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As filed with the Securities and Exchange Commission on July 24, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
USA WASTE SERVICES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 4953 73-1309529
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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USA WASTE SERVICES, INC.
1001 FANNIN, SUITE 4000
HOUSTON, TEXAS 77002
(713) 512-6200
(Name, Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
GREGORY T. SANGALIS
USA WASTE SERVICES, INC.
1001 FANNIN, SUITE 4000
HOUSTON, TEXAS 77002
(713) 512-6200
(Name, Address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
THOMAS J. MURPHY, P.C. OSCAR D. FOLGER
McDERMOTT, WILL & EMERY 521 5TH AVENUE
227 WEST MONROE STREET 24TH FLOOR
CHICAGO, ILLINOIS 60606-5096 NEW YORK, NEW YORK 10175
(312) 372-2000 (212) 697-6464
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement and the
satisfaction or waiver of all other conditions to the merger (the "Merger") of
Riviera Acquisition Corporation ("Acquisition") with and into United Waste
Systems, Inc. ("United") pursuant to the Agreement and Plan of Merger dated as
of April 13, 1997, among USA Waste Services, Inc., Acquisition and United,
described in the enclosed Joint Proxy Statement and Prospectus.
If the securities being registered on the Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
Calculation of Registration Fee
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Title of each class Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate Amount of
to be registered registered(1) per Share (2) offering (3) registration fee
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Common Stock,
$.01 par value 54,750,000 shares $42.875 $2,169,475,000 $654,417(4)
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(1) Based upon the registrant's estimate of the maximum number of shares of USA
Waste Common Stock that will be issued in connection with the Merger.
Includes up to 2,450,000 shares to be issued in exchange for the
cancellation of outstanding options to purchase Common Stock of United
Waste Services, Inc. in connection with the Merger.
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(f). Calculated pursuant to Rule 457(f) based upon
the average of the high and low sale prices for shares of United Common
Stock on the Nasdaq Stock Market on July 21, 1997.
(3) Calculated pursuant to Rule 457(f) based upon the average of the high and
low sale prices for shares of United Common Stock on the Nasdaq Stock
Market on July 21, 1997 ($42.875) multiplied by the 50.6 million shares of
United Common Stock and common stock equivalents to be exchanged or
cancelled in connection with the Merger.
(4) Pursuant to Rule 457(b), the calculated fee of $654,417 shall be offset by
the fee of $295,925 paid in connection with the Joint Proxy Statement and
Prospectus of USA Waste Services, Inc. and United filed with the Securities
and Exchange Commission on May 7, 1997. Accordingly, the balance of the
registration fee of $362,122 is filed herewith.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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USA WASTE SERVICES, INC.
FIRST CITY TOWER
1001 FANNIN, SUITE 4000
HOUSTON, TEXAS 77002
, 1997
Dear Stockholder of USA Waste Services, Inc.:
You are invited to attend the Annual Meeting of Stockholders of USA Waste
Services, Inc. ("USA Waste") to be held on August 26, 1997 at 2:00 p.m.,
Central Time. The Annual Meeting will be held at the Four Seasons Hotel, 1300
Lamar Street, Houston, Texas.
At the Annual Meeting you will be asked to consider and vote upon five
proposals, including a proposal to approve and adopt the Agreement and Plan of
Merger dated as of April 13, 1997 (the "Merger Agreement"), by and among USA
Waste, Riviera Acquisition Corporation ("Acquisition"), a wholly owned
subsidiary of USA Waste, and United Waste Systems, Inc. ("United"). The other
proposals include: (i) the election of four directors to the USA Waste Board
of Directors, (ii) the approval of the USA Waste Services, Inc. 1997 Employee
Stock Purchase Plan, (iii) the approval of an amendment to USA Waste's
Restated Certificate of Incorporation to increase the number of authorized
shares of the common stock of USA Waste from 300,000,000 to 500,000,000, to be
effective only if the Merger (as defined below) is consummated and (iv) the
ratification of Coopers & Lybrand L.L.P. as independent accountants for the
ensuing year.
The Merger Agreement provides, among other things, for the merger of
Acquisition with and into United (the "Merger"), pursuant to which United
would become a wholly owned subsidiary of USA Waste and each outstanding share
of common stock of United would be converted into 1.075 shares of common stock
of USA Waste (the "Exchange Ratio"). Upon consummation of the Merger, USA
Waste would issue approximately 49.5 million shares of its common stock to the
stockholders and option holders of United, representing approximately 23.5% of
the total shares of USA Waste's common stock to be outstanding immediately
after the Merger, based upon the number of shares of common stock of USA Waste
and United outstanding as of June 27, 1997. The Merger is subject to a number
of conditions, including obtaining the approval of the stockholders of USA
Waste and United and obtaining any necessary regulatory waivers or approvals.
A summary of the basic terms and conditions of the Merger, certain financial
and other information relating to USA Waste and United and a copy of the
Merger Agreement are set forth in the accompanying Joint Proxy Statement and
Prospectus. Please review and consider the enclosed materials carefully.
Your Board of Directors has unanimously approved the Merger Agreement. In
addition, the Board of Directors has received an opinion dated April 13, 1997
from Donaldson, Lufkin & Jenrette Securities Corporation (a copy of which is
included in the accompanying Joint Proxy Statement and Prospectus) that the
Exchange Ratio is fair to USA Waste from a financial point of view. THE BOARD
OF DIRECTORS OF USA WASTE BELIEVES THAT THE PROPOSED MERGER AND THE OTHER
PROPOSALS DESCRIBED ABOVE ARE IN THE BEST INTERESTS OF USA WASTE AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE OTHER PROPOSALS SET FORTH IN THE
JOINT PROXY STATEMENT AND PROSPECTUS.
Regardless of the number of shares you hold or whether you plan to attend
the Annual Meeting, we urge you to complete, sign, date, and return the
enclosed proxy card immediately. If you attend the Annual Meeting, you may
vote in person if you wish, even if you have previously returned your proxy
card.
Sincerely,
/s/ John E. Drury
John E. Drury
Chairman of the Board
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USA WASTE SERVICES, INC.
FIRST CITY TOWER
1001 FANNIN, SUITE 4000
HOUSTON, TEXAS 77002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 26, 1997
To the Stockholders of USA Waste Services, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of USA Waste
Services, Inc. ("USA Waste") will be held at the Four Seasons Hotel, 1300
Lamar Street, Houston, Texas, on August 26, 1997, at 2:00 p.m. Central Time,
to consider and act upon the following proposals:
1. To approve and adopt the Agreement and Plan of Merger dated as of
April 13, 1997, by and among USA Waste, Riviera Acquisition Corporation
("Acquisition"), a wholly owned subsidiary of USA Waste, and United Waste
Systems, Inc. ("United") providing for, among other things, the merger of
Acquisition with and into United (the "Merger") and the conversion of each
outstanding share of United common stock, par value $.001 per share, into
1.075 shares of USA Waste common stock, par value $.01 per share ("USA
Waste Common Stock").
2. To elect four members of the Board of Directors of USA Waste to serve
as Class II directors for a three-year term expiring at the USA Waste
annual meeting of stockholders to be held in the year 2000.
3. To approve and adopt the USA Waste Services, Inc. 1997 Employee Stock
Purchase Plan.
4. To approve an amendment to the Restated Certificate of Incorporation
of USA Waste to increase the number of authorized shares of USA Waste
Common Stock from 300,000,000 to 500,000,000, to be effective only if the
Merger is consummated.
5. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for the ensuing year.
6. To transact such other business as may be properly brought before the
meeting or any adjournments thereof.
The meeting may be postponed or adjourned from time to time, and at any
reconvened meeting actions with respect to the matters specified in this
notice may be taken without further notice to stockholders unless required by
the Bylaws of USA Waste.
Only stockholders of record at the close of business on June 27, 1997, are
entitled to notice of and to vote on all matters at the Annual Meeting and any
adjournments thereof. A list of all stockholders will be available at the
Annual Meeting and, during the 10-day period prior to the Annual Meeting, at
the offices of USA Waste, First City Tower, 1001 Fannin, Suite 4000, Houston,
Texas 77002, during ordinary business hours.
By Order of the Board of Directors,
/s/ Gregory T. Sangalis
Gregory T. Sangalis
Corporate Secretary
Houston, Texas
, 1997
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
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UNITED WASTE SYSTEMS, INC.
FOUR GREENWICH OFFICE PARK
GREENWICH, CONNECTICUT 06830
, 1997
Dear Stockholder of United Waste Systems, Inc.:
You are invited to attend a Special Meeting of Stockholders of United Waste
Systems, Inc. ("United") to be held on August 26, 1997 at 11:00 a.m. Central
Time. The Special Meeting will be held at the Four Seasons Hotel, 1300 Lamar
Street, Houston, Texas.
At the Special Meeting you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger dated as of
April 13, 1997 (the "Merger Agreement"), by and among USA Waste Services, Inc.
("USA Waste"), Riviera Acquisition Corporation ("Acquisition"), a wholly owned
subsidiary of USA Waste, and United.
The Merger Agreement provides, among other things, for the merger of
Acquisition with and into United (the "Merger"), pursuant to which United
would become a wholly owned subsidiary of USA Waste and each outstanding share
of common stock of United, par value $.001 per share (the "United Common
Stock"), would be converted into 1.075 shares of common stock of USA Waste,
par value $.01 per share (the "Exchange Ratio"). Upon consummation of the
Merger, USA Waste would issue approximately 49.5 million shares of its common
stock to the stockholders and option holders of United, representing
approximately 23.5% of the total shares of USA Waste's common stock to be
outstanding immediately after the Merger, based upon the number of shares of
common stock of USA Waste and United outstanding as of June 27, 1997. The
Merger is subject to a number of conditions, including obtaining the approval
of the stockholders of USA Waste and United and obtaining any necessary
regulatory waivers or approvals. A summary of the basic terms and conditions
of the Merger, certain financial and other information relating to USA Waste
and United and a copy of the Merger Agreement are set forth in the
accompanying Joint Proxy Statement and Prospectus. Please review and consider
the enclosed materials carefully.
Your Board of Directors has unanimously approved the Merger Agreement. In
addition, the Board of Directors has received an opinion dated April 13, 1997
from Goldman, Sachs & Co. that, as of such date, the Exchange Ratio pursuant
to the Merger Agreement was fair to the holders of United Common Stock.
Goldman, Sachs & Co. subsequently delivered to the Board of Directors of
United its written opinion, dated as of the date hereof (a copy of which is
included in the accompanying Joint Proxy Statement and Prospectus), that as of
such date the Exchange Ratio pursuant to the Merger Agreement is fair to the
holders of shares of United Common Stock. THE BOARD OF DIRECTORS OF UNITED
BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST INTERESTS OF UNITED AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
Regardless of the number of shares you hold or whether you plan to attend
the Special Meeting, we urge you to complete, sign, date, and return the
enclosed proxy card immediately. If you attend the Special Meeting, you may
vote in person if you wish, even if you have previously returned your proxy
card.
Sincerely,
/s/ BRADLEY S. JACOBS
Bradley S. Jacobs
Chairman of the Board
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UNITED WASTE SYSTEMS, INC.
FOUR GREENWICH OFFICE PARK
GREENWICH, CONNECTICUT 06830
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 26, 1997
To the Stockholders of United Waste Systems, Inc.:
Notice is hereby given that a Special Meeting of Stockholders of United
Waste Systems, Inc. ("United") will be held at the Four Seasons Hotel, 1300
Lamar Street, Houston, Texas, on August 26, 1997, at 11:00 a.m., Central Time,
to consider and act upon the following proposal (the "Merger Proposal"):
To approve and adopt the Agreement and Plan of Merger dated as of April 13,
1997 (the "Merger Agreement"), by and among United, USA Waste Services, Inc.
("USA Waste") and Riviera Acquisition Corporation ("Acquisition"), a wholly
owned subsidiary of USA Waste, providing for, among other things, the merger
of Acquisition with and into United (the "Merger") and the conversion of each
outstanding share of United common stock, par value $.001 per share, into
1.075 shares of USA Waste common stock, par value $.01 per share.
The meeting may be postponed or adjourned from time to time, and at any
reconvened meeting actions with respect to the matters specified in this
notice may be taken without further notice to stockholders unless required by
the Bylaws of United.
Only stockholders of record at the close of business on June 27, 1997, are
entitled to notice of and to vote on the Merger Proposal at the Special
Meeting and any postponements or adjournments thereof. The approval and
adoption of the Merger Agreement requires the affirmative vote of a majority
of the shares of United Common Stock outstanding on the record date. The
Merger and other related matters are more fully described in the accompanying
Joint Proxy Statement and Prospectus and the Appendices thereto, which form a
part of this notice and should be read carefully by all stockholders.
By Order of the Board of Directors,
/s/ JOHN N. MILNE
John N. Milne
Corporate Secretary
Greenwich, Connecticut
, 1997
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
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USA WASTE SERVICES, INC.
UNITED WASTE SYSTEMS, INC.
JOINT PROXY STATEMENT AND PROSPECTUS
This Joint Proxy Statement and Prospectus is being furnished to the
stockholders of USA Waste Services, Inc., a Delaware corporation ("USA
Waste"), in connection with the solicitation of proxies by its Board of
Directors to be voted at the Annual Meeting of Stockholders of USA Waste (the
"USA Waste Annual Meeting") scheduled to be held on August 26, 1997, at 2:00
p.m., Central Time, at the Four Seasons Hotel, 1300 Lamar Street, Houston,
Texas, and at any adjournment or postponement thereof, and to the stockholders
of United Waste Systems, Inc., a Delaware corporation ("United"), in
connection with the solicitation of proxies by its Board of Directors to be
voted at the Special Meeting of Stockholders of United (the "United Special
Meeting") scheduled to be held on August 26, 1997, at 11:00 a.m., Central
Time, at the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas, and at any
adjournment or postponement thereof.
At the USA Waste Annual Meeting and the United Special Meeting, the holders
of common stock, par value $.01 per share of USA Waste ("USA Waste Common
Stock") and the holders of common stock, par value $.001 per share of United
("United Common Stock"), will be asked to consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Merger dated as of April 13, 1997
(the "Merger Agreement"), among USA Waste, Riviera Acquisition Corporation, a
wholly owned subsidiary of USA Waste ("Acquisition"), and United providing for
the merger of Acquisition with and into United (the "Merger"). Such approvals
are a condition to consummating the Merger. Upon consummation of the Merger,
United will become a wholly owned subsidiary of USA Waste and the holders of
the issued and outstanding shares of United Common Stock will receive, at the
effective time of the Merger, 1.075 shares of USA Waste Common Stock for each
share of United Common Stock held by them (the "Exchange Ratio"). In
connection with the Merger, it is anticipated that all outstanding options to
purchase United Common Stock will be cancelled in exchange for a number of
shares of USA Waste Common Stock having a market value equal to the fair value
of such options at the time of consummation of the Merger, as determined by an
independent third party. See "The Plan of Merger and Terms of the Merger." A
copy of the Merger Agreement is attached hereto as Appendix A and incorporated
herein by reference.
On July 23, 1997, the closing sale price of USA Waste Common Stock on the
New York Stock Exchange was $41.13 per share. Based on such closing price, the
consideration to be received by stockholders of United pursuant to the Merger
would be approximately $44.21 per share of United Common Stock. Based upon the
number of shares of USA Waste Common Stock outstanding as of June 27, 1997,
and assuming that approximately 1.9 million shares of USA Waste Common Stock
are issued in exchange for the cancellation of outstanding options to purchase
United Common Stock, approximately 210.8 million shares of USA Waste Common
Stock will be outstanding after the Merger is consummated, of which
approximately 23.5% will be owned by former stockholders and option holders of
United and approximately 76.5% will be owned by current stockholders of USA
Waste.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN USA WASTE COMMON STOCK.
This Joint Proxy Statement and Prospectus also constitutes the prospectus of
USA Waste that is a part of the Registration Statement of USA Waste filed with
the Securities and Exchange Commission with respect to 54,750,000 shares of
USA Waste Common Stock to be issued in connection with the Merger (which
includes shares to be issued in exchange for the cancellation of outstanding
options to purchase United Common Stock). This Joint Proxy Statement and
Prospectus is first being mailed to the stockholders of USA Waste and United
on or about , 1997.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Joint Proxy Statement and Prospectus is , 1997.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT AND PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY USA WASTE OR UNITED. THIS JOINT PROXY
STATEMENT AND PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, USA WASTE COMMON STOCK, OR A SOLICITATION OF
A PROXY, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT
PROXY STATEMENT AND PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF USA WASTE OR UNITED SINCE THE DATE HEREOF OR
THAT THE INFORMATION IN THIS JOINT PROXY STATEMENT AND PROSPECTUS IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ALL INFORMATION HEREIN WITH
RESPECT TO USA WASTE AND ACQUISITION HAS BEEN FURNISHED BY USA WASTE, AND ALL
INFORMATION HEREIN WITH RESPECT TO UNITED HAS BEEN FURNISHED BY UNITED.
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TABLE OF CONTENTS
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AVAILABLE INFORMATION..................................................... v
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... vi
FORWARD-LOOKING STATEMENTS................................................ vii
SUMMARY................................................................... 1
The Companies........................................................... 1
The Meetings............................................................ 1
The Merger.............................................................. 2
Stockholders' Comparative Rights........................................ 8
Market Price Data....................................................... 8
Summary Financial Information........................................... 10
Other Proposals to be Presented at the USA Waste Annual Meeting......... 15
RISK FACTORS.............................................................. 16
Expected Benefits of Combined Business May Not Be Achieved.............. 16
Stock Prices May Vary in Response to Changes in Business and Economic
Conditions............................................................. 16
Interests of Certain Persons in the Merger.............................. 16
No Assurance of Successful Management and Maintenance of Growth......... 16
Risks Associated with Acquisitions, Including Legal Matters and
Potential Dilution of Ownership Interests of Existing Stockholders..... 17
International Expansion................................................. 17
Need For Capital; Debt Financing........................................ 17
Profitability May Be Affected By Factors Beyond USA Waste's Control,
Including Competition.................................................. 18
Capitalized Expenditures................................................ 18
Potential Adverse Effect Of Government Regulation....................... 18
Potential Environmental Liability and Limited Insurance Coverage........ 18
Alternatives To Landfill Disposal....................................... 19
No Dividends............................................................ 19
Potential Effect Of Certain USA Waste Anti-Takeover Provisions.......... 20
Recent Arbitration Demand............................................... 20
THE MEETINGS.............................................................. 21
Date, Time and Place of the Meetings.................................... 21
Purpose of the Meetings................................................. 21
Record Date and Outstanding Shares...................................... 21
Voting and Revocation of Proxies........................................ 22
Vote Required for Approval.............................................. 22
Solicitation of Proxies................................................. 23
Other Matters........................................................... 23
THE MERGER AND RELATED TRANSACTIONS....................................... 23
General Description of the Merger....................................... 23
Background of the Merger................................................ 24
Certain Litigation...................................................... 25
Joint Reasons for the Merger............................................ 25
USA Waste's Reasons for the Merger...................................... 26
Recommendation of the Board of Directors of USA Waste................... 27
United's Reasons for the Merger......................................... 27
Recommendation of the Board of Directors of United...................... 28
Opinion of Financial Advisor to USA Waste............................... 28
Opinion of Financial Advisor to United.................................. 33
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ii
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Conflicts of Interest................................................... 37
Material Federal Income Tax Consequences................................ 38
Accounting Treatment.................................................... 39
Government and Regulatory Approvals..................................... 39
Restrictions On Resales By Affiliates................................... 40
ELECTION OF USA WASTE DIRECTORS........................................... 41
Nominees For Election As Directors...................................... 41
Board of Directors After the Merger..................................... 44
Meetings, Committees and Compensation................................... 44
Executive Compensation.................................................. 44
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions................................................. 49
Certain Relationships and Related Transactions.......................... 49
Section 16(a) Beneficial Ownership Reporting Compliance................. 51
APPROVAL AND ADOPTION OF THE STOCK PURCHASE PLAN.......................... 51
Administration and Eligibility.......................................... 52
Participation and Terms................................................. 52
Amendment and Termination............................................... 52
Federal Income Tax Consequences......................................... 52
AMENDMENT TO USA WASTE RESTATED CERTIFICATE OF INCORPORATION.............. 53
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS.................... 54
THE PLAN OF MERGER AND TERMS OF THE MERGER................................ 54
Effective Time of the Merger............................................ 54
Manner and Basis for Converting Shares.................................. 54
Exchange and Cancellation of United Options............................. 55
Conversion of United Warrants........................................... 55
Adjustment of United Convertible Notes.................................. 55
Conditions to the Merger................................................ 56
Cooperation............................................................. 57
Representations and Warranties of USA Waste and United.................. 57
Conduct of the Business of USA Waste and United Prior to the Merger..... 57
No Solicitation of Acquisition Transactions............................. 60
Conduct of the Business of the Combined Companies Following the Merger.. 61
Termination or Amendment................................................ 61
Termination Fees........................................................ 62
Expenses................................................................ 62
Indemnification......................................................... 63
Other Agreements........................................................ 64
COMPARATIVE RIGHTS OF STOCKHOLDERS OF USA WASTE AND UNITED................ 64
General................................................................. 64
Classified Board of Directors........................................... 65
Number of Directors; Removal of Directors; Filling of Vacancies on the
Board of Directors..................................................... 65
Special Meetings of Stockholders........................................ 65
Stockholder Nominations and Proposals................................... 66
Amendment of Certain Charter Provisions................................. 66
Voting.................................................................. 66
Amendment of Bylaws..................................................... 66
Authorized Capital Stock................................................ 67
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USA WASTE AND UNITED COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL
STATEMENTS............................................................... 68
USA WASTE AND UNITED NOTES TO COMBINED UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS..................................................... 74
USA WASTE AND UNITED SUPPLEMENTAL INFORMATION RELATING TO THE COMBINED
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS....................... 76
USA WASTE AND UNITED NOTES TO SUPPLEMENTAL INFORMATION.................... 80
USA WASTE AND UNITED SUPPLEMENTAL INFORMATION--ADJUSTED RELATING TO THE
PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996... 83
PRINCIPAL STOCKHOLDERS OF USA WASTE AND UNITED............................ 84
MARKET PRICE DATA......................................................... 87
Market Information...................................................... 87
Dividend Information.................................................... 87
DESCRIPTION OF USA WASTE CAPITAL STOCK.................................... 88
Common Stock............................................................ 88
Preferred Stock......................................................... 88
Authorized But Unissued Shares.......................................... 88
Transfer Agent and Registrar............................................ 88
INDEPENDENT ACCOUNTANTS................................................... 88
LEGAL MATTERS............................................................. 89
EXPERTS................................................................... 89
PROPOSALS OF STOCKHOLDERS FOR ANNUAL MEETING.............................. 89
OTHER MATTERS............................................................. 89
APPENDIX A--Agreement and Plan of Merger.................................. A-1
APPENDIX B--Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation.............................................................. B-1
APPENDIX C--Opinion of Goldman, Sachs & Co................................ C-1
APPENDIX D--USA Waste Services, Inc. 1997 Employee Stock Purchase Plan.... D-1
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iv
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AVAILABLE INFORMATION
USA Waste and United are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements, and other information may be inspected and copied at the
offices of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Regional Offices of the Commission in Chicago,
Illinois at Citicorp Center, 500 W. Madison, Suite 1400, Chicago, Illinois
60661-2511 and in New York, New York at 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such materials may be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains an
Internet web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov). USA Waste's securities are listed on the New
York Stock Exchange (the "NYSE") and the reports, proxy statements and other
information of USA Waste described above may also be inspected at the NYSE at
20 Broad Street, New York, New York 10005. The United Common Stock is listed
on the Nasdaq National Market tier of The Nasdaq Stock Market (the "Nasdaq
Stock Market"). Upon consummation of the Merger, listing of the United Common
Stock on The Nasdaq Stock Market will be terminated.
USA Waste has filed with the Commission a registration statement (the
"Registration Statement") on Form S-4 under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Joint Proxy Statement and Prospectus also constitutes the Prospectus of
USA Waste filed as part of the Registration Statement and does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto, certain parts of which are omitted in accordance with the rules of
the Commission. Statements made in this Joint Proxy Statement and Prospectus
as to the contents of any contract, agreement, or other document referred to
are not necessarily complete; with respect to each such contract, agreement,
or other document filed as an exhibit to the Registration Statement, reference
is made to the exhibit for a more complete description of the matter involved,
and each such statement shall be qualified in its entirety by such reference.
The Registration Statement and any amendments thereto, including exhibits
filed as part thereof, are available for inspection and copying at the
Commission's offices as described above. After the Merger, registration of the
United Common Stock under the Exchange Act will be terminated.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
USA Waste incorporates herein by reference the following documents filed by
it with the Commission (File No. 1-12154) pursuant to the Exchange Act: (i)
its Annual Report on Form 10-K for the year ended December 31, 1996, as
amended by its Annual Report on Form 10-K/A (Amendment No. 1) dated April 30,
1997; (ii) its Quarterly Report on Form 10-Q for the quarter ended March 31,
1997; (iii) its Current Reports on Form 8-K dated January 13, 1997, January
24, 1997 (as amended by its Current Report on Form 8-K/A dated April 15,
1997), February 6, 1997, February 7, 1997, March 27, 1997 (as amended by its
Current Report on Form 8-K/A dated July 23, 1997) and April 17, 1997; and (iv)
the description of USA Waste Common Stock contained in its Registration
Statement on Form 8-A dated July 1, 1993, as amended by Form 8-B dated July
13, 1995.
United incorporates herein by reference the following documents filed by it
with the Commission (File No. 0-20868) pursuant to the Exchange Act: (i) its
Annual Report on Form 10-K for the year ended December 31, 1996, as amended by
its Annual Report on Form 10-K/A #1 dated April 30, 1997 and its Annual Report
on Form 10-K/A #2 dated June 24, 1997; (ii) its Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997; and (iii) its Current Reports on Form 8-
K dated March 3, 1997, March 11, 1997, April 16, 1997 and June 27, 1997.
All documents filed by USA Waste and United pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement and Prospectus and prior to the date the Merger is consummated
shall be deemed to be incorporated by reference in this Joint Proxy Statement
and Prospectus and to be part hereof from the date of filing of such
documents. All information appearing in this Joint Proxy Statement and
Prospectus is qualified in its entirety by the information and financial
statements (including notes thereto) appearing in the documents incorporated
by reference herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded, for purposes
of this Joint Proxy Statement and Prospectus, to the extent that a statement
contained herein or in any subsequently filed document that is deemed to be
incorporated herein modifies or supersedes any such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Joint Proxy Statement and Prospectus.
THIS JOINT PROXY STATEMENT AND PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. USA WASTE AND
UNITED HEREBY UNDERTAKE TO PROVIDE, BY FIRST CLASS MAIL OR OTHER EQUALLY
PROMPT MEANS WITHIN ONE BUSINESS DAY OF RECEIPT OF A REQUEST, WITHOUT CHARGE
TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS JOINT
PROXY STATEMENT AND PROSPECTUS HAS BEEN DELIVERED, ON WRITTEN OR ORAL REQUEST
OF ANY SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED TO ABOVE
THAT HAVE BEEN OR MAY BE INCORPORATED INTO THIS JOINT PROXY STATEMENT AND
PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
DOCUMENTS RELATING TO USA WASTE ARE AVAILABLE UPON REQUEST FROM USA WASTE
SERVICES, INC., FIRST CITY TOWER, 1001 FANNIN, SUITE 4000, HOUSTON, TEXAS
77002, ATTENTION: CORPORATE SECRETARY, TELEPHONE NUMBER (713) 512-6200.
DOCUMENTS RELATING TO UNITED ARE AVAILABLE UPON REQUEST FROM UNITED WASTE
SYSTEMS, INC., FOUR GREENWICH OFFICE PARK, GREENWICH, CONNECTICUT 06830,
ATTENTION: CORPORATE SECRETARY, TELEPHONE NUMBER (203) 622-3131. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST
19, 1997.
