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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-12154
USA WASTE SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 73-1309529
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5400 LBJ FREEWAY, SUITE 300 -- TOWER ONE
DALLAS, TEXAS 75240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 383-7900
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of
the registrant at February 29, 1996, was approximately $1,027,472,999. The
aggregate market value was computed by using the closing price of the stock as
of that date on the New York Stock Exchange. (For purposes of calculating this
amount only, all directors and executive officers of the registrant have been
treated as affiliates.)
The number of shares of Common Stock, $.01 par value, of the Registrant
outstanding at March 14, 1996, was 65,906,973.
DOCUMENTS INCORPORATED BY REFERENCE
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DOCUMENT INCORPORATED AS TO
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Joint Proxy Statement and Prospectus
for the 1996 Annual Meeting of Shareholders Part III
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TABLE OF CONTENTS
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PART I
Item 1. Business............................................................... 1
Item 2. Properties............................................................. 16
Item 3. Legal Proceedings...................................................... 16
Item 4. Submission of Matters to a Vote of Security Holders.................... 17
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.............................................................. 20
Item 6. Selected Consolidated Financial Data................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................ 22
Item 8. Financial Statements and Supplementary Data............................ 33
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................. 60
PART III
Item 10. Directors and Executive Officers of the Registrant..................... 60
Item 11. Executive Compensation................................................. 60
Item 12. Security Ownership of Certain Beneficial Owners and Management......... 60
Item 13. Certain Relationships and Related Transactions......................... 60
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........ 61
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PART I
ITEM 1. BUSINESS.
GENERAL
USA Waste Services, Inc. ("USA Waste" or the "Company") is the fourth
largest integrated solid waste management company in North America and serves
the full spectrum of municipal, commercial, industrial (roll-off), and
residential customers in 21 states. The Company's solid waste management
services include collection, transfer, and disposal operations and, to a lesser
extent, recycling and certain other waste management services. USA Waste owns or
operates 29 landfills, 22 transfer stations, and 44 collection operations and
serves more than 500,000 customers. The Company has a diversified customer base
with no single customer accounting for more than 5% of the Company's revenue or
income from continuing operations during 1995. The Company employs approximately
2,500 persons.
The terms "USA Waste" and the "Company" refer to USA Waste Services, Inc.,
a Delaware corporation incorporated on April 28, 1995, to become the successor
company of USA Waste Services, Inc., an Oklahoma corporation organized in 1987,
and include its predecessors, subsidiaries, and affiliates, unless the context
requires otherwise. USA Waste's executive offices are located at 5400 LBJ
Freeway, Suite 300, Tower One, Dallas, Texas 75240, and its telephone number is
214-383-7900.
Of the Company's revenues for the year ended December 31, 1995,
approximately 51.9% was attributable to collection operations, approximately
31.9% was attributable to landfill operations, approximately 10.2% was from
transfer operations, and approximately 6.0% from other operations. The Company's
average landfill volume for the year ended December 31, 1995, was approximately
23,400 tons per day.
INDUSTRY BACKGROUND
USA Waste operates in the non-hazardous solid waste segment of the waste
management industry. Despite the size of this industry, it has historically been
a fragmented industry, with a multitude of local private and municipal operators
servicing relatively centralized 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 significant 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.
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The rising costs associated with the new industry regulations have caused
consolidation and acquisition activity within the industry. Large 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 operations which either
complement existing businesses or otherwise increase overall strength and
flexibility. Compliance costs at the landfill/disposal level have directly
affected costs in the collection segment of the market as landfill operators
pass them on through higher fees for disposal 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
The Company intends to capitalize on the consolidation in the solid waste
management industry in several ways. Key elements of the Company's strategy
include:
- - Increasing productivity and operating efficiencies in existing and acquired
operations. The Company seeks to increase productivity, achieve
administrative and operating efficiencies and improve profitability in
existing operations and acquired businesses, with the objective of becoming
the low cost operator in each of its markets. Measures taken by the Company
in this connection include consolidating and implementing uniform
administrative and management systems, restructuring and consolidating
collection routes, improving equipment utilization and increasing employee
productivity through incentive compensation and training programs. The
Company's management believes that its ability to serve markets as a low
cost operator is fundamental to achieving sustainable internal growth and
to realizing the benefits of its acquisition strategy.
- - Increasing revenues and enhancing profitability through tuck-in
acquisitions. The Company continually seeks to expand its services through
the acquisition of additional solid waste management businesses and
operations that can be effectively integrated with the Company's existing
operations. These acquisitions typically involve adding collection
operations, transfer stations or landfills that are complementary to
existing operations and that permit the Company to implement operating
efficiencies and increase asset utilization.
- - Expanding into new markets through acquisitions. The Company pursues
acquisitions in new markets where the Company believes it can strengthen
its overall competitive position as a national provider of integrated solid
waste management services and where opportunities exist to apply the
Company's operating and management expertise to enhance the performance of
acquired operations.
The Company materially expanded its operations and markets with its
acquisition of Chambers Development Company, Inc. ("Chambers") on June 30, 1995
(the "Chambers Merger"). With the addition of the Chambers' operations, which
included significant landfill capacity as well as collection and transfer
station operations, the Company established its presence in the Mid-Atlantic and
southeastern regions of the United States. The Chambers Merger provided the
Company the opportunity to capitalize on the substantial investment made by
Chambers in the permitting, design and construction of its landfills. The
Company has taken a variety of steps to increase waste flows and improve
efficiencies of Chambers' collection and landfill operations, including the
completion of recent acquisitions that complement existing Chambers operations,
implementing various routing and other operating efficiencies and attracting
additional customers. The Company has also undertaken to reduce overhead and
operating costs and increase employee productivity. In this connection, the
Company has closed the Chambers corporate headquarters in Pittsburgh,
Pennsylvania, relocated two regional offices of Chambers to existing facilities
of the Company and implemented headcount reductions. Additionally, the Company
is
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implementing incentive compensation programs for Chambers employees where such
programs were not previously available.
Since the Chambers Merger, the Company has continued to expand its
operations and revenue base through a series of smaller acquisitions that
complemented and expanded the Company's operations. During the last six months
of 1995, the Company completed ten additional acquisitions resulting in the
addition of three landfills, ten collection operations, and nine transfer
stations. These acquired operations are based in Arkansas, Georgia, Missouri,
New Jersey, Pennsylvania, Texas, and Virginia.
On December 18, 1995, USA Waste entered into an Agreement and Plan of
Merger (the "Merger Agreement") to acquire Western Waste Industries ("Western"),
a California corporation, through a merger transaction ("Western Merger"). The
Western Merger is subject to, among other conditions, approval of both
companies' stockholders. It is anticipated that the Western Merger will be
completed in April 1996 and that it will be accounted for as a pooling of
interests. The Merger Agreement provides that on the effective date of the
Western Merger, USA Waste will issue 1.5 shares of its Common Stock for every
share of Western's common stock outstanding (other than shares owned by USA
Waste). USA Waste expects to issue approximately 21.4 million shares of Common
Stock and assume options under Western's stock option plans equivalent to
approximately 5.2 million underlying USA Waste shares of Common Stock in
connection with the Western Merger. Following the Western Merger, the Company's
Board of Directors will be expanded from 9 to 12 members and will include
nominees of both USA Waste and Western.
Western provides integrated solid waste services in the United States, with
operations or properties at the end of 1995 in California, Texas, Louisiana,
Florida, Colorado and Arkansas. Western has over 90 municipal and regional
authority contracts and serves over 785,000 customers. As part of its business,
Western operates six landfills, three transfer stations and five recycling
facilities. For its fiscal year ended June 30, 1995, Western had operating
revenues of $270,941,000 and income from continuing operations of $17,089,000.
As a result of the Western acquisition, the Company will become the third
largest integrated solid waste management company in North America.
The Company's business is subject to extensive federal, state, and local
regulation and legislative initiative. Further, in some states and
municipalities, its business is subject to environmental regulation, mandatory
recycling laws, prohibitions on the deposit of certain waste in landfills, and
restrictions on the flow of solid waste. Because of continuing public awareness
and influence regarding the collection, transfer, and disposal of waste and the
preservation of the environment, and uncertainty with respect to the enactment
and enforcement of future laws and regulations, the Company can not always
accurately predict the impact any future regulation or law may have on its
operations. See "Regulation" and "Legal Proceedings" for additional information.
OPERATIONS
USA Waste provides collection, transfer, recycling, disposal, soil
remediation, and medical and special waste incineration services to municipal,
commercial, industrial and residential customers in 21 states.
Management of USA Waste's solid waste operations is achieved through a
divisional alignment that currently includes five regions/divisions organized by
geographic area. Each region/division is headed by a regional vice president
("RVP") or divisional vice president ("DVP"). Each RVP/DVP is responsible for
the oversight of the following departments: sales and marketing, administration
and financial, operations, and maintenance. In addition, each RVP/DVP 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 region/division
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generally encompasses a multi-state area and may have a concentration from five
to 25 districts. Regions/divisions are divided into districts headed by a
district manager. Each district manager is responsible for the day-to-day
oversight of the district'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 decentralized management controls. Each
collection operation or district 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 land 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 transporting 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 necessity for all 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 utilize disposal facilities owned or operated by
affiliated parties so that access can be assured on favorable terms. Customers
are charged disposal charges or tipping fees based on market factors and the
type and volume or weight of solid waste deposited and the type and size of
vehicles used in the conveyance of solid waste.
The ownership or lease of a landfill site enables USA Waste to dispose of
waste without payment of disposal fees to unaffiliated parties. The Company does
not own or lease a landfill site in every metropolitan area in which it is
engaged in waste collection. To date, the Company has not experienced excessive
difficulty securing the use of disposal facilities owned or operated by
unaffiliated parties in those metropolitan areas in which it does not own or
operate its own landfill. The Company's landfills are also used by unaffiliated
waste collection companies and government agencies.
Prior to the Chambers Merger, Chambers had invested substantial capital to
develop landfills in compliance with strict environmental standards. Development
activities included 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 systems. A
large portion of the infrastructure expenditures with respect to each site is
nonrecurring and 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.
USA Waste currently owns and operates 28 non-hazardous solid waste
landfills and operates one municipal landfill. Of the 29 landfills owned or
operated by USA Waste, the average remaining life based on remaining permitted
capacity and current average monthly disposal volumes is approximately 21 years.
Collection. Solid waste collection is provided under two primary types of
arrangements 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 performed
under contracts with, or franchises granted by, municipalities or regional
authorities that have granted USA Waste exclusive rights to service all or a
portion of the homes in their
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respective jurisdictions. Such contracts or franchises usually range in duration
from one to five years. Recently, some municipalities have requested bids on
their residential collection contracts based on the volume of waste collected.
Residential collection fees are either paid by the municipalities from their tax
revenues or service charges or are paid directly by the residents receiving the
service.
As part of its services, the Company 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 either emptied into a collection vehicle's compaction hopper or
directly into a disposal site in the case of industrial (roll-off) customers.
The use of containers enables the Company 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 in approximately 44 locations in
15 states. Of the foregoing 44 locations, 28 collection operations are
integrated with landfills owned by the Company. On an overall basis, Company
collection operations deliver approximately 46% of collected waste to landfills
owned or operated by the Company. In the remaining markets, the waste collected
is delivered to a municipal, county or privately owned, unaffiliated landfill or
transfer station.
Transfer Stations. A transfer station is a facility located near
residential and commercial collection routes 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. Fees are generally based on such factors as the type and volume or
weight of the waste transferred and the transportation distance to disposal
sites. USA Waste owns or operates 22 transfer stations. Of the 22 transfer
stations owned or operated by the Company, 19 transfer some or all of the waste
received to a landfill owned or operated by the Company.
Recycling. In response to the increasing public environmental awareness and
expanding federal, state, and local 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. Although the Company has not made material
capital investments in these areas, additional opportunities for expansion in
these areas will continue to be evaluated.
USA Waste operates curbside recycling programs in connection with its
residential collection operations in a number of markets and in association with
a number of its transfer stations. 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. USA Waste also owns a 25% interest in
Automated Recycling Technologies, Inc. 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. Overall, however, USA Waste is not materially affected financially by
fluctuations in commodity pricing.
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Other. The Company owns and operates two soil remediation facilities in
Pennsylvania serving the greater Philadelphia metropolitan area, New Jersey, and
Southern New York. For a fee, contaminated soil is delivered to a remediation
facility and heated in a furnace under a carefully controlled process to remove
the contaminants. 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. In addition, the
Company owns and operates a medical, special and municipal waste incineration
facility in South Carolina which is permitted to incinerate 200 tons per day of
medical waste, municipal solid waste and other approved non-hazardous special
wastes. State legislation, however, currently restricts the facility's permitted
incineration capacity to the greater of (i) 50 tons per day of medical waste or
(ii) on a monthly basis, 1/12 of the estimated amount of medical waste generated
within the State of South Carolina within one year.
COMPETITION
The solid waste industry is highly competitive and requires substantial
amounts of capital. The industry is comprised of two large companies, WMX
Technologies, Inc. (formerly Waste Management, Inc.) and Browning-Ferris
Industries, Inc., as well as a number of smaller companies, and numerous
municipalities and other regional or multi-county authorities and large
commercial and industrial companies handling their own waste collection or
disposal operations. WMX and Browning-Ferris have significantly larger
operations and greater financial resources than the Company. 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.
The Company competes for landfill business on the basis of tipping fees,
geographical location, and quality of operations. The Company'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. The
Company competes for collection accounts primarily on the basis of price and the
quality of its services. Intense competition is encountered for both quality of
service and pricing. From time to time, competitors may reduce the price of
their services and accept lower profit margins in an effort to expand or
maintain market share or to win competitively bid contracts.
The Company 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 the Company will
be the successful bidder and will be able to retain such contracts. If the
Company 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 the Company could be
adversely affected. However, during 1995, no one commercial customer or
municipal contract accounted for more than 5% of the total revenue of the
Company. As the Company continues to grow, the loss of any one contract will
have less of an impact on the Company's operations as a whole.
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. In addition, the Company could face
competition from companies engaged in waste incineration and other alternatives
to landfill disposal. Although the Company 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.
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PRICING
Operating costs, disposal costs, and collection fees vary widely throughout
the geographic areas in which the Company operates. The prices that the Company
charges are determined locally, and typically by the volume or weight, type of
waste collected, treatment requirements, risks involved in the handling or
disposing of waste, frequency of collections, distance to final disposal sites
and amount and type of equipment furnished to the customer. Under certain
contracts, the Company's ability to pass on cost increases is limited. 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, 1995, the Company had approximately 2,500 full-time
employees, of which approximately 430 were employed in clerical, administrative,
and sales positions, 90 in management, and the balance in collection, transfer,
remediation, and disposal operations. Approximately 595 of the Company's
employees at 16 operating locations are covered by collective bargaining
agreements. The Company has not experienced a work stoppage, and management
considers its employee relations to be good.
INSURANCE AND FINANCIAL ASSURANCE OBLIGATIONS
The Company carries a broad range of insurance coverages, which management
considers prudent for the protection of the Company's assets and operations. The
casualty coverages currently include $2 million primary commercial general
liability and $1 million primary automobile liability supported by $100 million
in umbrella insurance protection. The property policy provides insurance
coverage for all of the Company's real and personal property.
The Company maintains workers' compensation insurance in accordance with
laws of the various states in which it has employees. The Company also currently
has an environmental impairment liability ("EIL") insurance policy for its
landfills and transfer stations that provides coverage for property damages
and/or bodily injuries to third parties caused by off-site pollution emanating
from such landfills or transfer stations. This policy provides $5 million of
coverage per incident with a $10 million aggregate limit. To date, the Company
has not had any difficulty in obtaining insurance. However, if the Company in
the future is unable to obtain adequate insurance, or decides to operate without
insurance, a partially or completely uninsured claim against the Company, if
successful and of sufficient magnitude, could have a material adverse effect
upon the Company's business or its financial condition. Additionally, continued
availability of casualty and EIL insurance with sufficient limits at acceptable
terms is an important aspect of obtaining revenue-producing waste service
contracts.
Municipal and governmental waste management contracts typically require
performance bonds or bank letters of credit to secure performance. In addition,
the Company is required to provide financial assurance for closure and
post-closure obligations with respect to many of its landfills. The Company has
not experienced difficulty in obtaining performance bonds or letters of credit
for its current operations. At December 31, 1995, the Company had provided to
municipalities and other customers and various regulatory authorities surety
bonds of approximately $134,600,000 and letters of credit of approximately
$32,400,000 to secure its obligations, exclusive of letters of credit enhancing
industrial revenue bonds of approximately $82,250,000. Continued availability of
surety bonds and letters of credit in sufficient amounts at acceptable rates is
an important aspect of obtaining additional municipal collection contracts or
obtaining or retaining landfill operating permits.
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REGULATION
General -- Potential Adverse Effect of Government Regulations
All of the Company's principal business activities are subject to extensive
and evolving environmental, health, safety, and transportation laws and
regulations at the federal, state, and local 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 the Company'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 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, the Company 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 environmental groups. Once obtained,
operating permits are subject to modification and revocation by the issuing
agency. Compliance with current and future regulatory requirements may require
the Company, 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.
International, 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 international, interstate or intrastate
shipment of wastes, impose higher taxes on out-of-site waste shipments than on
in-site shipments, limit the types of wastes that may be disposed of at existing
landfills, mandate waste minimization initiatives, recycling and yard waste
composting, 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, many of which could adversely affect the
demand for the Company's services. The effect of these and similar laws could be
a reduction of the volume of waste that would otherwise be disposed of in
Company landfills. The Company makes a continuing effort to anticipate
regulatory, political and legal developments that might affect operations, but
it is not always able to do so. The Company cannot predict the extent to which
any legislation or regulation that may be enacted, amended, repealed or enforced
in the future may affect its operations. Such actions could adversely affect the
Company's operations or impact the Company's financial condition or earnings for
one or more fiscal quarters or years.
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, the Company
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, the Company 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, jail terms, facility closure, or
inability to obtain permits for additional sites.
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As a result of changing government and public attitudes in the area of
environmental regulation and enforcement, management anticipates that
continually changing requirements in health, safety and environmental protection
laws will require the Company 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 the Company's
expenditures incurred in the operation of its landfills relate to complying with
the requirements of laws concerning the environment. These expenditures relate
to facility upgrades, corrective actions, and facility closure and post-closure
care. The majority of these expenditures are made in the normal course of the
Company's business and neither materially adversely affect the Company's
earnings nor place the Company at any competitive disadvantage. The Company has
not expended any material amount to remedy potential impact to the public or the
environment. Although the Company, to the best of its knowledge, is currently in
compliance in all material respects with all applicable federal, state and local
laws, permits, regulations and orders affecting its operations, there is no
assurance that the Company will not have to expend substantial amounts for such
actions in the future.
The Company expects to grow in part by acquiring existing landfills,
transfer stations, and collection operations. Although the Company conducts due
diligence investigations of the past waste management practices of the
businesses that it acquires, it can have no assurance that, through its
investigation, it will identify all potential environmental problems or risks.
As a result, the Company may have acquired, or may in the future acquire,
landfills that have unknown environmental problems and related liabilities. The
Company will be subject to similar risks and uncertainties in connection with
the acquisition of closed facilities that had been operated by businesses
acquired by the Company. The Company 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 the Company
will be able to realize on any such indemnities if an environmental liability
exists.
Federal Regulation
The primary federal statutes affecting the business of the Company are
summarized below.
(1) The Solid Waste Disposal Act ("SWDA"), as amended by the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"). The SWDA and its
implementing regulations establish a framework for regulating the handling,
transportation, treatment, and disposal of hazardous and non-hazardous wastes.
They also require states to develop programs to insure the safe disposal of
solid wastes in landfills.
Subtitle D of RCRA establishes a framework for federal, state, and local
government cooperation in controlling the management of non-hazardous solid
wastes. While the role of the EPA is to provide overall regulatory direction,
the actual planning and implementation of solid waste programs under Subtitle D
are largely state and local functions. In October 1993, the EPA adopted
regulations under Subtitle D with respect to solid waste disposal facility
criteria, which include location standards, hydrogeological investigations,
facility design requirements (including liners and leachate collection systems),
enhanced operating and control criteria, groundwater and methane gas monitoring,
corrective action standards, closure and extended post-closure requirements, and
financial assurance standards, many of which have not commonly been in place or
enforced at landfills. All Subtitle D regulations are in effect, except for
groundwater monitoring requirements, which will be phased in over a period of
five years ending October 9, 1996, and financial responsibility requirements,
which were to take effect in April 1997 although many states have already
implemented financial assurance programs. These federal regulations must be
implemented by the states, although states may impose requirements for landfill
sites that are more stringent than the federal Subtitle D standards. Once a
state has an approved program, it will review all existing landfill permits to
ensure that they comply with the new regulations. Although the
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states were required to submit proposed permitting programs designed to
implement the Subtitle D regulations to the EPA by April 1993, some states have
not submitted their programs to the EPA and others have not fully completed
their implementation. Because the new regulations did not take effect until late
1993 and have not been fully implemented by the states, their full impact may
not be apparent for several years. The Company could incur significant costs in
complying with such regulations; however, the Company does not believe that such
enhanced standards will have a material adverse effect on its operations. All of
the Company's planned landfill expansions will be engineered to meet or exceed
these requirements.
(2) 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 the
present and former owners or operators of facilities or sites (including a
contract carrier who has accepted a hazardous substance for transportation
during such transportation) from which there is a release or threatened release
of hazardous substances (former owners and operators are liable only to the
extent the release, and sometimes disposal, occurred during their period of
ownership.) Waste generators and transporters are also strictly liable. 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
received any regulated "hazardous wastes." Thus, even if the Company'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 the Company or its predecessors has been, or
with which the Company may become, associated as an owner or operator.
Consequently, if there is a release or threatened release of such substances
into the environment from a site currently or previously owned or operated by
the Company, the Company could be liable under CERCLA for the cost of removing
such hazardous substances at the site, remediation of impacted soil or
groundwater, and for damages to natural resources, even if those substances were
deposited at the Company's facilities before the Company 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 the
Company, a finding of such liability could have a material adverse impact on the
Company's business and financial condition. Although the Company maintains
environmental impairment liability insurance in amounts the Company believes are
compliant with state and federal requirements, these coverages might be
insufficient to cover a significant CERCLA mandated cleanup.
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. However, USA Waste
would be responsible during actual transportation for any hazardous waste. Also,
USA Waste could be liable under CERCLA for off-site environmental contamination
caused by the release of pollutants or hazardous substances at sites to which
USA Waste, or a waste transporter acquired by USA Waste, arranged for the
disposal site. CERCLA imposes liability for certain environmental response
measures upon transporters who arranged for the disposal site at which the
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release or threatened release of hazardous substances occurred. It therefore is
common in the solid waste transport business to receive information requests
from EPA about transporting activities to third party disposal sites. USA Waste
has received potentially responsible party information requests regarding third
party disposal sites. The environmental agencies or other potentially
responsible parties could assert that USA Waste is liable for environmental
response measures arising out of disposal at a site arranged for by USA Waste, a
waste transporter acquired by USA Waste or with whom USA Waste contracted.
The U.S. Congress may consider reauthorization revision of CERCLA in 1996.
In addition to possible changes in the statute's funding mechanisms and
provisions for allocating cleanup responsibility, Congress may also
fundamentally alter the statute's provisions governing the selection of
appropriate site cleanup remedies. In this regard, current new approaches to
cleanup and removal, and treatment of remediation wastes may be adopted which
rely on nationally or site-specific risk based standards. These types of policy
changes could significantly affect the stringency and extent of site
remediation, the types of remediation techniques employed, and the degree to
which permitted hazardous waste management facilities will be used for
remediation of waste. Congress may additionally consider revision of the
liability imposed by CERCLA on current owners of property for contamination
caused prior to a party's acquisition of the site. This consideration could
reduce the remediation obligations of the Company for remediation obligations
under CERCLA.
The EPA's primary way of determining whether a site is to be included on
the NPL is the Hazard Ranking System, 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. As of December 1989, the EPA had 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. Like
many of the landfills in the State of Illinois the Company's Countryside and
Leroy Brown landfills were placed on the CERCLIS list.
The Countryside landfill in Grayslake, Illinois 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. The EPA has not taken any
further action with respect to the evaluation of the Countryside landfill since
1986. 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 the Company from its independent environmental consultant at the
time the Company acquired the landfill, the Company does not believe that the
outcome of the EPA's evaluation of the Countryside landfill will result in it
being proposed for listing on the NPL or have any material adverse impact on the
operation of the landfill.
The Company's records indicate that in 1977 and 1978, the Leroy Brown
landfill in Macomb, Illinois accepted 40 drums of material that would now be
classified as hazardous waste, and a small quantity of hazardous waste was
accepted by 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. At this time, neither the EPA nor the IEPA
has recommended or required any remedial action, beyond normal closure and
post-closure monitoring, on the part of the Company with respect to any
hazardous substance present at the disposal facility. However, because of the
acceptance of the drums and the limited amount of hazardous waste at the site,
the IEPA could demand that the Company obtain a permit for a hazardous waste
facility. The process of securing this permit could take several years and could
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result in significant expenditures. The IEPA could also require the Company to
develop and execute a closure and post-closure plan, which is separate and apart
from the plan already approved by the IEPA for the non-hazardous landfill. 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, a subsidiary of the Company 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 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. The Company believes that
it can avoid costly remediation through the maintenance of the cap on the old
site, the design of an appropriate monitoring program and the institution of a
program of controls at the site, which should prevent harmful leaching.
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 did 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. The Company believes KCSL has
met its obligations by implementing such measures. There can be no assurance,
however, that state or federal environmental authorities will not require KCSL
to finance additional investigation or remedial action at the site. KCSL has
been indemnified by the landfill's previous owner against costs in excess of
$500,000 that may be incurred by KCSL to mitigate any required action. The
Company placed $500,000 in escrow at the closing of the KCSL acquisition to fund
any indemnified costs KCSL may be required to bear relating to the Hansville
County landfill.
(3) The Federal Water Pollution Control Act of 1972 (the "Clean Water
Act"). The Clean Water Act establishes rules for regulating the discharge of
pollutants into streams, rivers, groundwater, or other surface waters from a
variety of sources, including non-hazardous solid waste disposal sites. Should
run-off from the Company's landfills or transfer stations be discharged into
surface waters, the Clean Water Act could require the Company to apply for and
obtain discharge permits, conduct sampling and monitoring, and, under certain
circumstances, reduce the quantity of pollutants in those discharges. In
November 1990, the EPA issued additional rules, which established standards for
storm water runoff from landfills and which require landfills to obtain storm
water discharge permits, unless they are covered under a storm water general
permit issued by the EPA. In addition, if a Company landfill or transfer station
discharges wastewater through a sewage system to a publicly owned treatment
works, the facility must comply with discharge limits imposed by the treatment
works. Also, if development of a landfill may alter or affect "wetlands," a
permit may have to be obtained before such development may be commenced. This
requirement is likely to affect the construction or expansion of many landfill
sites. The Clean Water Act provides civil, criminal, and administrative
penalties for violations of its provisions.
(4) The Clean Air Act. The Clean Air Act provides for the federal, state,
and local regulation of the emission of air pollutants. The Company's soil
remediation facilities are required to obtain air emission permits for operation
under these regulations. These regulations also may impose emission limitations
and monitoring and reporting requirements on various of the Company's other
operations, including its landfills and waste collection vehicles. The EPA has
construed the Clean Air Act to apply to landfills. In May 1991, the EPA proposed
guidelines for new source performance standards regulating the emission of
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air pollutants from solid waste landfills. The regulations, as revised, are
expected to be finalized in early 1997. If the proposed regulations are adopted
by the EPA, they must be implemented by the states. These guidelines, combined
with the new permitting programs established under the 1990 Clean Air Act
Amendments, will likely subject solid waste landfills to new permitting
requirements and, in some instances, require installation of methane gas
recovery systems. The Clean Air Act Amendments could also result in the
imposition of strict requirements on many activities that have heretofore been
largely unregulated, as well as imposing more stringent requirements on, among
other activities, motor vehicle emissions. These costs are not anticipated to
adversely affect the Company.
(5) The Occupational Safety and Health Act of 1970 (the "OSHA Act"). The
OSHA Act authorizes the Occupational Safety and Health Administration to
promulgate occupational safety and health standards. Various of these standards,
including standards for notices of hazards, safety in excavation and demolition
work, and the handling of asbestos, may apply to the Company's operations.
State and Local Regulation
The states in which the Company 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. The Company's
facilities and operations are likely to be subject to many, if not all, of these
types of requirements. In addition, the Company'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. Additionally, certain
state and local governments have enacted "flow control" regulations, which
attempt to require that all waste generated within the state or local
jurisdiction be deposited at specific disposal 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. The U.S. Congress has from time to time
and is currently considering legislation authorizing states to adopt such
regulations, restrictions, or taxes on the importation of extraterritorial
waste, and granting states and local governments authority to enact partial flow
control legislation. To date, such Congressional efforts have been unsuccessful.
The U.S. Congress' adoption of such legislation allowing for restrictions on
importation of extraterritorial waste or certain types of flow control, or the
adoption of legislation affecting interstate transportation of waste at the
federal or state level, could adversely affect the Company's solid waste
management services, including collection, transfer, disposal and recycling
operations, and in particular the Company's ability to expand landfill
operations acquired in certain areas.
Many states and local jurisdictions in which the Company 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 (or permit holder's)
environmental or other legal compliance history. These laws authorize the
agencies to make determinations of an
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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 put in place to assure future compliance with applicable
laws and regulations.
FACTORS INFLUENCING FUTURE RESULTS AND ACCURACY OF FORWARD-LOOKING STATEMENTS
In the normal course of its business, the Company, in an effort to help
keep its shareholders and the public informed about the Company's operations,
may from time to time issue certain statements, either in writing or orally,
that contain or may contain forward-looking information. Generally, these
statements relate to business plans or strategies, projected or anticipated
benefits or other consequences of such plans or strategies, projected or
anticipated benefits from acquisitions made by or to be made by the Company, or
projections involving anticipated revenues, earnings or other aspects of
operating results. Such statements are subject to a number of factors that may
tend to influence the accuracy of the statements and the projections upon which
the statements are based. As noted elsewhere in this report, all phases of the
Company's operations are subject to a number of uncertainties, risks and other
influences, many of which are outside the control of the Company, and any one of
which, or a combination of which, could materially affect the results of the
Company's operations and whether forward-looking statements made by the Company
ultimately prove to be accurate.
The following discussion outlines certain factors that in the future could
affect the Company's consolidated results for 1996 and beyond and cause them to
differ materially from those that may be set forth in any forward-looking
statement made by or on behalf of the Company:
No Assurance of Successful Management and Maintenance of Growth
USA Waste has experienced rapid growth, primarily through acquisitions. USA
Waste's financial results and prospects depend in large part on its ability to
successfully manage and improve the operating efficiencies and productivity of
these acquired operations. In particular, there can be no assurance that USA
Waste will be able to successfully integrate the operations of Chambers
Development Company, Inc. ("Chambers"), USA Waste's largest acquisition to date
(the "Chambers Merger"), or that USA Waste will be able to successfully
integrate the operations of Western Waste Industries if the Merger with Western
(the "Western Merger") is consummated. Moreover, the ability of USA Waste to
continue to grow will depend on a number of factors, including competition from
other waste management companies, availability of attractive acquisition
opportunities, availability of working capital, ability to maintain margins and
the management of costs in a changing regulatory environment. USA Waste is
continually seeking acquisition opportunities and believes that there exist a
substantial number of potentially attractive consolidation opportunities in the
solid waste management industry. USA Waste may pursue significant acquisitions
if they can be achieved on acceptable terms. There can be no assurance that USA
Waste will be able to continue to expand and successfully integrate operations.
Need for Capital; Debt Financing
The long-term debt of USA Waste, including current maturities, at December
31, 1995 was approximately $373.8 million. USA Waste expects to require
additional capital from time to time to pursue its acquisition strategy and to
fund internal growth. A portion of USA Waste's future capital requirements may
be provided through future debt incurrences or issuances of equity securities.
There can be no assurance that USA Waste will be successful in obtaining
additional capital through such debt incurrences or issuances of additional
equity securities.
In addition, a large portion of the Company's existing indebtedness at
December 31, 1995 is priced at variable interest rates that fluctuate as general
interest rates change (see Note 5 to the consolidated financial statements). As
a result an increase in interest rates could adversely impact the Company's
earnings in the future.
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Profitability May be Affected by Competition
The waste management industry is highly competitive and requires
substantial capital resources. The industry consists of a few large national
waste management companies as well as numerous local and regional companies of
varying sizes and financial resources. The two largest national waste management
companies have significantly greater financial resources than USA Waste.
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 solid waste collected or deposited in landfills.
Potential Adverse Effect of Government Regulation
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 operations that could adversely
affect the Company's results, such as limitations on the expansion of disposal
facilities, limitations on or the banning of disposal of out-of-state waste or
certain categories of waste or mandates regarding the disposal of solid waste.
