases have been filed in the
Court of Chancery of the State of Delaware in New Castle County against
Chambers, its officers and directors and USA Waste and Envirofil, Inc. These
cases include Smith v. Rangos et al., C.A. No. 13906, Krim v. Rangos et al.,
C.A. No. 13985, and Adams v. Rangos et al., C.A. No. 13909. Each of these
actions relates to the Merger and seeks substantially similar relief.
Accordingly, a consolidation order was entered by the Court of Chancery on March
1, 1995. The cases have been consolidated for all purposes under Smith v.
Rangos, et al., and the caption of the consolidated case is In Re Chambers
Development Company, Inc. Shareholders Litigation, Consolidated C.A. No. 13906.
The complaint which will govern the consolidated action is the compliant filed
in the Krim action. The Krim complaint is brought as a purported class action on
behalf of the plaintiff and all similarly situated
F-44
<PAGE> 190
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Chambers security holders, excluding defendants and any person, firm,
corporation or similar entity related to or affiliated with any of the
defendants. The complaint alleges that the individual defendants, inter alia,
engaged in unfair dealing to the detriment of the class; the Merger is grossly
unfair to the members of the class; the members of the class would be
irreparably damaged if the Merger were to be consummated; and the defendants'
conduct constituted a breach of fiduciary and other common law duties allegedly
owed to the putative class. The plaintiff alleges that the Merger consideration
is inadequate for various reasons and that the individual defendants failed to
maximize shareholder value. The complaint seeks a declaration that the Merger
Agreement was the result of a breach of fiduciary duty by the individual
defendants, aided and abetted by the USA Waste defendants, and is thus unlawful
and unenforceable; an injunction to enjoin defendants from proceeding with the
Merger; an injunction to enjoin defendants from consummating any merger or
combination with a third party absent procedures or processes such as an
auction; an order invalidating certain proxy arrangements; and an order awarding
plaintiff and the class members damages, costs and disbursements, including
reasonable attorneys' and experts' fees. Counsel for the parties have engaged in
settlement discussions and, based thereon, USA Waste and Chambers anticipate
that a definitive agreement, subject to court approval, will be finalized before
the USA Waste Annual Meeting and the Chambers Special Meeting.
Other lawsuits, claims and proceedings have been or may be instituted or
asserted against Chambers from time to time. Although the outcome of these
matters cannot be predicted with certainty, management of Chambers believes that
disposition of these lawsuits, claims and proceedings which are pending or
asserted will not have a material adverse effect on Chambers' financial
condition or liquidity. Given Chambers' level of operating results, future
resolution of these matters may have a material effect on results of operations
for interim and annual periods.
Insurance
Chambers self-insures certain of its comprehensive general liability and
workers compensation risks, while maintaining third-party coverage to protect
against catastrophic loss, except for losses arising from pollution and
environmental liabilities which are self-insured. Chambers has not incurred
significant fines, penalties or liabilities for pollution or environmental
liabilities at any of its facilities; however, Chambers' operating results could
be adversely affected in the future in the event of uninsured losses.
F-45
<PAGE> 191
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF
NOVEMBER 28, 1994
BY AND AMONG
USA WASTE SERVICES, INC.,
CHAMBERS ACQUISITION CORPORATION
AND
CHAMBERS DEVELOPMENT COMPANY, INC.
<PAGE> 192
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE I
THE MERGER
SECTION 1.1. The Merger........................................................ AA-1
SECTION 1.2. Effective Time of the Merger...................................... AA-1
ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1. Certificate of Incorporation...................................... AA-1
SECTION 2.2. By-Laws........................................................... AA-2
SECTION 2.3. Directors......................................................... AA-2
SECTION 2.4. Officers.......................................................... AA-2
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. Conversion of Company Shares in the Merger........................ AA-2
SECTION 3.2. Conversion of Subsidiary Shares................................... AA-2
SECTION 3.3. Exchange of Certificates.......................................... AA-2
SECTION 3.4. No Fractional Securities.......................................... AA-4
SECTION 3.5. Closing........................................................... AA-4
SECTION 3.6. Closing of the Company's Transfer Books........................... AA-4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
SECTION 4.1. Organization and Qualification.................................... AA-4
SECTION 4.2. Capitalization.................................................... AA-4
SECTION 4.3. Subsidiaries...................................................... AA-5
SECTION 4.4. Authority; Non-Contravention; Approvals........................... AA-5
SECTION 4.5. Reports and Financial Statements.................................. AA-6
SECTION 4.6. Absence of Undisclosed Liabilities................................ AA-7
SECTION 4.7. Absence of Certain Changes or Events.............................. AA-7
SECTION 4.8. Litigation........................................................ AA-7
SECTION 4.9. Registration Statement and Proxy Statement........................ AA-7
SECTION 4.10. No Violation of Law............................................... AA-8
SECTION 4.11. Compliance with Agreements........................................ AA-8
SECTION 4.12. Taxes............................................................. AA-8
SECTION 4.13. Employee Benefit Plans; ERISA..................................... AA-9
SECTION 4.14. Labor Controversies............................................... AA-10
SECTION 4.15. Environmental Matters............................................. AA-10
SECTION 4.16. Non-competition Agreements........................................ AA-11
SECTION 4.17. Title to Assets................................................... AA-12
SECTION 4.18. Parent Stockholders' Approval..................................... AA-12
</TABLE>
AA-i
<PAGE> 193
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.1. Organization and Qualification.................................... AA-12
SECTION 5.2. Capitalization.................................................... AA-12
SECTION 5.3. Subsidiaries...................................................... AA-13
SECTION 5.4. Authority; Non-Contravention; Approvals........................... AA-13
SECTION 5.5. Reports and Financial Statements.................................. AA-14
SECTION 5.6. Absence of Undisclosed Liabilities................................ AA-15
SECTION 5.7. Absence of Certain Changes or Events.............................. AA-15
SECTION 5.8. Litigation........................................................ AA-15
SECTION 5.9. Registration Statement and Proxy Statement........................ AA-15
SECTION 5.10. No Violation of Law............................................... AA-15
SECTION 5.11. Compliance with Agreements........................................ AA-16
SECTION 5.12. Taxes............................................................. AA-16
SECTION 5.13. Employee Benefit Plans; ERISA..................................... AA-16
SECTION 5.14. Labor Controversies............................................... AA-17
SECTION 5.15. Environmental Matters............................................. AA-18
SECTION 5.16. Non-competition Agreements........................................ AA-18
SECTION 5.17. Title to Assets................................................... AA-19
SECTION 5.18. Company Stockholders' Approval.................................... AA-19
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. Conduct of Business by the Company Pending the Merger............. AA-19
SECTION 6.2. Conduct of Business by Parent and Subsidiary Pending the Merger... AA-20
SECTION 6.3. Control of the Company's Operations............................... AA-21
SECTION 6.4. Control of Parent's Operations.................................... AA-21
SECTION 6.5. Acquisition Transactions.......................................... AA-21
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. Access to Information............................................. AA-22
SECTION 7.2. Registration Statement and Proxy Statement........................ AA-23
SECTION 7.3. Stockholders' Approvals........................................... AA-23
SECTION 7.4. Compliance with the Securities Act................................ AA-24
SECTION 7.5. Exchange Listing.................................................. AA-24
SECTION 7.6. Expenses and Fees................................................. AA-24
SECTION 7.7. Agreement to Cooperate............................................ AA-25
SECTION 7.8. Public Statements................................................. AA-25
SECTION 7.9. Option Plans...................................................... AA-25
SECTION 7.10. Employee Benefits................................................. AA-26
SECTION 7.11. Notification of Certain Matters................................... AA-26
SECTION 7.12. Directors' and Officers' Indemnification.......................... AA-26
SECTION 7.13. Corrections to the Joint Proxy Statement/Prospectus and
Registration Statement............................................ AA-27
</TABLE>
AA-ii
<PAGE> 194
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE VIII
CONDITIONS
SECTION 8.1. Conditions to Each Party's Obligation to Effect the Merger........ AA-27
SECTION 8.2. Conditions to Obligation of the Company to Effect the Merger...... AA-27
SECTION 8.3. Conditions to Obligations of Parent and Subsidiary to Effect the
Merger............................................................ AA-28
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Termination....................................................... AA-29
SECTION 9.2. Effect of Termination............................................. AA-31
SECTION 9.3. Amendment......................................................... AA-32
SECTION 9.4. Waiver............................................................ AA-32
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. Non-Survival of Representations and Warranties.................... AA-32
SECTION 10.2. Brokers........................................................... AA-32
SECTION 10.3. Notices........................................................... AA-32
SECTION 10.4. Interpretation.................................................... AA-33
SECTION 10.5. Miscellaneous..................................................... AA-33
SECTION 10.6. Counterparts...................................................... AA-33
SECTION 10.7. Parties In Interest............................................... AA-33
</TABLE>
AA-iii
<PAGE> 195
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of November 28,
1994 (the "Agreement"), by and among USA Waste Services, Inc., an Oklahoma
corporation ("Parent"), Chambers Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Parent ("Subsidiary"), and Chambers Development
Company, Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Envirofil, Inc., a Delaware corporation ("Envirofil"), and
the Company entered into a merger agreement dated as of November 28, 1994 (the
"Original Merger Agreement") in order to effectuate the merger of a wholly owned
subsidiary of Parent with and into the Company (the "Merger"), as a result of
which the Company will become a wholly owned subsidiary of Parent;
WHEREAS, Parent, Envirofil and the Company agreed to amend the Original
Merger Agreement and executed an Amendment to Agreement and Plan of Merger as of
December 19, 1994;
WHEREAS, Envirofil subsequently assigned all of its rights under the
Original Merger Agreement to Subsidiary;
WHEREAS, Parent, Subsidiary and the Company intend the Merger to qualify as
a tax-free reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder;
and
WHEREAS, the parties wish to amend and restate the Original Merger
Agreement in its entirety and incorporate the previous amendment and assignment
and to make certain additional amendments.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the Delaware General Corporation Law (the "DGCL"), Subsidiary shall be
merged with and into the Company and the separate existence of Subsidiary shall
thereupon cease. The Company shall be the surviving corporation in the Merger
and is hereinafter sometimes referred to as the "Surviving Corporation."
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "Effective Time") as shall be stated in a
Certificate of Merger, in a form mutually acceptable to Parent and the Company,
to be filed with the Secretary of State of the State of Delaware in accordance
with the DGCL (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the closing of the
transactions contemplated by this Agreement in accordance with Section 3.5. The
parties acknowledge that it is their mutual desire and intent to consummate the
Merger as soon as practicable after the date hereof. Accordingly, the parties
shall use all reasonable efforts to consummate, as soon as practicable, the
transactions contemplated by this Agreement in accordance with Section 3.5.
ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of Subsidiary as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time, and thereafter may be amended in accordance with its terms and as provided
in the DGCL.
AA-1
<PAGE> 196
SECTION 2.2. BY-LAWS. The By-laws of Subsidiary as in effect immediately
prior to the Effective Time shall be the By-laws of the Surviving Corporation
after the Effective Time, and thereafter may be amended in accordance with their
terms and as provided by the Certificate of Incorporation of the Surviving
Corporation and the DGCL.
SECTION 2.3. DIRECTORS.
(a) The Board of Directors of Parent shall take such corporate action as
may be necessary to cause Parent's Board of Directors immediately following the
Effective Time to be composed of five members designated by the Board of
Directors of Parent and four members designated by the Board of Directors of the
Company.
(b) The Board of Directors of Parent shall take such corporate action
immediately prior to the Effective Time as may be necessary to appoint an
Executive Committee of Parent's Board of Directors immediately following the
Effective Time which shall be composed of three members selected by the Board of
Directors of Parent and two members selected by the Board of Directors of the
Company.
SECTION 2.4. OFFICERS. Except as otherwise agreed to by Parent and the
Company, the officers of the Company in office immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, to serve in
accordance with the By-laws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. CONVERSION OF COMPANY SHARES IN THE MERGER. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of the Company:
(a) each share of the Company's Common Stock, par value $.50 per share
(the "Regular Common Stock"), and each share of the Company's Class A
Common Stock, par value $.50 per share (the "Class A Common Stock" and,
together with the Regular Common Stock, the "Company Common Stock"), shall,
subject to Sections 3.3 and 3.4, be converted into the right to receive,
without interest, .41667 (the "Exchange Ratio") of a share of the common
stock, par value $.01 per share, of Parent ("Parent Common Stock");
(b) each share of capital stock of the Company, if any, owned by
Parent or any subsidiary of Parent or held in treasury by the Company or
any subsidiary of the Company immediately prior to the Effective Time shall
be cancelled and shall cease to exist from and after the Effective Time;
and
(c) subject to and as more fully provided in Section 7.9, each
unexpired option to purchase Company Common Stock that is outstanding at
the Effective Time, whether or not exercisable, shall automatically and
without any action on the part of the holder thereof be converted into an
option to purchase a number of shares of Parent Common Stock equal to the
number of shares of Company Common Stock that could be purchased under such
option multiplied by the Exchange Ratio, at a price per share of Parent
Common Stock equal to the per share exercise price of such option divided
by the Exchange Ratio.
SECTION 3.2. CONVERSION OF SUBSIDIARY SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent as the sole
stockholder of Subsidiary, each issued and outstanding share of common stock,
par value $.001 per share, of Subsidiary ("Subsidiary Common Stock") shall be
converted into one share of common stock, par value $.50 per share, of the
Surviving Corporation.
SECTION 3.3. EXCHANGE OF CERTIFICATES. (a) From and after the Effective
Time, each holder of an outstanding certificate which immediately prior to the
Effective Time represented shares of Company Common Stock shall be entitled to
receive in exchange therefor, upon surrender thereof to an exchange agent
reasonably satisfactory to Parent and the Company (the "Exchange Agent"), a
certificate or certificates
AA-2
<PAGE> 197
representing the number of whole shares of Parent Common Stock to which such
holder is entitled pursuant to Section 3.1(a). Notwithstanding any other
provision of this Agreement, (i) until holders or transferees of certificates
theretofore representing shares of Company Common Stock have surrendered them
for exchange as provided herein, no dividends shall be paid with respect to any
shares represented by such certificates and no payment for fractional shares
shall be made and (ii) without regard to when such certificates representing
shares of Company Common Stock are surrendered for exchange as provided herein,
no interest shall be paid on any dividends or any payment for fractional shares.
Upon surrender of a certificate which immediately prior to the Effective Time
represented shares of Company Common Stock, there shall be paid to the holder of
such certificate the amount of any dividends which theretofore became payable,
but which were not paid by reason of the foregoing, with respect to the number
of whole shares of Parent Common Stock represented by the certificate or
certificates issued upon such surrender.
(b) If any certificate for shares of Parent Common Stock is to be issued in
a name other than that in which the certificate for shares of Company Common
Stock surrendered in exchange therefor is registered, it shall be a condition of
such exchange that the person requesting such exchange shall pay any transfer or
other taxes required by reason of the issuance of certificates for such shares
of Parent Common Stock in a name other than that of the registered holder of the
certificate surrendered, or shall establish to the satisfaction of Parent that
such tax has been paid or is not applicable.
(c) Promptly after the Effective Time, Parent shall make available to the
Exchange Agent the certificates representing shares of Parent Common Stock
required to effect the exchanges referred to in paragraph (a) above and cash for
payment of any fractional shares referred to in Section 3.4.
(d) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates that immediately prior to
the Effective Time represented outstanding shares of Company Common Stock (the
"Company Certificates") (i) a form letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon actual delivery of the Company Certificates
to the Exchange Agent) and (ii) instructions for use in effecting the surrender
of the Company Certificates in exchange for certificates representing shares of
Parent Common Stock. Upon surrender of Company Certificates for cancellation to
the Exchange Agent, together with a duly executed letter of transmittal and such
other documents as the Exchange Agent shall reasonably require, the holder of
such Company Certificates shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares of Company Common Stock theretofore represented by the Company
Certificates so surrendered shall have been converted pursuant to the provisions
of Section 3.1(a), and the Company Certificates so surrendered shall forthwith
be cancelled. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of Company Common Stock for
any shares of Parent Common Stock or dividends or distributions thereon
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(e) Promptly following the date which is nine months after the Effective
Date, the Exchange Agent shall deliver to Parent all cash, certificates
(including any Parent Common Stock) and other documents in its possession
relating to the transactions described in this Agreement, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a Company Certificate
may surrender such Company Certificate to the Surviving Corporation and (subject
to applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Parent Common Stock, without any interest thereon. Notwithstanding
the foregoing, none of the Exchange Agent, Parent, Subsidiary, the Company or
the Surviving Corporation shall be liable to a holder of Company Common Stock
for any Parent Common Stock delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws.
(f) In the event any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed Company
Certificate the Parent Common Stock deliverable in respect thereof determined in
accordance with this Article III. When authorizing such payment in exchange
therefor, the Board of Directors of the Surviving Corporation may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or
AA-3
<PAGE> 198
destroyed Company Certificate to give the Surviving Corporation such indemnity
as it may reasonably direct as protection against any claim that may be made
against the Surviving Corporation with respect to the Company Certificate
alleged to have been lost, stolen or destroyed.
SECTION 3.4. NO FRACTIONAL SECURITIES. Notwithstanding any other provision
of this Agreement, no certificates or scrip for fractional shares of Parent
Common Stock shall be issued in the Merger and no Parent Common Stock dividend,
stock split or interest shall relate to any fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any other
rights of a security holder. In lieu of any such fractional shares, each holder
of Company Common Stock who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock upon surrender of Company
Certificates for exchange pursuant to this Article III shall be entitled to
receive from the Exchange Agent a cash payment equal to such fraction multiplied
by the closing price per share of Parent Common Stock on the New York Stock
Exchange, as reported by the Wall Street Journal, on the last trading day
preceding the Effective Time.
SECTION 3.5. CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at a location mutually agreeable
to Parent and the Company on the fifth business day immediately following the
date on which the last of the conditions set forth in Article VIII is fulfilled
or waived, or at such other time and place as Parent and the Company shall agree
(the date on which the Closing occurs is referred to in this Agreement as the
"Closing Date").
SECTION 3.6. CLOSING OF THE COMPANY'S TRANSFER BOOKS. At and after the
Effective Time, holders of Company Certificates shall cease to have any rights
as stockholders of the Company, except for the right to receive shares of Parent
Common Stock pursuant to Section 3.3 and the right to receive cash for payment
of fractional shares pursuant to Section 3.4. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time shall thereafter be made. If, after the Effective Time, subject to the
terms and conditions of this Agreement, Company Certificates formerly
representing Company Common Stock are presented to the Surviving Corporation,
they shall be cancelled and exchanged for Parent Common Stock in accordance with
this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant to the Company as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Each of Parent and Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted. Each of Parent and Subsidiary is qualified to do
business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of Parent and
its subsidiaries, taken as a whole. True, accurate and complete copies of each
of Parent's and Subsidiary's Certificates of Incorporation and By-laws, in each
case as in effect on the date hereof, including all amendments thereto, have
heretofore been (or, in the case of Subsidiary, will promptly be) delivered to
the Company.
SECTION 4.2. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of (i) 50,000,000
shares of Parent Common Stock, of which 22,575,263 shares were outstanding as of
November 10, 1994, and (ii) 10,000,000 shares of preferred stock, par value $.01
per share, none of which was issued and outstanding as of November 21, 1994. All
of the
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issued and outstanding shares of Parent Common Stock are validly issued and are
fully paid, nonassessable and free of preemptive rights.
(b) The authorized capital stock of Subsidiary consists of 1,000 shares of
Subsidiary Common Stock, of which 100 shares are issued and outstanding, which
shares are owned beneficially and of record by Parent.
(c) Except as disclosed in the Parent SEC Reports (as defined in Section
4.5) or as set forth on Schedule 4.2 attached hereto, as of the date hereof,
there are no outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement and also including any rights plan or other anti-takeover
agreement, obligating Parent or any subsidiary of Parent to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the capital
stock of Parent or obligating Parent or any subsidiary of Parent to grant,
extend or enter into any such agreement or commitment. There are no voting
trusts, proxies or other agreements or understandings to which Parent or any
subsidiary of Parent is a party or is bound with respect to the voting of any
shares of capital stock of Parent. The shares of Parent Common Stock issued to
stockholders of the Company in the Merger will be at the Effective Time duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights.
SECTION 4.3. SUBSIDIARIES. Each direct and indirect corporate subsidiary of
Parent is duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted. Each subsidiary of Parent is qualified to do
business, and is in good standing, in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing would not, when taken together with all such other
failures, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of Parent and its subsidiaries, taken as a whole. All of the
outstanding shares of capital stock of each corporate subsidiary of Parent are
validly issued, fully paid, nonassessable and free of preemptive rights, and are
owned directly or indirectly by Parent, free and clear of any liens, claims or
encumbrances except that such shares are pledged to secure Parent's credit
facilities. There are no subscriptions, options, warrants, rights, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting, transfer,
ownership or other rights with respect to any shares of capital stock of any
corporate subsidiary of Parent, including any right of conversion or exchange
under any outstanding security, instrument or agreement. As used in this
Agreement, the term "subsidiary" shall mean, when used with reference to any
person or entity, any corporation, partnership, joint venture or other entity
which such person or entity, directly or indirectly, controls or of which such
person or entity (either acting alone or together with its other subsidiaries)
owns, directly or indirectly, 50% or more of the stock or other voting
interests, the holders of which are entitled to vote for the election of a
majority of the board of directors or any similar governing body of such
corporation, partnership, joint venture or other entity. Parent does not own any
shares of Company Common Stock.
SECTION 4.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Parent and Subsidiary each have full corporate power and authority to
enter into this Agreement and, subject to the Parent Stockholders' Approval (as
defined in Section 7.3(b)) and the Parent Required Statutory Approvals (as
defined in Section 4.4(c)), to consummate the transactions contemplated hereby.
This Agreement has been approved by the Boards of Directors of Parent and
Subsidiary, and no other corporate proceedings on the part of Parent or
Subsidiary are necessary to authorize the execution and delivery of this
Agreement or, except for the Parent Stockholders' Approval, the consummation by
Parent and Subsidiary of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Parent and Subsidiary, and,
assuming the due authorization, execution and delivery hereof by the Company,
constitutes a valid and legally binding agreement of each of Parent and
Subsidiary enforceable against each of them in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles. Without limitation of the
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foregoing, each of the covenants and obligations of Parent set forth in Sections
6.2, 6.5, 7.3, 7.6, 7.7, 7.8 and 7.11 is valid, legally binding and enforceable
notwithstanding the absence of the Parent Stockholders' Approval.
(b) The execution and delivery of this Agreement by each of Parent and
Subsidiary do not violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Parent or any of
its subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or by-laws of Parent or any of its subsidiaries, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
Parent or any of its subsidiaries or any of their respective properties or
assets or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which Parent or any of its subsidiaries is now a
party or by which Parent or any of its subsidiaries or any of their respective
properties or assets may be bound or affected. The consummation by Parent and
Subsidiary of the transactions contemplated hereby will not result in any
violation, conflict, breach, termination, acceleration or creation of liens
under any of the terms, conditions or provisions described in clauses (i)
through (iii) of the preceding sentence, subject (x) in the case of the terms,
conditions or provisions described in clause (ii) above, to obtaining (prior to
the Effective Time) the Parent Required Statutory Approvals and the Parent
Stockholder's Approval and (y) in the case of the terms, conditions or
provisions described in clause (iii) above, to obtaining (prior to the Effective
Time) consents required from commercial lenders, lessors or other third parties.
Excluded from the foregoing sentences of this paragraph (b), insofar as they
apply to the terms, conditions or provisions described in clauses (ii) and (iii)
of the first sentence of this paragraph (b), are such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens, security
interests, charges or encumbrances that would not, in the aggregate, have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of Parent and
its subsidiaries, taken as a whole.
(c) Except for (i) the filings by Parent and the Company required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of the Joint Proxy Statement/Prospectus (as defined in
Section 4.9) with the Securities and Exchange Commission (the "SEC") pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act of 1933, as amended (the "Securities Act"), and the declaration
of the effectiveness thereof by the SEC and filings with various state blue sky
authorities, (iii) the making of the Merger Filing with the Secretary of State
of the State of Delaware in connection with the Merger, and (iv) any required
filings with or approvals from applicable state environmental authorities,
public service commissions and public utility commissions (the filings and
approvals referred to in clauses (i) through (iv) are collectively referred to
as the "Parent Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by Parent or Subsidiary or the consummation by Parent
or Subsidiary of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of Parent and its subsidiaries, taken as a whole.
SECTION 4.5. REPORTS AND FINANCIAL STATEMENTS. Since December 31, 1990,
Parent has filed with the SEC all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied in all material respects with all applicable requirements
of the appropriate act and the rules and regulations thereunder. Parent has
previously delivered to the Company copies of its (a) Annual Reports on Form
10-K for the fiscal year ended December 31, 1993 and for each of the two
immediately preceding fiscal years, as filed with the SEC, (b) proxy and
information statements relating to (i) all meetings of its stockholders (whether
annual or
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special) and (ii) actions by written consent in lieu of a stockholders' meeting
from December 31, 1990, until the date hereof, and (c) all other reports,
including quarterly reports, or registration statements filed by Parent with the
SEC since December 31, 1990 (other than Registration Statements filed on Form
S-8) (collectively, the "Parent SEC Reports"). As of their respective dates, the
Parent SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim consolidated financial statements of Parent included in such
reports (collectively, the "Parent Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present the financial position of Parent and its subsidiaries as of the dates
thereof and the results of their operations and changes in financial position
for the periods then ended, subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein.
SECTION 4.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
Parent SEC Reports or with respect to acquisitions or potential transactions or
commitments heretofore disclosed to the Company in writing, neither Parent nor
any of its subsidiaries had at September 30, 1994, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except (a) liabilities, obligations or contingencies
(i) which are accrued or reserved against in the Parent Financial Statements or
reflected in the notes thereto or (ii) which were incurred after September 30,
1994 and were incurred in the ordinary course of business and consistent with
past practices, (b) liabilities, obligations or contingencies which (i) would
not, in the aggregate, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of Parent and its subsidiaries, taken as a whole, or
(ii) have been discharged or paid in full prior to the date hereof, (c)
liabilities and obligations which are of a nature not required to be reflected
in the consolidated financial statements of Parent and its subsidiaries prepared
in accordance with generally accepted accounting principles consistently applied
and which were incurred in the normal course of business and (d) that the
Company acknowledges that (i) Parent is in the process of increasing the size of
its revolving credit facility with a group of banks for whom the First National
Bank of Boston is acting as agent and (ii) Parent has disclosed to the Company
that certain Home Value Guarantee Agreement between Parent and Homeowners
Association of Prairie Crossing in Lake County, Illinois.
SECTION 4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
most recent Parent SEC Report, there has not been any material adverse change in
the business, operations, properties, assets, liabilities, condition (financial
or other), results of operations or prospects of Parent and its subsidiaries,
taken as a whole.
SECTION 4.8. LITIGATION. Except as disclosed in the Parent SEC Reports or
in Schedule 4.8 attached hereto, there are no claims, suits, actions or
proceedings pending or, to the knowledge of Parent, threatened against, relating
to or affecting Parent or any of its subsidiaries, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that seek to restrain or enjoin the consummation of the Merger or
which could reasonably be expected, either alone or in the aggregate with all
such claims, actions or proceedings, to materially and adversely affect the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Parent and its subsidiaries, taken as a
whole. Except as set forth in the Parent SEC Reports, neither Parent nor any of
its subsidiaries is subject to any judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator which prohibits or restricts the consummation of the
transactions contemplated hereby or would have any material adverse effect on
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Parent and its subsidiaries, taken as a
whole.
SECTION 4.9. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by Parent or its subsidiaries for inclusion in (a)
the Registration Statement on Form S-4 to be filed under the Securities Act with
the SEC by Parent in connection with the Merger for the purpose of registering
the shares of Parent Common Stock to be issued in the Merger (the "Registration
Statement") or (b) the proxy
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statement to be distributed in connection with the Company's and Parent's
meetings of their respective stockholders to vote upon this Agreement and the
transactions contemplated hereby (the "Proxy Statement" and, together with the
prospectus included in the Registration Statement, the "Joint Proxy
Statement/Prospectus") will, in the case of the Proxy Statement or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
the meetings of stockholders of the Company and Parent to be held in connection
with the transactions contemplated by this Agreement, or, in the case of the
Registration Statement, as amended or supplemented, at the time it becomes
effective and at the time of such meetings of the stockholders of the Company
and Parent, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement/Prospectus will, as of its effective date,
comply as to form in all material respects with all applicable laws, including
the provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
Parent or Subsidiary with respect to information supplied by the Company or the
Majority Stockholders for inclusion therein.
SECTION 4.10. NO VIOLATION OF LAW. Except as disclosed in the Parent SEC
Reports, neither Parent nor any of its subsidiaries is in violation of, or has
been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance, or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the aggregate,
could not reasonably be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Parent and its subsidiaries, taken as a
whole. Except as disclosed in the Parent SEC Reports, as of the date of this
Agreement, to the knowledge of Parent, no investigation or review by any
governmental or regulatory body or authority is pending or threatened, nor has
any governmental or regulatory body or authority indicated an intention to
conduct the same, other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Parent and its subsidiaries, taken as
a whole. Parent and its subsidiaries have all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted
(collectively, the "Parent Permits"), except for permits, licenses, franchises,
variances, exemptions, orders, authorizations, consents and approvals the
absence of which, alone or in the aggregate, would not have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Parent and its subsidiaries,
taken as a whole. Parent and its subsidiaries are not in violation of the terms
of any Parent Permit, except for delays in filing reports or violations which,
alone or in the aggregate, would not have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Parent and its subsidiaries, taken as
a whole.
SECTION 4.11. COMPLIANCE WITH AGREEMENTS. Except as disclosed in the Parent
SEC Reports, Parent and each of its subsidiaries are not in breach or violation
of or in default in the performance or observance of any term or provision of,
and no event has occurred which, with lapse of time or action by a third party,
could result in a default under (a) the respective charters, by-laws or other
similar organizational instruments of Parent or any of its subsidiaries or (b)
any contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which Parent or any of its
subsidiaries is a party or by which any of them is bound or to which any of
their property is subject, which breaches, violations and defaults, in the case
of clause (b) of this Section 4.11, would have, in the aggregate, a material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of Parent and its
subsidiaries, taken as a whole.
SECTION 4.12. TAXES.
(a) Parent and its subsidiaries have (i) duly filed with the appropriate
governmental authorities all Tax Returns (as defined in Section 4.12(c))
required to be filed by them for all periods ending on or prior to the Effective
Time, other than those Tax Returns the failure of which to file would not have a
material adverse
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effect on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of Parent and its subsidiaries, taken
as a whole, and such Tax Returns are true, correct and complete in all material
respects and (ii) duly paid in full or made adequate provision for the payment
of all Taxes (as defined in Section 4.12(b)) for all periods ending at or prior
to the Effective Time. The liabilities and reserves for Taxes reflected in the
Parent balance sheet included in the latest Parent SEC Report are adequate to
cover all Taxes for all periods ending at or prior to the Effective Time and
there are no material liens for Taxes upon any property or assets of Parent or
any subsidiary thereof, except for liens for Taxes not yet due. There are no
unresolved issues of law or fact arising out of a notice of deficiency, proposed
deficiency or assessment from the Internal Revenue Service (the "IRS") or any
other governmental taxing authority with respect to Taxes of the Parent or any
of its subsidiaries which, if decided adversely, singly or in the aggregate,
would have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
Parent and its subsidiaries, taken as a whole. Neither Parent nor any of its
subsidiaries is a party to any agreement providing for the allocation or sharing
of Taxes with any entity that is not, directly or indirectly, a wholly-owned
corporate subsidiary of Parent other than agreements the consequences of which
are fully and adequately reserved for in the Parent Financial Statements.
Neither Parent nor any of its corporate subsidiaries has, with regard to any
assets or property held, acquired or to be acquired by any of them, filed a
consent to the application of Section 341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
including, without limitation, income, gross receipts, excise, property, sales,
withholding, social security, occupation, use, service, service use, license,
payroll, franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments imposed by the United States, or any
state, local or foreign government or subdivision or agency thereof, whether
computed on a separate, consolidated, unitary, combined or any other basis, and
such term shall include any interest, fines, penalties or additional amounts and
any interest in respect of any additions, fines or penalties attributable or
imposed or with respect to any such taxes, charges, fees, levies or other
assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall mean any
return, report or other document or information required to be supplied to a
taxing authority in connection with Taxes.
SECTION 4.13. EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as set forth in the
Parent SEC Reports, at the date hereof, Parent and its subsidiaries do not
maintain or contribute to any material employee benefit plans, programs,
arrangements or practices (such plans, programs, arrangements or practices of
Parent and its subsidiaries being referred to as the "Parent Plans"), including
employee benefit plans within the meaning set forth in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or other
similar material arrangements for the provision of benefits (excluding any
"Multi-employer Plan" within the meaning of Section 3(37) of ERISA or a
"Multiple Employer Plan" within the meaning of Section 413(c) of the Code).