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FORWARD-LOOKING STATEMENTS
Certain statements in the Summary and under the captions "Risk Factors,"
"The Merger and Related Transactions--Joint Reasons for the Merger," "--USA
Waste's Reasons for the Merger," "--Recommendation of the Board of Directors
of USA Waste," "--United's Reasons for the Merger," "--Recommendation of the
Board of Directors of United," "USA Waste and United Combined Unaudited Pro
Forma Condensed Financial Statements," "USA Waste and United Notes to Combined
Unaudited Pro Forma Condensed Financial Statements" and "USA Waste and United
Supplemental Information Relating to the Combined Unaudited Pro Forma
Condensed Financial Statements," and elsewhere in this Joint Proxy Statement
and Prospectus, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of the
combined company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements were based on various factors and
were derived utilizing numerous important assumptions and other important
factors that could cause actual results to differ materially from those in the
forward-looking statements. Important assumptions and other important factors
that could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to: uncertainty as to
the combined company's future profitability; the combined company's ability to
develop and implement operational and financial systems to manage rapidly
growing operations; competition in USA Waste's and United's existing and
potential future lines of business; the combined company's ability to
integrate and successfully operate acquired businesses and the risks
associated with such businesses; the combined company's ability to obtain
financing on acceptable terms to finance the combined company's growth
strategy and for the combined company to operate within the limitations
imposed by financing arrangements; uncertainty as to the future profitability
of acquired businesses; trends in the solid waste management industry;
competitive pressures; changes in relationships with customers; changes in the
regulatory environment; outcome of pending litigation and regulatory
inquiries; and the impact of accounting policies required to be adopted in the
near future. In addition, USA Waste and United stockholders should consider
carefully the information set forth herein under "Risk Factors" and under the
captions "Business--Regulation," "--Factors Influencing Future Results and
Accuracy of Forward-Looking Statements", "Legal Proceedings" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Parts I and II of USA Waste's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and the information set forth under the captions
"Business" (including "Business--Factors that May Influence Future Results and
Accuracy of Forward-Looking Statements" and "Business--Environmental
Regulations"), "Legal Proceedings" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in Parts I and II of
United's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, both of which are incorporated by reference herein. Other factors and
assumptions not identified above were also involved in the derivation of these
forward-looking statements, and the failure of such other assumptions to be
realized as well as other factors may also cause actual results to differ
materially from those projected. Neither USA Waste nor United assume any
obligation to update these forward-looking statements to reflect actual
results, changes in assumptions or changes in other factors affecting such
forward-looking statements.
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SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Joint Proxy Statement and Prospectus. The
information contained in this summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information appearing
elsewhere in this Joint Proxy Statement and Prospectus and the documents
incorporated herein by reference.
THE COMPANIES
USA Waste Services, Inc. and Acquisition
USA Waste is the third largest integrated, non-hazardous solid waste
management company in North America, as measured by 1996 revenues, and serves
municipal, commercial, industrial and residential customers in 35 states in the
United States, Canada, Puerto Rico and Mexico. USA Waste'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 121 landfills, 83 transfer stations and 243 collection
companies and serves more than two million municipal, commercial, industrial
and residential customers. Acquisition is a wholly owned subsidiary of USA
Waste organized for the purpose of effecting a transaction such as the Merger.
Acquisition has no material assets and has not engaged in any activities except
in connection with the Merger. The principal executive offices of USA Waste and
Acquisition are located at First City Tower, 1001 Fannin, Suite 4000, Houston,
Texas 77002, and the telephone number is (713) 512-6200.
Additional information concerning USA Waste is included in USA Waste's
reports filed under the Exchange Act that are incorporated by reference in this
Joint Proxy Statement and Prospectus. See "Available Information" and
"Incorporation of Certain Information by Reference."
United Waste Systems, Inc.
United is the sixth largest provider of integrated, non-hazardous solid waste
management services in the United States, as measured by 1996 revenues. United
owns or operates 39 landfills, 80 collection companies and 78 transfer
stations, and serves approximately 950,000 customers in 24 states. The
principal executive offices of United are located at Four Greenwich Office
Park, Greenwich, Connecticut 06830, and the telephone number is (203) 622-3131.
Additional information concerning United is included in United's reports
filed under the Exchange Act that are incorporated by reference in this Joint
Proxy Statement and Prospectus. See "Available Information" and "Incorporation
of Certain Information by Reference."
THE MEETINGS
The USA Waste Annual Meeting will be held at 2:00 p.m., Central Time on
August 26, 1997, at the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas,
for the purpose of considering and acting upon proposals to (i) approve and
adopt the Merger Agreement, (ii) elect four members of the USA Waste Board of
Directors to serve as Class II directors for a three-year term expiring at the
USA Waste annual meeting of stockholders to be held in the year 2000, (iii)
approve the USA Waste Services, Inc. 1997 Employee Stock Purchase Plan (the
"Stock Purchase Plan"), (iv) approve an amendment to USA Waste's Restated
Certificate of Incorporation to increase the number of authorized shares of USA
Waste Common Stock from 300,000,000 to 500,000,000, to be effective only if the
Merger is consummated, (v) to ratify the appointment of Coopers & Lybrand
L.L.P., as independent accountants for the ensuing year and (vi) to transact
such other business as may be properly brought before the meeting or any
adjournment thereof. The United Special Meeting will be held at 11:00 a.m.,
Central Time on August 26, 1997, at The Four Seasons Hotel, 1300 Lamar Street,
Houston, Texas for the purpose of considering and acting upon a proposal to
approve and adopt the Merger Agreement. The USA Waste Annual Meeting and the
United Special Meeting, together, are sometimes referred to hereinafter as the
"Meetings."
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Only those stockholders of USA Waste of record at the close of business on
June 27, 1997 (the "USA Waste Record Date"), are entitled to notice of, and to
vote at, the USA Waste Annual Meeting. Only those stockholders of United of
record at the close of business on June 27, 1997 (the "United Record Date"),
are entitled to notice of, and to vote at, the United Special Meeting.
Pursuant to the rules of the NYSE, approval and adoption of the Merger
Agreement requires the affirmative vote of the holders of a majority of the
shares of USA Waste Common Stock voted, in person or by proxy, at the USA Waste
Annual Meeting, provided that the total votes cast on the proposal represent
over 50% in interest of the shares entitled to vote thereon. At the close of
business on the USA Waste Record Date, there were approximately 161.3 million
shares of USA Waste Common Stock outstanding and entitled to vote at the USA
Waste Annual Meeting. All executive officers and directors of USA Waste who are
stockholders of USA Waste and who, as of the USA Waste Record Date,
collectively had the right to vote approximately 20.1 million shares of USA
Common Stock, representing approximately 12.4% of the shares outstanding as of
such date, have indicated to USA Waste that they intend to vote the shares of
USA Waste Common Stock over which they have voting control in favor of the
Merger Agreement. See "The Meetings--Vote Required for Approval."
Pursuant to Delaware law, approval and adoption of the Merger Agreement
requires the affirmative vote of the holders of a majority of the shares of
United Common Stock outstanding on the United Record Date. At the close of
business on the United Record Date, there were approximately 44.2 million
shares of United Common Stock outstanding and entitled to vote at the United
Special Meeting. All executive officers and directors of United who, as of the
United Record Date, were stockholders of United have indicated to United that
they intend to vote their shares of United Common Stock in favor of the Merger
Agreement. As of the United Record Date, such individuals collectively had the
right to vote approximately 507,000 shares of United Common Stock, representing
less than 2% of the shares outstanding as of such date. See "The Meetings--Vote
Required for Approval."
THE MERGER
Recommendations of the Boards of Directors
The Board of Directors of USA Waste has unanimously approved the Merger
Agreement and has directed that it be submitted to the stockholders of USA
Waste. The Board of Directors of USA Waste recommends that the stockholders of
USA Waste approve and adopt the Merger Agreement. See "The Merger and Related
Transactions--Background of the Merger," "--Joint Reasons for the Merger," "--
USA Waste's Reasons for the Merger" and "--Recommendation of the Board of
Directors of USA Waste."
The Board of Directors of United has unanimously approved the Merger
Agreement and has directed that it be submitted to the stockholders of United.
The Board of Directors of United recommends that the stockholders of United
approve and adopt the Merger Agreement. See "The Merger and Related
Transactions--Background of the Merger," "--Joint Reasons for the Merger," "--
United's Reasons for the Merger" and "--Recommendation of the Board of
Directors of United." In considering the recommendation of United's Board of
Directors with respect to the Merger, United stockholders should be aware that
certain officers and directors of United have direct or indirect interests in
recommending the Merger, apart from their interests as stockholders of United,
which are separate from those of unaffiliated stockholders of United. See "The
Merger and Related Transactions--Conflicts of Interest."
Conflicts of Interest
Certain officers and directors of United have direct or indirect interests in
recommending the Merger apart from their interests as stockholders of United,
which are separate from those of unaffiliated stockholders of United. Such
interests include: (i) pursuant to the Merger Agreement, USA Waste will offer
to enter into consulting and non-competition agreements with Bradley S. Jacobs,
Chairman of the Board and Chief Executive
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Officer of United, John N. Milne, Vice Chairman, Senior Vice President, Chief
Acquisition Officer, Treasurer and Secretary of United and Michael J. Nolan,
Chief Financial Officer of United, such agreements to be effective at the
Effective Time (as hereinafter defined) and it is expected that such
individuals will enter into such agreements; (ii) all officers and directors of
United hold vested and unvested options to acquire United Common Stock ("United
Options"), all of which options are expected to be cancelled in exchange for a
number of shares of USA Waste Common Stock equal in market value to the fair
value of such options, as determined by an independent third party, in
connection with the Merger; (iii) pursuant to the terms of their respective
employment agreements with United, certain officers of United (six
individuals), including Mr. Jacobs, Mr. Edward T. Sheehan, President and Chief
Operating Officer of United, Mr. Milne and Mr. Nolan will have the right, and
are expected, to terminate such employment agreements and will be entitled to
receive severance payments upon consummation of the Merger in an aggregate
amount of approximately $4.6 million; (iv) pursuant to the Merger Agreement,
officers, directors and employees of United will be indemnified by USA Waste
and United against certain liabilities and USA Waste will maintain in effect
directors' and officers' liability insurance on behalf of such directors and
officers; and (v) the Board of Directors of USA Waste is required, pursuant to
the Merger Agreement, to take such action as may be necessary to cause two
persons designated by United and acceptable to USA Waste to be elected to the
Board of Directors of USA Waste as of a mutually agreeable time after the
Effective Time. It is currently expected that Richard D. Kinder and Jerome B.
York will be the United designees to the USA Waste Board of Directors. See
"Election of USA Waste Directors--Board of Directors After the Merger." For
more information on such conflicts of interest, see "The Merger and Related
Transactions-- Conflicts of Interest."
Opinions of Financial Advisors
On April 13, 1997, the Board of Directors of USA Waste received a written
opinion from Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to the
effect that, as of such date, the Exchange Ratio was fair to USA Waste from a
financial point of view. The full text of the written opinion of DLJ, which
sets forth assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached to this Joint Proxy
Statement and Prospectus as Appendix B and is incorporated herein by reference.
HOLDERS OF USA WASTE COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION
IN ITS ENTIRETY. See "The Merger and Related Transactions--Opinion of Financial
Advisor to USA Waste." On April 13, 1997, Goldman, Sachs & Co. ("Goldman
Sachs") delivered its written opinion to the Board of Directors of United that,
as of the date of such opinion, the Exchange Ratio pursuant to the Merger
Agreement was fair to the holders of shares of United Common Stock. Goldman
Sachs subsequently delivered to the Board of Directors of United its written
opinion, dated as of the date of this Joint Proxy Statement and Prospectus,
that as of such date the Exchange Ratio pursuant to the Merger Agreement is
fair to the holders of shares of United Common Stock. The full text of the
written opinion of Goldman Sachs dated as of the date of this Joint Proxy
Statement and Prospectus, which sets forth assumptions made, matters considered
and limitations on the review undertaken in connection with the opinion, is
attached hereto as Appendix C and is incorporated herein by reference. HOLDERS
OF UNITED COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS
ENTIRETY. See "The Merger and Related Transactions--Opinion of Financial
Advisor to United."
Certain Terms of The Merger
EXCHANGE RATIO. At the Effective Time, Acquisition will merge with and into
United, and United will become a wholly owned subsidiary of USA Waste. In the
Merger, each outstanding share of United Common Stock will be converted into
the right to receive, without interest, 1.075 shares of USA Waste Common Stock.
In addition, at the Effective Time, each issued and outstanding share of common
stock, par value $.01 per share, of Acquisition ("Acquisition Common Stock")
will be converted into one share of common stock, par value $.001 per share of
the corporation surviving the Merger (the "Surviving Corporation").
Based upon the number of shares of common stock of USA Waste and United
outstanding as of June 27, 1997, and assuming that approximately 1.9 million
shares of USA Waste Common Stock are issued in exchange for the cancellation of
outstanding United Options in connection with the Merger, approximately 210.8
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million shares of USA Waste Common Stock will be outstanding immediately after
the Effective Time, of which approximately 49.5 million shares, representing
23.5% of the total number of outstanding shares, will be held by former holders
of United Common Stock and United Options. See "The Plan of Merger and Terms of
the Merger--Manner and Basis for Converting Shares" and "--Exchange and
Cancellation of United Options."
FRACTIONAL SHARES. No fractional shares of USA Waste Common Stock will be
issued pursuant to the Merger. In lieu of such fractional shares, each holder
of shares of United Common Stock who would otherwise have been entitled to
receive a fraction of a share of USA Waste Common Stock will be entitled to
receive from the Exchange Agent (as hereinafter defined) a cash payment equal
to such fraction multiplied by the average closing price per share of USA Waste
Common Stock as reported on the NYSE Composite Tape during the 10 trading days
immediately preceding the Effective Time.
EFFECTIVE TIME OF THE MERGER. The Merger will become effective at such time
(the "Effective Time") as shall be stated in a certificate of merger to be
filed with the Secretary of State of the State of Delaware (the "Certificate of
Merger") in accordance with the Delaware General Corporation Law (the "DGCL").
Assuming the requisite stockholder approval of the Merger Agreement is
obtained, it is anticipated that the Effective Time of the Merger will occur as
soon as practicable following the Meetings. If all other conditions to the
Merger have not been satisfied or waived prior to the Meetings, however, it is
expected that the Merger will occur as soon as practicable after such
conditions have been satisfied or waived.
EXCHANGE OF UNITED COMMON STOCK CERTIFICATES. Promptly after consummation of
the Merger, BankBoston, N.A. (the "Exchange Agent") will mail a letter of
transmittal with instructions to each holder of record of United Common Stock
for use in exchanging certificates representing shares of United Common Stock
for certificates representing shares of USA Waste Common Stock and cash in lieu
of any fractional shares. Certificates should not be surrendered by the holders
of United Common Stock until they have received the letter of transmittal from
the Exchange Agent. See "The Plan of Merger and Terms of the Merger--Manner and
Basis for Converting Shares."
EXCHANGE AND CANCELLATION OF UNITED OPTIONS; CONVERSION OF UNITED WARRANTS;
ADJUSTMENT OF UNITED CONVERTIBLE NOTES. Pursuant to the Merger Agreement,
United will use commercially reasonable efforts to ensure that, at the
Effective Time, all United Options which are outstanding on the date of
effectiveness of the Merger as specified in the Certificate of Merger (the
"Effective Date"), whether or not such United Options have previously vested or
become exercisable, will be cancelled in exchange for a number of shares of USA
Waste Common Stock equal in market value to the fair value of such United
Options as of the Effective Time, as determined by an independent third party.
See "The Plan of Merger and Terms of the Merger--Exchange and Cancellation of
United Options." The Merger Agreement also provides that at the Effective Time,
each unexpired warrant to purchase United Common Stock that is outstanding at
the Effective Time, whether or not exercisable, will be converted into a
warrant to purchase a number of shares of USA Waste Common Stock equal to the
number of shares of United Common Stock that could be purchased under such
warrant multiplied by the Exchange Ratio, at a price per share of USA Waste
Common Stock equal to the per share exercise price of such warrant divided by
the Exchange Ratio. See "The Plan of Merger and Terms of the Merger--Conversion
of United Warrants." The Merger Agreement further provides that United will,
and USA Waste will cause the Surviving Corporation to, execute a supplemental
indenture (the "Supplemental Indenture"), effective as of the Effective Time,
by which there will be made adjustments to the conversion provisions of the
Indenture dated as of June 5, 1996 (the "United Indenture") relating to the 4
1/2% convertible subordinated notes issued by United (the "United Convertible
Notes") that are required to be made as a result of the Merger in order to
provide for the United Convertible Notes to be convertible, from and after the
Merger, into shares of USA Waste Common Stock (and cash in lieu of fractional
shares) in the manner and to the extent required by the United Indenture. See
"The Plan of Merger and Terms of the Merger--Adjustment of United Convertible
Notes." As of June 27, 1997, the outstanding United Options included options
held by officers and directors of United to
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acquire 2,451,389 shares of United Common Stock pursuant to the terms of
certain stock option agreements, at exercise prices ranging from $7.00 to
$41.20 per share. See "The Merger and Related Transactions--Conflicts of
Interest."
INDEMNIFICATION. The Merger Agreement provides that the officers, directors,
employees and agents of United or any of its subsidiaries will be indemnified
by USA Waste against certain liabilities and costs, including those arising out
of, relating to or in connection with any action or omission occurring prior to
the Effective Time or arising out of or pertaining to the transactions
contemplated by the Merger Agreement. The Merger Agreement further provides
that (i) the indemnification provisions of the Certificate of Incorporation and
Bylaws of the Surviving Corporation as in effect at the Effective Time will not
be amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who, at the Effective Time, were directors, officers, employees
or agents of United, (ii) USA Waste will assume, be jointly and severally
liable for, and honor, and will cause the Surviving Corporation to honor, in
accordance with their respective terms, certain indemnification agreements of
United without limit as to time; and (iii) for a period of six years after the
Effective Time, USA Waste will cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by United
and its subsidiaries (or policies with the same coverages and amounts and
containing terms and conditions that are no less advantageous to the
indemnified parties) with respect to matters arising on or before the Effective
Time. See "The Plan of Merger and Terms of the Merger--Indemnification."
Conditions to the Merger
MATERIAL FEDERAL INCOME TAX CONSEQUENCES. It is a condition to USA Waste's
obligation to consummate the Merger (the "USA Waste Tax Condition") that USA
Waste shall have received an opinion of its counsel to the effect that (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code") and (ii) no gain or
loss will be recognized by USA Waste or Acquisition for federal income tax
purposes as a result of consummation of the Merger. It is a condition to
United's obligation to consummate the Merger (the "United Tax Condition") that
United shall have received an opinion of its counsel to the effect that (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code, (ii) no gain or loss will be recognized by USA Waste, United or
Acquisition as a result of the Merger, and (iii) no gain or loss will be
recognized by the holders of United Common Stock upon the exchange of their
United Common Stock solely for shares of USA Waste Common Stock, except for
gain or loss attributable to cash received in lieu of fractional shares. Both
the USA Waste Tax Condition and the United Tax Condition are waivable at the
option of the party entitled to receive such opinion as a condition of its
obligation to consummate the Merger. Neither USA Waste nor United currently
intends to waive such condition. In the event that such condition is waived by
either party, USA Waste and United will recirculate a revised Joint Proxy
Statement and Prospectus that discloses the waiver of this condition and
contains all related material disclosure, including risks to investors. In such
event, USA Waste and United will resolicit proxies from their stockholders. See
"The Merger and Related Transactions--Material Federal Income Tax
Consequences."
ACCOUNTING TREATMENT. It is a condition to each party's obligation to
consummate the Merger that USA Waste shall have received a letter from Coopers
& Lybrand L.L.P., dated as of the date on which the transactions contemplated
by the Merger Agreement are consummated (the "Closing Date"), to the effect
that the Merger will qualify for pooling of interests accounting treatment
under Accounting Principles Board Opinion No. 16 if closed and consummated in
accordance with the Merger Agreement. Furthermore, it is a condition to each
party's obligation to consummate the Merger that each of the parties to the
Merger Agreement shall have received a letter dated the Closing Date, addressed
to United, from Ernst & Young LLP regarding such firm's concurrence with
United's management's conclusions that no conditions exist related to United
that would preclude USA Waste's accounting for the Merger with United as a
pooling of interests under Accounting Principles Board Opinion No. 16 if closed
and consummated in accordance with the Merger Agreement. See "The Merger and
Related Transactions--Accounting Treatment."
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GOVERNMENTAL AND REGULATORY APPROVALS. Consummation of the Merger is
conditioned upon the expiration or termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). On April 18, 1997, USA Waste and United filed notification reports
under the HSR Act with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division"). On
May 16, 1997, USA Waste and United received a request from the Antitrust
Division for additional information. USA Waste and United substantially
complied with such request on July 11, 1997. USA Waste, United and the
Antitrust Division have agreed that the waiting period will expire at 11:59
p.m., New York City time, on August 4, 1997. At any time before or after the
Merger, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the Merger or seeking divestiture of substantial
assets of USA Waste or United or their subsidiaries. Private parties and state
attorneys general may also bring an action under the antitrust laws under
certain circumstances. There can be no assurance that a challenge to the Merger
on antitrust grounds will not be made or, if such a challenge is made, of the
result. Consummation of the Merger is also conditioned upon receipt, prior to
the Effective Time, of all necessary material governmental waivers, consents,
orders and approvals and all necessary material consents from lenders. See "The
Merger and Related Transactions--Government and Regulatory Approvals."
NO STATUTE OR INJUNCTION PREVENTING MERGER. Consummation of the Merger is
subject to the condition that no statute, rule or regulation shall have been
enacted by any state or federal government or governmental agency in the United
States which would prevent the consummation of the Merger or make the Merger
illegal, and no injunction, preliminary or permanent, or other order or decree
by any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect.
OTHER CONDITIONS TO THE MERGER. In addition to the approval and adoption of
the Merger Agreement by the requisite votes of USA Waste, Acquisition and
United stockholders and the satisfaction of the conditions described above, the
respective obligations of USA Waste and United to effect the Merger are subject
to the satisfaction or waiver, where permissible, of certain other conditions,
including, without limitation, (i) conditions relating to the accuracy of each
party's representations and warranties and compliance with each party's
covenants, and (ii) a condition to the effect that the shares of USA Waste
Common Stock issuable in the Merger and those to be reserved for issuance upon
the exercise of stock options or warrants or the conversion of convertible
securities shall have been authorized for listing on the NYSE, upon official
notice of issuance. Additionally, the obligation of United to effect the Merger
is subject to satisfaction or waiver of the condition that the average of the
daily closing prices per share of USA Waste Common Stock (as reported on the
NYSE Composite Tape) during the 20 consecutive trading days ending on the
second trading day prior to any then scheduled Closing Date (any such average,
the "USA Waste Trading Price") shall be $31.50 per share or more. See "The Plan
of Merger and Terms of the Merger--Conditions to the Merger."
No Solicitation
The Merger Agreement provides that, after the date of the Merger Agreement
and prior to the Effective Time or earlier termination of the Merger Agreement,
United will not, and will not permit its subsidiaries to, initiate, solicit,
negotiate, encourage, or provide confidential information to facilitate, and
United will use its reasonable efforts to cause any officer, director, or
employee of United, or any attorney, accountant, investment banker, financial
advisor or other agent retained by United or any of its subsidiaries not to
initiate, solicit, negotiate, encourage, or provide non-public or confidential
information to facilitate, any proposal or offer to acquire all or any
substantial part of the business or properties or any capital stock of United
whether by merger, purchase of assets, tender offer or otherwise, whether for
cash, securities or any other consideration or any combination thereof (an
"Acquisition Transaction"). Notwithstanding the foregoing, United may, in
response to an unsolicited written offer or proposal with respect to a
potential or proposed Acquisition Transaction ("Acquisition Proposal") that
United's Board of Directors determines, in good faith and after consultation
with its independent financial advisor, would result (if consummated pursuant
to its terms) in an Acquisition
6
<PAGE>
Transaction more favorable to United's stockholders than the Merger (any such
offer or proposal being referred to as a "Superior Proposal"), furnish (subject
to the execution of a confidentiality agreement substantially similar to the
confidentiality provisions of the Merger Agreement), confidential or non-public
information to a financially capable corporation, partnership, person or other
entity or group (a "Potential Acquirer") and negotiate with such Potential
Acquirer if the Board of Directors of United, after consulting with its outside
legal counsel, determines in good faith that the failure to provide such
confidential or non-public information to or negotiate with such Potential
Acquirer would be reasonably likely to constitute a breach of its fiduciary
duty to United's stockholders. See "The Plan of Merger and Terms of the
Merger--No Solicitation of Acquisition Transactions."
Termination or Amendment of Merger Agreement
TERMINATION. The Merger Agreement may be terminated under certain
circumstances, including (a) by the mutual written consent of USA Waste and
United or (b) either by USA Waste or United at any time prior to the Closing
Date (i) upon a material breach of a representation or warranty by the other
party (the "Non-Terminating Party") which is not cured in all material respects
and which causes certain conditions set forth in the Merger Agreement to be
incapable of being satisfied; (ii) if the Merger is not completed by October
31, 1997, (unless due to a delay or default on the part of the party requesting
termination (the "Terminating Party")); (iii) if the Merger is enjoined by a
final, unappealable court order not entered at the request or with the support
of the Terminating Party and if the Terminating Party shall have used
reasonable efforts to prevent entry of such order; (iv) if the Non-Terminating
Party (x) fails to perform in any material respect any of its material
covenants in the Merger Agreement and (y) does not cure such default in all
material respects within 30 days after written notice of such default
specifying such default in reasonable detail is given to the Non-Terminating
Party by the Terminating Party; and (v) if the stockholders of the Non-
Terminating Party fail to approve the Merger at a duly held meeting of
stockholders called for such purpose or any adjournment thereof. Additionally,
United may terminate the Merger Agreement if (A) it receives a Superior
Proposal, resolves to accept such Superior Proposal and if it shall have given
USA Waste two days' prior written notice of its intention to terminate
(provided that such termination shall not be effective until such time as
certain termination fees shall have been received by USA Waste); or (B) a
tender or exchange offer is commenced by a Potential Acquirer (excluding any
affiliate of United or any group of which any affiliate of United is a member)
for all outstanding shares of United Common Stock, United's Board of Directors
determines, in good faith and after consultation with an independent financial
advisor, that such offer constitutes a Superior Proposal and resolves to accept
such Superior Proposal or recommend to the stockholders that they tender their
shares in such tender or exchange offer, and United shall have given USA Waste
two days' prior written notice of its intention to terminate (provided that
such termination shall not be effective until such time as certain termination
fees shall have been received by USA Waste). USA Waste may terminate the Merger
Agreement if the Board of Directors of United shall have resolved to accept a
Superior Proposal or shall have recommended to the stockholders of United that
they tender their shares in a tender or exchange offer commenced by a third
party (excluding any affiliate of United or any group of which any affiliate of
United is a member); provided that USA Waste may not so terminate the Merger
Agreement until three days after receipt of a notice from United of such
Superior Proposal.
AMENDMENT. The Merger Agreement may be amended or supplemented by an
instrument in writing signed on behalf of each party and in compliance with
applicable law. Such amendment may occur at any time prior to the Closing Date,
and, subject to applicable law, whether before or after approval by the
stockholders of United and USA Waste. See "The Plan of Merger and Terms of the
Merger--Termination or Amendment."
TERMINATION FEES; EXPENSES. USA Waste or United may be required to pay the
other a fee of $50 million upon termination of the Merger Agreement depending
upon the circumstances surrounding such termination. Certain expenses incurred
in connection with this Joint Proxy Statement and Prospectus will be shared
equally by USA Waste and United. All other costs and expenses incurred in
connection with the Merger Agreement and
7
<PAGE>
the transactions contemplated thereby shall be paid by the party incurring such
expenses. See "The Plan of Merger and Terms of the Merger--Termination Fees"
and "--Expenses."
Dissenters' Rights
Delaware law does not require that holders of USA Waste Common Stock or
United Common Stock who object to the Merger and who vote against or abstain
from voting in favor of the Merger be afforded any appraisal or dissenters'
rights or the right to receive cash for their shares. Neither USA Waste nor
United intend to make available any such rights to their respective
stockholders.
STOCKHOLDERS' COMPARATIVE RIGHTS
The rights of stockholders of United are currently governed by Delaware law,
the Certificate of Incorporation and Bylaws of United. The rights of
stockholders of USA Waste are governed by Delaware law and the Certificate of
Incorporation and Bylaws of USA Waste. See "Comparative Rights of Stockholders
of USA Waste and United."