Because of heightened public concern, companies in the waste management business
may become subject to judicial and administrative proceedings involving federal,
state or local agencies. These governmental agencies may seek to impose fines on
the combined company or to revoke or deny renewal of operating permits or
licenses for violations of environmental laws or regulations or to require
remediation of environmental problems at sites or nearby properties, or
resulting from transportation or predecessors' transportation and collection
operations, all of which could have a material adverse effect on the Company.
Liability may also arise from actions brought by individuals or community groups
in connection with the permitting or licensing of operations, any alleged
violations of such permits and licenses or other matters.
Potential Environmental Liability
USA Waste is subject to liability for environmental damage that its
landfills, transfer stations and collection operations have caused or may cause
nearby landowners, particularly as a result of the contamination of drinking
water sources or soil, including damage resulting from conditions existing prior
to the acquisition of such assets or operations. Liability may also arise from
any off-site environmental contamination caused by pollutants or hazardous
substances under circumstances where transportation, treatment or disposal was
arranged for by USA Waste or predecessor owners of operations or assets acquired
by USA Waste. Any substantial liability for environmental damage could
materially adversely affect the operating results and financial condition of USA
Waste.
Benefit of the Western Merger May Not be Achieved
USA Waste expects to derive substantial benefits from the Western Merger.
Whether the anticipated benefits of the Merger are ultimately achieved will
depend on a number of factors, including the ability of the combined companies
to achieve administrative cost savings, rationalization of collection routes,
insurance and bonding cost reductions, lower interest expense and general
economics of scale, the ability of the combined companies to retain municipal
contracts and generally to capitalize on the combined asset base and strategic
position of the combined entity.
In 1995, Western derived approximately 49% of its revenues from municipal
and regional authority contracts. The combined company is expected to generate
approximately 20% of its revenues from municipal and regional authority
contracts. Many municipal franchise agreements are of fixed duration and are
subject to negotiation and renewal, and competitive bidding and may contain
change of control provisions requiring a consent for transactions such as the
Merger. There can be no assurance that such franchise agreements will be renewed
or that necessary consents will be obtained, or that obtaining such
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renewals or consents will not result in these agreements containing terms less
favorable to the combined company than Western's existing franchise agreements.
Shares Eligible for Future Sale May Adversely Affect Market Price of Stock
Sales of substantial amounts of USA Waste Common Stock in the public market
could adversely affect the market price of such stock. USA Waste recently filed
a shelf registration statement for the benefit of certain stockholders relating
to 4,000,000 shares of USA Waste Common Stock. Such shares are immediately
saleable in the open market. In addition, USA Waste has a shelf registration
statement covering approximately 5,200,000 shares of USA Waste Common Stock that
may be used for acquisitions. In the event the market price of USA Waste stock
were adversely affected by such sales, the Company's access to equity capital
markets could be adversely affected, and issuances of stock by USA Waste in
connection with acquisitions, or otherwise, could dilute earnings per share.
ITEM 2. PROPERTIES.
The principal property and equipment of the Company consists of land
(primarily landfill sites, transfer stations, and bases for collection
operations), buildings, and soil remediation facilities, and vehicles and
equipment. The Company owns or leases real property in most states in which it
is doing business. At December 31, 1995, 26 solid waste landfills, aggregating
approximately 13,324 total acres, including approximately 2,121 permitted acres,
were owned by the Company and 3 landfills, aggregating approximately 655 total
acres, including approximately 171 permitted acres, were operated by the Company
or leased from parties not affiliated with the Company.
The Company leases approximately 27,550 square feet of office space in
Dallas for its executive office under an eight year lease expiring in 2003. The
Company owns real estate, buildings, and other physical properties that it
employs in substantially all of its solid waste collection operations. The
Company also leases a portion of its transfer stations, offices, and garage and
shop facilities. For the year ended December 31, 1995, aggregate annual rental
payments on real estate leased by the Company was approximately $581,000.
The Company owns approximately 1,800 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. The Company has more than 285,000 steel containers in use,
ranging from one to 45 cubic yards, and a number of stationary compactors and
self-dumping hoppers.
The Company believes that its vehicles, equipment, and operating properties
are well maintained and adequate for its current operations. However, the
Company expects to make substantial investments in additional equipment and
property for expansion, for replacement of assets, and in connection with future
acquisitions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to various litigation matters arising in the
ordinary course of business. Management believes that the ultimate resolution of
these matters will not have a material adverse impact on the Company's financial
condition. In the normal course of its business and as a result of the extensive
government regulation of the solid waste industry, the Company periodically may
become subject to various judicial and administrative proceedings involving
federal, state, or local agencies. To date, the Company 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 the Company also may be subjected to
actions brought by citizen's groups in connection with the permitting of
landfills or transfer stations, or alleging
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violations of the permits pursuant to which the Company operates. The Company
also may be subject to claims for personal injury or property damage arising out
of accidents involving its vehicles.
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 Developement Company, Inc., et al., Civil
Action No. 93-354. This action was brought by a market maker in options in
Chambers stock and two of its general partners and asserts federal securities
law and common law claims alleging that Chambers, in publicly disseminated
materials, intentionally or negligently misstated its earnings and that
Chambers' officers and directors committed mismanagement and breach of fiduciary
duties. These plaintiffs allege that, as a result of large amounts of put
options traded on the Chicago Board of Options Exchange between March 13 and
March 18, 1992, they engaged in offsetting transactions resulting in
approximately $2.1 million in losses. The plaintiffs in Option Resource Group
had successfully requested exclusion from a now settled class action of
consolidated suits instituted on similar claims ("Class Action") and Option
Resource Group is continuing as a separate lawsuit. The case is currently near
the end of the discovery stage. In response to discovery on damages, the
plaintiffs reduced their damages claim to $433,000 in alleged losses, plus
interest and attorneys' fees, for a total damage claim of $658,000, as of August
21, 1995. The Company intends to continue to vigorously defend against this
action, and management believes the ultimate resolution of this suit will not
have a material adverse effect on the Company's financial position or results of
operations.
On August 3, 1995, Frederick A. Moran and certain related persons and
entities filed a lawsuit against Chambers, certain former officers and directors
of Chambers, and Grant Thornton, LLP, in the United States District Court for
the Southern District of New York under the caption Moran, et al. v. Chambers,
et al., Civil Action No. 95-6034. The plaintiffs, who claim to represent
approximately 484,000 shares of Chambers common stock, requested exclusion from
the settlement agreement which resulted in the resolution of the Class Action
and have asserted that they have incurred losses attributable to shares
purchased during the class period and certain additional losses by reason of
alleged management misstatements during and after the class period. The claimed
losses include damages to Mr. Moran's business and reputation. The Judicial
Panel on Multidistrict Litigation has transferred this case to the United States
District Court for the Western District of Pennsylvania. The Company has filed
its answer and intends to vigorously defend these claims. The case is currently
in discovery. Management of the Company believes that ultimate resolution of
such complaint will not have a material adverse effect on the Company's
financial position or results of operations.
On or about February 1, 1996, an action was filed in the Circuit Court of
Cook County, Illinois, captioned Allabastro v. USA Waste Services, Inc., Action
No. 96L01165. The plaintiff alleges to have entered into an oral agreement with
the Company for brokerage services and is demanding a fee of $950,000 based on
the alleged contract and on common law for acting as a broker/advisor to the
Company in its 1993 purchase of an Indiana landfill and hauling operation from
Chambers. Based on the same facts, the plaintiff is also demanding an additional
$36,250,000 fee in connection with the June 1995 merger of Chambers with the
Company. The plaintiff is also seeking unspecified damages for acting as a
management advisor to the Company in its procurement of a landfill
renovation/operation contract in Charleston, West Virginia. Interest and other
costs are also demanded. The case has not yet entered the discovery stage. The
Company intends to vigorously defend against this action, and management
believes the ultimate resolution of this suit will not have a material adverse
effect on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the shareholders of USA Waste during the
fourth quarter of 1995.
17
<PAGE> 20
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages, as of March 1, 1996, of the
Company's executive officers (as defined by regulations of the Securities and
Exchange Commission), the positions they hold with the Company and summaries of
their business experience.
John E. Drury, age 51, has been Chairman of the Board since June 30, 1995,
and Chief Executive Officer and a director of USA Waste since May 27, 1994. From
1991 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 Browning-Ferris Industries, Inc.
("BFI") form 1982 to 1991, during which time he had chief responsibility for all
solid waste operations.
Donald F. Moorehead, Jr., age 45, has been Vice Chairman of the Board since
June 30, 1995, and Chief Development Officer since May 27, 1994. From October 1,
1990 to June 30, 1995, he was also Chairman of the Board, and from October 1,
1990 to May 27, 1994, he was 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.
David Sutherland-Yoest, age 39, has been President, Chief Operating Officer
and a director since May 27, 1994. Prior to joining USA Waste, he was President,
Chief Executive Officer and a director of Envirofil, Inc. ("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 Development, 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.
Charles A. Wilcox, age 43, has been Executive Vice President -- Operations
since December 1,1994. 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.
Earl E. DeFrates, age 52, has been Executive Vice President and Chief
Financial Officer since May 1994. From October 1990 to April 1995, he was also
Secretary. 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.
Gregory T. Sangalis, age 40, 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 of Peavey Company and had been engaged in the private practice
of law in Minnesota.
Bruce E. Snyder, age 40, has been Vice President, Corporate Controller, and
Chief Accounting Officer of USA Waste 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 there 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 Oklahoma City, Oklahoma, and its
affiliated companies, ultimately serving as Senior Vice President.
18
<PAGE> 21
Hubert J. Bourque, age 46, 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, age 51, 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.
19
<PAGE> 22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "UW." The following table sets forth the range of the
high and low per share sales prices for the Common Stock as reported by the
NYSE.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1994
First Quarter................................................ $15.00 $11.13
Second Quarter............................................... 13.38 10.38
Third Quarter................................................ 15.13 11.50
Fourth Quarter............................................... 15.13 11.00
1995
First Quarter................................................ $12.38 $10.00
Second Quarter............................................... 16.63 11.50
Third Quarter................................................ 21.88 14.63
Fourth Quarter............................................... 22.50 17.00
1996
First Quarter (through March 14, 1996)....................... $24.63 $17.25
</TABLE>
On March 14, 1996, the closing sale price as reported on the NYSE was
$23.63 per share. The number of holders of record of Common Stock based on the
transfer records of the Company at March 14, 1996, was 3,846.
The Company has never paid cash dividends on its Common Stock, and the
Company's Board of Directors presently intends to retain any earnings in the
foreseeable future for use in the Company's business. Payment of dividends on
the Common Stock is restricted by terms of the Company's revolving credit
facility. See Note 5 to the consolidated financial statements of the Company.
20
<PAGE> 23
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The Selected Consolidated Financial Data set forth below include the
accounts of the Company and the businesses acquired in transactions accounted
for as poolings of interests as if such businesses had been combined since their
inception. The accounts of the businesses acquired in transactions accounted for
as purchases are included from their respective dates of acquisition.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
-------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues........................ $457,099 $ 434,224 $382,234 $351,359 $270,037
-------- --------- -------- -------- --------
Costs and Expenses:
Operating.............................. 253,884 257,370 217,345 208,928 230,129
General and administrative............. 62,178 71,500 66,968 75,426 23,332
Merger costs........................... 25,073 3,782 -- -- --
Unusual items.......................... 4,733 8,863 2,672 51,047 --
Depreciation and amortization.......... 56,378 56,139 52,222 44,139 39,209
-------- --------- -------- -------- --------
402,246 397,654 339,207 379,540 292,670
-------- --------- -------- -------- --------
Income (loss) from operations............. 54,853 36,570 43,027 (28,181) (22,633)
-------- --------- -------- -------- --------
Other income (expense):
Shareholder litigation settlement and
other litigation related costs....... -- (79,400) (5,500) (10,853) --
Interest expense:
Nonrecurring interest................ (10,994) (1,254) -- -- --
Other................................ (30,354) (32,804) (35,975) (35,840) (33,413)
Interest income........................ 2,666 2,641 3,539 5,435 11,814
Other income, net...................... 2,699 1,877 1,915 1,699 1,130
-------- --------- -------- -------- --------
(35,983) (108,940) (36,021) (39,559) (20,469)
-------- --------- -------- -------- --------
Income (loss) before income taxes......... 18,870 (72,370) 7,006 (67,740) (43,102)
Provision for (benefit from) income
taxes.................................. (11,393) 3,908 6,018 479 4,913
-------- --------- -------- -------- --------
Income (loss) from continuing
operations............................. $ 30,263 $ (76,278) $ 988 $(68,219) $(48,015)
======== ========= ======== ======== ========
Income (loss) from continuing operations
per common share....................... $ 0.55 $ (1.55) $ 0.01 $ (1.60) $ (1.07)
======== ========= ======== ======== ========
Weighted average number of common and
common equivalent shares outstanding... 55,270 49,671 45,885 42,707 44,990
======== ========= ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)................. $ 14,879 $ (4,601) $ 26,932 $ 61,459 $141,845
Intangible assets, net.................... 118,778 93,416 70,566 45,049 41,311
Total assets.............................. 908,037 785,616 748,932 739,057 769,094
Long-term debt, including current
maturities............................. 373,785 410,714 402,800 411,341 424,368
Stockholders' equity...................... 402,849 164,349 224,550 202,547 239,395
</TABLE>
21
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion reviews the Company's operations for the three
years ended December 31, 1995, and should be read in conjunction with the
Company's consolidated financial statements and related notes thereto included
elsewhere herein. The Company has restated its previously issued financial
statements for years prior to 1995 to reflect the acquisition of Chambers,
consummated June 30, 1995, and accounted for under the pooling of interests
method of accounting.
The following discussion includes statements that are forward-looking in
nature. Whether such statements ultimately prove to be accurate depends upon a
variety of factors that may affect the business and operations of the Company.
Certain of these factors are discussed under "Business -- Factors Influencing
Future Results and Accuracy of Foward-Looking Information" included in Item 1 of
this report.
INTRODUCTION
The Company provides non-hazardous solid waste management services,
consisting of collection, transfer, disposal, recycling, and other miscellaneous
services in 21 states. Since August 1990, the Company has experienced
significant growth principally through the acquisition and integration of solid
waste businesses and is now the fourth largest non-hazardous solid waste company
in North America. The Company owns or operates 29 landfills, 22 transfer
stations, and 44 collection companies serving more than 500,000 customers.
The Company'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. Fees for commercial and industrial services are
normally based on the type and frequency of service and the volume of solid
waste collected.
The Company'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 the Company's landfill sites. Fees are charged at transfer
stations based on the volume or weight of solid waste deposited, taking into
account the Company's cost of loading, transporting, and disposing of the solid
waste at a landfill. Intercompany revenues between the Company's landfill,
transfer, 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, property taxes, and accruals for future
landfill closure and post-closure costs. Certain direct landfill development
expenses are capitalized and depreciated over the estimated useful life of a
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 the Company's marketing and sales
force.
22
<PAGE> 25
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 Operations items.
<TABLE>
<CAPTION>
PERIOD TO PERIOD INCREASE (DECREASE)
---------------------------------------------------
FOR THE YEARS ENDED FOR THE YEARS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
AND 1994 AND 1993
--------------------- -----------------------
<S> <C> <C> <C> <C>
Operating revenues...................... $ 22,875 5.3% $ 51,990 13.6%
-------- --------
Costs and expenses:
Operating............................. (3,486) (1.4) 40,025 18.4
General and administrative............ (9,322) (13.0) 4,532 6.8
Merger costs.......................... 21,291 563.0 3,782 --
Unusual items......................... (4,130) (46.6) 6,191 231.7
Depreciation and amortization......... 239 0.4 3,917 7.5
-------- --------
4,592 1.2 58,447 17.2
-------- --------
Income from operations.................. 18,283 50.0 (6,457) (15.0)
-------- --------
Other income (expense):
Shareholder litigation settlement and
other litigation related costs..... 79,400 100.0 (73,900) (1,343.6)
Interest expense:
Nonrecurring interest.............. (9,740) (776.7) (1,254) --
Other.............................. 2,450 7.5 3,171 8.8
Interest income....................... 25 0.9 (898) (25.4)
Other income, net..................... 822 43.8 (38) (2.0)
-------- --------
72,957 67.0 (72,919) (202.4)
-------- --------
Income (loss) before income taxes....... 91,240 126.1 (79,376) (1,133.0)
Provision for (benefit from) income
taxes................................. (15,301) (391.5) (2,110) (35.1)
-------- --------
Net income (loss)....................... $106,541 139.7% $(77,266) (7,820.4)%
======== ========
</TABLE>
23
<PAGE> 26
The following table presents for the periods indicated, the percentage
relationship that the various Consolidated Statements of Operations items bear
to operating revenues.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Operating revenues:
Disposal.............................................. 31.9% 25.4% 26.9%
Waste collection...................................... 51.9 52.9 52.2
Transfer station...................................... 10.2 16.2 14.5
Other................................................. 6.0 5.5 6.4
----- ----- -----
100.0 100.0 100.0
----- ----- -----
Costs and expenses:
Operating............................................. 55.6 59.3 56.8
General and administrative............................ 13.6 16.5 17.5
Merger costs.......................................... 5.5 0.9 --
Unusual items......................................... 1.0 2.0 0.7
Depreciation and amortization......................... 12.3 12.9 13.7
----- ----- -----
88.0 91.6 88.7
----- ----- -----
Income from operations.................................. 12.0 8.4 11.3
----- ----- -----
Other income (expense):
Shareholder litigation settlement and other litigation
related costs...................................... -- (18.3) (1.4)
Interest expense:
Nonrecurring interest.............................. (2.4) (0.3) --
Other.............................................. (6.7) (7.5) (9.4)
Interest income....................................... 0.6 0.6 0.9
Other income, net..................................... 0.6 0.4 0.5
----- ----- -----
(7.9) (25.1) (9.4)
----- ----- -----
Income (loss) before income taxes....................... 4.1 (16.7) 1.9
Provision for (benefit from) income taxes............... (2.5) 0.9 1.6
----- ----- -----
Net income (loss)....................................... 6.6% (17.6)% 0.3%
===== ===== =====
</TABLE>
24
<PAGE> 27
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1995
Operating Revenues
Operating revenues were $457,099,000 in 1995, an increase of $22,875,000,
or 5.3%, as compared to 1994, and were $434,224,000 in 1994, an increase of
$51,990,000, or 13.6%, as compared to 1993. The increase in operating revenues
for both years is attributable to the effect of new acquisitions, less
dispositions, and the growth in operating revenues from comparable operations,
excluding the negative impact of certain businesses in New Jersey. Acquisitions
during 1995 and 1994 accounted for increases of $38,300,000 and $72,600,000,
respectively, in operating revenues, while dispositions in 1995 and 1994
accounted for decreases of $13,600,000 and $14,600,000, respectively, in
operating revenues compared to the respective prior years.
Operating revenues from comparable operations were most significantly
effected by certain businesses in New Jersey. Operating revenues in New Jersey
were negatively impacted as a result of contract renegotiations and terminations
in 1994 and 1993.
In December 1993, Chambers entered into a new three-year agreement at a
rate reduced from its existing contract for the municipal solid waste from
Bergen County, New Jersey, effective March 1994. A contract for the
transportation and disposal of ash generated by a local incinerator was lost in
March 1994. Another local solid waste contract for a local county expired in
December 1993, and still another local county began redirecting waste to a
competitor's landfill, commencing December 1, 1993.
On December 31, 1993, Chambers sold two transfer stations in Morris County,
New Jersey, to the Morris County Municipal Utilities Authority. Chambers agreed
to operate the transfer stations and provide certain transportation services at
a reduced rate until the county's long-term solid waste system is in operation,
or until December 31, 1996, if later. Morris County assumed operations of the
transfer stations on January 1, 1995, but Chambers continued providing
transportation services. Therefore, in 1995, operating revenues do not include
the pass-through of disposal and other costs necessary to operate the transfer
stations. Morris County has an option to extend the transportation agreement for
two six-month periods beyond 1996, if its solid waste system is not operational.
The operating revenues for the two transfer stations have declined from
approximately $42,100,000 in 1993 to $35,600,000 in 1994, to approximately
$13,000,000 in 1995. The combined negative impact of these contract
renegotiations and terminations was a decrease of operating revenues of
$39,200,000 from 1994 to 1995 and $40,200,000 from 1993 to 1994. It is expected
that the operating revenues for these New Jersey businesses will not be
significantly different in 1996 as compared to 1995, provided that Morris
County's solid waste system is not yet operational.
The components of the change in operating revenues are as follows:
<TABLE>
<CAPTION>
1995 VS. 1994 1994 VS. 1993
------------- -------------
<S> <C> <C>
Price.................................................... 1.8% 0.9%
Volume................................................... 6.8 8.0
Acquisitions, net of dispositions........................ 5.7 15.2
Certain New Jersey businesses............................ (9.0) (10.5)
----- ------
Total change.................................. 5.3% 13.6%
===== ======
</TABLE>
Operating Costs and Expenses
Operating costs and expenses decreased $3,486,000, or 1.4%, in 1995 as
compared to 1994, and increased $40,025,000 in 1994, or 18.4%, as compared to
1993. The decrease in operating costs and expenses in 1995 is attributable to a
$5,700,000 decrease due to the increased utilization of internal
25
<PAGE> 28
disposal capacity and reduced operating costs and expenses for the Chambers
operations of approximately $5,000,000 since the Chambers Merger (excluding
reduction in costs in New Jersey of approximately $21,500,000). These decreases
are offset by increased operating costs and expenses as a result of new
acquisitions, net of dispositions. The impact of acquisitions also explains the
increase in operating costs and expenses in 1994. New business acquisitions
resulted in an increase in operating costs and expenses of $26,100,000 in 1995
and $45,600,000 in 1994 while dispositions resulted in a decrease of $7,400,000
in 1995 and $12,600,000 in 1994. Operating costs and expenses for comparable
operations accounted for the remainder of the increase of $10,000,000.
As a percentage of operating revenues, operating costs and expenses
increased from 56.8% in 1993 to 59.3% in 1994 and decreased to 55.6% in 1995.
The emphasis in internalization and operating efficiency improvements at the
Chambers existing operations after the Chambers Merger in 1995 contributes to
the decrease in operating costs as a percent of operating revenues. Another
factor affecting the percent of operating costs and expenses as a percentage of
operating revenues is the strategic business decisions to exit or reduce
operations in certain markets in 1994 where margins were not as high, thereby
improving the relationship between operating costs and revenues. For example, in
September 1994, the Company determined that it would exit the market in Phoenix,
Arizona, which resulted in the reduction of operating costs and decreased the
percentage of operating costs as compared to operating revenues in 1995, as
compared to 1994. Another factor affecting the relationship of operating costs
and expenses as a percentage of operating revenues is the Company's percentage
of operating revenues generated by type of service. The Company's operating
revenues from disposal operations decreased from 26.9% in 1993 to 25.4% in 1994
and then increased to 31.9% in 1995. This affects the relationship between
operating costs and expenses and operating revenues since disposal operations
generally have lower cost margins than collection and transfer station
operations.
Harsh weather conditions in the first quarter of 1994 adversely affected
operating costs in certain markets. In the second quarter of 1994, the Company
experienced higher operating costs in two of its larger collection operations
due to higher labor costs and certain variable expenses, which were not offset
by a corresponding increase in operating revenues. In addition, certain
businesses acquired in late 1994 had relatively higher operating costs as
operational cost improvements had not yet been fully implemented by the Company.
General and Administrative
General and administrative expenses decreased $9,322,000 in 1995, as
compared to 1994, and increased $4,532,000 in 1994 as compared to 1993. The
decrease in 1995 is the result of the Company's ability to integrate operating
revenues from acquisitions without a proportionate increase in general and
administrative expenses and cost reductions in connection with the Chambers
Merger. In 1994, general and administrative expenses increased due to business
acquisitions which accounted for an increase of $7,700,000 and by accrued
contributions of $2,300,000 in the fourth quarter of 1994.
General and administrative expenses as percentage of operating revenues
decreased from 17.5% in 1993 to 16.5% in 1994 and to 13.6% in 1995. This
decrease has been as a result of the Company's ability to integrate new
operating revenues without a corresponding increase in general and
administrative costs and cost savings resulting from mergers completed in 1995
(Chambers) and 1994 (Envirofil, Inc.).
Merger Costs
In 1995, the Company incurred approximately $25,100,000 in merger costs in
the second quarter related to the Chambers Merger, which included $11,900,000 of
transaction costs, $9,500,000 of severance and other termination benefits, and
$3,700,000 of costs related to integrating operations. In
26
<PAGE> 29
1994, the Company incurred $3,782,000 of merger costs in the second quarter
related to the acquisition of Envirofil, Inc.
Unusual Items
In 1995, the unusual items include $2,800,000 of severance and other
termination benefits paid to former Chambers employees in connection with its
pre-merger reorganization, $1,300,000 of estimated future losses associated with
the renegotiated Bergen County, New Jersey, municipal solid waste contract, and
$600,000 of shareholder litigation settlement costs.
In 1994, unusual items consisted of $8,100,000 for asset impairments and
abandoned projects, including a $7,000,000 charge to reduce the carrying value
of the Chambers medical and special waste incinerator facility, and
restructuring costs of $800,000 relating to severance benefits. Unusual items of
$2,700,000 in 1993 consists of $4,900,000 for asset impairments and abandoned
projects, $2,100,000 for net losses on asset divesture and contractual
commitments, $1,600,000 for special directors and officers insurance premiums,
$900,000 for stock compensation expense, $300,000 for restructuring costs
relating to severance benefits, and a $7,100,000 credit for net gains on asset
divestitures.
Depreciation and Amortization
Depreciation and amortization increased $239,000 in 1995 and $3,917,000 in
1994 as compared to the prior years. In 1995, depreciation and amortization
decreased due to the change in the estimated useful life of excess cost over net
assets of acquired businesses related to certain acquisitions from 25 to 40
years, effective January 1, 1995, which resulted in decreased amortization
expense of approximately $1,488,000 for the year. This change in accounting
policy substantially offset the normal increase in depreciation and amortization
of property and equipment used to generate increased operating revenues. In
1994, the increase is primarily due to new acquisitions.
Depreciation and amortization, however, decreased as a percentage of
operating revenues from 13.7% in 1993 to 12.9% in 1994 and to 12.3% in 1995. The
decrease as a percent of operating revenues in 1995 was due to the change in
life used to amortize the excess of cost over net assets of acquired businesses
from 25 to 40 years and the result of a reduction in the estimates of costs to
be incurred to complete construction of certain landfills. In 1994, the decrease
is due to the impact of increased airspace projections resulting from future
expansions of existing landfill sites.
Income from Operations
Income from operations increased $18,283,000 in 1995 and decreased
$6,457,000 in 1994 as compared to their respective prior years due to the
reasons discussed above. In 1995 and 1994, the Company incurred certain
nonrecurring items reported as unusual items and merger costs. Excluding these
nonrecurring items, income from operations as a percentage of revenues would be
18.5%, 11.3%, and 12.0% for 1995, 1994, and 1993, respectively. The improvement
in recurring operations in 1995 is the result of economies of scale realized by
the Company with respect to recent acquisitions, improved operating margins at
Chambers locations since the Chambers Merger, the change in useful life of
excess cost over net assets of acquired businesses, dispositions of less
profitable businesses, and improvements in comparative operations.
Other Income and Expense
Other income and expense consists of shareholder litigation settlement,
interest expense, interest income, and other income. Shareholder litigation
settlement costs were incurred in connection with a settled class action of
consolidated suits or similar claims alleging federal securities violations
against
27
<PAGE> 30
Chambers, certain of its officers and directors, its former auditors and the
underwriters of its securities. Interest expense consists of recurring and
nonrecurring interest. Nonrecurring interest of $10,994,000 and $1,254,000 in
1995 and 1994, respectively consists of various extension fees and other charges
related to refinancing the Senior Notes in the second quarter of 1995. Overall,
recurring interest expense, gross of amounts capitalized, decreased slightly
each year due to reductions in the average effective borrowing rate on the
Company's outstanding debt. Capitalized interest for 1995 approximated
$6,120,000 compared to $3,977,000 and $3,450,000 for 1994 and 1993,
respectively, due to increased development activity incurred in connection with
disposal sites. The increase in other income in 1995 is primarily a result of
the sale of real estate in Phoenix, Arizona, during the first quarter of 1995.
Provision for (Benefit from) Income Taxes
The Company recorded an income tax benefit of $11,393,000 in 1995 compared
to an income tax provision of $3,908,000 and $6,018,000 in 1994 and 1993,
respectively. Future taxable income was projected utilizing taxable income of
1995 and annualized earnings from acquisitions consummated during 1995. Based on
this analysis of taxable income, the Company, during the fourth quarter of 1995,
recognized a net deferred tax asset through a $15,600,000 reduction in the
valuation allowance. The deferred tax asset is reflected as a current asset on
the Company's balance sheet at December 31, 1995. If the Company's current trend
of profitability continues, additional net deferred tax assets of up to
approximately $93,600,000 could be recognized in future periods.
Net Income (Loss)
For the reasons discussed above, net income (loss) improved $106,541,000
for the year ended December 31, 1995 as compared to 1994 and decreased
$77,266,000 for the year ended December 31, 1994 as compared to 1993.
VARIATION IN 1995 QUARTERLY NET INCOME (LOSS)
The Company's operating results during 1995 reflect significant quarterly
variations in net income (loss) as reflected below (see Note 15 to the
consolidated financial statements for additional information):
<TABLE>
<CAPTION>
QUARTER
-------------------------------------------------- NET INCOME
(LOSS)
--------------
(IN THOUSANDS)
<S> <C>
First............................................. $ 184
Second............................................ (27,839)
Third............................................. 18,902
Fourth............................................ 39,016
</TABLE>
The Company consummated the Chambers Merger on June 30, 1995, restating its
first quarter financial results in accordance with pooling of interests
accounting and reflecting combined operations with Chambers for the second
quarter of 1995. Prior to the merger, Chambers was involved in extensive
litigation, had a high level of debt and had been experiencing operating losses.
As a result of these losses, Chambers had generated a tax net operating loss
carryforward in excess of $230,000,000 at the date of the merger. As disclosed
in Note 2 to the consolidated financial statements, Chambers net loss of
approximately $5,269,000 in the first quarter of 1995 had a significant impact
on the restated first quarter results of the combined entities.
The net loss of approximately $27,839,000 reported by the Company in the
second quarter of 1995 principally results from the Chambers Merger costs of
approximately $25,073,000 recognized in the
28
<PAGE> 31
quarter and other unusual charges and nonrecurring interest costs relating to
Chambers which were also charged to expense during the quarter. Included in the
second quarter merger costs and unusual charges were $9,500,000 and $2,800,000
of severance and other termination benefits costs, respectively. The annualized
salary and benefits expense eliminated as a result of these terminations is
estimated to be $10,300,000.
Following the Chambers Merger, the Company initiated a comprehensive plan
to improve the operating results of the acquired Chambers businesses. In
addition to the terminations discussed above, this plan included closing the
Chambers corporate headquarters, adding managers with significant industry
experience, aggressively marketing additional volumes to the Chambers landfill
sites, refinancing Chambers indebtedness at lower borrowing costs, combining the
companies' insurance and bonding programs for additional cost savings, and
implementing operational changes and tightening financial controls to improve
margins at the Chambers field operations. The Company began to realize the
benefits of these post-merger actions in the third quarter. These factors,
combined with a series of acquisitions consummated in the third quarter and the
utilization of a portion of Chambers' net operating loss carryforwards,
contributed to the Company reporting net income of $18,902,000 for the third
quarter.
The Company continued its integration of the Chambers assets in the fourth
quarter, again focusing on improving margins at the field locations. In
addition, volumes at the Company's landfills continued to increase in the fourth
quarter. The Company also consummated an additional acquisition during the
quarter and recognized the benefit of a full quarter of operations of the
acquisitions closed during the third quarter of 1995. The Company continued a
strategy commenced during the third quarter in which a larger percentage of
waste collected by the Company was deposited in the Company's own landfills,
thereby reducing third party landfill costs and enhancing margins as a
percentage of revenues. Moreover, the Company's interest costs declined
approximately $2,700,000 in the fourth quarter as the Company reduced
indebtedness through the successful completion of an equity offering and the
conversion to equity of the Company's subordinated debentures.
Furthermore, with the Company's profitability improving and based upon an
analysis of future taxable income, the Company recognized the benefit of a
deferred tax asset in the amount of $15,600,000 during the fourth quarter,
significantly increasing fourth quarter 1995 net income to approximately
$39,016,000 (see Note 9 to the consolidated financial statements).
Although the Company's profits in the third and fourth quarter of 1995
showed marked improvements over the earlier 1995 quarters, there can be no
assurance that this trend will continue. Furthermore, the Company's anticipated
Western Merger will result in additional restatements of previously published
financial results and merger costs (which the Company currently estimates at
$27,000,000) will be expensed in the period the Western Merger is completed.