Schedule 4.13 attached hereto lists all Multi-employer Plans and Multiple
Employer Plans which any of Parent or its subsidiaries maintains or to which any
of them makes contributions. Neither Parent nor its subsidiaries has any
obligation to create any additional such plan or to amend any such plan so as to
increase benefits thereunder, except as required under the terms of the Parent
Plans, under existing collective bargaining agreements or to comply with
applicable law.
(b) Except as disclosed in the Parent SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Parent Plans that could
result in penalties, taxes or liabilities which, singly or in the aggregate,
could have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
Parent and its subsidiaries, taken as a whole, (ii) except for premiums due,
there is no outstanding material liability, whether measured alone or in the
aggregate, under Title IV of ERISA with respect to any of the Parent Plans,
(iii) neither the Pension Benefit Guaranty Corporation nor any plan
administrator has instituted proceedings to terminate any of the Parent Plans
subject to Title IV of ERISA other than in a "standard termination" described in
Section 4041(b) of ERISA, (iv) none of the Parent Plans has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, as of the last day of the most recent
fiscal year of each of the Parent Plans ended prior to the date of this
Agreement, (v) the current present value of all projected benefit obligations
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under each of the Parent Plans which is subject to Title IV of ERISA did not, as
of its latest valuation date, exceed the then current value of the assets of
such plan allocable to such benefit liabilities by more than the amount, if any,
disclosed in the Parent SEC Reports as of September 30, 1994, based upon
reasonable actuarial assumptions currently utilized for such Parent Plan, (vi)
each of the Parent Plans has been operated and administered in all material
respects in accordance with applicable laws during the period of time covered by
the applicable statute of limitations, (vii) each of the Parent Plans which is
intended to be "qualified" within the meaning of Section 401(a) of the Code has
been determined by the Internal Revenue Service to be so qualified and such
determination has not been modified, revoked or limited by failure to satisfy
any condition thereof or by a subsequent amendment thereto or a failure to
amend, except that it may be necessary to make additional amendments
retroactively to maintain the "qualified" status of such Parent Plans, and the
period for making any such necessary retroactive amendments has not expired,
(viii) with respect to Multi-employer Plans, neither Parent nor any of its
subsidiaries has made or suffered a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in Sections 4203, 4204 and
4205 of ERISA and, to the best knowledge of Parent and its subsidiaries, no
event has occurred or is expected to occur which presents a material risk of a
complete or partial withdrawal under said Sections 4203, 4204 and 4205, (ix) to
the best knowledge of Parent and its subsidiaries, there are no material
pending, threatened or anticipated claims involving any of the Parent Plans
other than claims for benefits in the ordinary course, and (x) Parent and its
subsidiaries have no current material liability for plan termination or
withdrawal (complete or partial) under Title IV of ERISA based on any plan to
which any entity that would be deemed one employer with Parent and its
subsidiaries under Section 4001 of ERISA or Section 414 of the Code contributed
during the period of time covered by the applicable statute of limitations (a
"Parent Controlled Group Plan"), and Parent and its subsidiaries do not
reasonably anticipate that any such liability will be asserted against Parent or
any of its subsidiaries. None of the Parent Controlled Group Plans has an
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code).
(c) The Parent SEC Reports contain a true and complete summary or list of
or otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
SECTION 4.14. LABOR CONTROVERSIES. Except as set forth in the Parent SEC
Reports, (a) there are no significant controversies pending or, to the knowledge
of Parent, threatened between Parent or its subsidiaries and any representatives
of any of their employees, (b) to the knowledge of Parent, there are no material
organizational efforts presently being made involving any of the presently
unorganized employees of Parent and its subsidiaries, (c) Parent and its
subsidiaries have, to the knowledge of Parent, complied in all material respects
with all laws relating to the employment of labor, including, without
limitation, any provisions thereof relating to wages, hours, collective
bargaining, and the payment of social security and similar taxes, and (d) no
person has, to the knowledge of Parent, asserted that Parent or any of its
subsidiaries is liable in any material amount for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing, except for
such controversies, organizational efforts, non-compliance and liabilities
which, singly or in the aggregate, could not reasonably be expected to
materially and adversely affect the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of Parent and
its subsidiaries, taken as a whole.
SECTION 4.15. ENVIRONMENTAL MATTERS. (a) Except as set forth in the Parent
SEC Reports, (i) Parent and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws, including,
without limitation, having all permits, licenses and other approvals and
authorizations necessary for the operation of their respective businesses as
presently conducted, (ii) none of the properties owned by Parent or any of its
subsidiaries contain any Hazardous Substance as a result of any activity of
Parent or any of its subsidiaries in amounts exceeding the levels permitted by
applicable Environmental Laws, (iii) neither Parent nor any of its subsidiaries
has received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that Parent or any of its subsidiaries may be in violation of, or liable under,
any Environmental Law in connection with the ownership or operation of their
businesses, (iv) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or threatened,
against Parent or any of its
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subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to be filed,
by Parent or any of its subsidiaries concerning the release of any Hazardous
Substance or the threatened or actual violation of any Environmental Law, (vi)
no Hazardous Substance has been disposed of, released or transported in
violation of any applicable Environmental Law from any properties owned by
Parent or any of its subsidiaries as a result of any activity of Parent or any
of its subsidiaries during the time such properties were owned, leased or
operated by Parent or any of its subsidiaries, (vii) there have been no
environmental investigations, studies, audits, tests, reviews or other analyses
regarding compliance or noncompliance with any applicable Environmental Law
conducted by or which are in the possession of Parent or its subsidiaries
relating to the activities of Parent or its subsidiaries which have not been
delivered to the Company prior to the date hereof, (viii) there are no
underground storage tanks on, in or under any properties owned by Parent and any
of its subsidiaries and no underground storage tanks have been closed or removed
from any of such properties during the time such properties were owned, leased
or operated by Parent or any of its subsidiaries, (ix) there is no asbestos or
asbestos containing material present in any of the properties owned by Parent
and its subsidiaries, and no asbestos has been removed from any of such
properties during the time such properties were owned, leased or operated by
Parent or any of its subsidiaries, and (x) neither Parent, its subsidiaries nor
any of their respective properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law, except for violations of the foregoing
clauses (i) through (x) that, singly or in the aggregate, would not reasonably
be expected to have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of Parent and its subsidiaries considered as one enterprise.
(b) As used herein, "Environmental Law" means any Federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any governmental entity relating to
(x) the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous Substances, in
each case as amended and as in effect on the Closing Date. The term
Environmental Law includes, without limitation, (i) the Federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970, each as
amended and as in effect on the Closing Date, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
SECTION 4.16. NON-COMPETITION AGREEMENTS. Neither Parent nor any subsidiary
of Parent is a party to any agreement which purports to restrict or prohibit in
any material respect any of them from, directly or indirectly, engaging in any
business of rubbish, garbage, paper, textile wastes, chemical or hazardous
wastes, liquid and other waste collection, interim storage, transfer, recovery,
processing, recycling, marketing or disposal or any other material business
currently engaged in by the Parent or the Company, or any
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corporations affiliated with either of them. None of Parent's officers,
directors or key employees is a party to any agreement which, by virtue of such
person's relationship with Parent, restricts in any material respect Parent or
any subsidiary of Parent from, directly or indirectly, engaging in any of the
businesses described above.
SECTION 4.17. TITLE TO ASSETS. Parent and each of its subsidiaries has good
and marketable title in fee simple to all its real property and good title to
all its leasehold interests and other properties as reflected in the most recent
balance sheet included in the Parent Financial Statements, except for such
properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i) the
lien for current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Parent's business
operations (in the manner presently carried on by the Parent), or (iii) as
disclosed in the Parent SEC Reports, and except for such matters which, singly
or in the aggregate, could not reasonably be expected to materially and
adversely affect the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of Parent and its
subsidiaries, taken as a whole. All leases under which Parent leases any real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
default or event which with notice or lapse of time or both would become a
default other than defaults under such leases which in the aggregate will not
materially and adversely affect the Parent and its subsidiaries, taken as a
whole.
SECTION 4.18. PARENT STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of Parent required for approval and adoption of this Agreement and
the Merger is a majority of the outstanding shares of Parent Common Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Subsidiary as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. The Company is qualified to do business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing will
not, when taken together with all other such failures, have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Company and its subsidiaries,
taken as a whole. True, accurate and complete copies of the Company's
Certificate of Incorporation and By-laws, in each case as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
Parent.
SECTION 5.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 50,000,000
shares of Regular Common Stock, 100,000,000 shares of Class A Common Stock and
10,000,000 shares of preferred stock. As of November 21, 1994, 15,959,968 shares
of Regular Common Stock and 50,829,159 shares of Class A Common Stock were
issued and outstanding and no shares of preferred stock were issued and
outstanding. All of such issued and outstanding shares are validly issued and
are fully paid, nonassessable and free of preemptive rights. No subsidiary of
the Company holds any shares of the capital stock of the Company.
(b) Except as set forth on Schedule 5.2 attached hereto, as of the date
hereof there were no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
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warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any rights plan or
other anti-takeover agreement, obligating the Company or any subsidiary of the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of the Company or obligating the Company
or any subsidiary of the Company to grant, extend or enter into any such
agreement or commitment. There are no voting trusts, proxies or other agreements
or understandings to which the Company or any subsidiary of the Company is a
party or is bound with respect to the voting of any shares of capital stock of
the Company.
SECTION 5.3. SUBSIDIARIES.
(a) Except as set forth in Schedule 5.3, each direct and indirect corporate
subsidiary of the Company is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each
subsidiary of the Company is qualified to do business, and is in good standing,
in each jurisdiction in which the properties owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all such other failures, have a material adverse effect on
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Company and its subsidiaries, taken as
a whole. All of the outstanding shares of capital stock of each corporate
subsidiary of the Company are validly issued, fully paid, nonassessable and free
of preemptive rights and are owned directly or indirectly by the Company free
and clear of any liens, claims, encumbrances, security interests, equities,
charges and options of any nature whatsoever except as set forth in Schedule 5.3
attached hereto. There are no subscriptions, options, warrants, rights, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting, transfer,
ownership or other rights with respect to any shares of capital stock of any
corporate subsidiary of the Company, including any right of conversion or
exchange under any outstanding security, instrument or agreement.
SECTION 5.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Company has full corporate power and authority to enter into this
Agreement and, subject to the Company Stockholders' Approval (as defined in
Section 7.3(a)) and the Company Required Statutory Approvals (as defined in
Section 5.4(c)), to consummate the transactions contemplated hereby. This
Agreement has been approved by the Board of Directors of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement or, except for the
Company Stockholders' Approval, the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by Parent and Subsidiary, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (b) general equitable
principles. Without limitation of the foregoing, each of the covenants and
obligations of the Company set forth in Sections 6.1, 6.5, 7.3, 7.6, 7.7, 7.8
and 7.11 is valid, legally binding and enforceable notwithstanding the absence
of the Company Stockholders' Approval.
(b) The execution and delivery of this Agreement by the Company do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or by-laws of the Company or any of its subsidiaries, (ii)
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which
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the Company or any of its subsidiaries is now a party or by which the Company or
any of its subsidiaries or any of their respective properties or assets may be
bound or affected. The consummation by the Company of the transactions
contemplated hereby will not result in any violation, conflict, breach,
termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the preceding
sentence, subject (x) in the case of the terms, conditions or provisions
described in clause (ii) above, to obtaining (prior to the Effective Time) the
Company Required Statutory Approvals and the Company Stockholder's Approval and
(y) in the case of the terms, conditions or provisions described in clause (iii)
above, to obtaining (prior to the Effective Time) consents required from
commercial lenders, lessors or other third parties. Excluded from the foregoing
sentences of this paragraph (b), insofar as they apply to the terms, conditions
or provisions described in clauses (ii) and (iii) of the first sentence of this
paragraph (b), are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests, charges or encumbrances
that would not, in the aggregate, have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Company and its subsidiaries, taken as
a whole.
(c) Except for (i) the filings by Parent and the Company required by the
HSR Act, (ii) the filing of the Joint Proxy Statement/Prospectus with the SEC
pursuant to the Exchange Act and the Securities Act and the declaration of the
effectiveness thereof by the SEC and filings with various state blue sky
authorities, (iii) the making of the Merger Filing with the Secretary of State
of the State of Delaware in connection with the Merger and (iv) any required
filings with or approvals from applicable state environmental authorities,
public service commissions and public utility commissions (the filings and
approvals referred to in clauses (i) through (iv) are collectively referred to
as the "Company Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not made
or obtained, as the case may be, would not, in the aggregate, have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of the Company and its
subsidiaries, taken as a whole.
SECTION 5.5. REPORTS AND FINANCIAL STATEMENTS. Except as set forth on
Schedule 5.5 attached hereto, since December 31, 1990, the Company has filed
with the SEC all material forms, statements, reports and documents (including
all exhibits, amendments and supplements thereto) required to be filed by it
under each of the Securities Act, the Exchange Act and the respective rules and
regulations thereunder, all of which, as amended if applicable, complied in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder. The Company has previously delivered to
Parent copies of its (a) Annual Reports on Form 10-K for the fiscal year ended
December 31, 1993 and for each of the two immediately preceding fiscal years, as
filed with the SEC, (b) proxy and information statements relating to (i) all
meetings of its stockholders (whether annual or special) and (ii) actions by
written consent in lieu of a stockholders' meeting from December 31, 1990 until
the date hereof, and (c) all other reports, including quarterly reports, or
registration statements filed by the Company with the SEC since December 31,
1990 (other than Registration Statements filed on Form S-8) and (the documents
referred to in clauses (a), (b) and (c) are collectively referred to as the
"Company SEC Reports"). Except as set forth in Schedule 5.5 attached hereto, as
of their respective dates, the Company SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements of the Company included in such reports (collectively, the "Company
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
the Company and its subsidiaries as of the dates thereof and the results of
their operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein.
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SECTION 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
Company SEC Reports, neither the Company nor any of its subsidiaries had at
September 30, 1994, or has incurred since that date, any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature,
except (a) liabilities, obligations or contingencies (i) which are accrued or
reserved against in the Company Financial Statements or reflected in the notes
thereto or (ii) which were incurred after September 30, 1994 and were incurred
in the ordinary course of business and consistent with past practices, (b)
liabilities, obligations or contingencies which (i) would not, in the aggregate,
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of the
Company and its subsidiaries, taken as a whole, or (ii) have been discharged or
paid in full prior to the date hereof, and (c) liabilities and obligations which
are of a nature not required to be reflected in the consolidated financial
statements of the Company and its subsidiaries prepared in accordance with
generally accepted accounting principles consistently applied and which were
incurred in the normal course of business.
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
most recent Company SEC Report, there has not been any material adverse change
in the business, operations, properties, assets, liabilities, condition
(financial or other), results of operations or prospects of the Company and its
subsidiaries, taken as a whole.
SECTION 5.8. LITIGATION. Except as referred to in the Company SEC Reports
or in Schedule 5.8 attached hereto, there are no claims, suits, actions or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting the Company or any of its subsidiaries, before any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that seek to restrain the consummation of the
Merger or which could reasonably be expected, either alone or in the aggregate
with all such claims, actions or proceedings, to materially and adversely affect
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Company and its subsidiaries, taken as
a whole. Except as referred to in the Company SEC Reports or in Schedule 5.8
attached hereto, neither the Company nor any of its subsidiaries is subject to
any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
which prohibits or restricts the consummation of the transactions contemplated
hereby or would have any material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries, taken as a whole. The Company has
heretofore delivered to Parent a true and complete copy of each document
identified in Schedule 5.8.
SECTION 5.9. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by the Company or its subsidiaries for inclusion in
(a) the Registration Statement or (b) the Proxy Statement will, in the case of
the Proxy Statement or any amendments thereof or supplements thereto, at the
time of the mailing of the Proxy Statement and any amendments or supplements
thereto, and at the time of the meetings of stockholders of the Company and
Parent to be held in connection with the transactions contemplated by this
Agreement or, in the case of the Registration Statement, as amended or
supplemented, at the time it becomes effective and at the time of such meetings
of the stockholders of the Company and Parent, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement/Prospectus will comply, as of its effective date, as to form in all
material respects with all applicable laws, including the provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by the Company with respect to
information supplied by Parent or Subsidiary for inclusion therein.
SECTION 5.10. NO VIOLATION OF LAW. Except as disclosed in the Company SEC
Reports or in Schedule 5.8 attached hereto, neither the Company nor any of its
subsidiaries is in violation of or has been given notice or been charged with
any violation of, any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable environmental law,
ordinance or regulation) of any governmental or regulatory body or authority,
except for violations which, in the aggregate, could not reasonably be expected
to have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
the Company and its subsidiaries, taken as a whole. Except as disclosed in the
Company SEC Reports, as of the date of this Agreement, to the knowledge
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of the Company, no investigation or review by any governmental or regulatory
body or authority is pending or threatened, nor has any governmental or
regulatory body or authority indicated an intention to conduct the same, other
than, in each case, those the outcome of which, as far as reasonably can be
foreseen, will not have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries taken as a whole. The Company and
its subsidiaries have all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals necessary
to conduct their businesses as presently conducted (collectively, the "Company
Permits"), except for permits, licenses, franchises, variances, exemptions,
orders, authorizations, consents and approvals the absence of which, alone or in
the aggregate, would not have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries, taken as a whole.
The Company and its subsidiaries are not in violation of the terms of any
Company Permit, except for delays in filing reports or violations which, alone
or in the aggregate, would not have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries, taken as a whole.
SECTION 5.11. COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
Company SEC Reports, the Company and each of its subsidiaries are not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under, (a) the respective charters,
by-laws or similar organizational instruments of the Company or any of its
subsidiaries or (b) any contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which the Company or any of its subsidiaries is a party or by which any of them
is bound or to which any of their property is subject, which breaches,
violations and defaults, in the case of clause (b) of this Section 5.11, would
have, in the aggregate, a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries, taken as a whole.
SECTION 5.12. TAXES. The Company and its subsidiaries have (i) duly filed
with the appropriate governmental authorities all Tax Returns required to be
filed by them for all periods ending on or prior to the Effective Time, other
than those Tax Returns the failure of which to file would not have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of the Company and its
subsidiaries, taken as a whole, and such Tax Returns are true, correct and
complete in all material respects, and (ii) duly paid in full or made adequate
provision for the payment of all Taxes for all periods ending at or prior to the
Effective Time. The liabilities and reserves for Taxes reflected in the Company
balance sheet included in the latest Company SEC Report are adequate to cover
all Taxes for all periods ending at or prior to the Effective Time and there are
no material liens for Taxes upon any property or asset of the Company or any
subsidiary thereof, except for liens for Taxes not yet due. There are no
unresolved issues of law or fact arising out of a notice of deficiency, proposed
deficiency or assessment from the IRS or any other governmental taxing authority
with respect to Taxes of the Company or any of its subsidiaries which, if
decided adversely, singly or in the aggregate, would have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Company and its subsidiaries,
taken as a whole. Neither the Company nor any of its subsidiaries is a party to
any agreement providing for the allocation or sharing of Taxes with any entity
that is not, directly or indirectly, a wholly-owned corporate subsidiary of
Company. Neither the Company nor any of its corporate subsidiaries has, with
regard to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the application of Section 341(f) of the Code.
SECTION 5.13. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except as set forth in the Company SEC Reports, at the date hereof, the
Company and its subsidiaries do not maintain or contribute to any material
employee benefit plans, programs, arrangements and practices (such plans,
programs, arrangements and practices of the Company and its subsidiaries being
referred to as the "Company Plans"), including employee benefit plans within the
meaning set forth in Section 3(3) of ERISA, or other similar material
arrangements for the provision of benefits (excluding any "Multi-employer Plan"
within the meaning of Section 3(37) of ERISA or a "Multiple Employer Plan"
within
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the meaning of Section 413(c) of the Code). Schedule 5.13(a) attached hereto
lists all Multi-employer Plans and Multiple Employer Plans which any of the
Company or its subsidiaries maintains or to which any of them makes
contributions. Neither the Company nor its subsidiaries has any obligation to
create any additional such plan or to amend any such plan so as to increase
benefits thereunder, except as required under the terms of the Company Plans,
under existing collective bargaining agreements or to comply with applicable
law.
(b) Except as disclosed in the Company SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Company Plans that could
result in penalties, taxes or liabilities which, singly or in the aggregate,
could have a material adverse effect on the business, operations, properties,
assets, condition (financial or other) results of operations or prospects of the
Company and its subsidiaries, taken as a whole, (ii) except for premiums due,
there is no outstanding material liability, whether measured alone or in the
aggregate, under Title IV of ERISA with respect to any of the Company Plans,
(iii) neither the Pension Benefit Guaranty Corporation nor any plan
administrator has instituted proceedings to terminate any of the Company Plans
subject to Title IV of ERISA other than in a "standard termination" described in
Section 4041(b) of ERISA, (iv) none of the Company Plans has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, as of the last day of the most recent
fiscal year of each of the Company Plans ended prior to the date of this
Agreement, (v) the current present value of all projected benefit obligations
under each of the Company Plans which is subject to Title IV of ERISA did not,
as of its latest valuation date, exceed the then current value of the assets of
such plan allocable to such benefit liabilities by more than the amount, if any,
disclosed in the Company SEC Reports as of September 30, 1994, based upon
reasonable actuarial assumptions currently utilized for such Company Plan, (vi)
each of the Company Plans has been operated and administered in all material
respects in accordance with applicable laws during the period of time covered by
the applicable statute of limitations, (vii) each of the Company Plans which is
intended to be "qualified" within the meaning of Section 401(a) of the Code has
been determined by the Internal Revenue Service to be so qualified and such
determination has not been modified, revoked or limited by failure to satisfy
any condition thereof or by a subsequent amendment thereto or a failure to
amend, except that it may be necessary to make additional amendments
retroactively to maintain the "qualified" status of such Company Plans, and the
period for making any such necessary retroactive amendments has not expired,
(viii) with respect to Multi-employer Plans, neither the Company nor any of its
subsidiaries has, made or suffered a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in Sections 4203, 4204 and
4205 of ERISA and, to the best knowledge of the Company and its subsidiaries, no
event has occurred or is expected to occur which presents a material risk of a
complete or partial withdrawal under said Sections 4203, 4204 and 4205, (ix) to
the best knowledge of the Company and its subsidiaries, there are no material
pending, threatened or anticipated claims involving any of the Company Plans
other than claims for benefits in the ordinary course, and (x) the Company and
its subsidiaries have no current material liability, whether measured alone or
in the aggregate, for plan termination or withdrawal (complete or partial) under
Title IV of ERISA based on any plan to which any entity that would be deemed one
employer with the Company and its subsidiaries under Section 4001 of ERISA or
Section 414 of the Code contributed during the period of time covered by the
applicable statute of limitations (the "Company Controlled Group Plans"), and
the Company and its subsidiaries do not reasonably anticipate that any such
liability will be asserted against the Company or any of its subsidiaries. None
of the Company Controlled Group Plans has an "accumulated funding deficiency"
(as defined in Section 302 of ERISA and 412 of the Code).
(c) The Company SEC Reports contain a true and complete summary or list of
or otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
SECTION 5.14. LABOR CONTROVERSIES. Except as set forth in the Company SEC
Reports, (a) there are no significant controversies pending or, to the knowledge
of the Company, threatened between the Company or its subsidiaries and any
representatives of any of their employees, (b) to the knowledge of the Company,
there are no material organizational efforts presently being made involving any
of the presently unorganized employees of the Company or its subsidiaries, (c)
the Company and its subsidiaries have, to the knowledge of
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the Company, complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (d) no person has, to the knowledge of the
Company, asserted that the Company or any of its subsidiaries is liable in any
material amount for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing, except for such controversies,
organizational efforts, non-compliance and liabilities which, singly or in the
aggregate, could not reasonably be expected to materially and adversely affect
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Company and its subsidiaries, taken as
a whole.
SECTION 5.15. ENVIRONMENTAL MATTERS. Except as set forth in the Company SEC
Reports, (i) the Company and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws, including,
without limitation, having all permits, licenses and other approvals and
authorizations necessary for the operation of their respective businesses as
presently conducted, (ii) none of the properties owned by the Company or any of
its subsidiaries contain any Hazardous Substance as a result of any activity of
the Company or any of its subsidiaries in amounts exceeding the levels permitted
by applicable Environmental Laws, (iii) neither the Company nor any of its
subsidiaries has received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity or
third party indicating that the Company or any of its subsidiaries may be in
violation of, or liable under, any Environmental Law in connection with the
ownership or operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to be filed,
by the Company or any of its subsidiaries concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law, (vi) no Hazardous Substance has been disposed of, released or transported
in violation of any applicable Environmental Law from any properties owned by
the Company or any of its subsidiaries as a result of any activity of the
Company or any of its subsidiaries during the time such properties were owned,
leased or operated by the Company or any of its subsidiaries, (vii) there have
been no environmental investigations, studies, audits, tests, reviews or other
analyses regarding compliance or noncompliance with any applicable Environmental
Law conducted by or which are in the possession of the Company or its
subsidiaries relating to the activities of the Company or its subsidiaries which
have not been delivered to Parent prior to the date hereof, (viii) there are no
underground storage tanks on, in or under any properties owned by the Company or
any of its subsidiaries and no underground storage tanks have been closed or
removed from any of such properties during the time such properties were owned,
leased or operated by the Company or any of its subsidiaries, (ix) there is no
asbestos or asbestos containing material present in any of the properties owned
by the Company and its subsidiaries, and no asbestos has been removed from any
of such properties during the time such properties were owned, leased or
operated by the Company or any of its subsidiaries, and (x) neither the Company,
its subsidiaries nor any of their respective properties are subject to any
material liabilities or expenditures (fixed or contingent) relating to any suit,
settlement, court order, administrative order, regulatory requirement, judgment
or claim asserted or arising under any Environmental Law, except for violations
of the foregoing clauses (i) through (x) that, singly or in the aggregate, would
not reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries considered as one
enterprise.
SECTION 5.16. NON-COMPETITION AGREEMENTS. Neither the Company nor any
subsidiary of the Company is a party to any agreement which purports to restrict
or prohibit in any material respect any of them from, directly or indirectly,
engaging in any business of rubbish, garbage, paper, textile wastes, chemical or
hazardous wastes, liquid and other waste collection, interim storage, transfer,
recovery, processing, recycling, marketing or disposal or any other material
business currently engaged in by the Parent or the Company, or any corporations
affiliated with either of them. None of the Company's officers, directors or key
employees is a party to any agreement which, by virtue of such person's
relationship with the Company, restricts in any material respect the Company or
any subsidiary of the Company from, directly or indirectly, engaging in any of
the businesses described above.
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SECTION 5.17. TITLE TO ASSETS. The Company and each of its subsidiaries has
good and marketable title in fee simple to all its real property and good title
to all its leasehold interests and other properties, as reflected in the most
recent balance sheet included in the Company Financial Statements, except for
properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i) the
lien of current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value, or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Company's business
operations (in the manner presently carried on by the Company) or (iii) as
disclosed in the Company SEC Reports, and except for such matters which, singly
or in the aggregate, could not reasonably be expected to materially and
adversely affect the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of the Company and its
subsidiaries, taken as a whole. All leases under which the Company leases any
substantial amount of real or personal property have been delivered to Parent
and are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event which with notice or lapse of time or both would become a
default other than defaults under such leases which in the aggregate will not
materially and adversely affect the condition of the Company.
SECTION 5.18. COMPANY STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of the Company required for approval and adoption of this Agreement
and the Merger is a majority of the votes to which holders of outstanding shares
of Regular Common Stock and Class A Common Stock, voting together as a single
class, are entitled. If all the shares of Company Common Stock as to which
irrevocable proxies have been granted were voted (whether pursuant to such
irrevocable proxies or otherwise) at a meeting of the Company's stockholders in
favor of the approval of this Agreement and the Merger, such vote would
constitute the requisite approval of the Company's stockholders for the approval
and adoption of this Agreement and the Merger under the DGCL.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Except
as otherwise contemplated by this Agreement, after the date hereof and prior to
the Closing Date or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company shall, and shall cause its subsidiaries,
to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charters or
by-laws, (ii) split, combine or reclassify their outstanding capital stock
or (iii) declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise, except for the payment of dividends or
distributions by a wholly-owned subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that the Company may issue shares upon
conversion of convertible securities and exercise of options outstanding on
the date hereof;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business or (B) borrowings to refinance existing indebtedness,
(ii) redeem, purchase, acquire or offer to purchase or acquire any shares
of its capital stock or any options, warrants or rights to acquire any of
its capital stock or any security convertible into or exchangeable for its
capital stock, (iii) take any action which would jeopardize the treatment
of the Merger as a pooling of interests under Opinion No. 16 of the
Accounting Principles
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Board ("APB No. 16"), (iv) take or fail to take any action which action or
failure to take action would cause the Company or its stockholders (except
to the extent that any stockholders receive cash in lieu of fractional
shares) to recognize gain or loss for federal income tax purposes as a
result of the consummation of the Merger, (v) make any acquisition of any
assets or businesses other than expenditures for fixed or capital assets in
the ordinary course of business, (vi) sell, pledge, dispose of or encumber
any assets or businesses other than sales in the ordinary course of
business or (vii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of Parent to report operational matters of materiality and
the general status of ongoing operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice; provided,
however, that the Company and its subsidiaries shall in no event enter into
any written employment agreement which provides for an annual base salary
in excess of $125,000 and has a term in excess of one year or enter into or
amend any severance or termination arrangement;
(h) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in applicable law; and
(i) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts and
against such risks and losses as are consistent with past practice.
SECTION 6.2. CONDUCT OF BUSINESS BY PARENT AND SUBSIDIARY PENDING THE
MERGER. Except as otherwise contemplated by this Agreement, after the date
hereof and prior to the Closing Date or earlier termination of this Agreement,
unless the Company shall otherwise agree in writing, Parent shall, and shall
cause its subsidiaries, to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charters or
by-laws, (ii) split, combine or reclassify (whether by stock dividend or
otherwise) their outstanding capital stock, or (iii) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise, except for the payment of dividends or distributions by a
wholly-owned subsidiary of Parent;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any shares of Parent Common Stock, or any options,
warrants or rights of any kind to acquire any shares of their capital stock
of any class or any debt or equity securities convertible into or
exchangeable for such capital stock, except for the issuance and sale of
shares issuable upon conversion of convertible securities and exercise of
options outstanding on the date hereof;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business or (B) borrowings to refinance existing indebtedness,
(ii) redeem, purchase, acquire or offer to purchase or acquire any shares
of its capital stock or any options, warrants or rights to acquire any of
its capital stock or any security convertible into or exchangeable for its
capital stock, (iii) take any action which would jeopardize the treatment
of the Merger as a pooling of interests under APB No. 16, (iv) take or fail
to take any action which action or failure to take action would cause
Parent or its stockholders (except to the extent that
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any stockholders receive cash in lieu of fractional shares) to recognize
gain or loss for federal income tax purposes as a result of the
consummation of the Merger, (v) make any acquisition of any assets or
businesses other than expenditures for fixed or capital assets in the
ordinary course of business, (vi) sell, pledge, dispose of or encumber any
assets or businesses other than sales in the ordinary course of business or
(vii) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of the Company to report operational matters of materiality
and the general status of ongoing operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice; provided,
however, that Parent and its subsidiaries shall in no event enter into any
written employment agreement which provides for an annual base salary in
excess of $125,000 and has a term in excess of one year or enter into or
amend any severance or termination arrangement;
(h) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in applicable law; and
(i) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts and
against such risks and losses as are consistent with past practice.
SECTION 6.3. CONTROL OF THE COMPANY'S OPERATIONS. Nothing contained in this
Agreement shall give to Parent, directly or indirectly, rights to control or
direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
SECTION 6.4. CONTROL OF PARENT'S OPERATIONS. Nothing contained in this
Agreement shall give to the Company, directly or indirectly, rights to control
or direct Parent's operations prior to the Effective Time. Prior to the
Effective Time, Parent shall exercise, consistent with the terms and conditions
of this Agreement, complete control and supervision of its operations.
SECTION 6.5. ACQUISITION TRANSACTIONS.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, neither the Company nor Parent shall, and shall
not permit any of its subsidiaries to, initiate, solicit, negotiate, encourage
or provide confidential information to facilitate, and each of the Company and
Parent shall, and shall cause each of its subsidiaries to, (i) cause any
officer, director or employee of, or any attorney, accountant or other agent
retained by it and (ii) use its reasonable best efforts to cause any financial
advisor or investment banker retained by it, not to initiate, solicit,
negotiate, encourage or provide non-public or confidential information to
facilitate, any proposal or offer to acquire all or any substantial part of the
business and properties of the Company or Parent or any capital stock of the
Company or Parent, whether by merger, purchase of assets, tender offer or
otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transactions being referred to herein as
"Acquisition Transactions").