MARKET PRICE DATA
USA Waste Common Stock is traded on the NYSE under the symbol "UW." United
Common Stock is traded on the Nasdaq Stock Market under the symbol "UWST." The
following table sets forth the range of high and low per share sale prices for
the USA Waste Common Stock and the United Common Stock as reported on the NYSE
Composite Tape and the Nasdaq Stock Market, respectively, for the period from
January 1, 1995 through July 23, 1997.
<TABLE>
<CAPTION>
USA WASTE UNITED COMMON
COMMON STOCK STOCK
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1995
First Quarter.............................. $12.50 $10.00 $15.00 $11.50
Second Quarter............................. 16.63 11.50 18.00 13.63
Third Quarter.............................. 22.00 14.63 21.88 17.25
Fourth Quarter 22.50 17.00 21.63 18.00
1996
First Quarter.............................. $25.63 $17.25 $25.75 $17.88
Second Quarter............................. 32.63 24.00 32.25 24.25
Third Quarter.............................. 34.13 22.75 35.50 23.75
Fourth Quarter 34.25 28.63 38.75 28.75
1997
First Quarter.............................. $38.88 $28.63 $40.88 $31.50
Second Quarter............................. 39.12 29.50 41.75 30.38
Third Quarter (through July 23)............ 41.75 38.00 44.38 40.25
</TABLE>
On April 11, 1997, the last trading day prior to announcement by USA Waste
and United that they had reached an agreement concerning the Merger, the
closing sale price of USA Waste Common Stock as reported on the NYSE Composite
Tape was $35.25 per share, and the closing sale price of United Common Stock as
reported on the Nasdaq Stock Market was $37.63 per share. Assuming the Merger
had occurred on such date, the equivalent market value per share of United
Common Stock, calculated by multiplying the closing sale price of USA Waste
Common Stock by the Exchange Ratio, would have been $37.89.
On July 23, 1997, the closing sale price of USA Waste Common Stock as
reported on the NYSE Composite Tape was $41.13 per share, and the closing sale
price of United Common as reported on the Nasdaq Stock
8
<PAGE>
Market was $43.75 per share. The market prices of shares of USA Waste Common
Stock and United Common Stock are subject to fluctuation. It is a condition to
United's obligation to effect the Merger that the USA Waste Trading Price is
$31.50 or more. See "The Plan of Merger and Terms of the Merger--Conditions to
the Merger." Subject to this condition, the market price of USA Waste Common
Stock on the Closing Date, the date shares of USA Waste Common Stock are
received by holders of United Common Stock, or the date on which such shares of
USA Waste Common Stock are eventually sold, may be more or less than the price
of USA Waste Common Stock as of the date of this Joint Proxy Statement and
Prospectus. As a result, stockholders are urged to obtain current market
quotations. Neither USA Waste nor United has ever declared or paid cash
dividends on its common stock. See "Market Price Data--Dividend Information."
Following the Merger, USA Waste Common Stock will continue to be traded on
the NYSE under the symbol "UW", and the listing of United Common Stock on the
Nasdaq Stock Market will be terminated.
9
<PAGE>
SUMMARY FINANCIAL INFORMATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data of USA Waste
for each of the five years in the period ended December 31, 1996, have been
derived from the historical audited consolidated financial statements. The
following selected historical consolidated financial data of USA Waste for the
three months ended March 31, 1996 and 1997, have been derived from the
historical unaudited condensed consolidated financial statements of USA Waste.
The selected Statement of Operations Data of United as set forth below for the
years ended December 31, 1993, 1994, 1995, and 1996 have been derived from the
audited consolidated financial statements of United. The selected Balance Sheet
Data of United as set forth below as of December 31, 1994, 1995, and 1996 has
also been derived from the audited consolidated financial statements of United.
The selected consolidated Statement of Operations Data and consolidated Balance
Sheet Data as set forth below for the year ended December 31, 1992, as of
December 31, 1992 and 1993, respectively, and as of and for the three months
ended March 31, 1996 and 1997, are derived from unaudited financial statements
of United and reflect all adjustments which management considers necessary for
a fair presentation of the financial position and results of operations for
these periods. The historical financial data is not necessarily indicative of
results to be expected after the Merger is consummated. The financial data
should be read in conjunction with the separate audited consolidated financial
statements and the notes thereto incorporated by reference herein. See
"Available Information."
USA WASTE SERVICES, INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues...... $ 682,869 $ 778,966 $ 897,644 $ 987,705 $1,313,388 $ 282,525 $ 364,905
---------- ---------- ---------- ---------- ---------- ---------- ----------
Costs and expenses:
Operating (exclusive of
depreciation and
amortization shown
below)................ 424,497 455,282 520,255 551,305 704,917 158,956 187,723
General and
administrative........ 130,956 126,347 138,819 140,051 160,539 36,704 42,794
Depreciation and
amortization.......... 77,872 96,861 112,860 119,570 153,168 32,701 45,589
Merger costs........... -- -- 3,782 25,639 120,656 -- --
Unusual items.......... 72,090 2,672 8,863 4,733 63,800 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
705,415 681,162 784,579 841,298 1,203,080 228,361 276,106
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
operations............. (22,546) 97,804 113,065 146,407 110,308 54,164 88,799
---------- ---------- ---------- ---------- ---------- ---------- ----------
Other income (expense):
Shareholder litigation
settlement and other
litigation related
costs................. (10,853) (5,500) (79,400) -- -- -- --
Interest expense:
Nonrecurring interest.. -- -- (1,254) (10,994) -- -- --
Other.................. (44,612) (46,032) (47,678) (48,558) (45,547) (11,227) (11,957)
Interest income........ 6,840 4,835 4,670 5,482 5,267 1,930 1,565
Other income, net...... 2,285 1,161 2,570 5,143 8,060 1,215 3,472
---------- ---------- ---------- ---------- ---------- ---------- ----------
(46,340) (45,536) (121,092) (48,927) (32,220) (8,082) (6,920)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... (68,886) 52,268 (8,027) 97,480 78,088 46,082 81,879
Provision for (benefit
from) income taxes..... (27,554) 24,249 1,015 44,992 45,142 18,430 32,752
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)....... (41,332) 28,019 (9,042) 52,488 32,946 27,652 49,127
Preferred dividends..... 152 582 565 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) available
to common shareholders. $ (41,484) $ 27,437 $ (9,607) $ 52,488 $ 32,946 $ 27,652 $ 49,127
========== ========== ========== ========== ========== ========== ==========
Earnings (loss) per
common share........... $ (0.47) $ 0.29 $ (0.09) $ 0.46 $ 0.24 $ 0.21 $ 0.32
========== ========== ========== ========== ========== ========== ==========
Weighted average number
of common and common
equivalent shares
outstanding............ 88,371 95,858 103,422 113,279 139,740 132,362 159,472
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital......... $ 75,143 $ 45,805 $ 9,971 $ 30,109 $ 20,020 $ 54,333 $ 70,640
Intangible assets, net.. 104,471 152,370 185,066 262,205 517,399 284,068 807,571
Total assets............ 1,311,828 1,428,444 1,588,996 1,933,557 2,830,505 2,154,399 3,686,795
Long-term debt,
including current
maturities............. 614,684 650,331 688,673 731,741 1,187,000 863,598 1,454,383
Stockholders' equity.... 457,745 534,989 560,616 907,622 1,155,276 1,002,542 1,668,948
</TABLE>
10
<PAGE>
UNITED WASTE SYSTEMS, INC.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues...... $ 56,771 $109,006 $146,043 $228,377 $335,743 $ 69,581 $ 95,580
-------- -------- -------- -------- -------- -------- --------
Costs and expenses:
Operating.............. 37,077 68,200 88,612 140,814 206,786 45,454 61,862
General and
administrative........ 14,276 20,440 22,527 34,841 53,106 11,410 15,202
-------- -------- -------- -------- -------- -------- --------
51,353 88,640 111,139 175,655 259,892 56,864 77,064
-------- -------- -------- -------- -------- -------- --------
Income from operations.. 5,418 20,366 34,904 52,722 75,851 12,717 18,516
-------- -------- -------- -------- -------- -------- --------
Other income (expense):
Interest expense....... (3,028) (4,705) (6,424) (10,061) (14,950) (3,409) (4,141)
Other income, net...... 796 825 474 948 (252) 139 662
-------- -------- -------- -------- -------- -------- --------
(2,232) (3,880) (5,950) (9,113) (15,202) (3,270) (3,479)
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes.................. 3,186 16,486 28,954 43,609 60,649 9,447 15,037
Provision for income
taxes.................. 2,068 4,921 7,944 15,321 25,256 3,669 6,202
-------- -------- -------- -------- -------- -------- --------
Net income.............. 1,118 11,565 21,010 28,288 35,393 5,778 8,835
Preferred dividends..... 2,529 1,655 1,275 373 -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) available
to common shareholders. $ (1,411) $ 9,910 $ 19,735 $ 27,915 $ 35,393 $ 5,778 $ 8,835
======== ======== ======== ======== ======== ======== ========
Primary earnings (loss)
per common share....... $ (0.14) $ 0.49 $ 0.76 $ 0.82 $ 0.89 $ 0.15 $ 0.21
======== ======== ======== ======== ======== ======== ========
Fully diluted earnings
(loss) per common
share.................. $ (0.14) $ 0.48 $ 0.72 $ 0.81 $ 0.88 $ 0.15 $ 0.21
======== ======== ======== ======== ======== ======== ========
Primary weighted average
number of common and
common equivalent
shares outstanding..... 10,256 20,108 26,076 34,694 39,944 39,073 42,707
======== ======== ======== ======== ======== ======== ========
Fully diluted weighted
average number of
common and common
equivalent shares
outstanding............ 10,256 20,841 29,154 34,899 42,914 39,283 47,353
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital
(deficit).............. $ (919) $ (8,240) $ (8,070) $ (3,975) $ 11,822 $ (3,345) $ 78,358
Intangible assets, net.. 14,136 43,983 65,485 171,739 286,852 192,153 303,329
Total assets............ 130,967 188,978 254,855 540,568 801,042 580,238 904,749
Long-term debt,
including current
maturities............. 40,107 60,683 70,458 177,309 317,888 193,014 278,442
Stockholders' equity.... 61,955 88,521 127,987 242,263 318,714 261,869 449,750
</TABLE>
11
<PAGE>
SUMMARY COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
AND SUPPLEMENTAL INFORMATION
The following summary combined unaudited pro forma condensed financial
information of USA Waste and United gives effect to the Merger under the
"pooling of interests" method of accounting as if the Merger had been
consummated as of the beginning of the periods presented. The pro forma
information for the years ended December 31, 1994, 1995 and 1996 was prepared
based on the respective audited historical financial information of USA Waste
and United. The pro forma information for the three months ended March 31, 1997
was prepared based on the respective unaudited historical financial information
of USA Waste and United. The Supplemental--Pro Forma information reflects, in
addition the pro forma adjustments in the combined unaudited pro forma
condensed financial statements, the impact of certain acquisition and financing
transactions occurring in 1996 and 1997. The Supplemental--Pro Forma earnings
per common share and weighted average number of common and common equivalent
shares outstanding for the three months ended March 31, 1997, includes the
dilutive impact of USA Waste's 4% convertible debt as if such debt was
converted on January 1, 1997. These supplemental adjustments do not include the
impact of certain cost and expense savings and other economic benefits that are
expected to be realized as a result of the Merger. See " USA Waste and United
Supplemental Information Relating to the Combined Unaudited Pro Forma Condensed
Financial Statements."
USA WASTE AND UNITED COMBINED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31, 1997
------------------------------------------------- -------------------------
SUMMARY
COMBINED
SUMMARY COMBINED UNAUDITED UNAUDITED
PRO FORMA CONDENSED SUPPLEMENTAL- PRO FORMA
FINANCIAL INFORMATION PRO FORMA CONDENSED
---------------------------------- ------------- FINANCIAL SUPPLEMENTAL-
1994 1995 1996 1996 INFORMATION PRO FORMA
---------- ---------- ---------- ------------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Operating revenues...... $1,043,687 $1,216,082 $1,649,131 $2,523,650 $460,485 $617,827
---------- ---------- ---------- ---------- -------- --------
Cost and expenses:
Operating (exclusive of
depreciation and
amortization shown
below)................ 596,868 672,117 881,401 1,428,559 241,318 341,227
General and
administrative........ 159,097 169,686 200,101 295,606 55,674 73,766
Depreciation and
amortization.......... 127,108 143,878 191,044 306,169 56,178 77,417
Merger costs........... 3,782 26,539 126,626 126,626 -- --
Unusual items.......... 8,863 4,733 63,800 63,800 -- --
---------- ---------- ---------- ---------- -------- --------
895,718 1,016,953 1,462,972 2,220,760 353,170 492,410
---------- ---------- ---------- ---------- -------- --------
Income from operations.. 147,969 199,129 186,159 302,890 107,315 125,417
---------- ---------- ---------- ---------- -------- --------
Other income (expense):
Shareholder litigation
settlement and other
related costs......... (79,400) -- -- -- -- --
Interest expense:
Nonrecurring........... (1,254) (10,994) -- -- -- --
Other.................. (54,102) (58,619) (60,497) (91,886) (16,098) (25,074)
Interest income........ 5,085 6,682 6,699 6,496 2,053 2,053
Other income, net...... 2,629 4,891 6,376 8,737 3,646 3,781
---------- ---------- ---------- ---------- -------- --------
(127,042) (58,040) (47,422) (76,653) (10,399) (19,240)
---------- ---------- ---------- ---------- -------- --------
Income before income
taxes.................. 20,927 141,089 138,737 226,237 96,916 106,177
Provision for income
taxes.................. 8,959 60,313 70,398 104,107 38,954 43,586
---------- ---------- ---------- ---------- -------- --------
Net income.............. 11,968 80,776 68,339 122,130 57,962 62,591
Preferred dividends..... 1,840 373 -- -- -- --
---------- ---------- ---------- ---------- -------- --------
Income available to
common shareholders.... $ 10,128 $ 80,403 $ 68,339 $ 122,130 $ 57,962 $ 62,591
========== ========== ========== ========== ======== ========
Earnings per common
share.................. $ 0.08 $ 0.53 $ 0.37 $ 0.59 $ 0.29 $ 0.30
========== ========== ========== ========== ======== ========
Weighted average number
of common equivalent
shares outstanding..... 131,454 150,575 182,680 205,263 205,382 217,026
========== ========== ========== ========== ======== ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
COMBINED UNAUDITED
PRO FORMA
CONDENSED SUPPLEMENTAL-
FINANCIAL PRO FORMA
INFORMATION AS OF AS OF
MARCH 31, 1997 MARCH 31, 1997
------------------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital......... $ 130,110 $ 116,702
Intangible assets, net.. 1,110,900 1,294,176
Total assets............ 4,591,544 5,185,286
Long-term debt,
including current
maturities............. 1,732,825 2,158,988
Stockholders' equity.... 2,099,810 2,180,373
</TABLE>
SUPPLEMENTAL INFORMATION--ADJUSTED RELATING TO PRO FORMA STATEMENT OF
OPERATIONS
The following Supplemental Information--Adjusted for the year ended December
31, 1996 adjusts the Supplemental Information--Pro Forma and reflects the pro
forma results of operations for the year ended December 31, 1996, exclusive of
merger costs and unusual items, which primarily represent charges to operations
for the estimated losses expected to be incurred as a result of the disposition
of duplicate or excess assets or certain non-core assets generally accumulated
through significant business combinations. The presentation of results of
operations exclusive of these nonrecurring items is not in accordance with
generally accepted accounting principles. However, the Supplemental
Information--Adjusted is included herein because USA Waste is aware that such
information is used by certain investors when analyzing USA Waste's results of
operations. USA Waste expects to continue to pursue opportunities to expand
through acquisitions and may incur similar charges to operations in the future.
These adjustments do not include additional cost reductions relating to
landfill and collection operations or additional revenues that may result from
volume or price increases.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
--------------
(IN THOUSANDS,
EXCEPT PER
SHARE AMOUNTS)
<S> <C>
Operating revenues.............................................. $2,523,650
Income from operations.......................................... $ 494,991
Income available to common shareholders......................... $ 249,998
Earnings per common share....................................... $ 1.21
Weighted average number of common and common equivalent shares
outstanding.................................................... 217,551
</TABLE>
The adjustments made to the Supplemental Information--Pro Forma to derive the
Supplemental Information--Adjusted are as follows:
. Removal of approximately $126.6 million in costs incurred in connection
with the merger transactions with Western Waste Industries ("Western"),
Grand Central Sanitation, the Salinas Companies, and Sanifill consummated
on May 7, 1996, May 15, 1996, June 28, 1996, and August 30, 1996,
respectively.
. Removal of other unusual and nonrecurring charges of $63.8 million
primarily relating to retirement benefits associated with Western's pre-
merger retirement plan, estimated future losses related to municipal
solid waste contracts in California as a result of the continuing decline
in prices of recyclable materials, estimated losses related to the
disposition of certain non-core business assets, project reserves related
to certain Mexican operations, and various other terminated projects.
. Adjustments to reflect USA Waste's effective tax rate of 40%, giving
effect to the exclusion of certain nondeductible merger costs using the
measurement principles contained in Statement of Financial Accounting
Standards No. 109.
. Earnings per common share and weighted average number of common and
common equivalent shares outstanding for the year ended December 31,
1996, include the dilutive impact of USA Waste's issuance of 4%
convertible debt as if such debt was converted on January 1, 1996.
13
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods and as of the dates indicated
(a) the income (loss) available to common shareholders per common share, the
book value per share and the tangible book value per share of USA Waste Common
Stock; (b) the income available to common shareholders per common share, the
book value per share and the tangible book value per share of United Common
Stock; (c) the combined unaudited pro forma income available to common
shareholders per common share, the unaudited pro forma book value per share and
the unaudited tangible book value per share of USA Waste Common Stock after
giving effect to the Merger on a pooling of interests basis; and (d) the United
equivalent combined unaudited pro forma income available to common shareholders
per common share, and the unaudited pro forma book value per share and tangible
book value per share attributable to the 1.075 shares of USA Waste Common Stock
that will be received by United stockholders for each share of United Common
Stock. The information presented in the table should be read in conjunction
with the combined unaudited pro forma condensed financial statements and the
separate historical consolidated financial statements of USA Waste and United
and the notes thereto appearing elsewhere herein or incorporated by reference
herein. The Supplemental Information--Pro Forma reflects, in addition to the
pro forma adjustments in the combined unaudited pro forma condensed financial
statements, the impact of certain acquisition and financing transactions
occurring in 1996 and 1997. The Supplemental Information--Pro Forma earnings
per common share and weighted average number of common and common equivalent
shares outstanding for the three months ended March 31, 1997 includes the
dilutive impact of USA Waste's 4% convertible debt as if such debt was
converted on January 1, 1997. See "USA Waste and United Combined Unaudited Pro
Forma Condensed Financial Statements."
<TABLE>
<CAPTION>
UNITED
EQUIVALENT
USA WASTE UNITED COMBINED COMBINED
--------- ------ -------- ----------
<S> <C> <C> <C> <C>
Income (loss) available to common
shareholders per common share:
Historical:
Year ended December 31, 1994......... $(0.09) $ 0.76 $ 0.08 $ 0.09
Year ended December 31, 1995......... 0.46 0.82 0.53 0.57
Year ended December 31, 1996......... 0.24 0.89 0.37 0.40
Three months ended March 31, 1997.... 0.32 0.21 0.29 0.31
Supplemental Information--Pro Forma:
Year ended December 31, 1996......... 0.59(1) 0.63
Three months ended March 31, 1997.... 0.30 0.32
Book value per share at March 31, 1997:
Historical........................... 10.83 10.45 10.48 11.27
Supplemental Information--Pro Forma.. 10.61 11.41
Tangible book value per share at March
31, 1997:
Historical........................... 5.59 3.40 4.90 5.31
Supplemental Information--Pro Forma.. 4.31 4.63
</TABLE>
- --------
(1) Does not give effect to adjustments for certain nonrecurring and other
items described elsewhere herein. See "Supplemental Information--Adjusted
Relating to Pro Forma Statement of Operations for the Year Ended December
31, 1996." If such adjustments were applied to the Supplemental
Information--Pro Forma reflected above, earnings per common share for the
year ended December 31, 1996 would have been $1.21.
Neither USA Waste nor United has ever declared or paid cash dividends on its
common stock. See "Market Price Data--Dividend Information."
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OTHER PROPOSALS TO BE PRESENTED AT THE USA WASTE ANNUAL MEETING
At the USA Waste Annual Meeting, stockholders of USA Waste will also be asked
to consider and act upon the following other proposals:
PROPOSAL NO. 2. To elect four members of the Board of Directors of USA Waste
to serve as Class II directors for a three-year term expiring at the USA Waste
annual meeting of stockholders to be held in the year 2000. See "Election of
USA Waste Directors--Nominees for Election as Directors." THE BOARD OF
DIRECTORS OF USA WASTE RECOMMENDS THAT THE STOCKHOLDERS OF USA WASTE VOTE FOR
THE NOMINEES FOR DIRECTORS DESCRIBED HEREIN.
PROPOSAL NO. 3. To approve and adopt the Stock Purchase Plan, which provides
the employees of USA Waste with the ability to purchase, under certain terms
and conditions, shares of USA Waste Common Stock in connection with payroll
deductions elected to be made by such employees. See "Approval and Adoption of
the Stock Purchase Plan." THE BOARD OF DIRECTORS OF USA WASTE RECOMMENDS THAT
THE STOCKHOLDERS OF USA WASTE VOTE FOR THE STOCK PURCHASE PLAN.
PROPOSAL NO. 4. To approve an amendment to the Restated Certificate of
Incorporation of USA Waste to increase the number of authorized shares of USA
Waste Common Stock from 300,000,000 to 500,000,000, to be effective only if the
Merger is consummated. The Board of Directors of USA Waste believes that this
amendment to increase the number of authorized shares of USA Waste Common Stock
is necessary in order to assure that after the Merger, USA Waste will have
shares available for issuance at the Board of Directors' discretion for future
acquisitions, stock splits, stock dividends, equity financings, employee
benefit plans and other corporate purposes. THE BOARD OF DIRECTORS OF USA WASTE
RECOMMENDS THAT THE STOCKHOLDERS OF USA WASTE VOTE FOR THE AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION OF USA WASTE.
PROPOSAL NO. 5. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants to audit USA Waste's financial statements for fiscal
1997. See "Ratification of Appointment of Independent Accountants." THE BOARD
OF DIRECTORS OF USA WASTE RECOMMENDS THAT THE STOCKHOLDERS OF USA WASTE VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P.
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RISK FACTORS
In addition to the other information set forth in this Joint Proxy Statement
and Prospectus, the following factors should be considered by the USA Waste
stockholders and the United stockholders before voting on the proposals
contained herein.
EXPECTED BENEFITS OF COMBINED BUSINESS MAY NOT BE ACHIEVED
There can be no assurance that the expected benefits of the Merger relative
to the combined business as described under "The Merger and Related
Transactions--Joint Reasons for the Merger," "--USA Waste's Reasons for the
Merger" and "--United's Reasons for the Merger" will be achieved. Whether the
anticipated benefits of the Merger are ultimately achieved will depend on a
number of factors, including the ability of the combined company to achieve
administrative cost savings, geographic and other efficiencies resulting from
access to more landfills, insurance and bonding cost reductions, lower cost of
capital and general economies of scale, and the ability of the combined
company to retain municipal contracts and generally to capitalize on its
combined asset base and strategic position.
STOCK PRICES MAY VARY IN RESPONSE TO CHANGES IN BUSINESS AND ECONOMIC
CONDITIONS
The relative stock prices of the USA Waste Common Stock and the United
Common Stock at the Effective Time may vary significantly from the prices as
of the date of execution of the Merger Agreement, the date hereof, the date on
which stockholders vote on the Merger, the date that shares of USA Waste
Common Stock are received by holders of United Common Stock or the date on
which such shares of USA Waste Common Stock are eventually sold due to, among
other factors, changes in the business, operations and prospects of USA Waste
or United, as the case may be, market assessments of the likelihood that the
Merger will be consummated and the timing thereof and general market and
economic conditions. The Exchange Ratio is fixed and will not be adjusted
based on changes in the relative stock prices of the USA Waste Common Stock
and the United Common Stock. However, it is a condition to United's obligation
to effect the Merger that the USA Waste Trading Price is $31.50 or more.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Merger by the Board of Directors of
United, United stockholders should be aware that the directors and executive
officers of United have certain interests in the Merger that are different
from, or in addition to, the interests of United stockholders generally; such
interests, together with other relevant factors, were considered by the Board
of Directors of United in making its recommendation and approving the Merger
Agreement. See "The Merger and Related Transactions--Conflicts of Interest."
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 to 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 Sanifill,
Inc. ("Sanifill") and Western Waste Industries ("Western"), USA Waste's
largest acquisitions to date, or that USA Waste will be able to successfully
integrate the operations of United if the Merger is consummated. In
particular, whether the anticipated benefits of the acquired operations 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, geographic and other efficiencies
resulting from access to more landfills, insurance and bonding cost
reductions, lower cost of capital and general economies of scale and the
ability of the combined company to retain municipal contracts and generally to
capitalize on its combined asset base and strategic position.
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 satisfactory acquisition opportunities,
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availability of capital, ability to maintain margins and the management of
costs in a changing regulatory environment. There can be no assurance that USA
Waste will be able to continue to expand and successfully manage its growth.
RISKS ASSOCIATED WITH ACQUISITIONS, INCLUDING LEGAL MATTERS AND POTENTIAL
DILUTION OF OWNERSHIP INTERESTS OF EXISTING STOCKHOLDERS
USA Waste regularly pursues opportunities to expand through acquisitions.
USA Waste plans to continue to seek acquisitions that complement its services,
broaden its customer base and improve its operating efficiencies. USA Waste's
acquisition strategy involves certain potential risks associated with
assessing, acquiring and integrating the operations of acquired companies and
potential risks associated with pre-existing liabilities of acquired
companies. Although USA Waste generally has been successful in implementing
its acquisition strategy, there can be no assurance that attractive
acquisition opportunities will continue to be available, that USA Waste will
have access to the capital required to finance potential acquisitions on
satisfactory terms, or that any businesses acquired will prove profitable.
Future acquisitions may result in the incurrence of additional indebtedness or
the issuance of additional equity securities which could dilute the ownership
interests of existing stockholders.
Among the risks associated with acquisitions is the risk that the acquired
company has engaged in or is alleged to have engaged in conduct prior to the
date of acquisition that becomes the subject of civil or criminal legal action
after such date. In this regard, on December 31, 1996, USA Waste was served
with subpoenas relating to documents covering a period from 1990 to the
present in connection with an ongoing investigation being conducted by the
United States Attorney's Office for the Central District of California (the
"Western Waste Investigation"). USA Waste has been informed that it is not a
target of the investigation but that one of its subsidiaries, Western, which
USA Waste acquired in May of 1996, is a target of the investigation. USA Waste
has pledged its full cooperation in the investigation. Although there can be
no assurance as to the outcome or consequences of this matter and although the
existence or outcome of this matter may adversely affect USA Waste's ability
to retain or obtain franchises or other business opportunities, USA Waste does
not believe that this matter will have a material adverse effect on USA Waste
and its subsidiaries taken as a whole.
INTERNATIONAL EXPANSION
A significant portion of USA Waste's operations are conducted in Canada. USA
Waste's operations in foreign countries, including Canada, generally are
subject to a number of risks inherent in any business operating in foreign
countries, including political, social and economic instability, general
strikes, nationalization of assets, currency restrictions and exchange rate
fluctuations, nullification, modification or renegotiation of contracts, and
governmental regulation, all of which are beyond the control of USA Waste. No
prediction can be made as to how existing or future foreign governmental
regulations in any jurisdiction may affect USA Waste in particular or the
solid waste management industry in general.
NEED FOR CAPITAL; DEBT FINANCING
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.
USA Waste and United have historically used variable rate debt under
revolving bank credit arrangements as one method of financing their rapid
growth. Although recent financings by both USA Waste and United have reduced
the amount of variable rate debt currently outstanding, USA Waste intends to
continue to use variable rate debt as a financing alternative after the
Merger. To the extent that variable interest rates tend to fluctuate as
general interest rates change, an increase in interest rates could have a
material adverse effect on USA Waste's earnings in the future.