Actual merger costs may vary from such estimate. In addition, the Company's
operations in the first quarter of 1996 have been impacted detrimentally by the
harsh winter weather. As a result, future results could reflect significant
variations in quarterly earnings.
LIQUIDITY AND CAPITAL RESOURCES
The Company operates in an industry that requires a high level of capital
investment. The Company's capital requirements basically stem from (i) its
working capital needs for its ongoing operations, (ii) capital expenditures for
cell construction and expansion of its landfill sites, as well as new trucks and
equipment for its collection and hauling operations, and (iii) business
acquisitions.
The Company's strategy is to meet these capital needs first from internally
generated funds and secondly from various financing sources available to the
Company, including the issuance of its Common Stock. It is further part of the
Company's strategy to minimize working capital while maintaining
29
<PAGE> 32
available commitments under bank credit agreements to fund any working capital
needs in excess of internally generated cash flow.
At December 31, 1995, the Company's working capital was $14,879,000 (the
ratio of current assets to current liabilities was 1.14:1) which compares to a
working capital deficit of $4,601,000 (the ratio of current assets to current
liabilities was 0.96:1) at December 31, 1994. Working capital was affected by a
19.6% increase in accounts receivable, which consists of a 17.7% increase due to
receivables acquired in business combinations, a 4.5% increase due to the
increase in operating revenues, excluding certain New Jersey businesses, and a
2.6% decrease related to these New Jersey businesses. The 1994 consolidated
financial statements have been restated to reflect the Chambers Merger which was
consummated June 30, 1995, and accounted for as a pooling of interests. Prior to
the Chambers Merger, Chambers had limited access to capital and maintained a
high level of debt, and was working under an intercreditor agreement with its
various lenders. At the time of the Chambers Merger, the Company entered into a
new $550,000,000 bank credit facility with a consortium of banks and
significantly refinanced Chambers indebtedness, funded certain required
litigation settlement payments related to Chambers, paid certain costs related
to the Chambers Merger and provided the Company with committed but unused funds
of $63,553,000 for general corporate purposes, including acquisitions. At June
30, 1995, the Company was highly leveraged, with indebtedness for borrowed money
representing almost 80% of the Company's total capitalization (with total
capitalization being equal to indebtedness for borrowed money plus stockholders'
equity). Subsequent to that date, the Company proceeded with a strategy to
reduce its indebtedness, increase its stockholders' equity, strengthen its
balance sheet and improve its credit profile.
In October 1995, the Company completed the sale of 6,345,625 shares of its
Common Stock, raising approximately $118,000,000, net of expenses. The proceeds
were used to reduce indebtedness, seventy-five percent (75%) of which remains
available to redraw for future use under the Company's bank credit facility.
Between November 3, 1995 and December 1, 1995, the Company also consummated the
conversion of $42,300,000 of 8 1/2% Convertible Subordinated Debentures
("debentures") into its Common Stock, issuing approximately 3,193,000 shares in
retirement of the debentures. Earlier in 1995, $6,700,000 of debentures, had
been converted into approximately 505,000 shares of Company Common Stock.
Moreover, the Company increased its stockholders' equity by using
approximately $38,000,000 of equity in business acquisitions during the second
half of 1995, and added almost $58,000,000 of equity through second half
earnings. The Company reported a net loss for the first six months of 1995 of
about $27,700,000, principally as a result of merger costs and other unusual
charges relating to Chambers.
As a result of these activities, the Company has increased its
stockholders' equity from $164,349,000 at December 31, 1994 (approximately
$138,000,000 at June 30, 1995) to $402,849,000 at December 31, 1995. At the same
time the Company has reduced its indebtedness for borrowed money (including
shareholder litigation indebtedness) from $496,014,000 at December 31, 1994
(approximately $550,000,000 at June 30, 1995) to $373,785,000 at December 31,
1995. Consequently, the Company has significantly reduced its percentage of
indebtedness for borrowed money to total capitalization from 75% at December 31,
1994 (approximately 80% at June 30, 1995) to 48% at December 31, 1995. Moreover,
at December 31, 1995, the Company had $13,164,000 in cash and cash equivalents
and approximately $108,400,000 available for loans under its bank credit
facility (expanded to $128,400,000 subsequent to December 31, 1995).
In December 1995, the Company announced that it had entered into an
agreement to merge with Western, another publicly-held solid waste management
company. Subject to shareholder approval, the Company expects that the Western
Merger will be consummated by April 30, 1996. The Company believes that the
Western Merger will further strengthen the Company's balance sheet, cash flow
and
30
<PAGE> 33
credit profile. As a result of the pending Western Merger, improved Company
profitability and strengthened balance sheet, Standard & Poor's recently
increased the Company's credit rating from BB+ to BBB- (investment grade). The
Company believes that the improved credit rating will benefit it in future
financing arrangements.
The Company is currently negotiating with its banks to provide a new credit
facility (or amendment to its existing facility) to be effective at or near the
date of the Western Merger. The Company believes this new facility will be
structured as a $700-$750 million revolving credit facility, will be unsecured,
will have a term of five years, and will be priced commensurate with the
Company's improved credit profile and credit rating.
The Company anticipates its capital expenditures for 1996 will be
approximately $90,000,000, which the Company intends to fund through its
internally generated cash flow and available bank credit facility. Almost 65% of
the 1996 capital expenditure budget is planned to be spent in the Company's
landfill operations for cell construction and certain expansion operations at
the Company's landfill sites. Slightly less than 30% of the 1996 capital
expenditure budget is allocated to the Company's waste collection and hauling
operations, with the balance predominantly allocated to the Company's transfer
station operations.
The Company has also recently announced its intention to enter the New York
City solid waste market with the potential acquisition of an existing group of
businesses. If consummated, the Company would have a cash obligation of
approximately $30,000,000 at closing with contingent consideration payable in
the future depending upon the actual performance of the businesses acquired for
up to five years after closing. The transaction is subject to certain required
approvals and permit issues which make the timing and ultimate consummation of
the transaction uncertain at this time. Although the Company remains optimistic,
there can be no assurance that the Company will obtain all the required
approvals and permits necessary for it to consummate the proposed transaction.
Part of the Company's business strategy is to grow through acquisitions.
The Company has been, and expects to continue to be, an active participant in
the consolidation trend ongoing within the industry. The Company has issued
equity securities in business acquisitions where appropriate, and expects to do
so in the future. Furthermore, the Company's future growth will depend 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 the Company is not successful in its future financing strategies, the
Company's growth could be limited.
The Company regularly engages in discussions relating to potential
acquisitions and has identified several possible acquisition opportunities and
may announce additional acquisition transactions at any time.
ENVIRONMENTAL MATTERS
The Company 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. The Company
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 final capping and cover for the site,
methane gas control, leachate management and ground water monitoring, and other
operational and maintenance costs to be incurred after each site stops accepting
waste.
31
<PAGE> 34
The Company has estimated that the aggregate final closure and post-closure
costs will be approximately $100,000,000. As of December 31, 1995 and 1994, the
Company had recorded liabilities of $47,000,000 and $39,000,000, respectively,
for closure and post-closure costs of disposal facilities. The difference
between the closure and post-closure costs accrued at December 31, 1995, and the
total estimated final closure and post-closure costs to be incurred will be
accrued and charged to expense as airspace is consumed such that the total
estimated final closure and post-closure costs to be incurred will be fully
accrued for each landfill at the time the site stops accepting waste and is
closed. The Company also expects to incur approximately $233,000,000 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.
Management believes that the ultimate disposition of these environmental
matters will not have a material, adverse effect on the financial condition of
the Company. However, the Company'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. The Company cannot predict the effect of any regulations or
legislation enacted in the future on the Company'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, the Company
experiences seasonal variations in its revenues. As a result, during spring and
summer, the Company's revenues tend to be higher than its revenues in fall and
winter. In addition, during the winter, harsh weather conditions often
temporarily affect the Company's ability to collect, transport, and dispose of
waste. The seasonal impact is often offset by revenues added through
acquisitions such that the Company's reported revenues have historically
reflected increases in period to period comparisons.
The Company 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.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of ("SFAS No. 121").
SFAS No. 121 sets forth standards for recognition and measurement of impairment
of long-lived assets. SFAS No. 121 is effective for the Company in 1996. The
Company does not believe the adoption of SFAS No. 121 will have a material
effect on its consolidated financial statements in 1996.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS No. 123"). SFAS No. 123 prescribes a fair value based method
of determining compensation expense related to stock-based awards granted to
employees or associates. The recognition provisions of SFAS No. 123 are
optional; however, entities electing not to adopt SFAS No. 123 are required to
make disclosures of pro forma net income and earnings per share as if SFAS No.
123 had been applied. The Company does not plan to adopt the recognition
provisions of SFAS No. 123. Pursuant to the pronouncement, the disclosure
requirements for the Company are effective in 1996.
32
<PAGE> 35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(1) Consolidated Financial Statements:
Report of Independent Accountants............................................ 34
Report of Independent Auditors............................................... 35
Consolidated Balance Sheets as of December 31, 1995 and 1994................. 36
Consolidated Statements of Operations for the Years Ended December 31, 1995,
1994, and 1993............................................................. 37
Consolidated Statements of Stockholders' Equity for the Years Ended December
31, 1995, 1994, and 1993................................................... 38
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995,
1994, and 1993............................................................. 39
Notes to Consolidated Financial Statements................................... 40
(2) Consolidated Financial Statement Schedules:
</TABLE>
All schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
33
<PAGE> 36
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
USA Waste Services, Inc.:
We have audited the consolidated financial statements of USA Waste
Services, Inc. and subsidiaries (the "Company") as listed in the accompanying
index in Item 8 of this Form 10-K. 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. In
1994 and 1993, we did not audit the consolidated financial statements of
Chambers Development Company, Inc. ("Chambers"), a wholly-owned subsidiary,
which statements reflect total assets constituting 62 percent at December 31,
1994, and total revenues constituting 59 percent and 75 percent in 1994 and
1993, respectively, 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 Chambers in 1994 and
1993, 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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report 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, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 1, 1996
34
<PAGE> 37
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Chambers Development Company,
Inc.:
We have audited the consolidated balance sheets of Chambers Development
Company, Inc. ("Chambers") and subsidiaries as of December 31, 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years ended December 31, 1994 and 1993 (not presented separately
herein). These consolidated financial statements are the responsibility of
Chambers' management. Our responsibility is to express an opinion on these
consolidated 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 and subsidiaries as of
December 31, 1994, and the results of their operations and their cash flows for
the years ended December 31, 1994 and 1993 in conformity with generally accepted
accounting principles.
As discussed in Note B to Chambers' consolidated financial statements,
Chambers changed its method of accounting for contributions effective January 1,
1994.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
March 30, 1995
35
<PAGE> 38
USA WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 13,164 $ 30,161
Accounts receivable, net of allowance for doubtful accounts of
$4,182 and $3,752, respectively............................. 58,333 48,765
Notes and other receivables.................................... 13,802 19,245
Deferred income taxes.......................................... 15,600 --
Prepaid expenses and other..................................... 19,223 20,945
--------- ---------
Total current assets..................................... 120,122 119,116
Notes and other receivables...................................... 11,704 7,621
Property and equipment, net...................................... 593,293 523,557
Excess of cost over net assets of acquired businesses, net....... 91,250 69,164
Other intangible assets, net..................................... 27,528 24,252
Other assets..................................................... 64,140 41,906
--------- ---------
Total assets............................................. $ 908,037 $ 785,616
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................... $ 32,364 $ 24,912
Accrued liabilities............................................ 27,924 37,346
Accrued shareholder litigation settlement...................... -- 10,000
Deferred revenues.............................................. 6,030 4,664
Current maturities of long-term debt........................... 38,925 46,795
--------- ---------
Total current liabilities............................. 105,243 123,717
Long-term debt, less current maturities.......................... 334,860 363,919
Accrued shareholder litigation settlement........................ -- 75,300
Closure, post-closure, and other liabilities..................... 65,085 58,331
--------- ---------
Total liabilities........................................ 505,188 621,267
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value; 10,000,000 shares authorized;
none issued................................................. -- --
Common stock, $.01 par value; 150,000,000 shares authorized;
65,975,048 and 50,557,574 shares issued, respectively....... 660 505
Additional paid-in capital..................................... 727,971 520,031
Accumulated deficit............................................ (323,963) (354,226)
Less treasury stock at cost, 138,810 and 149,285 shares,
respectively................................................ (1,819) (1,961)
--------- ---------
Total stockholders' equity............................... 402,849 164,349
--------- ---------
Total liabilities and stockholders' equity............... $ 908,037 $ 785,616
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE> 39
USA WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Operating revenues.................................... $457,099 $ 434,224 $382,234
-------- --------- --------
Costs and expenses:
Operating........................................... 253,884 257,370 217,345
General and administrative.......................... 62,178 71,500 66,968
Merger costs........................................ 25,073 3,782 --
Unusual items....................................... 4,733 8,863 2,672
Depreciation and amortization....................... 56,378 56,139 52,222
-------- --------- --------
402,246 397,654 339,207
-------- --------- --------
Income from operations................................ 54,853 36,570 43,027
-------- --------- --------
Other income (expense):
Shareholder litigation settlement and other
litigation
related costs.................................... -- (79,400) (5,500)
Interest expense:
Nonrecurring interest............................ (10,994) (1,254) --
Other............................................ (30,354) (32,804) (35,975)
Interest income..................................... 2,666 2,641 3,539
Other income, net................................... 2,699 1,877 1,915
-------- --------- --------
(35,983) (108,940) (36,021)
-------- --------- --------
Income (loss) before income taxes..................... 18,870 (72,370) 7,006
Provision for (benefit from) income taxes............. (11,393) 3,908 6,018
-------- --------- --------
Net income (loss)..................................... 30,263 (76,278) 988
Preferred dividends................................... -- 565 582
-------- --------- --------
Income (loss) available to common shareholders........ $ 30,263 $ (76,843) $ 406
======== ========= ========
Earnings (loss) per common share...................... $ 0.55 $ (1.55) $ 0.01
======== ========= ========
Weighted average number of common and common
equivalent shares outstanding....................... 55,270 49,671 45,885
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
37
<PAGE> 40
USA WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN ACCUMULATED TREASURY
STOCK STOCK CAPITAL DEFICIT STOCK
--------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993................... $ 9 $450 $489,264 $(280,849) $ (1,526)
Common stock options exercised........... -- -- 30 -- --
Common stock issued in acquisitions...... -- 10 4,790 -- --
Common stock purchased for treasury...... -- -- -- -- (1,332)
Preferred stock subscriptions
collected............................. -- -- 50 -- --
Common stock issued in private
placement............................. -- 6 4,742 -- --
Series D Preferred Stock issued.......... 5 -- 5,212 -- --
Common stock warrants granted as
compensation.......................... -- -- 69 -- --
Common stock issued for preferred stock
dividends............................. -- -- 154 (582) --
Change in Envirofil fiscal year.......... -- -- -- 3,060 --
Net income............................... -- -- -- 988 --
------ ------ -------- --------- -------
Balance, December 31, 1993................. 14 466 504,311 (277,383) (2,858)
Common stock options exercised........... -- -- 195 -- --
Common stock warrants exercised.......... -- 3 148 -- --
Common stock issued in acquisitions...... -- 16 14,506 -- --
Common stock issued from treasury upon
exercise of stock options............. -- -- (597) -- 897
Common stock issued for preferred stock
dividends............................. -- 1 1,390 (565) --
Conversion of preferred stock into
common stock.......................... (14) 19 (5) -- --
Common stock issued to directors as
compensation.......................... -- -- 83 -- --
Net loss................................. -- -- -- (76,278) --
------ ------ -------- --------- -------
Balance, December 31, 1994................. -- 505 520,031 (354,226) (1,961)
Common stock options exercised........... -- 3 1,907 -- --
Common stock warrants exercised.......... -- 9 3,692 -- --
Common stock issued in acquisitions...... -- 43 37,916 -- --
Common stock issued from treasury upon
exercise of stock options............. -- -- (89) -- 142
Conversion of subordinated debentures
into common stock..................... -- 37 46,704 -- --
Common stock issued in public offering... -- 63 117,785 -- --
Common stock issued to directors as
compensation.......................... -- -- 25 -- --
Net income............................... -- -- -- 30,263 --
------ ------ -------- --------- -------
Balance, December 31, 1995................. $ -- $660 $727,971 $(323,963) $ (1,819)
====== ====== ======== ========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
38
<PAGE> 41
USA WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................................... $ 30,263 $(76,278) $ 988
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization...................................................... 56,378 56,139 52,222
Deferred income taxes.............................................................. (15,600) -- --
Net gains on disposal of assets.................................................... (698) (1,338) (556)
Interest earned on escrowed funds.................................................. -- (415) (878)
Adjustment for change in Envirofil fiscal year..................................... -- -- (930)
Change in assets and liabilities, net of effects of acquisitions and divestitures:
(Increase) decrease in accounts receivable and other receivables................. 2,938 (14,594) (5,685)
(Increase) decrease in prepaid expenses and other................................ (2,399) (557) 1,191
Increase in other assets......................................................... (7,005) (1,005) (3,038)
Increase (decrease) in refundable taxes.......................................... -- (659) 16,049
Increase (decrease) in accounts payable and accrued liabilities.................. (15,315) 2,082 (16,845)
Increase (decrease) in accrued shareholder litigation settlement................. (85,300) 85,300 --
Increase in deferred revenues and other liabilities.............................. 1,278 4,560 1,840
Other............................................................................ -- 1,099 580
--------- -------- --------
Net cash provided by (used in) continuing operations................................... (35,460) 54,334 44,938
Net cash used in operating activities of discontinued operations....................... -- -- (2,148)
--------- -------- --------
Net cash provided by (used in) operating activities.................................... (35,460) 54,334 42,790
--------- -------- --------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired..................................... (8,283) (23,944) (44,522)
Capital expenditures................................................................. (84,597) (80,678) (61,409)
Loans and advances to others......................................................... (19,660) (7,504) (4,932)
Collection of loans and advances to others........................................... 4,880 1,785 1,607
Proceeds from sale of assets......................................................... 7,134 16,987 36,251
Decrease (increase) in restricted funds.............................................. 11,753 14,657 (404)
Investment in Western................................................................ (12,569) -- --
Other................................................................................ -- (199) (603)
Net investing activities of discontinued operations.................................. -- -- 4,500
--------- -------- --------
Net cash used in investing activities.................................................. (101,342) (78,896) (69,512)
--------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt............................................. 392,000 44,260 55,922
Principal payments on long-term debt................................................. (393,544) (38,732) (71,572)
Net proceeds from issuance of preferred stock........................................ -- -- 9,537
Net proceeds from issuance of common stock........................................... 117,850 -- 13,106
Proceeds from exercise of warrants................................................... 3,701 151 --
Proceeds from exercise of common stock options....................................... 1,910 492 30
Reissuances (purchases) of treasury stock............................................ 54 -- (1,332)
Funds provided by replacement letters of credit...................................... -- -- 10,243
Other................................................................................ (2,166) (627) (697)
--------- -------- --------
Net cash provided by financing activities.............................................. 119,805 5,544 15,237
--------- -------- --------
Decrease in cash and cash equivalents.................................................. (16,997) (19,018) (11,485)
Cash and cash equivalents at beginning of year......................................... 30,161 49,179 60,664
--------- -------- --------
Cash and cash equivalents at end of year............................................... $ 13,164 $ 30,161 $ 49,179
========= ======== ========
Supplemental cash flow information:
Cash paid during the year for:
Interest........................................................................... $ 40,885 $ 33,277 $ 35,849
Income taxes....................................................................... 14,189 7,334 6,160
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of property and equipment through capital leases......................... $ -- $ 408 $ 62
Conversion of subordinated notes..................................................... 49,000 -- --
Issuance of common stock for preferred dividends..................................... -- 1,391 327
Receivables from sale of businesses.................................................. -- -- 4,056
Acquisitions of businesses:
Liabilities incurred or assumed.................................................... 13,523 10,085 20,534
Common stock issued................................................................ 29,147 14,522 4,800
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
39
<PAGE> 42
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business -- USA Waste Services, Inc. and subsidiaries (the "Company") is
engaged in the non-hazardous solid waste management business and provides solid
waste management services, consisting of collection, transfer, disposal,
recycling and other miscellaneous services to municipal, commercial, industrial,
and residential customers. The Company conducts operations through subsidiaries
in multiple locations nationwide.
Basis of presentation -- The accompanying consolidated financial statements
give retroactive effect to the merger with Chambers Development Company, Inc.
("Chambers") on June 30, 1995 (the "Chambers Merger") using the pooling of
interests method of accounting and include the accounts of the Company and its
majority-owned subsidiaries after elimination of all material intercompany
balances and transactions. Investments in affiliated companies in which the
Company owns 50% or less are accounted for under the equity method or cost
method of accounting, as appropriate.
Use of estimates -- The preparation of the consolidated financial
statements requires the use of management's estimates and assumptions in
determining the carrying values of certain assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts for certain revenues and expenses during the
reporting period. Actual results could differ from those estimated.
Cash and cash equivalents -- Cash and cash equivalents consist 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.
Restricted funds held by trustees -- Restricted funds held by trustees of
$19,195,000 and $30,948,000 at December 31, 1995 and 1994, respectively, are
included in other assets and 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.
The Company 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 costs. Substantially all of these
investments mature within one year. The Company's insurance escrow funds are
invested in pooled investment accounts that hold debt and equity securities and
are considered to be available for sale. The market value of those pooled
accounts approximates their aggregate cost at December 31, 1995.
Concentrations of credit risk -- Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash
investments and accounts receivable. The Company places its cash investments
with high quality financial institutions and limits the amount of credit
exposure to any one institution. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of geographically diverse
customers make up the Company's customer base, thus spreading the trade credit
risk. No single group or customer represents greater than 10% of total accounts
receivable. The Company controls credit risk through credit approvals, credit
limits, and monitoring procedures. The Company performs in-depth credit
evaluations for commercial and industrial customers and performs ongoing credit
evaluations of its customers' financial condition but generally does
40
<PAGE> 43
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
not require collateral to support accounts receivable. The Company maintains an
allowance for doubtful accounts for potential credit losses. Actual bad debt
expenses have not been material.
Interest rate swap agreements -- The Company uses interest rate swap
agreements to minimize the impact of interest 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.
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 and equipment is retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is included in current operations. Depreciation is provided over the
estimated useful lives of the related assets using the straight-line method. The
estimated useful lives are seven to thirty years for buildings and improvements,
three to twelve 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. During the
years ended December 31, 1995, 1994, and 1993, interest costs were $47,468,000,
$38,035,000, and $39,425,000, respectively, of which $6,120,000, $3,977,000, and
$3,450,000 were capitalized, respectively, with respect to landfills and
facilities under construction.
Depreciation and amortization of property and equipment was $48,921,000,
$46,432,000, and $42,209,000 for the years ended December 31, 1995, 1994, and
1993, respectively.
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 commencing on the dates of the respective acquisitions. Effective January
1, 1995, the Company changed the estimated useful life of excess of cost over
net assets of acquired businesses from 25 to 40 years to more appropriately
reflect the estimated period during which the benefit of the assets will be
realized. This change in accounting estimate had the effect of reducing
amortization expense and increasing net income by $1,488,000 and increasing
earnings per share by $0.03 in 1995. Accumulated amortization was $9,762,000 and
$7,100,000 at December 31, 1995 and 1994, respectively. The Company assesses
whether the excess of cost over net assets acquired is impaired based on the
ability of the operation to which it relates to generate cash flows in amounts
adequate to cover the future amortization of such assets. If an impairment is
determined, the amount of such impairment is calculated based on the estimated
fair value of the related asset.
Accounting for acquisitions -- The Company assesses each acquisition to
determine whether the pooling of interests or the purchase method of accounting
is appropriate. For those acquisitions accounted for under the pooling of
interests method, the financial statements of the acquired company are combined
with those of the Company at their historical amounts, and, if material, all
periods presented are restated as if the combination occurred on the first day
of the earliest year presented. 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
estimates of fair values thereof. These estimates are revised during the
allocation period as necessary when information regarding
41
<PAGE> 44
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
contingencies becomes available to define and quantify assets acquired and
liabilities assumed. The allocation period varies 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,
such items are included in the revised allocation of the purchase price. After
the allocation period, the effect of changes in such contingencies is included
in results of operations in the periods in which the adjustments are 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 forty years. Accumulated amortization was $23,869,000 and
$19,730,000 at December 31, 1995 and 1994, respectively.
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 certainty, the Company has estimated that the aggregate final
closure and post-closure costs for all sites will be approximately $99,700,000.
As of December 31, 1995 and 1994, the Company has accrued $47,392,000, and
$38,990,000, 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, 1995 and the total estimated final closure and post-closure
costs to be incurred will be accrued and charged to expense as airspace is
consumed such that the total estimated final closure and post-closure costs will
be fully accrued for each landfill at the time the site stops accepting waste
and is closed. The Company also expects to incur an estimated $233,200,000
related to capping activities expected to occur during the operating lives of
these disposal sites. These costs are also being accrued 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. Final 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. For disposal sites that were previously operated by others, 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.
Income taxes -- Deferred income taxes are determined based on the
difference between the financial accounting and tax bases of assets and
liabilities. Deferred income tax expense (benefit) represents the change during
the period in the deferred income tax assets and deferred income tax
liabilities. Deferred tax assets include tax loss and credit carryforwards and
are reduced by a valuation allowance if, based on available evidence, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.
42
<PAGE> 45
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Revenue recognition -- The Company recognizes revenues as services are
provided. Amounts billed and received prior to services being performed are
included in deferred revenues.
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 consolidated statements of operations.
Reclassifications -- Certain 1994 amounts have been reclassified to conform
to the 1995 presentation.
New accounting pronouncements -- In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To
Be Disposed Of ("SFAS No. 121"). SFAS No. 121 sets forth standards for
recognition and measurement of impairment of long-lived assets. SFAS No. 121 is
effective for the Company in 1996. The Company does not believe the adoption of
SFAS No. 121 will have a material effect on its consolidated financial
statements in 1996.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS No. 123"). SFAS No. 123 prescribes a fair value based method
of determining compensation expense related to stock-based awards granted to
employees or associates. The recognition provisions of SFAS No. 123 are
optional; however, entities electing not to adopt SFAS No. 123 are required to
make disclosures of pro forma net income and earnings per share as if SFAS No.
123 had been applied. The Company does not plan to adopt the recognition
provisions of SFAS No. 123. Pursuant to the pronouncement, the disclosure
requirements for the Company are effective in 1996.
2. BUSINESS COMBINATIONS
On June 30, 1995, the Company consummated the Chambers Merger, pursuant to
which the Company acquired a 100% ownership interest in Chambers. Under the
terms of the merger agreement, approximately 27,800,000 shares of the Company's
Common Stock were issued in exchange for all outstanding shares of Chambers
Common Stock and Class A Common Stock. The acquisition was accounted for as a
pooling of interests and, accordingly, the accompanying consolidated financial
statements include the accounts and operations of Chambers for all periods
presented. Related to this acquisition, the Company incurred $25,073,000 in
merger costs in the second quarter of 1995.
43
<PAGE> 46
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BUSINESS COMBINATIONS -- (CONTINUED)
Combined and separate results of operations of the Company prior to
consummation of the merger ("USA Waste") and Chambers for the restated periods
are as follows (in thousands):
<TABLE>
<CAPTION>
USA WASTE CHAMBERS ADJUSTMENTS COMBINED
--------- -------- ----------- --------
<S> <C> <C> <C> <C>
Three months ended March 31, 1995
(unaudited):
Operating revenues...................... $ 46,508 $ 54,734 $ -- $101,242
Net income (loss)....................... 4,788 (5,269) 665(a)(b) 184
Year ended December 31, 1994:
Operating revenues...................... 176,235 257,989 -- 434,224
Net income (loss)....................... 13,831 (90,244) 135(a)(b) (76,278)
Year ended December 31, 1993:
Operating revenues...................... 93,753 288,481 -- 382,234
Net income.............................. 5,190 8,303 (12,505)(a)(b) 988
</TABLE>
The following adjustments have been made to the combined results of
operations:
(a) All significant intercompany transactions between the Company and
Chambers have been eliminated. In September 1993, Chambers sold certain of
its collection and landfill operations to the Company and, as a result of
such sale, Chambers recorded a gain of approximately $13,600,000. The
Company accounted for the transaction as a purchase and allocated the
purchase price to the assets acquired. The gain recorded by Chambers in
1993 has been removed based on the assumption that the Company and Chambers
had been combined from their inception. In addition, the combined results
have been adjusted for the effect of lower amortization as a result of the
reduction in the asset amounts recorded.
(b) The combined results assume that the acquisition qualifies as a
"tax-free" reorganization for federal income tax purposes. As a result of
the acquisition, certain tax net operating loss carryforwards will become
available to offset future taxable income of the combined company. Chambers
had not recognized any benefit with respect to these tax net operating loss
carryforwards in prior years; however, the combined results recognize these
benefits to the extent of previously recognized deferred tax liabilities.
On August 11, 1995 and November 13, 1995, the Company consummated mergers
accounted for as poolings of interests, pursuant to which the Company issued
800,000 and 1,787,502 shares of its common stock, respectively, in exchange for
all outstanding shares of the acquired companies. Periods prior to consummation
of these acquisitions were not restated to include the accounts and operations
of the acquired companies as combined results are not materially different from
the results as presented.
On May 27, 1994, the Company consummated a merger agreement with Envirofil,
Inc. ("Envirofil"), pursuant to which the Company acquired Envirofil. Under the
terms of the agreement, approximately 9,700,000 shares of the Company's common
stock were issued in exchange for all outstanding shares of Envirofil common
stock. The acquisition was accounted for as a pooling of interests and,
accordingly, the accompanying consolidated financial statements include the
accounts and operations of Envirofil for all periods presented. Costs related to
the acquisition of $3,782,000 were charged to expense in the quarter in which
the acquisition was consummated.
44
<PAGE> 47
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BUSINESS COMBINATIONS -- (CONTINUED)
On 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. The acquisition was accounted for in a manner similar
to a pooling of interests, however, periods prior to consummation were not
restated to include the accounts and operations of Custom as the combined
results are not materially different from the results as presented. On September
30, 1994, the Company sold substantially all of Custom's assets.
During 1995 and 1994, the Company consummated 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 the acquisitions. The total costs of acquisitions
accounted for under the purchase method were $52,334,000 and $49,033,000 in 1995
and 1994, respectively. The excess of the aggregate purchase price over the fair
value of net assets acquired in 1995 and 1994 was approximately $22,873,000 and
$23,957,000, respectively.
The following summarized pro forma results of operations assumes 1995 and
1994 acquisitions accounted for as purchases occurred at the beginning of 1994
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Operating revenues......................................... $475,467 $472,709
Net income (loss).......................................... 31,824 (73,670)
Earnings (loss) per common share........................... 0.56 (1.43)
</TABLE>
3. DIVESTITURES
In late 1992, Chambers initiated a program to divest certain businesses
that did not meet strategic and performance objectives. Under this program,
Chambers completed a series of asset sales to various parties in 1993 and 1994.
During 1993, Chambers sold a transfer station, five collection and hauling
businesses, and a parcel of land for $20,669,000 in cash and received another
$996,000 in cash with respect to a development project in California. These
sales resulted in a net gain of $7,101,000. 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 their operating and disposal service agreement, pursuant to which
Chambers operates the transfer stations and provides waste disposal services,
reducing the rates charged for such services in 1994 and 1995. 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 Morris County's long-term solid waste system is in operation or until
December 31, 1996, if later. During 1994, Chambers sold a recycling operation, a
building, and a parcel of land for $2,089,000 in cash. The losses incurred as a
result of these sales were charged to a previously established allowance for
divestiture losses.
45
<PAGE> 48
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DIVESTITURES -- (CONTINUED)
The following are summarized operating results of the businesses that were
sold during 1994 and 1993, included in income from operations on the
consolidated statements of operations. These results exclude the two transfer
stations in Morris County, New Jersey, that the Company will continue to operate
and the net gain from divestitures of $7,101,000 included in unusual items for
the year ended December 31, 1993 (in thousands).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1994 1993
------ -------
<S> <C> <C>
Operating revenues............................................ $9,264 $17,829
Income from operations........................................ 398 444
</TABLE>
Chambers recorded a loss reserve in 1992 for estimated losses on the
disposition of certain of its businesses. The loss reserve 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. Approximately $2,299,000 in operating losses incurred by these
businesses during 1994 and 1993 and $1,484,000 of losses on divestitures
incurred in 1994 and 1993 have been charged against the loss reserve.
Approximately $3,689,000 was charged to the loss reserve in 1994 and 1993 as a
result of writing down assets to their net realizable values. Loss reserves 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 1994 and 1993 (see Note 11).