(b) Notwithstanding the provisions of paragraph (a) above, the Company or
the Parent may, in response to an unsolicited written proposal with respect to
an Acquisition Transaction, which proposal (insofar as it relates to the
consideration to be paid to the Company or its stockholders) is not subject to a
financing
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condition, furnish (subject to a confidentiality agreement reasonably acceptable
to the Company and Parent) confidential or non-public information concerning its
business, properties or assets to a financially capable corporation,
partnership, person or other entity or group (a "Potential Acquirer") or
negotiate with such Potential Acquirer if (i) the Company or the Parent, as the
case may be, shall have given not less than five business days' advance written
notice of its intention to do so to the other party, (ii) the board of directors
of the Company or the Parent, as the case may be, is advised by one or more of
its independent financial advisors that providing confidential or non-public
information to the Potential Acquirer is likely to lead to an Acquisition
Transaction on terms that would yield a materially higher value to the Company's
or the Parent's stockholders, as the case may be, than the Merger and (iii)
based upon advice of its independent legal counsel, its board of directors
determines in good faith that there is a significant risk that the failure to
provide such confidential or non-public information to such Potential Acquirer
would constitute a breach of its fiduciary duty to its stockholders.
(c) In the event either party hereto shall determine to provide any
information or negotiate as described in paragraph (b) above, or shall receive
any offer of the type referred to in paragraph (b) above, it shall promptly
inform the other party hereto that information is to be provided, that
negotiations are to take place or that an offer has been received and shall
furnish to the other party hereto the identity of the person receiving such
information or the proponent of such offer, if applicable, and, if an offer has
been received, a description of the material terms thereof.
(d) A party hereto may enter into a definitive agreement for an Acquisition
Transaction which meets the requirements set forth above with a Potential
Acquirer with which it is permitted to negotiate pursuant to paragraph (b)
above, but only if (i) the board of directors of such party shall have duly
determined that such Acquisition Transaction would yield a materially higher
value to such party's stockholders than the Merger and that the execution of
such definitive agreement is in the best interests of such party's stockholders,
(ii) at least ten business days prior to the execution of such definitive
agreement, such party shall have furnished the other party hereto with a copy of
such definitive agreement and (iii) such other party shall have failed within
such ten-day period to offer to amend the terms of this Agreement in order that
the Merger would yield a value to such party's stockholders at least equal to
the Acquisition Transaction. In making the determination required by clause (i)
above, the board of directors referred to therein shall consider all relevant
considerations and factors, including, without limitation, the form and value of
the consideration, the extent to which the economic benefits of the Acquisition
Transaction differ from the economic benefits contemplated by this Agreement,
the likelihood that the Potential Acquirer will be able to obtain financing to
consummate the Acquisition Transaction, the proposed closing date, the certainty
of consummation, antitrust issues and closing conditions.
(e) Each party (i) acknowledges that a breach of any of its covenants
contained in this Section 6.5 will result in irreparable harm to the other party
which will not be compensable in money damages and (ii) agrees that such
covenant shall be specifically enforceable and that specific performance and
injunctive relief shall be a remedy properly available to the other party for a
breach of such covenant.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. ACCESS TO INFORMATION. (a) The Company and its subsidiaries
shall afford to Parent and Subsidiary and their respective accountants, counsel,
financial advisors and other representatives (the "Parent Representatives") and
Parent and its subsidiaries shall afford to the Company and its accountants,
counsel, financial advisors and other representatives (the "Company
Representatives") full access during normal business hours throughout the period
prior to the Effective Time to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, Tax Returns)
and, during such period, shall furnish promptly to one another (i) a copy of
each report, schedule and other document filed or received by any of them
pursuant to the requirements of federal or state securities laws or filed by any
of them with the SEC in connection with the transactions contemplated by this
Agreement or which may have a material effect on their respective businesses,
properties or personnel and (ii) such other information concerning their
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respective businesses, properties and personnel as Parent or Subsidiary or the
Company, as the case may be, shall reasonably request; provided that no
investigation pursuant to this Section 7.1 shall amend or modify any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Parent and its subsidiaries
shall hold and shall use their reasonable best efforts to cause the Parent
Representatives to hold, and the Company and its subsidiaries shall hold and
shall use their reasonable best efforts to cause the Company Representatives to
hold, in strict confidence all non-public documents and information furnished to
Parent and Subsidiary or to the Company, as the case may be, in connection with
the transactions contemplated by this Agreement, except that (i) Parent,
Subsidiary and the Company may disclose such information as may be necessary in
connection with seeking the Parent Required Statutory Approvals and Parent
Stockholders' Approval, the Company Required Statutory Approvals and the Company
Stockholders' Approval and (ii) each of Parent, Subsidiary and the Company may
disclose any information that it is required by law or judicial or
administrative order to disclose.
(b) In the event that this Agreement is terminated in accordance with its
terms, each party shall promptly redeliver to the other all non-public written
material provided pursuant to this Section 7.1 and shall not retain any copies,
extracts or other reproductions in whole or in part of such written material. In
such event, all documents, memoranda, notes and other writings prepared by
Parent or the Company based on the information in such material shall be
destroyed (and Parent and the Company shall use their respective reasonable best
efforts to cause their advisors and representatives to similarly destroy their
documents, memoranda and notes), and such destruction (and reasonable best
efforts) shall be certified in writing by an authorized officer supervising such
destruction.
(c) The Company shall promptly advise Parent and Parent shall promptly
advise the Company in writing of any change or the occurrence of any event after
the date of this Agreement having, or which, insofar as can reasonably be
foreseen, in the future may have, any material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries or Parent and its
subsidiaries, as the case may be, taken as a whole.
SECTION 7.2. REGISTRATION STATEMENT AND PROXY STATEMENT. Parent and the
Company shall file with the SEC as soon as is reasonably practicable after the
date hereof the Joint Proxy Statement/Prospectus and shall use all reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable. Parent shall also take any action required to be taken
under applicable state blue sky or securities laws in connection with the
issuance of Parent Common Stock pursuant hereto. Parent and the Company shall
promptly furnish to each other all information, and take such other actions, as
may reasonably be requested in connection with any action by any of them in
connection with the preceding sentence. The information provided and to be
provided by Parent and the Company, respectively, for use in the Joint Proxy
Statement/Prospectus shall be true and correct in all material respects without
omission of any material fact which is required to make such information not
false or misleading as of the date thereof and in light of the circumstances
under which given or made.
SECTION 7.3. STOCKHOLDERS' APPROVALS.
(a) The Company shall, as promptly as practicable, submit this Agreement
and the transactions contemplated hereby for the approval of its stockholders at
a meeting of stockholders and, subject to the fiduciary duties of the Board of
Directors of the Company under applicable law, shall use its reasonable best
efforts to obtain stockholder approval and adoption (the "Company Stockholders'
Approval") of this Agreement and the transactions contemplated hereby. Such
meeting of stockholders shall be held as soon as practicable following the date
upon which the Registration Statement becomes effective. Subject to the
fiduciary duties of the Board of Directors of the Company under applicable law,
the Company shall, through its Board of Directors, recommend to its stockholders
approval of the transactions contemplated by this Agreement. The Company (i)
acknowledges that a breach of its covenant contained in this Section 7.3(a) to
convene a meeting of its stockholders and call for a vote thereat with respect
to the approval of this Agreement and the Merger will result in irreparable harm
to Parent which will not be compensable in money damages and (ii) agrees that
such covenant shall be specifically enforceable and that specific performance
and injunctive relief shall be a remedy properly available to Parent for a
breach of such covenant.
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(b) Parent shall, as promptly as practicable, submit this Agreement and the
transactions contemplated hereby for the approval of its stockholders at a
meeting of stockholders and, subject to the fiduciary duties of the Board of
Directors of Parent under applicable law, shall use its reasonable best efforts
to obtain stockholder approval and adoption (the "Parent Stockholders'
Approval") of this Agreement and the transactions contemplated hereby. Such
meeting of stockholders shall be held as soon as practicable following the date
on which the Registration Statement becomes effective. Parent shall, through its
Board of Directors, but subject to the fiduciary duties of the members thereof,
(i) recommend to its stockholders approval of the transactions contemplated by
this Agreement and (ii) authorize and cause an officer of Parent to vote
Parent's shares of Subsidiary Common Stock for adoption and approval of this
Agreement and the transactions contemplated hereby and shall take all additional
actions as the sole stockholder of Subsidiary necessary to adopt and approve
this Agreement and the transactions contemplated hereby. Parent (i) acknowledges
that a breach of its covenant contained in this Section 7.3(b) to convene a
meeting of its stockholders and call for a vote thereat with respect to the
approval of this Agreement and the Merger will result in irreparable harm to the
Company which will not be compensable in money damages and (ii) agrees that such
covenant shall be specifically enforceable and that specific performance and
injunctive relief shall be a remedy properly available to the Company for a
breach of such covenant.
SECTION 7.4. COMPLIANCE WITH THE SECURITIES ACT. Parent and the Company
shall each use its reasonable best efforts to cause each principal executive
officer, each director and each other person who is an "affiliate," as that term
is used in paragraphs (c) and (d) of Rule 145 under the Securities Act, of
Parent or the Company, as the case may be, to deliver to Parent and the Company
on or prior to the Effective Time a written agreement (an "Affiliate Agreement")
to the effect that such person will not offer to sell, sell or otherwise dispose
of any shares of Parent Common Stock issued in the Merger, except, in each case,
pursuant to an effective registration statement or in compliance with Rule 145,
as amended from time to time, or in a transaction which, in the opinion of legal
counsel satisfactory to Parent, is exempt from the registration requirements of
the Securities Act and, in any case, until after the results covering 30 days of
post-Merger combined operations of Parent and the Company have been filed with
the SEC, sent to stockholders of Parent or otherwise publicly issued.
SECTION 7.5. EXCHANGE LISTING. Parent shall use its reasonable best efforts
to effect, at or before the Effective Time, authorization for listing on the New
York Stock Exchange Inc. (the "NYSE"), upon official notice of issuance, of the
shares of Parent Common Stock to be issued pursuant to the Merger.
SECTION 7.6. EXPENSES AND FEES.
(a) Except as provided in Section 7.6(b) or Section 7.6(c), all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
that those expenses incurred in connection with printing the Joint Proxy
Statement/Prospectus shall be shared equally by Parent and the Company.
(b) The Company agrees to pay to Parent a fee equal to $28,000,000 plus the
reasonable out-of-pocket expenses incurred by Parent in connection with this
Agreement and the transactions contemplated hereby:
(i) if the Company terminates this Agreement pursuant to clause (v) or
(vi) of Section 9.1(a);
(ii) if (A) either the Company terminates this Agreement pursuant to
clause (i) or (ii) of Section 9.1(a) or Parent terminates this Agreement
pursuant to clause (vii) of Section 9.1(b) and (B) one or more of the
following events shall occur prior to one year after such termination:
(1) the Company is acquired by merger or otherwise by another
person under terms which provide for the Company and/or its stockholders
to receive consideration having a fair value on the date of the first
public announcement of such merger or other acquisition transaction
equal to or greater than that provided in Section 3.1(a) of this
Agreement;
(2) the Company enters into a merger or other agreement which
contemplates the acquisition of the Company by another person under
terms which provide for the Company and/or its stockholders to receive
consideration having a fair value on the date of the first public
announcement
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of such merger or other agreement equal to or greater than that provided
in Section 3.1(a) of this Agreement;
(3) another person acquires or becomes the beneficial owner of more
than 50% of the outstanding shares of Company Common Stock for
consideration having a fair value on the date of such acquisition
greater than that provided in Section 3.1(a) of this Agreement;
(4) another person acquires all or any substantial portion of the
Company's assets under terms which provide for the Company and/or its
stockholders to receive consideration having a fair value on the date of
the first public announcement of such acquisition transaction equal to
or greater than that provided in Section 3.1(a) of this Agreement; or
(5) the Company adopts a plan of liquidation relating to all or a
substantial portion of its assets or declares a distribution to its
stockholders of all or a substantial portion of its assets and in
connection therewith the stockholders receive consideration having a
fair value on the date of the first public announcement of such plan of
liquidation or dividend declaration equal to or greater than that
provided in Section 3.1(a) of this Agreement.
(c) Parent agrees to pay to the Company a fee equal to $21,000,000 plus the
reasonable out-of-pocket expenses incurred by the Company in connection with
this Agreement and the transactions contemplated hereby if Parent terminates
this Agreement pursuant to clause (v) or (vi) of Section 9.1(b).
SECTION 7.7. AGREEMENT TO COOPERATE.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including using its reasonable
efforts to obtain all necessary or appropriate waivers, consents and approvals
and SEC "no-action" letters to effect all necessary registrations, filings and
submissions and to lift any injunction or other legal bar to the Merger (and, in
such case, to proceed with the Merger as expeditiously as possible), subject,
however, to the requisite votes of the stockholders and boards of directors of
the Company and Parent.
(b) Without limitation of the foregoing, each of Parent and the Company
undertakes and agrees to file as soon as practicable after the date hereof a
Notification and Report Form under the HSR Act with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the
"Antitrust Division"). Each of Parent and the Company shall (i) use its
reasonable efforts to comply as expeditiously as possible with all lawful
requests of the FTC or the Antitrust Division for additional information and
documents and (ii) not extend any waiting period under the HSR Act or enter into
any agreement with the FTC or the Antitrust Division not to consummate the
transactions contemplated by this Agreement, except with the prior consent of
the other parties hereto.
(c) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, including any
Acquisition Transaction, Parent shall have the right, at its own expense, to
participate therein, and the Company will not settle any such litigation without
the consent of Parent, which consent will not be unreasonably withheld.
(d) The Company and Parent approve that certain financing plan set forth in
the letter agreement between the Company and Parent dated December 19, 1994.
SECTION 7.8. PUBLIC STATEMENTS. The parties shall consult with each other
prior to issuing any press release or any written public statement with respect
to this Agreement or the transactions contemplated hereby and shall not issue
any such press release or written public statement prior to such consultation.
SECTION 7.9. OPTION PLANS. Prior to the Effective Time, the Company and
Parent shall take such action as may be necessary to cause each unexpired and
unexercised option (each a "Company Option") to be automatically converted at
the Effective Time into an option (each a "Parent Option") to purchase a number
of shares of Parent Common Stock equal to the number of shares of Company Common
Stock that could
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have been purchased under the Company Option multiplied by the Exchange Ratio,
at a price per share of Parent Common Stock equal to the option exercise price
determined pursuant to the Company Option divided by the Exchange Ratio and
subject to the same terms and conditions as the Company Option. The date of
grant of the substituted Parent Option shall be the date on which the
corresponding Company Option was granted. At the Effective Time, all references
in the stock option agreements to the Company shall be deemed to refer to
Parent. Parent shall assume all of the Company's obligations with respect to
Company Options as so amended and shall, from and after the Effective Time, make
available for issuance upon exercise of the Parent Options all shares of Parent
Common Stock covered thereby and amend its Registration Statement on Form S-8 to
cover the additional shares of Parent Common Stock subject to Parent Options
granted in replacement of Company Options.
SECTION 7.10. EMPLOYEE BENEFITS. Parent acknowledges its intention, after
the Effective Time, that employees of the Company who continue after the Merger
shall be provided with benefits which are no less favorable than those provided
by Parent to its own employees.
SECTION 7.11. NOTIFICATION OF CERTAIN MATTERS. Each of the Company, Parent
and Subsidiary agrees to give prompt notice to each other of, and to use their
respective reasonable best efforts to prevent or promptly remedy, (i) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.11 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 7.12. DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) After the Effective Time, the Surviving Corporation shall, to the
fullest extent permitted under applicable law, indemnify and hold harmless, each
present and former director, officer, employee and agent of the Company or any
of its subsidiaries (each, together with such person's heirs, executors or
administrators, an "indemnified Party" and collectively, the "indemnified
Parties") against any costs or expenses (including attorneys fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of, relating to or
in connection with any action or omission occurring prior to the Effective Time
(including, without limitation, acts or omissions in connection with such
persons serving as an officer, director or other fiduciary in any entity if such
service was at the request or for the benefit of the Company) or arising out of
or pertaining to the transactions contemplated by this Agreement. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) the Company or Parent and the Surviving
Corporation, as the case may be, shall pay the reasonable fees and expenses of
counsel selected by the indemnified Parties, which counsel shall be reasonably
satisfactory to the Parent and the Surviving Corporation, promptly after
statements therefor are received, (ii) the Parent and the Surviving Corporation
will cooperate in the defense of any such matter, and (iii) any determination
required to be made with respect to whether an indemnified Party's conduct
complies with the standards set forth under the DGCL and the Parent's or the
Surviving Corporation's respective Certificates of Incorporation or By-Laws
shall be made by independent legal counsel acceptable to the Parent or the
Surviving Corporation, as the case may be, and the indemnified Party; provided,
however, that neither Parent nor the Surviving Corporation shall be liable for
any settlement effected without its written consent (which consent shall not be
unreasonably withheld).
(b) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Parent shall assume the obligations set forth in this Section
7.12.
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SECTION 7.13. CORRECTIONS TO THE JOINT PROXY STATEMENT/PROSPECTUS AND
REGISTRATION STATEMENT. Prior to the date of approval of the Merger by their
respective stockholders, each of the Company, Parent and Subsidiary shall
correct promptly any information provided by it to be used specifically in the
Joint Proxy Statement/Prospectus and Registration Statement that shall have
become false or misleading in any material respect and shall take all steps
necessary to file with the SEC and have declared effective or cleared by the SEC
any amendment or supplement to the Joint Proxy Statement/Prospectus or the
Registration Statement so as to correct the same and to cause the Joint Proxy
Statement/Prospectus as so corrected to be disseminated to the stockholders of
the Company and Parent, in each case to the extent required by applicable law.
ARTICLE VIII
CONDITIONS
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of the
Company and Parent under applicable law and applicable listing
requirements;
(b) the shares of Parent Common Stock issuable in the Merger shall
have been authorized for listing on the NYSE upon official notice of
issuance;
(c) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated;
(d) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(e) no preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect (each party agreeing to use its
reasonable efforts to have any such injunction, order or decree lifted);
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Merger or make the consummation of the Merger illegal;
(g) all governmental waivers, consents, orders and approvals legally
required for the consummation of the Merger and the transactions
contemplated hereby, and all consents from lenders required to consummate
the Merger, shall have been obtained and be in effect at the Effective
Time; and
(h) Coopers & Lybrand, certified public accountants for Parent, shall
have delivered a letter, dated the Closing Date, addressed to Parent, in
form and substance reasonably satisfactory to Parent and the Company,
stating that the Merger will qualify as a pooling of interests transaction
under APB No. 16.
SECTION 8.2. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
Unless waived by the Company, the obligation of the Company to effect the Merger
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
(a) Parent and Subsidiary shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of Parent and Subsidiary contained in this Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and the
Company shall have received a certificate of the Chairman of the Board and
Chief Executive
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Officer, the President or a Vice President of Parent and of the President
and Chief Executive Officer or a Vice President of Subsidiary to that
effect;
(b) the Company shall have received an opinion of Sullivan & Cromwell
and/or Thorp, Reed & Armstrong, in form and substance reasonably
satisfactory to the Company, dated the Closing Date, to the effect that the
Company and holders of Company Common Stock (except to the extent any
stockholders receive cash in lieu of fractional shares) will recognize no
gain or loss for federal income tax purposes as a result of consummation of
the Merger;
(c) the Company shall have received an opinion or opinions from Snell
& Smith and/or Andrews & Kurth L.L.P., special counsel to Parent and
Subsidiary, dated the Closing Date, reasonably satisfactory to the Company
and covering the due incorporation of Parent and Subsidiary, the binding
nature of this Agreement, the effectiveness of the Merger, the validity of
the Parent Common Stock to be issued in connection with the Merger and such
other matters as may be reasonably requested by the Company;
(d) the Company shall have received "comfort" letters in customary
form from Coopers & Lybrand, certified public accountants for Parent and
Subsidiary, dated the date of the Proxy Statement, the effective date of
the Registration Statement and the Closing Date (or such other date
reasonably acceptable to the Company) with respect to certain financial
statements and other financial information included in the Registration
Statement and any subsequent changes in specified balance sheet and income
statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
(e) since the date hereof, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted
in or constitute, a material adverse change in the business, operations,
properties, assets, condition (financial or other), results of operations
or prospects of Parent and its subsidiaries, taken as a whole;
(f) all governmental waivers, consents, orders, and approvals legally
required for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and be in effect at the
Closing Date, and no governmental authority shall have promulgated any
statute, rule or regulation which, when taken together with all such
promulgations, would materially impair the value to Parent of the Merger;
and
(g) the Company shall have received from J.P. Morgan Securities Inc.
(or other nationally recognized investment banking firm reasonably
acceptable to Parent) an opinion, dated as of the date on which the Joint
Proxy Statement/Prospectus is first distributed to the stockholders of the
Company, to the effect that the consideration to be received by the
stockholders of the Company in the Merger is fair, from a financial point
of view, to the holders of Company Common Stock, and such opinion shall not
have been withdrawn.
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF PARENT AND SUBSIDIARY TO EFFECT
THE MERGER. Unless waived by Parent and Subsidiary, the obligations of Parent
and Subsidiary to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and Parent shall have received a Certificate
of the President and Chief Executive Officer or of a Vice President of the
Company to that effect;
(b) Parent shall have received an opinion of Andrews & Kurth L.L.P.,
in form and substance reasonably satisfactory to Parent, dated the Closing
Date, to the effect that Parent and Subsidiary will recognize no gain or
loss for federal income tax purposes as a result of consummation of the
Merger;
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(c) Parent shall have received an opinion or opinions from Sullivan &
Cromwell and/or Thorp, Reed & Armstrong, special counsel to the Company,
dated the Closing Date, reasonably satisfactory to Parent and covering the
due incorporation of the Company, the binding nature of this Agreement, the
effectiveness of the Merger and such other matters as may be reasonably
requested by Parent;
(d) Parent shall have received "comfort" letters from Deloitte &
Touche, certified public accountants for the Company, dated the date of the
Proxy Statement, the effective date of the Registration Statement and the
Closing Date (or such other date reasonably acceptable to Parent) with
respect to certain financial statements and other financial information
included in the Registration Statement in customary form and any subsequent
changes in specified balance sheet and income statement items, including
total assets, working capital, total stockholders' equity, total revenues
and the total and per share amounts of net income;
(e) the Affiliate Agreements required to be delivered to Parent
pursuant to Section 7.4 shall have been furnished as required by Section
7.4;
(f) since the date hereof, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted
in or constitute, a material adverse change in the business, operations,
properties, assets, condition (financial or other), results of operations
or prospects of the Company and its subsidiaries, taken as a whole;
(g) all governmental waivers, consents, orders and approvals legally
required for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and be in effect at the
Closing Date, and no governmental authority shall have promulgated any
statute, rule or regulation which, when taken together with all such
promulgations, would materially impair the value to Parent of the Merger;
(h) all the litigation and proceedings described or referred to in
each Memorandum of Understanding identified in Schedule 5.8 shall have been
fully and irrevocably settled, a final, nonappealable order shall have been
entered and all claims, demands and causes of action pertaining in any way
to such litigation or proceedings shall have been fully and irrevocably
released and discharged, all substantially upon the terms and conditions
set forth in such Memoranda of Understanding or otherwise upon terms and
conditions satisfactory to Parent in its sole discretion;
(i) the SEC shall have agreed to a consent order as to the matter
referred to in the letter described in Item 1 of Schedule 5.8 and Parent
shall have determined within fifteen business days after being notified of
the terms and conditions thereof that such consent decree is satisfactory
to Parent in its sole discretion; and
(j) Parent shall have received from Donaldson, Lufkin & Jenrette
Securities Corporation (or other nationally recognized investment banking
firm reasonably acceptable to the Company) an opinion reasonably acceptable
to the Company, dated as of the date on which the Joint Proxy
Statement/Prospectus is first distributed to the shareholders of Parent, to
the effect that the Exchange Ratio is fair, from a financial point of view,
to Parent's stockholders, and such opinion shall not have been withdrawn.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the stockholders
of the Company or Parent, as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) if, within 21 days after the date of this Agreement, the
Company's Board of Directors:
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(A) does not receive from J.P. Morgan Securities Inc. an opinion
to the effect that the consideration to be received by the
stockholders of the Company in the Merger is fair, from a financial
point of view, to the holders of Company Common Stock, with such
limitations and qualifications as are customary in such opinions;
(B) reasonably determines that the representations and
warranties of Parent and Subsidiary contained in this Agreement are
not true and correct in any material respect on and as of the date
made and on and as of the date of the Board's determination;
(C) reasonably determines, after consultation with Deloitte &
Touche, certified public accountants for the Company, and Coopers &
Lybrand, certified public accountants for Parent, that the Merger
will not qualify as a pooling of interests transaction under APB No.
16, provided that the Company is not in default of the covenant
contained in Section 6.1(d)(iii); or
(D) reasonably determines that the condition set forth in
Section 8.1(g) above will not be satisfied in all material respects
on or prior to the Closing Date;
(ii) if, within 21 days after the date of this Agreement, the
Company and Parent have not reached mutual agreement on the financing
plan contemplated by Section 7.7(d) (the Company agreeing that it will
not unreasonably withhold its approval of any such financing plan and
acknowledging its acceptance of those aspects of such financing plan set
forth in each Memorandum of Understanding referred to in Section
8.3(h));
(iii) if the Merger is not completed by July 31, 1995 otherwise
than account of delay or default on the part of the Company or any of
its 5% stockholders or any of their affiliates or associates;
(iv) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of the Company or any of
its 5% stockholders or any of their affiliates or associates;
(v) if (A) the Company receives an offer from any third party
(excluding any affiliate of the Company or any group of which any
affiliate of the Company is a member) with respect to a merger, sale of
substantial assets or other business combination involving the Company,
(B) the Company's Board of Directors determines, in good faith and after
consultation with an independent financial advisor, that such offer
would yield a materially higher value to the Company or its stockholders
than the Merger and (C) Parent fails, within ten business days after
Parent is notified of such determination and of the terms and conditions
of such offer, to make an offer which is substantially equivalent to, or
more favorable than, such offer;
(vi) if (A) a tender/exchange offer is commenced by a third party
(excluding any affiliate of the Company or any group of which any
affiliate of the Company is a member) for all outstanding shares of
Company Common Stock, (B) the Company's Board of Directors determines,
in good faith and after consultation with an independent financial
advisor, that such offer would yield a materially higher value to the
Company or its stockholders than the Merger and (C) Parent fails, within
ten business days after Parent is notified of such determination, to
make an offer which is substantially equivalent to, or more favorable
than, such tender/exchange offer; or
(vii) if Parent (A) fails to perform in any material respect any of
its material covenants in this Agreement and (B) does not cure such
default in all material respects within 30 days after notice of such
default is given to Parent by the Company.
(b) Parent shall have the right to terminate this Agreement:
(i) if, within 21 days after the date of this Agreement, Parent's
Board of Directors:
(A) does not receive from Donaldson, Lufkin & Jenrette
Securities Corporation an opinion to the effect that the Exchange
Ratio is fair, from a financial point of view, to Parent's
stockholders, with such limitations and qualifications as are
customary in such opinions;
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(B) reasonably determines that the representations and
warranties of the Company contained in this Agreement are not true
and correct in any material respect on and as of the date made and on
and as of the date of the Board's determination;
(C) reasonably determines, after consultation with Deloitte &
Touche, certified public accountants for the Company, and Coopers &
Lybrand, certified public accountants for Parent, that the Merger
will not qualify as a pooling of interests transaction under APB No.
16, provided that Parent is not in default of the covenant contained
in Section 6.2(d)(iii); or
(D) reasonably determines that the condition set forth in
Section 8.1(g) above will not be satisfied in all material respects
on or prior to the Closing Date;
(ii) if, within 21 days after the date of this Agreement, the
Company and Parent have not reached mutual agreement on the financing
plan contemplated by Section 7.7(d) (Parent agreeing that it will not
unreasonably withhold its approval of any such financing plan and
acknowledging its acceptance of those aspects of such financing plan set
forth in each Memorandum of Understanding identified in Schedule 5.8);
(iii) if the Merger is not completed by July 31, 1995 otherwise
than account of delay or default on the part of Parent or any of its 5%
stockholders or any of their affiliates or associates;
(iv) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of Parent or any of its
5% stockholders or any of their affiliates or associates;
(v) if (A) Parent receives an offer from any third party (excluding
any affiliate of Parent or any group of which any affiliate of Parent is
a member) with respect to a merger, sale of substantial assets or other
business combination involving Parent, (B) Parent's Board of Directors
determines, in good faith and after consultation with an independent
financial advisor, that such offer would yield a materially higher value
to Parent or its stockholders than the Merger and (C) the Company fails,
within ten business days after the Company is notified of such
determination and of the terms and conditions of such offer, to offer to
amend this Agreement in order to make the Merger substantially
equivalent to, or more favorable than, such offer;
(vi) if (A) a tender/exchange offer is commenced by a third party
(excluding any affiliate of Parent or any group of which any affiliate
of Parent is a member) for all outstanding shares of Parent Common
Stock, (B) Parent's Board of Directors determines, in good faith and
after consultation with an independent financial advisor, that such
offer would yield a materially higher value to Parent or its
stockholders than the Merger and (C) the Company fails, within ten
business days after the Company is notified of such determination, to
make an offer which is substantially equivalent to, or more favorable
than, such tender/exchange offer; or
(vii) if the Company (A) fails to perform in any material respect
any of its material covenants in this Agreement and (B) does not cure
such default in all material respects within 30 days after notice of
such default is given to the Company by Parent.
(c) As used in this Section 9.1, (i) "affiliate" has the meaning
assigned to it in Section 7.4 and (ii) "group" has the meaning set forth in
Section 13(d) of the Exchange Act and the rules and regulations thereunder.
SECTION 9.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no further obligation
on the part of the Company, Parent, Subsidiary or their respective officers or
directors (except as set forth in this Section 9.2 and in Sections 7.1, 7.6 and
7.8, all of which shall survive the termination). Nothing in this Section 9.2
shall relieve any party from liability for any breach of this Agreement.
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SECTION 9.3. AMENDMENT. This Agreement may not be amended except by action
taken by their respective Boards of Directors or duly authorized committee
thereof and then only by an instrument in writing signed on behalf of each of
the parties hereto and in compliance with applicable law.
SECTION 9.4. WAIVER. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties in this Agreement shall not survive the Merger,
and after effectiveness of the Merger neither the Company, Parent, Subsidiary or
their respective officers or directors shall have any further obligation with
respect thereto.
SECTION 10.2. BROKERS. The Company represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
(except for the fee payable to the investment banking firm described in Section
8.2(g)) or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. Parent and Subsidiary represent and warrant that no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee (except
for the fee payable to the investment banking firm described in Section 8.3(j))
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or
Subsidiary.
SECTION 10.3. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Parent or Subsidiary to:
USA Waste Services, Inc.
5000 Quorum Drive, Suite 300
Dallas, Texas 75240
Attention: Earl DeFrates
with a copy to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: David G. Elkins, Esq.
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(b) If to the Company, to:
Chambers Development Company, Inc.
10700 Frankstown Road
Pittsburgh, Pennsylvania 15235
Attention: Alexander W. Rangos
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Richard R. Howe, Esq.
SECTION 10.4. INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision.
SECTION 10.5. MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
(b) is not intended to confer upon any other person any rights or remedies
hereunder, except for rights of indemnified Parties under Section 7.12 and (c)
shall not be assigned by operation of law or otherwise, except that Subsidiary
may assign this Agreement to any other wholly-owned subsidiary of Parent. THIS
AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION
AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
SECTION 10.6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 10.7. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except as set forth in the
exception to Section 10.5(b), nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
AA-33
<PAGE> 228
IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers as of the date first written
above.
USA WASTE SERVICES, INC.
By:_______________________________
Name: John E. Drury
Title: Chief Executive Officer
CHAMBERS ACQUISITION CORPORATION
By:_______________________________
Name: Donald F. Moorehead, Jr.
Title: Chairman of the Board
CHAMBERS DEVELOPMENT COMPANY, INC.
By:_______________________________
Name: Alexander W. Rangos
Title: President
AA-34
<PAGE> 229
[DONALDSON, LUFKIN & JENRETTE LETTERHEAD]
May 13, 1995
Board of Directors
USA Waste Services, Inc.
5000 Quorum Drive, Suite 300
Dallas, TX 75240
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to USA Waste Services, Inc. ("USA Waste" or the "Company") of the exchange
ratio provided for in the Amended and Restated Merger Agreement dated November
28, 1994 (the "Agreement") between USA Waste and Chambers Development Company,
Inc. ("Chambers").
Pursuant to the Agreement, USA Waste is proposing to issue 0.41667 shares
of its common stock for each share of Chambers. The total number of Chambers
shares outstanding is 66.8 million. USA Waste, which has approximately 23.0
million shares outstanding (26.9 million on a fully diluted basis), will issue
27.8 million new shares.