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<PAGE>
PROFITABILITY MAY BE AFFECTED BY FACTORS BEYOND USA WASTE'S CONTROL, INCLUDING
COMPETITION
The waste management industry is highly competitive and requires substantial
capital resources. The industry consists of several large national waste
management companies as well as numerous local and regional companies of
varying sizes and financial resources. USA Waste competes with numerous waste
management companies, some of which have significantly larger operations and
greater resources than USA Waste. USA Waste also competes with those counties
and municipalities that maintain their own waste collection and disposal
operations. These counties and municipalities may have financial advantages
due to the availability to them of tax revenues and tax exempt financing. In
addition, competitors may reduce the price of their services in an effort to
expand sales volume or to win competitively bid municipal contracts.
Profitability 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.
CAPITALIZED EXPENDITURES
In accordance with generally accepted accounting principles, USA Waste and
United capitalize certain expenditures and advances relating to their
acquisitions, pending acquisitions and landfill development and expansion
projects. Indirect acquisition costs, such as executive salaries, general
corporate overhead, public affairs and other corporate services, are expensed
as incurred. USA Waste's and United's policy is to charge against earnings any
unamortized capitalized expenditures and advances (net of any portion thereof
that United or USA Waste, as the case may be, estimates will be recoverable,
through sale or otherwise) relating to any operation that is permanently shut
down, any pending acquisition that is not consummated, and any landfill
development or expansion project that is not successfully completed. There can
be no assurance that the combined company in future periods will not be
required to incur a charge against earnings in accordance with such policy,
which charge, depending upon the magnitude thereof, could have a material
adverse effect on the combined company's results of operations and financial
condition.
POTENTIAL ADVERSE EFFECT OF GOVERNMENT REGULATION
USA Waste's operations are, and the combined company's operations will be,
subject to and substantially affected by 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 combined 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. In
particular, each of United and USA Waste is subject to extensive and evolving
environmental and land use laws and regulations, which have become
increasingly stringent. These laws and regulations affect United's and USA
Waste's businesses in a variety of ways. In order to develop and operate a
landfill or other solid waste management facility, it is necessary to obtain
and maintain in effect various facility permits and other governmental
approvals, including those related to zoning, environmental and land use.
These permit approvals are difficult, time consuming and costly to obtain and
may be subject to community opposition by various local elected officials or
citizens, regulatory delays, subsequent modifications and other uncertainties.
There can be no assurance that the combined company will be successful in
obtaining and maintaining in effect permits and approvals required for the
successful operation and growth of its business, including permits and
approvals required for the development of additional disposal capacity needed
to replace existing capacity that is exhausted. The design, operation and
closure of landfills are also subject to extensive federal and state
regulations. These regulations could also require the combined company to
undertake investigatory or remedial activities, to curtail operations or to
close a landfill temporarily or permanently. Furthermore, future changes in
these regulations may require the combined company to modify, supplement, or
replace equipment or facilities at costs which could be substantial.
POTENTIAL ENVIRONMENTAL LIABILITY AND LIMITED INSURANCE COVERAGE
The combined company may be subject to liability for environmental damage
that its landfills, transfer stations and collection operations may have
caused or may cause nearby landowners, particularly as a result of
18
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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, the
transportation, treatment or disposal of which was arranged for by USA Waste,
United or their predecessor owners of operations or assets acquired by such
companies. Any substantial liability for environmental damage could have a
material adverse effect on the combined company's results of operations and
financial condition.
In the ordinary course of their businesses, United and USA Waste may become
involved in a variety of legal and administrative proceedings relating to land
use and environmental laws and regulations. These may include proceedings by
federal, state or local agencies seeking to impose civil or criminal penalties
on the company for violations of such laws and regulations, or to impose
liability on United or USA Waste under federal or state statutes, or to
revoke, or deny renewal of, a permit; actions brought by citizens' groups,
adjacent landowners or governmental entities opposing the issuance of a permit
or approval to United or USA Waste or alleging violations of the permits
pursuant to which United or USA Waste operates or laws or regulations to which
United or USA Waste is subject; and actions seeking to impose liability on
United or USA Waste for any environmental damage at their owned or operated
facilities (or at facilities formerly owned by United or USA Waste or its
predecessors) or damage that those facilities or other properties may have
caused to adjacent landowners or others, including groundwater or soil
contamination. The adverse outcome of one or more of these proceedings could
have a material adverse effect on the combined company's results of operations
and financial condition.
During the ordinary course of its operations, each of United and USA Waste
has from time to time received, and expects that it may in the future from
time to time receive, citations or notices from governmental authorities that
its operations are not in compliance with its permits or certain applicable
environmental or land use laws and regulations. Each of United and USA Waste
generally seeks to work with the authorities to resolve the issues raised by
such citations or notices. There can be no assurance, however, that the
combined company will always be successful in this regard.
USA Waste's and United's insurance for environmental liability is very
limited because USA Waste and United believe that the cost for such insurance
is high relative to the coverage it would provide. Due to the limited nature
of such insurance coverage for environmental liability, if USA Waste or United
were to incur liability for environmental damage, such liability could have a
material adverse effect on the combined company's results of operations and
financial condition.
ALTERNATIVES TO LANDFILL DISPOSAL
Alternatives to landfill disposal, such as recycling and composting, are
increasingly being used. In addition, in certain of USA Waste's and United's
markets, incineration is an alternative to landfill disposal. There also has
been an increasing trend at the state and local levels to mandate recycling
and waste reduction at the source and to prohibit the disposal of certain
types of wastes, such as yard wastes, at landfills. These developments may
result in the volume of waste going to landfills being reduced in certain
areas, which may affect the combined company's ability to operate its
landfills at full capacity and the prices that can be charged for landfill
disposal services.
NO DIVIDENDS
USA Waste has never declared or paid cash dividends on its common stock. USA
Waste currently expects to retain its earnings for its business and does not
anticipate paying dividends on its common stock at any time in the foreseeable
future. The decision whether to apply legally available funds to the payment
of dividends on USA Waste Common Stock will be made by the USA Waste Board of
Directors from time to time in the exercise of its business judgment. See
"Market Price Data."
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POTENTIAL EFFECT OF CERTAIN USA WASTE ANTI-TAKEOVER PROVISIONS
Certain provisions of the USA Waste Restated Certificate of Incorporation
(the "USA Waste Certificate") and USA Waste By-laws may have the effect of
making more difficult an acquisition of USA Waste in a transaction that is not
approved by the USA Waste Board of Directors. For example, the USA Waste Board
of Directors is given the power to issue up to 10,000,000 shares of Preferred
Stock of USA Waste in one or more series, and to fix the rights and
preferences as to any such series, without further authorization of the
holders of USA Waste Common Stock. In addition, the USA Waste Board of
Directors is divided into three classes, each of which serves for a staggered
three-year term, making it more difficult for a third party to gain control of
the USA Waste Board of Directors. These provisions generally are designed to
permit USA Waste to develop its businesses and foster its long-term growth
without the disruption caused by the threat of a takeover not deemed by the
USA Waste Board of Directors to be in the best interests of USA Waste and its
stockholders. They may also have the effect of discouraging a third party from
making a tender offer or otherwise attempting to gain control of USA Waste
even though such an attempt might be economically beneficial to USA Waste and
its stockholders. See "Comparative Rights of Stockholders of USA Waste and
United," and "--Description of USA Waste Capital Stock--Preferred Stock."
RECENT ARBITRATION DEMAND
On June 25, 1997, Richard and Martin Zielinski (the "claimants") filed a
demand for arbitration against Connecticut Valley Sanitary Waste Disposal,
Inc. ("CVSWD"), a subsidiary of United Waste. The claimants seek approximately
$8,600,000, plus treble damages based on CVSWD's alleged breaches of
obligations under a lease and Massachusetts law in relation to the operation
of CVSWD's Chicopee, Massachusetts landfill. CVSWD disagrees with claimants'
contentions and intends to vigorously defend against this claim. CVSWD will be
filing a counter-demand for arbitration, based on the claimants' breaches of
the lease and Massachusetts law. It is too early to predict the outcome of the
arbitration.
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THE MEETINGS
DATE, TIME AND PLACE OF THE MEETINGS
The USA Waste Annual Meeting will be held at 2:00 p.m., Central Time, on
August 26, 1997, at the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas.
The United Special Meeting will be held at 11:00 a.m., Central Time, on August
26, 1997, at the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas.
PURPOSE OF THE MEETINGS
The purpose of the USA Waste Annual Meeting is to consider and act upon the
following proposals: (i) to approve and adopt the Merger Agreement, (ii) to
elect four members of USA Waste's Board of Directors to serve as Class II
directors for a three-year term expiring at the USA Waste annual meeting of
stockholders to be held in the year 2000, (iii) to approve and adopt the Stock
Purchase Plan, (iv) to amend the USA Waste Restated Certificate of
Incorporation to increase the number of authorized shares of USA Waste Common
Stock from 300,000,000 to 500,000,000, to be effective only if the Merger is
consummated, and (v) to ratify the appointment of Coopers & Lybrand L.L.P. as
USA Waste's independent accountants for the ensuing year. Any other proper
business may be transacted at the USA Waste Annual Meeting or any adjournments
thereof. USA Waste stockholder approval of the Merger is required in
accordance with the rules of the NYSE since the USA Waste Common Stock to be
issued in connection with the Merger will be in excess of 20% of the number of
shares of USA Waste Common Stock outstanding before such issuance.
The purpose of the United Special Meeting is to consider and act upon a
proposal to approve and adopt the Merger Agreement.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of USA Waste Common Stock at the close of business on
the USA Waste Record Date are entitled to notice of, and to vote at, the USA
Waste Annual Meeting, and only holders of record of United Common Stock at the
close of business on the United Record Date are entitled to notice of, and to
vote at, the United Special Meeting.
On the USA Waste Record Date, there were 3,646 holders of record of USA
Waste Common Stock and 161,270,883 shares of USA Waste Common Stock issued and
outstanding. Each share of USA Waste Common Stock entitles the holder thereof
to one vote on each matter submitted for stockholder approval. See "Principal
Stockholders of USA Waste and United" for information regarding persons known
to management of USA Waste to be the beneficial owners of more than 5% of the
outstanding USA Waste Common Stock.
On the United Record Date, there were 174 holders of record of United Common
Stock and 44,244,280 shares of United Common Stock issued and outstanding.
Each share of United Common Stock entitles the holder thereof to one vote on
each matter submitted for stockholder approval. See "Principal Stockholders of
USA Waste and United" for information regarding persons known to management of
United to be the beneficial owners of more than 5% of the outstanding United
Common Stock.
An automated system administered by the transfer agent of USA Waste and
United, respectively will be used to tabulate the votes at the Meetings.
Abstentions, directions to withhold authority, and broker non-votes are
counted as shares present in the determination of whether the shares of stock
represented at the meeting constitutes a quorum. In the case of proposals
requiring the affirmative vote of the holders of a majority of shares present
or represented by proxy and entitled to vote thereon, abstentions will be
counted as part of the total number of votes cast on such proposals in
determining whether the proposals have received the requisite number of
favorable votes, whereas broker non-votes will not be counted as part of the
total number of votes cast on such proposals. Thus, abstentions will have the
same effect as votes against any such proposal, whereas broker non-votes will
have no effect in determining whether any such proposal has been approved by
the stockholders.
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In the case of proposals requiring the affirmative vote of the holders of a
specified percentage of outstanding shares (such as the vote of holders of
United Common Stock regarding the approval and adoption of the Merger
Agreement and the vote of holders of USA Waste Common Stock regarding the
approval of the amendment of USA Waste's Restated Certificate of
Incorporation) both abstentions and broker non-votes will be counted as part
of the total number of votes cast on such proposals in determining whether the
proposals have been approved by the stockholders. Thus, both abstentions and
broker non-votes will have the same effect as a vote against such proposals.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the USA
Waste Annual Meeting and the United Special Meeting, as applicable, in
accordance with the instructions contained therein. If a holder of USA Waste
Common Stock executes and returns a proxy and does not specify otherwise, the
shares represented by such proxy will be voted FOR (i) approval and adoption
of the Merger Agreement, (ii) election of the USA Waste Board's nominees for
directors, (iii) approval of the Stock Purchase Plan, (iv) approval of the
amendment to the USA Waste Restated Certificate of Incorporation to increase
the number of authorized shares of USA Waste Common Stock from 300,000,000 to
500,000,000, to be effective only if the Merger is consummated, and (v)
ratification of the appointment of Coopers and Lybrand L.L.P. as USA Waste's
independent accountants for the ensuing year. If a holder of United Common
Stock executes and returns a proxy and does not specify otherwise, the shares
represented by such proxy will be voted FOR approval and adoption of the
Merger Agreement. A stockholder of USA Waste or United who has executed and
returned a proxy may revoke it at any time before it is voted at the
respective meeting by (a) executing and returning a proxy bearing a later
date, (b) filing a written notice of such revocation with the Secretary of USA
Waste or United, as appropriate, stating that the proxy is revoked or (c)
attending the meeting and voting in person.
Delaware law does not require that holders of USA Waste Common Stock or
United Common Stock who object to the Merger and who vote against or abstain
from voting in favor of the Merger be afforded any appraisal rights or the
right to receive cash for their shares. Neither USA Waste nor United intends
to make any such rights available to its stockholders.
VOTE REQUIRED FOR APPROVAL
USA WASTE. The presence at the USA Waste Annual Meeting, in person or by
proxy, of holders of a majority of the outstanding shares of USA Waste Common
Stock entitled to vote at the meeting will constitute a quorum for the
transaction of business. Under the rules of the NYSE, approval of the Merger
requires the affirmative vote of the holders of a majority of the shares of
USA Waste Common Stock voted, in person or by proxy, at the USA Waste Annual
Meeting provided that the total vote cast on the proposal represents over 50%
in interest of all shares entitled to vote on the proposal. On the USA Waste
Record Date, the directors and officers of USA Waste and their affiliates held
approximately 20.1 million shares of USA Waste Common Stock, representing
approximately 12.4% of the outstanding shares. Such persons have indicated to
USA Waste that they intend to vote their shares in favor of the Merger.
With respect to the election of USA Waste directors, the four Class II
nominees receiving the highest number of votes will be elected to the Board of
Directors of USA Waste. Proxies given to the persons named in the USA Waste
form of proxy will be voted FOR the election of the nominees listed under
"Election of USA Waste Directors" unless authority to vote is withheld. A
stockholder entitled to vote for the election of directors can withhold
authority to vote for all nominees for director or can withhold authority to
vote for certain nominees for director.
The adoption and approval of the Stock Purchase Plan requires the
affirmative vote of the holders of a majority of the shares of USA Waste
Common Stock present or represented by proxy and entitled to vote at the USA
Waste Annual Meeting.
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Adoption and approval of the amendment to USA Waste's Restated Certificate
of Incorporation requires the affirmative vote of the holders of a majority of
the outstanding shares of USA Waste Common Stock entitled to vote on such
proposal. Approval and adoption of such amendment is not a condition to the
Merger.
Ratification of the appointment of the independent auditors for the ensuing
year requires the vote of a majority of the shares of USA Waste Common Stock
present or represented by proxy and entitled to vote at the USA Waste Annual
Meeting.
UNITED. The presence at the United Special Meeting, in person or by proxy,
of holders of a majority of the issued and outstanding shares of United Common
Stock entitled to vote at the meeting will constitute a quorum for the
transaction of business. Pursuant to Delaware law, approval and adoption of
the Merger Agreement requires the affirmative vote of the holders of a
majority of the shares of United Common Stock entitled to vote thereon. All
officers and directors of United who, as of the United Record Date, were
stockholders of United have indicated to United that they intend to vote their
shares of United Common Stock in favor of the Merger Agreement. As of the
United Record Date, such individuals collectively had the right to vote
approximately 507,000 shares of United Common Stock, representing less than 2%
of the outstanding shares of United Common Stock on such date. See "Principal
Stockholders of USA Waste and United."
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, and employees
of each of USA Waste and United may solicit proxies from their respective
stockholders by personal interview, telephone, telegram, facsimile, or
otherwise. USA Waste and United will each bear the costs of the solicitation
of proxies from their respective stockholders, except that USA Waste and
United will share equally the cost of printing this Joint Proxy Statement and
Prospectus. USA Waste has engaged Corporate Investor Communications, Inc., a
proxy solicitation firm, to assist in the solicitation of proxies from USA
Waste stockholders. USA Waste will pay the fees in connection with the
solicitation by such firm which are anticipated to be $6,000 plus such firm's
out-of-pocket expenses. United has engaged D.F. King & Co., Inc. , a proxy
solicitation firm, to assist in the solicitation of proxies from United
stockholders. United will pay the fees in connection with the solicitation by
such firm which are anticipated to be $6,000, plus such firm's out-of-pocket
expenses. Arrangements will be made with brokerage firms and other custodians,
nominees, and fiduciaries who hold USA Waste Common Stock and United Common
Stock of record for the forwarding of solicitation materials to the beneficial
owners thereof. USA Waste and United will reimburse brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them in connection therewith.
OTHER MATTERS
At the date of this Joint Proxy Statement and Prospectus, the Board of
Directors of USA Waste does not know of any business to be presented at the
USA Waste Annual Meeting, and the Board of Directors of United does not know
of any business to be presented at the United Special Meeting, other than as
set forth in their respective notices accompanying this Joint Proxy Statement
and Prospectus.
THE MERGER AND RELATED TRANSACTIONS
The detailed terms and conditions of the Merger, including conditions to
consummation of the Merger, are contained in the Merger Agreement, which is
attached hereto as Appendix A and incorporated herein by reference. The
following discussion sets forth a description of material terms and conditions
of the Merger Agreement. The description in this Joint Proxy Statement and
Prospectus of the terms and conditions of the Merger is qualified in its
entirety by reference to the Merger Agreement.
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that, at the Effective Time, Acquisition will
merge with and into United, whereupon United will become a wholly owned
subsidiary of USA Waste and each outstanding share of United
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Common Stock will be converted into 1.075 shares of USA Waste Common Stock. In
addition, at the Effective Time, each issued and outstanding share of
Acquisition Common Stock shall be converted into one share of common stock,
par value $.001 per share, of the Surviving Corporation.
Based upon the number of shares of USA Waste Common Stock and United Common
Stock outstanding as of June 27, 1997, and assuming that approximately 1.9
million shares of USA Waste Common Stock are issued in exchange for the
cancellation of outstanding United Options in connection with the Merger,
approximately 210.8 million shares of USA Waste Common Stock will be
outstanding immediately following the Effective Time, of which approximately
49.5 million shares, representing 23.5% of the total, will be held by former
holders of United Common Stock and United Options.
BACKGROUND OF THE MERGER
Over the past several years, representatives of USA Waste and United on
occasion had discussions concerning the potential for some type of business
combination. During the same period, representatives of United also had
discussions with representatives of Sanifill, Inc., which is now a subsidiary
of USA Waste, concerning the potential for some type of business combination
with Sanifill, Inc.
In addition, over the past several years, representatives of United on
occasion had discussions regarding a possible business combination with a
potential strategic buyer in the solid waste industry. The parties engaged in
preliminary discussions from time to time in which they considered whether or
not a merger or other business combination would be advisable and whether
potential negotiations on material terms might be successful. At the time of
the last such discussion in mid-1996 the consensus of the parties was that
further discussions would not result in an agreement on price or other
material terms. Prior to entering into the Merger Agreement, the Board of
Directors of United evaluated the advisability of contacting such other
company with respect to its possible interest in a business combination. The
United Board of Directors weighed the likelihood of reaching a desirable
agreement with USA Waste and the risks to the proposed USA Waste transaction
of approaching the other potential merger partner at that time, against the
Board's view that the other party was unlikely to propose or agree to a
superior transaction and the Board's belief that, although the Merger
Agreement would provide for a $50 million termination fee, such party would
not be prevented from making a proposal following execution of an agreement
with USA Waste. The Board of Directors concluded that it was not advisable for
the Board to authorize management to contact the other potential merger
partner.
On March 18, 1997, Mr. Drury (Chairman of the Board and Chief Executive
Officer of USA Waste), Mr. Jacobs (Chairman of the Board and Chief Executive
Officer of United) and Mr. Milne (Vice Chairman of the Board and Senior Vice
President of United) met at an investment conference to discuss matters
unrelated to a business combination. During this meeting, Mr. Drury indicated
that USA Waste might be interested in pursuing a business combination
transaction with United on a stock-for-stock basis. Messrs. Drury, Jacobs and
Milne then discussed generally the potential advantages of a business
combination of USA Waste and United. These discussions were continued by
Messrs. Drury and Jacobs over the next several days.
On March 18, 1997, following the meeting described above, United asked
Goldman Sachs to act as its financial advisor in connection with a possible
business combination with USA Waste.
On April 3, 1997, at a meeting of the Board of Directors of United, Mr.
Jacobs briefed the Board on the discussions with Mr. Drury that had occurred
concerning a potential business combination with USA Waste. The Board
authorized Mr. Jacobs to pursue such discussions.
On April 4, 1997, the management teams of USA Waste and United met to
commence their respective due diligence investigations, review the operations
of the two companies and discuss the potential synergies, cost-savings and
other benefits that would result from a business combination. During the
period following such meeting, USA Waste and United each continued their
respective due diligence investigations. At the end of the April 4, 1997
meeting, USA Waste presented United with a draft Merger Agreement, which did
not include a proposed exchange ratio or any other economic terms.
On April 7, 1997, in a telephone conversation, Messrs. Drury and Jacobs
continued to discuss a potential business combination and agreed that they and
their respective teams would meet in New York City on April 10,
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1997 for the purpose of conducting further discussions concerning a potential
business combination between the two companies.
On April 9, 1997, prior to the scheduled meeting in New York, United
delivered to USA Waste written comments on the draft Merger Agreement. During
the period from April 10, 1997 through April 13, 1997, representatives of USA
Waste and United and their respective financial advisors and legal counsel
held a series of meetings in New York City, at which the parties negotiated
the final terms of the Merger Agreement, including the exchange ratio, and
related documents. On April 11, 1997, USA Waste retained DLJ to act as its
financial advisor in connection with the proposed business combination with
United.
On April 12, 1997, the United Board held a special meeting, at which the
Board members discussed the proposed Merger. On the evening of April 13, 1997,
the United Board held another special meeting at which (i) the Board reviewed
with United management and legal and financial advisors the proposed terms of
the Merger and Merger Agreement and the anticipated effects of the Merger on
United and the combined companies, (ii) members of United's senior management
and United's financial and legal advisors made presentations concerning the
Merger, and (iii) Goldman Sachs rendered its written opinion that, as of such
date, the Exchange Ratio pursuant to the Merger Agreement was fair to the
holders of United Common Stock. At such meeting, the United Board unanimously
approved the Merger Agreement and recommended that the stockholders of United
vote in favor of the Merger.
On April 12, 1997, the Board of Directors of USA Waste held a special
meeting at which the Board members discussed the proposed Merger. On April 13,
1997, the USA Waste Board held another special meeting at which (i) the Board
reviewed with USA Waste's management and legal and financial advisors the
proposed terms of the Merger and Merger Agreement and the probable effects of
the Merger on USA Waste and the combined company, (ii) members of USA Waste's
senior management and USA Waste's legal and financial advisors made
presentations concerning the Merger, and (iii) DLJ rendered its written
opinion that, as of such date, the Exchange Ratio was fair to USA Waste from a
financial point of view. At such meeting, the USA Waste Board unanimously
approved the Merger Agreement and recommended that the stockholders of USA
Waste vote in favor of the Merger.
The Merger Agreement was executed early in the morning of April 14, 1997. A
joint public announcement was made by the parties on the morning of April 14,
1997.
CERTAIN LITIGATION
On April 17, 1997, a purported class action entitled Schipper v. United
Waste et al. (C.A. 15664-NC) was filed in the Court of Chancery of the State
of Delaware against United and each of the members of United's Board of
Directors asserting, among other things, that defendants breached their
fiduciary duties to stockholders of United in negotiating the Merger Agreement
and in engaging in certain related alleged acts and omissions. In particular,
the complaint in the Schipper action alleges that the proposed United/USA
Waste transaction "is wrongful, unfair and harmful to United Waste's
shareholders" because United's shareholders will allegedly not receive the
fair value of United's assets and business in the proposed merger. The
Schipper complaint further alleges that "[i]n negotiating the proposed
merger/acquisition of United Waste by USA Waste, defendants did not exercise
good faith, fair dealing, loyalty and due care" because defendants, among
other things, allegedly (a) failed to "evaluate adequately the Company's worth
as a potential merger/acquisition candidate;" (b) failed to "take sufficient
steps to enhance United Waste's value and/or attractiveness as a
merger/acquisition candidate;" (c) failed to "expose the Company effectively
in the marketplace to create an active and open auction for the Company;" and
(d) failed to "act independently" to protect "the interests of United Waste's
public shareholders." The complaint seeks, among other things, injunctive and
other equitable relief against consummation of the Merger, damages and costs.
United believes the claim is without merit.
JOINT REASONS FOR THE MERGER
The Boards of Directors of USA Waste and United believe that the Merger
represents a unique strategic fit between two companies with similar business
strategies and corporate cultures and complementary operations
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and geographical presence. Both Boards of Directors believe that USA Waste and
United, as a combined company, will have greater financial strength,
operational efficiencies, earning power and growth potential than either USA
Waste or United would have on its own. The USA Waste Board and the United
Board identified a number of potential benefits of the Merger which they
believe will contribute to the success of the combined company and thus inure
to the benefit of stockholders of both companies, including the following:
SYNERGIES OF THE COMBINED COMPANY. USA Waste and United, as a combined
company, expects to have annualized revenues of approximately $2.3 billion and
total assets in excess of $4.5 billion and expects to operate approximately
155 landfills, 270 collection companies and 153 transfer stations serving over
three million customers in 42 states, the District of Columbia, Canada, Mexico
and Puerto Rico. The combined company is expected to be the operator of the
largest number of landfills in North America. Each Board of Directors believes
that the Merger should result in a number of important synergies, including
the opportunity to leverage certain financial and administrative functions
over a larger operational and revenue base and lower costs of capital,
insurance and bonding. In evaluating the Merger, each Board of Directors also
considered the desirability of other potential savings from the synergies
between USA Waste and United and the integration of the companies' operations,
including administrative cost savings through elimination of duplicative
positions and geographic and other efficiencies resulting from access to more
landfills. The Boards of Directors of USA Waste and United estimated the
potential cost savings from the Merger to be approximately $29 million pre-tax
per annum, although there can be no assurance as to the timing or amount of
such potential cost savings.
GEOGRAPHICALLY COMPLEMENTARY OPERATIONS. Both USA Waste and United are
engaged in the non-hazardous solid waste management business and provide solid
waste management services, consisting of solid waste collection, transfer,
disposal and recycling services to municipal, commercial, industrial and
residential customers. Although both USA Waste and United have operations that
are national in scope, their collection operations and landfills are highly
complementary. USA Waste's collection operations and landfills are located
predominantly in urban areas, while United has maintained a secondary market
focus and has operations concentrated primarily in suburban and rural areas.
Both Boards of Directors also considered the strategic fit between the markets
served by USA Waste and those served by United and believe that a combination
of USA Waste and United will result in the potential for accelerated growth
and further operational efficiencies by allowing the combined company to
expand, complete and link existing service areas.
SIGNIFICANT NEW GROWTH OPPORTUNITIES. The strategy of both USA Waste and
United has been to expand their solid waste management services aggressively
by acquiring additional solid waste collection operations, landfills and
transfer stations. Both companies anticipate that significant attractive
consolidation opportunities currently exist as a result of added service
requirements, increased environmental regulation and public concern over the
environment, all of which have contributed to higher costs associated with
providing waste management services generally. The Boards of Directors of USA
Waste and United believe that the combined company will be better positioned
to pursue consolidation opportunities by being able to draw upon the
resources, experience and development efforts of both USA Waste and United.