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Disposal sites, including costs incurred for expansion
projects in process of $38,737 and $32,499,
respectively............................................. $501,874 $434,456
Vehicles................................................... 97,401 70,233
Machinery and equipment.................................... 72,822 70,669
Containers................................................. 49,641 40,292
Buildings and improvements................................. 38,025 28,965
Furniture and fixtures..................................... 14,606 12,661
Land....................................................... 53,973 52,972
-------- --------
828,342 710,248
Less accumulated depreciation and amortization............. 235,049 186,691
-------- --------
$593,293 $523,557
======== ========
</TABLE>
46
<PAGE> 49
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Credit Facility:
Revolving credit facility................................ $ 51,613 $ 98,000
Term loan facility....................................... 215,835 --
Senior Notes, interest at 11.45%........................... -- 133,501
Senior Notes, interest at 11.95%........................... -- 17,929
8 1/2% Convertible Subordinated Debentures................. -- 49,000
Industrial revenue bonds, variable interest rates (5.25% to
5.50% at December 31, 1995), principal payable in annual
installments, maturing in 2001-2007, enhanced by letters
of credit................................................ 82,250 88,800
Other...................................................... 24,087 23,484
-------- --------
373,785 410,714
Less current maturities.................................... 38,925 46,795
-------- --------
$334,860 $363,919
======== ========
</TABLE>
The aggregate estimated payments, including scheduled minimum maturities,
of long-term obligations outstanding at December 31, 1995 for the five years
ending December 31, 1996 through 2000 are: 1996 -- $38,925,000;
1997 -- $45,762,000; 1998 -- $52,441,000; 1999 -- $60,394,000; and 2000 --
$116,397,000.
On June 30, 1995, in connection with the acquisition of Chambers, the
Company entered into a $550,000,000 financing agreement consisting of a
$300,000,000 five-year revolving credit and letter of credit facility and a
$250,000,000 term loan facility (the "Credit Facility"). On that date, the
Company arranged to borrow $370,000,000, of which $267,448,000 was outstanding
at December 31, 1995, the proceeds of which were used to refinance outstanding
indebtedness under the Company's revolving credit facility, retire the 11.45%
and 11.95% Senior Notes of Chambers, and finance the Chambers' shareholder
litigation settlements discussed in Note 12 and certain other merger related
costs. Borrowings under the Credit Facility are collateralized by all the stock
and intercompany receivables of the Company and its subsidiaries, whether now
owned or hereafter acquired.
Revolving credit loans under the Credit Facility are limited to
$160,000,000 at December 31, 1995, (expanded to $180,000,000 subsequent to
December 31, 1995) less the amount of any future industrial revenue bonds
enhanced by letters of credit under the Credit Facility. Loans bear interest at
a rate based on the Eurodollar rate or the prime rate, plus a spread not to
exceed 1.75% per annum (the applicable interest rate at December 31, 1995 was
7.31%). The Credit Facility may also be used for letters of credit purposes with
variable fees from 0.75% to 1.75% per annum (1.50% at December 31, 1995) charged
on amounts issued. A commitment fee of up to .5% is required on the unused
portion of the Credit Facility.
In August 1995, the Company entered into a three year interest rate swap
agreement whereby the Company fixed a maximum interest rate on $125,000,000 of
its Credit Facility. The interest rate is a fixed
47
<PAGE> 50
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT -- (CONTINUED)
rate of approximately 5.9% plus a spread (not to exceed 1.75%) over the
Eurodollar rate as determined under the Credit Facility (the applicable interest
rate at December 31, 1995 was 7.40%).
The Credit Facility contains financial covenants, including minimum
consolidated net worth, funded debt levels, capital expenditures, and interest
and debt service coverage requirements. The Credit Facility also restricts the
incurrence of additional indebtedness, liens, and the payment of dividends.
Chambers accrued nonrecurring interest expense of $10,994,000 and
$1,254,000 in 1995 and 1994, respectively, as a result of amendments to its
Credit Facility and Senior Notes in November 1994. Chambers proratably accrued
the extension fees, the expected refinancing premium, and other charges expected
to be incurred upon consummation of the Chambers Merger.
On October 6, 1995, the Company completed a public offering of 6,345,625
shares of its common stock, priced at $19.625 per share. The net proceeds of
approximately $118,000,000 were primarily used for the repayment of debt.
Approximately 75% of the proceeds were applied to the Credit Facility and can be
redrawn as the Company's needs dictate for use in the expansion of its business,
including acquisitions.
In September 1992, the Company, in an underwritten public offering, issued
$49,000,000 of 8 1/2% Convertible Subordinated Debentures (the "debentures") due
October 15, 2002, with interest payable semi-annually. The debentures were
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 Company had an option to redeem the debentures, 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
debentures. Between November 3, 1995 and December 1, 1995, the Company converted
the remaining balance of the debentures of approximately $42,300,000 into
3,193,000 shares of the Company's Common Stock. The unamortized premium of
$1,983,000 as of December 1, 1995, was recorded as a reduction to additional
paid-in capital. Earlier in 1995, $6,700,000 of debentures had been converted
into approximately 505,000 shares of the Company's Common Stock.
If the aforementioned public offering and subordinated debenture conversion
transactions had occurred on January 1, 1995, earnings per share would have
increased by $0.04 for the year ended December 31, 1995 due to a reduction in
interest expense resulting from the retirement of long-term debt. Weighted
average shares would have been 63,266,000.
Letters of credit have been provided to the Company supporting industrial
revenue bonds, performance of landfill closure and post-closure requirements,
insurance contracts, and other contracts. Letters of credit outstanding at
December 31, 1995 aggregated $122,433,000.
6. PREFERRED STOCK
The Board of Directors is authorized to issue 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 dividends and liquidation), and limitations. The Company
currently has no issued or outstanding preferred stock.
48
<PAGE> 51
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMON STOCK OPTIONS AND WARRANTS
In accordance with the Company's 1990 Stock Option Plan (the "1990 Plan"),
options to purchase 900,000 shares of the Company's Common Stock may be granted
to officers, directors, and key employees. In accordance with the Company's 1993
Stock Option Incentive Plan (the "1993 Plan"), options to purchase 4,000,000
shares of the Company's Common Stock may be granted to officers, directors, and
key employees. Options are 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, with various vesting periods, and expire up to ten years from the
date of grant. No options are available for future grant under the 1990 Plan.
In March 1993, Envirofil adopted the Envirofil Employees' 1993 Stock Option
Plan (the "1993 Envirofil Plan"). Under the 1993 Envirofil Plan, options could
be granted to purchase 600,000 shares of the Company's Common Stock. The 1993
Envirofil Plan terminates in January 2003. Options were granted under the 1993
Envirofil Plan at an exercise price which equaled or exceeded the fair market
value of the common stock at the date of grant, with various vesting periods and
expiration dates up to ten years from date of grant. On May 27, 1994, Envirofil
had outstanding options to purchase 443,182 shares under the 1993 Envirofil
Plan, which were assumed by the Company. No additional options may be issued
under such plan.
Chambers had two plans under which stock options for the purchase of its
Class A Common Stock could be granted: the 1993 Stock Incentive Plan (the "1993
Chambers Plan") and the 1991 Stock Option Plan for Non-Employee Directors (the
"Chambers Directors' Plan"). The maximum number of shares of Chambers Class A
Common stock available for grant under the 1993 Chambers Plan in each calendar
year was equal to one percent of the total number of outstanding shares of
Chambers 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 (the "1988 Chambers Plan"). Any unused shares available for grant in
any calendar year were carried forward and available for award in succeeding
calendar years. Under the terms of the 1993 Chambers Plan, options were granted
at fair market value on the date of grant, but in no event were options granted
at less than the stock's par value, with various vesting periods, and expire up
to ten years from date of grant.
Under the Chambers Directors' Plan, options could be granted to purchase
150,000 shares of Chambers Class A Common Stock. The Chambers Directors' Plan
stipulates that each person serving as a director and who was not employed by
Chambers was automatically granted options for the purchase of 2,000 shares of
Chambers Class A Common 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 Chambers Class
A Common Stock for each year previously served on Chambers' Board of Directors.
As a result of the Merger, all unexpired and unexercised options under the 1993
Chambers Plan, the 1988 Chambers Plan, and the Chambers Directors' Plan
converted to options to purchase shares of the Company's Common Stock, as
adjusted, and subject to the same terms and conditions as provided under the
Chambers plans. No additional options may be issued under such plans.
49
<PAGE> 52
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMON STOCK OPTIONS AND WARRANTS -- (CONTINUED)
The following table summarizes activity under all of the above stock option
plans (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Outstanding, beginning of year.......................... 1,974 1,807 1,070
Granted................................................. 2,216 567 882
Exercised............................................... (260) (211) (134)
Canceled................................................ (95) (189) (11)
----- ----- -----
Outstanding, end of year................................ 3,835 1,974 1,807
===== ===== =====
</TABLE>
The exercise prices of options exercised during 1995, 1994, and 1993 were
from $5.00 to $18.00 in 1995, from $2.50 to $14.00 in 1994, and $6.00 in 1993.
As of December 31, 1995, options for the purchase of 1,173,000 shares of the
Company's Common Stock were exercisable at prices ranging from $2.25 to $59.11
per share. The Company holds 138,810 shares of its Common Stock in treasury as
of December 31, 1995 for future distribution upon exercise of options under the
plans.
The Company has issued warrants expiring through 2002 for the purchase of
shares of its Common Stock 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
are summarized as follows:
<TABLE>
<CAPTION>
EXERCISE
WARRANTS PRICE
--------- ---------------
<S> <C> <C>
Outstanding at January 1, 1993..................... 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
Issued........................................... 230,000 $10.50 -- $15.00
Exercised........................................ (958,048) $1.25 -- $15.00
---------
Outstanding at December 31, 1995................... 1,967,417
=========
</TABLE>
In 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 or renegotiated 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 granting of the options or
warrants, or on the date the exercise price was reduced. As a result, stock
compensation expense of $923,000 was recognized in the consolidated statement of
operations included in unusual items for the year ended December 31, 1993, with
a corresponding increase in additional paid-in capital.
50
<PAGE> 53
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. EMPLOYEE SAVINGS PLAN
Effective July 1, 1995, the Company established the USA Waste Services,
Inc. Employee Savings Plan (the "Savings Plan"), a qualified defined
contribution retirement plan covering employees (except those working subject to
a collective bargaining agreement) 21 years of age or older who have completed
one year of service, or were actively employed on the Savings Plan's
commencement date. The Savings Plan allows eligible employees to defer receipt
of up to 15% of their compensation and contribute such amounts to various
investment funds. The Company matches 50% of the first 6% an employee
contributes in the same manner as the participant's contribution. Both employee
and Company contributions vest immediately. In 1995, the Company contributed
approximately $218,000 and incurred approximately $25,000 in administrative
fees.
9. INCOME TAXES
The provision for (benefit from) for income taxes consists of the following
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994 1993
-------- ------ ------
<S> <C> <C> <C>
Current............................................ $ 4,207 $3,908 $6,018
Deferred........................................... (15,600) -- --
-------- ------ ------
$(11,393) $3,908 $6,018
======== ====== ======
</TABLE>
The difference in federal income taxes at the statutory rate and the
provision for (benefit from) income taxes for the years presented above is as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Income taxes (benefit) at federal statutory
rate.......................................... $ 6,605 $(25,330) $ 2,382
Loss providing no current benefit............... -- 28,520 --
Tax benefit of operating loss carryforwards..... -- -- (1,895)
Prior year tax adjustment....................... -- (4,300) --
Nondeductible expenses.......................... 4,807 4,480 --
State and local income taxes, net of federal
income tax benefit............................ 204 866 2,071
Net change in valuation allowance............... (24,704) -- --
Other........................................... 1,695 (328) 3,460
-------- -------- -------
Provision for (benefit from) income taxes..... $(11,393) $ 3,908 $ 6,018
======== ======== =======
</TABLE>
The statute of limitations has expired for Chambers' federal income tax
returns for 1987 and prior years. Chambers' tax 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. The statute of limitations has expired for USA
Waste's federal income tax returns for 1990 and prior years. No USA Waste tax
returns are currently under examination by the IRS.
51
<PAGE> 54
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES -- (CONTINUED)
At December 31, 1995, the Company had approximately $234,000,000 of net
operating loss ("NOL") carryforwards. Most of the NOL carryforwards will begin
to expire in 2007. The use of the NOL carryforwards is subject to annual
limitations of approximately $39,000,000 due to an ownership change subsequent
to the Merger within the meaning of Section 382 of the Internal Revenue Code.
The prorated annual limitation for 1995 was approximately $9,200,000.
The components of the net deferred tax assets are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............ $ 97,160 $ 101,155 81,603
Accrued shareholder litigation settlement... 27,897 28,360 --
Closure, post-closure, and other
liabilities.............................. 17,251 15,367 11,141
Other (principally asset impairments and
losses from planned asset divestures).... 15,621 16,158 7,797
Valuation allowance......................... (93,624) (127,414) (77,089)
-------- --------- --------
Deferred tax assets................ 64,305 33,626 23,452
-------- --------- --------
Deferred tax liabilities:
Property, equipment, intangible assets, and
other.................................... 48,705 33,626 23,452
-------- --------- --------
Deferred tax liabilities........... 48,705 33,626 23,452
-------- --------- --------
Net deferred tax assets....................... $ 15,600 $ -- $ --
========= ========== =========
</TABLE>
The valuation allowance for deferred tax assets decreased by $33,790,000 in
1995 due to changes in the Company's gross deferred tax assets and liabilities,
including $9,086,000 of adjustments relating to an IRS examination, and the
realization of a portion of the Company's net deferred tax asset. Future taxable
income was projected utilizing 1995 taxable income along with annualized
earnings from acquisitions consummated during 1995. Based on this analysis of
taxable income, the Company has recognized a net deferred tax asset through a
$15,600,000 reduction in the valuation allowance. If the Company's current trend
of profitability continues, additional net deferred tax assets of up to
approximately $93,600,000 could be recognized in future periods. In 1994, the
valuation allowance increased by $50,325,000 due to changes in the Company's
gross deferred tax assets and liabilities.
A significant portion of the increase in the valuation allowance in 1994
relates to the accrual for the shareholder litigation settlement. The Claims
Administrator of the Settlement Fund Escrow Account distributed the shareholder
litigation settlement to the claimants on March 1, 1996; therefore, a portion of
the charge in 1994 of $75,300,000 will become deductible for tax purposes in
1996. However, the final determination of what portion of the settlement will
qualify as deductible for tax purposes and what portion will be nondeductible
has not been completed.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, restricted funds held by trustees, 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.
52
<PAGE> 55
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
The fair values of the Company's debt maturing within one year, the
revolving credit facility, and the term loan approximate the carrying values due
to the nature of the instruments involved.
The fair value of the $125,000,000 interest rate swap approximates the
carrying value due to the interest rate swap's relatively short maturity of
three years and the differential between its fixed rate of 7.4% at December 31,
1995 compared to the Credit Facility's variable rate of 7.31% at December 31,
1995.
The fair values of the industrial revenue bonds approximate the carrying
values as the interest rates on the bonds are reset weekly based on the credit
quality of the letters of credit which collateralize the bonds.
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.
11. UNUSUAL ITEMS
A summary of unusual items is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994 1993
------ ------- -------
<S> <C> <C> <C>
Net gains on asset divestitures.................... $ -- $ -- $(7,101)
Provision for loss on asset divestitures and
contractual commitments.......................... 1,313 3,366 8,687
Reversal of prior provisions for loss and costs on
asset divestitures and contractual commitments... -- (3,565) (6,636)
Asset impairments and abandoned projects........... -- 8,237 4,929
Stock compensation expense......................... -- -- 923
Financing and professional fees.................... 610 -- --
Directors and officers insurance................... -- -- 1,555
Corporate and regional restructurings.............. 2,810 825 315
------ ------- -------
Total unusual items..................... $4,733 $ 8,863 $ 2,672
====== ======= =======
</TABLE>
In 1992, Chambers became a defendant in shareholder litigation arising out
of financial statement revisions (see Note 12) 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.
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 1995, 1994, and
1993, Chambers incurred substantial expenses related to these matters as
discussed below.
In 1995, Chambers recorded charges of $2,810,000 of severance and other
termination benefits paid to former Chambers employees in connection with its
pre-merger reorganization, $1,313,000 of estimated
53
<PAGE> 56
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. UNUSUAL ITEMS -- (CONTINUED)
future losses associated with the renegotiated Bergen County, New Jersey,
municipal solid waste contract, and $610,000 of shareholder litigation
settlement costs.
In 1994, Chambers recorded charges of $3,366,000 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
$2,252,000 related to the estimated future loss on a municipal contract. During
that year, Chambers also reversed prior year provisions for losses on
divestitures and contractual commitments of $3,565,000, including $2,000,000
previously recorded for losses expected 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.
Chambers also recorded net charges of $8,237,000 for asset impairments and
abandoned projects in 1994. That amount includes a charge of $6,978,000 made in
the fourth quarter to reduce the carrying value 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 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 its purchase of a landfill and
its 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
totaling $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 results from 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.
During 1993, Chambers sold certain businesses as part of its divestiture
program, which resulted in a net gain of $7,101,000. 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
above, (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.
54
<PAGE> 57
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SETTLEMENT OF SHAREHOLDER LITIGATION
In connection with the settlement of certain Chambers' shareholder
litigation, 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 an expense and $10,000,000 was to be paid from the
proceeds of Chambers' directors and officers liability insurance policy which
was recorded as a current asset and is included in notes and other receivables
at December 31, 1994. At December 31, 1994, $75,300,000 of the amount accrued
for settlement payments was classified as a noncurrent liability based on the
expectation that such amount would be funded by long-term financing in
connection with the Merger (see Note 2). The $10,000,000 of settlement payments
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. The $5,500,000 charge in 1993 relates
to legal and other costs associated with the shareholder litigation. All amounts
were paid as of December 31, 1995.
13. RELATED PARTY TRANSACTIONS
In 1994, the Company 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 2%. In connection with this investment, the Company had a right
of first refusal to acquire any landfills, collection, or other operations that
EDM wished to sell. On September 30, 1995, the Company acquired the balance of
the equity interests in EDM in an acquisition accounted for as a purchase (see
Note 2). Under the terms of the acquisition agreement, the Company acquired the
remaining equity interests in EDM in exchange for 108,375 shares of the
Company's Common Stock and forgiveness of a $1,750,000 loan due from EDM. At the
time of closing, EDM was renamed Modern Sanitation, Inc.
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 $49,000,000 of its
8 1/2% Convertible 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. In 1995, the Company
called the debentures and in connection with such call, entered into a Standby
Agreement with SMMI pursuant to which SMMI received a fee of $200,000 and was
reimbursed for the fees and disbursements of its council.
At December 31, 1994, Chambers' headquarters facility was leased from the
principal stockholders of Chambers under a lease dated December 29, 1986 with an
initial term expiring in October 2006 and a ten-year renewal option. The
agreement provided for monthly lease payments (aggregating $531,000 during 1995)
prior to the Company being released from the lease by assuming the related
mortgage of $1,945,000 from the principal stockholders of Chambers in July 1995.
In August 1995 and pursuant to the terms of the Merger, the Company
exercised an option to purchase real estate from John G. Rangos, Sr., a
principal stockholder of Chambers and a director of the Company, and Michael J.
Peretto, a former director of Chambers, and certain members of his family. The
real estate is adjacent to the Company's Monroeville landfill. The option to
purchase the real estate was granted pursuant to agreements among the parties
dated July 8, 1993. The total consideration paid by
55
<PAGE> 58
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. RELATED PARTY TRANSACTIONS -- (CONTINUED)
the Company for the real estate was $2,986,000, of which $2,104,000 was paid to
John G. Rangos, Sr. and $883,000 was paid to Mr. Peretto and members of his
family.
14. COMMITMENTS AND CONTINGENCIES
Operating leases -- The Company has entered into certain noncancelable
operating leases for vehicles, equipment, offices, and other facilities which
expire through 2003. Lease expense aggregated $4,812,000, $8,046,000, and
$11,164,000 during 1995, 1994, and 1993, respectively. Future minimum lease
payments under operating leases in effect at December 31, 1995 are
1996 -- $4,277,000; 1997 -- $2,597,000; 1998 -- $1,429,000; 1999 -- $832,000;
2000 -- $655,000; and thereafter $2,175,000.
Environmental matters -- 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.
Litigation and investigation -- 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., Civil Action No. 93-354. This action was brought by a
market maker in options in Chambers stock and two of its general partners and
asserts federal securities law and common law claims alleging that Chambers, in
publicly disseminated materials, intentionally or negligently misstated its
earnings and that Chambers' officers and directors committed mismanagement and
breach of fiduciary duties. These plaintiffs allege that, as a result of large
amounts of put options traded on the Chicago Board of Options Exchange between
March 13 and March 18, 1992, they engaged in offsetting transactions resulting
in approximately $2.1 million in losses. The plaintiffs in Option Resource Group
had successfully requested exclusion from a now settled class action of
consolidated suits instituted on similar claims ("Class Action") and Option
Resource Group is continuing as a separate lawsuit. The case is currently near
the end of the discovery stage. In response to discovery on damages, the
plaintiffs reduced their damages claim to $433,000 in alleged losses, plus
interest and attorneys' fees, for a total damage claim of $658,000, as of August
21, 1995. The Company intends to continue to vigorously defend against this
action. Management of the Company believes the ultimate resolution of such
complaint will not have a material adverse effect on the Company's financial
position or results of operations.
On August 3, 1995, Frederick A. Moran and certain related persons and
entities filed a lawsuit against Chambers Development Company, Inc., certain
former officers and directors of Chambers, and Grant Thronton, LLP, in the
United States District Court for the Southern District of New York under the
caption Moran, et al. v. Chambers, et al., Civil Action No. 95-6034. Plaintiffs,
who claim to represent approximately 484,000 shares of Chambers stock, requested
exclusion from the settlement agreements which resulted in the resolution of the
Class Action and assert that they have incurred losses attributable to shares
purchased during the class period and certain additional losses by reason of
alleged management
56
<PAGE> 59
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
misstatements during and after the class period. The claimed losses include
damages to Mr. Moran's business and reputation. The Judicial Panel on
Multidistrict Litigation has transferred this case to the United States District
Court for the Western District of Pennsylvania. The Company has filed its answer
to the complaint and intends to vigorously defend against these claims. The case
is currently in discovery. Management of the Company believes the ultimate
resolution of such complaint will not have a material adverse effect on the
Company's financial position or results of operations.
In 1992, the American Stock Exchange and the Chicago Board of Options
Exchange also advised Chambers that they would conduct 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, and
the Company has cooperated with each of the investigations.
On or about February 1, 1996, an action was filed in the Circuit Court of
Cook County, Illinois, captioned Allabastro v. USA Waste Services, Inc., Action
No. 96L01165. The plaintiff alleges to have entered into an oral agreement with
the Company for brokerage services and is demanding a fee of $950,000 based on
the alleged contract and on common law for acting as a broker/advisor to the
Company in its 1993 purchase of an Indiana landfill and hauling operation from
Chambers. Based on the same facts, the plaintiff is also demanding an additional
$36,250,000 fee in connection with the June 1995 merger of Chambers with the
Company. The plaintiff is also seeking unspecified damages for acting as a
management advisor to the Company in its procurement of a landfill
renovation/operation contract in Charleston, West Virginia. Interest and other
costs are also demanded. The case has not yet entered the discovery stage. The
Company intends to vigorously defend against this action, and management
believes the ultimate resolution of this suit will not have a material adverse
effect on the Company's financial position or results of operations.
Insurance -- The Company self-insures certain of its comprehensive general
liability and workers' compensation risks, while maintaining third-party
coverage to protect against catastrophic loss. The Company has not incurred
significant fines, penalties, or liabilities for pollution or environmental
liabilities at any of its facilities; however, the Company's operating results
could be adversely affected in the future in the event of uninsured losses.
Employment agreements -- 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 agreements can be terminated by the Company or the
employee. Upon termination of an 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 1996 or if certain executives elected to terminate their
agreements, the aggregate annual compensation on a part-time basis would be
approximately $1,250,000. If a change in control were to occur in 1996 and the
executives were to elect to
57
<PAGE> 60
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
take the change in control payments, they would receive approximately
$6,473,000. As of December 31, 1995, the Company has not recorded any accruals
in the financial statements related to these employment agreements.
Other commitments and contingencies -- The Company is a party to certain
other litigation 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 adverse effect on the Company's financial position and
results of operations.
15. SELECTED QUARTERLY FINANCIAL DATA, UNAUDITED
The following table summarizes the unaudited consolidated quarterly results
of operations for 1995 and 1994 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues
1995......................................... $101,242 $111,229 $119,976 $124,652
========= ========= ========= =========
1994......................................... $ 97,971 $113,514 $114,270 $108,469
========= ========= ========= =========
Income (loss) from operations
1995......................................... $ 12,400 $(12,644) $ 26,388 $ 28,709
========= ========= ========= =========
1994......................................... $ 9,943 $ 9,692 $ 15,856 $ 1,079
========= ========= ========= =========
Net income (loss)
1995......................................... $ 184 $(27,839) $ 18,902 $ 39,016
========= ========= ========= =========
1994......................................... $ 1,122 $ 1,795 $(68,189) $(11,006)
========= ========= ========= =========
Income (loss) available to common shareholders
1995......................................... $ 184 $(27,839) $ 18,902 $ 39,016
========= ========= ========= =========
1994......................................... $ 741 $ 1,611 $(68,189) $(11,006)
========= ========= ========= =========
Earnings (loss) per common share
1995......................................... $ .00 $ (.54) $ .35 $ .60
========= ========= ========= =========
1994......................................... $ .02 $ .03 $ (1.36) $ (.22)
========= ========= ========= =========
</TABLE>
Earnings (loss) per common share calculations for each of the quarters is
based on the weighted average number of shares outstanding for each period and
the sum of the quarters may not necessarily be equal to the full year earnings
(loss) per common share amount.
Amounts presented for 1995 and 1994 are restated for the pooling of
interests transactions discussed in Note 2, and are different from amounts
originally reported due to the business combination with Chambers.
The results of operations for 1995 and 1994 include certain nonrecurring
charges for merger costs, unusual items, and nonrecurring interest, as disclosed
elsewhere herein. In 1995, the nonrecurring charges amounted to $4,206,000 and
$36,594,000 in the first and second quarters, respectively. In 1994, the
58
<PAGE> 61
USA WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SELECTED QUARTERLY FINANCIAL DATA, UNAUDITED -- (CONTINUED)
nonrecurring charges amounted $3,782,000, $74,100,000, and $15,417,000 in the
second, third, and fourth quarters, respectively. In addition, the fourth
quarter of 1995 includes a $15,600,000 deferred tax benefit from the reduction
of the valuation allowance. Although the Company's net income in the third and
fourth quarter of 1995 showed marked improvements over the first and second
quarter, there can be no assurance that this trend will continue.
16. MERGER WITH WESTERN WASTE INDUSTRIES
On December 18, 1995, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") to acquire Western Waste Industries ("Western")
through a merger transaction ("Western Merger"). The Western Merger is subject
to, among other conditions, approval of both companies' shareholders. It is
anticipated that the Western Merger will be completed in April 1996 and that it
will be accounted for as a pooling of interests. The Merger Agreement provides
that on the effective date of the Western Merger, the Company will issue 1.50
shares of its Common Stock for each share of Western outstanding common stock.
The Company has received an irrevocable proxy from Kosti Shirvanian, Western's
Chairman and Chief Executive Officer, who is Western's largest shareholder and
owns approximately 31% of Western's outstanding shares. The Company currently
owns approximately 4.3% of Western's outstanding shares (634,900 common shares
of Western are recorded at cost of $12,569,000 in other assets), which will be
canceled on the Western Merger's effective date. The Western Merger is expected
to increase the Company's outstanding shares of Common Stock by approximately
21.4 million shares and the Company will assume options under Western's stock
option plans equivalent to approximately 5.2 million underlying USA Waste shares
of Common Stock. Following the Western Merger, the Company's Board of Directors
will be expanded from 9 to 12 members and will include nominees of both the
Company and Western.
59
<PAGE> 62
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information set forth under the caption "Election of USA Waste
Directors" in the Company's definitive Joint Proxy Statement and Prospectus for
the 1996 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, prior to April 30, 1996
(the "1996 Proxy Statement"), is incorporated herein by reference. Information
concerning the executive officers of the Company is set forth above under
"Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the caption "Election of USA Waste
Directors -- Executive Compensation" in the 1996 Proxy Statement is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the caption "Election of USA Waste
Directors -- Beneficial Ownership of USA Waste Common Stock" in the 1996 Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information set forth under the caption "Election of USA Waste
Directors -- Certain Relationships and Related Transactions" in the 1996 Proxy
Statement is incorporated herein by reference.
60
<PAGE> 63
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Consolidated Financial Statements:
Report of Independent Accountants
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Operations for the years ended December 31,
1995, 1994, and 1993
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994, and 1993
Notes to Consolidated Financial Statements
(a)(2) Consolidated Financial Statement Schedules:
All Consolidated Financial Statement Schedules have been omitted since
the required information is not present or not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the Consolidated Financial Statements
or the notes thereto.
(a)(3) Exhibits:
3.1 Restated Certificate of Incorporation [Incorporated by reference
to Exhibit 3.1 of the Registrant's Registration Statement on
Form S-4, File No. 33-60103].
3.2 Bylaws [Incorporated by reference to Exhibit 3.2 of the
Registrant's Registration Statement on Form S-4, File No.
33-60103].
4.1 Specimen Stock Certificate [Incorporated by reference to Exhibit
4.3 of the Registrant's Registration Statement on Form S-3, File
No. 33-76224].
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
4.4 of the Registrant's Registration Statement on Form S-8, File
No. 33-72436].
10.3 Envirofil, Inc. 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 Amended and Restated Plan and Agreement of Reorganization dated
March 29, 1994, among the Registrant, Envirofil Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary
of the Registrant, and Envirofil, Inc., a Delaware corporation
[Incorporated by reference to Exhibit 2.1 to the Registrant's
Registration Statement on Form S-4, File No. 33- 77110].
10.5 Amended and Restated Agreement and Plan of Merger dated as of
November 28, 1994, among the Registrant, Chambers Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary
of the Registrant, and Chambers Development Company, Inc.,
61
<PAGE> 64
a Delaware corporation [Incorporated by reference to Exhibit 2.1
of the Registrant's Registration Statement on Form S-4, File No.
33-59259].
10.6 Revolving Credit and Term Loan Agreement dated as of June 30,
1995, among the Registrant, its subsidiaries, The First National
Bank of Boston, Bank of America Illinois, J.P. Morgan
Securities, Inc., and Morgan Guaranty Trust Company of New York
[Incorporated by reference to Exhibit 10.19 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1995, as amended by Form 10-Q/A].
10.7 First Amendment to Revolving Credit and Term Loan Agreement
dated as of August 11, 1995, among the Registrant, its
subsidiaries, The First National Bank of Boston, Bank of America
Illinois, J.P. Morgan Securities, Inc., and Morgan Guaranty
Trust Company of New York, and the other financial institutions
party thereto.
10.8 Second Amendment to Revolving Credit and Term Loan Agreement
dated as of September 7, 1995, among the Registrant, its
subsidiaries, The First National Bank of Boston, Bank of America
Illinois, J.P. Morgan Securities, Inc., and Morgan Guaranty
Trust Company of New York, and the other financial institutions
party thereto.
10.9 Third Amendment to Revolving Credit and Term Loan Agreement
dated as of January 26, 1996, among the Registrant, its
subsidiaries, The First National Bank of Boston, Bank of America
Illinois, J.P. Morgan Securities, Inc., and Morgan Guaranty
Trust Company of New York, and the other financial institutions
party thereto.
10.10 Fourth Amendment to Revolving Credit and Term Loan Agreement
dated as of February 29, 1996, among the Registrant, its
subsidiaries, The First National Bank of Boston, Bank of America
Illinois, J.P. Morgan Securities, Inc., and Morgan Guaranty
Trust Company of New York, and other financial institutions
party thereto.
10.11 Form of Employment Agreement between the Registrant 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].
10.12 Employment Agreement between the Registrant 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].
10.13 Employment Agreement between the Registrant and Gregory T.
Sangalis [Incorporated by reference to Exhibit 10.17 to the
Registrant's Registration Statement on Form S-4, File No.
33-59259].
10.14 Amendment to Amended and Restated Agreement and Plan of Merger
dated June 27, 1995, among the Registrant, Chambers Acquisition
Corporation, and Chambers Development Company, Inc.
[Incorporated by reference to Exhibit 2.2 to the Registrant's
Current Report on Form 8-K dated June 30, 1995].
10.15 Shareholders Agreement dated December 18, 1995, among USA Waste
Services, Inc., Donald F. Moorehead, Jr., John E. Drury, John G.
Rangos, Sr., John G. Rangos, Jr., Alexander W. Rangos, and John
Rangos Development Corporation, Inc. [Incorporated by reference
to Exhibit 1 to the Schedule 13D dated December 17, 1995
relating to the Registrant].