In arriving at our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by the Company and Chambers including information provided during discussions
with their respective managements. Included in the information provided during
discussions with the respective managements were certain financial projections
of the Company prepared by the management of the Company, certain financial
projections of Chambers prepared by the Company in conjunction with the
management of Chambers and certain financial information of the Company and
Chambers on a combined basis prepared by the Company. In addition, we have
compared certain financial and securities data of the Company and Chambers with
various other companies whose securities are traded in public markets, reviewed
the historical stock prices and trading volumes of the common stock of the
Company, reviewed prices and premiums paid in other business combinations and
conducted such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy, completeness and fairness of all of the
financial and other information that was available to us from public sources,
that was provided to us by the Company, and Chambers and their respective
representatives, or that was otherwise reviewed by us. In particular, we have
relied, without independent investigation, upon the estimates of the managements
of the Company and Chambers of the operating synergies achievable as a result of
the proposed merger and upon our discussion of such synergies with the
managements of the Company and Chambers. With respect to the financial
projections supplied to us, we have assumed that they have been reasonably
prepared on the basis reflecting the best currently available estimates and
judgments of the management of the Company and Chambers as to the future
operating and financial performance of the Company and Chambers. We did not make
any independent evaluation of assets or liabilities of the Company or Chambers
nor did we verify any of the information reviewed by us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
proposed transaction.
<PAGE> 230
Board of Directors
USA Waste Services, Inc.
Page 2
May 13, 1995
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has performed
investment banking and other services for the Company in the past and has
received customary compensation for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the exchange ratio pursuant to the Agreement is fair to the
Company from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
2
<PAGE> 231
May 12, 1995
The Board of Directors
Chambers Development Company, Inc.
10700 Frankstown Road
Pittsburgh, PA 15235
Attn: John Rangos, Sr.
Chairman of the Board
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the stockholders of Chambers Development Company, Inc. (the
"Company") of the consideration to be received by them pursuant to the terms and
subject to the conditions of the proposed merger (the "Merger") contemplated by
the Agreement and Plan of Merger dated as of November 28, 1994 (the "Agreement")
by and among USA Waste Services, Inc. ("USA Waste"), Envirofil, Inc. and the
Company. The Agreement provides that, at the effective time of the Merger, each
share of the Company's Common Stock, par value $.50 per share, and each share of
the Company's Class A Common Stock, par value $.50 per share, shall be converted
into the right to receive, without interest, .41667 (the "Exchange Ratio") of a
share of the common stock, par value $.01 per share, of USA Waste.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii)
certain publicly available information concerning the Company, USA Waste, and of
certain other companies engaged in businesses comparable to the Company and USA
Waste, and the reported market prices for certain other companies' securities
deemed comparable; (iii) publicly available terms of certain transactions
involving companies comparable to the Company and USA Waste and the
consideration received for such companies; (iv) current and historical market
prices of the common stock of the Company and of USA Waste; (v) the audited
financial statements of the Company and USA Waste for the fiscal year ended
December 31, 1994; (vi) certain agreements with respect to outstanding
indebtedness or obligations of the Company and of USA Waste; (vii) certain
internal financial analyses and forecasts prepared by the Company and USA Waste
and their respective managements; (viii) the terms of other business
combinations that we have deemed relevant; and (ix) the currently contemplated
capital structure and the anticipated credit standing of the merged companies
upon consummation of the Merger.
In addition, we have held discussions with certain members of the
management of the Company, and USA Waste, with respect to certain aspects of the
Merger, and the past and current business operations of the Company and USA
Waste, the financial condition and future prospects and operations of the
Company and USA Waste, the effects of the Merger on the financial condition and
future prospects of the merged company, and certain other matters we believed
necessary or appropriate to our inquiry. We have visited certain representative
facilities of the Company, and USA Waste, and reviewed such other financial
studies and analyses and considered such other information as we deemed
appropriate for the purposes of this opinion. J.P. Morgan was not authorized to
and did not solicit any expressions of interest from any other parties with
respect to and sales of all or any part of the stock, assets or business of the
Company.
In giving our opinion we have assumed, with your consent, that there will
not be any material adverse effect on USA Waste or on the trading value of the
common stock of USA Waste as a result of (i) the settlement of the litigation
and proceedings described or referred to in each Memorandum of Understanding
identified in Schedule 5.8 to the Agreement or (ii) the entry by the Company
into a consent order as to the matter referred to in the letter described in
Item 1 of Schedule 5.8 to the Agreement. We are not in a position to evaluate
these matters and assume no responsibility for and express no view with respect
to these matters.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and USA Waste or otherwise
reviewed by us. We have not verified the accuracy or completeness of any such
<PAGE> 232
information and we have not conducted any evaluation or appraisal of any assets
or liabilities, nor have any such evaluations or appraisals been provided to us.
In relying on financial analyses and forecasts provided to us, we have assumed
that they have been reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by management of the Company and USA
Waste, respectively as to the expected future results of operations and
financial condition of the Company to which such analyses or forecasts relate.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion. In particular, we are expressing no opinion herein as to the price
at which the common stock of USA Waste will trade at any future time. Because of
the mechanism described in the first paragraph of this opinion for determining
the Exchange Ratio, the actual value of the shares of common stock of USA Waste
to be issued in exchange for each share of common stock of the Company pursuant
to the Merger may vary significantly. Because of the large aggregate amount of
common stock of USA Waste being issued to stockholders of the Company pursuant
to the Merger and other factors, such securities may trade initially at prices
below those at which they would trade on a fully distributed basis.
Our opinion addresses only the fairness from a financial point of view of
the consideration to be received by the stockholders of the Company pursuant to
the Merger. We do not express any views on any other terms of the Agreement or
any related agreements or arrangements, including any transactions which might
occur among USA Waste and any stockholders of the Company after the Merger.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services. We
will also receive an additional fee if the proposed Merger is consummated. We
have acted as financial advisor to the Company since 1992 and advised the
Company on the sale of Security Bureau, Inc., a wholly-owned subsidiary of the
Company. In the ordinary course of their businesses, affiliates of the
undersigned may actively trade the debt and equity securities of the Company or
USA Waste, for their own accounts, or for the accounts of customers, and
accordingly, may at any time hold a long or short position in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be received by the stockholders of the
Company in the proposed Merger is fair, from a financial point of view, to the
stockholders of the Company.
This letter is provided solely for the benefit of the Board of Directors of
the Company in connection with and for the purposes of, their consideration of
the Merger, and is not on behalf of, and shall not confer rights or remedies
upon, any stockholder of the Company or USA Waste, or any other person other
than the Board of Directors of the Company or be used for any other purpose.
This opinion may not be used or relied upon by, or disclosed, referred to or
communicated by you (in whole or in part) to any third party for any purpose
whatsoever except with our prior written consent in each instance. This opinion
may be reproduced in full in any proxy or information statement mailed to
stockholders of the Company but may not otherwise be disclosed publicly in any
manner without our prior written approval and must be treated as confidential.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ ROBERT SROKA
Name: Robert Sroka
Title: Managing Director
2
<PAGE> 233
APPENDIX D
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is entered into this
day of , 1995, by and between USA Waste Services, Inc., an
Oklahoma corporation ("USA Waste Oklahoma"), and USA Waste Services, Inc., a
Delaware corporation ("USA Waste Delaware").
WITNESSETH:
WHEREAS, USA Waste Oklahoma is a corporation organized and existing under
the laws of the State of Oklahoma, having been incorporated on September 30,
1987; and
WHEREAS, USA Waste Oklahoma has authorized the issuance of (i) 50,000,000
shares of Common Stock, par value $.01 per share, of which, as of the date
hereof, 22,678,822 shares are issued and outstanding and (ii) 10,000,000 shares
of Preferred Stock, par value $.01 per share, of which, as of the date hereof,
none of which are issued and outstanding; and
WHEREAS, USA Waste Delaware is a corporation organized and existing under
the laws of the State of Delaware, having been incorporated on April , 1995;
and
WHEREAS, USA Waste Delaware has authorized the issuance of (i) 150,000,000
shares of Common Stock, par value $.01 per share, of which, as of the date
hereof, 1,000 shares are issued and outstanding and (ii) 10,000,000 shares of
Preferred Stock, par value $.01 per share, of which, as of the date hereof, none
of which are issued and outstanding; and
WHEREAS, USA Waste Oklahoma owns all of the issued and outstanding shares
of Common Stock of USA Waste Delaware; and
WHEREAS, the respective Boards of Directors of USA Waste Oklahoma and USA
Waste Delaware have determined that, in order to change the domicile of USA
Waste Oklahoma from Oklahoma to Delaware, the merger of USA Waste Oklahoma into
USA Waste Delaware on the terms and conditions set forth in this Agreement is
desirable and in the best interests of the shareholders of USA Waste Oklahoma,
the respective Boards of Directors of USA Waste Oklahoma and USA Waste Delaware
have approved and adopted this Agreement, and the Board of Directors of USA
Waste Oklahoma has directed that this Agreement be submitted to the shareholders
of USA Waste Oklahoma for their consideration, approval and adoption;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties set forth herein and other valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. In accordance with the provisions of this Agreement, at the
Effective Time (as hereinafter defined), USA Waste Oklahoma shall be merged with
and into USA Waste Delaware (the "Merger"), which shall be the surviving
corporation and shall continue its corporate existence under the laws of the
State of Delaware under the name "USA Waste Services, Inc." (the "Surviving
Corporation") unimpaired and unaffected by the Merger. The separate corporate
existence of USA Waste Oklahoma shall cease at the Effective Time. USA Waste
Oklahoma and USA Waste Delaware are sometimes hereinafter collectively referred
to as the "Constituent Corporations."
1.2 Effective Time. The Merger shall become effective at the time of (a)
the filing of a Certificate of Merger with the Secretary of State of Delaware in
accordance with the provisions of the Delaware General Corporation Law, and (b)
the filing of a Certificate of Merger with the Secretary of State of Oklahoma in
accordance with the provisions of the Oklahoma General Corporation Act. USA
Waste Oklahoma and
<PAGE> 234
USA Waste Delaware agree to file the aforementioned Certificates of Merger at
the time of the Closing, as hereinafter defined. The date and time when the
Merger shall become effective is referred to herein as the "Effective Time."
1.3 Effect of the Merger. (a) The Surviving Corporation shall, without
transfer, thereupon and thereafter possess all assets and property of every
description, and every interest therein, wherever located, and the rights
privileges, immunities, powers, franchises and authority, of a public as well as
of a private nature, and be subject to all of the restrictions, disabilities,
and duties of each of the Constituent Corporations, and all obligations of or
belonging to or due to either of the Constituent Corporations, shall be vested
in the Surviving Corporation without further act or deed; all assets and
property of every description, and every interest therein, wherever located, and
the rights privileges, immunities, powers, franchises, and authority shall
thereafter be the property of the Surviving Corporation as effectively as when
they were the property of the Constituent Corporations, and the title to any
real estate or any interest therein vested in either of the Constituent
Corporations shall not revert or in any way be impaired by reason of the Merger;
all rights of creditors and all liens upon any property of the Constituent
Corporations existing as of the Effective Time shall be preserved unimpaired;
and all debts, liabilities, and duties of the Constituent Corporations shall
thenceforth attach to the Surviving Corporation and may be enforced against it
to the same extent as if such debts, liabilities, and duties had been incurred
for or by it; and any action or proceeding, whether civil, criminal, or
administrative, pending by or against either Constituent Corporation shall be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in any such action or proceeding.
(b) All corporate acts, plans, policies, contracts, approvals, and
authorizations of USA Waste Oklahoma and its shareholders, Board of Directors,
committees elected or appointed by its Board of Directors, officers, and agents
that were valid and effective immediately prior to the Effective Time shall be
taken for all purposes as the acts, plans, policies, contracts, approvals, and
authorizations of the Surviving Corporation and shall be effective and binding
thereon as the same were with respect to USA Waste Oklahoma. Any employees of
USA Waste Oklahoma at the Effective Time shall become employees of the Surviving
Corporation.
(c) The Constituent Corporations do hereby certify and agree that at any
time after the Effective Time the Surviving Corporation may be served with
process in the State of Oklahoma in any proceeding for enforcement of any
obligation of USA Waste Oklahoma, as well as for enforcement of any obligation
of the Surviving Corporation arising from the Merger, including any suit or
other proceeding to enforce the right of any shareholder as determined in
appraisal proceedings pursuant to the provisions of Section 1091 of the Oklahoma
General Corporation Act; the Constituent Corporations do hereby irrevocably
appoint the Secretary of State of Oklahoma as their agent to accept service of
process in any suit or other proceedings; and a copy of any process served on
the Secretary of State of Oklahoma shall be mailed to USA Waste Services, Inc.,
5000 Quorum Drive, Suite 300, Dallas, Texas 75240, Attention: Chief Financial
Officer.
1.4 Closing. The Closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of USA Waste Oklahoma at 10:00
a.m. local time, on , 1995, or at such other place and on such other
date as USA Waste Oklahoma and USA Waste Delaware may mutually agree in writing
(the "Closing Date").
1.5 Certificate of Incorporation, Bylaws, and Directors and Officers. The
Certificate of Incorporation of USA Waste Delaware, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until amended as provided by law. The Bylaws of USA Waste
Delaware, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation until amended as provided by law. The
directors and officers of USA Waste Oklahoma immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation until their respective successors shall have been
elected and qualified.
1.6 USA Waste Oklahoma's Shareholders Meeting. USA Waste Oklahoma shall
submit for consideration, approval and adoption at its 1995 Annual Meeting of
Shareholders the Merger and all other actions contemplated by this Agreement
which require approval and adoption by USA Waste Oklahoma's shareholders.
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ARTICLE 2
CONVERSION OF SHARES
2.1 Conversion. At the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof:
(a) Each share of the Common Stock, par value $.01 per share, of USA
Waste Delaware issued and outstanding immediately prior to the Effective
Time shall be retired and cancelled without payment of any consideration
therefor and without any conversions thereof.
(b) Each share of Common Stock, par value $.01 per share, of USA Waste
Oklahoma issued and outstanding immediately prior to the Effective Time
("USA Waste Oklahoma Common Stock") (except for shares of USA Waste
Oklahoma Common Stock held as treasury shares of USA Waste Oklahoma, all of
which shall be retired and cancelled) shall automatically be converted by
reason of the Merger and without any action by the holders thereof into and
become one share of Common Stock of the Surviving Corporation ("USA Waste
Delaware Common Stock"); the shares of USA Waste Oklahoma Common Stock so
converted shall cease to exist as such and shall exist only as shares of
USA Waste Delaware Common Stock.
(c) Each option to purchase shares of USA Waste Oklahoma Common Stock
outstanding immediately prior to the Effective Time under or pursuant to
USA Waste Oklahoma's 1990 Stock Option Plan, USA Waste Oklahoma's 1993
Stock Incentive Plan and Envirofil's 1993 Stock Option Plan shall continue
outstanding as an option to purchase, in lieu of the right to purchase
shares of USA Waste Oklahoma Common Stock, the same number of shares of USA
Waste Delaware Common Stock upon the same terms and conditions as
applicable immediately prior to the Effective Time under the relevant
Option Plan. To the extent that USA Waste Oklahoma has obligated itself to
issue options prior to the Merger pursuant to the aforementioned Option
Plans, the Surviving Corporation shall remain liable to issue such options
upon the satisfaction of the conditions precedent to the issuance thereof,
until such Option Plans are amended or terminated in accordance with their
respective terms.
(d) Each warrant or option (other than options included in Section
2.1(c)) to purchase shares of USA Waste Oklahoma Common Stock outstanding
immediately prior to the Effective Time shall continue outstanding as a
warrant or option to purchase, in lieu of the right to purchase each share
of USA Waste Oklahoma Common Stock, the same number of shares of USA Waste
Delaware Common Stock upon the same terms and conditions as applicable
immediately prior to the Effective Time under the relevant warrant or
option.
2.2 Exchange of Certificates. (a) If the Merger is approved by the
shareholders of USA Waste Oklahoma as described in Section 3.1(a), after the
Effective Time, each holder of an outstanding certificate or certificates
representing shares of USA Waste Oklahoma Common Stock may, but is not required
to, surrender such certificate or certificates to USA Waste Oklahoma along with
such other documents as may be deemed necessary by USA Waste Oklahoma and the
Surviving Corporation effectively to surrender and exchange such certificate or
certificates. From and after the Effective Time and until certificates
representing shares of USA Waste Oklahoma Common Stock are surrendered for
exchange or registration of transfer, all certificates that prior to the
Effective Time of the Merger represented shares of USA Waste Oklahoma Common
Stock shall be deemed for all purposes to represent and evidence the same number
of shares of USA Waste Delaware Common Stock into which they were so converted
under the terms of Section 2.1(b) of this Agreement.
(b) After the Effective Time, whenever certificates that formerly
represented USA Waste Oklahoma Common Stock are presented for exchange or
registration of transfer, the Surviving Corporation shall cause to be issued in
respect thereof certificates representing an equal number of shares of the USA
Waste Delaware Common Stock. If certificates for USA Waste Delaware Common Stock
are to be delivered to or in the name of a person other than the person in whose
name a surrendered certificate is registered, the surrendered certificate shall
be properly endorsed or otherwise be in proper form for transfer and the person
requesting the
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transfer shall pay to USA Waste Delaware all transfer or other taxes required by
reason of the change in ownership or establish to USA Waste Delaware's
satisfaction that such taxes have been or are not required to be paid.
(c) If any certificate formerly representing shares of USA Waste Oklahoma
Common Stock shall have been lost, stolen, or destroyed, upon the making of an
affidavit in form and substance satisfactory to USA Waste Delaware of that fact
by the person claiming the certificate to be lost, stolen or destroyed and
subject to such other conditions as USA Waste Delaware may reasonably impose,
USA Waste Delaware shall issue in exchange for the lost, stolen or destroyed
certificate a certificate representing the shares of USA Waste Delaware Common
Stock. When authorizing the issuance of the shares of USA Waste Delaware Common
Stock in exchange therefor, USA Waste Delaware may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such a
certificate to give USA Waste Delaware a bond or other indemnity in any amount
reasonably satisfactory to USA Waste Delaware against any claim arising against
USA Waste Delaware with respect to the stolen or destroyed certificate.
(d) All shares of USA Waste Delaware Common Stock into which USA Waste
Oklahoma Common Stock shall have been converted pursuant to this Section 2.2
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such converted shares and shall, when issued pursuant to the
provisions hereof, be validly issued, fully paid, and nonassessable.
ARTICLE 3
CONDITIONS TO CLOSING
The respective obligations of USA Waste Oklahoma and USA Waste Delaware to
enter into the Merger are subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have
been authorized and approved by the shareholders of USA Waste Oklahoma in
accordance with the provisions of Sections 1082 and 1083 of the Oklahoma
General Corporation Act and the stockholder of USA Waste Delaware in
accordance with Section 252 and 253 of the Delaware General Corporation
Law. After approval and adoption of this Agreement by the shareholders of
each of the Constituent Corporations, all required documents shall be
executed, verified, filed, and recorded and all required acts shall be done
in order to accomplish the Merger under the provisions of the applicable
statutes of the States of Oklahoma and Delaware.
(b) Listing. The shares of USA Waste Delaware Common Stock to be
issued or reserved for issuance shall have been approved for listing upon
official notice of issuance by the New York Stock Exchange.
(c) Tax Opinion. USA Waste Oklahoma shall have received, in form and
substance satisfactory to it, an opinion of Snell & Smith, P.C. with
respect to certain Federal income tax effects of the Merger.
(d) Litigation. As of the Effective Time, no action, suit or
proceeding shall have been instituted or, to the knowledge of the parties,
be pending or threatened before any court or other governmental body by any
public agency or governmental authority seeking to restrain, enjoin or
prohibit the consummation of the transactions contemplated hereby or to
seek damages on other relief in connection therewith against any officer or
director of USA Waste Oklahoma or USA Waste Delaware.
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ARTICLE 4
ABANDONMENT OF MERGER
Notwithstanding anything contained in this Agreement to the contrary, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time, whether before or after adoption and approval of this Agreement
by the shareholders of USA Waste Oklahoma:
(a) By mutual consent of the Boards of Directors of USA Waste Oklahoma
and USA Waste Delaware; or
(b) By the Board of Directors of USA Waste Oklahoma or the Board of
Directors of USA Waste Delaware if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling (which order, decree or ruling the
parties shall use their best efforts to have vacated or reversed), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree or
ruling shall have become final and nonappealable; or
(c) By the Board of Directors of USA Waste Oklahoma, if such Board of
Directors determines that the consummation of the transaction provided for
herein would not, for any reason, be in the best interests of USA Waste
Oklahoma and its shareholders.
ARTICLE 5
MISCELLANEOUS PROVISIONS
5.1 Complete Agreement. This Agreement contains a complete and exclusive
statement of the agreement of the parties with respect to the subject matter
hereof, and all prior negotiations and agreements between the parties are
superseded by this Agreement.
5.2 Waiver and Amendment. Any representation, warranty, covenant, term or
condition of this Agreement which may legally be waived, may be waived, or the
time of performance thereof extended, at any time by the party entitled to the
benefit thereof, and any term, condition or covenant hereof (including, without
limitation, the period during which any condition is to be satisfied or any
obligation performed) may be amended by the parties at any time. Any waiver,
extension or amendment shall be evidenced by any instrument in writing executed
on behalf of the appropriate party or parties or on its behalf by its Chairman,
President or any Vice President or other person who has been authorized by its
Board of Directors to execute waivers, extensions or amendments on its behalf.
5.3 Assignment; Binding Effect. This Agreement may not be assigned by
either party without the written consent of the other party. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.
5.4 Notices. Any notice, demand, claim or other communication under this
Agreement shall be in writing and shall be deemed to have been given upon the
delivery or mailing thereof, as the case may be, if delivered personally or sent
by certified mail, return receipt requested, postage prepaid, to the parties at
such address as a party may specify by notice to the other.
5.5 Additional Agreements. Subject to the terms and conditions of this
Agreement, each of the parties agrees to use its best efforts in good faith to
take or cause to be taken as promptly as practicable all action and to do or
cause to be done all things necessary or advisable to consummate and make
effective the transaction contemplated by this Agreement. In case at any time
after the Effective Time any further action is necessary or advisable to carry
out the purposes of this Agreement, each party to this Agreement shall take all
such action. If at any time the Surviving Corporation shall consider or be
advised that any further assignment or assurance in law or other action is
necessary or desirable to vest, perfect, or confirm, of record or otherwise, in
the Surviving Corporation the title to any property or rights of USA Waste
Oklahoma acquired or to be acquired as a result of the Merger, the proper
officers and directors of USA Waste Oklahoma and of the Surviving Corporation
shall be and they hereby are severally and fully authorized to execute and
deliver such
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deeds, assignments, and assurances in law and to take such other action as may
be necessary or proper in the name of USA Waste Oklahoma or the Surviving
Corporation, respectively, to vest, perfect, or confirm title to such property
or rights in the Surviving Corporation and otherwise to carry out the purpose of
this Agreement.
5.6 Governing Law. As to all matters of law, this Agreement shall be
governed by and construed in accordance with Delaware law, regardless of the
laws that might otherwise be applicable under principles of conflicts of law.
5.7 Headings. Any headings in this Agreement are solely for convenience of
reference and shall not affect its interpretation.
5.8 Execution of Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
5.9 Severability. If any provision of this Agreement is held or deemed to
be, or in fact is, invalid, inoperative or unenforceable for any reason, this
Agreement shall be construed as though such invalid, inoperative or
unenforceable provision had never been contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
<TABLE>
<S> <C>
ATTEST: USA WASTE SERVICES, INC.,
an Oklahoma corporation
__________________________ By:________________________
Name: Gregory T. Sangalis Name:
Title: Secretary Title:
ATTEST: USA WASTE SERVICES, INC.,
a Delaware corporation
__________________________ By:________________________
Name: Gregory T. Sangalis Name:
Title: Secretary Title:
</TABLE>
DD-6
<PAGE> 239
APPENDIX E
CERTIFICATE OF INCORPORATION
OF
USA WASTE SERVICES, INC.
First: The name of the Corporation is USA Waste Services, Inc.
Second: The registered office of the Corporation in the State of Delaware
is located at Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name and address of its registered agent
is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware.
Third: The nature of the business, objects and purposes to be transacted,
promoted or carried on by the Corporation is:
To engage in any lawful activity for which corporations may be
organized under the General Corporation Law of Delaware.
Fourth: The total number of shares of capital stock which the Corporation
shall have authority to issue is one hundred sixty million (160,000,000),
divided into one hundred fifty million (150,000,000) shares of Common Stock of
the par value of one cent ($0.01) per share and ten million (10,000,000) shares
of Preferred Stock of the par value of one cent ($0.01) per share.
A. No holder of Common Stock or Preferred Stock of the Corporation shall
have any pre-emptive, preferential, or other right to purchase or subscribe for
any shares of the unissued stock of the Corporation or of any stock of the
Corporation to be issued by reason of any increase of the authorized capital
stock of the Corporation or of the number of its shares, or of any warrants,
options, or bonds, certificates of indebtedness, debentures, or other securities
convertible into or carrying options or warrants to purchase stock of the
Corporation or of any stock of the Corporation purchased by it or its nominee or
nominees or other securities held in the treasury of the Corporation, whether
issued or sold for cash or other consideration or as a dividend or otherwise,
other than such rights, if any, as the Board of Directors in its discretion from
time to time may grant and at such price as the Board of Directors in its
discretion may fix.
B. The holders of Common Stock shall have the right to one vote per share
on all questions to the exclusion of all other classes of stock, except as by
law expressly provided or as otherwise herein expressly provided with respect to
the holders of any other class or classes of stock.
C. The Board of Directors is authorized, subject to limitations prescribed
by law, by resolution or resolutions to provide for the issuance of shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences, and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof. The authority of the Board
with respect to each series shall include, but not be limited to, determination
of the following:
(1) The number of shares constituting that series and the distinctive
designation of that series;
(2) The dividend rights and dividend rate on the shares of that
series, whether dividends shall be cumulative, and, if so, from which date
or dates, and the relative rights of priority, if any, of payment of
dividends on shares of that series;
(3) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(4) Whether that series shall have conversion or exchange privileges,
and, if so, the terms and conditions of such conversion or exchange
including provision for adjustment of the conversion or exchange rate in
such events as the Board of Directors shall determine;
<PAGE> 240
(5) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per
share payable in cash on redemption, which amount may vary under different
conditions and at different redemption dates;
(6) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of
such sinking fund;
(7) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of that
series;
(8) Any other relative rights, preferences and limitations of that
series; or
(9) Any or all of the foregoing terms.
D. Except where otherwise set forth in the resolution or resolutions
adopted by the Board of Directors of the Corporation providing for the issue of
any series of Preferred Stock created thereby, the number of shares comprising
such series may be increased or decreased (but not below the number of shares
then outstanding) from time to time by like action of the Board of Directors of
the Corporation. Should the number of shares of any series be so decreased, the
shares constituting such decrease shall resume the status which they had prior
to adoption of the resolution originally fixing the number of shares of such
series.
E. Shares of any series of Preferred Stock which have been redeemed
(whether through the operation of a sinking fund or otherwise), purchased or
otherwise acquired by the Corporation, or which, if convertible or exchangeable,
have been converted into or exchanged for shares of stock of any other class or
classes, shall have the status of authorized and unissued shares of Preferred
Stock and may be reissued as a part of the series of which they were originally
a part or may be reclassified or reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of Directors or as
part of any other series of Preferred Stock, all subject to the conditions or
restrictions adopted by the Board of Directors of the Corporation providing for
the issue of any series of Preferred Stock and to any filing required by law.
Fifth: The name and mailing address of the incorporator is John T. Unger
and his mailing address is 1000 Louisiana, Suite 3650, Houston, Texas
77002-5012.
Sixth: The Corporation is to have perpetual existence.
Seventh: Elections of directors need not be by written ballot unless the
bylaws of the Corporation shall so provide. Meetings of stockholders may be held
within or without the State of Delaware, as the bylaws may provide. The books of
the Corporation may be kept (subject to any provision contained in the statutes
of the State of Delaware) outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
bylaws of the Corporation.
Eighth: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of Delaware or any
amendment thereto or successor provision thereto, or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of Delaware hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
General Corporation Law of Delaware. Neither this Certificate of Incorporation
nor any amendment, alteration, or repeal of this Article Eighth, nor the
adoption of any provision of the Certificate of Incorporation inconsistent with
this Article Eighth, shall adversely effect, eliminate, or reduce any right or
protection of a director of the Corporation hereunder with respect to any act,
omission or matter occurring, or any action, suit, or claim that, but for this
Article Eighth, would accrue or arise, prior to the time of such
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<PAGE> 241
amendment, modification, repeal, or adoption of an inconsistent provision. All
references in this Article to a "director" shall also be deemed to refer to such
person or persons, if any, who pursuant to a provision of the Certificate of
Incorporation in accordance with subsection (a) of Section 141 of the Delaware
General Corporation Law, exercise or perform any of the powers or duties
otherwise conferred or imposed upon the board of directors by the Delaware
General Corporation Law.
Ninth: This Corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request shall
advance expenses to any person who is or was a party or is threatened to be made
a party to any threatened, pending or completed action, suit, proceeding or
claim, whether civil, criminal, administrative or investigative, by reason of
the fact that such person is or was or has agreed to be a director or officer of
this Corporation or any of its direct or indirect subsidiaries or while such a
director or officer is or was serving at the request of this Corporation as a
director, officer, partner, trustee, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, against expenses (including attorney's fees
and expenses), judgments, fines, penalties and amounts paid in settlement
incurred in connection with the investigation, preparation to defend or defense
of such action, suit, proceeding or claim; provided, however, that the foregoing
shall not require this Corporation to indemnify or advance expenses to any
person in connection with any action, suit, proceeding, claim or counterclaim
initiated by or on behalf of such person. Such indemnification shall not be
exclusive of other indemnification rights arising under any bylaws, agreement,
vote of directors or stockholders or otherwise and shall inure to the benefit of
the heirs and legal representatives of such person. Any person seeking
indemnification under this Article Ninth shall be deemed to have met the
standard of conduct required for such indemnification unless the contrary shall
be established.
Tenth: (A) Except as otherwise provided in this Certificate of
Incorporation or the Bylaws of the Corporation relating to the rights of the
holders of any class or series of Preferred Stock, voting separately by class or
series, to elect additional directors under specified circumstances, the number
of directors of the Corporation shall be as fixed from time to time by, or in
the manner provided in, the bylaws of the Corporation. Unless approved by at
least two-thirds of the incumbent directors, the number of directors which shall
constitute the whole Board of Directors shall be no fewer than three and no more
than nine.
(B) Commencing with the election of directors at the 1995 Annual Meeting of
Stockholders, the directors, other than those who may be elected by the holders
of any class or series of Preferred Stock voting separately by class or series,
shall be classified, with respect to the time for which they severally hold
office, into three classes, Class I, Class II and Class III, which shall be as
nearly equal in number as possible, as shall be provided in the manner specified
in the bylaws of the Corporation. Each initial director in Class I shall hold
office for a term expiring at the 1996 annual meeting of stockholders; each
initial director of Class II shall hold office initially for a term expiring at
the 1997 annual meeting of stockholders; and each initial director of Class III
shall hold office for a term expiring at the 1998 annual meeting of
stockholders. Notwithstanding the foregoing provision of this Article, each
director shall serve until his successor is duly elected and qualified or until
his earlier death, resignation or removal. At each annual meeting of
stockholders following the 1995 annual meeting, the successors to the class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election and until their successors have been duly
elected and qualified or until their earlier death, resignation or removal.
(C) Except as otherwise provided pursuant to the provisions of this
Certificate of Incorporation or the bylaws of the Corporation relating to the
rights of the holders of any class or series of Preferred Stock, voting
separately by class or series, to elect directors under specified circumstances,
any director or directors may be removed from office at any time, with or
without cause but only by the affirmative vote, at any regular meeting or
special meeting (as the case may be) of the Board of Directors or of the
stockholders, of not less than two-thirds of the incumbent members of the Board
of Directors (not taking into account the directors being removed) or two-thirds
of the total number of votes of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, but only if notice of such proposal was contained in
the notice of such meeting.
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<PAGE> 242
(D) In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be appointed or determined by the Board of Directors
among the three classes of directors so as to maintain such classes as nearly
equal as possible. No decrease in the number of directors constituting the Board
of Directors shall shorten the term of any incumbent director.
(E) Vacancies in the Board of Directors, however caused, and newly-created
directorships shall be filled solely by a majority vote of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for a term expiring at the annual meeting of stockholders at which the term of
the class to which the director has been chosen expires and when the director's
successor is elected and qualified, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.
(F) Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filing of
vacancies, and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
Tenth unless expressly provided by such terms.
(G) Notwithstanding any other provision of this Certificate of
Incorporation or the bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Certificate of
Incorporation or the bylaws of the Corporation), the affirmative vote, at any
regular meeting or special meeting of the stockholders, of not less than
two-thirds of the total number of votes of the then outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend or
repeal, or to adopt any provision inconsistent with the purpose or intent of,
this Article Tenth, but only if notice of the proposed alteration or amendment
was contained in the notice of such meeting.