USA WASTE'S REASONS FOR THE MERGER
In evaluating the Merger, management and the Board of Directors of USA Waste
considered a variety of factors in the context of USA Waste's strategic
objectives, including those set forth above under "--Joint Reasons for the
Merger". A key element of USA Waste's strategy is to expand solid waste
management services through the acquisition of additional solid waste
collection, transfer and recycling operations and landfills, with the
objective of increasing its presence as a national integrated solid waste
management company with a broad geographic base of operations. USA Waste's
Board concluded that by combining operations of USA Waste and United, USA
Waste would further its strategic objectives and that the combined entity
could participate more effectively in the ongoing consolidation of the solid
waste services industry. In evaluating the Merger, the USA Waste Board also
took into account United's profitability and strong history of growth and
earnings and concluded that a combination with United would strengthen USA
Waste's financial position in a number of key areas. In addition, the USA
Waste Board of Directors and management concluded that (i) certain of the
members
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of United's management would complement USA Waste's existing management team
in pursuing acquisitions and managing the growth of USA Waste in a
consolidating industry and (ii) assuming the achievement of certain operating
synergies, the Merger would result in accretion to USA Waste's earnings.
At the April 13, 1997 meeting, the USA Waste Board of Directors received a
written opinion from DLJ that the Exchange Ratio was fair as of such date,
from a financial point of view, to USA Waste. See "--Opinion of Financial
Advisor to USA Waste."
The foregoing discussion of the information and factors considered by the
USA Waste Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Merger, the USA
Waste Board did not find it practicable to and did not quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the USA Waste Board may have
given different weights to the different factors.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF USA WASTE
For the reasons set forth under "--Joint Reasons for the Merger" and "--USA
Waste's Reasons for the Merger," the Board of Directors of USA Waste believes
that the terms of the Merger Agreement and the Merger are fair to, and in the
best interests of, USA Waste and the holders of USA Waste Common Stock. All
members of the Board of Directors of USA Waste approved the Merger Agreement.
THE USA WASTE BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF USA WASTE
COMMON STOCK VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
UNITED'S REASONS FOR THE MERGER
In reaching its decision to approve the Merger Agreement and to recommend
that United's stockholders vote to approve and adopt the Merger Agreement,
United's Board of Directors considered, among other things, the factors set
forth above under "--Joint Reasons for the Merger" and the following factors:
(i) its knowledge of the historical and prospective business, operations,
properties, assets, financial condition and operating results of United;
(ii) presentations by United management with respect to the estimated
synergies and benefits contemplated to be obtained in the Merger and the
likely favorable impact of the proposed Merger on continued prospects for
growth and acquisitions;
(iii) the financial terms of the Merger and the opinions of Goldman Sachs
dated April 13, 1997 and the opinion dated as of the date of this Joint
Proxy Statement and Prospectus as to the fairness of the Exchange Ratio
pursuant to the Merger Agreement to the holders of United Common Stock. See
"--Opinion of Financial Advisor to United";
(iv) the terms of the Merger Agreement, including (a) the prohibition on
the solicitation of other offers and the circumstances under which United
would be able to pursue unsolicited alternative proposals, (b) the
requirement that the USA Waste Trading Price be at least $31.50 per share,
and (c) the commitments that USA Waste had made with respect to actions
that might be necessary in order to obtain approval under the HSR Act. See
"The Plan of Merger and Terms of the Merger";
(v) the matters set forth herein under "--Conflicts of Interest,"
including that (a) at the Closing of the Merger, USA Waste will offer to
enter into the Consulting Agreements (as defined below) with each of
Bradley S. Jacobs, John N. Milne and Michael J. Nolan, (b) two persons
designated by United and acceptable to USA Waste would be elected to the
Board of Directors of USA Waste after the Effective Time to serve as
directors until the 1998 USA Waste annual meeting, (c) certain officers of
United would have the right, and are expected to, terminate their
employment agreements and receive specified payments upon consummation of
the Merger, (d) all vested and unvested United Options held by officers and
directors of United are expected to be cancelled in exchange for a number
of shares of USA Waste Common Stock
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equal in market value to the fair value of such United Options, as
determined by an independent third party, in connection with the Merger,
and (e) all officers, directors and employees of United will be indemnified
by USA Waste and United against certain liabilities and USA Waste will
maintain in effect directors' and officers' liability insurance on behalf
of such officers and directors. The Board noted that such factors gave
certain directors and officers interests in the Merger in addition to their
interests as stockholders of United;
(vi) its assessment of the historical and prospective business,
operations, properties, assets, financial condition and operating results
of USA Waste and the potential negative impact thereon of the matters
discussed above under "Risk Factors." In that regard, the Board of
Directors considered the financial presentation to the Board of Directors
by Goldman Sachs summarized below under "--Opinion of Financial Advisor to
United." The Board also considered USA Waste's management's favorable
record with respect to achieving synergies in connection with previous
acquisitions. The Board also considered that the combined company would
have a stronger balance sheet than United alone and that such factor should
facilitate access to credit markets on more favorable terms.
The Board of Directors also evaluated the potential negative consequences
to the combined entity of the Western Waste Investigation. See "Risk
Factors--Risks Associated with Acquisitions, Including Legal Matters and
Potential Dilution of Ownership Interests of Existing Stockholders." The
Board determined that although there was no assurance as to the outcome or
consequences of the Western Waste Investigation, such matter should not
prevent the proposed transaction since it is related to activities of a
company prior to its acquisition by USA Waste and since the Board of
Directors believed that the potential downside of the matter was outweighed
by the potential benefits of the transaction.
(vii) the historical trading prices for United Common Stock, on the one
hand, and USA Waste Common Stock, on the other;
(viii) the compatibility of the respective business strategies of USA
Waste and United; and
(ix) the opportunity for United stockholders to participate, as holders
of USA Waste Common Stock, in a larger, stronger, more geographically
diversified company of which United would become a significant part, and to
do so by means of a transaction which is designed to be tax-free to
United's stockholders and accounted for as a pooling of interests.
The foregoing discussion of the information and factors considered by the
United Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Merger, the United
Board did not find it practicable to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. The United Board viewed its determination as being based on the
totality of the information presented to and considered by it and not on one
particular factor. In addition, individual members of the United Board may
have given different weights to different factors. See "--Conflicts of
Interest."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF UNITED
For the reasons set forth under "--Joint Reasons for the Merger" and "--
United's Reasons for the Merger," the Board of Directors of United believes
that the Merger Agreement is fair to, and in the best interests of, United and
the holders of United Common Stock. All members of the United Board approved
the Merger Agreement. THE UNITED BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS
OF UNITED COMMON STOCK VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. In considering the recommendation of the United Board of Directors
with respect to the Merger, United stockholders should be aware that certain
officers and directors of United have direct and indirect interests in the
consummation of the Merger, apart from their interests as stockholders of
United, which are separate from those of unaffiliated stockholders of United.
See "--Conflicts of Interest."
OPINION OF FINANCIAL ADVISOR TO USA WASTE
In its role as financial advisor to USA Waste, DLJ was asked by USA Waste to
render an opinion (the "DLJ Opinion") to the Board of Directors of USA Waste
as to the fairness to USA Waste, from a financial
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point of view, of the Exchange Ratio. On April 13, 1997, DLJ delivered a
written opinion to the USA Waste Board that the Exchange Ratio was fair to USA
Waste from a financial point of view.
A COPY OF THE DLJ OPINION IS ATTACHED HERETO AS APPENDIX B. USA WASTE
STOCKHOLDERS ARE URGED TO READ THE DLJ OPINION IN ITS ENTIRETY FOR ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW
BY DLJ.
The DLJ Opinion was prepared for the USA Waste Board and is directed only to
the fairness of the Exchange Ratio to USA Waste from a financial point of view
and does not constitute a recommendation to any USA Waste stockholder as to
how such stockholder should vote at the USA Waste Annual Meeting.
The USA Waste Board of Directors selected DLJ as its financial advisor
because it is a nationally recognized investment banking firm that has
substantial experience in the solid waste industry and is familiar with USA
Waste and its businesses. DLJ was not retained as an advisor or agent to the
stockholders of USA Waste or any other person. As part of its investment
banking business, DLJ is regularly engaged in the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
The DLJ Opinion does not constitute an opinion as to the price at which the
USA Waste Common Stock will actually trade at any time. DLJ did not, and was
not requested by the USA Waste Board to, make any recommendation as to the
form or amount of consideration to be paid to holders of United Common Stock
in the Merger, which issues were resolved in arms'-length negotiations between
USA Waste and United, in which negotiations DLJ advised USA Waste. No
restrictions or limitations were imposed by USA Waste upon DLJ with respect to
the investigations made or the procedures followed by DLJ in rendering its
opinion.
In arriving at its opinion, DLJ reviewed a draft of the Merger Agreement
(which did not substantively differ from the executed Merger Agreement). DLJ
also reviewed financial and other information that was publicly available or
furnished to it by USA Waste and United including information provided during
discussions with their respective managements, which included certain
financial projections of USA Waste prepared by the management of USA Waste and
certain financial projections of United prepared by the management of United.
In addition, DLJ compared certain financial and securities data of USA Waste
and United with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of USA Waste
Common Stock and United Common Stock, reviewed prices and premiums paid in
certain other selected business combinations and conducted such other
financial studies, analyses and investigations as DLJ deemed appropriate for
purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that
was available to it from public sources, that was provided to it by USA Waste
and United or their respective representatives, or that was otherwise reviewed
by it. DLJ relied upon the estimates of the managements of USA Waste and
United of the operating synergies achievable as a result of the Merger and its
discussion of such synergies with the respective managements of USA Waste and
United. DLJ did not make any independent evaluation of the assets or
liabilities of USA Waste or United, nor did DLJ independently verify the
information reviewed by it. DLJ also assumed that the financial projections
supplied to it were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of USA Waste
and United as to the future operating and financial performance of USA Waste
and United, respectively. DLJ did not perform any procedures or analysis
regarding potential environmental liabilities of either USA Waste or United,
nor did it consider the impact of changes in the regulatory environment in
which USA Waste and United operate.
The DLJ Opinion was necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
it as of, the date of its opinion. It should be understood that, although
subsequent developments may affect its opinion, DLJ does not have any
obligation to update, revise or reaffirm the DLJ Opinion.
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The following is a summary of the presentation made by DLJ to the USA Waste
Board in connection with the DLJ Opinion.
PRO FORMA MERGER ANALYSIS. DLJ analyzed certain pro forma effects resulting
from the Merger. DLJ reviewed the operating synergies contemplated to result
from the Merger in 1997 and 1998 by combining the operations of United and USA
Waste as projected by the managements of United and USA Waste. DLJ analyzed
the pro forma effect of such operating synergies (estimated at approximately
$29 million pre-tax per annum, although there can be no assurance as to the
timing or amount of such estimated operating synergies) on net income and
earnings per share for USA Waste. The analysis indicated that the pro forma
fully diluted earnings per share ("EPS") of USA Waste assuming the annual
operating synergies contemplated to result from the Merger, would be 2.4%
accretive in the fiscal year ending 1997 and 4.0% accretive in the fiscal year
ending 1998 as compared to comparable projections for USA Waste as a stand-
alone company during the same periods.
CONTRIBUTION ANALYSIS. DLJ analyzed USA Waste's and United's relative
contribution to the combined companies with respect to total revenues;
earnings before interest, taxes, depreciation and amortization ("EBITDA");
earnings before interest and taxes ("EBIT"); and total assets and total debt.
Its analysis was made for the year ended December 31, 1996 based on actual
results for both USA Waste and United. The balance sheet data used for the
contribution analysis (total assets and total debt) was adjusted for
acquisitions and financings made through the first fiscal quarter of 1997 by
both USA Waste and United. As a result of the Merger, USA Waste stockholders
will own approximately 77% of the common stock of the combined companies. This
compares with USA Waste's contribution to the combined companies pro forma
results for the period ended December 31, 1996 (prior to taking into account
any operating synergies which may result from the Merger) of approximately 80%
of total revenues, 79% of EBITDA, 78% of EBIT, 81% of total assets, and 84% of
total debt.
PREMIUM ANALYSIS. DLJ compared the premium represented by the Exchange Ratio
(based on the closing prices of USA Waste Common Stock and United Common Stock
on April 11, 1997) one day, one week and one month prior to such date to the
comparable average premiums for all transactions ("All Transactions") from $1
billion to $3 billion and for all stock-for-stock transactions ("Stock
Transactions") from $1 billion to $3 billion since January 1, 1993. This
analysis showed that the Exchange Ratio represented: (i) a 0.7% premium over
the one day prior closing price compared to one day prior average premiums of
33.5% for All Transactions and 31.4% for Stock Transactions, (ii) a 2.5%
discount from the one week prior closing price compared to one week prior
average premiums of 42.2% for All Transactions and 42.8% for Stock
Transactions and (iii) a 0.9% discount from the one month prior closing price
compared to one month prior average premiums of 42.3% for All Transactions and
39.9% for Stock Transactions. In considering this analysis, DLJ indicated to
the USA Waste Board that the per share price of United Common Stock had
increased 39% over the past 12 months.
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. To provide contextual
data and comparative market information, DLJ compared selected historical
share price, earnings, and operating and financial ratios for United to the
corresponding data and ratios of USA Waste and certain other companies whose
securities are publicly traded (collectively, the "Public Companies"). The
Public Companies were chosen because they possess general business, operating
and financial characteristics representative of companies in the industry in
which USA Waste and United operate. The Public Companies consisted of Allied
Waste Industries, Inc., American Disposal Services, Inc., Browning-Ferris
Industries, Inc., SuperiorServices, Inc., USA Waste and WMX Technologies, Inc.
DLJ determined that USA Waste (the "Comparable Company") was the most
representative of the Public Companies because in DLJ's view USA Waste
possessed general business, operating and financial characteristics most
similar to United. Such data and ratios included Enterprise Value ("Enterprise
Value" is defined as the product of the stock price and total shares
outstanding plus Net Debt ("Net Debt" is defined as long-term debt plus
preferred stock less cash and cash equivalents, which for United was assumed
to be $210.1 million, the amount outstanding at December 31, 1996 adjusted for
United's equity offering in March, 1997)) as a multiple of revenues, EBITDA
and EBIT for the latest reported twelve months ("LTM") and operating margins
for the three most recent fiscal years. The multiple of Enterprise Value to
LTM revenues ("LTM revenue multiple") for the Comparable Company was 5.3. The
LTM revenue multiple was then
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multiplied by United's LTM revenues, for the period ending December 31, 1996,
to arrive at an implied total Enterprise Value for United of $1,779.2 million.
The implied Enterprise Value for United was then adjusted for Net Debt to
yield an implied equity value, which was then divided by United's common
shares outstanding on a fully diluted basis of 44.9 million shares to arrive
at an implied price of $34.95 per fully diluted share. The multiple of
Enterprise Value to LTM EBITDA ("LTM EBITDA multiple") for the Comparable
Company was 15.4. The average LTM EBITDA multiple was then multiplied by
United's LTM EBITDA, for the period ending December 31, 1996, to arrive at an
implied total Enterprise Value for United of $1,857.2 million. The implied
Enterprise Value for United was then adjusted for Net Debt to yield an implied
equity value, which was then divided by United's common shares outstanding on
a fully diluted basis to arrive at an implied price of $36.68 per fully
diluted share. The multiple of Enterprise Value to LTM EBIT ("LTM EBIT
multiple") for the Comparable Company was 23.4. The LTM EBIT multiple was then
multiplied by United's LTM EBIT for the period ending December 31, 1996, to
arrive at an implied total Enterprise Value for United of $1,935.2 million.
The implied Enterprise Value for United was then adjusted for Net Debt to
yield an implied equity value, which was then divided by United's common
shares outstanding on a fully diluted basis to arrive at an implied price of
$38.42 per fully diluted share.
In addition, DLJ examined the ratios of current stock prices (based on
reported closing prices on April 11, 1997) to estimated fiscal year 1997 and
1998 EPS (as estimated by First Call Real Time Earnings Estimates); and
current stock prices to book value for the Comparable Company and compared
such ratios with those of United. The multiple of current stock price to
estimated fiscal year 1997 EPS for the Comparable Company was 21.4. The
multiple of estimated fiscal year 1997 EPS was then multiplied by United's
estimated fiscal 1997 net income to arrive at an implied total Equity Value,
which was then divided by United's common shares outstanding on a fully
diluted basis to arrive at an implied price of $35.32 per fully diluted share.
The multiple of current stock price to estimated fiscal year 1998 EPS for the
Comparable Company was 16.9. The multiple of estimated fiscal year 1998 EPS
was then multiplied by United's estimated fiscal 1998 net income to arrive at
an implied total Equity Value, which was then divided by United's common
shares outstanding on a fully diluted basis to arrive at an implied price of
$39.63 per fully diluted share. The multiple of stock price to latest
available book value for the Comparable Company was 3.5. The multiple of
latest available book value was then multiplied by United's book value as of
December 31, 1996, which was adjusted to reflect the impact of United's equity
offering in March 1997 to arrive at an implied total Equity Value, which was
then divided by United's common shares outstanding on a fully diluted basis to
arrive at an implied price of $34.14 per fully diluted share.
TRANSACTION ANALYSIS. DLJ reviewed publicly available information for eight
selected transactions involving the combination of selected solid waste
management companies. The eight transactions reviewed (the "Comparative
Transactions") were: (i) USA Waste/Allied Waste Industries, Inc., Canadian
assets; (ii) Allied Waste Industries Inc./Laidlaw Solid Waste Management
Group; (iii) Republic Industries, Inc./Addington Resources, Inc.; (iv)
Republic Industries, Inc./Continental Waste Industries, Inc., (v) USA
Waste/Sanifill, Inc. (vi) USA Waste/Western Waste Industries; (vii) USA
Waste/Chambers Development Company, Inc.; and (viii) Browning-Ferris
Industries, Inc./Attwoods Group PLC. The eight transactions selected are not
intended to represent the complete list of solid waste management transactions
which have occurred during the last two years; rather they include only
transactions involving combinations of companies with operating
characteristics, size or financial performance characteristics which DLJ
believed to be comparable to those of United and USA Waste. DLJ reviewed the
consideration paid in such transactions in terms of the Equity Purchase Price
(as defined hereinafter) plus total debt less cash and cash equivalents
("Adjusted Purchase Price") as a multiple of LTM revenues, LTM EBITDA and LTM
EBIT. The ratio of Adjusted Purchase Price to revenues, computed for the
Comparative Transactions, had an average of 3.3. The ratio of Adjusted
Purchase Price to EBITDA, computed for the Comparative Transactions, had an
average of 11.0. The ratio of Adjusted Purchase Price to EBIT, computed for
the Comparative Transactions, had an average of 18.2. DLJ also reviewed the
consideration paid in each of the Comparative Transactions in terms of the
offer price per share multiplied by total common shares outstanding (the
"Equity Purchase Price") as a multiple of the book value. The ratio of Equity
Purchase Price to book value, computed for the Comparative Transactions, had
an average of 3.5. DLJ determined that the analysis of the Comparative
Transactions purchase price multiples described above was of limited
relevance. In
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its presentation to the USA Waste Board, DLJ noted that this analysis was of
limited relevance in its view because such analysis was based on publicly
available historical information, whereas prices paid in transactions in the
solid waste industry are generally based on future financial expectations, for
which data is unavailable.
STOCK TRADING HISTORY. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and their relative
relationships for both USA Waste Common Stock and United Common Stock for the
latest 12-month period ended April 11, 1997. DLJ also reviewed the daily
closing prices of United Common Stock and compared the United closing stock
prices with an index of selected waste companies and the S&P 500 Index. The
index of selected companies included Allied Waste Industries, Inc., Browning-
Ferris Industries, Inc., United, USA Waste, and WMX Technologies, Inc. This
information was presented solely to provide the Board of Directors of USA
Waste with background information regarding the stock prices of United and USA
Waste over the periods indicated. DLJ noted the high and low prices for USA
Waste over the twelve-month period ended April 11, 1997 was $38.88 and $22.75,
respectively, and the high and low prices for United over the twelve-month
period ended April 11, 1997 was $41.75 and $23.75, respectively.
DISCOUNTED CASH FLOW ANALYSIS. DLJ also performed a discounted cash flow
analysis to evaluate the Exchange Ratio. In conducting its analysis, DLJ
relied on certain assumptions, financial projections and other information
provided by United and USA Waste management. Using the information set forth
in the United and USA Waste projections, DLJ performed stand-alone discounted
cash flow analyses for USA Waste and United. DLJ calculated the estimated
"Free Cash Flow" for each company stand-alone based on projected unleveraged
operating income adjusted for: (i) taxes; (ii) certain projected non-cash
items (i.e., depreciation and amortization); (iii) projected changes in non-
cash working capital; and (iv) projected capital expenditures. DLJ analyzed
the United and USA Waste stand-alone projections and discounted the stream of
free cash flows from fiscal 1997 to fiscal 2001, provided in such projections,
back to April 11, 1997 using discount rates ranging from 12.5% to 13.5%. To
estimate the residual values of United and USA Waste stand-alone at the end of
the forecast period, DLJ applied terminal multiples of 9.0 to 11.0 to the
projected fiscal 2001 EBITDA and discounted such value estimates back to April
11, 1997 using discount rates ranging from 12.5% to 13.5%. DLJ then aggregated
the present values of the free cash flows and the present values of the
residual values to derive a range of implied enterprise values for United and
USA Waste stand-alone. The range of implied enterprise values of United and
USA Waste stand-alone were then adjusted for their respective Net Debt to
yield implied equity values of United and USA Waste stand-alone. The range of
equity values were then divided by the respective stand-alone fully diluted
shares to determine a range of equity values per share for each company stand-
alone. The range of implied equity values per share for United, based on the
range of discount rates of 12.5% to 13.5% and the range of terminal multiples
of 9.0 to 11.0, was $46.52 to $63.90 per share. The range of implied equity
values per share for USA Waste, based on the range of discount rates of 12.5%
to 13.5% and the range of terminal multiples of 9.0 to 11.0, was $38.27 to
$52.63 per share.
DLJ derived a range of implied exchange ratios by dividing the high and low
equity values per share of United by the low and high equity values per share
of USA Waste, respectively. Based on this analysis, using the range of
discount rates of 12.5% to 13.5% and the range of terminal multiples of 9.0 to
11.0 and without taking into account the potential impact of any synergies,
DLJ calculated a range of implied exchange ratios of 0.88 to 1.67 with the
median implied exchange ratio calculated to be 1.21.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, notwithstanding the separate factors
summarized above, DLJ believes that its analyses must be considered as a whole
and that selecting portions of its analysis and the factors considered by it,
without considering all analyses and factors, could create an incomplete or
misleading view of the evaluation process underlying its opinions. In
performing its analyses, DLJ made numerous assumptions with respect to
industry performance, business and economic conditions and other matters. The
analyses performed by DLJ are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than
suggested by such analyses.
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Pursuant to the terms of an engagement letter dated April 11, 1997, USA
Waste has agreed to pay DLJ a fee of $500,000 upon delivery of the DLJ Opinion
and an additional fee of $1,750,000 to be paid upon consummation of the
Merger. USA Waste has also agreed to reimburse DLJ promptly for all out-of-
pocket expenses (including the reasonable fees and out-of-pocket expenses of
counsel) incurred by DLJ in connection with its engagement, and to indemnify
DLJ and certain related persons against certain liabilities in connection with
its engagement, including liabilities under the federal securities laws. The
terms of the fee arrangement with DLJ, which DLJ and USA Waste believe are
customary in transactions of this nature, were negotiated at arm's length
between USA Waste and DLJ and the USA Waste Board of Directors was aware of
such arrangement, including the fact that a significant portion of the
aggregate fee payable to DLJ is contingent upon consummation of the Merger.
In the ordinary course of business, DLJ may actively trade the securities of
both USA Waste and United for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. DLJ has provided financial advisory and investment banking
services to USA Waste in the past, including (i) acting as the lead manager in
a public offering of USA Waste Common Stock and Convertible Subordinated
Debentures completed in February, 1997, (ii) acting as USA Waste's financial
advisor in connection with USA Waste's merger with Sanifill completed in
September, 1996, (iii) acting as USA Waste's financial advisor in connection
with USA Waste's merger with Western Waste completed in May, 1996, (iv) acting
as the lead manager in a public offering of USA Waste Common Stock completed
in October, 1995 and (v) acting as USA Waste's financial advisor in connection
with USA Waste's merger with Chambers completed in June, 1995, and has in each
case received usual and customary fees for rendering such services.
OPINION OF FINANCIAL ADVISOR TO UNITED
On April 13, 1997, Goldman Sachs delivered its written opinion to the Board
of Directors of United that, as of the date of such opinion, the Exchange
Ratio pursuant to the Merger Agreement was fair to the holders of shares of
United Common Stock. Goldman Sachs subsequently delivered to the Board of
Directors of United its written opinion, dated as of the date of this Joint
Proxy Statement and Prospectus, that as of such date the Exchange Ratio
pursuant to the Merger Agreement is fair to the holders of shares of United
Common Stock. The full text of the written opinion of Goldman Sachs dated as
of the date of this Joint Proxy Statement and Prospectus, which sets forth
assumptions made, matters considered and limitations on review undertaken in
connection with the opinion, is attached hereto as Appendix C to this Joint
Proxy Statement and Prospectus and is incorporated herein by reference.
Stockholders of United are urged to, and should, read such opinion in its
entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Merger Agreement; (ii) Annual Reports to Stockholders and Annual
Reports on Form 10-K of United and USA Waste for the five years ended December
31, 1996; (iii) certain interim reports to stockholders and Quarterly Reports
on Form 10-Q of United and USA Waste; (iv) certain other communications from
United and USA Waste to their respective stockholders; and (v) certain
internal financial analyses and forecasts for United and USA Waste prepared by
their respective managements. Goldman Sachs also held discussions with members
of the senior management of United and USA Waste regarding the strategic
rationale for, and potential benefits of, the Merger and the past and current
business operations, financial condition, and future prospects of their
respective companies. In addition, Goldman Sachs reviewed the reported price
and trading activity for United Common Stock and USA Waste Common Stock,
compared certain financial and stock market information for United and USA
Waste with similar information for certain other companies thesecurities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the waste management industry specifically and in
other industries generally and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all the financial
and other information reviewed by it, including, without limitation, the
representations set forth in the Merger Agreement, and assumed such accuracy
and completeness for purposes of rendering its opinion. In that regard,
Goldman Sachs relied upon the management of United and USA Waste as to the
reasonableness and achievability of the financial forecasts
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(and the assumptions and bases thereof) provided to Goldman Sachs, and with
the consent of United, assumed that such forecasts, including, without
limitation, projected cost savings and operating synergies resulting from the
Merger, reflect the best currently available estimates and judgments of such
respective managements and that such forecasts will be realized in the amounts
and times contemplated thereby. In addition, Goldman Sachs has not made an
independent evaluation or appraisal of the assets and liabilities of United or
USA Waste or any of their subsidiaries and Goldman Sachs has not been
furnished with any such evaluation or appraisal. Goldman Sachs' advisory
services and opinion were provided for the information and assistance of the
Board of Directors of United in connection with its consideration of the
transaction contemplated by the Merger Agreement and such opinion does not
constitute a recommendation as to how any holder of United Common Stock should
vote with respect to the Merger.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its written opinion to the Board of
Directors of United on April 13, 1997. Goldman Sachs utilized substantially
the same financial analyses in preparing the opinion dated as of the date of
this Joint Proxy Statement and Prospectus.
(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the daily
historical trading prices and volumes for United Common Stock and USA Waste
Common Stock for the period from April 11, 1996 to April 11, 1997. Goldman
Sachs also reviewed the monthly historical trading prices and volumes for
United Common Stock for the period from December 1, 1992 to March 31, 1997
and reviewed the monthly historical trading prices and volumes for USA
Waste Common Stock for the period from March 31, 1992 to March 31, 1997. In
addition, Goldman Sachs reviewed the average exchange ratio of the closing
prices of United Common Stock to the closing prices of USA Common Stock for
the 20-trading-day, three-month, six-month, one-year and five-year periods
immediately preceding April 11, 1997, which resulted in average exchange
ratios of 1.039, 1.043, 1.052, 1.039 and 0.858, respectively.
(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to United and USA Waste to
corresponding financial information, ratios and public market multiples for
seven publicly traded corporations in the solid waste industry: Allied
Waste Industries, Inc., American Disposal Services, Inc., Eastern
Environmental Services, Inc., Superior Services, Inc., Browning-Ferris
Industries, Inc. and WMX Technologies, Inc. (the "Selected Companies").