62
<PAGE> 65
10.16 Consulting and Non-Compete Agreement dated June 25, 1995,
between the Registrant and John G. Rangos, Sr. [Incorporated by
reference to Exhibit 10.21 to the Registrant's Quarterly Report
on Form 10-Q/A for the period ended June 30, 1995].
10.17 Employment Agreement dated June 25, 1995, between the Registrant
and Alexander W. Rangos [Incorporated by reference to Exhibit
10.22 to the Registrant's Quarterly Report on Form 10-Q/A for
the period ended June 30, 1995].
10.18 Employment Agreement dated December 18, 1995, between the
Registrant and Kosti Shirvanian.
11.1 Computation of Earnings Per Common Share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
--------------------
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K dated December 18, 1995.
Such Current Report reported on Item 5. Other Events and Item 7. Financial
Statements and Exhibits. The financial statements filed included:
(a) The following financial statements of Western:
(i) the audited consolidated balance sheets as of June 30, 1994 and
1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the
period ended June 30, 1995, together with the notes thereto and the
report of independent auditors dated August 25, 1995, except for Note 8
as to which the date is September 12, 1995; and (ii) the audited
consolidated balance sheets as of June 30, 1995 and the unaudited
consolidated balance sheet as of September 30, 1995 and the related
unaudited consolidated statements of operations and cash flows for the
three months ended September 30, 1994 and 1995.
(b) Pro forma financial information of the Company and Western including
the combined historical unaudited pro forma condensed balance sheet as
of September 30, 1995 and the related combined historical unaudited pro
forma condensed statements of operations for the nine months ended 1995
and 1994 and for each of the three years in the period ended December
31, 1994.
63
<PAGE> 66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
USA WASTE SERVICES, INC.
By: /s/ JOHN E. DRURY
------------------------------
John E. Drury
Chief Executive Officer
Date: March 22, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/ JOHN E. DRURY Chief Executive Officer and March 22, 1996
- ------------------------------ Chairman of the Board (Principal
John E. Drury Executive Officer)
/s/ DONALD F. MOOREHEAD, JR. Chief Development Officer and March 22, 1996
- ------------------------------ Director
Donald F. Moorehead, Jr.
/s/ DAVID SUTHERLAND-YOEST President, Chief Operating March 22, 1996
- ------------------------------ Officer and Director
David Sutherland-Yoest
/s/ EARL E. DEFRATES Executive Vice President and March 22, 1996
- ------------------------------ Chief Financial Officer
Earl E. DeFrates (Principal Financial Officer)
/s/ BRUCE E. SNYDER Vice President, Corporate March 22, 1996
- ------------------------------ Controller and Chief Accounting
Bruce E. Snyder Officer
/s/ GEORGE L. BALL Director March 22, 1996
- ------------------------------
George L. Ball
/s/ PETER J. GIBBONS Director March 22, 1996
- ------------------------------
Peter J. Gibbons
/s/ RICHARD J. HECKMANN Director March 22, 1996
- ------------------------------
Richard J. Heckmann
/s/ WILLIAM E. MOFFETT Director March 22, 1996
- ------------------------------
William E. Moffett
/s/ ALEXANDER W. RANGOS Director March 22, 1996
- ------------------------------
Alexander W. Rangos
/s/ JOHN G. RANGOS, SR. Director March 22, 1996
- ------------------------------
John G. Rangos, Sr.
</TABLE>
64
<PAGE> 67
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ---------- ----------- ------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation [Incorporated by reference to Exhibit
3.1 of the Registrant's Registration Statement on Form S-4, File No.
33-60103].
3.2 Bylaws [Incorporated by reference to Exhibit 3.2 of the Registrant's
Registration Statement on Form S-4, File No. 33-60103].
4.1 Specimen Stock Certificate [Incorporated by reference to Exhibit 4.3 of the
Registrant's Registration Statement on Form S-3, File No. 33-76224].
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 4.4 of the
Registrant's Registration Statement on Form S-8, File No. 33-72436].
10.3 Envirofil, Inc. 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 Amended and Restated Plan and Agreement of Reorganization dated March 29,
1994, among the Registrant, Envirofil Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of the Registrant, and Envirofil,
Inc., a Delaware corporation [Incorporated by reference to Exhibit 2.1 to
the Registrant's Registration Statement on Form S-4, File No. 33- 77110].
10.5 Amended and Restated Agreement and Plan of Merger dated as of November 28,
1994, among the Registrant, Chambers Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of the Registrant, and Chambers
Development Company, Inc., a Delaware corporation [Incorporated by reference
to Exhibit 2.1 of the Registrant's Registration Statement on Form S-4, File
No. 33-59259].
10.6 Revolving Credit and Term Loan Agreement dated as of June 30, 1995, among
the Registrant, its subsidiaries, The First National Bank of Boston, Bank of
America Illinois, J.P. Morgan Securities, Inc., and Morgan Guaranty Trust
Company of New York [Incorporated by reference to Exhibit 10.19 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995, as amended by Form 10-Q/A].
10.7 First Amendment to Revolving Credit and Term Loan Agreement dated as of
August 11, 1995, among the Registrant, its subsidiaries, The First National
Bank of Boston, Bank of America Illinois, J.P. Morgan Securities, Inc., and
Morgan Guaranty Trust Company of New York, and the other financial
institutions party thereto.
10.8 Second Amendment to Revolving Credit and Term Loan Agreement dated as of
September 7, 1995, among the Registrant, its subsidiaries, The First
National Bank of Boston, Bank of America Illinois, J.P. Morgan Securities,
Inc., and Morgan Guaranty Trust Company of New York, and the other financial
institutions party thereto.
10.9 Third Amendment to Revolving Credit and Term Loan Agreement dated as of
January 26, 1996, among the Registrant, its subsidiaries, The First National
Bank of Boston, Bank of America Illinois, J.P. Morgan Securities, Inc., and
Morgan Guaranty Trust Company of New York, and the other financial
institutions party thereto.
10.10 Fourth Amendment to Revolving Credit and Term Loan Agreement dated as of
February 29, 1996, among the Registrant, its subsidiaries, The First
National Bank of Boston, Bank of America Illinois, J.P. Morgan Securities,
Inc., and Morgan Guaranty Trust Company of New York, and other financial
institutions party thereto.
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------------------- ------------
<C> <S> <C>
10.11 Form of Employment Agreement between the Registrant 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].
10.12 Employment Agreement between the Registrant 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].
10.13 Employment Agreement between the Registrant and Gregory T. Sangalis
[Incorporated by reference to Exhibit 10.17 to the Registrant's Registration
Statement on Form S-4, File No. 33-59259].
10.14 Amendment to Amended and Restated Agreement and Plan of Merger dated June
27, 1995, among the Registrant, Chambers Acquisition Corporation, and
Chambers Development Company, Inc. [Incorporated by reference to Exhibit 2.2
to the Registrant's Current Report on Form 8-K dated June 30, 1995].
10.15 Shareholders Agreement dated December 18, 1995, among USA Waste Services,
Inc., Donald F. Moorehead, Jr., John E. Drury, John G. Rangos, Sr., John G.
Rangos, Jr., Alexander W. Rangos, and John Rangos Development Corporation,
Inc. [Incorporated by reference to Exhibit 1 to the Schedule 13D dated
December 17, 1995 relating to the Registrant].
10.16 Consulting and Non-Compete Agreement dated June 25, 1995, between the
Registrant and John G. Rangos, Sr. [Incorporated by reference to Exhibit
10.21 to the Registrant's Quarterly Report on Form 10-Q/A for the period
ended June 30, 1995].
10.17 Employment Agreement dated June 25, 1995, between the Registrant and
Alexander W. Rangos [Incorporated by reference to Exhibit 10.22 to the
Registrant's Quarterly Report on Form 10-Q/A for the period ended June 30,
1995].
10.18 Employment Agreement dated December 18, 1995, between the Registrant and
Kosti Shirvanian.
11.1 Computation of Earnings Per Common Share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.7
182886
FIRST AMENDMENT TO REVOLVING
CREDIT AND TERM LOAN AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT (this
"First Amendment") is made and entered into as of the 11th day of August, 1995,
by and among USA WASTE SERVICES, INC., a Delaware corporation (the "Borrower"),
its Subsidiaries listed on Schedule 1 to the Credit Agreement defined below
(collectively the "Guarantors"), THE FIRST NATIONAL BANK OF BOSTON, a national
banking association ("FNBB"), BANK OF AMERICA ILLINOIS, an Illinois banking
association ("BAI"), and J.P. MORGAN SECURITIES, INC., a Delaware corporation
("J.P. Morgan") (collectively, the "Agents"), FNBB, BAI, Morgan Guaranty Trust
Company of New York, a New York state banking association ("MGT") and the other
financial institutions party hereto (collectively, the "Banks"), and MGT as the
Administrative Agent and FNBB, as Documentation Agent (collectively, the "Bank
Agents").
WHEREAS, the Borrower, the Guarantors, FNBB, BAI, MGT, the Agents and
the Bank Agents entered into a Revolving Credit and Term Loan Agreement dated
as of June 30, 1995 (the "Credit Agreement"), pursuant to which FNBB, BAI and
MGT extended credit to the Borrower on the terms set forth therein;
WHEREAS, FNBB, BAI and MGT (collectively, the "Assignor Banks") wish
to assign interests in their respective Term Loans, Revolving Credit Loans,
Letter of Credit Participations and other rights, interests and obligations
under the Credit Agreement to the financial institutions listed on Schedule 2
attached hereto (collectively, the "Assignee Banks"), and the Assignee Banks
wish to assume such interests and become parties to the Credit Agreement, all
as set forth in this First Amendment;
WHEREAS, the parties desire to amend the Credit Agreement to reflect
such assignments on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
<PAGE> 2
-2-
1. DEFINITIONS. Capitalized terms used herein without definition
shall have the meanings assigned to such terms in the Credit Agreement.
2. AMENDMENT TO Section 1 OF THE CREDIT AGREEMENT. The
definition of "Commitment Percentage" set forth in Section 1.1 of the Credit
Agreement is hereby amended by deleting such definition in its entirety and
substituting the following new definition in place thereof:
"Commitment Percentage. With respect to each Bank, the
percentage set forth on Schedule 2.
3. AMENDMENT TO Section 3.5 OF THE CREDIT AGREEMENT. Section 3.5
of the Credit Agreement is hereby amended by deleting the word "he" and
substituting the word "The" in place thereof.
4. AMENDMENT TO Section 7.4(C) OF THE CREDIT AGREEMENT. Section
7.4(c) of the Credit Agreement is hereby amended by deleting the text "Sections
8.1(h) and (n)" and substituting the text "Sections 8.1(h), (m) and (o)" in
place thereof.
5. AMENDMENT TO 7.4 OF THE CREDIT AGREEMENT. Section 7.4 of the
Credit Agreement is hereby amended by deleting the text "provided, however,
that such Bank shall, to the extent practicable and allowable under law, notify
the Borrower within a reasonable period prior to the time any such disclosure
is made; and provided further," where such text appears in the final paragraph
of such Section 7.4 and substituting in lieu thereof the text "provided,
however,".
6. AMENDMENT TO Section 16.4 OF THE CREDIT AGREEMENT. Section
16.4 of the Credit Agreement is hereby amended by deleting the text "Section
14.3" and substituting the text "Section 16.3" in place thereof.
7. AMENDMENT TO Section 20 OF THE CREDIT AGREEMENT. Section 20
of the Credit Agreement is hereby amended by inserting the word "each" after
the text "consent of" and before the text "the Banks."
8. AMENDMENT TO SCHEDULE 2 OF THE CREDIT AGREEMENT. Schedule 2
to Credit Agreement is hereby amended by deleting such schedule in its entirety
and substituting the Schedule 2 attached hereto in place thereof.
9. AMENDMENT TO EXHIBIT C OF THE CREDIT AGREEMENT. Exhibit C to
the Credit Agreement is hereby amended by inserting the following text at the
end thereof:
<PAGE> 3
-3-
"Attached hereto are calculations relating to compliance with
the convenants set forth in Sections 8.1(h), (m) and (o),
8.3(e) and 8.9."
10. ASSIGNMENT. (a) Each of the Assignor Banks hereby sells and
assigns to the Assignee Banks, and each of the Assignee Banks hereby purchases
and assumes without recourse to the Assignor Banks, an interest in and to
rights, benefits, indemnities and obligations under the Credit Agreement equal
to such Assignee Bank's Commitment Percentage (set forth on Schedule 2 to the
Credit Agreement) in respect of the Total Revolving Credit Commitment, the
Letter of Credit Participations and the Term Loan, each as in effect
immediately prior to the Effective Date (as hereinafter defined). Nothing
contained in this Section 10(a) shall affect the rights of any Assignee Bank to
proceed against any Assignor Bank for losses directly caused by such Assignor
Bank's breach of the representations set forth in Section 10(b).
(b) Each of the Assignor Banks makes no representation or
warranty, express or implied, and shall have no responsibility with respect to
any statements, warranties or representations made in or in connection with the
Credit Agreement or any of the other Loan Documents or the execution (other
than with respect to each its own execution thereof), legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, the
other Loan Documents or any other instrument or document furnished pursuant
thereto or the attachment, perfection or priority of any security interest or
mortgage, other than that such Assignor Bank is the legal and beneficial owner
of its interests being assigned hereunder free and clear of any claim or
encumbrance and that such Assignor Bank has no knowledge or notice of a Default
or an Event of Default.
(c) Each of the Assignee Banks (i) confirms that it has
received a copy of the Credit Agreement and each of the other Loan Documents,
together with copies of the most recent financial statements delivered pursuant
to Sections 6.4 and 7.4 of the Credit Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into the Credit Agreement; and (ii) agrees that it has made
its own credit decisions in entering into the Credit Agreement, and will
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement, in each case independently and without reliance upon the
Assignor Banks, the Agents, the Bank Agents or any other Bank.
(d) From and after the Effective Date, each of the
Assignee Banks shall be a party to the Credit Agreement and have the rights and
obligations of a Bank thereunder.
<PAGE> 4
-4-
11. REPRESENTATIONS AND WARRANTIES. The Borrower and the
Guarantors jointly and severally represent and warrant as follows:
(a) The execution, delivery and performance of this First
Amendment, the Replacement Notes (as hereinafter defined) and the Credit
Agreement, as modified by this First Amendment, and the transactions
contemplated hereby and thereby (i) are within the corporate authority of the
Borrower and each of the Guarantors, (ii) have been duly authorized by all
necessary corporate proceedings on the part of the respective Borrower or
Guarantor, (iii) do not conflict with or result in any material breach or
contravention of any provision of law, statute, rule or regulation to which the
Borrower or any Guarantor is subject or any judgment, order, writ, injunction,
license or permit applicable to the Borrower or any Guarantor so as to
materially adversely affect the assets, business or any activity of the
Borrower and the Guarantors as a whole, and (iv) do not conflict with any
provision of the corporate charter or bylaws of the Borrower or any Guarantor
or any agreement or other instrument binding upon the Borrower or any
Guarantor.
(b) The execution, delivery and performance of this First
Amendment, the Replacement Notes and the Credit Agreement, as modified by this
First Amendment, will result in valid and legally binding obligations of the
Borrower and the Guarantors party thereto enforceable against each in
accordance with the respective terms and provisions hereof and thereof, except
as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors rights and except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought.
(c) The execution, delivery and performance by the Borrower and
the Guarantors of this First Amendment, the Replacement Notes and the Credit
Agreement, as modified by this First Amendment, and the consummation by the
Borrower and the Guarantors of the transactions contemplated hereby and thereby
do not require any approval or consent of, or filing with, any governmental
agency or authority other than those already obtained and those required after
the date hereof in connection with the Borrower's and the Guarantors'
performance of their covenants contained in Sections 7, 8 and 9 of the Credit
Agreement.
(d) The representations and warranties contained in Section 6 of
the Credit Agreement are true and correct in all material respects as of the
date hereof as though made on and as of the date hereof.
<PAGE> 5
-5-
(e) No Default or Event of Default under the Credit Agreement has
occurred and is continuing.
12. RATIFICATION, ETC. Except as expressly amended hereby, the
Credit Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects
and shall continue in full force and effect. Each of the Guarantors hereby
confirms that its guaranty of the Guaranteed Obligations contained in Section
27 of the Credit Agreement remains in full force and effect. This First
Amendment and the Credit Agreement shall hereafter be read and construed
together as a single document, and all references in the Credit Agreement, any
other Loan Document or any agreement or instrument related to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended by this
First Amendment.
13. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
14. COUNTERPARTS. This First Amendment may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which counterparts taken together shall be deemed to
constitute one and the same instrument.
15. EFFECTIVENESS. This First Amendment shall become effective
upon the satisfaction of each of the following conditions (the "Effective
Date"):
(a) This First Amendment shall have been executed and delivered by
the respective parties hereto;
(b) The Borrower shall have executed and delivered to each of the
Banks (i) an Amended and Restated Revolving Credit Note in substantially the
form of Exhibit A-1 to the Credit Agreement in an amount equal to such Bank's
Revolving Credit Commitment (based on such Bank's Commitment Percentage set
forth on Schedule 2 attached hereto) and (ii) an Amended and Restated Term Note
in substantially the form of Exhibit A-2 to the Credit Agreement in an amount
equal to such Bank's Commitment Percentage (as set forth on Schedule 2 attached
hereto) of the Term Loan, each such Note to be in form and substance
satisfactory to each Bank (collectively, the "Replacement Notes");
<PAGE> 6
-6-
(c) All corporate action necessary for the valid execution,
delivery and performance by the Borrower of the Credit Agreement, as amended by
this First Amendment, and the Replacement Notes shall have been taken, and
evidence thereof satisfactory to the Banks shall have been provided to the
Banks;
(d) The Agent shall have received a certificate of the Secretary
or Clerk of the Borrower stating that no amendments to the charter documents of
the Borrower have been adopted since June 30, 1995 (other than as set forth in
such certificate);
(e) The Banks shall have received from Snell & Smith, P.C. an
opinion addressed to the Banks dated the Effective Date, in form and substance
satisfactory to the Banks, regarding this First Amendment and the Replacement
Notes.
<PAGE> 7
IN WITNESS WHEREOF, each of the undersigned have duly executed this
First Amendment under seal as of the date first set forth above.
THE BORROWER:
USA WASTE SERVICES, INC.
By: /s/ EARL E. DEFRATES
---------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer
THE GUARANTORS:
BEST PAK DISPOSAL, INC.
BIG DIPPER ENTERPRISES, INC.
BREM-AIR DISPOSAL, INC.
CENTRAL ILLINOIS DISPOSAL,
INC.
COUNTRYSIDE LANDFILL, INC.
CRYSTAL LAKE DISPOSAL, INC.
CUSTOM DISPOSAL SERVICES,
INC.
EARTHMOVERS, INC.
ELLIS-SCOTT, INC.
ENVIROFIL, INC.
ENVIROFIL OF ILLINOIS, INC.
(FORMERLY LEROY BROWN & SONS,
INC.)
ENVIROFIL SERVICES, INC.
ENVIRONMENTAL WASTE OF
SKAGIT COUNTY, INC.
By: /s/ EARL E. DEFRATES
---------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 8
EVH CO.
EWA, INC. (FORMERLY MARCH
ACQUISITION CORPORATION)
FORCEES, INC.
JUAN DE FUCA CORRUGATED, LTD.
KITSAP COUNTY SANITARY
LANDFILL, INC.
LAKELAND PROPERTIES, INC.
LIBERTY LANDFILL, INC.
MEADOWBROOK CARTING CO.,
INC.
MID-JERSEY DISPOSAL CO., INC.
MID-VALLEY ACQUISITION
CORPORATION
MISSION DISPOSAL, INC.
NORTH SOUND SANITATION, INC.
QUALITY RECYCLING CO., INC.
SACRAMENTO VALLEY
ENVIRONMENTAL WASTE
COMPANY
SOIL REMEDIATION OF
PHILADELPHIA, INC.
SOUTH SOUND SANITATION, INC.
STANWOOD CAMANO DISPOSAL,
INC.
STOCKTON SCAVENGERS
ASSOCIATION
USA WASTE HAULING OF
PHILADELPIA, INC.
USA WASTE OF OKLAHOMA, INC.
(FORMERLY UNITED SANITATION
ASSOCIATES WASTE MANAGEMENT,
INC.)
USA WASTE OF ARIZONA, INC.
USA WASTE OF ILLINOIS, INC.
USA WASTE OF INDIANA, INC.
By: /s/ EARL E. DEFRATES
---------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 9
USA WASTE OF TEXAS, INC.
(FORMERLY USA WASTE SERVICES,
INC. OF TEXAS)
U.S.A. WASTE OF FAIRLESS
HILLS, INC.
CLEANSOILS FAIRLESS HILLS,
INC.
WEST VIRGINIA WASTE
SERVICES, INC.
WPP, INC.
WASTE RECOVERY
CORPORATION
CHAMBERS ACQUISITION CORP.
CHAMBERS DEVELOPMENT
COMPANY, INC.
CHAMBERS CLEARVIEW
ENVIRONMENTAL LANDFILL,
INC.
CHAMBERS DEVELOPMENT OF
OHIO, INC.
CHAMBERS DEVELOPMENT OF
VIRGINIA, INC.
CHAMBERS ENTERPRISES, INC.
CHAMBERS INTERNATIONAL,
INC.
CHAMBERS LAUREL HIGHLANDS
LANDFILL, INC.
CHAMBERS MAPLEWOOD
LANDFILL, INC.
CHAMBERS MEDICAL
TECHNOLOGIES, INC.
(INCORPORATED 2/12/85)
CHAMBERS MEDICAL
TECHNOLOGIES, INC.
(INCORPORATED 4/26/91)
By: /s/ EARL E. DEFRATES
---------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 10
CHAMBERS MEDICAL
TECHNOLOGIES OF SOUTH
CAROLINA, INC.
CHAMBERS NEW JERSEY LAND,
INC.
CHAMBERS OAKRIDGE USA
LANDFILL, INC.
CHAMBERS ORANGE COUNTY
LANDFILL, INC.
CHAMBERS RESOURCES, INC.
CHAMBERS RICHLAND COUNTY
LANDFILL, INC.
CHAMBERS SERVICES, INC.
CHAMBERS SMYRNA LANDFILL,
INC.
CHAMBERS WASTE SYSTEMS OF
CALIFORNIA, INC.
CHAMBERS WASTE SYSTEMS OF
FLORIDA, INC.
CHAMBERS WASTE SYSTEMS OF
MISSISSIPPI, INC.
CHAMBERS WASTE SYSTEMS OF
NEW YORK, INC.
CHAMBERS WASTE SYSTEMS OF
NORTH CAROLINA, INC.
CHAMBERS WASTE SYSTEMS OF
OHIO, INC.
CHAMBERS WASTE SYSTEMS OF
NEW JERSEY, INC.
CHAMBERS WASTE SYSTEMS OF
RHODE ISLAND, INC.
CHAMBERS WASTE SYSTEMS OF
SOUTH CAROLINA, INC.
CHAMBERS WASTE SYSTEMS OF
TEXAS, INC.
By: /s/ EARL E. DEFRATES
---------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 11
CHAMBERS WASTE SYSTEMS OF
VIRGINIA, INC.
CHAMBERS OF DELAWARE, INC.
CHAMBERS OF GEORGIA, INC.
CHAMBERS OF ILLINOIS, INC.
CHAMBERS OF INDIANA, INC.
CHAMBERS OF NEW JERSEY,
INC.
CHAMBERS OF NEW JERSEY
RECYCLING, INC.
CHAMBERS OF MARYLAND, INC.
CHAMBERS OF
MASSACHUSETTS, INC.
CHAMBERS OF MISSISSIPPI, INC.
CHAMBERS OF PENNSYLVANIA,
INC.
CHAMBERS OF TENNESSEE, INC.
CHAMBERS OF WEST VIRGINIA,
INC.
DAUPHIN MEADOWS, INC.
THE H. SIENKNECHT CO.
LCS SERVICES, INC.
WILLIAM H. MARTIN, INC.
MORRIS COUNTY TRANSFER
STATION, INC.
RAIL-IT CORPORATION
REMOTE LANDFILL SERVICES,
INC.
CDC SERVICES, INC.
SOUTHERN ALLEGHENIES
DISPOSAL SERVICES, INC.
U.S. SERVICES CORPORATION
U.S. UTILITIES SERVICES CORP.
CHAMBERS R & B LANDFILL,
INC.
By: /s/ EARL E. DEFRATES
---------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 12
By: Rail-It Corporation, Its General
Partner
By:/s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
THE BANKS AND AGENTS:
THE FIRST NATIONAL BANK OF BOSTON,
Individually and as Documentation
Agent and Issuing Bank and as Agent
By: /s/ CHARLES C. WOODARD
-------------------------------------
Title: Charles C. Woodard, Managing
Director
---------------------------------
BANK OF AMERICA, ILLINOIS, Individually
and as Agent
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, Individually and as the
Administrative Agent
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
<PAGE> 13
J.P. MORGAN SECURITIES INC., as Agent
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
BANK OF AMERICA ILLINOIS
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
THE BANK OF NOVA SCOTIA
By: /s/ W.J. BROWN
-------------------------------------
Title: W.J. Brown, Vice President
---------------------------------
BANK ONE, TEXAS N.A.
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
BANQUE PARIBAS, HOUSTON
AGENCY
By: /s/ CHERYL JOHNSON
-------------------------------------
Title: CHERYL JOHNSON, ASST. VICE
PRESIDENT
---------------------------------
By:/s/ SCOTT CLINGAN
-------------------------------------
Title: SCOTT CLINGAN, VICE PRESIDENT
---------------------------------
BHF-BANK AG
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
CIBC INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
<PAGE> 14
COMERICA BANK
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
----------------------------------
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK,
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By: /s/ W. JEFFREY VOLLACK
-------------------------------------
Title: W. Jeffrey Vollack, Vice
President, Manager
---------------------------------
By: /s/ DANA W. HEMENWAY
-------------------------------------
Title: DANA W. HEMENWAY, Vice President
---------------------------------
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By: /s/ JEAN M. HANNIGAN
-------------------------------------
Title: Jean M. Hannigan, Assistant Vice
President
---------------------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
FIRST INTERSTATE BANK OF TEXAS,
N.A.
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
---------------------------------
<PAGE> 15
FLEET BANK OF MASSACHUSETTS,
N.A.
By: /s/ THOMAS J. BULLARD
------------------------------------
Title: Vice President
---------------------------------
THE FUJI BANK, LIMITED, HOUSTON
AGENCY
By: /s/ PHILIP C. LAUINGER III
------------------------------------
Title: Vice President & Joint Manager
--------------------------------
HIBERNIA NATIONAL BANK
By: /s/ [ILLEGIBLE]
------------------------------------
Title: Vice President
--------------------------------
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By: /s/ [ILLEGIBLE]
------------------------------------
Title: Joint General Manager
--------------------------------
NATWEST BANK N.A.
By: /s/ KATHLEEN WEISS
------------------------------------
Title: Vice President
--------------------------------
<PAGE> 16
THE NIPPON CREDIT BANK, LTD.
By: /s/ [ILLEGIBLE]
------------------------------------
Title: Senior Manager
---------------------------------
THE SANWA BANK, LIMITED, DALLAS AGENCY
By: /s/ MATTHEW G. PATRICK
------------------------------------
Title: Vice President
--------------------------------
THE SUMITOMO BANK, LTD. -
HOUSTON AGENCY
By: /s/ TOSHIRO KUBOTA
------------------------------------
Title: Joint General Manager
--------------------------------
SOCIETY NATIONAL BANK
By: /s/ JANICE M. COOK
------------------------------------
Title: Vice President
--------------------------------
UNION BANK
By: /s/ JULIE B. BLOOMFIELD
------------------------------------
Title: Vice President
--------------------------------
WELLS FARGO BANK, N.A.
By: /s/ [ILLEGIBLE]
------------------------------------
Title: Seniro Vice President
--------------------------------
VAN KAMPEN MERRITT PRIME RATE INCOME
TRUST
By: /s/ JEFFREY W. MAILLET
------------------------------------
Title: Sr. Vice Pres. - Portfolio Mgr.
--------------------------------
<PAGE> 17
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: /s/ RAY WHITE
------------------------------------
Title: Authorized Signature
--------------------------------
<PAGE> 18
SCHEDULE 2
BANKS; COMMITMENT PERCENTAGE;
EURODOLLAR LENDING OFFICES
BANK OF AMERICA ILLINOIS
Commitment Percentage: 9.090909090900%
Eurodollar Lending Office:
231 LaSalle Street
Chicago, Illinois 60697
Attention: Noreen Wright
Telephone: 312-828-8162
Telecopier: 312-828-1974
THE FIRST NATIONAL BANK OF BOSTON
Commitment Percentage: 9.090909090900%
Eurodollar Lending Office:
Environmental Services Division
100 Federal Street, 01-08-05
Boston, MA 02110
Attn: Connie Keyes
Telephone: 617-434-3571
Telecopier: 617-434-2160
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, NY
Commitment Percentage: 9.090909090900%
Eurodollar Lending Office:
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713-2107
Attn: MOF Unit
Telephone: 302-634-1800
Telecopier: 302-634-1094
<PAGE> 19
BHF - BANK AG
Commitment Percentage: 5.454545454500%
Eurodollar Lending Office:
Grand Cayman Branch c/o New York Branch
590 Madison Avenue
New York, NY 10022
Attn: Sharon Fang
Telephone: 212-756-5503
Telecopier: 212-756-5536
NATWEST BANK N.A.
Commitment Percentage: 5.454545454500%
Eurodollar Lending Office:
175 Water Street - 27th Floor
New York, NY 10038
Attn: Delores Jones
Telephone: 212-602-2578
Telecopier: 212-602-2590
CREDIT LYONNAIS CAYMAN ISLAND BRANCH AND
CREDIT LYONNAIS NEW YORK BRANCH
Commitment Percentage: 5.454545454500%
Eurodollar Lending Office:
Credit Lyonnais Cayman Island Branch c/o Credit Lyonnais Dallas
500 North Akard Sutie 3210
Dallas, TX
Attn: Judy Gordon
Telephone: 212-954-3500
Telecopier: 212-954-3312
DEUTSCHE BANK AG
Commitment Percentage: 5.454545454500%
Eurodollar Lending Office:
Cayman Islands Branch
31 West 52nd Street
New York, NY 10019
Attn: CFS John Quinn
Telephone: 212-474-8229
Telecopier: 212-474-7880
<PAGE> 20
UNION BANK
Commitment Percentage: 4.181818181800%
Eurodollar Lending Office:
Energy Capital Services
445 S. Figueroa Street
15th Floor
Los Angeles, CA 90071
Attn: Yolande Hollis
Telephone: 213-236-5130
Telecopier: 213-236-4096
CANADIAN IMPERIAL BANK OF COMMERCE
Commitment Percentage: 4.181818181800%
Eurodollar Lending Office:
Two Paces West
Suite 1200
2727 Paces Ferry Road
Atlanta, GA 30339
Attn: Suzanne Miles
Telephone: 404-319-4822
Telecopier: 404-319-4950
FLEET BANK OF MASSACHUSETTS, N.A.
Commitment Percentage: 4.181818181800%
Eurodollar Lending Office:
75 State Street
Boston, MA 02109
Attn: Deborah Milue
Telephone: 617-346-1639
Telecopier: 617-346-1679
COMERICA BANK
Commitment Percentage: 4.181818181800%
Eurodollar Lending Office:
9th Floor MC3281 500 Woodward Ave
Detroit, MI 48226
Attn: Tina Azar
Telephone: 313-222-6274
Telecopier: 313-222-3330
<PAGE> 21
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST
Commitment Percentage: 4.181818181800%
Eurodollar Lending Office:
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrance, IL 60181
Attn: Brian Murphy
Telephone: 708-684-6479
Telecopier: 708-684-6740
THE NIPPON CREDIT BANK, LTD.
Commitment Percentage: 2.727272727200%
Eurodollar Lending Office:
245 Park Avenue - 30th Floor
New York, NY 10167
Attn: Peter Fiorillo
Telephone: 212-984-1263
Telecopier: 212-697-8034
FIRST INTERSTATE BANK OF TEXAS, N.A.
Commitment Percentage: 2.727272727200%
Eurodollar Lending Office:
1445 Ross Avenue
Suite 300
Dallas, TX 75201
Attn: Nancy Harwell
Telephone: 214-740-1569
Telecopier: 214-740-1519
COOPERATIEVE CENTRALE RAIFFEISEN - BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
Commitment Percentage: 2.727272727200%
Eurodollar Lending Office:
245 Park Avenue
New York, NY 10167-0062
Attn: Brenda Lyew
Telephone: 212-916-7928
Telecopier: 212-916-7930
<PAGE> 22
THE BANK OF NOVA SCOTIA
Commitment Percentage: 2.727272727200%
Eurodollar Lending Office:
Atlanta Agency
600 Peachtree Street, N.E.
Suite 2700
Atlanta, GA 30308
Attn: Phyllis Walker
Telephone: 404-877-1552
Telecopier: 404-888-8998
BANK ONE, TEXAS - N.A.