Eleventh: The names and mailing addresses of the initial directors who are
to serve as directors until the first annual meeting of stockholders or until
their successors are elected and qualify are:
<TABLE>
<CAPTION>
NAME ADDRESS
------------------------- -----------------------------
<S> <C>
Donald F. Moorehead, Jr. 5000 Quorum Drive, Suite 300
Dallas, Texas 75240
John E. Drury 5000 Quorum Drive, Suite 300
Dallas, Texas 75240
David Sutherland-Yoest 5000 Quorum Drive, Suite 300
Dallas, Texas 75240
</TABLE>
Twelfth: In furtherance of, and not in limitation of, the powers conferred
by statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the bylaws of the Corporation, or adopt new bylaws, without any action on
the part of the stockholders; provided, however, that no such adoption,
amendment or repeal shall be valid with respect to bylaw provisions which have
been adopted, amended or repealed by the stockholders; and further provided,
that bylaws adopted or amended by the Directors and any powers thereby conferred
may be amended, altered or repealed by the stockholders.
Thirteenth: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provision of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the
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<PAGE> 243
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
Fourteenth: The Corporation reserves the right at any time, and from time
to time, to amend, alter, change, or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences, and privileges
of whatsoever nature conferred upon stockholders, directors, or any other
persons whomsoever by and pursuant to this Certificate of Incorporation in its
present form or as hereafter amended are granted subject to the rights reserved
in this Article; provided, however, that the Corporation shall not amend Article
Tenth to be effective on a date other than a date on which directors are to be
elected.
I, the undersigned being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this certificate, hereby declaring that this is my act and
deed and that the facts herein stated are true, and accordingly have hereunto
set my hand this 27th day of April, 1995.
------------------------------------
JOHN T. UNGER
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<PAGE> 244
APPENDIX F
BY-LAWS
OF
USA WASTE SERVICES, INC.
ARTICLE I
OFFICES
SECTION 1.1. Registered Office. The registered office of the Corporation
required by the General Corporation Law of the State of Delaware to be
maintained in the State of Delaware shall be the registered office named in the
original Certificate of Incorporation of the Corporation, or such other office
as may be designated from time to time by the Board of Directors in the manner
provided by law. Should the Corporation maintain a principal office or place of
business within the State of Delaware, such registered office need not be
identical to such principal office or place of business of the Corporation.
SECTION 1.2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. Place of Meetings. All meetings of the stockholders shall be
held at the principal office of the Corporation, or at such other place either
within or without the State of Delaware and at such date and time as shall be
designated from time to time by the Board of Directors and stated in the notice
or waivers of notice of the meeting.
SECTION 2.2. Voting List. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order for each class of stock, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be opened to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
SECTION 2.3. Annual Meetings. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, within or without the State of Delaware, on such
date, and at such time as the Board of Directors shall fix each year and set
forth in the notice of the meeting, which date shall be within 13 months
subsequent to the later of the date of incorporation or the last annual meeting
of stockholders.
SECTION 2.4. Special Meeting. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board (if
any), by the Chief Executive Officer, or by written order of a majority of the
directors, but such special meetings may not be called by any other person or
persons. The Chairman, Chief Executive Officer, or directors so calling any such
meeting shall fix the date and time of, and the place (either within or without
the State of Delaware) for, the meeting.
SECTION 2.5. Notice of Meeting. Written notice of the annual, and each
special meeting of stockholders, stating the place, date and hour and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be given to each stockholder entitled to vote thereat, not less
than ten nor more than
<PAGE> 245
60 days before the meeting. Such notice may be delivered either personally or by
mail. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the Corporation.
SECTION 2.6. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at any meeting of stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Notwithstanding the other provisions of the Certificate of Incorporation or
these by-laws, the chairman of the meeting or the holders of a majority of the
shares of such stock, present in person or represented by proxy, although not
constituting a quorum, shall have power to adjourn, postpone, or recess the
meeting from time to time, without notice other than announcement at the meeting
of the time and place of the adjourned, postponed, or recessed meeting. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum shall be present or represented any business
may be transacted which might have been transacted at the meeting as originally
notified.
SECTION 2.7. Voting. When a quorum is present at any meeting of the
stockholders, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which, by express
provision of the statutes, of the Certificate of Incorporation or of these
by-laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question. Where a separate vote by
class is required, the affirmative vote of the majority of shares of such class
present in person or represented by proxy at the meeting shall be the act of
such class. Every stockholder having the right to vote at a meeting of
stockholders or to express consent or dissent to a corporate action in writing
without a meeting shall be entitled to vote in person, or by proxy appointed by
an instrument in writing subscribed by such stockholder, bearing a date not more
than three years prior to voting, unless such instrument provides for a longer
period, and filed with the Secretary of the Corporation, or such other officer
as the Board of Directors may from time to time determine by resolution, before,
or at the time of, the meeting.
All proxies shall be received and taken charge of and all ballots shall be
received and canvassed by the secretary of the meeting who shall decide all
questions touching upon the qualification of voters, the validity of the
proxies, and the acceptance or rejection of votes, unless an inspector or
inspectors shall have been appointed by the chairman of the meeting, in which
event such inspector or inspectors shall decide all such questions. Each proxy
shall be revocable unless expressly provided therein to be irrevocable and
coupled with an interest sufficient in law to support an irrevocable power. If
such instrument shall designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all the powers of voting or giving consents thereby conferred,
or if only one be present, then such powers may be exercised by that one, or, if
an even number attend and a majority do not agree on any particular issue, each
proxy so attending shall be entitled to exercise such powers in respect of the
same portion of the shares as he is of the proxies representing such shares.
SECTION 2.8. Voting of Stock of Certain Holders; Elections: Inspectors.
Shares standing in the name of another corporation, domestic or foreign, may be
voted by such officer, agent or proxy as the by-laws of such corporation may
prescribe, or in the absence of such provision, as the Board of Directors of
such corporation may determine. Shares standing in the name of a deceased person
may be voted by the executor or administrator of such deceased person, either in
person or by proxy. Shares standing in the name of a guardian, conservator or
trustee may be voted by such fiduciary, either in person or by proxy, but no
fiduciary shall be entitled to vote shares held in such fiduciary capacity
without a transfer of such shares into the name of such fiduciary. Shares
standing in the name of a receiver may be voted by such receiver. A stockholder
whose shares are pledged shall be entitled to vote such shares, unless in the
transfer by the pledgor on the books of
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<PAGE> 246
the Corporation, he has expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent the stock and vote
thereon.
If shares or other securities having voting power stand of record in the
names of two or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise, or if
two or more persons have the same fiduciary relationship respecting the same
shares, unless the Secretary of the Corporation is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect:
(a) If only one votes, his act binds all;
(b) If more than one vote, the act of the majority so voting binds
all;
(c) If more than one vote, but the vote is evenly split on any
particular matter, each fraction may vote the securities in question
proportionally, or any person voting the shares, or a beneficiary, if any,
may apply to the Court of Chancery or such other court as may have
jurisdiction to appoint an additional person to act with the persons so
voting the shares, which shall then be voted as determined by a majority of
such persons and the person appointed by the Court. If the instrument so
filed shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of this subsection shall be a majority or
even-split in interest.
All voting of stockholders shall be taken by written ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
At any meeting at which a vote is taken by ballots, the chairman of the meeting
may appoint one or more inspectors, each of whom shall subscribe an oath or
affirmation to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. Such inspector
shall receive the ballots, count the votes and make and sign a certificate of
the result thereof. The chairman of the meeting may appoint any person to serve
as inspector, except no candidate for the office of director shall be appointed
as inspector.
Unless otherwise provided in the Certificate of Incorporation, cumulative
voting for the election of directors shall be prohibited.
SECTION 2.9. Conduct of Meeting. The meetings of the stockholders shall be
presided over by the Chairman of the Board (if any), or if he is not present, by
the Vice Chairman of the Board (if any, but if there is more than one, the Vice
Chairman who is senior in terms of time as such), or if neither the Chairman of
the Board (if any) nor the Vice Chairman of the Board (if any) is present, by
the President, or if neither the Chairman of the Board (if any), the Vice
Chairman of the Board (if any) nor President is present, by a chairman elected
at the meeting. The Secretary of the Corporation, if present, shall act as
secretary of such meetings, or if he is not present, an Assistant Secretary
shall so act; if neither the Secretary nor an Assistant Secretary is present,
then a secretary shall be appointed by the chairman of the meeting. The chairman
of any meeting of stockholders shall determine the order of business and the
procedure at the meeting, including such regulation of the manner of voting and
the conduct of discussion as seem to him in order. Unless the chairman of the
meeting of stockholders shall otherwise determine, the order of business shall
be as follows:
(a) Calling of meeting to order.
(b) Election of a chairman and the appointment of a secretary if
necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of a
quorum.
(e) Reading and settlement of the minutes of the previous meeting.
(f) Reports of officers and committees.
(g) The election of directors if an annual meeting, or a meeting
called for that purpose.
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(h) Unfinished business.
(i) New business.
(j) Adjournment.
SECTION 2.10. Treasury Stock. The Corporation shall not vote, directly or
indirectly, shares of its own stock owned by it; and such shares shall not be
counted in determining the total number of outstanding shares.
SECTION 2.11. Fixing Record Date. The Board of Directors may fix in advance
a date, not exceeding 60 days preceding the date of any meeting of stockholders
or any adjournment thereof, or the date for payment of any dividend or
distribution, or the date for the allotment of rights, or the date when any
change, or conversion or exchange of capital stock shall go into effect, or a
date in connection with obtaining express consent to corporate action in writing
without a meeting, as a record date for the determination of the stockholders
entitled to notice of or to vote at, any such meeting and any adjournment
thereof, or entitled to receive payment of such dividend or distribution, or to
receive any such allotment of rights, or to exercise the rights in respect of
any such change, conversion or exchange of capital stock, or to give such
consent, and in such case such stockholders and only such stockholders as shall
be stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, any such meeting and any adjournment thereof, or to receive
payment of such dividends or distribution, or to receive such allotment of
rights, or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
any such record dated fixed as aforesaid. With respect to a meeting of
stockholders, the record date shall not be less than ten days before the date of
such meeting.
If the Board of Directors does not fix a record date for any meeting of the
stockholders, the record date for determining stockholders entitled to notice of
or to vote at such meeting shall be at the close of business on the day next
preceding the day on which notice is given, or, if in accordance with Section
5.2 of these by-laws notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 2.12. Stockholder Proposals. At an annual or special meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual or special
meeting business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Chairman of the Board,
the President, or the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Chairman of the Board, the President,
or the Board of Directors, or (c) otherwise properly brought before the meeting
by a stockholder.
No proposal by a stockholder shall be presented at an annual or special
meeting of stockholders unless such stockholder shall provide the Board of
Directors or the Secretary of the Corporation with timely written notice of
intention to present a proposal for action at the forthcoming meeting of
stockholders, which notice shall include (a) the name and address of such
stockholder, (b) the number of voting securities he or she holds of record and
which he or she holds beneficially, (c) the text of the proposal to be presented
at the meeting, (d) a statement in support of the proposal, and (e) any material
interest of the stockholder in such proposal. To be timely, a stockholder's
notice with respect to an annual meeting of stockholders must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than 120 days nor more than 150 days in advance of the date the
Corporation's proxy statement was released to stockholders in connection with
the previous year's annual meeting of stockholders; provided, however, that if
no annual meeting was held the previous year or the date of the annual meeting
has been changed by more than 30 calendar days from the date contemplated at the
time of the previous year's proxy statement, notice by the stockholder to be
timely must be so received at least 80 days prior to the date the Corporation
intends to distribute its proxy statement with respect to such meeting. To be
timely, a stockholder's notice with respect to a special meeting must be
delivered to or mailed and received at the principal executive offices of the
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Corporation, not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the fifth (5th) day following the day on which such notice
of the date of the special meeting was mailed or such public disclosure was
made. Any stockholder may make any other proposal at an annual or special
meeting of stockholders and the same may be discussed and considered, but unless
stated in writing and filed with the Board of Directors or the Secretary prior
to the date set forth above, no action with respect to such proposal shall be
taken at such meeting and such proposal shall be laid over for action at an
adjourned, special, or annual meeting of the stockholders taking place no
earlier than 120 days after such meeting.
This provision shall not prevent the consideration and approval or
disapproval at an annual meeting of reports of officers, directors, and
committees; but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as provided in this Section
2.12. Notwithstanding anything in the by-laws to the contrary, no business shall
be conducted at any annual or special meeting except in accordance with the
procedures set forth in this Section 2.12. The chairman of the annual meeting or
a special meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 2.12, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Notwithstanding any other provision of these by-laws, the Corporation shall
be under no obligation to include any stockholder proposal in its proxy
statement materials or otherwise present any such proposal to stockholders at a
special or annual meeting of stockholders if the Board of Directors reasonably
believes the proponents thereof have not complied with Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder, and the Corporation shall not be required to include in
its proxy statement material to stockholders any stockholder proposal not
required to be included in its proxy material to stockholders in accordance with
such Act, rules, or regulations.
SECTION 2.13. Nomination of Directors. Only persons who are nominated in
accordance with the procedures of this Section 2.13 shall be eligible for
election as directors. Subject to the rights of holders of any class or series
of stock having a preference over the common stock as to dividends or upon
liquidation, nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote in the election of directors
generally who complies with the notice procedures set forth in this Section
2.13. Any stockholder entitled to vote in the election of directors generally
may nominate one or more persons for election as a director at a meeting only if
timely written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by U.S. mail, first
class postage prepaid, return receipt requested, to the Secretary of the
Corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation not less than 120
days nor more than 150 days in advance of the date the Corporation's proxy
statement was released to stockholders in connection with the previous year's
annual meeting of stockholders; provided, however, that if no annual meeting was
held the previous year or the date of the annual meeting has been changed by
more than 30 calendar days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received at least 80 days prior to the date the Corporation intends to
distribute its proxy statement with respect to such meeting. Each such notice
shall set forth: (a) the name and address of the stockholder who intends to make
the nomination, (b) the name, age, business address, and home address of the
person or persons to be nominated; (c) the principal occupation of the person or
persons nominated; (d) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting and intends to appear at the
meeting to nominate the person or persons specified in the notice; (e) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (f) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the rules of the Securities and Exchange Commission, had the nominee
been nominated, or
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intended to be nominated, by the Board of Directors; and (g) the consent of each
nominee to serve as a director of the Corporation if so elected. At the request
of the Board of Directors any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section
2.13. The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the by-laws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. Powers. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors, which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation or by these by-laws directed
or required to be exercised or done by the stockholders.
SECTION 3.2. Number, Election and Term. Except as otherwise provided in the
Certificate of Incorporation relating to the rights of the holders of any class
or series of Preferred Stock, voting separately by class or series, to elect
additional directors under specified circumstances, the number of directors of
the Corporation shall initially be the number specified in the Certificate of
Incorporation, and subject to the following sentence, such number may be
increased or decreased by a resolution duly adopted by the Board of Directors.
Unless approved by at least two-thirds of the incumbent directors, the number of
directors which shall constitute the whole Board of Directors shall be no fewer
than three and no more than nine. Unless otherwise provided in the Certificate
of Incorporation, directors need not be residents of Delaware or stockholders of
the Corporation.
Commencing with the election of directors at the 1995 annual meeting of
stockholders, the directors, other than those who may be elected by the holders
of any class or series of Preferred Stock, voting separately by class or series,
shall be classified, with respect to the time for which they severally hold
office, into three classes, Class I, Class II and Class III, which shall be as
nearly equal in number as possible, as shall be provided in a resolution duly
adopted by the Board of Directors. Each initial director in Class I shall hold
office for a term expiring at the 1996 annual meeting of stockholders; each
initial director of Class II shall hold office initially for a term expiring at
the 1997 annual meeting of stockholders; and each initial director of Class III
shall hold office for a term expiring at the 1998 annual meeting of
stockholders. Notwithstanding the foregoing provision of this Article, each
director shall serve until his successor is duly elected and qualified or until
his earlier death, resignation or removal. At each annual meeting of
stockholders following the 1995 annual meeting, the successors to the class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election and until their successors have been duly
elected and qualified or until their earlier death, resignation or removal.
SECTION 3.3. Vacancies, Additional Directors and Removal From Office.
Except as otherwise provided pursuant to the provisions of the Certificate of
Incorporation relating to the rights of the holders of any class or series of
Preferred Stock, voting separately by class or series, to elect directors under
specified circumstances, any director or directors may be removed from office at
any time, with or without cause but only by the affirmative vote, at any regular
meeting or special meeting (as the case may be) of the Board of Directors or of
the stockholders, of not less than two-thirds of the incumbent members of the
Board of Directors (not taking into account the directors being removed) or
two-thirds of the total number of votes of the then outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, but only if notice of such
proposal was contained in the notice of such meeting.
In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be appointed or determined by the
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Board of Directors among the three classes of directors so as to maintain such
classes as nearly equally as possible. Vacancies in the Board of Directors,
however caused, and newly-created directorships shall be filled solely by a
majority vote of the directors then in office, whether or not a quorum, and any
director so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of the class to which the director has been
chose expires and when the director's successor is elected and qualified,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
SECTION 3.4. Regular Meeting. A regular meeting of the Board of Directors
shall be held each year, without notice other than this by-law, at the place of,
and immediately following, the annual meeting of stockholders if a quorum is
present; and other regular meetings of the Board of Directors shall be held each
year, at such time and place as the Board of Directors may provide, by
resolution, either within or without the State of Delaware, without notice other
than such resolution.
SECTION 3.5. Special Meeting. A special meeting of the Board of Directors
may be called by the Chairman of the Board (if any) or by the Chief Executive
Officer and shall be called by the Secretary on the written request of any two
directors. The Chairman or Chief Executive Officer so calling, or the directors
so requesting, any such meeting shall fix the time and place, either within or
without the State of Delaware, of holding such meeting.
SECTION 3.6. Notice of Special Meeting. Personal written, telegraphic,
cable or wireless notice of special meetings of the Board of Directors shall be
given to each director at least 24 hours prior to the time of such meeting. Any
director may waive notice of any meeting. The attendance of a director at any
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened.
SECTION 3.7. Place of Meetings; Order of Business. The directors may hold
their meetings and may have an office and keep the books of the Corporation,
except as otherwise provided by law, in such place or places, within or without
the State of Delaware, as the Board of Directors may from time to time determine
by resolution. The Chairman of the Board shall preside at all meetings of the
Board of Directors. In the absence of the Chairman of the Board, a Chairman
shall be elected from the directors present. The Secretary of the Corporation
shall act as Secretary of all meetings of the directors; but in the absence of
the Secretary, the Chairman may appoint any person to act as Secretary of the
meeting. At all meetings of the Board of Directors business shall be transacted
in such order as shall from time to time be determined by the Chairman of the
Board, or in his absence by the director elected as chairman of the meeting.
SECTION 3.8. Quorum and Participation. A majority of the Board of Directors
shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors, and the act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute, by the Certificate
of Incorporation or by these by-laws. Members of the Board of Directors, may
participate in a meeting of the Board of Directors or such committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other and such participation shall constitute presence in person and
attendance at such meeting, except where a person participates in the meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened. If a quorum shall
not be present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
SECTION 3.9. Presumption of Assent. A director who is present at a meeting
of the Board of Directors at which action on any corporate matter is taken shall
be presumed to have assented to the action unless his dissent shall be entered
in the minutes of the meeting or unless he shall file his written dissent to
such action with the person acting as secretary of the meeting before the
adjournment thereof. Such right to dissent shall not apply to a director who
voted in favor of such action.
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SECTION 3.10. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof as provided in Article IV of these by-laws, may be taken without a
meeting, if a written consent thereto is signed by all members of the Board or
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board or committee. Such consent shall have
the same force and effect as a unanimous vote at a meeting, and may be stated as
such in any document or instrument filed with the Secretary of State of
Delaware.
SECTION 3.11. Compensation. Unless otherwise restricted by the Certificate
of Incorporation, the Board of Directors shall have the authority to fix the
compensation of directors. No provision of these by-laws shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
SECTION 3.12. Approval or Ratification of Acts or Contracts by
Stockholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the stockholders,
or at any special meeting of the stockholders called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by the vote of the stockholders holding a majority of
the issued and outstanding shares of stock of the Corporation entitled to vote
and present in person or by proxy at such meeting (provided that a quorum is
present), shall be as valid and as binding upon the Corporation and upon all the
stockholders as if it has been approved or ratified by every stockholder of the
Corporation. In addition, any such act or contract may be approved or ratified
by the written consent of stockholders holding a majority of the issued and
outstanding shares of capital stock of the Corporation entitled to vote and such
consent shall be as valid and as binding upon the Corporation and upon all the
stockholders as if it had been approved or ratified by every stockholder of the
Corporation.
ARTICLE IV
COMMITTEE OF DIRECTORS
SECTION 4.1. Designation, Powers and Name. The Board of Directors shall
designated an Executive Committee, a Compensation Committee, and an Audit
Committee and may, by resolution passed by a majority of the whole Board,
designate one or more other committees, each such committee to consist of one or
more of the directors of the Corporation. Any such designated committee shall
have and may exercise such of the powers and authority of the Board of Directors
in the management of the business and affairs of the Corporation as may be
provided in these by-laws or such resolution. Any such designated committee may
authorize the seal of the Corporation to be affixed to all papers which may
require it. No such committee shall have the power or authority in reference to
amending the Certificate of Incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the Board of Directors as provided by statute, fix
the designation and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
by-laws of the Corporation; and, unless the resolution, by-laws, or Certificate
of Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger. The Board of Directors may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of such committee. In the absence
or disqualification of any member of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Such committee or committees shall have such name or names
and such
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limitations of authority as may be determined from time to time by the by-laws
or the resolution adopted by the Board of Directors.
SECTION 4.2. Executive Committee. The Executive Committee of the Board of
Directors (the "Executive Committee") shall consist of not less than two
directors to be designated by the Board of Directors. None of the members of the
Executive Committee need be officers of the Corporation. The Executive Committee
shall have and may exercise all of the powers of the Board of Directors during
the period between meetings of the Board of Directors except as reserved to the
Board of Directors or as delegated by these by-laws or by the Board of Directors
to another standing committee or as may be prohibited by law and, except
further, that the Executive Committee shall not have the power to elect officers
of the Corporation.
SECTION 4.3. Compensation Committee. The Compensation Committee of the
Board of Directors (the "Compensation Committee") shall consist of not less than
three directors, a majority of whom shall be "outside" (as hereinafter defined)
directors of the Corporation, to be designated by the Board of Directors. The
term "outside" director, as used in this Section, shall mean a director of the
Corporation who is independent of management and not an officer, employee,
agent, or affiliate (except as a director) of the Corporation. The Compensation
Committee shall have and may exercise all of the powers of the Board of
Directors during the period between meetings of the Board of Directors, except
as may be prohibited by law, with respect to (i) studying, recommending,
adopting, implementing, administering, determining, and authorizing the amount,
terms, and conditions of payment of any and all forms of compensation for the
Corporation's directors, officers, employees, and agents and (ii) approving and
administering any loan to, guarantee of any obligation of, or other assistance
to any officer or other employee of the Corporation or any of its subsidiaries,
including any officer or employee who is a director of the Corporation or any of
its subsidiaries.
SECTION 4.4. Audit Committee. The Audit Committee of the Board of Directors
(the "Audit Committee") shall consist of not less than two directors, all of
whom shall be "outside" (as hereinafter defined) directors of the Corporation,
to be designated by the Board of Directors. The term "outside" director, as used
in this Section, shall mean a director of the Corporation who is independent of
management and not an officer, employee, agent, or affiliate (except as a
director) of the Corporation and who is free from any relationship that, in the
opinion of the Board of Directors, would interfere with the designated
director's exercise of independent judgment as a committee member. The Audit
Committee shall have and may exercise all of the powers of the Board of
Directors, except as may be prohibited by law, with respect to (i) the selection
and recommendation for employment by the Corporation, subject to approval by the
Board of Directors and the stockholders, of a firm of certified public
accountants to audit the books and accounts of the Corporation and its
subsidiaries for the fiscal year in which they are appointed and who shall
report to the Audit Committee, (ii) reviewing the audit and other work and
reports submitted by the certified public accountants, conferring with the
auditors, and reporting thereon to the Board of Directors with such
recommendations as the Audit Committee may deem appropriate, (iii) reviewing
annually the maintenance and safekeeping of the Corporation's books and records,
(iv) meeting with the Corporation's principal financial and accounting officers,
the certified public accountants and auditors, and other officers and employees
of the Corporation as the Audit Committee shall deem necessary in order to
determine the adequacy of the Corporation's accounting principles and operating
policies, controls, and practices, its public financial reporting policies and
practices, and the results of the Corporation's annual audit, and (v) retaining
such professional assistance, including outside counsel, auditors, and others,
as the Audit Committee shall deem necessary or advisable, in connection with the
exercise of its powers on such terms as the Audit Committee shall deem necessary
or advisable to protect the interests of the stockholders of the Corporation.
SECTION 4.5. Procedure; Meetings; Quorum. Any committee designated pursuant
to Sections 4.1, 4.2, 4.3, or 4.4 shall choose its own chairman, shall keep
regular minutes of its proceedings and report the same to the Board of Directors
when requested, shall fix its own rules or procedures, and shall meet at such
times and at such place or places as may be provided by such rules, or by
resolution of such committee or resolution of the Board of Directors. At every
meeting of any such committee, the presence of a majority of all the members
thereof shall constitute a quorum and the affirmative vote of a majority of the
members present shall be necessary for the adoption by it of any resolution.
Unless otherwise restricted by the Certificate of Incorporation or by these
by-laws, the members of any committee designated by these by-laws or the Board
of
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Directors, may participate in a meeting of such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting may hear each other, and such participation shall
constitute presence in person at such meeting. Unless otherwise restricted by
the Certificate of Incorporation or these by-laws, any action required or
permitted to be taken at any meeting of any committee of the Board of Directors
may be taken without a meeting if all members of such committee consent thereto
in writing and the writing or writings are filed with the minutes of the
proceedings of the committee.
SECTION 4.6. Compensation. Members of special or standing committees may be
allowed compensation for attending committee meetings, if the Board of Directors
shall so determine.
ARTICLE V
NOTICE
SECTION 5.1. Methods of Giving Notice. Whenever under the provisions of the
statutes, the Certificate of Incorporation or these by-laws, notice is required
to be given to any director, member of any committee or stockholder, such notice
shall be in writing and delivered personally or mailed to such director, member
or stockholder; provided that in the case of a director or a member of any
committee such notice may be given orally or by telephone, telegram,
telegraphic, cable or wireless transmission. If mailed, notice to a director,
member of a committee or stockholder shall be deemed to be given when deposited
in the United States mail first class in a sealed envelope, with postage therein
prepaid, addressed, in the case of a stockholder, to the stockholder at the
stockholder's address as it appears on the records of the corporation or, in the
case of a director or a member of a committee, to such person at his business
address. If sent by telegram, notice to a director or member of a committee
shall be deemed to be given when the telegram, so addressed, is delivered to the
telegraph company. Notice shall be deemed to have been given on the date of any
telegraphic, cable or wireless transmission.
SECTION 5.2. Written Waiver. Whenever any notice is required to be given
under the provisions of the statutes, the Certificate of Incorporation or these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation or the by-laws.
ARTICLE VI
OFFICERS
SECTION 6.1. Officers. The officers of the Corporation shall be a Chairman
of the Board, one or more Vice Chairmen of the Board, a Chief Executive Officer,
a President, one or more Vice Presidents, any one or more of which may be
designated Executive Vice President or Senior Vice President, a Secretary, a
Controller, and such other officers as the Board of Directors may elect or
appoint. The Board of Directors may appoint such other officers and agents,
including Assistant Vice Presidents, Assistant Secretaries and Assistant
Controllers, as it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined by the Board. Any two or more offices, may be held by the same person
unless the Certificate of Incorporation provides otherwise. No officer shall
execute, acknowledge, verify or countersign any instrument on behalf of the
Corporation in more than one capacity, if such instrument is required by law, by
these by-laws or by any act of the Corporation to be executed, acknowledged,
verified or countersigned by two or more officers. The Chairman of the Board
shall be elected from among the directors. With the foregoing exceptions, none
of the other officers need be a director, and none of the officers need be a
stockholder of the Corporation.
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SECTION 6.2. Term of Office. Each officer shall hold office until his
successor shall have been chosen and shall have qualified or until his death or
the effective date of his resignation or removal, or until he shall cease to be
a director in the case of the Chairman and Vice Chairman.
SECTION 6.3. Removal and Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed, with or without cause, by
the affirmative vote of a majority of the Board of Directors whenever, in its
judgment, the best interests of the Corporation shall be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed. Election or appointment of an officer or agent shall not
of itself create contract rights. Any officer may resign at any time by giving
written notice to the Corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein, and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 6.4. Vacancies. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 6.5. Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors or pursuant to its
direction; no officer shall be prevented from receiving such salary by reason of
his also being a director.
SECTION 6.6. Chairman of the Board. The Chairman of the Board (if such
office is created by the Board) shall have all powers and shall perform all
duties incident to the office of Chairman of the Board. The Chairman shall
preside at all meetings of the Board of Directors or of the stockholders of the
Corporation. In the Chairman's absence, such duties shall be attended to by the
Vice Chairman of the Board (if any, but if there is more than one, the Vice
Chairman who is senior in terms of time as such) or (if there is no Vice
Chairman) by the President. The Chairman shall formulate and submit to the Board
of Directors or the Executive Committee (if any) matters of general policy of
the Corporation and shall have such other powers and perform such other duties
as usually appertain to the office or as may be prescribed by the Board of
Directors or the executive committee. The Chairman of the Board may hold such
other offices as the Board of Directors may determine.
SECTION 6.7. Vice Chairmen of the Board. In the absence of the Chairman of
the Board, or in the event of his inability or refusal to act, the Vice Chairman
(if any, but if there is more than one, the Vice Chairman who is senior in terms
of time as such) shall perform the duties and exercise the powers of the
Chairman of the Board, and when acting shall have all the powers of and be
subject to all the restriction upon the Chairman of the Board. In the absence of
the Chairman of the Board, such Vice Chairman shall preside at all meetings of
the Board of Directors or of the stockholders of the Corporation. In the
Chairman's and Vice Chairmen's absence, such duties shall be attended to by the
President. The Vice Chairmen shall perform such other duties, and shall have
such other powers, as from time to time may be assigned to them by the Board of
Directors or the Executive Committee (if any).
SECTION 6.8 Chief Executive Officer. The Chief Executive Officer shall be
the chief executive officer of the Corporation and, subject to the control of
the Board of Directors, shall in general manage, supervise, and control the
properties, business, and affairs of the Corporation with all such powers as may
be reasonably incident to such responsibilities. Unless the Board of Directors
otherwise determines, the Chief Executive Officer shall have the authority to
agree upon and execute all leases, contracts, evidences of indebtedness, and
other obligations in the name of the Corporation. In the absence of the Chairman
of the Board, the Chief Executive Officer shall preside at all meetings of the
Stockholders and (should he be a director) of the Board of Directors. He may
also preside at any such meeting attended by the Chairman of the Board if he is
so designated by the Chairman. He shall have the power to appoint and remove
subordinate officers, agents, and employees, except those elected or appointed
by the Board of Directors. The Chief Executive Officer shall keep the Board of
Directors and the Executive Committee fully informed and shall consult them
concerning the business of the Corporation. He shall perform all other duties
normally incident to the office of Chief Executive Officer and such other
duties, and shall have such other powers, as may be prescribed by the
stockholders, the Board of Directors or the Executive Committee (if any) from
time to time.
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SECTION 6.9 President. The President shall be the chief operating officer
of the Corporation and, subject to the control of the Chief Executive Officer
and the Board of Directors, shall in general manage, supervise and control the
properties, business and day-to-day affairs of the Corporation with all such
powers as may be reasonably incident to such responsibilities. In the absence of
the Chief Executive Officer, or in the event of his inability or refusal to act,
the President shall perform the duties and exercise the powers of the Chief
Executive Officer. In the absence of the Chairman of the Board and the Chief
Executive Officer, the President shall preside at all meetings of the
Stockholders and (should he be a director) of the Board of Directors. He may
also preside at any such meeting attended by the Chairman of the Board if he is
so designated by the Chairman. He shall have the power to appoint and remove
subordinate officers, agents and employees, except those elected or appointed by
the Board of Directors. Unless the Board of Directors otherwise determines, the
President shall have the authority to agree upon and execute all leases,
contracts, evidences of indebtedness, and other obligations in the name of the
Corporation. The President shall keep the Board of Directors, the Executive
Committee, and the Chief Executive Officer fully informed and shall consult them
concerning the business of the Corporation. He shall vote, or give a proxy to
any other officer of the Corporation to vote all shares of stock of any other
corporation standing in the name of the Corporation and shall exercise any and
all rights and powers which this Corporation may possess by reason of its
ownership of securities in such other corporation; provided that the Board of
Directors may from time to time, by resolution, confer like powers upon any
other person or persons. In general the President shall have all powers and
shall perform all other duties normally incident to the office of President and
such other duties, and shall have such other powers, as may be prescribed by
these by-laws, the Board of Directors, or the Executive Committee (if any) from
time to time. In the discretion of the Board of Directors, the President may
also serve as chief executive officer of the Corporation.