Goldman Sachs calculated and compared various financial multiples and
ratios. The multiples of United and USA Waste were calculated using a price
of $37.625 per share of United Common Stock and a price of $35.250 per
share of USA Waste Common Stock, the closing prices of such shares on April
11, 1997. The multiples and ratios for United, USA Waste and the Selected
Companies were based on the most recent publicly available information. The
median calculations set forth below include information for United and USA
Waste and exclude information relating to Browning-Ferris Industries, Inc.
and WMX Technologies, Inc.
Goldman Sachs considered (i) total debt-to-total capitalization ratios,
(ii) price as a multiple of EPS as estimated for the 1997 ("1997E P/E
Multiple") and 1998 ("1998E P/E Multiple") calendar years based on
calendarized median Institutional Brokers Estimate System ("IBES") earnings
estimates ("IBES Estimates") as of April 11, 1997; (iii) levered market
value (i.e., market value of common equity plus estimated market value of
debt and preferred stock less cash) as a multiple of EBITDA as estimated
for the 1997 ("Levered Market Value/1997E EBITDA Multiple") and 1998
("Levered Market Value/1998E EBITDA Multiple") calendar years; (iv) five-
year IBES projected growth estimates; (v) estimated EPS growth for the
period between 1997 and 1998 based on IBES Estimates ("1997E-1998E EPS
Growth Estimates"); and (vi) price-to-earnings as estimated for the 1997
calendar year as a multiple of IBES long term growth rate ("1997E P/E/IBES
LT Growth Rate Multiple"). Goldman Sachs' analyses indicated (a) total
debt-to-total capitalization ratios for the Selected Companies that ranged
from 42.9% to 85.9% with a median of 51.4%, compared to 49.9% for United
and 50.7% for USA Waste; (b) 1997E P/E Multiples for the Selected Companies
that ranged from 16.8x to 51.5x with a median of 25.5x, compared to 25.1x
for United and 21.4x for USA Waste; (c) 1998E P/E Multiples for the
Selected Companies that ranged from 13.0x to 22.4x with a median of 18.1x,
compared to 19.4x for United and 16.8x for USA Waste; (d) Levered Market
Value/1997E EBITDA Multiples for the Selected Companies that ranged from
6.6x to 19.7x with a
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median of 9.0x, compared to 10.2x for United (calculated assuming EBIT
based on equity research and assuming depreciation and amortization of
12.0% of sales (based on historical levels)) and 9.5x for USA Waste; (e)
Levered Market Value/1998E EBITDA Multiples for the Selected Companies that
ranged from 4.0x to 9.0x with a median of 7.2x, compared to 7.7x for United
and 7.2 for USA Waste; (f) five-year IBES projected growth estimates for
the Selected Companies that ranged from 11.0% to 25.0% with a median of
25.0%, compared to 25.0% for United and 23.0% for USA Waste; (g) 1997E-
1998E EPS Growth Estimates for the Selected Companies that ranged from
13.3% to 64.7% with a median of 29.3%, compared to 29.3% for United and
27.3% for USA Waste; and (h) 1997E P/E/IBES LT Growth Rate Multiples for
the Selected Companies that ranged from 0.8x to 2.1x with a median of 1.0x,
compared to 1.0x for United and 0.9x for USA Waste.
(iii) Contribution Analysis. Goldman Sachs reviewed certain historical
and future operating and financial information (including, among other
things, revenues, EBITDA, EBIT, net income, book value, market
capitalization and total shares outstanding) for United, USA Waste and the
pro forma combined entity resulting from the Merger based on United and USA
Waste managements' financial forecasts. The analysis indicated that the
United stockholders would contribute (i) 20.4%, 19.3% and 21.0%,
respectively, of the revenues of the combined company in 1996 and for the
estimated 1997 and 1998 calendar years; (ii) 25.3%, 21.2% and 22.8%,
respectively, of the EBITDA of the combined company in 1996 and for the
estimated 1997 and 1998 calendar years; (iii) 29.3%, 21.3% and 23.0%,
respectively, of the EBIT of the combined company in 1996 and for the
estimated 1997 and 1998 calendar years; (iv) 33.0%, 21.3% and 22.9%,
respectively, of the net income of the combined company in 1996 and for the
estimated 1997 and 1998 calendar years; (v) 21.6% of the book value of the
combined company (based on information as of December 31, 1996); (vi) 22.8%
of the market capitalization of the combined company (as of April 11,
1997); and (vii) 23.7% of the equity interest in the combined company at an
Exchange Rate of 1.075.
(iv) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to selected transactions in the waste management
industry since 1994, (the "Selected Transactions"): Allied Waste
Industries, Inc. (Canadian Solid Waste)/USA Waste, Mid-American Waste/USA
Waste, Laidlaw Waste Systems, Inc./Allied Waste, Sanifill, Inc./USA Waste,
Continental Waste Industries, Inc./Republic Industries, Inc., Western Waste
Industries, Inc./USA Waste and Chambers Development Co./USA Waste. For
purposes of the analyses, the EBITDA calculation for Allied Waste was based
on equity research dated January 20, 1997. Goldman Sachs' analysis
indicated that for the Selected Transactions (i) levered aggregate
consideration as a multiple of LTM sales ranged from 1.6x to 8.2x, as
compared to 5.9x for the levered aggregate consideration to be received in
the Merger, (ii) levered aggregate consideration as a multiple of LTM
EBITDA ranged from 7.8x to 21.3x, as compared to 17.5x for the levered
aggregate consideration to be received in the Merger, (iii) levered
aggregate consideration as a multiple of LTM EBIT ranged from 16.9x to
39.8x, as compared to 26.3x for the aggregate consideration to be received
in the Merger; and (iv) based on Goldman Sachs' estimates, the acquiror's
EPS accretion (including synergies), as applicable, in the first full year
following the respective transactions ranged from 4.1% to 6.0%, as compared
to an estimated 3.9% to be recognized by USA Waste as a result of the
Merger.
(v) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma analyses
of the financial impact of the Merger. Using earnings estimates prepared by
United management for United and IBES Estimates for USA Waste for the years
1997 and 1998, and assuming a tax rate of 40.0% for the combined entity
following the Merger, Goldman Sachs compared the EPS of USA Waste Common
Stock, on a standalone basis, to the EPS of the common stock of the
combined company. For purpose of the analysis, Goldman Sachs assumed $29
million and $30.5 million, respectively, in pre-tax savings for the
combined company for 1997 and 1998. Based on such analyses, the Merger (i)
would be accretive to USA Waste stockholders on an EPS basis in 1997 and
1998, if synergies are included, and (ii) would be dilutive to USA Waste
stockholders on an EPS basis in 1997 and accretive to USA Waste
shareholders on an EPS basis in 1998, if synergies are excluded.
(vi) Discounted Cash Flow Analysis. Goldman Sachs performed a discounted
cash flow analysis for United using United management projections. Goldman
Sachs calculated a net present value of free cash
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flows for United for the years 1997 through 2001 using discount rates
ranging from 11.0% to 14.0%. Goldman Sachs calculated United's terminal
values in the year 2001 based on multiples ranging from 5.0x EBITDA to 9.0x
EBITDA. These terminal values were then discounted to present value using
discount rates from 11.0% to 14.0%. Such analysis resulted in implied per
share values that ranged from $17.04 to $51.69.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying Goldman Sachs' opinion. In arriving at its fairness
determination, Goldman Sachs considered the results of all such analyses. No
company or transaction used in the above analyses as a comparison is identical
to United or USA Waste or the contemplated transaction. The analyses were
prepared solely for purposes of Goldman Sachs' providing its opinion to the
Board of Directors of United as to the fairness of the Exchange Ratio pursuant
to the Merger Agreement to the holders of United Common Stock and do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of United, USA Waste, Goldman Sachs or any other person assumes
responsibility if future results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the Board of Directors of United
was one of many factors taken into consideration by the United Board of
Directors in making its determination to approve the Merger Agreement. The
foregoing summary does not purport to be a complete description of the
analysis performed by Goldman Sachs and is qualified by reference to the
written opinion of Goldman Sachs set forth as Appendix C hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. United selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions
similar to the Merger. Goldman Sachs is familiar with United, having provided
certain investment banking services to United from time to time, including
having acted as lead underwriter of shares of United Common Stock in March
1997 and July 1995, as lead manager of an issuance of 5-year convertible
subordinated notes of United in May 1996, as underwriter of a municipal bond
offering of United in May 1995 and having acted as financial advisor in
connection with, and having participated in certain of the negotiations
leading to, the Merger Agreement. Goldman Sachs has also provided certain
investment banking services to USA Waste, including having acted as co-manager
and underwriter of 5-year convertible subordinated notes of USA Waste and as
an underwriter of USA Waste Common Stock in February 1997. Goldman Sachs may
also provide investment banking services to USA Waste and its subsidiaries in
the future.
Goldman Sachs is a full service securities firm and in the course of normal
trading activities may from time to time effect transactions and hold
positions in the securities of United and USA Waste for its own account or for
the accounts of customers. As of July 17, 1997, Goldman Sachs, for its own
account, had a $7,785,000 long position in 4.5% convertible subordinated notes
of United, a short position of 205,550 shares of United Common Stock, and a
short position of 6,400 shares of USA Waste Common Stock.
Pursuant to a letter agreement dated April 2, 1997 (the "Goldman Sachs
Engagement Letter"), United engaged Goldman Sachs to act as its financial
advisor in connection with the Merger. Pursuant to the terms of the Goldman
Sachs Engagement Letter, United has agreed to pay Goldman Sachs upon
consummation of the Merger a transaction fee of $4.0 million. United has
agreed to reimburse Goldman Sachs for certain out-of-pocket expenses,
including attorney's fees, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities under the federal securities laws.
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CONFLICTS OF INTEREST
In considering the recommendation of the Boards of Directors of United with
respect to the Merger, holders of United Common Stock should be aware that
certain members of the Boards of Directors and management have certain
interests separate from their interests as stockholders, including those
referred to below.
The Merger Agreement provides that, at the closing of the Merger, USA Waste
will offer to enter into consulting and non-competition agreements (each
individually a "Consulting Agreement" and collectively, the "Consulting
Agreements") with each of Bradley S. Jacobs, John N. Milne and Michael J.
Nolan (each individually a "Consultant" and collectively, the "Consultants"),
such agreements to be effective at the Effective Time, and it is expected that
such individuals will enter into such agreements. Pursuant to the Consulting
Agreements, which shall each have a term of five years, USA Waste will agree
to pay annual compensation of $450,000 to Bradley S. Jacobs, annual
compensation of $300,000 to John N. Milne and annual compensation of $90,000
to Michael J. Nolan in consideration of certain non-competition agreements of
each Consultant and each Consultant's performance of certain duties on USA
Waste's behalf, in the case of Messrs. Jacobs and Milne relating to
identifying acquisitions and market development prospects, negotiating such
arrangements and leading and directing related due diligence reviews and, in
the case of Mr. Nolan, relating to financial matters in connection with such
acquisitions and market development prospects.
In addition, pursuant to the Merger Agreement, the Board of Directors of USA
Waste is required to take such action as may be necessary to cause two persons
designated by United and acceptable to USA Waste to be elected to the Board of
Directors of USA Waste as of a mutually agreeable time after the Effective
Time. Each of such directors shall have a term of office expiring at USA
Waste's annual meeting of stockholders to be held in 1998.
Pursuant to the terms of their respective employment agreements, certain
officers of United (six individuals) including Messrs. Jacobs, Sheehan, Milne
and Nolan will have the right, and are expected, to terminate such employment
agreements and will be entitled to receive severance payments upon
consummation of the Merger. The aggregate amount of such payments is expected
to be approximately $4.6 million. The amounts payable to each of Mr. Jacobs,
Mr. Sheehan, Mr. Milne and Mr. Nolan are approximately $2,665,000, $439,000,
$574,000 and $529,000, respectively.
As of the United Record Date, 173 individuals, including all officers and
directors of United, held options to acquire an aggregate of approximately 3.6
million shares of United Common Stock pursuant to the terms of certain stock
option agreements, at exercise prices ranging from $5.06 to $41.20 per share.
Pursuant to the Merger Agreement, United is required to use commercially
reasonable efforts to ensure that, at the Effective Time, all United Options,
whether or not such options have vested or become exercisable, will be
cancelled in exchange for a number of shares of USA Waste Common Stock equal
in market value to the fair value of such options, as determined by an
independent third party. Assuming a market value of USA Waste Common Stock of
$40.25 per share, the value of the shares of USA Waste Common Stock issuable
in exchange for vested and unvested United Options held by executive officers
and directors of United is expected to be approximately as follows: Mr. Jacobs
($10,297,732/$4,574,896); Mr. Sheehan ($3,549,552/$1,701,519); Mr. Milne
($8,200,737/$2,409,071); Mr. Nolan ($2,865,572/$1,701,519); Mr. Volonino
($2,810,404/$345,267); Mr. Miner ($1,842,991/$983,837); Mr. Andersen
($1,567,844/$0); Mr. Twill ($2,005,169/$0); Mr. Weyer ($1,231,957/$0); and Mr.
Williams, III ($1,993,346/$0). See "The Plan of Merger and Terms of the
Merger--Exchange and Cancellation of United Options." As of the United Record
Date, Mr. Jacobs held 501,126 shares of United Common Stock. Such shares will
be converted into 538,710 shares of USA Waste Common Stock in the Merger.
Assuming a market value of USA Waste Common Stock of $40.25 per share, the
value of such shares is $21,683,077.
The Merger Agreement provides that the officers, directors, employees and
agents of United will be indemnified by USA Waste against certain liabilities
and costs, including those arising out of, relating to or in connection with
any action or omission occurring prior to the Effective Time or arising out of
or pertaining to the transactions contemplated by the Merger Agreement. The
Merger Agreement further provides that (i) the indemnification provisions of
the Certificate of Incorporation and Bylaws of the Surviving Corporation as in
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effect at the Effective Time shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the indemnification rights of individuals who were
directors, officers, employees or agents of United at the Effective Time, (ii)
that USA Waste shall assume, be jointly and severally liable for, and honor,
and shall cause the Surviving Corporation to honor, in accordance with their
respective terms, certain indemnification agreements of United without limit
as to time; and (iii) for a period of six years after the Effective Time, USA
Waste shall cause to be maintained in effect the current policies of directors
and officers' liability insurance maintained by United and its subsidiaries
(or policies with the same coverages and amounts and conditions that are no
less advantageous to the indemnified parties) with respect to matters arising
on or before the Effective Time.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material Federal income tax
consequences of the Merger to holders of United Common Stock under the Code,
but does not deal with all tax consequences of the Merger that may be relevant
to United stockholders in light of their particular circumstances, such as the
tax consequences to United stockholders who do not hold their United Common
Stock as a capital asset, foreign persons, insurance companies, tax-exempt
organizations, financial institutions, securities dealers, broker-dealers or
persons who acquired their shares in compensatory transactions. Furthermore,
no foreign, state or local tax considerations are addressed herein.
THIS SUMMARY SHOULD NOT BE REGARDED AS A SUBSTITUTE FOR AN INDIVIDUAL
ANALYSIS OF THE TAX CONSEQUENCES OF THE MERGER TO A UNITED STOCKHOLDER. EACH
UNITED STOCKHOLDER SHOULD CONSULT A TAX ADVISOR REGARDING THE PARTICULAR
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE MERGER TO
SUCH STOCKHOLDER'S OWN PARTICULAR SITUATION.
It is a condition precedent to United's obligation to consummate the Merger
that United shall have received from its special counsel, Wachtell, Lipton,
Rosen & Katz, an opinion substantially to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code,
(ii) no gain or loss will be recognized by USA Waste, United, or Acquisition
as a result of the Merger and (iii) no gain or loss will be recognized by the
holders of United Common Stock upon the exchange of their United Common Stock
solely for shares of USA Common Stock (except with respect to cash received in
lieu of fractional shares of USA Waste Common Stock). It is a condition
precedent to USA Waste's obligation to consummate the Merger that USA Waste
shall have received from its counsel, McDermott, Will & Emery, an opinion
substantially to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and (ii) no
gain or loss will be recognized by USA Waste or Acquisition for Federal income
tax purposes as a result of the consummation of the Merger. The opinions of
Wachtell, Lipton, Rosen & Katz and McDermott, Will & Emery are hereinafter
referred to as the "Opinions." The Opinions are attached as Exhibits 8.1 and
8.2 to the Registration Statement of which this Joint Proxy Statement and
Prospectus forms a part. The Opinions will be subject to certain assumptions
as noted therein and will be based on certain representations of USA Waste,
Acquisition, United and affiliates of United. The Opinions will be based upon
the Code, applicable Treasury regulations, judicial authority and
administrative rulings and practice, all as of the date of the Opinions. There
can be no assurance that future legislative, judicial or administrative
changes or interpretations will not adversely affect the accuracy of the
statements and conclusions set forth therein. Any such changes or
interpretations could be applied retroactively and could affect the tax
consequences of the Merger. The Opinions will not be binding upon the Internal
Revenue Service (the "Service"), and the Service will not be precluded from
adopting a contrary position. Both the USA Waste Tax Condition and the United
Tax Condition are waivable at the option of the party entitled to receive such
opinion as a condition of its obligation to consummate the Merger. Neither USA
Waste nor United currently intends to waive such condition. In the event that
such condition is waived by either party, USA Waste and United will
recirculate a revised Joint Proxy Statement and Prospectus that discloses the
waiver of this condition and contains all related material disclosure,
including risks to investors. In such event, USA Waste and United will
resolicit proxies from their stockholders.
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Assuming the Merger qualifies as a reorganization under Section 368(a) of
the Code, the following Federal income tax consequences will occur:
(a) no gain or loss will be recognized by USA Waste, Acquisition or
United as a result of the Merger;
(b) no gain or loss will be recognized by holders of United Common Stock
upon the exchange of their United Common Stock solely for shares of USA
Waste Common Stock (except with respect to cash received in lieu of
fractional shares of USA Waste Common Stock).
(c) the tax basis of the shares of USA Waste Common Stock received by a
United stockholder in the Merger (including any fractional share deemed
received) will be the same as the tax basis of United Common Stock
surrendered in exchange therefor;
(d) the holding period of the shares of USA Waste Common Stock received
by a United stockholder in the Merger (including any fractional share
deemed received) will include the holding period of the shares of United
Common Stock surrendered in exchange therefor, provided that such shares of
United Common Stock are held as capital assets at the Effective Time; and
(e) a cash payment in lieu of a fractional share will be treated as if a
fractional share of USA Waste Common Stock had been received in the Merger
and then redeemed by USA Waste. Such redemption should qualify as a
distribution in full payment in exchange for the fractional share rather
than as a distribution of a dividend. Accordingly, a United stockholder
receiving cash in lieu of a fractional share will recognize gain or loss
upon such payment in an amount equal to the difference, if any, between
such stockholder's basis in the fractional share (as described in paragraph
(c) above) and the amount of cash received. Such gain or loss will be a
capital gain or loss if such stockholder's United Common Stock is held as a
capital asset at the Effective Time.
Each United stockholder should consult a tax advisor as to the particular
consequences of the Merger that may apply to such stockholder, including the
application of state, local, foreign and other Federal tax laws.
For more information on the tax opinions to be delivered by counsel to USA
Waste and United as conditions to the obligations of the parties to consummate
the Merger, see "The Plan of Merger and Terms of the Merger--Conditions to the
Merger."
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for using the "pooling
of interests" method of accounting pursuant to Opinion No. 16 of the
Accounting Principles Board. The pooling of interests method of accounting
assumes that the combining companies have been merged from inception, and the
historical financial statements for periods prior to consummation of the
Merger are restated as though the companies had been combined from inception.
Two of the conditions to the closing of the Merger are as follows: (i)
Coopers & Lybrand L.L.P., independent accountants for USA Waste, shall have
delivered a letter, dated the Closing Date, addressed to USA Waste, in form
and substance reasonably satisfactory to USA Waste, to the effect that the
merger will qualify for "pooling of interests" accounting treatment if
consummated in accordance with the Merger Agreement, and (ii) Ernst & Young
LLP, independent auditors for United, shall have delivered a letter, dated the
Closing Date addressed to United and USA Waste, regarding such firm's
concurrence with the conclusions of United's management that no conditions
exist related to United that would preclude USA Waste's accounting for the
Merger with United as a "pooling of interests" under Accounting Principles
Board Opinion No. 16 if closed and consummated in accordance with the Merger
Agreement.
GOVERNMENT AND REGULATORY APPROVALS
Transactions such as the Merger are reviewed by the Antitrust Division and
the FTC to determine whether they comply with applicable antitrust laws. Under
the provisions of the HSR Act, the Merger may not be
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consummated until such time as the specified waiting period requirements of
the HSR Act have been satisfied. USA Waste and United filed notification
reports with the Department of Justice and FTC under the HSR Act on April 18,
1997. On May 16, 1997, USA Waste and United received a request from the
Antitrust Division for additional information. USA Waste and United
substantially complied with such request on July 11, 1997. USA Waste, United
and the Antitrust Division have agreed that the waiting period will expire at
11:59 p.m., New York City time, on August 4, 1997. Only one extension of the
waiting period pursuant to a request for additional information is authorized
by the HSR Act. Thereafter, such waiting period may be extended only by court
order or with the consent of the parties.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the Merger, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the Merger or seeking divestiture of
substantial assets of USA Waste or United or their subsidiaries. Private
parties and state attorneys general may also bring an action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Merger on antitrust grounds will not be made or, if such a
challenge is made, of the result.
Consummation of the Merger is conditioned upon all governmental waivers,
consents, orders and approvals legally required for the consummation of the
Merger and the transactions contemplated thereby, and all consents from
lenders required to consummate the Merger, having been obtained and being in
effect at the Effective Time, except where the failure to obtain the same
would not be reasonably likely, individually or in the aggregate, to have a
material adverse effect on the business, operations, properties, assets,
liabilities, condition (financial or other) or results of operations of United
and its subsidiaries, taken as a whole, following the Effective Time.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of USA Waste Common Stock received by United stockholders in
connection with the Merger have been registered under the Securities Act and,
except as set forth below, may be traded without restriction. The shares of
USA Waste Common Stock issued in the Merger and received by persons who are
deemed to be "affiliates" (as that term is defined in Rule 144 under the
Securities Act) of United prior to the Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 under the
Securities Act (or, in the case of persons who become affiliates of USA Waste,
Rule 144 under the Securities Act) or as otherwise permitted under the
Securities Act. The Merger Agreement provides that United and USA Waste will
use their reasonable efforts to cause each of their officers, directors and
each other person who is an "affiliate" of United or USA Waste, as the case
may be, to deliver to USA Waste and/or United on or prior to the Effective
Time a written agreement to the effect that such persons will not offer to
sell, sell or otherwise dispose of any shares of USA Waste Common Stock issued
in the Merger except, in each case, pursuant to an effective registration
statement or in compliance with Rule 145 or in a transaction which, in the
opinion of legal counsel satisfactory to USA Waste, is exempt from the
registration requirements of the Securities Act and, in any case, until after
the results covering 30 days of post-Merger combined operations of USA Waste
and United have been filed with the Commission, sent to stockholders of USA
Waste or otherwise publicly issued.
Under Commission guidelines interpreting generally accepted accounting
principles, with certain limited exceptions, the sale of USA Waste Common
Stock or United Common Stock by an affiliate of either USA Waste or United
generally within 30 days prior to the Effective Time or thereafter prior to
the publication of results that include a minimum of at least 30 days of
combined operations of USA Waste and United after the Effective Time could
preclude "pooling of interests" accounting treatment for the Merger.
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ELECTION OF USA WASTE DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
The USA Waste Restated Certificate of Incorporation and the USA Waste Bylaws
provide that, subject to the rights of holders of any class or series of USA
Waste Preferred Stock to elect additional directors under specified
circumstances, the number of directors will be fixed from time to time by
resolution of the USA Waste Board of Directors; provided, however, that unless
approved by at least two-thirds of the incumbent directors, the number of
directors which shall constitute the whole USA Waste Board of Directors shall
be no fewer than three and no more than nine. The Board of Directors of USA
Waste currently consists of 12 members. The USA Waste Restated Certificate of
Incorporation and the USA Waste Bylaws also provide that the Board of
Directors of USA Waste be divided into three classes of directors, as nearly
equal in number as possible. At each annual meeting of the stockholders, one
class of directors is elected for a three-year term. The terms of the existing
Class II directors expire at the annual meeting of the stockholders of USA
Waste to be held in 1997, the terms of the existing Class III directors expire
at the annual meeting of the stockholders of USA Waste to be held in 1998, and
the terms of the existing Class I directors expire at the annual meeting of
the stockholders of USA Waste to be held in 1999.
USA Waste's Board intends to cause the nomination of John E. Drury, William
E. Moffett, John G. Rangos, Sr., and Jerome B. York for election to the USA
Waste Board of Directors as Class II directors for a three-year term expiring
at the annual meeting of stockholders of USA Waste to be held in the year
2000. Mr. Drury currently is a Class III director, but intends to resign his
position as a Class III director effective as of the USA Waste Annual Meeting.
The USA Waste Board of Directors intends to appoint Richard D. Kinder to fill
the Class III vacancy effective as of the USA Waste Annual Meeting.
Unless a stockholder requests that voting of his proxy be withheld for any
one or more of the nominees for directors by so directing on the proxy card,
the shares represented by the proxy will be voted FOR the election of Messrs.
Drury, Moffett, Rangos, Sr. and York. If any nominee becomes unavailable for
any reason, then the shares represented by a proxy will be voted FOR the
remainder of the listed nominees and for such other nominees as may be
designated by the Board of Directors of USA Waste as replacements for those
who become unavailable. The directors will be elected by the holders of USA
Waste Common Stock.
The following sets forth certain information concerning each of the nominees
for election to the Board of Directors of USA Waste at the USA Waste Annual
Meeting and each director who will be a member of USA Waste's Board of
Directors after the Effective Time.
<TABLE>
<CAPTION>
DIRECTOR DIRECTOR
NAME DESCRIPTION AGE SINCE CLASS
---- ----------- --- -------- --------
<S> <C> <C> <C> <C>
John E. Drury(1)........ Chairman of the Board and Chief Executive 53 1994 III(2)
Officer
David Sutherland- Yoest. Vice Chairman of the Board 41 1994 I
Richard J. Heckmann(4).. Director 53 1994 I
William E. Moffett(3)... Director 66 1995 II
Alexander W. Vice Chairman of the Board 37 1995 III
Rangos(1)(3)...........
John G. Rangos, Sr.(1).. Director 67 1995 II
Kosti Shirvanian(1)..... Vice Chairman of the Board 67 1996 I
Rodney R. Proto(1)...... President, Chief Operating Officer and 48 1996 III(5)
Director
Ralph F. Cox(4)......... Director 64 1996 I
Larry J. Martin(4)...... Director 55 1996 III
Richard D. Kinder....... Nominee(6) 52 -- III
Jerome B. York.......... Nominee 59 -- II
</TABLE>
- --------
(1) Member of the Executive Committee
(2) Mr. Drury intends to resign as a Class III director effective as of the
USA Waste Annual Meeting and is expected to be nominated for election as a
Class II director.
(3) Member of the Compensation and Stock Incentive Plan Committee
(4) Member of the Audit Committee
(5) To be renominated at expiration of term with term expiring in the year
2000 or thereafter
(6) To be appointed as a Class III Director.
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Nominees For Terms Expiring at the Annual Meeting in 2000 (Class II
Directors)
John E. Drury has been Chief Executive Officer since 1994 and Chairman of
the Board since 1995. From 1992 to May 1994, Mr. Drury served as a Managing
Director of Sanders Morris Mundy Inc. ("SMMI"), a Houston based investment
banking firm. Mr. Drury served as President and Chief Operating Officer of
Browning-Ferris Industries, Inc. ("BFI") from 1982 to 1991, during which time
he had chief responsibility for worldwide operations.
William E. Moffett has served as a director of USA Waste since June 1995. In
1992, Mr. Moffett retired as Chairman of the Board and Chief Executive Officer
of Chatham Enterprises, Inc. (real estate development) and Hazmed, Inc.