Commitment Percentage: 2.727272727200%
Eurodollar Lending Office:
Corporate Banking
910 Travis
7th Floor
Houston, TX 77002-58602
Attn: Michelle Wondrak
Telephone: 713-751-3605
Telecopier: 713-751-6199
BANQUE PARIBAS, HOUSTON AGENCY
Commitment Percentage: 2.727272727200%
Eurodollar Lending Office:
1200 Smith
Suite 3100
Houston, TX 77002
Attn: Leah Evans-Hughs
Telephone: 713-659-4811
Telecopier: 713-659-3832
<PAGE> 23
THE FUJI BANK, LTD
Commitment Percentage: 2.727272727200%
Eurodollar Lending Office:
Houston Agency 1 Houston Center
1221 McKinney Street Suite 4100
Houston, TX 77010
Attn: Jenny Lin
Telephone: 713-650-7821
Telecopier: 713-759-0048
SOCIETY NATIONAL BANK
Commitment Percentage: 1.818181818100%
Eurodollar Lending Office:
127 Public Square
Cleveland, OH 44114-1306
Attn: Kathy Kuenig
Telephone: 216-689-4228
Telecopier: 216-689-4981
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
Commitment Percentage: 1.818181818100%
Eurodollar Lending Office:
New York Branch Finance Division
165 Broadway
New York, NY 10006
Attn: Mr. R. Pacifici
Telephone: 212-335-4801
Telecopier: 212-608-3452
THE SUMITOMO BANK, LTD.
Commitment Percentage: 1.818181818100%
Eurodollar Lending Office:
Houston Agency
NationsBank Center Suite 1750
700 Louisiana Street
Houston, TX 77002
Attn: Mr. Hiroshi Abe
Telephone: 713-238-8240
Telecopier: 713-759-0020
<PAGE> 24
THE SANWA BANK LIMITED, DALLAS AGENCY
Commitment Percentage: 1.818181818100%
Eurodollar Lending Office:
901 Main Street
Suite 2830
Dallas, TX 75202
Attn; Greg Crowe
Telephone: 214-744-5555
Telecopier: 214-741-6535
HIBERNIA NATIONAL BANK
Commitment Percentage: 1.818181818100%
Eurodollar Lending Office:
313 Carondelet Street
New Orleans, LA 70130
Attn: Virginia Bell
Telephone: 504-533-2905
Telecopier: 504-533-5344
WELLS FARGO BANK, N.A.
Commitment Percentage: 1.818181818100%
Eurodollar Lending Office:
420 Montgomery
9th Floor
San Francisco, CA 94104
Dallas, TX 75201
Telephone: 415-396-3807
Telecopier: 415-989-4319
<PAGE> 1
Exhibit 10.8
SECOND AMENDMENT TO REVOLVING
CREDIT AND TERM LOAN AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT (this
"Second Amendment") is made and entered into as of the 7th day of September,
1995, by and among USA WASTE SERVICES, INC., a Delaware corporation (the
"Borrower"), its Subsidiaries listed on Schedule 1 to the Credit Agreement
defined below (collectively the "Guarantors"), THE FIRST NATIONAL BANK OF
BOSTON, a national banking association ("FNBB"), BANK OF AMERICA ILLINOIS, an
Illinois banking association ("BAI"), and J.P. MORGAN SECURITIES, INC., a
Delaware corporation ("J.P. Morgan") (collectively, the "Agents"), FNBB, BAI,
Morgan Guaranty Trust Company of New York, a New York state banking association
("MGT") and the other financial institutions party hereto (collectively, the
"Banks"), and MGT as the Administrative Agent and FNBB, as Documentation Agent
(collectively, the "Bank Agents").
WHEREAS, the Borrower, the Guarantors, the Banks, the Agents and the Bank
Agents are party to a Revolving Credit and Term Loan Agreement dated as of June
30, 1995, as amended by the First Amendment to Revolving Credit and Term Loan
Agreement dated as of August 11, 1995 (as so amended, the "Credit Agreement"),
pursuant to which the Banks have extended credit to the Borrower on the terms
set forth therein;
WHEREAS, the Borrower has requested that the Banks, the Agents, and the
Bank Agents amend the Credit Agreement, and the Banks, the Agents and the Bank
Agents are willing to amend the Credit Agreement on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. DEFINITIONS. Capitalized terms used herein without definition
shall have the meanings assigned to such terms in the Credit Agreement.
2. AMENDMENT TO Section 4.5 OF THE CREDIT AGREEMENT. Section 4.5 of
the Credit Agreement is hereby amended by deleting the percent "50%" set forth
in subclause (c) of such Section 4.5 and substituting in place thereof the
percentage "25%".
3. REPRESENTATIONS AND WARRANTIES. The Borrower and the Guarantors
jointly and severally represent and warrant as follows:
<PAGE> 2
-2-
(a) The execution, delivery and performance of this Second Amendment
and the Credit Agreement, as modified by this Second Amendment, and the
transactions contemplated hereby and thereby (i) are within the corporate
authority of the Borrower and each of the Guarantors, (ii) have been duly
authorized by all necessary corporate proceedings on the part of the respective
Borrower or Guarantor, (iii) do not conflict with or result in any material
breach or contravention of any provision of law, statute, rule or regulation to
which the Borrower or any Guarantor is subject or any judgment, order, writ,
injunction, license or permit applicable to the Borrower or any Guarantor so as
to materially adversely affect the assets, business or any activity of the
Borrower and the Guarantors as a whole, and (iv) do not conflict with any
provision of the corporate charter or bylaws of the Borrower or any Guarantor
or any agreement or other instrument binding upon the Borrower or any
Guarantor.
(b) The execution, delivery and performance of this Second Amendment
and the Credit Agreement, as modified by this Second Amendment, will result in
valid and legally binding obligations of the Borrower and the Guarantors party
thereto enforceable against each in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
(c) The execution, delivery and performance by the Borrower and the
Guarantors of this Second Amendment and the Credit Agreement, as modified by
this Second Amendment, and the consummation by the Borrower and the Guarantors
of the transactions contemplated hereby and thereby do not require any approval
or consent of, or filing with, any governmental agency or authority other than
those already obtained and those required after the date hereof in connection
with the Borrower's and the Guarantors' performance of their covenants
contained in Sections 7, 8 and 9 of the Credit Agreement.
(d) The representations and warranties contained in Section 6 of the
Credit Agreement are true and correct in all material respects as of the date
hereof as though made on and as of the date hereof.
(e) No Default or Event of Default under the Credit Agreement has
occurred and is continuing.
4. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and
<PAGE> 3
-3-
confirmed in all respects and shall continue in full force and effect. Each of
the Guarantors hereby confirms that its guaranty of the Guaranteed Obligations
contained in Section 27 of the Credit Agreement remains in full force and
effect. This Second Amendment and the Credit Agreement shall hereafter be read
and construed together as a single document, and all references in the Credit
Agreement, any other Loan Document or any agreement or instrument related to
the Credit Agreement shall hereafter refer to the Credit Agreement as amended
by this Second Amendment.
5. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
6. COUNTERPARTS. This Second Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
7. EFFECTIVENESS. This Second Amendment shall become effective upon the
satisfaction of each of the following conditions (the "Effective Date"):
(a) This Second Amendment shall have been executed and delivered by
the Borrower, the Guarantors, the Majority Banks, the Agents and the Bank
Agents;
(b) All corporate action necessary for the valid execution, delivery
and performance by the Borrower of the Credit Agreement, as amended by this
Second Amendment, shall have been taken, and evidence thereof satisfactory to
the Agents shall have been provided to the Agents; and
(c) The Borrower shall have completed an equity offering with net cash
proceeds of at least $75,000,000 on or before November 30, 1995.
<PAGE> 4
-4-
IN WITNESS WHEREOF, each of the undersigned have duly executed this Second
Amendment under seal as of the date first set forth above.
THE BORROWER:
USA WASTE SERVICES, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer
THE GUARANTORS:
BEST PAK DISPOSAL, INC.
BIG DIPPER ENTERPRISES, INC.
BREM-AIR DISPOSAL, INC.
CENTRAL ILLINOIS DISPOSAL,
INC.
COUNTRYSIDE LANDFILL, INC.
CRYSTAL LAKE DISPOSAL, INC.
CUSTOM DISPOSAL SERVICES,
INC.
EARTHMOVERS, INC.
ELLIS-SCOTT, INC.
ENVIROFIL, INC.
ENVIROFIL OF ILLINOIS, INC.
(FORMERLY LEROY BROWN & SONS,
INC.)
ENVIROFIL SERVICES, INC.
ENVIRONMENTAL WASTE OF
SKAGIT COUNTY, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 5
-5-
EVH CO.
EWA, INC. (FORMERLY MARCH
ACQUISITION CORPORATION)
FORCEES, INC.
JUAN DE FUCA CORRUGATED,
LTD.
KITSAP COUNTY SANITARY
LANDFILL, INC.
LAKELAND PROPERTIES, INC.
LIBERTY LANDFILL, INC.
MEADOWBROOK CARTING CO.,
INC.
MID-JERSEY DISPOSAL CO., INC.
MID-VALLEY ACQUISITION
CORPORATION
MISSION DISPOSAL, INC.
NORTH SOUND SANITATION, INC.
QUALITY RECYCLING CO., INC.
SACRAMENTO VALLEY
ENVIRONMENTAL WASTE
COMPANY
SOIL REMEDIATION OF
PHILADELPHIA, INC.
SOUTH SOUND SANITATION, INC.
STANWOOD CAMANO DISPOSAL,
INC.
STOCKTON SCAVENGERS
ASSOCIATION
USA WASTE HAULING OF
PHILADELPIA, INC.
USA WASTE OF OKLAHOMA, INC.
(FORMERLY UNITED SANITATION
ASSOCIATES WASTE MANAGEMENT,
INC.)
USA WASTE OF ARIZONA, INC.
USA WASTE OF ILLINOIS, INC.
USA WASTE OF INDIANA, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 6
-6-
USA WASTE OF TEXAS, INC.
(FORMERLY USA WASTE SERVICES,
INC. OF TEXAS)
U.S.A. WASTE OF FAIRLESS
HILLS, INC.
CLEANSOILS FAIRLESS HILLS,
INC.
WEST VIRGINIA WASTE
SERVICES, INC.
WPP, INC.
WASTE RECOVERY
CORPORATION
CHAMBERS ACQUISITION CORP.
CHAMBERS DEVELOPMENT
COMPANY, INC.
CHAMBERS CLEARVIEW
ENVIRONMENTAL LANDFILL,
INC.
CHAMBERS DEVELOPMENT OF
OHIO, INC.
CHAMBERS DEVELOPMENT OF
VIRGINIA, INC.
CHAMBERS ENTERPRISES, INC.
CHAMBERS INTERNATIONAL,
INC.
CHAMBERS LAUREL HIGHLANDS
LANDFILL, INC.
CHAMBERS MAPLEWOOD
LANDFILL, INC.
CHAMBERS MEDICAL
TECHNOLOGIES, INC.
(INCORPORATED 2/12/85)
CHAMBERS MEDICAL
TECHNOLOGIES, INC.
(INCORPORATED 4/26/91)
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 7
-7-
CHAMBERS MEDICAL
TECHNOLOGIES OF SOUTH
CAROLINA, INC.
CHAMBERS NEW JERSEY LAND,
INC.
CHAMBERS OAKRIDGE USA
LANDFILL, INC.
CHAMBERS ORANGE COUNTY
LANDFILL, INC.
CHAMBERS RESOURCES, INC.
CHAMBERS RICHLAND COUNTY
LANDFILL, INC.
CHAMBERS SERVICES, INC.
CHAMBERS SMYRNA LANDFILL,
INC.
CHAMBERS WASTE SYSTEMS OF
CALIFORNIA, INC.
CHAMBERS WASTE SYSTEMS OF
FLORIDA, INC.
CHAMBERS WASTE SYSTEMS OF
MISSISSIPPI, INC.
CHAMBERS WASTE SYSTEMS OF
NEW YORK, INC.
CHAMBERS WASTE SYSTEMS OF
NORTH CAROLINA, INC.
CHAMBERS WASTE SYSTEMS OF
OHIO, INC.
CHAMBERS WASTE SYSTEMS OF
NEW JERSEY, INC.
CHAMBERS WASTE SYSTEMS OF
RHODE ISLAND, INC.
CHAMBERS WASTE SYSTEMS OF
SOUTH CAROLINA, INC.
CHAMBERS WASTE SYSTEMS OF
TEXAS, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 8
-8-
CHAMBERS WASTE SYSTEMS OF
VIRGINIA, INC.
CHAMBERS OF DELAWARE, INC.
CHAMBERS OF GEORGIA, INC.
CHAMBERS OF ILLINOIS, INC.
CHAMBERS OF INDIANA, INC.
CHAMBERS OF NEW JERSEY,
INC.
CHAMBERS OF NEW JERSEY
RECYCLING, INC.
CHAMBERS OF MARYLAND, INC.
CHAMBERS OF
MASSACHUSETTS, INC.
CHAMBERS OF MISSISSIPPI, INC.
CHAMBERS OF PENNSYLVANIA,
INC.
CHAMBERS OF TENNESSEE, INC.
CHAMBERS OF WEST VIRGINIA,
INC.
DAUPHIN MEADOWS, INC.
THE H. SIENKNECHT CO.
LCS SERVICES, INC.
WILLIAM H. MARTIN, INC.
MORRIS COUNTY TRANSFER
STATION, INC.
RAIL-IT CORPORATION
REMOTE LANDFILL SERVICES,
INC.
CDC SERVICES, INC.
SOUTHERN ALLEGHENIES
DISPOSAL SERVICES, INC.
U.S. SERVICES CORPORATION
U.S. UTILITIES SERVICES CORP.
CHAMBERS R & B LANDFILL,
INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 9
-9-
RAIL-IT LIMITED PARTNERSHIP
By: Rail-It Corporation, Its General Partner
By: /s/ EARL E. DEFRATES
----------------------------------------
Title: Executive VP & CFO
-------------------------------------
THE BANKS AND AGENTS:
THE FIRST NATIONAL BANK OF BOSTON,
Individually and as Documentation Agent and
Issuing Bank and as Agent
By: [ILLEGIBLE]
----------------------------------------
Title: Managing Director
-------------------------------------
BANK OF AMERICA, ILLINOIS, Individually
and as Agent
By: [ILLEGIBLE]
----------------------------------------
Title: Vice President
-------------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
Individually and as the Administrative Agent
By: /s/ LAURA E. REIM
----------------------------------------
Title: Vice President
-------------------------------------
<PAGE> 10
-10-
J.P. MORGAN SECURITIES INC., as Agent
By:
----------------------------------------
Title:
-------------------------------------
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. ASHBY
----------------------------------------
Title: Senior Manager Loan Operations
-------------------------------------
BANK ONE, TEXAS N.A.
By:
----------------------------------------
Title:
-------------------------------------
BANQUE PARIBAS, HOUSTON
AGENCY
By: /s/ TIMOTHY A. DONNON
----------------------------------------
Title: Regional General Manager
-------------------------------------
By: /s/ SCOTT CLINGAN
----------------------------------------
Title: Vice President
-------------------------------------
BHF-BANK AG
By: [ILLEGIBLE]
----------------------------------------
Title: AVP
-------------------------------------
By: [ILLEGIBLE]
----------------------------------------
Title: VP
-------------------------------------
CIBC INC.
By:
----------------------------------------
Title:
-------------------------------------
COMERICA BANK
By:
----------------------------------------
Title:
-------------------------------------
<PAGE> 11
-11-
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK,
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By: /s/ STEPHEN A. RICH
----------------------------------------
Title: Vice President
-------------------------------------
By: /s/ W. JEFFREY VOLLACK
----------------------------------------
Title: Vice President, Manager
-------------------------------------
CREDIT LYONNAIS NEW YORK
BRANCH
By: [ILLEGIBLE]
----------------------------------------
Title: Vice President
-------------------------------------
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: [ILLEGIBLE]
----------------------------------------
Title: Authorized Signature
-------------------------------------
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By: /s/ JEAN M. HANNINGAN
----------------------------------------
Title: Assistant Vice President
-------------------------------------
By: /s/ JOHN AUGSBURGER
----------------------------------------
Title: Vice President
-------------------------------------
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: [ILLEGIBLE]
----------------------------------------
Title: Vice President
-------------------------------------
<PAGE> 12
-12-
FLEET BANK OF MASSACHUSETTS, N.A.
By: /s/ MARYANN S. SMITH
----------------------------------------
Title: Vice President
-------------------------------------
THE FUJI BANK, LIMITED, HOUSTON
AGENCY
By: [ILLEGIBLE]
----------------------------------------
Title: Vice President and Senior Manager
-------------------------------------
HIBERNIA NATIONAL BANK
By: /s/ TROY J. VILLAFARRA
----------------------------------------
Title: Vice President
-------------------------------------
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By: [ILLEGIBLE]
----------------------------------------
Title: Joint General Manager
-------------------------------------
NATWEST BANK N.A.
By: /s/ DILCIA PENA HILL
----------------------------------------
Title: Vice President
-------------------------------------
THE NIPPON CREDIT BANK, LTD.
By: [ILLEGIBLE]
----------------------------------------
Title: Vice President & Manager
-------------------------------------
THE SUMITOMO BANK, LTD. -
HOUSTON AGENCY
By: [ILLEGIBLE]
----------------------------------------
Title: General Manager
-------------------------------------
<PAGE> 13
-13-
SOCIETY NATIONAL BANK
By: [ILLEGIBLE]
----------------------------------------
Title: VP & Manager
-------------------------------------
UNION BANK
By: [ILLEGIBLE]
----------------------------------------
Title: [ILLEGIBLE]
-------------------------------------
WELLS FARGO BANK, N.A.
By: [ILLEGIBLE]
----------------------------------------
Title: SVP
-------------------------------------
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST
By:
----------------------------------------
Title:
-------------------------------------
THE SANWA BANK, LIMITED, DALLAS AGENCY
By: /s/ MATTHEW G. PATRICK
----------------------------------------
Title: Vice President
-------------------------------------
<PAGE> 1
Exhibit 10.9
THIRD AMENDMENT TO REVOLVING
CREDIT AND TERM LOAN AGREEMENT
THIS THIRD AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT (this
"Third Amendment") is made and entered into as of the 26th day of January,
1996, by and among USA WASTE SERVICES, INC., a Delaware corporation (the
"Borrower"), its Subsidiaries listed on Schedule 1 to the Credit Agreement
defined below (collectively the "Guarantors"), THE FIRST NATIONAL BANK OF
BOSTON, a national banking association ("FNBB"), BANK OF AMERICA ILLINOIS, an
Illinois banking association ("BAI"), and J.P. MORGAN SECURITIES, INC., a
Delaware corporation ("J.P. Morgan") (collectively, the "Agents"), FNBB, BAI,
Morgan Guaranty Trust Company of New York, a New York state banking association
("MGT") and the other financial institutions party hereto (collectively, the
"Banks"), and MGT as the Administrative Agent and FNBB, as Documentation Agent
(collectively, the "Bank Agents").
WHEREAS, the Borrower, the Guarantors, the Banks, the Agents and the Bank
Agents are party to a Revolving Credit and Term Loan Agreement dated as of June
30, 1995, as amended by the First Amendment to Revolving Credit and Term Loan
Agreement dated as of August 11, 1995 and the Second Amendment dated as of
September 7, 1995 (as so amended, the "Credit Agreement"), pursuant to which
the Banks have extended credit to the Borrower on the terms set forth therein;
WHEREAS, the Borrower has requested that the Banks, the Agents, and the
Bank Agents amend the definition of Investments contained in the Credit
Agreement to exclude certain investments by the Borrower, and the Banks, the
Agents and the Bank Agents are willing to amend the Credit Agreement on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. DEFINITIONS. Capitalized terms used herein without definition
shall have the meanings assigned to such terms in the Credit Agreement.
2. AMENDMENT TO Section 1.1 OF THE CREDIT AGREEMENT. Section 1.1 of
the Credit Agreement is hereby amended by inserting the following parenthetical
after the text "the acquisition of stock" in the second line of the definition
of Investments: "(other than the capital stock of Western Waste Industries,
Inc. owned by the Borrower as of December 18, 1995 provided that the aggregate
amount excluded from the determination of Investments
<PAGE> 2
-2-
outstanding at any particular time pursuant to this parenthetical shall not
exceed $13,000,000)".
3. REPRESENTATIONS AND WARRANTIES. The Borrower and the Guarantors
jointly and severally represent and warrant as follows:
(a) The execution, delivery and performance of this Third Amendment
and the Credit Agreement, as modified by this Third Amendment, and the
transactions contemplated hereby and thereby (i) are within the corporate
authority of the Borrower and each of the Guarantors, (ii) have been duly
authorized by all necessary corporate proceedings on the part of the respective
Borrower or Guarantor, (iii) do not conflict with or result in any material
breach or contravention of any provision of law, statute, rule or regulation to
which the Borrower or any Guarantor is subject or any judgment, order, writ,
injunction, license or permit applicable to the Borrower or any Guarantor so as
to materially adversely affect the assets, business or any activity of the
Borrower and the Guarantors as a whole, and (iv) do not conflict with any
provision of the corporate charter or bylaws of the Borrower or any Guarantor
or any agreement or other instrument binding upon the Borrower or any
Guarantor.
(b) The execution, delivery and performance of this Third Amendment
and the Credit Agreement, as modified by this Third Amendment, will result in
valid and legally binding obligations of the Borrower and the Guarantors party
thereto enforceable against each in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
(c) The execution, delivery and performance by the Borrower and the
Guarantors of this Third Amendment and the Credit Agreement, as modified by
this Third Amendment, and the consummation by the Borrower and the Guarantors
of the transactions contemplated hereby and thereby do not require any approval
or consent of, or filing with, any governmental agency or authority other than
those already obtained and those required after the date hereof in connection
with the Borrower's and the Guarantors' performance of their covenants
contained in Sections 7, 8 and 9 of the Credit Agreement.
(d) The representations and warranties contained in Section 6 of the
Credit Agreement are true and correct in all material respects as of the date
hereof as though made on and as of the date hereof.
<PAGE> 3
-3-
(e) No Default or Event of Default under the Credit Agreement has
occurred and is continuing.
4. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects
and shall continue in full force and effect. Each of the Guarantors hereby
confirms that its guaranty of the Guaranteed Obligations contained in Section
27 of the Credit Agreement remains in full force and effect. This Third
Amendment and the Credit Agreement shall hereafter be read and construed
together as a single document, and all references in the Credit Agreement, any
other Loan Document or any agreement or instrument related to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended by this
Third Amendment.
5. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT
REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN
ACCORDANCE WITH SUCH LAWS.
6. COUNTERPARTS. This Third Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
7. EFFECTIVENESS. This Third Amendment shall become effective upon the
satisfaction of each of the following conditions (the "Effective Date"):
(a) This Third Amendment shall have been executed and delivered by the
Borrower, the Guarantors, the Majority Banks, the Agents and the Bank Agents;
and
(b) All corporate action necessary for the valid execution, delivery
and performance by the Borrower of the Credit Agreement, as amended by this
Third Amendment, shall have been taken, and evidence thereof satisfactory to
the Agents shall have been provided to the Agents.
<PAGE> 4
-4-
IN WITNESS WHEREOF, each of the undersigned have duly executed this Third
Amendment under seal as of the date first set forth above.
THE BORROWER:
USA WASTE SERVICES, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer
THE GUARANTORS:
BEST PAK DISPOSAL, INC.
BIG DIPPER ENTERPRISES, INC.
BREM-AIR DISPOSAL, INC.
CENTRAL ILLINOIS DISPOSAL,
INC.
COUNTRYSIDE LANDFILL, INC.
CRYSTAL LAKE DISPOSAL, INC.
CUSTOM DISPOSAL SERVICES,
INC.
EARTHMOVERS, INC.
ELLIS-SCOTT, INC.
ENVIROFIL, INC.
ENVIROFIL OF ILLINOIS, INC.
(FORMERLY LEROY BROWN & SONS, INC.)
ENVIROFIL SERVICES, INC.
ENVIRONMENTAL WASTE OF
SKAGIT COUNTY, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 5
-5-
EVH CO.
EWA, INC. (FORMERLY MARCH
ACQUISITION CORPORATION)
FORCEES, INC.
JUAN DE FUCA CORRUGATED,
LTD.
KITSAP COUNTY SANITARY
LANDFILL, INC.
LAKELAND PROPERTIES, INC.
LIBERTY LANDFILL, INC.
MEADOWBROOK CARTING CO.,
INC.
MID-JERSEY DISPOSAL CO., INC.
MID-VALLEY ACQUISITION
CORPORATION
MISSION DISPOSAL, INC.
NORTH SOUND SANITATION, INC.
QUALITY RECYCLING CO., INC.
SACRAMENTO VALLEY
ENVIRONMENTAL WASTE
COMPANY
SOIL REMEDIATION OF
PHILADELPHIA, INC.
SOUTH SOUND SANITATION, INC.
STANWOOD CAMANO DISPOSAL,
INC.
STOCKTON SCAVENGERS
ASSOCIATION
USA WASTE HAULING OF
PHILADELPIA, INC.
USA WASTE OF OKLAHOMA, INC.
(FORMERLY UNITED SANITATION
ASSOCIATES WASTE MANAGEMENT,
INC.)
USA WASTE OF ARIZONA, INC.
USA WASTE OF ILLINOIS, INC.
USA WASTE OF INDIANA, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 6
-6-
USA WASTE OF TEXAS, INC.
(FORMERLY USA WASTE SERVICES,
INC. OF TEXAS)
U.S.A. WASTE OF FAIRLESS
HILLS, INC.
CLEANSOILS FAIRLESS HILLS,
INC.
WEST VIRGINIA WASTE
SERVICES, INC.
WPP, INC.
WASTE RECOVERY
CORPORATION
CHAMBERS ACQUISITION CORP.
CHAMBERS DEVELOPMENT
COMPANY, INC.
CHAMBERS CLEARVIEW
ENVIRONMENTAL LANDFILL,
INC.
CHAMBERS DEVELOPMENT OF
OHIO, INC.
CHAMBERS DEVELOPMENT OF
VIRGINIA, INC.
CHAMBERS ENTERPRISES, INC.
CHAMBERS INTERNATIONAL,
INC.
CHAMBERS LAUREL HIGHLANDS
LANDFILL, INC.
CHAMBERS MAPLEWOOD
LANDFILL, INC.
CHAMBERS MEDICAL
TECHNOLOGIES, INC.
(INCORPORATED 2/12/85)
CHAMBERS MEDICAL
TECHNOLOGIES, INC.
(INCORPORATED 4/26/91)
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 7
-7-
CHAMBERS MEDICAL
TECHNOLOGIES OF SOUTH
CAROLINA, INC.
CHAMBERS NEW JERSEY LAND,
INC.
CHAMBERS OAKRIDGE USA
LANDFILL, INC.
CHAMBERS ORANGE COUNTY
LANDFILL, INC.
CHAMBERS RESOURCES, INC.
CHAMBERS RICHLAND COUNTY
LANDFILL, INC.
CHAMBERS SERVICES, INC.
CHAMBERS SMYRNA LANDFILL,
INC.
CHAMBERS WASTE SYSTEMS OF
CALIFORNIA, INC.
CHAMBERS WASTE SYSTEMS OF
FLORIDA, INC.
CHAMBERS WASTE SYSTEMS OF
MISSISSIPPI, INC.
CHAMBERS WASTE SYSTEMS OF
NEW YORK, INC.
CHAMBERS WASTE SYSTEMS OF
NORTH CAROLINA, INC.
CHAMBERS WASTE SYSTEMS OF
OHIO, INC.
CHAMBERS WASTE SYSTEMS OF
NEW JERSEY, INC.
CHAMBERS WASTE SYSTEMS OF
RHODE ISLAND, INC.
CHAMBERS WASTE SYSTEMS OF
SOUTH CAROLINA, INC.
CHAMBERS WASTE SYSTEMS OF
TEXAS, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 8
-8-
CHAMBERS WASTE SYSTEMS OF
VIRGINIA, INC.
CHAMBERS OF DELAWARE, INC.
CHAMBERS OF GEORGIA, INC.
CHAMBERS OF ILLINOIS, INC.
CHAMBERS OF INDIANA, INC.
CHAMBERS OF NEW JERSEY,
INC.
CHAMBERS OF NEW JERSEY
RECYCLING, INC.
CHAMBERS OF MARYLAND, INC.
CHAMBERS OF
MASSACHUSETTS, INC.
CHAMBERS OF MISSISSIPPI, INC.
CHAMBERS OF PENNSYLVANIA,
INC.
CHAMBERS OF TENNESSEE, INC.
CHAMBERS OF WEST VIRGINIA,
INC.
DAUPHIN MEADOWS, INC.
THE H. SIENKNECHT CO.
LCS SERVICES, INC.
WILLIAM H. MARTIN, INC.
MORRIS COUNTY TRANSFER
STATION, INC.
RAIL-IT CORPORATION
REMOTE LANDFILL SERVICES,
INC.
CDC SERVICES, INC.
SOUTHERN ALLEGHENIES
DISPOSAL SERVICES, INC.
U.S. SERVICES CORPORATION
U.S. UTILITIES SERVICES CORP.
CHAMBERS R & B LANDFILL,
INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 9
-9-
RAIL-IT LIMITED PARTNERSHIP
By: Rail-It Corporation, Its General Partner
By: /s/ EARL E. DEFRATES
-----------------------------------------
Title: Vice President
--------------------------------------
THE BANKS AND AGENTS:
THE FIRST NATIONAL BANK OF BOSTON,
Individually and as Documentation Agent and
Issuing Bank and as Agent
By: [ILLEGIBLE]
-----------------------------------------
Title: Managing Director
--------------------------------------
BANK OF AMERICA, ILLINOIS, Individually
and as Agent
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President
--------------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
Individually and as the Administrative Agent
By: /s/ TIMOTHY S. BROADBENT
-----------------------------------------
Title: Vice President
--------------------------------------
<PAGE> 10
-10-
J.P. MORGAN SECURITIES INC., as Agent
By: [ILLEGIBLE]
-----------------------------------------
Title: VP
--------------------------------------
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. ASHBY
-----------------------------------------
Title: Senior Manager Loan Operations
--------------------------------------
BANK ONE, TEXAS N.A.
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President
--------------------------------------
BANQUE PARIBAS, HOUSTON
AGENCY
By: /s/ SCOTT CLINGARS
-----------------------------------------
Title: Vice President
--------------------------------------
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President
--------------------------------------
BHF-BANK AKTIENGESELLSCHAFT
By: [ILLEGIBLE]
-----------------------------------------
Title: VP
--------------------------------------
By: [ILLEGIBLE]
-----------------------------------------
Title: VP
--------------------------------------
CIBC INC.
By: [ILLEGIBLE]
-----------------------------------------
Title: Authorized Signature
--------------------------------------
COMERICA BANK
By: [ILLEGIBLE]
-----------------------------------------
Title: First Vice President
--------------------------------------
<PAGE> 11
-11-
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK,
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By: /s/ DANA W. HEMENWAY
-----------------------------------------
Title: Vice President
--------------------------------------
By: /s/ IAN REECE
-----------------------------------------
Title: Vice President & Manager
--------------------------------------
CREDIT LYONNAIS NEW YORK
BRANCH
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President
--------------------------------------
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: [ILLEGIBLE]
-----------------------------------------
Title: Authorized Signature
--------------------------------------
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By: /s/ JOHN AUGSBURGER
-----------------------------------------
Title: Vice President
--------------------------------------
By: /s/ JEAN M. HANNIGAN
-----------------------------------------
Title: Assistant Vice President
--------------------------------------
FIRST INTERSTATE BANK OF TEXAS,
N.A.
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President
--------------------------------------
<PAGE> 12
-12-
FLEET BANK OF MASSACHUSETTS,
N.A.
By: /s/ THOMAS J. BULLARD
-----------------------------------------
Title: Vice President
--------------------------------------
THE FUJI BANK, LIMITED, HOUSTON
AGENCY
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President & Joint Manager
--------------------------------------
HIBERNIA NATIONAL BANK
By: /s/ TROY J. VILLAFARRA
-----------------------------------------
Title: Vice President
--------------------------------------
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By: [ILLEGIBLE]
-----------------------------------------
Title: Joint General Manager
--------------------------------------
NATWEST BANK N.A.
By: /s/ DILICIA PENA HILL
-----------------------------------------
Title: Vice President
--------------------------------------
THE NIPPON CREDIT BANK, LTD.