SECTION 6.10. Vice Presidents. The Board of Directors may appoint such Vice
Presidents, including, Executive or Senior Vice Presidents, as it may determine
to be in the best interests of the Corporation. In the absence of the President,
or in the event of his inability or refusal to act, the Executive Vice President
(or in the event there shall be no Vice President designated Executive Vice
President, any Vice President designated by the Board) shall perform the duties
and exercise the powers of the President, and when so acting shall have all the
powers of and be subject to all the restrictions upon the President. In the
absence of a designation by the Board of Directors of a Vice President to
perform the duties of the President, or in the event of his absence or inability
or refusal to act, the Vice President who is present and who is senior in terms
of time as a Vice President of the Corporation shall so act. Any Vice President
may sign, with the Secretary or Assistant Secretary, certificates for shares of
the Corporation. Each Vice President shall perform all duties incident to the
office of Vice President and shall have such powers and perform such other
duties, as from time to time may be assigned to him by these by-laws or by the
Chief Executive Officer, the President, the Board of Directors, or the Executive
Committee (if any).
SECTION 6.11. Secretary. The Secretary shall (a) keep the minutes of the
meetings of the stockholders, the Board of Directors, and committees of
directors; (b) see that all notices are duly given in accordance with the
provisions of these by-laws and as required by law; (c) be custodian of the
corporate records and of the seal of the Corporation, and see that the seal of
the Corporation or a facsimile thereof is affixed to all certificates for shares
prior to the issue thereof and to all documents, the execution of which on
behalf of the Corporation under its seal is duly authorized in accordance with
the provisions of these by-laws and attest the affixation of the seal of the
Corporation thereto; (d) keep or cause to be kept a register of the post office
address of each stockholder which shall be furnished by such stockholder; (e)
sign with the President, or an Executive Vice President or Vice President,
certificates for shares of the Corporation, the issue of which shall have been
authorized by resolution of the Board of Directors; (f) have general charge of
the stock transfer books of the Corporation; and (g) in general, shall have such
other powers and shall perform all duties normally incident to the office of
Secretary and such other duties, and shall have such other powers, as from time
to time may be assigned to him by these by-laws, the Chief Executive Officer,
the President, the Board of Directors, or the Executive Committee (if any).
SECTION 6.12. Controller. The Controller shall (a) have charge and custody
of and be responsible for all funds and securities of the Corporation; receive
and give receipts for moneys due and payable to the
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Corporation from any source whatsoever and deposit all such moneys in the name
of the Corporation in such banks, trust companies, or other depositories as
shall be selected in accordance with the provisions of Section 7.3 of these
by-laws; (b) prepare, or cause to be prepared, for submission at each regular
meeting of the Board of Directors, at each annual meeting of the stockholders,
and at such other times as may be required by the Board of Directors, the
President or the executive committee (if any), a statement of financial
condition of the Corporation in such detail as may be required; and (c) in
general, shall have all powers and shall perform all the duties incident to the
office of Controller and such other duties, and shall have such other powers, as
from time to time may be assigned to him by these by-laws, the Chief Executive
Officer, the President, the Board of Directors, or the Executive Committee (if
any). If required by the Board of Directors, the Controller shall give a bond
for the faithful discharge of his duties in such sum and with such surety or
sureties as the Board of Directors shall determine.
SECTION 6.13. Assistant Secretary or Controller. The Assistant Secretaries
and Assistant Controllers shall, in general, perform such duties and have such
powers as shall be assigned to them by the Secretary or the Controller,
respectively, or by the Chief Executive Officer, the President, the Board of
Directors or the Executive Committee. The Assistant Secretaries and Assistant
Controller shall, in the absence or inability or refusal to act of the Secretary
or Controller, respectively, perform all functions and duties which such absent
officers may delegate, but such delegation shall not relieve the absent officer
from the responsibilities and liabilities of his office. The Assistant
Secretaries may sign, with the President or a Vice President, certificates for
shares of the Corporation, the issue of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Controllers shall
respectively, if required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Board of
Directors shall determine.
ARTICLE VII
CONTRACTS, CHECKS AND DEPOSITS
SECTION 7.1. Contracts. Except as otherwise provided in these by-laws or by
law or as otherwise directed by the Board of Directors, the Chairman of the
Board, the Chief Executive Officer, the President, and Vice President, or the
Secretary shall be authorized to execute and deliver, in the and on behalf of
the Corporation, all agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or in a fiduciary or other
capacity, and the seal of the Corporation, if appropriate shall be affixed
thereto by any such officer or the Secretary or an Assistant Secretary. The
Board of Directors, the Chairman of the Board, the Chief Executive Officer, or
the President or, if designated by the Board of Directors, the Chairman of the
Board, the Chief Executive Officer, or the President, any Vice President or the
Secretary, may authorize any other officer, employee, or agent to execute and
deliver, in the name and on behalf of the Corporation, agreements, bonds,
contracts, deeds, mortgages, and other instruments, either for the Corporation's
own account or in a fiduciary or other capacity, and, if appropriate, to affix
the seal of the Corporation thereto. The grant of such authority by the Board of
Directors or any such officer may be general or confined to specific conditions.
Subject to the foregoing provisions, the Board of Directors may authorize any
officer, officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 7.2. Checks, Etc. All checks, demands, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed and, if so required by the Board of
Directors, shall be countersigned by such officer or officers or such agent or
agents of the Corporation, and in such manner, as shall be determined by the
Board of Directors.
SECTION 7.3. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select. Checks, drafts, bills of exchange, acceptances, notes, obligations, and
orders for payment of money made payable to the Corporation may be endorsed for
deposit to the credit of the Corporation with a duly authorized depositary by
the Controller and/or such other officers or persons as the Board of Directors
from time to time may designate.
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SECTION 7.4. Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do, any officer or agent of the Corporation may
effect loans and advances for the Corporation from any bank, trust company, or
other institution or from any individual, corporation, or firm, and for such
loans and advances may make, execute, and deliver promissory notes, bonds, or
other evidences of indebtedness of the Corporation. When authorized to do so,
any officer or agent of the Corporation may pledge, hypothecate, or transfer as
security for the payment of any and all loans, advances, indebtedness, and
liabilities of the Corporation, any and all stocks, securities, and other real
or personal property at any time held by the Corporation and to that end may
endorse, assign, and deliver same. Such authority may be general or confined to
specific instances.
ARTICLE VIII
CERTIFICATES OF STOCK
SECTION 8.1. Issuance. The shares of the Corporation shall be represented
by certificates, provided that the Board of Directors may provide by resolution
that some or all classes or series of the Corporation's stock may be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered. Notwithstanding the
adoption of such a resolution by the Board of Directors, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to a certificate or certificates showing the number of
shares of stock registered in his name on the books of the Corporation. The
certificates shall be in such form as may be determined by the Board of
Directors, shall be issued in numerical order and shall be entered in the books
of the Corporation as they are issued. They shall exhibit the holder's name and
number of shares (and if the stock of the Corporation shall be divided into
classes or series, the class or series of such shares) and shall be signed by
the Chairman of the Board, the Chief Executive Officer, the President or a Vice
President and by the Secretary or an Assistant Secretary or the Controller or
Assistant Controller. Any of or all of the signatures on the certificate may be
facsimiles. The stock record books and the blank stock certificate books shall
be kept by the Secretary, or at the office of such transfer agent or transfer
agents as the Board of Directors may from time to time by resolution determine.
In case any officer, transfer agent or registrar who shall have signed or whose
facsimile signature or signatures shall have been placed upon any such
certificate or certificates shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued by the Corporation, such
certificate may nevertheless be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class of stock; provided that, except as otherwise
provided by statute, in lieu of the foregoing requirements there may be set
forth on the face or back of the certificate which the Corporation shall issue
to represent such class or series of stock, a statement that the Corporation
will furnish to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance of transfer of uncertificated stock, the Corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this Section 8.1
or otherwise required by statute or with respect to this Section 8.1 a statement
that the Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Except as otherwise expressly provided by law, the rights and
obligations of the holders of uncertificated stock and the rights and
obligations of the holders of certificates representing stock of the same class
and series shall be identical.
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All certificates surrendered to the corporation for transfer shall be
cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in the case of a lost, stolen, destroyed or mutilated certificate a new one
may be issued therefor upon such terms and with such indemnity, if any, to the
Corporation as the Board of Directors may prescribe. Certificates shall not be
issued representing fractional shares of stock.
SECTION 8.2. Lost Certificates. The Board of Directors may direct a new
certificate of stock or uncertificated shares to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or his
legal representative, to advertise the same in such manner as it shall require
or to give the Corporation a bond in such sum as it may deem sufficient to
indemnify it against any claim that may be made against the Corporation on
account of the alleged loss, theft or destructions of any such certificate or
the issuance of such new certificate or uncertificated shares, or both.
SECTION 8.3. Transfers. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and register the
transaction upon its books. Upon presentation to the Corporation or the transfer
agent of the Corporation of an instruction with a request to transfer, pledge or
release an uncertificated share or shares, it shall be the duty of the
Corporation to register the transfer, pledge or release upon its books, and
shall provide the registered owner with such notices as may be required by law.
Transfers of shares shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney and filed with the Secretary of the Corporation or the transfer agent.
SECTION 8.4. Registered Stockholders. The Corporation shall be entitled to
treat the registered owner of any share or shares of stock whether certificated
or uncertificated as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Delaware.
SECTION 8.5. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Corporation.
ARTICLE IX
DIVIDENDS
SECTION 9.1. Declaration. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property or in
shares of capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 9.2. Reserve. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
shall think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interest of the Corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
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ARTICLE X
INDEMNIFICATION
SECTION 10.1. Third Party Actions. This Corporation shall, to the maximum
extent permitted from time to time under the law of the State of Delaware,
indemnify and upon request shall advance expenses to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit, proceeding or claim, whether civil, criminal,
administrative or investigative (other than an action by or in the name of the
Corporation) by reason of the fact that such person is or was or has agreed to
be a director, officer, employee, or agent of this Corporation or any of its
direct or indirect subsidiaries or while such person is or was serving at the
request of this Corporation as a director, officer, partner, trustee, employee
or agent of any corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, against
expenses (including attorney's fees and expenses), judgments, fines, penalties
and amounts paid in settlement actually and reasonably incurred in connection
with the investigation, preparation to defend or defense of such action, suit,
proceeding or claim if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interest of the
Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful; provided,
however, that the foregoing shall not require this Corporation to indemnify or
advance expenses to any person in connection with any action, suit, proceeding,
claim or counterclaim initiated by or on behalf of such person. Such
indemnification shall not be exclusive of other indemnification rights arising
under any by-laws, agreement, vote of directors or stockholders or otherwise and
shall inure to the benefit of the heirs and legal representatives of such
person. Any person seeking indemnification under this Section 10.1 shall be
deemed to have met the standard of conduct required for such indemnification
unless the contrary shall be established.
SECTION 10.2. Actions By or in the Right of the Corporation. This
Corporation shall, to the maximum extent permitted from time to time under the
law of the State of Delaware, indemnify and upon request shall advance expenses
to any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit, proceeding or claim by or on the
right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was or has agreed to be a director, officer,
employee, or agent of this Corporation or any of its direct or indirect
subsidiaries or while such person is or was serving at the request of this
Corporation as a director, officer, partner, trustee, employee or agent of any
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, against expenses (including
attorney's fees and expenses), judgments, fines, penalties and amounts paid in
settlement actually and reasonably incurred in connection with the
investigation, preparation to defend or defense of such action, suit, proceeding
or claim if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interest of the
Corporation, and except that no indemnification shall be made with respect to
any claim, issue, or matter as to which such person shall have been adjudged to
be liable to the Corporation unless and only to the extent that the Delaware
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper. Such indemnification shall not be exclusive
of other indemnification rights arising under any by-laws, agreement, vote of
directors or stockholders or otherwise and shall inure to the benefit of the
heirs and legal representatives of such person. Any person seeking
indemnification under this Section 10.2 shall be deemed to have met the standard
of conduct required for such indemnification unless the contrary shall be
established.
SECTION 10.3. Successful Defense. To the extent that a director, officer,
employee, or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in Sections
10.1 or 10.2 or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonable
incurred by him in connection therewith.
SECTION 10.4. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
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Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article X of the by-laws.
SECTION 10.5. Definitions. For purposes of this Article X, reference to the
"Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence has continued, would
have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article X with
respect to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had continued.
For purposes of this Article X, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
X.
SECTION 10.6. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee, and agent who serves in any
such capacity at any time while these provisions as well as relevant provisions
of the Delaware General Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit,
or proceeding previously or thereafter brought or threatened based in whole or
in part upon any such state of facts. Such a contract right may not be modified
retroactively without the consent of such director, officer, employee, or agent.
The indemnification provided by this Article X shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office, and shall continue as to a person who has
ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Seal. The Board of Directors may provide a suitable seal,
containing the name of the corporation, and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
SECTION 11.2. Books. The books of the corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of
Directors.
SECTION 11.3. Fiscal Year. The fiscal year of the Corporation shall be such
as established from time to time by the Board of Directors.
SECTION 11.4. Resignations. Any director, member of a committee, or officer
may resign at any time. Such resignation shall be made in writing and shall take
effect at the time specified therein, or if no time be
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specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.
SECTION 11.5. Facsimile Signatures. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these by-laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors.
SECTION 11.6. Reliance upon Books, Reports and Records. Each director and
each member of any committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account or reports made to the Corporation by any of its officers, or
by an independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors or by any such committee, or in
relying in good faith upon other records of the Corporation.
ARTICLE XII
AMENDMENT
If provided in the Certificate of Incorporation of the Corporation, the
Board of Directors shall have the power to adopt, amend and repeal from time to
time by-laws of the Corporation, subject to the right of the stockholders
entitled to vote with respect thereto to amend or repeal such by-laws as adopted
or amended by the Board of Directors.
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APPENDIX G
PROPOSED AMENDMENTS TO THE CERTIFICATE OF INCORPORATION OF
USA WASTE SERVICES, INC.
Twelfth: (A) Except as otherwise provided in this Certificate of
Incorporation or the Bylaws of the Corporation relating to the rights of the
holders of any class or series of Preferred Stock, voting separately by class or
series, to elect additional directors under specified circumstances, the number
of directors of the Corporation shall be as fixed from time to time by, or in
the manner provided in, the bylaws of the Corporation. Unless approved by at
least two-thirds of the incumbent directors, the number of directors which shall
constitute the whole Board of Directors shall be no fewer than three and no more
than nine.
(B) Commencing with the election of directors at the 1995 Annual Meeting of
Stockholders, the directors, other than those who may be elected by the holders
of any class or series of Preferred Stock voting separately by class or series,
shall be classified, with respect to the time for which they severally hold
office, into three classes, Class I, Class II and Class III, which shall be as
nearly equal in number as possible, as shall be provided in the manner specified
in the bylaws of the Corporation. Each initial director in Class I shall hold
office for a term expiring at the 1996 annual meeting of stockholders; each
initial director of Class II shall hold office initially for a term expiring at
the 1997 annual meeting of stockholders; and each initial director of Class III
shall hold office for a term expiring at the 1998 annual meeting of
stockholders. Notwithstanding the foregoing provision of this Article, each
director shall serve until his successor is duly elected and qualified or until
his earlier death, resignation or removal. At each annual meeting of
stockholders following the 1995 annual meeting, the successors to the class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election and until their successors have been duly
elected and qualified or until their earlier death, resignation or removal.
(C) Except as otherwise provided pursuant to the provisions of this
Certificate of Incorporation or the bylaws of the Corporation relating to the
rights of the holders of any class or series of Preferred Stock, voting
separately by class or series, to elect directors under specified circumstances,
any director or directors may be removed from office at any time, with or
without cause but only by the affirmative vote, at any regular meeting or
special meeting (as the case may be) of the Board of Directors or of the
stockholders, of not less than two-thirds of the incumbent members of the Board
of Directors (not taking into account the directors being removed) or two-thirds
of the total number of votes of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, but only if notice of such proposal was contained in
the notice of such meeting.
(D) In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be appointed or determined by the Board of Directors
among the three classes of directors so as to maintain such classes as nearly
equal as possible. No decrease in the number of directors constituting the Board
of Directors shall shorten the term of any incumbent director.
(E) Vacancies in the Board of Directors, however caused, and newly-created
directorships shall be filled solely by a majority vote of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for a term expiring at the annual meeting of stockholders at which the term of
the class to which the director has been chosen expires and when the director's
successor is elected and qualified, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.
(F) Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filing of
vacancies, and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
Twelfth unless expressly provided by such terms.
<PAGE> 263
(G) Notwithstanding any other provision of this Certificate of
Incorporation or the bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Certificate of
Incorporation or the bylaws of the Corporation), the affirmative vote, at any
regular meeting or special meeting of the stockholders, of not less than
two-thirds of the total number of votes of the then outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend or
repeal, or to adopt any provision inconsistent with the purpose or intent of,
this Article Twelfth, but only if notice of the proposed alteration or amendment
was contained in the notice of such meeting.
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<PAGE> 264
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1031 of the Oklahoma General Corporation act (the "OGCA") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the corporation, by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or is or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. With respect to actions by
or in the right of the corporation, a person may not be indemnified if he has
been adjudged to be liable to the corporation, except where, besides meeting the
requirements described in the preceding sentence, the court in which such action
was brought determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, he shall be indemnified against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection therewith. A corporation shall have the power to purchase insurance
on behalf of the persons referred to above against any liability asserted
against them and incurred by them in such capacities referred to whether or not
the corporation would have the power to indemnify them against such liability.
Section 1006 of the OGCA provides that the certificate of incorporation of
a corporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director for (i) any breach of
the director's duty of loyalty to the corporation or its shareholders, (ii) acts
or omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) dividend payment or stock purchase or redemption
under Section 1053 of the OGCA, (iv) any transaction from which the director
derived an improper personal benefit, or (v) any act or omission occurring prior
to the date when such provision becomes effective.
The Registrant's Certificate of Incorporation provides that (i) the
Registrant shall indemnify, and advance litigation expenses to, its officers,
directors, employees and agents to the fullest extent permitted by the OGCA and
all other laws of the State of Oklahoma, (ii) to the fullest extent that the
OGCA, as it existed on November 1, 1987, permits the limitation or elimination
of the liability of directors, no director of the Registrant shall be liable to
the Registrant or its shareholders for monetary damages for breach of fiduciary
duty as a director, (iii) no amendment to or repeal of the provision of the
Certificate of Incorporation described in clause (ii) shall apply to or have any
effect on the liability or alleged liability of any director of the Registrant
for or with respect to any acts or omission of such director occurring prior to
the time of such amendment or repeal and (iv) any amendment to the OGCA which
further limits or eliminates the liability of directors shall be fully
applicable to the Registrant's directors, but any such amendment which expands
such liability shall be applicable only to future acts or omissions by the
Registrant's directors.
USA Waste may enter into indemnification agreements with its directors.
II-1
<PAGE> 265
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
- --------------------
<C> <S>
*2.1 -- Amended and Restated Agreement and Plan of Merger dated as of
November 28, 1994, among USA Waste Services, Inc. ("USA Waste"),
Chambers Acquisition Corporation, a wholly owned subsidiary of USA
Waste, and Chambers Development Company, Inc. ("Chambers") [included
as Appendix A to the Joint Proxy Statement/Prospectus herein].
3.1 -- Certificate of Incorporation, as amended [incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement on Form
S-18, File No. 33-20237-FW].
3.2 -- Bylaws, as amended [incorporated by reference to Exhibit 3.2 of the
Registrant's Registration Statement on Form S-18, File No.
33-20237-FW].
4.1 -- Specimen Stock Certificate [incorporated by reference to Exhibit 3.2
of the Registrant's Registration Statement on Form 8-A, File No.
0-17034, Reference No. 8-15-2847].
4.2 -- Indenture dated September 25, 1992, between USA Waste and The First
National Bank of Boston, as trustee, with respect to USA Waste's
8 1/2% Convertible Subordinated Debentures Due 2002 [incorporated by
reference to Exhibit 4.1 of the Registrant's Registration Statement
on Form S-1, file No. 33-50918.]
*5.1 -- Opinion of Snell & Smith, P.C. as to the legality of the securities
being registered.
*8.1 -- Opinion of Thorp, Reed & Armstrong as to certain federal income tax
matters.
10.1 -- 1990 Stock Option Plan [incorporated by reference to Exhibit 10.1 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990].
10.2 -- 1993 Stock Incentive Plan [incorporated by reference to Exhibit 10.1
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993].
10.3 -- Envirofil, Inc. ("Envirofil") 1993 Stock Incentive Plan [incorporated
by reference to Exhibit 10.3 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994].
10.4 -- Asset Purchase Agreement dated August 12, 1993, between Chambers of
Indiana, Inc. and USA Waste of Indiana, Inc. [incorporated by
reference to Exhibit 2.2 of the Registrant's Current Report on Form
8-K dated September 30, 1993].
10.5 -- Stock Purchase Agreement dated August 12, 1993, between Chambers and
USA Waste of Indiana, Inc. [incorporated by reference to Exhibit 2.1
of the Registrant's Current Report on Form 8-K dated September 30,
1993].
10.6 -- Agreement of Merger dated as of September 29, 1993, among USA Waste,
USA Acquisition Co., Soil Remediation of Philadelphia, Inc., and
Louis D. Paolino, Jr. [incorporated by reference to Exhibit 2.3 of
the Registrant's Current Report on Form 8-K dated September 30,
1993].
10.7 -- Agreement and Plan of Reorganization dated as of March 17, 1993, as
amended on March 25, 1993, March 31, 1993 and August 20, 1993,
between Envirofil and Environmental Waste of America, Inc.
[incorporated by reference to Exhibit (c)(i) of Envirofil's Current
Report on Form 8-K filed on November 16, 1993, as amended by Current
Report on Form 8-K/A filed on January 18, 1994].
10.8 -- Stock Purchase Agreement dated March 15, 1993, between Environmental
Waste of America, Inc. and Donald G. Lindgren, as amended and
assigned to Envirofil as of November 5, 1993 [incorporated by
reference to Exhibit (c)(i) to Envirofil's Current Report on Form 8-K
filed on November 16, 1993, as amended by Current Report on Form
8-K/A filed on January 18, 1994].
</TABLE>
II-2
<PAGE> 266
<TABLE>
<CAPTION>
EXHIBIT
- --------------------
<C> <S>
10.9 -- Stock Purchase Agreement dated March 19, 1993, among Envirofil,
Meadowbrook Carting Co., Inc., and certain shareholders of
Meadowbrook Carting Co., Inc. [incorporated by reference to Exhibit
(c)(ii) of Envirofil's Current Report on Form 8-K filed February 28,
1994, as amended by Current Report on Form 8-K/A filed on May 11,
1994].
10.10 -- Stock Purchase Agreement dated March 19, 1993, among Envirofil,
Mid-Jersey Disposal, Co., Inc., and certain shareholders of
Mid-Jersey Disposal Co., Inc. [incorporated by reference to Exhibit
(c)(ii) of Envirofil's Current Report on Form 8-K filed February 28,
1994, as amended by Current Report on Form 8-K/A filed on May 11,
1994].
10.11 -- Stock Purchase Agreement dated March 19, 1993, among Envirofil,
Quality Recycling Co., Inc., and certain shareholders of Quality
Recycling Co., Inc. [incorporated by reference to Exhibit (c)(iii) of
Envirofil's Current Report on Form 8-K filed February 28, 1994, as
amended by Current Report on Form 8-K/A filed on May 11, 1994].
10.12 -- Stock Purchase Agreement dated March 19, 1993, among Envirofil,
Forcees, Inc., and certain shareholders of Forcees, Inc.
[incorporated by reference to Exhibit (c)(iv) of Envirofil's Current
Report on Form 8-K filed February 28, 1994, as amended by Current
Report on Form 8-K/A filed on May 11, 1994].
10.13 -- Amended and Restated Plan and Agreement of Reorganization dated March
29, 1994, among USA Waste, Envirofil Acquisition Corporation, a
wholly owned subsidiary of the Registrant, and Envirofil
[incorporated by reference to Exhibit 2.1 to Registration Statement
on Form S-4 (File No. 33-77110)].
10.14 -- Amended and Restated Revolving Credit Agreement dated as of November
28, 1994, among USA Waste, its subsidiaries, The First National Bank
of Boston, Bank of America Illinois, Bank One Texas, National
Association, The Bank of Nova Scotia, National Westminster Bank USA,
and Banque Paribas [incorporated by reference to Exhibit 10.17 of the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994].
10.15 -- Form of Employment Agreement between USA Waste and each of John E.
Drury, Donald F. Moorehead, Jr., David Sutherland-Yoest and Charles
A. Wilcox [incorporated by reference to Exhibit 10.18 of the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994].
10.16 -- Employment Agreement between USA Waste and Earl E. DeFrates
[incorporated by reference to Exhibit 10.19 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994].
*10.17 -- Employment Agreement between USA Waste and Gregory T. Sangalis.
11.1 -- USA Waste statement regarding computation of earnings per share
[incorporated by reference to Exhibit 11 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994].
21 -- Subsidiaries of the Registrant [incorporated by reference to Exhibit
21 of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994].
*23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of Deloitte & Touche LLP.
*23.3 -- Consent of Arthur Andersen LLP.
*23.4 -- Consent of Snell & Smith, P.C. [included in Exhibit 5.1].
*23.5 -- Consent of Thorp, Reed & Armstrong [included in Exhibit 8.1].
</TABLE>
II-3
<PAGE> 267
<TABLE>
<CAPTION>
EXHIBIT
- --------------------
<C> <S>
*23.6 -- Consent of Donaldson, Lufkin & Jenrette Securities Corporation
[included in Exhibit 99.1].
*23.7 -- Consent of J.P. Morgan Securities Inc. [included in Exhibit 99.2].
*24.1 -- Powers of Attorney [included on the signature pages in Part II of
this Registration Statement].
*99.1 -- Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
[included as Appendix B to the Joint Proxy Statement/Prospectus
herein].
*99.2 -- Opinion of J.P. Morgan Securities Inc. [included as Appendix C to the
Joint Proxy Statement/Prospectus herein].
</TABLE>
- ---------------
*Filed herewith.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(1) The undersigned Registrant hereby undertakes as follows: that,
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration
II-4
<PAGE> 268
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) The Registrant hereby undertakes that every prospectus: (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 269
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on the 11th day of May, 1995.
USA WASTE SERVICES, INC.
By: /s/ JOHN E. DRURY
John E. Drury
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints John E. Drury, Donald F.
Moorehead, Jr. and David Sutherland-Yoest, and each of them acting alone, as his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, and grants unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or would
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his or her substitute and substitutes, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED BELOW ON MAY 11, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<C> <S>
/s/ JOHN E. DRURY Chief Executive Officer; Director
John E. Drury
/s/ DONALD F. MOOREHEAD. JR. Chairman of the Board; Chief Development
Donald F. Moorehead, Jr. Officer; Director
/s/ DAVID SUTHERLAND-YOEST President; Chief Operating Officer; Director
David Sutherland-Yoest
/s/ EARL E. DEFRATES Executive Vice President; Chief Financial
Earl E. DeFrates Officer; Secretary; Treasurer; Director
/s/ BRUCE E. SNYDER Vice President; Corporate Controller; Chief
Bruce E. Snyder Accounting Officer
/s/ GEORGE L. BALL Director
George L. Ball
/s/ ROBERT A. MOSLEY Director
Robert A. Mosley
/s/ JOHN D. SPELLMAN Director
John D. Spellman
/s/ GENE A. MEREDITH Director
Gene A. Meredith
/s/ RICHARD J. HECKMANN Director
Richard J. Heckmann
</TABLE>
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<PAGE> 270
USA WASTE SERVICES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF USA WASTE
SERVICES, INC.
The undersigned, having received the Notice of Annual Meeting of Shareholders
and Joint Proxy Statement and Prospectus, hereby appoints Donald F. Moorehead,
Jr., John E. Drury, and David Sutherland-Yoest, and each or any of them as
proxies, with full power of substitution and revocation to each, for and in the
name and on behalf of the undersigned, to vote all shares of Common Stock, $.01
par value, of USA Waste Services, Inc. owned of record by the undersigned, which
the undersigned is entitled to vote at the 1995 Annual Meeting of Shareholders
of USA Waste Services, Inc. to be held on June 22, 1995, at : p.m.,
Dallas, Texas time, at the Grand Kempinski -- Dallas Hotel, 15201 Dallas
Parkway, Dallas, Texas 75248, and any adjournments thereof, upon the matters
listed below and, in their discretion, upon such other matters as may properly
come before the meeting.
George L. Ball, Earl E. DeFrates, John E. Drury, Richard D. Heckmann,
Gene A. Meredith, Donald P. Moorehead, Jr.,
Robert A. Mosley, John D. Spellman, David Sutherland-Yoest
You are encouraged to specify your choices by marking the appropriate
boxes (SEE BELOW), but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The proxies cannot
vote your shares unless you sign and return this card.
/X/ Please mark your votes as in this example.
The Board of Directors recommends a vote FOR Proposals 1, 2, 3, 4, 5, 6
and 7. This proxy when properly executed will be voted in the manner
directed herein. If no direction is made, this proxy will be voted FOR all
of the Board of Directors' nominees and FOR Proposals 1, 3, 4, 5, 6 and 7.
1. Proposal to approve and adopt the Amended and Restated Agreement and
Plan of Merger dated as of November 28, 1994, among USA Waste Services,
Inc. (the "Company"), Chambers Acquisition Corporation, and Chambers
Development Company, Inc.
/ / For / / Against / / Abstain
2. Election of Directors / / For / / Withheld
For, except vote withheld from the following nominee(s): .
(Continued on Reverse Side)
3. Proposal to change the domicile of the Company from Oklahoma to
Delaware.
/ / For / / Against / / Abstain
4. Proposal to amend the Certificate of Incorporation of the Company to
provide for classification of the Board of Directors into three classes
and certain related matters.
/ / For / / Against / / Abstain
5. Proposal to amend the Certificate of Incorporation of the Company to
increase the authorized shares of Common Stock, par value $.01 per
share, from 50,000,000 to 150,000,000.
/ / For / / Against / / Abstain
6. Proposal to amend the 1993 Stock Incentive Plan of the Company to
increase the aggregate number of shares of the Company's Common Stock
that may be issued under such Plan from 1,000,000 to 4,000,000.
/ / For / / Against / / Abstain
The undersigned hereby revokes
all proxies heretofore given
by the undersigned to vote at
said meeting or any
adjournment thereof.
Please sign your name exactly
as it appears hereon. Joint
owners must each sign. When
signing as attorney, executor,
administrator, trustee, or
guardian, please give your
full title as such.
-------------------------------
-------------------------------
SIGNATURE(S) Date
<PAGE> 271
CHAMBERS DEVELOPMENT COMPANY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CHAMBERS
DEVELOPMENT COMPANY, INC.
The undersigned, having received the Notice of Special Meeting of
Stockholders and Joint Proxy Statement and Prospectus, hereby appoints John G.
Rangos, Sr, John G. Rangos, Jr. and Alexander W. Rangos, and each or any of them
as proxies, with full power of substitution and revocation to each, for and in
the name and on behalf of the undersigned, to vote all shares of Common Stock,
$.50 par value, of Chambers Development Company, Inc. owned of record by the
undersigned, which the undersigned is entitled to vote at the Special Meeting of
Stockholders of Chambers Development Company, Inc. to be held on June 22, 1995,
at 10:00 a.m., Dallas, Texas time, at The Grand Kempinski-Dallas Hotel, 15201
Dallas Parkway, Dallas, Texas 75248, and any adjournments thereof, upon the
matter listed on the reverse side hereof.
You are encouraged to specify your choice by marking the appropriate box
(SEE REVERSE SIDE), but you need not mark any box if you wish to vote in
accordance with the Board of Directors' recommendation. The proxies cannot vote
your shares unless you sign and return this card.
The Board of Directors recommends a vote FOR the Proposal. This proxy when
properly executed will be voted in the manner directed herein. If no direction
is made, this proxy will be voted FOR the Proposal.
See Reverse Side
/ X / PLEASE
MARK YOUR
VOTE AS IN
THIS
EXAMPLE
Proposal to approve and adopt the Amended and Restated Agreement and Plan
of Merger dated as of November 28, 1994, among USA Waste Services, Inc.,
Chambers Acquisition Corporation and Chambers Development Company, Inc.
/ / For / / Against / / Abstain
The undersigned hereby revokes all
proxies heretofore given by the
undersigned to vote at said meeting
or any adjournments thereof.