(environmental services). In May 1985, he retired as President of Gulf Oil
Foundation and as Vice President--Public Affairs of Gulf Oil Corporation,
having joined Gulf Oil Corporation in 1969 and served in a number of
managerial assignments for that company and its subsidiaries. Mr. Moffett also
serves as a director of Calvin Exploration Company, Inc.
John G. Rangos, Sr. served as Vice Chairman of the Board of Directors of USA
Waste from June 1995 until December 1995. Prior to such time, Mr. Rangos
served as Chief Executive Officer of Chambers from 1973 to June 1995. Mr.
Rangos is the father of Alexander W. Rangos, a Vice Chairman of USA Waste. In
connection with the settlement of a Commission investigation with respect to
Chambers' accounting method and the accuracy of its financial statements, the
Commission, in May 1995, instituted administrative proceedings against
Chambers and certain of its employees and outside auditors whose conduct the
Commission found caused Chambers' violations of the reporting, internal
controls and recordkeeping provisions of the Exchange Act. The Commission,
while not finding that Mr. Rangos knew of those violations, found that he had
not exercised sufficient oversight over the company's recordkeeping, internal
accounting controls, and financial reporting functions to assure that Chambers
complied with the applicable provisions of the Exchange Act. Mr. Rangos
consented to the issuance of a cease and desist order without admitting or
denying the Commission's findings.
Jerome B. York has been Vice Chairman of Tracinda Corporation since
September 1995. From 1993 to 1995, he was Senior Vice President and Chief
Financial Officer of IBM Corporation and was elected to the Board of Directors
of IBM in January 1995. From 1979 to 1993, Mr. York served in various
management positions with Chrysler Corporation ("Chrysler"), including
Executive Vice President--Finance and Chief Financial Officer, and he was a
director of Chrysler in 1992 and 1993. Mr. York also serves as a director of
MGM Grand, Inc. and Metro-Goldwyn-Mayer, Inc.
Directors Whose Terms Expire at the Annual Meeting in 1997
Savey Tufenkian has been a director of USA Waste since May 1996. She helped
to establish Western in 1955 and served as the Secretary and Treasurer of
Western from its incorporation in 1964 until May 1996. In 1988, she was
elected as Executive Vice President, Secretary and Treasurer of Western and
served as such until May 1996. Ms. Tufenkian has informed USA Waste that she
will not stand for reelection as a director at the USA Waste Annual Meeting.
Donald F. Moorehead, Jr. has been Vice Chairman since 1995. Prior to such
time, Mr. Moorehead served as Chairman of the Board and Chief Development
Officer since 1994. From October 1, 1990 to May 27, 1994, he was also Chief
Executive Officer. Mr. Moorehead was Chairman of the Board and Chief Executive
Officer of Mid-American Waste Systems Inc. ("Mid-American") from the inception
of Mid-American in December 1985 until August 1990 and continued as a director
until February 1991. From 1977 until 1984, Mr. Moorehead served in various
management positions with Waste Management Inc. Mr. Moorehead has informed USA
Waste that he will not stand for reelection as a director at the USA Waste
Annual Meeting.
Directors Whose Terms Expire at the Annual Meeting in 1998 (Class III
Directors)
Larry J. Martin was a co-founder and Vice Chairman of the Board of Directors
of Sanifill. From October 1989 to July 1991, Mr. Martin was President and Co-
Chief Executive Officer of Sanifill and from July 1991 to
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February 1992, he was President of Sanifill. For more than five years before
the acquisition of Sanifill, Mr. Martin was the president of a group of
companies involved in the waste disposal business.
Rodney R. Proto has been President and Chief Operating Officer of USA Waste
since August 1996. Prior thereto, he was President, Chief Operating Officer
and a Director of Sanifill. Mr. Proto joined Sanifill in February 1992. Before
joining Sanifill, he was employed by BFI for 12 years where Mr. Proto served,
among other positions, as Chairman of BFI Overseas from 1985 to 1987 and
President of Browning-Ferris Industries Europe, Inc. from 1987 through 1991.
Alexander W. Rangos has been a director of USA Waste since June 1995. From
June 1995 to December 1995, he was Executive Vice President--Corporate
Development of USA Waste. Prior to such time, he served as President and Chief
Operating Officer of Chambers since January 1994. Prior thereto, he served
with Chambers first as Manager of the Southern Region and then as Executive
Vice President in various capacities. Mr. Rangos is a son of John G. Rangos,
Sr.
Richard D. Kinder has been Chairman and Chief Executive Officer of Kinder
Morgan Energy Partners, L.P., a master limited partnership headquartered in
Houston, Texas since February 1997. From 1990 through December 1996, he was
President and Chief Operating Officer of Enron Corp. Prior thereto, Mr. Kinder
served in various management and legal positions with Enron Corp. and its
affiliates commencing in 1980. Mr. Kinder is also a director of Baker Hughes
Incorporated and Transocean Offshore Inc. He is past Chairman of the
Interstate Natural Gas Association of America and is a Trustee of the Museum
of Fine Arts, Houston. The Board of Directors of USA Waste intends to appoint
Mr. Kinder to serve as a Class III director effective as of the USA Waste
Annual Meeting.
Directors Whose Terms Expire at the Annual Meeting in 1999 (Class I
Directors)
Ralph F. Cox was a Director of Sanifill from September 1993 until December
1996. Since February 1, 1994, Mr. Cox has been a management consultant. For
four years prior thereto, Mr. Cox was President of Greenhill Petroleum
Corporation, a subsidiary of Western Mining Corporation. From 1985 through
1990, he served as President and Chief Operating Officer of Union Pacific
Resources Company, a petroleum exploration and production company. Before
1985, Mr. Cox spent 31 years with Atlantic Richfield Company ("ARCO"), joining
the ARCO board in 1978, assuming responsibility for ARCO's worldwide petroleum
exploration and production activities and minerals exploration and production
activities in 1984, and culminating with his election as Vice Chairman of ARCO
in 1985. Mr. Cox serves as a director of Bonneville Pacific Corporation, an
independent power company, of Daniel Industries, Inc., which manufactures oil
and gas measurement and flow control equipment, of Rio Grande, Inc., a
petroleum exploration and production company, and CH2M Hill, a consulting
engineering firm. He also serves as an Independent Trustee for The Fidelity
Group of funds. Mr. Cox holds a Bachelor of Science in Petroleum Engineering
and a Bachelor of Science in Mechanical Engineering from Texas A&M University.
Richard J. Heckmann is Chairman, President, and Chief Executive Officer of
United States Filter Corporation ("U.S. Filter"), a position he assumed in
July 1990. Prior to joining U.S. Filter, Mr. Heckmann was a Senior Vice
President--Investments and Branch Manager of Prudential-Bache Securities in
Rancho Mirage, California. Mr. Heckmann is also a director of Air Cure, Inc.
Kosti Shirvanian founded Western in 1955 as a sole proprietorship. He has
served as Western's Chairman of the Board of Directors, President and Chief
Executive Officer since Western's incorporation in 1964.
David Sutherland-Yoest was President, Chief Operating Officer and a director
of USA Waste from May 1994 until August 1996 and has been a Vice Chairman of
the Board and Vice President--Atlantic Region and Canada since August 1996.
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-
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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.
BOARD OF DIRECTORS AFTER THE MERGER
Pursuant to the Merger Agreement, the Board of Directors of USA Waste has
agreed to take such action as may be necessary to cause two persons designated
by United and acceptable to USA Waste to be elected to USA Waste's Board of
Directors as of a mutually agreeable time after the Effective Time. It is
currently expected that Mr. Kinder and Mr. York will be the United designees to
the USA Waste Board of Directors.
MEETINGS, COMMITTEES AND COMPENSATION
The USA Waste Board of Directors held seven meetings in 1996. For 1996,
directors who were not employed by USA Waste received a grant of options to
purchase 10,000 shares of USA Waste Common Stock. In addition, USA Waste
reimburses directors for their travel and out-of-pocket expenses incurred in
attending Board or committee meetings.
The USA Waste Board of Directors has an Audit Committee, a Compensation and
Stock Incentive Plan Committee (the "Compensation Committee") and an Executive
Committee. The Audit Committee reviews external and internal audit plans and
activities, annual financial statements, and the system of internal financial
controls, and approves all significant fees for audit, audit-related and non-
audit services provided by independent auditors. The Audit Committee met once
in 1996. The Compensation Committee reviews and recommends compensation for USA
Waste officers and employees and recommends to the Board of Directors changes
in USA Waste's incentive compensation plans. The Compensation Committee met six
times in 1996. The Executive Committee may act for the Board of Directors when
action is required between Board meetings and may act on behalf of the Board on
all but major corporate matters. All actions taken by the Executive Committee
must be reported at the Board's next meeting. The Executive Committee met five
times in 1996. All of the directors attended all committee meetings of the
committees of which they are members. Each incumbent director attended more
than 75% of all meetings of the entire USA Waste Board of Directors and the
committees on which he served.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation. The following is a
report from the Compensation Committee of USA Waste describing the policies
pursuant to which compensation was paid to executive officers of USA Waste
during 1996.
Compensation Philosophy. It is USA Waste's mission to continually improve the
Company's position in the solid waste management industry, with a strong focus
on steadily improving earnings and increasing shareholder value. The
Compensation Committee believes USA Waste's compensation policies should
support USA Waste's mission. As outlined below, USA Waste's executive
compensation programs are designed to enable USA Waste to attract, retain and
motivate the high caliber of executives required in order to achieve its
objective.
Compensation Policies Applicable to Executive Officers. Each executive
officer's annual compensation includes primarily three elements: (i) base
salary, which is reviewed annually; (ii) bonus; and (iii) incentive
compensation consisting of stock options. Adjustments to base salaries and the
granting of bonuses to USA Waste's executive officers are based on the
executive's individual contribution to USA Waste's performance in that fiscal
year. In evaluating USA Waste's performance, the Compensation Committee
considers such items as return on equity, earnings per share improvements,
results compared to competitors, business acquisitions and new markets entered,
the assimilation of new acquisitions into USA Waste and progress made in
projects that will benefit USA Waste in the future. Stock options are generally
granted annually as additional compensation in an effort to link each executive
officer's future compensation to the long-term financial success of USA Waste,
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as measured by stock performance. Options are priced at 100% of the stock
market value on the day of grant and typically vest in equal annual increments,
beginning one year from the date of grant, over the life of the option. The
total number of options awarded each executive is based on a subjective
evaluation of the performance of each executive under consideration without
regard to the number of options held by or previously granted to each
executive.
Compensation Policy Applicable to the Chief Executive Officer. The
compensation policies applicable to Mr. Drury, Chief Executive Officer of USA
Waste, are the same as noted for other executive officers. The Compensation
Committee considers Mr. Drury's experience and knowledge of the solid waste
management industry to be important to USA Waste's continued growth and
prosperity. Mr. Drury became associated with USA Waste in May 1994 following
the acquisition of Envirofil. At the time of his employment with USA Waste, Mr.
Drury's annual base salary was set at $500,000 following negotiations between
Mr. Moorehead, on behalf of the USA Waste Board of Directors, and Mr. Drury,
and such salary was approved by the Board. For the fiscal year 1995, Mr. Drury
received a base salary of $500,000, a bonus of $625,000 and was granted options
to purchase 425,000 shares of USA Waste Common Stock. For the fiscal year 1996,
Mr. Drury received a base salary of $563,000, a bonus of $625,000 and was
granted options to purchase 725,000 shares of USA Waste Common Stock. Mr.
Drury's 1996 bonus and stock option grant were based on a subjective evaluation
which considered, in part, USA Waste's financial performance for 1996, as well
as the fact that the Company had consummated the acquisitions of two publicly
traded solid waste management companies in 1996, Western and Sanifill. In
setting Mr. Drury's compensation, the Compensation Committee also made an
overall assessment of Mr. Drury's leadership in achieving the Company's long-
term strategic and business goals.
Tax Considerations. Section 162(m) of the Internal Revenue Code imposes a
limitation on the deductibility of nonperformance-based compensation in excess
of $1 million paid to a company's chief executive officer and its next four
highest paid executive officers. In response to Section 162(m) and in an effort
to provide that compensation to such executive officers will be deductible for
federal income tax purposes, the Compensation Committee in 1996 adopted the
Company's Corporate Performance-Based Compensation Plan (the "Compensation
Plan") and an amendment to the Company's 1993 Stock Incentive Plan (the "1993
Plan") providing for an annual limit on awards to be received by a participant.
Both items were approved by the Company's stockholders at the 1996 annual
meeting of stockholders. The amendment to the 1993 Plan is intended to permit
grants under such plan to be considered "performance-based" for purposes of
Section 162(m). Bonuses under the Compensation Plan are also intended to
qualify as "performance-based compensation." The Compensation Committee
believes that the Compensation Plan and the amendment to the 1993 Plan will
allow USA Waste to manage its executive compensation program to preserve
federal income tax deductions.
COMPENSATION COMMITTEE
Savey Tufenkian
William E. Moffett
Alexander W. Rangos
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Performance Graph. The following performance graph compares the performance
of USA Waste Common Stock to the New York Stock Exchange Composite Index and
to the Smith Barney Solid Waste Index ("Peer Group Index") for the period of
five years commencing December 31, 1991, and ending December 31, 1996. The
graph assumes that $100 was invested on December 31, 1991, in USA Waste Common
Stock and in each index and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
LOGO
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
USA Waste................. $100 $ 82.86 $ 65.00 $ 65.00 $107.86 $182.14
SB Solid Waste Index...... $100 $ 97.65 $ 73.54 $ 72.37 $ 86.36 $ 99.75
NYSE Composite............ $100 $104.69 $112.92 $109.37 $143.61 $170.98
</TABLE>
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Summary Compensation Table. The following table sets forth information with
respect to persons serving as USA Waste's Chief Executive Officer during 1996
and the four most highly compensated executive officers other than the Chief
Executive Officer whose total annual salary and bonus for 1996 exceeded
$100,000 ("named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
----------------- -----------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS AWARDS OPTIONS COMPENSATION(1)
------------------ ---- -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John E. Drury........... 1996 $563,000 $625,000 725,000 $4,750
Chairman of the Board 1995 500,000 625,000 425,000 5,192
and Chief Executive 1994 290,217 200,000 850,000 --
Officer(2)
Rodney R. Proto......... 1996 $317,700 $360,000 822,500 $8,807
President and Chief 1995 269,791 260,000 51,000 11,784
Operating Officer(4) 1994 248,083 225,000 $500,010(3) 34,000 10,279
Donald F. Moorehead,
Jr..................... 1996 $335,000 $330,000 200,000 4,750
Vice Chairman and Chief 1995 300,000 375,000 180,000 4,154
Development Officer 1994 260,000 130,000 25,000 --
David Sutherland-Yoest.. 1996 $328,850 $330,000 200,000 4,750
Vice Chairman and Vice 1995 300,000 375,000 180,000 4,154
President-- 1994 251,597 65,000 -- --
Atlantic Region(4)
Earl E. DeFrates........ 1996 $238,450 $275,000 150,000 4,750
Executive Vice 1995 187,500 200,000 95,000 2,769
President and Chief 1994 155,000 70,000 25,000 --
Financial Officer
</TABLE>
- --------
(1) Includes contributions by the Company under its 401(k) plan.
(2) Mr. Drury joined the Company in May 1994.
(3) Represents the aggregate value of restricted stock holdings as of December
31, 1996. Mr. Proto received an award of 23,810 shares of restricted
common stock of Sanifill pursuant to the Sanifill, Inc. 1994 Long-Term
Incentive Plan (the "Sanifill Plan") in 1994. Such shares of restricted
stock became fully vested and were converted into 40,477 shares of USA
Waste Common Stock in connection with the merger of Sanifill with a
subsidiary of USA Waste (the "Sanifill Merger"). The Sanifill Plan is no
longer in existence.
(4) Mr. Proto joined USA Waste in August 1996 in connection with the Sanifill
Merger, at which time he became President and Chief Operating Officer of
USA Waste. Mr. Sutherland-Yoest joined the Company in May 1994 in
connection with USA Waste's acquisition of Envirofil and served as
President and Chief Operating Officer of USA Waste until August 1996.
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The following table sets forth information concerning the grant of stock
options during 1996 to the named executive officers:
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL REALIZABLE VALUE AT
NUMBER OF OF TOTAL ASSUMED ANNUAL RATE OF STOCK
SHARES OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME GRANTED(1) FISCAL 1996 (PER SHARE) DATE 5% 10%
---- ---------- ------------ ----------- ---------- -- --------------
<S> <C> <C> <C> <C> <C> <C>
John E. Drury........... 300,000 3.84% $17.750 01/22/06 $ 7,983,407.18 $10,234,589.32
425,000 5.45% $27.125 08/30/06 $14,999,553.30 $19,229,166.77
Rodney R. Proto......... 212,500 2.72% $21.250 02/16/06 $11,590,563.91 $14,858,901.59
610,000 7.82% $27.125 08/30/06 $21,528,770.62 $27,599,509.95
Donald F. Moorehead,
Jr..................... 150,000 1.92% $17.750 01/22/06 $ 3,991,703.58 $ 5,117,294.65
50,000 0.64% $27.125 08/30/06 $ 1,764,653.33 $ 2,262,254.91
David Sutherland-Yoest.. 150,000 1.92% $17.750 01/22/06 $ 3,991,703.58 $ 5,117,294.65
50,000 0.64% $27.125 08/30/06 $ 1,764,653.33 $ 2,262,254.91
Earl E. DeFrates........ 50,000 0.64% $17.750 01/22/06 $ 1,330,567.86 $ 1,705,764.88
100,000 1.28% $27.125 08/30/06 $ 3,529,306.66 $ 4,524,509.83
</TABLE>
- --------
(1) All of such options vest in increments of 20% per year over a period of 5
years beginning on the first anniversary of the date of grant. In
addition, all of such options vest immediately upon a change of control of
USA Waste as defined in the USA Waste Amended and Restated 1993 Stock
Incentive Plan.
(2) The potential realizable value of each grant of options assuming that the
market price of the underlying security appreciates in value from the date
of grant to the end of the option term at the rates of 5% and 10%
compounded annually.
The following table sets forth information concerning the exercise of stock
options during 1996 by USA Waste's named executive officers:
OPTION EXERCISES AND YEAR-END VALUE TABLE(1)
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED IN-THE-
SHARES DECEMBER 31, 1996 MONEY OPTIONS AT DECEMBER 31,
ACQUIRED (SHARES) 1996(2)
ON VALUE ------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ---------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
John E. Drury........... 510,000 1,490,000 $ 9,740,950.00 $19,086,800.00
Rodney R. Proto......... 807,500 610,000 $12,504,676.40 $ 2,894,450.00
Donald F. Moorehead,
Jr..................... 193,500 369,000 $ 3,370,282.50 $ 4,711,521.13
David Sutherland-Yoest.. 209,029 $3,256,391 0 459,353 $ 0.00 $ 5,979,255.00
Earl E. DeFrates........ 104,000 251,000 $ 722,180.00 $ 2,484,595.00
</TABLE>
- --------
(1) Includes exercise of warrants that were granted to such officers as
compensation.
(2) Computed based upon the difference between aggregate fair market value
based on the NYSE Composite Tape closing price on December 31, 1996 (of
$31.875 per share) and the aggregate exercise price.
Employment Agreements. Messrs. Drury, Proto, Moorehead and Sutherland-Yoest
are each parties to employment agreements with USA Waste, which have
continuously renewing terms of five years until age 65 and which provide for
the payment of minimum annual base salaries and for the participation by the
employee in all USA Waste benefit plans and programs. In addition, Mr. Drury's
employment agreement provides that USA Waste would purchase his former
residence in Houston, Texas for $1,375,000, the fair market value of such
residence at June 1, 1994.
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The employment agreements include provisions governing compensation and
severance benefits upon termination of employment with USA Waste and upon
certain changes of control of USA Waste. The agreements may be terminated by
USA Waste other than for cause (as defined in the agreements) on the date five
years after such notice is given. During that ensuing period, the employee
would continue his employment on a part-time basis and be available to consult
with USA Waste. Generally, the employee's compensation while on part-time
status would be 75% of the average of the employee's compensation (including
salary and bonus) for the two highest of the three years prior to the employee
going on part-time status. Mr. Moorehead has informed USA Waste that he
intends to terminate his employment agreement effective as of the date of the
USA Waste Annual Meeting. See "Certain Relationships and Related
Transactions."
In the event of a change of control of USA Waste, the employee may elect to
receive a lump sum payment equal to three times the employee's average
annualized base compensation includable in gross income over the five taxable
years preceding the tax year in which the change of control occurs if,
following such change in control, USA Waste seeks to terminate such officer
without cause or takes any action adverse to such officer without his or her
consent with respect to, among other things, his or her duties, level of
compensation or benefits. The election by the employee to take the change of
control payment would be in lieu of other benefits and rights under such
employee's agreement except, generally, amounts payable under pension,
insurance, and similar plans, reimbursement for legal and other advisory
expenses and certain stock option and indemnification rights.
Mr. DeFrates also currently has an employment agreement with USA Waste.
Pursuant to the terms of his agreement, Mr. DeFrates has agreed to serve as a
full-time employee of USA Waste for a period of three years (until September
26, 1997) with automatic three-year extensions thereafter unless the agreement
is terminated by either party. The agreement provides for a minimum annual
salary and for the participation by Mr. DeFrates in all USA Waste benefit
programs. The employment agreement includes provisions governing termination
and changes in control of USA Waste.
The employment agreement entered into by Mr. DeFrates provides that if Mr.
DeFrates voluntarily terminates his employment with USA Waste, USA Waste will
pay him severance pay equal to 70% of his base salary in effect at termination
for a period of three years. In addition, in the event there is a change in
control of USA Waste after which USA Waste seeks to terminate him without
cause or takes any action adverse to him without his consent with respect to,
among other things, his duties, level of compensation or benefits, USA Waste
is required to pay Mr. DeFrates a lump sum equal to three times the sum of his
base salary in effect at termination and the highest bonus he received in the
three-year period prior to termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During 1996, Ms. Tufenkian, Mr. Moffett and Mr. Alexander Rangos served on
the Compensation Committee of the Board of Directors of USA Waste. During
1996, no executive officer of USA Waste served as (i) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served on the
Compensation Committee, (ii) a director of another entity, one of whose
executive officers served on the Compensation Committee or (iii) a member of
the compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of USA Waste.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Moorehead has informed USA Waste that he will not stand for reelection
as a director and will terminate his employment agreement effective as of the
date of the USA Waste Annual Meeting. In connection with the termination of
Mr. Moorehead's employment agreement, USA Waste has agreed to grant to Mr.
Moorehead certain severance benefits, including cash payments of $500,000 in
1997 and $500,000 in 1998, 77,500 shares of USA Waste Common Stock, and a
warrant to purchase 150,000 shares of USA Waste Common Stock at the closing
price on the date of the USA Waste Annual Meeting. Mr. Moorehead also has
agreed to enter into a Consulting Agreement with USA Waste. The Consulting
Agreement will expire on December 31, 2002, and provides for
49
<PAGE>
compensation of $125,000 per annum, commencing January 1, 1999, as well as
certain customary benefits and perquisites. The Consulting Agreement also
prohibits Mr. Moorehead from competing with USA Waste in the solid waste
business.
In connection with USA Waste's merger (the "Western Merger") with Western in
May 1996, Kosti Shirvanian became a Vice Chairman of USA Waste and a member of
the Executive Committee of the USA Waste Board of Directors. USA Waste and Mr.
Shirvanian entered into an employment agreement effective as of the effective
time of the Western Merger providing for an annual salary of $500,000 (to be
increased by a minimum of 10% per year), a guaranteed annual bonus of $250,000
and a discretionary annual bonus of up to $250,000. Pursuant to his employment
agreement, Mr. Shirvanian is also entitled to receive additional compensation
from USA Waste as its compensation committee may determine.
In addition, USA Waste assumed, pursuant to the employment agreement with Mr.
Shirvanian, certain obligations with respect to a split dollar life insurance
agreement (the "Insurance Agreement") entered into in 1995 by Western and Mr.
and Mrs. Kosti Shirvanian and Ms. Linda Shirvanian, as trustee for the Kosti
and Marian Shirvanian Family 1995 Irrevocable Trust (the "Trust"). The
Insurance Agreement provides for life insurance on the life of Mr. Shirvanian
or the lives of Mr. and Mrs. Shirvanian. The beneficiary of the policy is the
Trust. The beneficiaries of the Trust are the descendants of Mr. and Mrs.
Shirvanian. Under the Insurance Agreement, the premium payment obligations are
split between Western and the Trust. The estimated discounted single premium
payment required to pay in full the obligations under the Insurance Agreement
would be approximately $7 million, of which approximately $2.35 million
represents the Trust's share of such premium. In connection with the Western
Merger, USA Waste assumed the payment obligations of both Western and the
Trust. All premium payments made by USA Waste or Western are recoupable out of
the death benefits of such policy.
Pursuant to his employment agreement, Mr. Shirvanian was granted options to
purchase 900,000 shares of USA Waste Common Stock at an exercise price equal to
the closing trading price on the NYSE for USA Waste Common Stock on the
effective date of the Western Merger. On each of the first four anniversary
dates of the effective date of the Western Merger, Mr. Shirvanian is entitled
to additional grants of options to purchase 162,500 shares of USA Waste Common
Stock at an exercise price equal to the fair market value of the USA Waste
Common Stock at the date of grant. The options will expire 10 years from the
date of grant and will vest at a rate of 20% annually.
The agreement provides that upon a change of control of USA Waste while Mr.
Shirvanian is still an employee or within 12 months after Mr. Shirvanian is
placed on part-time status, Mr. Shirvanian will be entitled, at his election,
to receive a lump sum amount equal to three times the sum of his then base
salary and guaranteed bonus, less $1.00.
Mr. Shirvanian's employment agreement is for a continuously renewing term of
five years from the effective date of the Western Merger, subject to
termination under certain circumstances. At all times during the term of the
employment agreement, and for a period of two years after the termination of
his employment, Mr. Shirvanian has agreed not to compete with the business of
USA Waste.
In January 1996, Western's Board of Directors approved the payment of a
$750,000 bonus to Mr. Shirvanian prior to the Western Merger, which payment was
made to Mr. Shirvanian in January 1996.
Pursuant to the terms of the Western Merger, USA Waste and the Shirvanian
Family Investment Partnership (the "Partnership"), of which Kosti Shirvanian, a
director of USA Waste, is a general partner, transferred to USA Waste the
Partnership's interests in the land and improvements constituting a portion of
a transfer station in Carson, California, in exchange for the issuance by USA
Waste of 337,500 shares of USA Waste Common Stock.
In connection with USA Waste's merger with Chambers, USA Waste entered into
an employment agreement with Alexander W. Rangos similar to the employment
agreements with Messrs. Moorehead and Drury, and into consulting and non-
compete agreements with each of John G. Rangos, Sr. and John G. Rangos, Jr. The
employment agreement with Alexander Rangos is for a five-year term at a base
salary of $275,000 per year. The consulting and non-compete agreements with
each of John G. Rangos, Sr. and John G. Rangos, Jr.
50
<PAGE>
provide for annual compensation of $450,000 and $250,000, respectively, and are
for a term of five years. In connection with the Sanifill Merger, USA Waste
agreed to accelerate payments under such employment and consulting agreements,
John G. Rangos, Sr. resigned as Vice Chairman (but remains a director of USA
Waste), and Alexander W. Rangos became Vice Chairman of the Board of Directors
and resigned as an Executive Vice President of USA Waste. On December 29, 1994,
Chambers made unconditional promises to contribute $3,000,000 to certain
charitable organizations at the direction of John G. Rangos, Sr. On December
18, 1995, USA Waste agreed that an additional $2,000,000 would be funded in
connection with charitable contributions pursuant to such arrangements. In
addition, USA Waste agreed to file a shelf registration statement relating to
4,000,000 shares of USA Waste Common Stock held by John G. Rangos, Sr.,
Alexander W. Rangos and John G. Rangos, Jr. and one of their affiliates.
In August 1995, USA Waste exercised an option to purchase real estate from
Mr. John Rangos, Sr. and Mr. Michael J. Peretto, a former director of Chambers,
and certain members of his family. The real estate is adjacent to USA Waste's
Monroeville, Pennsylvania landfill. The option to purchase the real estate was
originally granted to Chambers pursuant to an agreement among the parties dated
July 8, 1993. The total consideration paid by USA Waste for the real estate was
$2,986,118, of which $2,103,585 was paid to Mr. Rangos and $882,533 was paid to
Mr. Peretto and members of his family.