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President & Manager
--------------------------------------
THE SUMITOMO BANK, LTD. -
HOUSTON AGENCY
By: /s/ HARUMITSU SEKI
-----------------------------------------
Title: General Manager
--------------------------------------
<PAGE> 13
-13-
SOCIETY NATIONAL BANK
By: /s/ LAWRENCE A. MACK
-----------------------------------------
Title: Vice President
--------------------------------------
UNION BANK
By: /s/ JULIE D. BLOOMFIELD
-----------------------------------------
Title: Vice President
--------------------------------------
WELLS FARGO BANK, N.A.
By: /s/ KELLIE DEWHITT
-----------------------------------------
Title: Vice President
--------------------------------------
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By: /s/ JEFFREY W. MAILLET
-----------------------------------------
Title: Sr. Vice Pres.- Portfolio Mgr.
--------------------------------------
THE SANWA BANK, LIMITED, DALLAS AGENCY
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President
--------------------------------------
<PAGE> 1
Exhibit 10.10
FOURTH AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS FOURTH AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT (this
"Fourth Amendment") is made and entered into as of the 29th day of February,
1996, by and among USA WASTE SERVICES, INC., a Delaware corporation (the
"Borrower"), its Subsidiaries listed on Schedule 1 to the Credit Agreement
defined below (collectively the "Guarantors"), THE FIRST NATIONAL BANK OF
BOSTON, a national banking association ("FNBB"), BANK OF AMERICA ILLINOIS, an
Illinois banking association ("BAI"), and J.P. MORGAN SECURITIES, INC., a
Delaware corporation ("J.P. Morgan") (collectively, the "Agents"), FNBB, BAI,
Morgan Guaranty Trust Company of New York, a New York state banking association
("MGT") and the other financial institutions party hereto (collectively, the
"Banks"), and MGT as the Administrative Agent and FNBB, as Documentation Agent
(collectively, the "Bank Agents").
WHEREAS, the Borrower, the Guarantors, the Banks, the Agents and the Bank
Agents are party to a Revolving Credit and Term Loan Agreement dated as of June
30, 1995, as amended by the First Amendment to Revolving Credit and Term Loan
Agreement dated as of August 11, 1995, the Second Amendment to Revolving Credit
and Term Loan Agreement dated as of September 7, 1995 and the Third Amendment
to Revolving Credit and Term Loan Agreement dated as of January 26, 1996 (as so
amended, the "Credit Agreement"), pursuant to which the Banks have extended
credit to the Borrower on the terms set forth therein;
WHEREAS, the Borrower has requested that the Banks, the Agents, and the Bank
Agents amend certain provisions of the Credit Agreement in connection with the
Borrower's acquisition of Western Waste Industries, and the Banks, the Agents
and the Bank Agents are willing to so amend the Credit Agreement on the terms
and conditions set forth herein;
WHEREAS, the Borrower has requested that the Banks, the Agents, and the Bank
Agents amend certain provisions of the Credit Agreement in connection with the
Borrower's entering into a credit facility provided by FNBB, BAI and MGT to
finance the Western Waste Merger and the Banks, the Agents and the Bank Agents
are willing to so amend the Credit Agreement on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
<PAGE> 2
-2-
1. DEFINITIONS. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. As of the Effective Date (as
hereinafter defined), the Credit Agreement is hereby amended as follows:
(a) The definition of "Consolidated Earnings Before Interest and Taxes,
or EBIT" set forth in Section 1.1 of the Credit Agreement is hereby amended by
deleting such definition in its entirety and substituting the following new
definition in place thereof:
"Consolidated Earnings Before Interest and Taxes, or EBIT. For any period, the
Consolidated Net Income (or Deficit) of the Borrower and the Guarantors on a
consolidated basis plus (1) interest expense, (2) income taxes, (3) up to
$25,000,000 of merger expenses with respect to the Chambers Merger taken as a
special charge in the quarter in which the Chambers Merger is consummated and
(4) up to $25,000,000 in merger expenses with respect to the Western Waste
Merger taken as a special charge in the quarter in which the Western Waste
Merger is consummated, to the extent that each was deducted in determining
Consolidated Net Income."
(b) Section 1.1 of the Credit Agreement is hereby amended by inserting
the following new definitions immediately after the definition of "Total
Revolving Credit Commitment" set forth therein:
"Western Waste. Western Waste Industries, a California corporation.
Western Waste Merger. The merger of Western Waste and Riviera Acquisition
Corporation, a Subsidiary of the Borrower, pursuant to the terms of the Western
Waste Merger Agreement.
Western Waste Merger Agreement. The Agreement and Plan of Merger dated as of
December 18, 1995 between Western Waste, the Borrower and Riviera Acquisition
Corporation."
(c) Section 2.4 of the Credit Agreement is hereby amended by deleting
the amount "$160,000,000" set forth in the eleventh line thereof and
substituting the amount "$180,000,000" in place thereof.
<PAGE> 3
-3-
(d) Section 2.8 of the Credit Agreement is hereby amended by deleting
the amount "$160,000,000" set forth in the seventh line thereof and
substituting in place thereof the amount "$180,000,000".
(e) Section 8.1 of the Credit Agreement is hereby amended by:
(i) deleting the words "subsection (g) or (m) hereof" set forth
in Section 8.1(h)(iii) and substituting in place thereof the words
"subsection (g), (m) or (p) of this Section 8.1";
(ii) deleting the word "and" at the end of Section 8.1(o);
(iii) deleting the letter "(p)" at the beginning of Section
8.1(p) and substituting the letter "(r)" in place thereof; and
(iv) inserting the following new Sections 8.1(p) and (q)
immediately after Section 8.1(o):
"(p) Indebtedness in an aggregate amount of up to
$32,200,000 with respect to IRBs of Western Waste listed on Schedule
8.1(p) (the "Western Waste IRBs"), including Indebtedness with
respect to letters of credit issued for the account of Western Waste
by Bank of California, Bank of America or Citibank to secure or
enhance the Western Waste IRBs, which letters of credit may be
replaced by Letters of Credit issued hereunder; provided that the
Western Waste IRBs shall not be deemed to be Enhanced IRBs if
secured or enhanced by Letters of Credit issued hereunder;
(q) Indebtedness consisting of senior unsecured debt in
an amount not to exceed the sum of (i) $75,000,000 minus (ii) the
amount of the Indebtedness outstanding under Section 8.1(p) which is
secured or enhanced by letters of credit other than Letters of
Credit issued hereunder, arising under a credit facility (the
"Bridge Loan Facility") provided by FNBB, BAI and MGT to finance the
Western Waste Merger, which Bridge Loan Facility shall: (A) be an
obligation of the Borrower which is guaranteed by each of the
Subsidiaries of the Borrower which is a Guarantor; (B) have a term
of 364 days; (C) be unsecured; (D) incorporate by reference those
covenants contained in this Agreement as in effect on the closing
date of such facility; (E) contain provisions requiring mandatory
repayment by the Borrower of all amounts outstanding under the
Bridge Loan Facility
<PAGE> 4
-4-
if the Obligations are refinanced or increased; and (F) contain
"release on sale" provisions whereby the guarantee of the Bridge
Loan Facility given by any Subsidiary of the Borrower would be
automatically released upon (i) the sale of the stock or all or
substantially all of the assets of such Subsidiary, or any merger of
such Subsidiary into another Person permitted under Section 8.4 of
the Credit Agreement; provided that any Subsidiary receiving assets
or stock or surviving a merger in connection therewith is or becomes
a Guarantor of the Bridge Loan or (ii) sale or foreclosure by the
Banks on the stock of a Subsidiary provided that all proceeds of any
such sale or foreclosure would first be applied to the Obligations;
and"
(f) Section 8.2 of the Credit Agreement is hereby amended by (i)
deleting the word "and" at the end of Section 8.2(h), (ii) deleting the period
at the end of Section 8.2(i) and substituting a semi-colon and the word "and"
in place thereof, and (iii) inserting the following new Section 8.2(j)
immediately after Section 8.2(i):
"(j) Liens securing Indebtedness permitted by Section
8.1(p) hereof; provided that the assets subject to such liens and
security interests shall be limited to those solid waste disposal
facilities constructed with the proceeds of the Western Waste IRBs."
(g) Schedule 1 to the Credit Agreement is hereby amended by deleting
such Schedule 1 in its entirety and substituting Schedule 1 attached hereto in
place thereof. By its signature below, each of the Subsidiaries of the
Borrower listed on Exhibit 2(g) to this Fourth Amendment hereby (i) becomes a
party to the Credit Agreement and agrees to be legally bound as a Guarantor
thereunder, (ii) becomes a party to the Pledge Agreement and agrees to be
legally bound as a Pledgor thereunder, (iii) becomes a party to the Security
Agreement and agrees to be legally bound as a Company thereunder.
3. CONSENT TO WESTERN WASTE MERGER. Notwithstanding the provisions of
clause (f) of the second sentence of Section 8.4 of the Credit Agreement, each
of the undersigned Banks, the Agents and the Bank Agents hereby consents to the
Western Waste Merger; provided that (a) no Default or Event of Default has
occurred and is continuing at the time thereof, or would occur after giving
effect thereto; (b) the Western Waste Merger shall be on terms and conditions
substantially the same as described in the Western Waste Merger Agreement, (c)
the Western Waste Merger shall comply with all of the other terms and
conditions set forth in Section 8.4 (other than clause (f) of the second
sentence of Section 8.4), including without limitation, the requirements that
the Riviera Acquisition Corporation Subsidiary and all former Western Waste
<PAGE> 5
-5-
Subsidiaries surviving the Western Waste Merger (collectively, the "Surviving
Western Waste Subsidiaries") shall make each of the representations and
warranties made by a Guarantor under the Credit Agreement and shall become
Guarantors of the Obligations and be made a party to the Credit Agreement, the
Pledge Agreement, the Partnership Pledge Agreement and the Security Agreement,
and the stock of each of the Surviving Western Waste Subsidiaries shall be
pledged and delivered, along with appropriate instruments of transfer executed
in blank, to the Banks under the Pledge Agreement (collectively, the "Adherence
Documents"), in each case on the effective date of the Western Waste Merger,
and (d) the Effective Date shall have occurred.
4. REPRESENTATIONS AND WARRANTIES. The Borrower and the Guarantors
jointly and severally represent and warrant as of the Effective Date as
follows:
(a) The execution, delivery and performance of this Fourth Amendment and
the Credit Agreement, as modified by this Fourth Amendment, and the
transactions contemplated hereby and thereby (i) are within the corporate
authority of the Borrower and each of the Guarantors, (ii) have been duly
authorized by all necessary corporate proceedings on the part of the respective
Borrower or Guarantor, (iii) do not conflict with or result in any material
breach or contravention of any provision of law, statute, rule or regulation to
which the Borrower or any Guarantor is subject or any judgment, order, writ,
injunction, license or permit applicable to the Borrower or any Guarantor so as
to materially adversely affect the assets, business or any activity of the
Borrower and the Guarantors as a whole, and (iv) do not conflict with any
provision of the corporate charter or bylaws of the Borrower or any Guarantor
or any agreement or other instrument binding upon the Borrower or any
Guarantor.
(b) The execution, delivery and performance of this Fourth Amendment and
the Credit Agreement, as modified by this Fourth Amendment, will result in
valid and legally binding obligations of the Borrower and the Guarantors party
thereto enforceable against each in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
(c) The execution, delivery and performance by the Borrower and the
Guarantors of this Fourth Amendment and the Credit Agreement, as modified by
this Fourth Amendment, and the consummation by the Borrower and the
<PAGE> 6
-6-
Guarantors of the transactions contemplated hereby and thereby do not require
any approval or consent of, or filing with, any governmental agency or
authority other than those already obtained and those required after the date
hereof in connection with the Borrower's and the Guarantors' performance of
their covenants contained in Sections 7, 8 and 9 of the Credit Agreement.
(d) The representations and warranties contained in Section 6 of the
Credit Agreement are true and correct in all material respects as of the date
hereof as though made on and as of the date hereof.
(e) No Default or Event of Default under the Credit Agreement has
occurred and is continuing.
5. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects
and shall continue in full force and effect. Each of the Guarantors hereby
confirms that its guaranty of the Guaranteed Obligations contained in Section
27 of the Credit Agreement remains in full force and effect. This Fourth
Amendment and the Credit Agreement shall hereafter be read and construed
together as a single document, and all references in the Credit Agreement, any
other Loan Document or any agreement or instrument related to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended by this
Fourth Amendment.
6. GOVERNING LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT
REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN
ACCORDANCE WITH SUCH LAWS.
7. COUNTERPARTS. This Fourth Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
8. EFFECTIVENESS. This Fourth Amendment shall become effective upon the
satisfaction of each of the following conditions (the "Effective Date"):
(a) This Fourth Amendment shall have been executed and delivered by the
Borrower, the Guarantors, the Majority Banks, the Agents and the Bank Agents;
<PAGE> 7
-7-
(b) All corporate action necessary for the valid execution, delivery and
performance by the Borrower and the Guarantors of the Credit Agreement, as
amended by this Fourth Amendment, and of the Adherence Documents by the
Surviving Western Waste Subsidiaries shall have been taken, and evidence
thereof satisfactory to the Agents shall have been provided to the Agents;
(c) The Agents shall have received a certificate of the Secretary or
Clerk of the Borrower (i) stating that there have been no amendments to or
modifications of the charter documents of the Borrower or any Guarantor since
June 30, 1995 (other than as set forth on such certificate) and (ii) stating
that Schedule 1 to the Credit Agreement sets forth a complete and accurate list
of all of the Subsidiaries of the Borrower as of the Effective Date (other than
as set forth on such certificate);
(d) The Documentation Agent shall have received (i) all of the stock
certificates, together with stock powers executed in blank with respect to the
stock pledged pursuant to the Pledge Agreement, including, without limitation,
the stock certificates of each of the Surviving Western Waste Subsidiaries and
(ii) copies of all charter documents all Surviving Western Waste Subsidiaries;
(e) The Banks shall have received a favorable legal opinion from outside
counsel to the Borrower and the Guarantors addressed to the Banks, dated the
Effective Date, in form and substance satisfactory to the Documentation Agent
concerning the effectiveness of the Western Waste Merger and the Adherence
Documents and such other matters reasonably requested by the Documentation
Agent;
(f) The Documentation Agent shall have received evidence satisfactory in
form and substance to the Documentation Agent as to the existence of no liens
on the assets of the Surviving Western Waste Subsidiaries (other than liens
permitted by the Credit Agreement); and
(g) The Banks shall have received evidence of the closing of the Bridge
Loan Facility on the terms described in Section 8.1(q) hereof.
<PAGE> 8
-8-
IN WITNESS WHEREOF, each of the undersigned have duly executed this Fourth
Amendment under seal as of the date first set forth above.
THE BORROWER:
USA WASTE SERVICES, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer
THE GUARANTORS:
USA WASTE OF HOUSTON, INC.
(FORMERLY BEST PAK DISPOSAL, INC.)
BIG DIPPER ENTERPRISES, INC.
BREM-AIR DISPOSAL, INC.
CENTRAL ILLINOIS DISPOSAL, INC.
COUNTRYSIDE LANDFILL, INC.
CRYSTAL LAKE DISPOSAL, INC.
CUSTOM DISPOSAL SERVICES, INC.
EARTHMOVERS, INC.
ELLIS-SCOTT, INC.
ENVIROFIL, INC.
ENVIROFIL OF ILLINOIS, INC.
(FORMERLY LEROY BROWN & SONS, INC.)
ENVIROFIL SERVICES, INC.
ENVIRONMENTAL WASTE OF
SKAGIT COUNTY, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 9
-9-
EVH CO.
EWA, INC. (FORMERLY MARCH
ACQUISITION CORPORATION)
FORCEES, INC.
JUAN DE FUCA CORRUGATED, LTD.
OLYMPIC VIEW SANITARY
LANDFILL, INC. (FORMERLY, KITSAP
COUNTY SANITARY LANDFILL, INC.)
LAKELAND PROPERTIES, INC.
LIBERTY LANDFILL, INC.
MEADOWBROOK CARTING CO., INC.
MID-JERSEY DISPOSAL CO., INC.
MID-VALLEY ACQUISITION
CORPORATION
MISSION DISPOSAL, INC.
NORTH SOUND SANITATION, INC.
QUALITY RECYCLING CO., INC.
SACRAMENTO VALLEY
ENVIRONMENTAL WASTE COMPANY
SOIL REMEDIATION OF
PHILADELPHIA, INC.
SOUTH SOUND SANITATION, INC.
STANWOOD CAMANO DISPOSAL, INC.
STOCKTON SCAVENGERS ASSOCIATION
USA WASTE HAULING OF
PHILADELPHIA, INC.
USA WASTE OF OKLAHOMA, INC.
(FORMERLY UNITED SANITATION ASSOCIATES
WASTE MANAGEMENT, INC.)
USA WASTE OF ARIZONA, INC.
USA WASTE OF ILLINOIS, INC.
USA WASTE OF INDIANA, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 10
-10-
USA WASTE OF TEXAS, INC.
(FORMERLY USA WASTE SERVICES,
INC. OF TEXAS)
U.S.A. WASTE OF FAIRLESS
HILLS, INC.
CLEANSOILS FAIRLESS HILLS, INC.
WEST VIRGINIA WASTE SERVICES, INC.
WPP, INC.
WASTE RECOVERY CORPORATION
CHAMBERS ACQUISITION CORP.
CHAMBERS DEVELOPMENT COMPANY, INC.
CHAMBERS CLEARVIEW
ENVIRONMENTAL LANDFILL, INC.
CHAMBERS DEVELOPMENT OF
OHIO, INC.
CHAMBERS DEVELOPMENT OF
VIRGINIA, INC.
CHAMBERS ENTERPRISES, INC.
CHAMBERS INTERNATIONAL, INC.
CHAMBERS LAUREL HIGHLANDS
LANDFILL, INC.
CHAMBERS ENERGY, INC.
(FORMERLY CHAMBERS MAPLEWOOD
LANDFILL, INC.)
CHAMBERS MEDICAL
TECHNOLOGIES, INC.
(INCORPORATED 2/12/85)
CHAMBERS MEDICAL
TECHNOLOGIES, INC.
(INCORPORATED 4/26/91)
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 11
-11-
CHAMBERS MEDICAL
TECHNOLOGIES OF SOUTH
CAROLINA, INC.
CHAMBERS OAKRIDGE USA
LANDFILL, INC.
CHAMBERS ORANGE COUNTY
LANDFILL, INC.
CHAMBERS RESOURCES, INC.
CHAMBERS RICHLAND COUNTY
LANDFILL, INC.
CHAMBERS SERVICES, INC.
CHAMBERS SMYRNA LANDFILL, INC.
CHAMBERS WASTE SYSTEMS OF
CALIFORNIA, INC.
CHAMBERS WASTE SYSTEMS OF
FLORIDA, INC.
CHAMBERS WASTE SYSTEMS OF
MISSISSIPPI, INC.
CHAMBERS WASTE SYSTEMS OF
NEW YORK, INC.
CHAMBERS WASTE SYSTEMS OF
NORTH CAROLINA, INC.
CHAMBERS WASTE SYSTEMS OF
OHIO, INC.
CHAMBERS WASTE SYSTEMS OF
NEW JERSEY, INC.
CHAMBERS WASTE SYSTEMS OF
RHODE ISLAND, INC.
CHAMBERS WASTE SYSTEMS OF
SOUTH CAROLINA, INC.
CHAMBERS WASTE SYSTEMS OF
TEXAS, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 12
-12-
CHAMBERS OF DELAWARE, INC.
CHAMBERS OF GEORGIA, INC.
CHAMBERS OF ILLINOIS, INC.
CHAMBERS OF INDIANA, INC.
CHAMBERS OF NEW JERSEY, INC.
CHAMBERS OF MARYLAND, INC.
CHAMBERS OF MASSACHUSETTS, INC.
CHAMBERS OF MISSISSIPPI, INC.
CHAMBERS OF PENNSYLVANIA, INC.
CHAMBERS OF TENNESSEE, INC.
CHAMBERS OF WEST VIRGINIA, INC.
DAUPHIN MEADOWS, INC.
THE H. SIENKNECHT CO.
LCS SERVICES, INC.
WILLIAM H. MARTIN, INC.
MORRIS COUNTY TRANSFER
STATION, INC.
RAIL-IT CORPORATION
REMOTE LANDFILL SERVICES, INC.
CDC SERVICES, INC.
SOUTHERN ALLEGHENIES
DISPOSAL SERVICES, INC.
U.S. SERVICES CORPORATION
U.S. UTILITIES SERVICES CORP.
CHAMBERS R & B LANDFILL, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
<PAGE> 13
-13-
WHITE BROS. TRUCKING COMPANY
USA WASTE TRANSFER OF
PHILADELPHIA, INC.
USA WASTE SERVICES OF WESTERN
ILLINOIS, INC.
ART-JO COMPANY
BRAZORIA COUNTY RECYCLING CENTER,
INC.
ELLESOR, INC.
FULTON SANITATION SERVICE, INC.
MODERN SANITATION, INC.
OLD DOMINION RECYCLING
SERVICE, INC.
SAFETY RECYCLING COMPANY, INC.
SUNRAY SERVICES, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Earl E. DeFrates, Executive Vice
President and Chief Financial
Officer of each of the Companies
listed above
RAIL-IT LIMITED PARTNERSHIP
By: Rail-It Corporation,
Its General Partner
By: /s/ EARL E. DEFRATES
------------------------------------
Title: VP
---------------------------------
<PAGE> 14
-14-
THE BANKS AND AGENTS:
THE FIRST NATIONAL BANK OF BOSTON,
Individually and as Documentation Agent
and Issuing Bank and as Agent
By: /s/ CHARLES C. WOODARD
------------------------------------
Title: Managing Director
---------------------------------
BANK OF AMERICA, ILLINOIS, Individually
and as Agent
By: /s/ ROBERT P. ROSPIERSKI
------------------------------------
Title: Vice President
---------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, Individually and as the
Administrative Agent
By: /s/ LAURA E. REIM
------------------------------------
Title: Vice President
---------------------------------
J.P. MORGAN SECURITIES INC., as Agent
By: /s/ CAROLINE NAPIER
------------------------------------
Title: Vice President
---------------------------------
THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. ASHBY
------------------------------------
Title: Senior Manager Loan Operations
---------------------------------
<PAGE> 15
-15-
BANK ONE, TEXAS N.A.
By: /s/ H. GALE SMITH
------------------------------------
Title: Vice President
---------------------------------
BANK OF TOKYO, LTD., DALLAS
AGENCY
By: /s/ JOHN E. BECKWITH
------------------------------------
Title: Vice President
---------------------------------
BANQUE PARIBAS, HOUSTON
AGENCY
By: /s/ CHERYL JOHNSON
------------------------------------
Title: Assistant Vice President
---------------------------------
By: /s/ SCOTT CLINGAN
------------------------------------
Title: Vice President
---------------------------------
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ LIND PACE /s/ EVON CONTOS
------------------------------------
Title: Assistant Vice President
---------------------------------
Vice President
---------------------------------
CIBC INC.
By: /s/ GARY C. GASKILL
------------------------------------
Title: Authorized Signatory
---------------------------------
COMERICA BANK
By: /s/ CHARLES A. VIANE
------------------------------------
Title: First Vice President
---------------------------------
<PAGE> 16
-16-
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK,
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By: /s/ MICHEL DE KONKOLY THEGE
------------------------------------
Title: Deputy General Director
---------------------------------
By: /s/ DANA W. HEMENWAY
------------------------------------
Title: Vice President
---------------------------------
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ ROBERT H. DIAL
------------------------------------
Title: Vice President
---------------------------------
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: /s/ ROBERT H. DIAL
------------------------------------
Title: Vice President
---------------------------------
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By: /s/ JEAN M. HANNIGAN
------------------------------------
Title: Assistant Vice President
---------------------------------
By: /s/ JAMES FOX
------------------------------------
Title: Assistant Vice President
---------------------------------
FIRST INTERSTATE BANK OF TEXAS,
N.A.
By: /s/ CRAIG T. SCHEEF
------------------------------------
Title: Vice President
---------------------------------
<PAGE> 17
-17-
FLEET BANK OF MASSACHUSETTS,
N.A.
By: /s/ THOMAS J. BULLARD
------------------------------------
Title: Vice President
---------------------------------
THE FUJI BANK, LIMITED, HOUSTON
AGENCY
By: /s/ P. C. LAURINGER, III
------------------------------------
Title: Vice President & Joint Manager
---------------------------------
HIBERNIA NATIONAL BANK
By: /s/ TROY VILLAFARA
------------------------------------
Title: Vice President
---------------------------------
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By: /s/ S. OTSUBO
------------------------------------
Title: Joint General Manager
---------------------------------
NATWEST BANK N.A.
By: /s/ DILCIA PENA HILL
------------------------------------
Title: Vice President
---------------------------------
THE NIPPON CREDIT BANK, LTD.
By: /s/ YOSHIHIDE WATANABE
------------------------------------
Title: Vice President & Manager
---------------------------------
<PAGE> 18
-18-
THE SUMITOMO BANK, LTD. -
HOUSTON AGENCY
By: /s/ TOSHIRO KUBOTA
------------------------------------
Title: Joint General Manager
---------------------------------
SOCIETY NATIONAL BANK
By: /s/ SHARON WEINSTEIN
------------------------------------
Title: Vice President
---------------------------------
UNION BANK
By: /s/ JULIE BLOOMFIELD
------------------------------------
Title: Vice President
---------------------------------
WELLS FARGO BANK, N.A.
By: /s/ KELLIE DEWHITT
------------------------------------
Title: Vice President
---------------------------------
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By: /s/ JEFFREY W. MAILLET
------------------------------------
Title: Sr. Vice Pres. Portfolio Mgr.
---------------------------------
THE SANWA BANK, LIMITED, DALLAS AGENCY
By: /s/ MATTHEW G. PATRICK
------------------------------------
Title: Vice President
---------------------------------
<PAGE> 19
Schedule I
Information Relating to the Company and its Subsidiaries
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
USA Waste Services, Inc. Delaware Texas 5400 LBJ Freeway, Company 150,000,000
Suite 300
Dallas, TX 75240
USA Waste of Oklahoma, Inc. Oklahoma N/A 2001 N Portland Company 500 500
Newcastle, OK 73065
USA Waste of Texas, Inc. Texas N/A 250 S Business 45 Company 1,000 1,000
Corsicana, TX 75110
Mission Disposal, Inc. Texas N/A 4730 SE Loop 410 USA Waste of 1,000,000 1,000
San Antonio, TX 78222 Texas
USA Waste Services of Texas N/A 10701 Todd Rd. USA Waste of 500,000 500,000
Houston, Inc. (formerly Houston, TX 75055 Texas
Best Pak Disposal, Inc.)
Brazoria County Recycling Texas N/A 100 Genoe-Red Bluff Road Company 1,000 1,000
Center, Inc. Houston, Texas 77034
Modern Sanitation, Inc. Texas N/A 5400 LBJ Freeway Company 12,000
(formerly EDM Corporation) Suite 300 40,000
Dallas, Texas 75240 Preferred
USA Waste of Illinois, Inc. Illinois N/A 105 Skokie Valley Rd. Company 10,000 1,000
Lade Bluff, Il 60044
Countryside Landfill, Inc. Illinois N/A 31725 N Rte 83 USA Waste of 1,000,000 20,000
Grayslake, IL 60030 Illinois
Lakeland Properties, Inc. Illinois N/A 31725 N Rte 83 USA Waste of 100,000 1,000
Grayslake, IL 60030 Illinois
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Central Illinois Illinois N/A 5400 LBJ Freeway, USA Waste of 10,000 1,000
Disposal, Inc. Suite 300 Illinois
Dallas, TX 75240
Crystal Lake Disposal, Inc. Delaware Illinois 9310 Route 176 USA Waste of 4,000 2,000
Crystal Lake, IL 60014 Illinois
USA Waste Services of Illinois N/A 5400 LBJ Freeway, USA Waste of
Western Illinois, Inc. Suite 300 Illinois
Dallas, TX 75240
Big Dipper Enterprises, North Dakota N/A Hwy 31 Company 50,000 50,000
Inc. Gwinner, N.D. 58040
Waste Recovery Corporation Ohio N/A 1350 W 5th Ave. Company 500 500
Suite 227
Columbus, OH 43212
USA Waste of Indiana, Inc. Indiana N/A 1250 S & Hwy 43 Company 10,000 1,000
Brookston, IN 47923
Earthmovers, Inc. Indiana N/A 26488 County Road 26 USA Waste of 1,000 100
Elkhart, IN 46517 Indiana
Liberty Landfill, Inc. Indiana N/A 8625 E State Rd 16 USA Waste of 1,000 100
Monticello, IN 47960 Indiana
USA Waste of Arizona, Inc. Arizona N/A 5400 LBJ Freeway, Company 1,000,000 1,000
Suite 300
Dallas, TX 75240
Custom Disposal Service, Arizona N/A 5400 LBJ Freeway, USA Waste of 100,000 Class A 100,000
Inc. Suite 300 Arizona 142,231 Class B 142,231
Dallas, TX 75240
</TABLE>
2
<PAGE> 21
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Soil Remediation of Delaware Pennsylvania 3201 S 61st Company 1,000 100
Philadelphia, Inc. Philadelphia, PA 19153
WPP, Inc. Ohio N/A 5400 LBJ Freeway, Company 750
Suite 300
Dallas, TX 75240
West Virginia Waste W. Virginia N/A South Park Rd. Company 1,000 1,000
Services, Inc. Charleston, W.V. 25304
Envirofil, Inc. Delaware Texas 5400 LBJ Freeway, Company 100,000,000 100
Suite 300
Dallas, TX 75240
Envirofil Services, Inc. Delaware N/A 5400 LBJ Freeway, Envirofil 1,000 100
Suite 300
Dallas, TX 75240
EVH Co. Delaware N/A 5400 LBJ Freeway, Envirofil 1,000 100
Suite 300
Dallas, TX 75240
Envirofil of Illinois, Inc. Illinois N/A 13998 E 1400th St. Envirofil 2,000 1,000
Mcombe, IL 61455
Ellis-Scott, Inc. Missouri N/A 61 NW 850 Envirofil 100,000 100,000
Clinton, MO 64735
Sacramento Valley California N/A 8761 Younger Creek Dr Envirofil 100,000 3,500
Environmental Waste Company Sacramento, CA 95827
Mid-Valley Acquisition Delaware N/A 5400 LBJ Freeway, Envirofil 1,000 1,000
Corporation Suite 300
Dallas, TX 75240
</TABLE>
3
<PAGE> 22
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
EWA, Inc. Delaware N/A 5400 LBJ Freeway, Envirofil 5,000 1,000
Suite 300
Dallas, TX 75240
Stockton Scavengers California N/A 1240 Navy Dr Envirofil 75,000 8,000
Association Stockton, CA 95206
Olympic View Sanitary Washington N/A 10015 SW Barney White Rd. Envirofil 10,000 10,000
Landfill, Inc. Port Orchard, WA 98366
(formerly Kitsap County
Sanitary Landfill, Inc.)
Brem-Air Disposal, Inc. Oregon Washington 512 Sheldon Rd. Envirofil 500 200
Bremerton, WA 98310
North Sound Sanitation, Washington N/A 512 Sheldon Rd. Brem-Air 1,000 1,000
Inc. Bremerton, WA 98310
South Sound Sanitation, Washington N/A 512 Sheldon Rd. Brem-Air 10,000 1,000
Inc. Bremerton, WA 98310
Juan De Fuca Corrugated, Washington N/A 512 Sheldon Rd. Brem-Air 1,000 500
Ltd. Bremerton, WA 98310
Stanwood Camano Disposal, Washington N/A 27028 Ninety-Ninth EWA 500 394
Inc. Ave. NW
Stanwood, WA 98292
Environmental Waste of Washington N/A 998 Chuckanut Dr. EWA 5,000,000 100
Skagit County, Inc. Burlington, WA 98233
</TABLE>
4
<PAGE> 23
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Offier Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Meadowbrook Carting Co., New Jersey N/A 505 Memorial Dr. Envirofil 200 100
Inc. Neptune, N.J. 07753
Mid-Jersey Disposal Co., New Jersey N/A 505 Memorial Dr. Envirofil 1,000 100
Inc. Neptune, N.J. 07753
Quality Recycling Co., Inc. New Jersey N/A 505 Memorial Dr. Envirofil 2,500 300
Neptune, N.J. 07753
Forcees, Inc. New Jersey N/A N Mainshore Rd. Envirofil 100 100
Waretown, N.J. 08758
White Bros, Trucking New Jersey N/A 864 Julia Street Company
Company Elizabeth, N.J. 07201
Art-Jo Company New Jersey N/A 864 Julia Street Company
Elizabeth, N.J. 07201
Elleson, Inc. New Jersey N/A 864 Julia Street Company
Elizabeth, N.J. 07201
Safety Recycling Company, New Jersey N/A 864 Julia Street Company
Inc. Elizabeth, N.J. 07201
CleanSoils Fairless Hills, Minnesota Pennsylvania USX Fairless Works Company 1,000,000
Inc. Fairless Hills, PA 19030
U.S.A. Waste of Fairless Delaware N/A USX Fairless Works Company
Hills, Inc. Fairless Hills, PA 19030
</TABLE>
5
<PAGE> 24
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
USA Waster Hauling of Delaware Pennsylvania 5400 LBJ Freeway, Company
Philadelphia, Inc. Suite 300
Dallas, Texas 75240
USA Waster Transfer of Delaware Pennsylvania 5400 LBJ Freeway, Company
Philadelphia Suite 300
Dallas, Texas 75240
Sunray Services, Inc. Delaware Arkansas, 5400 LBJ Freeway, Company
Texas Suite 300
Dallas, Texas 75240
Old Dominion Recycling Virginia N/A 5400 LBJ Freeway, Company
Services, Inc. Suite 300
Dallas, Texas 75240
Fulton Sanitation Services, Arkansas N/A 5400 LBJ Freeway, Company
Inc. Suite 300
Dallas, Texas 75240
USA Waste of Massachusetts, Massachusetts N/A 5400 LBJ Freeway, Company &
Inc. Suite 300 Modern
Dallas, Texas 75240 Sanitation
</TABLE>
6
<PAGE> 25
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Chambers Development Delaware Connecticut 5400 LBJ Freeway, Company 100,000,000 A 100
Company, Inc. California Suite 300 50,000,000 B
("Chambers") North Carolina Dallas, TX 75240
South Carolina
West Virginia
New Jersey
Pennsylvania
Georgia
Illinois
District of
Columbia
Ohio
Maryland
Virginia
Massachusetts
New York
Chambers Clearview Mississippi N/A 5400 LBJ Freeway, Chambers of 5,000 1,000
Environmental Suite 300 Georgia, Inc.