Please sign your name exactly as it
appears hereon. Joint owners must
each sign. When signing as
attorney, executor, administrator,
trustee, or guardian, please give
your full title as such.
-----------------------------------
-----------------------------------
SIGNATURE(S) Date
<PAGE> 272
CHAMBERS DEVELOPMENT COMPANY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CHAMBERS
DEVELOPMENT COMPANY, INC.
The undersigned, having received the Notice of Special Meeting of
Stockholders and Joint Proxy Statement and Prospectus, hereby appoints John G.
Rangos, Sr, John G. Rangos, Jr. and Alexander W. Rangos, and each or any of them
as proxies, with full power of substitution and revocation to each, for and in
the name and on behalf of the undersigned, to vote all shares of Class A Common
Stock, $.50 par value, of Chambers Development Company, Inc. owned of record by
the undersigned, which the undersigned is entitled to vote at the Special
Meeting of Stockholders of Chambers Development Company, Inc. to be held on June
22, 1995, at 10:00 a.m., Dallas, Texas time, at The Grand Kempinski-Dallas
Hotel, 15201 Dallas Parkway, Dallas, Texas 75248, and any adjournments thereof,
upon the matter listed on the reverse side hereof.
You are encouraged to specify your choice by marking the appropriate box
(SEE REVERSE SIDE), but you need not mark any box if you wish to vote in
accordance with the Board of Directors' recommendation. The proxies cannot vote
your shares unless you sign and return this card.
The Board of Directors recommends a vote FOR the Proposal. This proxy when
properly executed will be voted in the manner directed herein. If no direction
is made, this proxy will be voted FOR the Proposal.
See Reverse Side
/ X / PLEASE
MARK YOUR
VOTE AS IN
THIS
EXAMPLE
Proposal to approve and adopt the Amended and Restated Agreement and Plan
of Merger dated as of November 28, 1994, among USA Waste Services, Inc.,
Chambers Acquisition Corporation and Chambers Development Company, Inc.
/ / For / / Against / / Abstain
The undersigned hereby revokes all
proxies heretofore given by the
undersigned to vote at said meeting
or any adjournments thereof.
Please sign your name exactly as it
appears hereon. Joint owners must
each sign. When signing as
attorney, executor, administrator,
trustee, or guardian, please give
your full title as such.
-----------------------------------
-----------------------------------
SIGNATURE(S) Date
<PAGE> 273
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NUMBER
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*2.1 -- Amended and Restated Agreement and Plan of Merger dated as of November
28, 1994, among USA Waste Services, Inc. ("USA Waste"), Chambers
Acquisition Corporation, a wholly owned subsidiary of USA Waste, and
Chambers Development Company, Inc. ("Chambers") [included as Appendix
A to the Joint Proxy Statement/Prospectus herein].
3.1 -- Certificate of Incorporation, as amended [incorporated by reference to
Exhibit 3.1 to the Registrant's Registration Statement on Form S-18,
File No. 33-20237-FW].
3.2 -- Bylaws, as amended [incorporated by reference to Exhibit 3.2 of the
Registrant's Registration Statement on Form S-18, File No.
33-20237-FW].
4.1 -- Specimen Stock Certificate [incorporated by reference to Exhibit 3.2
of the Registrant's Registration Statement on Form 8-A, File No.
0-17034, Reference No. 8-15-2847].
4.2 -- Indenture dated September 25, 1992, between USA Waste and The First
National Bank of Boston, as trustee, with respect to USA Waste's
8 1/2% Convertible Subordinated Debentures Due 2002 [incorporated by
reference to Exhibit 4.1 of the Registrant's Registration Statement on
Form S-1, file No. 33-50918.]
*5.1 -- Opinion of Snell & Smith, P.C. as to the legality of the securities
being registered.
*8.1 -- Opinion of Thorp, Reed & Armstrong as to certain federal income tax
matters.
10.1 -- 1990 Stock Option Plan [incorporated by reference to Exhibit 10.1 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990].
10.2 -- 1993 Stock Incentive Plan [incorporated by reference to Exhibit 10.1
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993].
10.3 -- Envirofil, Inc. ("Envirofil") 1993 Stock Incentive Plan [incorporated
by reference to Exhibit 10.3 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994].
10.4 -- Asset Purchase Agreement dated August 12, 1993, between Chambers of
Indiana, Inc. and USA Waste of Indiana, Inc. [incorporated by
reference to Exhibit 2.2 of the Registrant's Current Report on Form
8-K dated September 30, 1993].
10.5 -- Stock Purchase Agreement dated August 12, 1993, between Chambers and
USA Waste of Indiana, Inc. [incorporated by reference to Exhibit 2.1
of the Registrant's Current Report on Form 8-K dated September 30,
1993].
10.6 -- Agreement of Merger dated as of September 29, 1993, among USA Waste,
USA Acquisition Co., Soil Remediation of Philadelphia, Inc., and Louis
D. Paolino, Jr. [incorporated by reference to Exhibit 2.3 of the
Registrant's Current Report on Form 8-K dated September 30, 1993].
10.7 -- Agreement and Plan of Reorganization dated as of March 17, 1993, as
amended on March 25, 1993, March 31, 1993 and August 20, 1993, between
Envirofil and Environmental Waste of America, Inc. [incorporated by
reference to Exhibit (c)(i) of Envirofil's Current Report on Form 8-K
filed on November 16, 1993, as amended by Current Report on Form 8-K/A
filed on January 18, 1994].
10.8 -- Stock Purchase Agreement dated March 15, 1993, between Environmental
Waste of America, Inc. and Donald G. Lindgren, as amended and assigned
to Envirofil as of November 5, 1993 [incorporated by reference to
Exhibit (c)(i) to Envirofil's Current Report on Form 8-K filed on
November 16, 1993, as amended by Current Report on Form 8-K/A filed on
January 18, 1994].
</TABLE>
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10.9 -- Stock Purchase Agreement dated March 19, 1993, among Envirofil,
Meadowbrook Carting Co., Inc., and certain shareholders of Meadowbrook
Carting Co., Inc. [incorporated by reference to Exhibit (c)(ii) of
Envirofil's Current Report on Form 8-K filed February 28, 1994, as
amended by Current Report on Form 8-K/A filed on May 11, 1994].
10.10 -- Stock Purchase Agreement dated March 19, 1993, among Envirofil,
Mid-Jersey Disposal, Co., Inc., and certain shareholders of Mid-Jersey
Disposal Co., Inc. [incorporated by reference to Exhibit (c)(ii) of
Envirofil's Current Report on Form 8-K filed February 28, 1994, as
amended by Current Report on Form 8-K/A filed on May 11, 1994].
10.11 -- Stock Purchase Agreement dated March 19, 1993, among Envirofil,
Quality Recycling Co., Inc., and certain shareholders of Quality
Recycling Co., Inc. [incorporated by reference to Exhibit (c)(iii) of
Envirofil's Current Report on Form 8-K filed February 28, 1994, as
amended by Current Report on Form 8-K/A filed on May 11, 1994].
10.12 -- Stock Purchase Agreement dated March 19, 1993, among Envirofil,
Forcees, Inc., and certain shareholders of Forcees, Inc. [incorporated
by reference to Exhibit (c)(iv) of Envirofil's Current Report on Form
8-K filed February 28, 1994, as amended by Current Report on Form
8-K/A filed on May 11, 1994].
10.13 -- Amended and Restated Plan and Agreement of Reorganization dated March
29, 1994, among USA Waste, Envirofil Acquisition Corporation, a wholly
owned subsidiary of the Registrant, and Envirofil [incorporated by
reference to Exhibit 2.1 to Registration Statement on Form S-4 (File
No. 33-77110)].
10.14 -- Amended and Restated Revolving Credit Agreement dated as of November
28, 1994, among USA Waste, its subsidiaries, The First National Bank
of Boston, Bank of America Illinois, Bank One Texas, National
Association, The Bank of Nova Scotia, National Westminster Bank USA,
and Banque Paribas [incorporated by reference to Exhibit 10.17 of the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994].
10.15 -- Form of Employment Agreement between USA Waste and each of John E.
Drury, Donald F. Moorehead, Jr., David Sutherland-Yoest and Charles A.
Wilcox [incorporated by reference to Exhibit 10.18 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994].
10.16 -- Employment Agreement between USA Waste and Earl E. DeFrates
[incorporated by reference to Exhibit 10.19 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994].
*10.17 -- Employment Agreement between USA Waste and Gregory T. Sangalis.
11.1 -- USA Waste statement regarding computation of earnings per share
[incorporated by reference to Exhibit 11 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994].
21 -- Subsidiaries of the Registrant [incorporated by reference to Exhibit
21 of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994].
*23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of Deloitte & Touche LLP.
*23.3 -- Consent of Arthur Andersen LLP.
*23.4 -- Consent of Snell & Smith, P.C. [included in Exhibit 5.1].
*23.5 -- Consent of Thorp, Reed & Armstrong [included in Exhibit 8.1].
</TABLE>
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*23.6 -- Consent of Donaldson, Lufkin & Jenrette Securities Corporation
[included in Exhibit 99.1].
*23.7 -- Consent of J.P. Morgan Securities Inc. [included in Exhibit 99.2].
*24.1 -- Powers of Attorney [included on the signature pages in Part II of this
Registration Statement].
*99.1 -- Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
[included as Appendix B to the Joint Proxy Statement/Prospectus
herein].
*99.2 -- Opinion of J.P. Morgan Securities Inc. [included as Appendix C to the
Joint Proxy Statement/Prospectus herein].
</TABLE>
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*Filed herewith.
<PAGE> 1
EXHIBIT 5.1
[SNELL & SMITH LETTERHEAD]
May 11, 1995
USA Waste Services, Inc.
5000 Quorum Drive, Suite 300
Dallas, Texas 75240
Gentlemen:
We have acted as counsel for USA Waste Services, Inc., an
Oklahoma corporation (the "Company"), in connection with the proposed offering
by the Company of approximately 28,000,000 shares of the common stock, $.01 par
value per share (the "Common Stock"), of the Company to be issued in connection
with the merger (the "Merger") of Chambers Acquisition Company, a Delaware
corporation and wholly-owned subsidiary of the Company, with and into Chambers
Development Company, Inc., a Delaware corporation ("Chambers").
In connection with such matters, we have examined among other
things, the Certificate of Incorporation and the By- Laws of the Company, the
corporate proceedings with respect to the offering of the Common Stock, the
Amended and Restated Plan and Agreement of Merger dated as of November 28, 1994
(the "Merger Agreement"), among the Company, Chambers, and Acquisition, and the
Registration Statement on Form S-4 filed by the Company with the Securities and
Exchange Commission for the registration of the Common Stock under the
Securities Act of 1933, as amended (the "Securities Act") (the Registration
Statement as amended at the time when it becomes effective being herein
referred to as the "Registration Statement").
We have assumed the genuineness and authenticity as all
signatures on all original documents, the authenticity of all documents
submitted to us as originals, the conformity to originals of all documents
submitted to us as copies, and the due authorization, execution, delivery, or
recordation of all documents where such due authorization, execution, delivery,
or recordation are prerequisites to the effectiveness thereof.
Based on the foregoing, and having regard for such legal
considerations as we deemed relevant, we are of the opinion (limited in all
respects to the internal laws of the State of Texas, the Oklahoma General
Corporation Law, and applicable federal law) that:
<PAGE> 2
USA Waste Services, Inc.
May 11, 1995
Page 2
1. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Oklahoma.
2. The shares of Common Stock proposed to be issued by
the Company to the shareholders of Chambers, pursuant to the Merger,
have been duly authorized for issuance, and subject to the
Registration Statement becoming effective under the Securities Act,
and to compliance with any applicable state securities laws, when
issued in accordance with the terms of the Merger Agreement will be
duly authorized, validly issued, fully paid, and non-assessable.
3. The authorized capital of the Company consists of
50,000,000 shares of Common Stock, of which, as of the date hereof,
22,967,256 shares are issued and outstanding, and 10,000,000 shares of
Preferred Stock, $.01 par value per share, none of which, as of the
date hereof, are issued and outstanding.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under "Legal Matters"
in the Joint Proxy Statement and Prospectus forming a part of the Registration
Statement.
Very truly yours,
SNELL & SMITH, A Professional
Corporation
JTU:bm
<PAGE> 1
Exhibit 8.1
May 12, 1995
Chambers Development Company, Inc.
10700 Frankstown Road
Pittsburgh, Pennsylvania 15235
Gentlemen:
We are rendering this opinion letter as special tax counsel to
Chambers Development Company, Inc. ("Company") in connection with the merger
("Merger") of Chambers Acquisition Corporation ("Acquisition") into the Company
and the conversion of the Company Class A Common Stock and Common Stock into
.41667 of a share of USA Waste Services, Inc. ("Parent") common stock, pursuant
to the Amended and Restated Agreement and Plan of Merger ("Plan") between the
parties, dated as of November 28, 1994.
In rendering this opinion we have relied upon the terms of the
Plan and upon the Joint Proxy Statement and Prospectus of the Parent and the
Company (the "Joint Proxy Statement/Prospectus"). In addition, we have obtained
certain representations from certain key stockholders of the Company, the
Company and the Parent concerning certain facts and their intentions with
respect to the assets of the Company and the shares in the Parent. Should
there be a change in these facts or should the representations prove to be
untrue, the opinions expressed herein may no longer be valid.
In issuing our opinion, we have assumed that the facts as set
forth in the Joint Proxy Statement/Prospectus and the representations made to
us by the Parent, the Company and certain stockholders of the Company are true
and correct in all material respects. Any alterations of such facts and
assumptions may adversely affect our opinion.
We express no opinion concerning tax matters relating to the
Merger under the federal income tax laws except on the basis of the documents
and the assumptions described above. Accordingly, we express no opinion
concerning the effect, if any, upon the resolution of tax matters relating to
the Merger of any variation from the facts contemplated in such documents or
represented by the Parent, Subsidiary, Company or certain stockholders. We
expressly do not render any opinion pertaining to any matter not specifically
set forth herein. In addition, we express no opinion as to the tax
consequences of the settlement of certain securities litigation involving the
Company, and we express no opinion as to the tax
<PAGE> 2
Chambers Development Company, Inc.
May 12, 1995
Page 2
consequences of the shareholders of John Rangos Development Corporation, Inc.
In issuing the opinions set forth below, we have referred
solely to the existing provisions of the Internal Revenue Code of 1986, as
amended, and existing and proposed regulations thereunder, and current
administrative rulings and court decisions. Such laws, regulations,
administrative rulings and court decisions are subject to change at any time,
which change could be retroactive in application. Any such change will affect
the continuing validity of the opinions set forth below.
A legal opinion is not binding on the Internal Revenue
Service. The Internal Revenue Service ("Service") may challenge the tax
treatment of a transaction notwithstanding the fact that a favorable opinion
has been issued by legal counsel.
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Plan constitutes a plan of reorganization and the
Company, Acquisition and the Parent are parties to the plan of reorganization.
2. The merger of Acquisition into the Company, and the
subsequent exchange of Parent stock for stock of the Company, will be treated
as a tax-free reorganization under Section 368(a)(2)(E) of the Code.
3. Under Section 354 of the Code, no stockholder of the
Company, other than a stockholder who receives cash in lieu of fractional
shares, will recognize gain or loss by reason of the Merger.
4. Under Section 358 of the Code, a stockholder's basis
in Parent stock received in the reorganization will equal the stockholder's
aggregate basis in stock in the Company immediately prior to the Merger, less
any cash received in lieu of fractional shares.
5. Under Section 1223 of the Code, the holding period of
the shares of Parent stock will include the holding period of the Company stock
surrendered in the Merger, provided that the shares of Company stock were held
as capital assets at the Effective Time.
<PAGE> 3
Chambers Development Company, Inc.
May 12, 1995
Page 3
6. Under Section 361 of the Code, the Company will not
recognize any gain or loss by reason of the Merger.
7. The receipt of cash in lieu of fractional shares will
trigger the recognition of gain or loss to any Company stockholder who receives
that cash. The character of and type of gain will depend upon the holding
period and the investment intent of a stockholder of the Company.
8. The change in the state of incorporation of the
Parent immediately prior to the Effective Time will not affect the tax-free
status of the Merger.
Even if the Merger qualifies as a tax-free reorganization, a
recipient of Parent stock could recognize gain to the extent that such shares
were considered by the Service to be received in exchange for consideration
other than Company stock. All or a portion of such gain may be taxable as
ordinary income. Gain would be recognized to the extent that a Company
stockholder was treated by the Service as receiving (directly or indirectly)
consideration other than Parent stock in exchange for his or her Company stock.
A successful challenge by the Service to the tax-free
reorganization status of the Merger would result in a Chambers stockholder
recognizing taxable gain or loss with respect to the difference between the
stockholder's basis in his or her shares and the fair market value, as of the
Effective Date, of the Parent stock received in exchange therefor. In such
event, a stockholder's basis in Parent stock so received would equal its fair
market value and the holding period for such stock would begin on the Effective
Date.
<PAGE> 4
Chambers Development Company, Inc.
May 12, 1995
Page 4
The foregoing opinions are expressed only as of the date
hereof and do not take into account any subsequent events or possible changes
in the tax law. Subsequent events, including retroactive tax law changes,
could result in a change in the opinions expressed herein. However, we are not
obligated to revise our opinion letter for subsequent events and do not intend
to do so. This opinion letter does not address any state, local, foreign or
the income tax consequences of stockholders governed by special provisions of
the Code, such as U.S. withholding tax obligations. Each investor is urged to
consult with his or her own tax advisor for specialized advice on those issues.
Very truly yours
THORP, REED & ARMSTRONG
<PAGE> 1
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
April 3, 1995, by and between USA WASTE SERVICES, INC., an Oklahoma corporation
(the "Company"), and GREGORY T. SANGALIS ("Employee").
R E C I T A L S:
The Company recognizes that the efforts of its officers and key
management employees have contributed and will continue to contribute to the
growth and success of the Company.
The Company believes that, in the Company's best interest, it is
essential that its officers and key management employees, including the
Employee, be retained and that the Company be in a position to rely on their
ongoing dedication and commitment to render services to the Company.
The Company wishes to take steps to assure that the Company will
continue to have the Employee's services available to the Company by entering
into an agreement with the Employee concerning his employment by the Company.
In consideration of the foregoing, the mutual provisions contained
herein, and for other good and valuable consideration, the parties agree with
each other as follows:
1. EMPLOYMENT
A. The Company hereby employs the Employee and the Employee
hereby accepts employment as the Vice President, General Counsel, and Corporate
Secretary of the Company on the terms and conditions hereinafter set forth.
The Employee shall perform such duties, and have such powers, authority,
functions and responsibilities for the Company and corporations affiliated with
the company (commensurate with such employment capacity), and have such
additional duties, powers, authority, functions and responsibilities as may be
assigned to him by the Company's Board of Directors (or a committee thereof) or
by the Chief Executive Officer which are not (except with the Employee's
consent) inconsistent with or which interfere with or detract from those vested
in or being performed by the Employee for the Company.
B. The Employee shall not, during the term of his employment
under this Agreement, be engaged in any other activities if such activities
interfere materially with the Employee's current duties, authority and
responsibilities for the Company, except for those other activities as shall
hereafter be carried on with the Company's consent. The Employee shall be
entitled to carry on those activities as have heretofore been carried on with
the Company's consent including, without limitation, making and managing his
personal investments provided such investments or other activities do not
violate in any material respect the terms of Sections 6, 7 or 8 hereof.
<PAGE> 2
2. TERM
A. Subject only to the provision of either Section 3(D) or
Section 4 hereof, the term of the Employee's employment under this Agreement
shall be for a continually renewing term of three (3) years without any further
action by either the Company or the Employee, it being the intention of the
parties that there shall be continuously a term of three (3) years duration of
the Employee's Employment under this Agreement until an event has occurred as
described in, or one of the parties shall have made an election pursuant to,
the provisions of either Section 3(D) or Section 4 of this Agreement; provided,
however, that if no such event has occurred or election has been made, such
term shall terminate on the date the Employee becomes age 65.
3. COMPENSATION
For all services rendered by the Employee while on active status under
this Agreement, the Company agrees to compensate the Employee for each
compensation year (January 1 through December 31) during the term hereof, as
follows:
A. Base Salary. A base salary shall be payable to the Employee
by the Company as a guaranteed annual amount under this Agreement equal
initially to $175,000, for each compensation year (as the same may be adjusted
as provided herein, the "Base Salary"), which shall be payable in the intervals
consistent with the Company's normal payroll schedules (but in no event less
than semi-monthly). The Base Salary shall be subject to being increased (but
not decreased or adjusted other than as provided in Section 4 of this
Agreement) in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (or a similar Board committee composed solely of
"outside" directors, hereinafter referred to as the "Compensation Committee")
but only in such form and to such extent as the Compensation Committee may from
time to time approve. The official action of the Compensation Committee
increasing the Base Salary payable to the Employee shall modify the amount of
Base Salary stated in this Section 3(A).
B. Other Compensation. The Employee shall be entitled to
participate in any incentive or supplemental compensation plan or arrangement
instituted by the Company and covering its principal executive officers and to
receive additional compensation from the Company in such form and to such
extent, if any, as the Compensation Committee may in its sole discretion from
time to time specify and determine with respect to the Company's principal
executive officers generally; provided, however, in the event the Employee
shall go on part-time status for any reason, the Employee shall nevertheless be
entitled to be paid pro rata incentive or supplemental compensation for the
fiscal year ending in the compensation year in which the Employee goes on
part-time status, for the number of calendar months during such fiscal year
that Employee shall have been on active status, at the same time, on the same
basis and to the same extent as any of the Company's principal executive
officers on active status are selected by the Compensation Committee to receive
any incentive or supplemental compensation award for such fiscal year. The
phrase "principal executive officer" as used in this Agreement shall mean
-2-
<PAGE> 3
the chief executive officer of the Company and other senior corporate officers
of the Company who are from time to time designated as principal executive
officers by the Compensation Committee. The Employee shall be entitled to
participate in the Company's bonus compensation plan and shall be entitled to a
bonus of up to 50% of his base salary upon achievement of predetermined goals
and objectives mutually agreed upon by the Employee and the Company at the
beginning of each year; provided, however, that the Compensation Committee of
the Board of Directors reserves the right in its discretion to change the terms
and conditions for payment of bonuses by the Company or to suspend, terminate,
or limit the Company's bonus plan and may from time-to-time establish such
terms and conditions for participation in the bonus plan as it shall deem
appropriate and in the best interests of the Company. The Employee shall be
paid the sum of $50,000 on commencement of his employment under this Agreement,
which shall be offset against the amount of any bonus awarded to the Employee
under the Company's bonus compensation plan with respect to fiscal 1995
(notwithstanding that such bonus may not be declared or awarded by the Company
until 1996).
C. Tax Indemnity. Should any of the payments of Base Salary,
other incentive or supplemental compensation, benefits, allowances, awards,
payments, reimbursements or other perquisites (including the payments provided
for under this Section 3(C), singly, in any combination or in the aggregate,
that are provided for hereunder to be paid to or for the benefit of the
Employee (including, without limitation, the payment provided for in Section
3(D) hereof) or under any other plan, agreement or arrangement between the
Employee and the Company, be determined or alleged to be subject to an excise
or similar purpose tax pursuant to Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor or other comparable federal,
state or local tax laws, the Company shall pay to the Employee such additional
compensation as is necessary (after taking into account all federal, state and
local income taxes payable by the Employee as a result of the receipt of such
additional compensation) to place the Employee in the same after tax position
(including federal, state and local taxes) he would have been in had no such
excise or similar purpose tax (or any interest or penalties thereon) been paid
or incurred. The Company hereby agrees to pay such additional compensation
within five (5) business days after the Employee notifies the Company that the
Employee intends to file a tax return which takes the position that such excise
or similar purpose tax is due and payable in reliance on a written opinion of
the Employee's tax counsel (such tax counsel to be chosen solely by the
Employee) that it is more likely than not that such excise tax is due and
payable. The costs of obtaining such tax counsel's opinion shall be borne by
the Company, and as long as such tax counsel was chosen by the Employee in good
faith, the conclusions reached in such opinion shall not be challenged or
disputed by the Company. If the Employee intends to make any payment with
respect to any such excise or similar purpose tax as a result of an adjustment
to the Employee's tax liability by any federal, state or local tax authority,
the Company will pay such additional compensation by delivering its cashier's
check payable in such amount to the Employee within five (5) business days
after the Employee notifies the Company of his intention to make such payment.
Without limiting the obligation of the Company hereunder, the Employee agrees,
in the event the Employee makes any payment pursuant to the preceding sentence,
to negotiate with the Company in good faith with respect to procedures
-3-
<PAGE> 4
reasonably requested by the Company which would afford the Company the ability
to contest the imposition of such excise tax; provided, however, that the
Employee will not be required to afford the Company any right to contest the
applicability of any such excise tax to the extent that the Employee reasonably
determines (based upon the opinion of his tax counsel) that such contest is
inconsistent with the overall tax interests of the Employee.
D. (i) Change of Control - Operation of Section 3(D).
(a) This Section 3(D) shall be effective, but not
operative, immediately upon execution of this Agreement by the
parties hereto and shall remain in effect so long as the
Employee remains employed by the Company on active status and
for twelve (12) months after the Employee goes on part-time
status, but shall not be operative unless and until there has
been a Change in Control, as defined in subsection (i)(b)
hereof. Upon such a Change in Control, this Section 3(D)
shall become operative immediately.
(b) "Change in Control" shall mean a change in
control of the Company that shall be deemed to have occurred
if and when, with or without the approval of the Board of
Directors of the Company incumbent prior to the occurrence,
(1) more than 25% of the Company's
outstanding securities entitled to vote in elections
of directors shall be acquired by any person (as such
term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) other
than by any person which includes the Employee; or
(2) as the result of a tender offer,
merger, consolidation, sale of assets or contested
election, or any combination of such transactions,
the persons who were directors immediately before the
transaction shall cease to constitute a majority of
the Board of Directors of the Company or of any
successor to the Company;
provided, however, that neither (A) the acquisition by John G.
Rangos, Sr. and the Rangos family of more than 25% of the
Company's outstanding securities entitled to vote in the
election of directors in connection with the business
combination of the Company and Chambers Development Company,
Inc., nor (B) a business combination involving the Company and
another solid waste management company, which is approved by a
75% majority of the Board of Directors of the Company
incumbent prior to the occurrence of such business
combination, notwithstanding that a principal shareholder or
shareholders of such other solid waste management company
acquires more than 25% of the Company's outstanding securities
entitled to vote in the election of directors in connection
with such business combination, shall be deemed to be a
"Change in Control."
-4-
<PAGE> 5
(ii) Employee's Rights Upon Change of Control. If, while
the Employee is employed on active status by the Company, or if within
twelve (12) months after the Employee has been placed on part-time
status pursuant to either Section 4(C)(i), (ii) or (iii) or Section
4(G), a Change in Control (as defined in subsection (b) of Section
3(D)(i)) occurs and one or more of the following events occurs:
(a) The assignment to the Employee of duties,
responsibilities, or status inconsistent with his duties,
responsibilities, and status prior to the Change in Control or
a reduction or alteration in the nature or status of the
Employee's duties and responsibilities from those in effect
prior to the Change in Control;
(b) A reduction by the Company in the Employee's
Base Salary (as in effect prior to the Change in Control);
(c) The failure by the Company to continue in
effect the Company's insurance, disability, stock option plan,
or any other employee benefit plans, policies, practices, or
arrangements in which the Employee participates, or the
failure of the Company to continue the Employee's
participation therein on substantially the same basis, both in
terms of the amount of benefits provided and the level of the
Employee's participation relative to other participants, as
existed prior to the Change in Control;
(d) The failure of the Company to obtain a
satisfactory agreement from the successor to the Company to
assume and agree to perform this Agreement;
(e) Any purported termination by the Company of
the Employee's employment other than pursuant to Section
4(A)(i) or 4(A)(ii); or
(f) the person who was Chief Executive Officer of
the Company immediately before the transaction shall ceases to
be the Chief Executive Offcier of the Company or the the
persons who were directors immediately before the transaction
shall cease to constitute a majority of the Board of Directors
of the Company,
the Employee may, in his sole discretion, within three (3) months after the
date of the Change of Control, give notice to the Chief Executive Officer of
the Company that he intends to elect to exercise his rights under this Section
3(D) (the "Notice of Intention"). The right to give such Notice of Intention
to elect to receive the payment provided for in subsection (iii) of this
Section 3(D) shall continue for three (3) months from the date of the Change of
Control irrespective of any action by the Company pursuant to Section 4(A)(iii)
or Section 4(G) within such three (3) month period. Within thirty (30) days
after the Company's receipt of the Notice of Intention, the Company shall
provide written notice to the Employee setting forth the Company's computation
of the amount that would be payable pursuant to subsection (iii) of this
Section 3(D),
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<PAGE> 6
accompanied by the written opinion of the Company's independent certified
public accountants confirming the Company's computation. If the Employee takes
exception to the Company's computation of such amount, the Employee may (but
shall not be prejudiced in his right to later contest the amount actually paid
by failure to do so) give a further written notice to the Company setting forth
in reasonable detail the Employee's exceptions to the Company's computation,
accompanied by the written opinion of the Employee's tax advisor confirming the
basis for such exceptions. Exercise by the Employee of his rights pursuant to
this Section 3(D) shall only be made by giving further notice to the Chief
Executive Officer of the Company (the "Notice of Exercise") within six (6)
months from the date of the Notice of Intention.
(iii) Payment upon Change of Control.
(a) If the Employee gives the Notice of Exercise
described in subsection (ii) of this Section 3(D) to the
Company, the Company shall pay the Employee a lump sum amount
equal to three (3) times the Employee's base amount (as
defined by Section 280(G) of the Code), less one dollar
($1.00). The Company shall, within five (5) business days
after the date of the Notice of Exercise, deliver to the
Employee its cashier's check in the amount payable pursuant to
this subsection (iii)(a) of Section 3(D), and payment of such
amount shall terminate the Employee's rights to receive any
and all other payments, rights or benefits pursuant to
Sections 3(A), 3(B), 4 and 5 of this Agreement, other than any
payments, rights or benefits arising (x) pursuant to Section
3(C), subsection (iii) of Section 3(D), Section 3(E) or
Section 12 of this Agreement, or (y) from any other agreement,
plan or policy which by its terms or by operation of law
provides for the continuation of such payments, rights or
benefits after the termination of the Employee's relationship
with the Company.
(b) Such lump sum payment shall be in addition to
and shall not be offset or reduced by (x) any other amounts
that have accrued or have otherwise become payable to the
Employee or his beneficiaries, but have not been paid by the
Company at the time the Employee gives Notice of Exercise
pursuant to this Section 3(D) including, but not limited to,
salary, severance pay, consulting fees, disability benefits,
termination benefits, retirement benefits, life and health
insurance benefits, or any other compensation or benefit
payment that is part of any valid previous, current, or future
contract, plan or agreement, written or oral, or (y) any
indemnification payments that may be or become payable to the
Employee pursuant to the provisions of the Company's
Certificate of Incorporation, By-laws, or similar policy,
plan, or agreement relating to the indemnification of
directors or officers of the Company under certain
circumstances.
E. Employee's Expenses. All costs and expenses
(including reasonable legal, accounting and other advisory fees)
incurred by the Employee to (w) defend the validity
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of this Agreement (x) contest any determinations by the Company
concerning the amounts payable (or reimbursable) by the Company to the
Employee under this Agreement, (y) determine in any tax year of the
Employee the tax consequences to the Employee of any amounts payable
(or reimbursable) under Section 3(C) or (D) hereof, or (z) prepare
responses to an Internal Revenue Service audit of, and to otherwise
defend, his personal income tax return for any year which is the
subject of any such audit, or an adverse determination, administrative
proceedings or civil litigation arising therefrom that is occasioned
by or related to an audit by the Internal Revenue Service of the
Company's income tax returns, are, upon written demand by the
Employee, to be promptly advanced or reimbursed to the Employee or
paid directly, on a current basis, by the Company or its successors.
4. TERMINATION, PART-TIME STATUS, AND REVISED COMPENSATION, DEATH,
DISABILITY
A. Termination. The employment of the Employee under this
Agreement, while the Employee is on active status, may be terminated at any
time by the Company, acting through its Board of Directors (and not a committee
thereof),
(i) only for cause in the event of (x) the Employee's
final conviction of a felony crime involving moral turpitude, or (y)
the Employee's deliberate and intentional continuing refusal to
substantially perform his duties and obligations under this Agreement
(except by reason of incapacity due to illness or accident) if he
shall have either failed to remedy such alleged breach within
forty-five (45) days from his receipt of written notice from the Chief
Executive Officer the Company demanding that he remedy such alleged
breach, or shall have failed to take reasonable steps in good faith to
that end during such forty-five (45) day period and thereafter,
provided that there shall have been delivered to the Employee a
further notice after the end of such forty-five (45) day period
asserting that the Board of Directors has determined that the Employee
was guilty of conduct set forth in this clause (y), that the Employee
has failed to take reasonable steps in good faith to remedy such
alleged breach, and specifying the particulars thereof in detail, and
provided further that the Employee thereafter shall have received a
certified copy of a resolution of the Board of Directors of the
Company adopted by the affirmative vote of not less than three-fourths
of the entire membership of the Board of Directors at a meeting called
and held for that purpose and at which the Employee was given an
opportunity to be heard, finding that the Employee was guilty of
conduct set forth in this clause (y), that the Employee has failed to
take reasonable steps in good faith to remedy such alleged breach, and
specifying the particulars thereof in detail,
(ii) upon a determination that the Employee has engaged in
willful fraud or defalcation involving material funds or other assets
of the Company, or
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(iii) for any reason in its sole discretion upon written
notice to the Employee effective (subject to the provisions of Section
4(D) (iii) hereof) on the date that is three (3) years after the date
on which such notice is received by the Employee.
B. Termination Payment For Cause. In the event of termination of
the Employee's employment under this Agreement by the Company under either
Section 4(A)(i) or (ii), the Employee shall only be entitled to receive the
monthly installment of his Base Salary being paid at the time of such
termination, and, if applicable, other compensation, due hereunder, computed on
a pro rata basis, up to the effective date of such termination.
C. (i) Part-time Status-Election by Company. In the event
the Company shall give Employee notice of termination of the
Employee's employment under this Agreement pursuant to Section
4(A)(iii), the Employee shall, subject to the provisions of Section
4(D)(iii) and (vii), be placed on part-time employment status for a
period of three (3) years after the date on which such notice is
received by the Employee.
(ii) Termination - Election by Employee. Employee shall
have the right at any time during his employment on active status, by
giving written notice to the Chief Executive Officer of the Company,
to terminate the Employee's employment under this Agreement effective
ninety (90) days after the date on which such notice is given by the
Employee. In the event the Employee shall make such election under
this Section 4(C)(ii), the Employee shall, in addition to all other
reimbursements, payments or other allowances required to be paid under
this Agreement or under any other plan, agreement or policy which
survives the termination of this Agreement, be entitled to be paid, in
addition to the Base Salary payable during such ninety (90) day period
after the giving of such notice, a lump sum payment payable by
delivery of the Company's cashier's check within five (5) business
days after the end of such ninety (90) day period, in an amount equal
to three (3) monthly installments of the Base Salary (less required
tax withholding) in effect pursuant to Section 3(A) hereof at the time
the Employee makes such election under this Section 4(C)(ii).
Thereupon, this Agreement shall terminate and Employee shall have no
further rights under or be entitled to any other benefits of this
Agreement, provided that the provisions of Sections 3(C) and (E), 6,
7, 8 and 12 shall survive such termination.
D. Employee's Rights on Part-time Status. During the period that
the Employee is on part-time status,
(i) The Company shall pay Employee a revised, guaranteed
minimum annual Base Salary from the date the Employee goes on
part-time status for a period of three (3) years in an amount equal to
seventy-five percent (75%) of the average of the total annual direct
compensation paid to the Employee by the Company (whether under this
Agreement, a predecessor agreement or otherwise) for the two (2)
highest of the three (3) compensation years immediately preceding the
compensation year in which the notice
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specified in Section 4(A)(iii), or Section 4(G) of this Agreement is
given. As used in this Agreement, the phrase "total annual direct
compensation" shall mean the sum of the gross amount of Base Salary
(as from time to time adjusted) paid to the Employee during a
compensation year and all other forms of direct compensation for a
compensation year (including, but not limited to, incentive or
supplemental compensation awards made to the Employee for the fiscal
year ending in each of such compensation year), whether or not paid to
the Employee during a compensation year, (x) including any amounts
paid by the Employee into any savings, deferred compensation or
similar Company sponsored plan or arrangement, and (y) excluding any
amounts that must be recognized as compensation in any such
compensation year as a result of the Employee's exercise of a stock
option or receipt of an award or unit of the Company's (or any
successor's) stock;
(ii) The revised, guaranteed minimum annual Base Salary
payable by the Company to the Employee pursuant to this Section 4(D)
shall be increased (but not decreased) annually on the first
anniversary of the date of the Employee's going on part-time status
and each anniversary thereafter, on a compound basis, by the same
percentage increase (if any) in the Consumer Price Index for All Urban
Consumer's - All Items Index, for Dallas, Texas (or any substantially
similar index published for the same area) as published by the U.S.
Department of Labor, Bureau of Labor Statistics for the twelve (12)
month period immediately preceding the first anniversary of the date
of the Employee's going on part-time status and on each yearly
anniversary thereafter;
(iii) (1) The Employee shall continue to participate
(at not less than his highest levels of participation or
coverage during the last twelve (12) months the Employee was
on active status) in all of the Company's pension, group life,
medical, dental, accidental death or disability insurance,
thrift, savings, deferred compensation, stock option, unit or
award plans, vacation plans, automobile allowances and all
other Company benefit plans, fringe benefits, allowances and
accommodations of employment on active status that are
afforded to the principal executive officers of the Company,
(2) With respect to any stock option, unit or
award plan of the Company as referred to in this Section
4(D)(iii), the Employee's right to continue participation at
and consistent with his highest levels of participation during
the last twelve (12) months the Employee was on active status,
(x) is intended to include (but only to the extent consistent
with the Company's treatment of its principal executive
officers) the Employee receiving renewal and/or replacement
grants of or awards for options or units on or with respect to
the Company's common stock (for not less than the same number
of shares or units, at the fair market value prevailing at the
time, and otherwise on terms and conditions no more or less
favorable than such grants or awards are made to the Company's
principal executive officers who are then on active employment
status) consistent with the Company's stock option plan as
then existing, not more than thirty (30)
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days after the date any of the previous options or units are
cancelled, vest or expire (or would have expired but for their
exercise by the Employee), and (y) solely for the purposes of
any stock options, units or awards outstanding at the time the
Employee goes on part-time status or for any renewal or
replacement grants or awards, the Employee's status as an
"employee" or, thereafter, the Employee's status as an
"affiliate" of the Company (or of any successor thereto) shall
continue to the last date of expiration, cancellation, vesting
or exercise, as the case may be, of any and all of such
outstanding stock options, units or awards or renewal or
replacement grants or awards, and
(3) If the Company is merged into or consolidated
with another corporation under circumstances where the Company
is not the surviving corporation, or if the Company's voting
common stock is no longer publicly traded on a national
securities exchange, or if the Company sells or disposes of
substantially all its assets to another corporation, then any
such renewal and/or replacement grants of or awards for
options or units pursuant to subparagraph (x) of Section
4(D)(iii)(2) shall be made in or for the shares of such stock
or other securities as the holders of shares of the Company's
voting common stock received pursuant to the terms of the
merger, consolidation or sale, and
(4) If any of the Company's pension; group life,
medical, dental, accidental death, or disability insurance;
deferred compensation; thrift, savings, stock option, unit or
award plans; or any other Company benefit plans, fringe
benefits, allowances or accommodations of employment that were
available to the Employee at any time during the last twelve
(12) months the Employee was on active status shall not
continue to be maintained by the Company (or by any successor
thereto) or are otherwise not made available to the Employee,
the Company (or any successor thereto) shall provide for or
make available to the Employee substantially similar economic
benefits (and tax benefits attendant thereto) through such
alternative means and upon such terms as shall be reasonably
satisfactory to the Employee, provided that nothing in this
clause (4) shall obligate the Company to provide for or make
any such substantially similar alternative benefits available
to the Employee if the Company (or any successor thereto) does
not have such benefits available either directly or indirectly
(whether or not granted) for its principal executive officers.
(iv) The Employee shall otherwise be entitled to all other
principal executive officer perquisites, allowances and benefits on
the same terms and conditions as such are from time to time made
available generally to the other principal executive officers of the
Company (or any successor thereto) but in no event less than the
highest level of the perquisites, allowances and benefits that were
available to the Employee during the last twelve (12) months of his
employment on active status;
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(v) The Employee shall otherwise continue to receive all
the rights and benefits of this Agreement including, without
limitation, those rights and benefits (not inconsistent with this
Section 4(D)) that are set forth in Sections 3(C), 3(E), 5, 9 and 12
hereof;
(vi) The Employee shall not be prevented from accepting
other employment while on part-time status or engaging in (and
devoting substantially all of his time to) other business activities
that are not in conflict in any material respect with the limitations
set forth in Section 6 hereof;
(vii) This Agreement and Employee's continuing employment
on part-time status may be terminated at any time by the Company (x)
pursuant to the provisions of Section 4(A)(ii), or (y) acting through
its Board of Directors (and not a committee thereof) only if the
Employee knowingly violates in any material respect the provisions of
Sections 6, 7 and 8, respectively, as found by final judgment of a
court of competent jurisdiction;
(viii) While on part-time status and except as otherwise
required herein, the Employee shall not be required to perform any
regular duties for the Company (except to provide such services
consistent with the Employee's educational background, experience and
prior positions with the Company, as may be acceptable to the
Employee) or to seek or accept additional employment with any other
person or firm (although the Employee shall be free to do so so long
as accepting such additional employment or engaging in other business
activity is not in conflict in any material respect with the
limitations set forth in Section 6 of this Agreement). If the
Employee, at his discretion, shall accept any such additional
employment or engage in any such other business activity consistent in
all material respects with Section 6 of this Agreement, there shall be
no offset, reduction or effect upon any rights, benefits or payments
to which the Employee is entitled pursuant to this Agreement.
Furthermore, the Employee shall have no obligation to account for,
remit, rebate or pay over to the Company any compensation or other
amounts earned or derived in connection with such additional
employment or business activity consistent in all material respects
with Section 6 of this Agreement; and
(ix) The Employee shall, however, make himself generally
available for special projects or to consult with the Company and its
employees at such times and at such places as may be reasonably
requested by the Company and which shall be reasonably satisfactory to
the Employee and consistent with the Employee's regular duties and
responsibilities in the course of his then new occupation or other
employment, if any.
E. After the termination of the Employee's employment on
part-time status, the former Employee shall remain an "affiliate" of the
Company for the period described in Section 4(D)(iii)(2) hereof and during such
time shall continue to be available to consult with the Company and its
employees at such time and at such places as may be reasonably convenient and
acceptable to the former Employee and in such manner as may be consistent with
the former Employee's educational background, experience and prior positions
with the Company and with
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<PAGE> 12
his regular duties and responsibilities in the course of his then new
occupation or other employment, if any.
F. Death. In the event of the Employee's death during the term
of his employment hereunder, the Company shall pay to the Employee's surviving
spouse or to the executor or administrator of the Employee's estate (if his
spouse shall not survive him) an amount equal to the installments of his Base
Salary then payable pursuant to Sections 3(A) or 4(D), as the case may be, for
the month in which he dies, and for the greater of (i) the balance of the term
remaining under this Agreement, or (ii) two (2) years.
G. Disability. The Employee shall be covered by the Company's
disability benefit plan as such plan may from time to time exist. The Company
may eliminate or change the terms and conditions of said plan at its discretion
with no liability to the Employee other than the liability, if any, under such
plan which may have accrued up to the elimination or change of such plan. In
the event because of physical or mental illness or personal injury while the
Employee is on active status or part-time status, the Employee shall become
permanently unable or disabled such that he is unable to perform, and in all
reasonable medical likelihood, going to continue indefinitely to be unable to
perform his normal duties in his regular manner, as determined by independent,
competent medical authority.
(i) if such disability determination occurs while the
Employee is on active status, the Company may elect (but shall not be
obligated) to terminate the Employee's employment under this Agreement
on a date which is not less than three (3) years after the date on
which written notice of such termination is received by the Employee
in which event the Employee shall be placed on part-time status, and
the Company shall pay to the Employee the Base Salary payable pursuant
to Section 4(D)(i) for a period not less than three (3) years
thereafter; or
(ii) if such disability determination occurs while the
Employee is on part-time status pursuant to Section 4(C)(i) or (ii),
the Company shall continue to pay to the Employee the amount of his
Base Salary then payable for the greater of (x) the balance of the
period remaining under the term of this Agreement, or (y) two (2)
years;
reduced, in any case however, by the amount of any payments made to such
Employee under the coverage then afforded to the Employee by the Company's
disability benefit plan in effect at the time such disability determination is
made. The Employee shall, during such disability and until the effective date
of the termination of this Agreement and of payments hereunder by the Company
to the Employee, continue to enjoy all other applicable benefits of employment
that would otherwise pertain to continued employment on part-time status
pursuant to this Agreement.
H. Return of Property. Upon termination of the Employee's
employment under this Agreement, however brought about, the Employee (or his
representatives) shall promptly deliver and return to the Company all the
Company's property including, but not limited to, credit cards,
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manuals, customer lists, financial data, letters, notes, notebooks, reports and
copies of any of the above, and any Protected Information (as defined in
Section 7) which is in the possession or under the control of the Employee
except such property as may be necessary for the former Employee to continue
his duties, if any, as an "affiliate" which the Company may expressly direct
the former Employee to keep in his possession; and upon the termination of his
status as an "affiliate", the former Employee shall promptly deliver and return
all such property to the Company.
5. OTHER EMPLOYEE RIGHTS
A. The Employee shall be entitled to (i) participate in the
Company's pension, group life, medical, dental, accidental death, or disability
insurance, thrift, savings, deferred compensation, incentive compensation,
stock option, unit or award plans, vacation plans, automobile allowances and
all other Company benefit plans, fringe benefits, allowances and accommodations
of employment (including, but only as approved from time to time by the Chief
Executive Officer of the Company, club memberships and dues, business and
professional societies, etc.), accommodations and allowances as are from time
to time generally available or applicable to the Company's principal executive
officers (but in no event less than are currently available to the Employee),
and (ii) annual vacations in accordance with the vacation policy established by
the Company for the Company's principal executive officers (but in no event
less than currently available to the Employee) during which time his applicable
compensation shall be paid in full.
B. The Employee is authorized (to the same extent and in the same
manner as the Company's other principal executive officers are authorized) to
incur reasonable business expenses while on active or part-time status as an
employee of the Company, including expenses for meals, entertainment, hotel and
air travel, telephone, automobile, dues, club expenses, fees, and similar items
(and shall be entitled to incur such reasonable business expenses, determined
commensurate with the extent of his consultation hereunder, while an
"affiliate" of the Company). The Company shall either pay directly or promptly
reimburse the Employee for such expenses upon the presentment by the Employee
from time to time of an itemized accounting (as reasonably required by the
Company's policies) of such expenditures for which reimbursement is sought.
C. The Employee shall, while on active status, be provided by the
Company with office space, furnishings and facilities, reserved parking,
secretarial and administrative assistance, supplies and equipment commensurate
with the size and quality of that which is provided from time to time to the
Company's principal executive officers.
D. The Employee shall be granted options to purchase 100,000
shares of common stock, $.01 par value, of the Company under the Company's 1993
Stock Incentive Plan. The price, terms, and conditions of such options shall be
in accordance with the provisions of the 1993 Stock Incentive Plan.
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<PAGE> 14
E. The Company will reimburse the Employee for all direct
commuting and moving costs incurred by the Employee in relocating to Dallas,
Texas upon submission of an appropriately documented request for reimbursement
in a form and manner consistent with the Company's expense reporting policy.
Reimbursement can be claimed on a timeframe that suits the Employee's personal
requirements (i.e., weekly, bi-weekly, or monthly). The Company will also
reimburse the Employee for all direct real estate fees and transaction costs
incurred by the Employee in disposing of the Employee's current residence and
purchasing a new principal residence in Dallas, Texas. In addition, the
Company will pay the Employee an amount equal to the Employee's individual U.S.
federal income taxes associated with the Company's reimbursement of the
Employee's relocation expenses.
6. COVENANT NOT TO COMPETE
A. The Employee recognizes that in each of the highly competitive
businesses in which the Company is engaged, personal contact is of primary
importance in securing new customers and in retaining the accounts and goodwill
of present customers and protecting the business of the Company. The Employee,
therefore, agrees that at all times during the term of his employment hereunder
and for a period of two (2) years after the termination of his employment
hereunder, howsoever brought about, he will not, within 100 miles of
(i) the principal place of business of the Company,
(ii) the principal place of business of any corporation or
other entity owned, controlled by (or otherwise affiliated with) the
Company by which he may also be employed or served by him a an officer
or director, or
(iii) any other geographic location in which the Employee
has specifically represented the interests of the Company or such
other affiliated entity, in any of the businesses described in
subsections (a) through (d) below during the twelve (12) months prior
to the termination of this Agreement, as principal agent, partner,
employee, consultant, distributor, dealer, contractor, broker or
trustee or through the agency of any corporation, partnership,
association or agent or agency, engage directly or indirectly, in any
business of (a) rubbish, garbage, paper, textile wastes, chemical or
hazardous wastes, liquid or other waste collection, interim storage,
transfer, recovery, processing, recycling, marketing or disposal, (b)
engineering or design, construction, or operation of any plant,
facility or other structure having as its primary purpose the mass
burning of solid or liquid waste with or without any intended efforts
to recover from such wastes, energy, steam, ash, fly ash or other
constituents of the waste stream, regardless of whether such
constituents have any value, (c) manufacturing, selling, leasing or
distributing machinery, equipment or products used or produced in
connection with the activities described in subsections (a) or (b)
above, or (d) any other material business engaged in by the Company,
and shall not be the owner of more than 1% of the outstanding capital
stock of any corporation (other than the Company), or an officer,
director or employee of any
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<PAGE> 15
corporation (other than the Company or a corporation affiliated with
the Company), or a member or employee of any partnership, or an owner,
investor, lender, agent, consultant, distributor, dealer, contractor,
broker or employee of any other business which conducts a business
described in subsections (a), (b), (c) and (d) above, within the
territory described above.
B. The Employee agrees that during the term of his employment
under this Agreement and for a period of two (2) years after the termination of
the Employee's employment under this Agreement, he will not directly or
indirectly (i) induce any customers of the Company or corporations affiliated
with the Company to patronize any similar business that competes with any
material business of the Company; (ii) canvass, solicit, or accept any similar
business from any customer of the Company or corporations affiliated with the
Company; (iii) request or advise any customers of the Company or corporations
affiliated with the Company to withdraw, curtail, or cancel such customer's
business with the Company; (iv) disclose to any other person, firm, or
corporation the names or addresses of any of the customers of the Company or
corporations affiliated with the Company; or (v) individually or through any
person, firm, association, or corporation with which he is now or may hereafter
become associated, cause, solicit, entice, or induce any present or future
employee of the Company or any corporation affiliated with the Company to leave
the employ of the Company or such other corporation to accept employment with
or compensation from the Employee or any such person, firm, association, or
corporation without the prior written consent of the Company. The Employee
further agrees that he shall not engage in any pattern of conduct that involves
the making or publishing of written or oral statements or remarks (including,
without limitation, the repetition or distribution of derogatory rumors,
allegations, negative reports or comments) which are disparaging, deleterious
or damaging to the integrity, reputation or good will of the Company, its
management, or of management of corporations affiliated with the Company.
C. If the provisions of this Section 6 are violated, in whole or
in part, the Company shall be entitled, upon application to any court of proper
jurisdiction, to a temporary restraining order or preliminary injunction
(without the necessity of posting any bond with respect thereto) to restrain
and enjoin the Employee from such violation without prejudice to any other
remedies the Company may have at law or in equity. Further, in the event that
the provisions of this Section 6 should ever be deemed to exceed the time,
geographic or occupational limitations permitted by the applicable laws, the
Employee and the Company agree that such provisions shall be and are hereby
reformed to the maximum time, geographic or occupational limitations permitted
by the applicable laws. The provisions of this Section 6 shall survive the
termination of the Employee's employment or expiration or termination of this
Agreement.
7. CONFIDENTIAL INFORMATION - INTELLECTUAL PROPERTY
A. The Employee recognizes and acknowledges that he has had and
will continue to have access to various confidential or proprietary information
concerning the Company and corporations affiliated with the Company of a
special and unique value which may include,
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without limitation, (i) books and records relating to operation, finance,
accounting, sales, personnel and management, (ii) policies and matters relating
particularly to operations such as customer service requirements, costs of
providing service and equipment, operating costs and pricing matters, and (i)
various trade or business secrets, including business opportunities, marketing
or business diversification plans, business development and bidding techniques,
methods and processes, financial data and the like (collectively, the
"Protected Information").
B. The Employee agrees, therefore, that he will not at any time,
either while employed by the Company or afterwards, knowingly make any
independent use of, or knowingly disclose to any other person or organization
(except as authorized by the Company) any of the Protected Information.
C. In the event of a breach or threatened breach by the Employee
of the provisions of this Section 7, the Employee agrees that Company shall be
entitled to a temporary restraining order or a preliminary injunction (without
the necessity of the Company posting any bond in connection therewith)
restraining the Employee from using or disclosing, in whole or in part, such
Protected Information. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from the Employee.
D. The Employee shall disclose promptly to the Company any and
all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by the
Employee solely or jointly with another during the period of employment on
active status or within one (1) years thereafter and which pertain primarily to
the material business activities of the Company and the Employee hereby assigns
and agrees to assign all his interests therein to the Company or to its
nominee; whenever requested to do so by the Company, the Employee shall execute
any and all applications, assignments or other instruments which the Company
shall deem necessary to apply for and obtain Letters of Patent of the United
States or any foreign country or to otherwise protect the Company's interest
therein. These obligations shall continue beyond the termination of employment
with respect to inventions, improvements, and valuable discoveries, whether
patentable or not, conceived, made or acquired by the Employee during the
period of employment or within one(1) year thereafter, and shall be binding
upon the Employee's assigns, executors, administrators and other legal
representatives.
8. EMPLOYEE CONDUCT
A. The Employee represents and agrees with the Company that he
will make no disbursement or other payment of any kind or character out of the
compensation paid or expenses reimbursed to him pursuant hereto or with any
other fund, which contravene, in any material respect, any policy of the
Company or, in any material respect, any applicable statute or rule, regulation
or order of any jurisdiction, foreign or domestic. The Employee further agrees
to indemnify and save harmless the Company from any liabilities, obligations,
claims, penalties, fines or losses resulting from any unauthorized or unlawful
acts of the Employee which
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contravene in any material respect any policy of the Company or any statute,
rule, regulation or order of any jurisdiction, foreign or domestic, applicable
to the Employee or the Company. The provisions of this Section 8 shall survive
the dissolution or termination of the Employee's employment under this
Agreement.
B. The Employee acknowledges that he has been furnished with a
current copy of the policy and procedures manual of the Company, that he has
read and understands such policies and procedures set forth in such manual,
that he understands such policies and procedures (and will read and become
familiar with any revisions or supplements to this manual) are applicable to
the Employee in the performance of his duties and job performance for the
Company, and that he agrees to observe in all material respects the Company's
policies and procedures in the conduct by the Employee of his employment duties
for the Company.
C. The Employee agrees to disclose honestly and fully all
information and documentation in his possession concerning all transactions or
events relating to or affecting the Company or any entity owned, controlled (or
otherwise affiliated) by the Company, as and to the extent such information or
documentation is requested by the Company or the authorized representatives
thereof; provided that if the Employee indicates to the Company that the
information or documentation requested is privileged, confidential or
personally sensitive, appropriate steps will be taken to attempt to protect
such privilege, confidentiality or privacy to the extent possible consistent
with the ethical or legal obligations applicable to the Company, but neither
such assertions by the Employee nor the undertakings attempted by the Company
with respect thereto shall qualify the unconditional disclosure obligation of
the Employee set forth above.
9. GENERAL PROVISIONS
A. In case any one or more of the provisions of this Agreement
shall, for any reason, be held or found by final judgment of a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect
(i) such invalidity, illegality or unenforceability shall not affect any other
provisions of this Agreement, (ii) this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein
(except that this subsection (ii) shall not prohibit any modification allowed
under Section 6 hereof), and (iii) if the effect of a holding or finding that
any such provision is either invalid, illegal or unenforceable is to modify to
the Employee's detriment, reduce or eliminate any compensation, reimbursement,
payment, allowance or other benefit to the Employee intended by the Company and
Employee in entering into this Agreement, the Company shall promptly negotiate
and enter into an agreement with the Employee containing alternative provisions
(reasonably acceptable to the Employee), that will restore to the Employee (to
the extent lawfully permissible) substantially the same economic, substantive
and income tax benefits the Employee would have enjoyed had any such provision
of this Agreement been upheld as legal, valid and enforceable. Failure to
insist upon strict compliance with any provision of this Agreement shall not be
deemed a waiver of such provision or of any other provision of this Agreement.
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<PAGE> 18
B. The Employee acknowledges receipt of a copy of this Agreement
(together with any attachments hereto), which has been executed in duplicate
and agrees that, with respect to the subject matter hereof, it is the entire
Agreement with the Company. Any other oral or any written representations,
understandings or agreements with the Company or any of its officers or
representatives covering the same subject matter which are in conflict with
this Agreement are hereby merged into and superseded by the provisions of this
Agreement.
C. The Company shall have no right of set-off or counter-claim in
respect of any debt or other obligation of the Employee to the Company against
any payment or other obligation of the Company to the Employee provided for in
this Agreement or pursuant to any other plan, agreement or policy.
D. No provision of this Agreement may be amended, modified or
waived unless such amendment, modification or waiver shall be agreed to in
writing and signed by the Employee and by a person duly authorized by the
Compensation Committee.
E. No right to or interest in any compensation or reimbursement
payable hereunder shall be assignable or divisible by the Employee; provided,
however, that this provision shall not preclude the Employee from designating
one or more beneficiaries to receive any amount that may be payable after his
death and shall preclude his executor or administrator from assigning any right
hereunder to the person or person entitled thereto.
F. The headings of Sections and subsection hereof are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
G. (i) Company consents with respect to any action, suit or
other legal proceeding pertaining directly to this Agreement or to the
interpretation of or enforcement of any of the Employee's rights
hereunder, to service of process in the State of Texas and appoints CT
Corporation System, 811 Dallas Avenue, Houston, Texas 77002 or such
other agent within Houston, Texas as shall be designated by Company in
a written notice to Employee, as its agent, in such state for such
purpose. Company irrevocably (i) agrees that any such suit, action or
legal proceeding may be brought in the courts of such state or the
courts of the United States for such state, (ii) consents to the
jurisdiction of each such court in any such suit, action or legal
proceeding and (iii) waives any objection it may have to laying of
venue of any such suit, action or legal proceeding in any of such
courts.
(ii) This Agreement shall be construed in accordance with
and governed for all purposes by the laws of the State of Texas.
H. This Agreement may not be assigned, partitioned, subdivided,
pledged, or hypothecated in whole or in part without the express prior written
consent of the Employee and
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<PAGE> 19
Company. This Agreement shall not be terminated either by the voluntary or
involuntary dissolution or the winding up of the affairs of the Company, or by
any merger or consolidation wherein the Company is not the surviving
corporation, or by any transfer of all or substantially all of the Company's
assets on a consolidated basis. In the event of any such merger, consolidation
or transfer of assets, the provisions of this Agreement shall be binding upon
and shall inure to the benefit of the surviving corporation or to the
corporation to which such assets shall be transferred.
I. If any amounts which are required or determined to be paid or
payable or reimbursed or reimbursable to the Employee under this Agreement (or
under any other plan, agreement, policy or arrangement with the Company) are
not so paid promptly at the times provided herein or therein, such amounts
shall accrue interest compounded daily at the annual percentage rate which is
three percentage points (3%) above the interest rate which is announced by The
First National Bank of Boston, Boston, Massachusetts, from time to time, as its
Base Rate (or prime lending rate), from the date such amounts were required or
determined to have been paid or payable or reimbursed or reimbursable to the
Employee until such amounts and any interest accrued thereon are finally and
fully paid, provided, however, that in no event shall the amount of interest
contracted for, charged or received hereunder exceed the maximum non-usurious
amount of interest allowed by applicable law.
J. The Company agrees with the Employee that, except to the
extent required by law, it will not make or publish, without the express prior
written consent of the Employee, any written or oral statement concerning the
terms of the Employee's employment relationship with the Company and will not,
if the Employee goes on part-time status for any reason or severs his
employment with the Company, make or publish any written or oral statement
concerning the Employee including, without limitation, his work-related
performance or the reasons or basis for the Employee going on part-time status
or otherwise severing his employment relationship with the Company.
10. TERMINATION OF PRIOR AGREEMENTS
This Agreement shall terminate and supersede any and all prior written
or oral agreements or understandings existing between the Company and the
Employee with respect to employment or compensation, and the Company and the
Employee hereby mutually release and discharge each other from any further
obligation, liability or responsibility under any of the foregoing.
11. NOTICES
Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given when delivered in
person or when deposited in the U.S. mail, registered or certified, postage
prepaid, and mailed to the respective addresses set forth herein.
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<PAGE> 20
12. DISPUTES; PAYMENT OF ATTORNEYS' FEES
If at any time during the term of this Agreement or afterwards there
should arise any dispute as to the validity, interpretation or application of
any term or condition of this Agreement, the Company agrees, upon written
demand by Employee (and Employee shall be entitled, upon application to any
court of competent jurisdiction, to the entry of a mandatory injunction,
without the necessity of posting any bond with respect thereto, compelling the
Company) to promptly provide sums sufficient to pay on a current basis (either
directly or by reimbursing the Employee) the Employee's costs and reasonable
attorney's fees (including expenses of investigation and disbursements for the
fees and expenses of experts, etc.) incurred by the Employee in connection with
any such dispute or any litigation, (x) provided that the Employee shall repay
any such amounts paid or advanced if the Employee is not the prevailing party
with respect to any dispute or litigation arising under Sections 6, 7 or 8, or
(y) regardless of whether the Employee is the prevailing party in a dispute or
in litigation involving any other provision of this Agreement, provided that
the court in which such litigation is first initiated determines with respect
to this obligation, upon application of either party hereto, the Employee did
not initiate frivolously such litigation. Under no circumstances shall be
Employee be obligated to pay or reimburse the Company for any attorneys' fees,
costs of expenses incurred by the Company. The provisions of this Section 12
shall survive the expiration or termination of this Agreement and of the
Employee's employment hereunder.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amended and Restated Agreement as of the day and year indicated above.
____________________________________
(Employee's Signature)
Employee's Permanent Address:
1206 Kingsley Court
Ambler, PA 19002
USA WASTE SERVICES, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
5000 Quorum Drive, Suite 300
Dallas, Texas 75240
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
To USA Waste Services, Inc.:
We consent to the inclusion in this registration statement on Form S-4 of
our report dated March 10, 1995, on our audits of the consolidated financial
statements of USA Waste Services, Inc. In addition, we consent to the
incorporation by reference of our report dated March 10, 1995 on USA Waste
Services, Inc. included in the registration statement on Form S-4 into the USA
Waste Services, Inc.'s previously filed registration statements on Form S-3
(File Nos. 33-42988, 33-43809, 33-76226 and 33-85018) and registration
statements on Form S-8 (File Nos. 33-43619, 33-72436, 33-84990 and 33-84988). We
also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Dallas, Texas
May 11, 1995
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of USA Waste Services,
Inc. on Form S-4 of our report dated March 30, 1995 on the consolidated
financial statements of Chambers Development Company, Inc. and subsidiaries,
appearing in the Joint Proxy Statement and Prospectus, which is part of this
Registration Statement, and to the incorporation by reference into this
Registration Statement of our report dated March 30, 1995 on the consolidated
financial statements of Chambers Development Company, Inc. and subsidiaries,
appearing in the Annual Report on Form 10-K of Chambers Development Company,
Inc. for the year ended December 31, 1994. We also consent to the incorporation
by reference of our report dated March 30, 1995 on the consolidated financial
statements of Chambers Development Company, Inc. and subsidiaries, appearing in
the Joint Proxy Statement and Prospectus, into the Registration Statements on
Form S-3 (File Nos. 33-42988, 33-43809, 33-76226 and 33-85018) and on Form S-8
(File Nos. 33-43619, 33-72436, 33-84990 and 33-84988) of USA Waste Services,
Inc. In addition, we consent to the reference to us under the heading "Experts"
in the Joint Proxy Statement and Prospectus.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
May 11, 1995
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To USA Waste Services, Inc.:
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-4 of our report dated
March 25, 1994 on the Acquired New Jersey Solid Waste Companies included in the
Envirofil, Inc.'s previously filed Form 8-K/A filed as of May 11, 1994. In
addition, we hereby consent to the incorporation of our report dated September
22, 1993 on Envirofil, Inc. included in this Registration Statement on Form S-4
and our report dated March 25, 1994 on the Acquired New Jersey Solid Waste
Companies incorporated by reference in this Registration Statement on Form S-4
into the USA Waste Services, Inc.'s previously filed Registration Statements on
Form S-3 (File Nos. 33-42988, 33-43809, 33-76226 and 33-85018) and Registration
Statements on Form S-8 (File Nos. 33-43619, 33-72436, 33-84990 and 33-84988) and
to all references to our Firm included in this Registration Statement on Form
S-4.
Philadelphia, PA
May 11, 1995