Landfill, Inc. Dallas, TX 75240
</TABLE>
7
<PAGE> 26
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Chambers Development of Ohio N/A 323 S. Main St. Chambers 1,000 500
Ohio, Inc. Cadiz, OH 73907
Chambers Development of Virginia N/A 2307 E. Broad St. Chambers 5,000 100
Virginia, Inc. Richmond, VA 11213 Waste
Systems of
VA, Inc.
Chambers Enterprises, Inc. Pennsylvania N/A 5400 LBJ Freeway, Chambers 1,000 1,000
Suite 300
Dallas, TX 75240
Chambers International, Delaware N/A 5400 LBJ Freeway, Chambers 5,000 1,000
Inc. Suite 300
Dallas, TX 75240
Chambers Laurel Highlands Pennsylvania N/A R.D. 1 Box 10 Chambers 5,000 1,000
Landfill, Inc. Wagner Rd.
Vittondale, PA 15961
Chambers Energy, Inc. Virginia N/A Business Rt. 364 Chambers Waste 1,000 1,000
(formerly Chambers Maplewood VIllage Dell Spg Ctr Systems of VA, Inc.
Landfill, Inc.) Amelia, VA 23002
Chambers Medical Pennsylvania N/A One Monroeville Center Chambers 100,000 1,000
Technologies, Inc. Monroeville, PA 15146
(Incorporated 2/12/85)
Chambers Medical Pennsylvania N/A One Monroeville Center Chambers 100,000,000 A 1,000
Technologies, Inc. Monroeville, PA 15146 50,000,000
(Incorporated 4/26/91)
</TABLE>
8
<PAGE> 27
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Chambers Medical South Pennsylvania 100 Nix Street Chambers 5,000 1,000
Technologies of South Carolina New Jersey Hampton, SC 29924 Medical
Carolina Inc. Technologies,
Inc.
Chambers Oakridge South N/A Rt. 1 Box 899 Chambers 1,000 100
Landfill, Inc. Carolina Dorchester, SC 29437 Waste Systems
of SC, Inc.
Chambers Orange County Florida N/A Chambers 5,000 1,000
Landfill, Inc. Waste Systems
of FA, Inc.
Chambers Resources, Inc. Pennsylvania N/A 5400 LBJ Freeway, Chambers 1,000 100
Suite 300
Dallas, TX 75240
Chambers Richland County South N/A 1521 Screaming Eagle Chambers 1,000 1,000
Landfill, Inc. Carolina Elgin, SC 29045 Waste Systems
of SC, Inc.
Chambers Services, Inc. Delaware New York 5400 LBJ Freeway, Chambers 1,500 1,000
Virginia Suite 300
Pennsylvania Dallas, TX 75240
Chambers Smyrna Lanfill, Georgia N/A 5455 Oakdale Rd. Chambers of 100,000 500
Inc. Smyrna, GA 30092 Georgia, Inc.
Chambers Waste Systems of California N/A 50 Airport Parkway Chambers 5,000 1,000
California, Inc. San Jose, CA 95113
Chambers Waste Systems of Florida N/A 10600 N.E. 128th Chambers 5,000 1,000
Florida, Inc. Okeechobee, FL 34972
</TABLE>
9
<PAGE> 28
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Chambers Waste Systems of Mississippi N/A Route 2, Box 85C Chambers 5,000 1,000
Mississippi, Inc. Lake, MS 39092
Chambers Waste Systems of New Jersey N/A 1 Disposal Rd. Chambers of 1,000 1,000
New Jersey, Inc. N. Arlington, NJ 07232 New Jersey,
Inc.
Chambers Waste Systems of New York N/A 5400 LBJ Freeway, Chambers 5,000 1,000
New York, Inc. Suite 300
Dallas, TX 75240
Chambers Waste Systems of North N/A 4290 Joe St. Chambers 100 100
North Carolina, Inc. Carolina Charlotte, NC 28206
Chambers Waste Systems of Ohio N/A 232 S. Main Chambers 5,000 1,000
Ohio, Inc. Cadiz, OH 43917
Chambers Waste Systems of Rhode Island N/A 1615 Pontiac Ave. Chambers 1,000 1,000
Rhode Island, Inc. Cranston, RI 02920
Chambers Waste Systems of South North 6417 Fairfield Chambers 100,000 1,000
South Carolina, Inc. Carolina Carolina Columbia, SC 29203
Chambers Waste Systems of Texas N/A 2720 Coombsville Ave. Chambers 1,000,000 1,000
Texas, Inc. Dallas, TX 75212
Chambers of Delaware, Inc. Delaware N/A 5400 LBJ Freeway, Chambers 1,000 1,000
Suite 300
Dallas, TX 75240
</TABLE>
10
<PAGE> 29
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Chambers of Georgia Georgia N/A 2097 Buchanan Hwy Chambers 100,000 1,000
Cedartown, GA 30125
Chambers of Illinois Illinois N/A 733 Kilbourne Ave. Chambers 1,000 1,000
Chicago, IL 62655
Chambers of Indiana, Inc. Indiana N/A 504 Mor-Land Dr. Chambers 1,000 1,000
Lafayette, IN 47905
Chambers of Maryland, Inc. Maryland N/A Rt 1 Box 562 Chambers 1,000 1,000
Frostburg, MD 21532
Chambers of Massachusetts, Massachusetts N/A 1063 N. Main St. Chambers 5,000 1,000
Inc. Brockton, MA 02401
Chambers of Mississippi, Mississippi N/A Route 2, Box 85C Chambers 5,000 1,000
Inc. Lake, MS 39092
Chambers of New Jersey, New Jersey N/A 9 Sylvan Way, Ste 170 Chambers 1,000 1,000
Inc. Parsippany, NJ 07054
Chambers of New Jersey New Jersey Pennsylvania 5400 LBJ Freeway, Chamber of 1,000 1,000
Recycling, Inc. Suite 300 New Jersey,
Dallas, TX 75240 Inc.
Chambers of Pennsylvania, Pennsylvania N/A 7429 Allentown Blvd Chambers 3,000 200
Inc. Harrisburg, PA 17112
Chambers of Tennessee, Inc. Tennessee N/A Oakridge, TN 37931 Chambers 5,000 100
</TABLE>
11
<PAGE> 30
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other Shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Chambers of West Virginia, West Virginia N/A Chambers 3,000 100
Inc.
Dauphin Meadows, Inc. Pennsylvania N/A Route 209, RD #1 Chambers 10,000 170
Millersburg, PA 17061
The H. Sienknecht Co. Tennessee N/A Remote 1,000 V 5,000
Landfill 5,000 NV
Services Inc.
LCS Services, Inc. West Virginia N/A N. Mountain Landfill Chambers of 15,000 15,000
Allensville, Rd. West
hedgesville, WV 35427 Virginia,
Inc.
William H. Martin, Inc. Pennsylvania New Jersey 951 Henderson Ave. Chambers 4,000 2,468
Washington, PA 15301
Morris County Transfer New Jersey Pennsylvania 9 Sylvan Way, Ste 170 Chambers of 1,000 1,000
Station, Inc. Ohio Parsippany, NJ 07054 New Jersey,
Inc.
Rail-It Corporation Illinois N/A 5400 LBJ Freeway, Chambers 140,000 140,000
Suite 300
Dallas, TX 75240
Rail-It Limited Partnership Illinois N/A 5400 LBJ Freeway, Rail-It(GP)
Suite 300
Dallas, TX 75240
Remote Landfill Services, Tennessee N/A 5400 LBJ Freeway, Chambers of 1,000 1,000
Inc. Suite 300 Tennessee,
Dallas, TX 75240 Inc.
</TABLE>
12
<PAGE> 31
<TABLE>
<CAPTION>
Jurisdictions Stock
in Ownership
which by the
Jurisdiction Qualified Company Authorized
of as a Foreign Address of Chief and Other shares of Outstanding
Name Incorporation Corporation Executive Officer Subsidiaries* Common Stock Shares
---- ------------- ----------- ------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
CDC Services, Inc. Delaware California 5400 LBJ Freeway, Chambers 1,000,000 A 1,050,000
Florida Suite 300 500,000 B
Pennsylvania Dallas, TX 75240
Southern Alleghenies Pennsylvania N/A R.D. 3, box 310 U.S. Services 1,000,000 5,000
Disposal Services, Inc. Valley View Dr. Corporation
Holsopple, PA 15935
U.S. Services Corporation Pennsylvania N/A 5400 LBJ Freeway, Chambers 5,000 A 5,000
Suite 300 5,000 B
Dallas, TX 75240
U.S. Utilities Services Pennsylvania N/A 5400 LBJ Freeway, U.S. Services 1,200,000 1,082,800
Corp. Suite 300 Corporation
Dallas, TX 75240
Chambers R & B Landfill, Georgia N/A 5400 LBJ Freeway, Chambers of 100
Inc. Suite 300 Georgia, Inc.
Dallas, TX 75240
</TABLE>
13
<PAGE> 32
EXHIBIT 2(g)
New Guarantors
1. White Bros. Trucking Company
2. USA Waste Transfer of Philadelphia, Inc.
3. USA Waste Services of Western Illinois, Inc.
4. Art-Jo Company
5. Brazoria County Recycling Center, Inc.
6. Ellesor, Inc.
7. Fulton Sanitation Service, Inc.
8. Modern Sanitation, Inc.
9. Old Dominion Recycling Service, Inc.
10. Safety Recycling Company, Inc.
11. Sunray Services, Inc.
12. USA Waste of Massachusetts, Inc.
<PAGE> 1
Exhibit 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
December 18, 1995, by and between USA WASTE SERVICES, INC., a Delaware
corporation (the "Company"), and Kosti Shirvanian ("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.
The Company and Employee have executed a letter agreement of even date
herewith attached hereto as Exhibit A concerning the composition of the Board
of Directors of the Company and Employee's rights to designate certain members
thereof.
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 Chairman of the Company, member of the
Executive Committee of the Company's Board of Directors and Chairman of Western
Waste Industries ("Western") 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 as are commensurate with his position as Vice Chairman of the
Company, and have such additional duties, powers, authority, functions and
responsibilities as may be assigned to him by the Company's Board of Directors
or by John E. Drury or by Donald F. Moorehead, Jr. 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 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 the
<PAGE> 2
activities of making and managing his personal investments and to expend no
more than ten (10) hours per week in a truck body and equipment manufacturing
enterprise provided such investments or other activities do not violate in any
material respect the terms of Sections 6, 7 or 8 hereof.
C. During the term of the Employee's employment under this
Agreement, the Company will designate as Employee's principal place of
employment either the current offices of Western Waste Industries in Torrance,
California or such other locations that are within a radius of ten (10) miles
of Employee's current principal place of residence in Newport Beach,
California. In addition, Employee shall be entitled to retain a full-time
secretary of his choosing at the Company's cost at compensation levels that are
commensurate with other similarly situated employees but no less than amounts
paid to his current secretary.
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 commence on the effective date of the merger ("Merger") between Western
Waste Industries and Riviera Acquisition Corporation ("Effective Date")
pursuant to the Agreement and Plan of Merger of even date herewith (the "Merger
Agreement") and be for a continually renewing term of five (5) years without
any further action by either the Company or the Employee (during which period
Employee shall be deemed to be on "active status"). In the case where the term
of Employee's employment under this Agreement extends beyond the fifth
anniversary date of this agreement ("Fifth Anniversary Date"), it is the
intention of the parties that there shall be continuously a term of five (5)
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.
3. COMPENSATION
For all services rendered by the Employee while on active status under
this Agreement, the Company agrees to compensate the Employee, 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 $500,000 (as the same may be increased 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 increased by a minimum of 10% per year compounded
annually (but not decreased or adjusted other than as provided in Section 4 of
this Agreement) or such greater amount, if approved, in the sole discretion of
the Compensation Committee of the Board of Directors of the Company (or a
similar Board committee, hereinafter referred to as the "Compensation
Committee"). Notwithstanding the foregoing, if at any time a principal
executive
-2-
<PAGE> 3
officer of the Company or any of its subsidiaries (other than John E. Drury)
has a base salary in excess of Employee's Base Salary, the Company shall
increase Employee's Base Salary to an amount equal to such principal executive
offiicer's base salary.
B. Other Compensation.
(i) Bonus. The Employee shall be entitled to a guaranteed annual
bonus of $250,000 ("Guaranteed Bonus"), shall be eligible for a
discretionary annual bonus in an amount not to exceed an additional
$250,000 and shall be entitled 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
bonus payable as provided above is applicable to less than a full
year, such bonus shall be pro-rated for the portion of such year to
which such bonus applies. All annual bonus payments shall be made
within 90 days after the end of the Company's fiscal year for which
such bonus was earned. The phrase "principal executive officer" as
used in this Agreement shall mean 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.
(ii) Stock Options. As of the Effective Date, Employee shall be
granted stock options to purchase 900,000 shares of common stock of
the Company under a Plan registered under the Securities Act of 1933
with an exercise price equal to the closing trading price on the New
York Stock Exchange for such stock on the Effective Date. Employee
shall be entitled to additional grants of stock options on each of the
first four anniversary dates of the Effective Date to purchase 162,500
shares of common stock of the Company with an exercise price equal to
the closing trading price on the New York Stock Exchange for such
stock on the date of the grant. Such grants shall be appropriately
adjusted in the event of a stock split, stock dividend or other
similar change affecting stock rights in the Company's common stock.
All stock options granted to Employee as set forth in this subsection
shall have a life of ten (10) years and shall vest twenty (20%) per
year over the first five years after the date of grant. In the event
of the death of Employee, the vesting period for all stock options
granted under this subsection to Employee prior to the date of
Employee's death shall accelerate and be fully vested as of the date
of death and shall be exercisable by Employee's estate for a period of
one year after such date of death but not beyond the remaining option
term. In consideration of this Employment Agreement, Employee hereby
agrees that with respect to the Company options into which, the
unexpired and unexercised Western Waste Industries options held by him
shall convert on the Effective Date, that
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Employee will not elect to accelerate the option vesting period but
will rather allow such options to vest on the Western Waste vesting
schedule of such grant.
(iii) Life Insurance. In the event Western Waste Industries
("Western") does not, prior to the Effective Time, make a single
premium payment to satisfy its obligations to pay (until such policies
are fully paid up) two thirds (2/3) and Employee's obligation to pay
(until such policies are fully paid up) one third (1/3) of the
premiums with respect to the split dollar life insurance program
described in Western's proxy statement dated December 5, 1995 on the
life of Employee and his wife, Marian Shirvanian, then the Company
will assume and pay such single premium payments covering the total
obligations of Western thereunder and the Employee's obligations to
make premium payments. Both of such payments will be recoupable out
of the death benefits of such policies, on a split dollar basis.
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
reasonably requested by the
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<PAGE> 5
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) A "Change in Control" 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, or
(3) either John E. Drury or Donald F.
Moorehead, Jr. are no longer employed full- time by
the Company.
provided, however, that 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
acquire more than 25% of the Company's outstanding securities
entitled to vote in the election of directors in connection
with such business combination, shall not be deemed to be
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<PAGE> 6
a "Change in Control" unless as a result thereof, either John
E. Drury or Donald F. Moorehead, Jr. are no longer employed
full-time by the Company.
(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, the Employee may, in his sole discretion, within
three (3) months after the date of the Change of Control, give notice
to the Secretary 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), 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
Secretary 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 Salary plus
Guaranteed Bonus, 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,
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<PAGE> 7
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 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, REVISED COMPENSATION, DEATH, AND
DISABILITY
A. Termination. The employment of the Employee under this
Agreement, while the Employee is on active status, may be terminated 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 (a)
shall have either failed
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<PAGE> 8
to remedy such alleged breach within forty-five (45) days from his
receipt of written notice from the Secretary of the Company demanding
that he remedy such alleged breach, or (b) 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 and/or his attorney or representative was given an
opportunity to be heard, finding that the Employee was guilty of
conduct set forth in this clause (y) (which finding is reflective of a
final judgment of a court of competent jurisdiction), 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 final judgment of a court of competent
jurisdiction that the Employee has engaged in willful fraud or
defalcation involving material funds or other assets of the Company,
or
(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 five (5) years after the date
on which such notice is received by the Employee; provided, however,
in no event shall such notice be deemed received by the Employee prior
to the Fifth Anniversary Date.
B. Termination Payment.
(i) 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 (x) cease to be entitled to
receive his Base Salary or Guaranteed Bonus except for the monthly
installment of his Base Salary for the month in which such termination
occurs plus the pro rata portion of the Guaranteed Bonus through the
time of termination and (y) with respect to stock options, units and
award plans, any options theretofor granted shall vest in full, but
the Company shall have no obligation to make any further grants of
options or awards under Section 3B(ii) or otherwise.
(ii) In the event of termination of the Employee's
employment under this Agreement by the Company under Section 4A(iii),
the Employee shall continue to receive the monthly installment of Base
Salary and Guaranteed Bonus up to the Fifth Anniversary Date and
thereafter the compensation described in 4D.
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<PAGE> 9
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 five (5) years after the Fifth Anniversary Date.
(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 Secretary 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, subject to the provisions of Section
4(D)(iii) and (vii), be placed on part-time employment status for a
period of five (5) years after the Fifth Anniversary Date.
D. Employee's Rights on Part-time Status. During the period that
the Employee is on part-time status,
(i) Except as provided in Section 4B(i) the Company shall
pay Employee a revised, guaranteed minimum annual Base Salary from the
date the Employee ceases to be on active status for a period of five
(5) years in an amount equal to seventy-five percent (75%) of the sum
of the average of the total annual Base Salary plus the average
guaranteed annual bonus ("Revised Minimum Bonus") paid to the Employee
by the Company for the two (2) highest of the three (3) compensation
years immediately preceding the compensation year in which the notice
specified in Section 4(A)(iii), or Section 4(G) of this Agreement is
given;
(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 Los Angeles/Riverside/Anaheim,
California (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
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<PAGE> 10
compensation, 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) The Employee shall continue to receive any
options not theretofore granted under Section 3B(ii).
Thereafter, Employee shall continue to participate in stock
option, unit or award plans of the Company and the Employee's
right to continue participation (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) 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
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<PAGE> 11
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;
(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
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<PAGE> 12
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 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 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 Base Salary and Guaranteed
Bonus described under Sections 3A and 3B for the period remaining prior to the
Fifth Anniversary Date (if any) plus the Revised Minimum Compensation for the
remainder of the part-time payment period under this Agreement.
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, and
(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 five (5) 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
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Employee the Base Salary and Guaranteed Bonus described under Sections
3A and 3B for the period remaining prior to the Fifth Anniversary Date
(if any) and the Revised Minimum Compensation for the remainder of the
part-time payment period under this Agreement; 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 Revised Minimum
Compensation for the remainder of the part-time payment period under
this Agreement;
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, 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 Employee to retain because of his role as a
director of the Company and which was received by Employee on his role as a
director of 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 John E.
Drury or Donald F. Moorehead, 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, (ii) annual vacations in accordance with the vacation policy
established by the Company for the Company's principal executive officers
during which time his applicable compensation shall be paid in full, and (iii)
reimbursement of the cost of an annual medical examination of Employee. In
leiu of an automobile allowance, Employee may use the Company's automobile
previously used by Marion Shirvanian, and Employee shall have the option to
purchase such car from the Company on the fourth anniversary of the date of
this Agreement at a price equal to its fair market value.
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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, first
class hotel and air travel (including such expenses for Employee's spouse if
such expenses would constitute reasonable and necessary business expenses),
telephone, cellular phone, 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.
Employee expenses incurred in connection with Employee's duties and on behalf
of the Company are eligible for reimbursement by the Company, provided that all
such expenses are of a type and amount that are consistent with his status as
Vice Chairman or within an annual budget for such expenses prepared by
Employee and approved by John E. Drury (or the Chief Executive Officer of the
Company if Mr. Drury is no longer employed by the Company).
C. The Employee shall 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.
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 as 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,
-14-
<PAGE> 15
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, or (c) 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 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) and (c) 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 which 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) directly or indirectly 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; or (iv) directly or
indirectly 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. Each party 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, in the case of Employee, or the Company and its management,
in the case of the Employee.
C. If the provisions of this Section 6 are violated, in whole or
in part, the Company shall be entitled to seek, upon application to any court
of proper jurisdiction and an appropriate showing to such court, 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
-15-
<PAGE> 16
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, 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 (iii) 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 seek, upon application to any court of proper jurisdiction and an
appropriate showing to such court, 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 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 not 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 after the period
of employment, and shall be binding upon the Employee's assigns, executors,
administrators and other legal representatives. Notwithstanding anything above
to the contrary,
-16-
<PAGE> 17
any conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by the
Employee that relate primarily to the truck body and equipment manufacturing
enterprise discussed in Section 1(B) hereof shall be excluded from the
provisions of this Section 7(D).
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 contravene in any material respect 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. [This subsection intentionally left blank.]
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
-17-
<PAGE> 18
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 fullest 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.
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 California and
appoints CT Corporation System or such other agent within California
as shall be designated by Company in a written notice to Employee, as
its agent, in such state for such
-18-
<PAGE> 19
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 California.
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 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.
-19-
<PAGE> 20
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.
K. The Company agrees with the Employee that, if not completed by
the Effective Date, the Company will (i) transfer to Employee for fair market
value consideration the truck body and equipment manufacturing enterprise,
(ii) complete the transactions described on Schedule 7.13 of the Merger
Agreement with respect to the transfer station in Carson, California and the
office building in Torrence, California and (iii) pay to Employee the $750,000
bonus specified in Schedule 7.13.
L. The Company will provide indemnification to Employee and shall
include Employee in the Companys Directors' and Officers' insurance policies
consistent with the indemnification and insurance applicable to the principal
executive officers of 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.
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
-20-
<PAGE> 21
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 the 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.
-21-
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
/s/ KOSTI SHIRVANIAN
---------------------------------------
Kosti Shirvanian
Employee's Permanent Address:
USA WASTE SERVICES, INC.
By: /s/ JOHN E. DRURY
-----------------------------------
John E. Drury
Chief Executive Officer
5400 LBJ Freeway
Suite 300 - Tower One
Dallas, Texas 75240
-22-
<PAGE> 1
EXHIBIT 11.1
USA WASTE SERVICE, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
PRIMARY
Income (loss) available to common shareholders........ $ 30,262 $(76,843) $ 406
======== ======== =======
Number of common shares outstanding................... 65,975 50,409 46,430
Effect of using weighted average common stock
outstanding........................................ (11,579) (1,375) (1,071)
Common stock equivalents(1)........................... 874 637 526
-------- -------- -------
Total........................................ 55,270 49,671 45,885
======== ======== =======
Earnings (loss) per common share............. $ 0.55 $ (1.55) $ 0.01
======== ======== =======
FULLY DILUTED
Net income (loss)..................................... $ 30,262 $(76,278) $ 988
======== ======== =======
Number of common shares outstanding................... 65,975 50,409 46,430
Effect of using weighted average common stock
outstanding........................................ (11,579) (1,375) (1,071)
Common stock equivalents(1)........................... 924 1,466 2,184
-------- -------- -------
Total........................................ 55,320 50,500 47,543
======== ======== =======
Earnings (loss) per common share(2).......... $ 0.55 $ (1.51) $ 0.02
======== ======== =======
</TABLE>
- ---------------
(1) Common stock equivalents were determined based on the "Treasury Stock
Method" as set forth in Accounting Principles Board Opinion No. 15.
(2) The dilutive effect between primary and fully dilutive earnings (loss) per
common share is less than 3% or is anti-dilutive for all periods presented
and is therefore not disclosed in the consolidated statements of
operations.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation Assumed Names
---- ------------- -------------
<S> <C> <C>
USA Waste of Oklahoma, Inc. Oklahoma Norman Transfer
Moore Transfer
Pinecrest Landfill
USA Waste of Texas, Inc. Texas ECO Waste Services
Ellis County Landfill
USA Waste of Fort Worth
Mission Disposal, Inc. Texas
Best Pak Disposal, Inc. Texas
USA Waste of Illinois, Inc. Illinois Northshore Waste Control
USA Waste Services
Countryside Landfill, Inc. Illinois
Lakeland Properties Illinois
Central Illinois Disposal, Inc. Illinois
Big Dipper Enterprises, Inc. North Dakota Dakota Landfill
Waste Recovery Corporation Ohio
USA Waste of Indiana, Inc. Indiana Liberty Disposal
Earthmovers, Inc. Indiana
Liberty Landfill, Inc. Indiana
Soil Remediation of Philadelphia, Inc. Delaware
West Virginia Waste Services, Inc. West Virginia
Envirofil, Inc. Delaware
Envirofil Services, Inc. Delaware
EVH Co. Delaware
Envirofil of Illinois, Inc. Illinois Leroy Brown Landfill
Ellis-Scott, Inc. Missouri
Sacramento Valley Environmental Waste Company California
Mid-Valley Acquisition Corporation Delaware
EWA, Inc. Delaware
Stockton Scavengers Association California
Kitsap County Sanitary Landfill, Inc. Washington Olympic View Sanitary Landfill
Brem-Air Disposal, Inc. Oregon Brem-Med
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
North Sound Sanitation, Inc. Washington North-Med
South Sound Sanitation, Inc. Washington South-Med
Juan De Fuca Corrugated, Ltd. Washington Peninsula Recycling
Stanwood Camano Disposal, Inc. Washington
Environmental Waste of Skagit County, Inc. Washington
Meadowbrook Carting Co. New Jersey
Mid-Jersey Disposal, Inc. New Jersey
Quality Recycling Co., Inc. New Jersey
Forcees, Inc. New Jersey
CleanSoils Fairless Hills, Inc. Minnesota
U.S.A. Waste of Fairless Hills, Inc. Delaware
Chambers Development Company, Inc. Delaware
Chambers Clearview Environmental Landfill, Inc. Mississippi
Chambers Development of Ohio, Inc. Ohio
Chambers Development Virginia, Inc. Virginia
Chambers Enterprises, Inc. Pennsylvania
Chambers International, Inc. Delaware
Chambers Laurel Highlands Landfill, Inc. Pennsylvania
Chambers Maplewood Landfill, Inc. Virginia
Chambers Medical Technologies, Inc. (Incorporated Pennsylvania
2/12/85)
Chambers Medical Technologies, Inc. (Incorporated Pennsylvania
4/26/91
Chambers Medical Technologies of South Carolina, South Carolina
Inc.
Chambers New Jersey Land, Inc. New Jersey
Chambers Oakridge Landfill, Inc. South Carolina
Chambers Orange County Landfill, Inc. Florida
Chambers Resources, Inc. Pennsylvania
Chambers Richland County Landfill, Inc. South Carolina
Chambers Services, Inc. Delaware
Chambers Smyrna Landfill, Inc. Georgia
Chambers Waste Systems of California, Inc. California
Chambers Waste Systems of Florida, Inc. Florida
Chambers Waste Systems of Mississippi, Inc. Mississippi
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C>
Chambers Waste Systems of New Jersey, Inc. New Jersey
Chambers Waste Systems of New York, Inc. New York
Chambers Waste Systems of North Carolina, Inc. North Carolina
Chambers Waste Systems of Ohio, Inc. Ohio
Chambers Waste Systems of Rhode Island, Inc. Rhode Island
Chambers Waste Systems of South Carolina, Inc. South Carolina
Chambers Waste Systems of Texas, Inc. Texas
Chambers Waste Systems of Virginia, Inc. Virginia
Chambers of Delaware, Inc. Delaware
Chambers of Georgia, Inc. Georgia
Chambers of Illinois, Inc. Illinois
Chambers of Indiana, Inc. Indiana
Chambers of Maryland, Inc. Maryland
Chambers of Massachusetts, Inc. Massachusetts
Chambers of Mississippi, Inc. Mississippi
Chambers of New Jersey, Inc. New Jersey
Chambers of New Jersey Recycling, Inc. New Jersey
Chambers of Pennsylvania, Inc. Pennsylvania
Chambers of Tennessee, Inc. Tennessee
Chambers of West Virginia, Inc. West Virginia
Dauphin Meadows, Inc. Pennsylvania
The H. Sienknecht Co. Tennessee
LCS Services, Inc. West Virginia
William H. Martin, Inc. Pennsylvania
Morris County Transfer Station, Inc. New Jersey
Rail-It Corporation Illinois
Rail-It Limited Partnership Illinois
Remote Landfill Services, Inc. Tennessee
CDC Services, Inc. Delaware
Southern Alleghenies Disposal Services, Inc. Pennsylvania
U.S. Services Corporation Pennsylvania
U.S. Utilities Services Corp. Pennsylvania
Chambers R & B Landfill, Inc. Georgia
Brazoria County Recycling Center, Inc. Texas
Sunray Services, Inc. Delaware
</TABLE>
-3-
<PAGE> 4
<TABLE>
<S> <C>
Old Dominion Recycling Services, Inc. Virginia
White Bros. Trucking Company New Jersey
Ellesor, Inc. New Jersey
Safety Recycling Company, Inc. New Jersey
Art-Jo Company New Jersey
Fulton Sanitation Services, Inc. Arkansas
</TABLE>
-4-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in USA Waste Services, Inc.'s
Registration Statements on Form S-4 (File Nos. 33-60103 and 33-63981),
Registration Statements on Form S-3 (File Nos. 33-42988, 33-43809, 33-76226,
33-85018 and 333-00097) and Registration Statements on Form S-8 (File Nos.
33-43619, 33-59807, 33-72436, 34-84988, 33-84990, 33- 61621, 33-61625 and
33-61627), of our report, which makes reference to the reliance on the report
of other auditors, dated March 1, 1996 on our audits of the consolidated
financial statements of USA Waste Services, Inc. and subsidiaries as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 21, 1996
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in USA Waste Services, Inc.'s
Registration Statement Nos. 33-60103 and 33-63981 on Form S-4, Registration
Statement Nos. 33-42988, 33-43809, 33-76226, 33-85018 and 333-00097 on Form S-3
and Registration Statement Nos. 33-43619, 33-59807, 33-72436, 34-84988,
33-84990, 33-61621, 33-61625 and 33-61627 on Form S-8 of our report dated
March 30, 1995 on the consolidated financial statements of Chambers Development
Company, Inc. and subsidiaries as of December 31, 1994 and for the years ended
December 31, 1994 and 1993, appearing in this Annual Report on Form 10-K of USA
Waste Services, Inc. for the year ended December 31, 1995.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 21, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF USA WASTE FOR THE TWELVE MONTHS ENDED DECEMBER 31,1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 13,164,000
<SECURITIES> 0
<RECEIVABLES> 62,515,000
<ALLOWANCES> (4,182,000)
<INVENTORY> 0
<CURRENT-ASSETS> 120,122,000
<PP&E> 828,342,000
<DEPRECIATION> 235,049,000
<TOTAL-ASSETS> 908,037,000
<CURRENT-LIABILITIES> 105,243,000
<BONDS> 334,860,000
<COMMON> 660,000
0
0
<OTHER-SE> 402,189,000
<TOTAL-LIABILITY-AND-EQUITY> 908,037,000
<SALES> 0
<TOTAL-REVENUES> 457,099,000
<CGS> 0
<TOTAL-COSTS> 402,246,000
<OTHER-EXPENSES> (2,699,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,348,000
<INCOME-PRETAX> 18,870,000
<INCOME-TAX> (11,393,000)
<INCOME-CONTINUING> 30,263,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,263,000
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