In connection with USA Waste's acquisition of Envirofil in May 1994, SMMI, in
its capacity as financial advisor to Envirofil received a fee of $850,000. In
1995, USA Waste called for redemption its 8% Convertible Subordinated
Debentures, and in connection with such transaction, entered into a standby
agreement with SMMI, pursuant to which SMMI received $200,000 and reimbursement
for its legal fees. Prior to joining USA Waste, Mr. Drury was a Managing
Director and shareholder of SMMI and remains a director thereof.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, USA Waste's directors, executive (and
certain other) officers and any person holding more than ten percent of the
outstanding USA Waste Common Stock are required to report their beneficial
ownership of USA Waste Common Stock to USA Waste and the Commission. Specific
due dates for these reports have been established by regulation and USA Waste
is required to report any failure to file by these dates during 1996. All of
these filings were satisfied by USA Waste's directors, officers and ten percent
holders, except that Messrs. Martin, Moorehead, Sutherland-Yoest and Sangalis
and Ms. Tufenkian each failed to file on a timely basis one report concerning
one transaction.
As of the date of this Joint Proxy Statement and Prospectus, USA Waste
believes that all directors, officers and ten percent holders are current in
their filings. In making these statements, USA Waste has relied on the written
representations of its directors, officers and ten percent holders and copies
of reports that they have filed with the Commission.
APPROVAL AND ADOPTION OF THE STOCK PURCHASE PLAN
The Board of Directors of USA Waste believes it is in the best interests of
USA Waste to encourage stock ownership by its employees. Accordingly, the
Compensation Committee of the Board of Directors approved the establishment of
the Stock Purchase Plan on April 8, 1997, subject to approval of the Board of
Directors and the stockholders of USA Waste. An aggregate of 1,000,000 shares
of USA Waste Common Stock (subject to adjustment for any stock dividend, stock
split or other relevant changes in USA Waste's capitalization) may be sold
pursuant to the Stock Purchase Plan. The text of the Stock Purchase Plan is
attached as Appendix D to this Joint Proxy Statement and Prospectus. Set forth
below is a summary of the material provisions of the Stock Purchase Plan.
On the first day (the "Enrollment Date") of each six month period (each, an
"Offering Period") commencing on January 1 and terminating the following June
30 or commencing on July 1 and terminating on the following December 31, each
employee who is eligible to participate in the Stock Purchase Plan and who has
enrolled therein will receive an option to purchase on the last day of the
applicable Offering Period (the
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<PAGE>
"Exercise Date") up to a number of shares of USA Waste Common Stock determined
by dividing such employee's payroll deductions accumulated in the Stock
Purchase Plan during such Offering Period by 85% of the fair market value of a
share of USA Waste Common Stock on the applicable Enrollment Date or Exercise
Date, whichever is lower. The price of each of the shares offered in a given
Offering Period shall be the lower of: (i) 85% of the fair market value of a
share of USA Waste Common Stock on the Enrollment Date, or (ii) 85% of the fair
market value of a share of USA Waste Common Stock on the applicable Exercise
Date.
ADMINISTRATION AND ELIGIBILITY
The Stock Purchase Plan will be administered by a Committee appointed by USA
Waste's Board of Directors (the "Committee"). The Committee has the authority
to interpret all provisions of the Stock Purchase Plan. All employees of the
Company and its participating subsidiaries who have been employed by the
Company for at least one year are eligible to participate in the Stock Purchase
Plan, except for employees whose customary employment is twenty hours or fewer
per week or employees whose customary employment is for not more than five
months in any calendar year. As of March 31, 1997, approximately 5,350
employees were eligible to participate in the Stock Purchase Plan.
PARTICIPATION AND TERMS
An eligible employee may elect to participate in the Stock Purchase Plan by
completing an enrollment agreement in the form provided by the Company, which
agreement will authorize payroll deductions from such employee's pay. The
payroll deduction may not exceed ten percent of the employee's gross pay. In
addition, an employee cannot contribute more than any amount which would (a)
result in the employee, immediately after the purchase of USA Waste Common
Stock under the Stock Purchase Plan, owning USA Waste Common Stock and/or
holding outstanding options to purchase USA Waste Common Stock possessing five
percent or more of the total combined voting power of all outstanding capital
stock of USA Waste, or (b) permit such employee to purchase capital stock of
USA Waste under all stock purchase plans of USA Waste at a rate which would
exceed $25,000 in fair market value of capital stock in a calendar year in
which such employee has outstanding options to purchase USA Waste Common Stock.
In any event, no employee may make payroll deductions in any one year in excess
of $21,250.
The Committee shall invest all payroll deductions in USA Waste's general
corporate account. No interest shall accrue or be credited to such payroll
deductions, and an employee participating in the Stock Purchase Plan may not
make any additional payments into such account. Employees may purchase Common
Stock under the Stock Purchase Plan only through payroll deductions.
AMENDMENT AND TERMINATION
The Board of Directors of USA Waste may amend the Stock Purchase Plan at any
time. However, the Stock Purchase Plan may not be amended in any way that will
cause rights issued thereunder to fail to meet the requirements for employee
stock purchase plans as defined in Section 423 of the Code, including
stockholder approval if required.
The Stock Purchase Plan shall terminate upon (i) the Exercise Date that
employees participating in the Stock Purchase Plan become entitled to purchase
an aggregate number of shares of USA Waste Common Stock greater than the number
of reserved shares of USA Waste Common Stock remaining available for purchase
under the Stock Purchase Plan, or (ii) the date on which the Stock Purchase
Plan is terminated by the Board of Directors.
FEDERAL INCOME TAX CONSEQUENCES
The Stock Purchase Plan is intended to be an "employee stock purchase plan"
as defined in Section 423 of the Code, which provides that an employee does not
have to pay any federal income tax when he or she joins the Stock Purchase Plan
or when he or she receives shares of USA Waste Common Stock. The employee is,
however, required to pay a federal income tax on the difference, if any,
between the price at which he or she sells the shares received under the Stock
Purchase Plan and the price he or she paid for them.
The foregoing description of the Stock Purchase Plan is qualified in its
entirety by, and should be read in conjunction with, the text of the Stock
Purchase Plan, a copy of which is attached hereto.
BOARD RECOMMENDATION. The Board of Directors of USA Waste recommends a vote
FOR the Stock Purchase Plan which will benefit USA Waste by encouraging stock
ownership by the employees of USA Waste.
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VOTE REQUIRED FOR APPROVAL. The affirmative vote of the holders of a
majority of the shares of USA Waste Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote thereon is
required to approve the Stock Purchase Plan.
AMENDMENT TO USA WASTE RESTATED CERTIFICATE OF INCORPORATION
The authorized capital stock of USA Waste currently consists of 300,000,000
shares of Common Stock, par value $.01 per share, and 10,000,000 shares of
Preferred Stock, par value $.01 per share. On the USA Waste Record Date,
161,270,883 shares of USA Waste Common Stock were issued and outstanding, and
3,920,720 shares were reserved for issuance upon exercise of outstanding
options, warrants and convertible securities.
The Board of Directors of USA Waste believes that it is in the best
interests of USA Waste to have additional shares of USA Waste Common Stock
available for issuance at the Board of Directors' discretion for future
acquisitions, stock splits, stock dividends, equity financings, employee
benefit plans and other corporate purposes. Accordingly, the USA Waste Board
of Directors has proposed an amendment to the Restated Certificate of
Incorporation of USA Waste to increase the number of shares of USA Waste
Common Stock available for issuance from 300,000,000 to 500,000,000, such
amendment to be effective only if the Merger is consummated.
If the proposal is approved by the stockholders of USA Waste as described
below, the additional shares of USA Waste Common Stock may be issued from time
to time upon authorization of the Board of Directors, without further approval
by the stockholders unless required by applicable law or NYSE rules, which
generally require the approval of a majority of USA Waste's stockholders when
USA Waste Common Stock is to be issued if such USA Waste Common Stock has
voting power equal to or in excess of 20% of the voting power outstanding, and
for such consideration as the USA Waste Board of Directors may determine and
as may be permitted by applicable law. The availability of additional shares
of USA Waste Common Stock for issuance will afford USA Waste greater
flexibility in acting upon proposed transactions.
The increase in authorized shares is not being proposed as a means of
preventing or dissuading a change in control or takeover of USA Waste.
However, use of these shares for such a purpose is possible. Shares of
authorized but unissued or unreserved USA Waste Common Stock and Preferred
Stock, for example, could be issued in an effort to dilute the stock ownership
and voting power of persons seeking to obtain control of USA Waste or could be
issued to purchasers who would support the Board of Directors in opposing a
takeover proposal. In addition, the increase in authorized shares, if
approved, may have the effect of discouraging a challenge for control or make
it less likely that such a challenge, if attempted, would be successful.
The proposed amendment does not change the terms of the USA Waste Common
Stock, which does not have preemptive rights. The additional shares of USA
Waste Common Stock for which authorization is sought will have the same voting
rights, the same rights to dividends and distributions and will be identical
in all other respects to the shares of USA Waste Common Stock now authorized.
RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors of USA
Waste recommends that the stockholders of USA Waste vote FOR the amendment to
increase the number of authorized shares of USA Waste Common Stock from
300,000,000 to 500,000,000, such amendment to be effective only if the Merger
is consummated. This amendment is being proposed by the Board of Directors in
order to ensure that, after the Merger, USA Waste will have shares available
for issuance at the Board of Directors' discretion for future acquisitions,
stock splits, stock dividends, equity financings, employee benefit plans and
other corporate purposes.
VOTE REQUIRED FOR APPROVAL. Approval of the amendment to the USA Waste
Restated Certificate of Incorporation requires the affirmative vote of a
majority of the outstanding shares of USA Waste Common Stock.
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If approved by the stockholders of USA Waste, it is anticipated that this
amendment to the Restated Certificate of Incorporation will become effective
as soon as practicable after the Merger is consummated.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. was engaged to audit USA Waste's 1996
financial statements. The Board of Directors of USA Waste proposes to continue
the services of this firm as independent accountants to audit USA Waste's
financial statements for 1997. If the appointment of Coopers & Lybrand L.L.P.
is ratified by the stockholders, the firm will audit the financial statements
of USA Waste and its subsidiaries for the current fiscal year and perform
other appropriate accounting services as requested. Coopers & Lybrand L.L.P.
has advised USA Waste that no member of the firm has any financial interest,
direct or indirect, in USA Waste or any of its subsidiaries in any capacity
other than that of auditors. Representatives of Coopers & Lybrand L.L.P. will
be present at the USA Waste Annual Meeting and will be available to answer
appropriate questions from stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS. The USA Waste Board of Directors
recommends that USA Waste stockholders vote FOR ratification of the
appointment of Coopers & Lybrand L.L.P. as independent accountants to audit
USA Waste's financial statements for fiscal 1997.
VOTE REQUIRED FOR APPROVAL. The affirmative vote of a majority of the shares
of USA Waste Common Stock present or represented by proxy and entitled to vote
at the USA Waste Annual Meeting is required for the ratification of the
appointment of Coopers & Lybrand L.L.P. as independent accountants to audit
USA Waste's financial statements for fiscal 1997.
THE PLAN OF MERGER AND TERMS OF THE MERGER
The following summary of the terms of the Merger Agreement is qualified in
its entirety by reference to the Merger Agreement, a copy of which is attached
hereto as Appendix A. Certain capitalized terms used herein without definition
have the respective meanings set forth in the Merger Agreement.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at such time as shall be stated in the
Certificate of Merger, which shall be in a form mutually acceptable to USA
Waste and United, and shall be filed with the Secretary of State of the State
of Delaware in accordance with the DGCL (the "Merger Filing"). The Merger
Filing shall be made simultaneously with, or as soon as practicable after, the
closing of the transactions contemplated by the Merger Agreement in accordance
with the Merger Agreement. See "--Conditions to the Merger."
MANNER AND BASIS FOR CONVERTING SHARES
At the Effective Time, each outstanding share of United Common Stock (other
than shares owned by USA Waste) will be converted into the right to receive,
without interest, 1.075 shares of USA Waste Common Stock. In addition, at the
Effective Time, each issued and outstanding share of Acquisition Common Stock
will be converted into one share of common stock, par value $.001 per share,
of the Surviving Corporation.
After the Effective Time, the stock transfer books of United will be closed.
SHARE CERTIFICATES SHOULD NOT BE SURRENDERED FOR EXCHANGE BY STOCKHOLDERS OF
UNITED PRIOR TO APPROVAL OF THE MERGER AND THE RECEIPT OF A LETTER OF
TRANSMITTAL.
No certificates or scrip for fractional shares of USA Waste Common Stock
will be issued in the Merger and no USA Waste Common Stock dividend, stock
split or interest shall relate to any fractional security, and such fractional
interests will not entitle the owner thereof to vote or to any other rights of
a security holder. In lieu of
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any such fractional shares, each holder of shares of United Common Stock who
would otherwise have been entitled to receive a fraction of a share of USA
Waste Common Stock upon surrender of United certificates for exchange pursuant
to the Merger Agreement will be entitled to receive from the Exchange Agent a
cash payment equal to such fraction multiplied by the average closing price
per share of USA Waste Common Stock on the NYSE Composite Tape, as reported by
the Wall Street Journal, during the 10 trading days immediately preceding the
Effective Time.
From and after the Effective Time, each holder of an outstanding certificate
which immediately prior to the Effective Time represented shares of United
Common Stock will be entitled to receive in exchange therefor, upon surrender
thereof to the Exchange Agent, a certificate or certificates representing the
number of whole shares of USA Waste Common Stock to which such holder is
entitled pursuant to the Merger Agreement. Until holders or transferees of
certificates theretofore representing shares of United Common Stock have
surrendered them for exchange as provided herein, no dividends or other
distributions will be paid with respect to any shares represented by such
certificates and no payment for fractional shares will be made and, without
regard to when such certificates representing shares of United Common Stock
are surrendered for exchange as provided herein, no interest will be paid on
any dividends or other distributions or any payment for fractional shares.
Upon surrender of a certificate which, immediately prior to the Effective Time
represented shares of United Common Stock, there will be paid to the holder of
such certificate the amount of any dividends or other distributions which
theretofore became payable, but which were not paid by reason of the
foregoing, with respect to the number of whole shares of USA Waste Common
Stock represented by the certificate or certificates issued upon such
surrender.
EXCHANGE AND CANCELLATION OF UNITED OPTIONS
Pursuant to the Merger Agreement, United shall use commercially reasonable
efforts to ensure that, at the Effective Time, all rights with respect to
options to purchase shares of United Common Stock granted under United's stock
option plans or otherwise which are outstanding on the Effective Date, whether
or not such options have previously vested or become exercisable, will be
cancelled in exchange for a number of shares of USA Waste Common Stock equal
in market value (based upon the USA Waste Trading Price computed with respect
to the Closing Date) to the fair value of such options as determined by Price
Waterhouse LLP, or another party mutually agreed upon by USA Waste and United.
USA Waste and United have agreed that the value determined by using the
methodology proposed by such independent third party experts will represent
the fair value of such options as of the Effective Time.
CONVERSION OF UNITED WARRANTS
Pursuant to the Merger Agreement, each unexpired warrant to purchase United
Common Stock that is outstanding at the Effective Time, whether or not
exercisable, will automatically be converted into a warrant with similar terms
to purchase a number of shares of USA Waste Common Stock equal to the number
of shares of United Common Stock that could be purchased under such warrant
multiplied by the Exchange Ratio, at a price per share of USA Waste Common
Stock equal to the per share exercise price of such warrant divided by the
Exchange Ratio.
ADJUSTMENT OF UNITED CONVERTIBLE NOTES
The Merger Agreement provides that United and the Surviving Corporation
shall execute the Supplemental Indenture, effective as of the Effective Time,
by which there shall be made the adjustments in the conversion provisions of
the United Indenture relating to the United Convertible Notes that are
required to be made as a result of the Merger in order to provide for the
United Convertible Notes to be convertible from and after the Merger, into
shares of USA Waste Common Stock (and cash in lieu of fractional shares), in
the manner and to the extent required by the United Indenture.
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CONDITIONS TO THE MERGER
The respective obligations of USA Waste and United to effect the Merger are
subject to the fulfillment at or prior to the Closing Date of the following
conditions: (a) the Merger Agreement and the transactions contemplated thereby
shall have been approved and adopted by the requisite vote of the stockholders
of USA Waste and United under applicable law and applicable listing
requirements; (b) the shares of USA Waste Common Stock issuable in the Merger
and those to be reserved for issuance upon exercise of stock options or
warrants or the conversion of convertible securities shall have been
authorized for listing on the NYSE upon official notice of issuance; (c) the
waiting period applicable to consummation of the Merger under the HSR Act
shall have expired or been terminated; (d) the Registration Statement shall
have become effective in accordance with the provisions of the Securities Act,
no stop order suspending such effectiveness shall have been issued and remain
in effect and no proceeding for that purpose shall have been instituted by the
Commission or any state regulatory authorities; (e) no preliminary or
permanent injunction or other order or decree by any federal or state court
which prevents the consummation of the Merger shall have been issued and
remain in effect (each party agreeing to use its reasonable efforts to have
any such injunction, order or decree lifted); (f) no statute, rule or
regulation shall have been enacted by any state or federal government or
governmental agency in the United States which would prevent the consummation
of the Merger or make the Merger illegal; (g) all material governmental
waivers, consents, orders and approvals legally required for the consummation
of the Merger and the transactions contemplated thereby, and all material
consents from lenders required to consummate the Merger, shall have been
obtained and be in effect at the Effective Time; (h) Coopers & Lybrand L.L.P.,
independent accountants for USA Waste, shall have delivered a letter, dated
the Closing Date, addressed to USA Waste, in form and substance reasonably
satisfactory to USA Waste, to the effect that the merger will qualify for
"pooling of interests" accounting treatment if consummated in accordance with
the Merger Agreement; and (i) each of the parties to the Merger Agreement
shall have received a letter dated the Closing Date from Ernst & Young LLP
regarding such firm's concurrence with United's management's conclusions that
no conditions exist related to United that would preclude USA Waste's
accounting for the Merger as a "pooling of interests" under Accounting
Principles Board Opinion No. 16 if closed and consummated in accordance with
the Merger Agreement.
The obligation of United to effect the Merger is further subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions, unless waived by United: (a) USA Waste and Acquisition shall have
performed their agreements in the Merger Agreement required to be performed on
or prior to Closing Date, and the representations and warranties of USA Waste
and Acquisition contained in the Merger Agreement shall be true and correct on
and as of the date made and (except to the extent that such representations
and warranties speak as of an earlier date) on and as of the Closing Date as
if made at and as of such date, except for such failures to perform or to be
true and correct that would not reasonably be expected to have a material
adverse effect on the business operations, properties, assets, condition
(financial or other) or results of operations of USA Waste and its
subsidiaries considered as a whole, and United shall have received a
certificate of the Chairman of the Board and Chief Executive Officer, the
President or a Vice President of USA Waste and of the President and Chief
Executive Officer or a Vice President of Acquisition to that effect; (b)
United shall have received an opinion of Wachtell, Lipton, Rosen & Katz, in
form and substance reasonably satisfactory to United, dated the Closing Date,
substantially to the effect that on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and neither
USA Waste, Acquisition, United, nor the holders of United Common Stock (except
to the extent any such holders receive cash in lieu of fractional shares) will
recognize any gain or loss for federal income tax purposes; and (c) the
average daily closing price per share of USA Waste Common Stock during the 20
consecutive trading days ending on the second trading day prior to any then
scheduled Closing Date (the Parent Trading Price) is $31.50 per share or more
(such amount to be appropriately adjusted for any stock split or stock
dividend or distribution, combination or other change in USA Waste Common
Stock).
The obligation of USA Waste and Acquisition to effect the Merger is further
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions, unless waived by USA Waste and Acquisition:
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(a) United shall have performed its agreements in the Merger Agreement
required to be performed on or prior to the Closing Date, and the
representations and warranties of United contained in the Merger Agreement
shall be true and correct on and as of the date made and (except to the extent
that such representations and warranties speak as of an earlier date) on and
as of the Closing Date as if made at and as of such date, except for such
failures to perform or to be true and correct that would not reasonably be
expected to have a material adverse effect on the business operations,
properties, assets, condition (financial or other) or results of operations of
USA Waste and its subsidiaries considered as a whole, and USA Waste shall have
received a certificate of the President and Chief Executive Officer or of a
Vice President of United to that effect; (b) USA Waste shall have received an
opinion of McDermott, Will & Emery, in form and substance reasonably
satisfactory to USA Waste, dated the Closing Date, substantially to the effect
that on the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the Effective
Time, the Merger will constitute a reorganization under Section 368(a) of the
Code and neither USA Waste nor Acquisition will recognize any gain or loss for
federal income tax purposes as a result of consummation of the Merger; and (c)
at least 60 days prior to the Closing Date, United shall have delivered to USA
Waste a complete copy of each agreement which requires United to register any
shares of United Common Stock under the Securities Act and which would require
USA Waste to register any shares of USA Waste Common Stock under the
Securities Act upon or after the Closing Date.
COOPERATION
Pursuant to the Merger Agreement, each of the parties has agreed to take, or
to cause to be taken, all action and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement. In this regard, the Merger Agreement provides, among other things,
that USA Waste shall take all reasonable steps necessary to avoid or eliminate
impediments under any antitrust, competition or trade regulation law that may
be asserted by the FTC, the Antitrust Division, any state Attorney General or
any governmental entity with respect to the Merger so as to enable
consummation of the Merger to occur as soon as reasonably possible. The Merger
Agreement further provides that, notwithstanding the foregoing, USA Waste will
propose, negotiate, commit to and effect, by consent decree, hold separate
order, or otherwise, the sale, divestiture, or disposition of such assets or
businesses of USA Waste or, effective as of the Effective Time, the Surviving
Corporation, as may be required in order to avoid the entry of, or to effect
the dissolution of, any injunction, temporary restraining order or other order
in any suit or proceeding, which would otherwise have the effect of preventing
or delaying consummation of the Merger; provided, however, that USA Waste will
not be required to sell, divest, dispose of, or hold separate assets or
businesses with aggregate 1996 revenues in excess of $30 million, not
including any assets or businesses that are required to be sold, divested,
disposed of, or held separate as a result of acquisitions of assets or
businesses by USA Waste or any of its subsidiaries after the date of the
Merger Agreement.
REPRESENTATIONS AND WARRANTIES OF USA WASTE AND UNITED
In the Merger Agreement, USA Waste and United have made various
representations and warranties relating to, among other things, their
respective businesses and financial condition, the accuracy of their various
filings with the Commission, the satisfaction of certain legal requirements
for the Merger and the absence of undisclosed liabilities or material
litigation matters. The representations and warranties of each of the parties
to the Merger Agreement will expire upon consummation of the Merger.
CONDUCT OF THE BUSINESS OF USA WASTE AND UNITED PRIOR TO THE MERGER
Pursuant to the Merger Agreement, United has agreed that, after the date of
the Merger Agreement and prior to the Closing Date or earlier termination of
the Merger Agreement, and except as otherwise agreed to in writing by USA
Waste and except as otherwise contemplated by or disclosed in the Merger
Agreement, it shall, and shall cause each of its subsidiaries to: (a) conduct
their respective businesses in the ordinary and usual course of business and
consistent with past practice; (b) not (i) amend or propose to amend their
respective charters or bylaws (except that United may amend its charter to
increase the number of authorized shares of United Common
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Stock), (ii) split, combine or reclassify their outstanding capital stock or
(iii) declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise, except for the payment of dividends or
distributions to United by a wholly owned subsidiary of United; (c) not issue,
sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any
additional shares of, or any options, warrants or rights of any kind to
acquire any shares of their capital stock of any class or any debt or equity
securities convertible into or exchangeable for such capital stock, except
that (i) United may issue shares upon conversion of convertible securities and
exercise of options and warrants, (ii) United may issue shares of United
Common Stock (or warrants or options to acquire United Common Stock) in
connection with acquisitions of assets or businesses pursuant to the proviso
set forth in (d)(vii) below, and (iii) United may grant options with an
exercise price per share of United Common Stock no less than the closing price
of a share of United Common Stock on the day prior to grant of such option
with respect to up to an aggregate of 200,000 shares of United Common Stock;
provided that such grants may not be made to any current executive officer or
director of United and may only be made (A) to persons who have not held or do
not hold other options to purchase United Common Stock or (B) in the ordinary
course of business, to existing employees of United and its subsidiaries; (d)
not (i) incur or become contingently liable with respect to any indebtedness
for borrowed money other than (A) borrowings in the ordinary course of
business (other than pursuant to credit facilities) or borrowings under the
existing credit facilities of United or any of its subsidiaries as such
facilities may be amended in a manner that does not have a material adverse
effect on United up to the borrowing limit in effect on the date of the Merger
Agreement, (B) borrowings to refinance existing indebtedness on terms which
are reasonably acceptable to USA Waste or (C) borrowings in connection with
acquisitions as set forth in the proviso to (d)(vii) below, (ii) redeem,
purchase, acquire or offer to purchase or acquire any shares of its capital
stock, or any options, warrants or rights to acquire any of its capital stock,
or any security convertible into or exchangeable for its capital stock, (iii)
take any action that would jeopardize the treatment of the Merger as a pooling
of interests under Accounting Principles Board Opinion No. 16, (iv) take or
fail to take any action which action or failure to take action would cause
United or its stockholders (except to the extent that any stockholders receive
cash in lieu of fractional shares and except to the extent of stockholders in
special circumstances) to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger or would otherwise
cause the Merger not to qualify as a reorganization under Section 368(a) of
the Code, (v) make any acquisition of any assets or businesses other than
expenditures for current assets in the ordinary course of business and other
than as set forth in the proviso in (d)(vii) below, (vi) sell, pledge, dispose
of or encumber any material assets or businesses other than (a) sales of
businesses or assets in the ordinary course of business, (b) sales of
businesses or assets otherwise disclosed pursuant to the Merger Agreement, (c)
sales of businesses or assets with aggregate 1996 revenues less than $5.0
million, and (d) pledges or encumbrances pursuant to existing credit
facilities or other permitted borrowings, or (vii) except as set forth in the
following proviso, enter into any binding contract, agreement, commitment or
arrangement with respect to any of the foregoing; provided that,
notwithstanding the foregoing (other than subsections (iii) and (iv) of this
clause (d)), United shall not be prohibited from acquiring any assets or
businesses or incurring or assuming indebtedness in connection with
acquisitions of assets or businesses so long as (A) such acquisitions are
otherwise disclosed in the Merger Agreement, (B) the aggregate value of
consideration paid in connection with all such acquisitions (other than those
acquisitions disclosed in the Merger Agreement) including any funded
indebtedness assumed and any United Common Stock issued in connection with
such acquisitions (valued for purposes of this limitation at a price per share
equal to the price of United Common Stock on the date the agreement in respect
of any such acquisition is entered into) does not exceed $150 million, and the
aggregate value of consideration paid or payable for any one such acquisition
(other than those acquisitions disclosed pursuant to the Merger Agreement),
including any funded indebtedness assumed and any United Common Stock issued
in connection with such acquisition (valued for purposes of this limitation at
a price per share equal to the price of United Common Stock on the date the
agreement in respect of any such acquisition is entered into), does not exceed
$40 million. (For purposes of the foregoing, any contingent, royalty and
similar payments made in connection with acquisitions of businesses or assets
will be included as acquisition consideration and will be deemed to have a
value equal to their present value assuming an 8% per annum discount rate and
assuming that all amounts payable for the first five years following
consummation of the acquisitions (but not thereafter) are paid); (e) use all
reasonable efforts to preserve intact their respective business organizations
and goodwill, keep available the services of their respective present officers
and key employees,
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preserve the goodwill and business relationships with customers and others
having business relationships with them and not engage in any action, directly
or indirectly, with the intent to adversely impact the transaction
contemplated by the Merger Agreement; (f) subject to restrictions imposed by
applicable law, confer with one or more representatives of USA Waste to report
operational matters of materiality and the general status of ongoing
operations; (g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice; provided,
however, that United and its subsidiaries shall in no event enter into or
amend any written employment agreement providing for annual base salary in
excess of $75,000 per annum; (h) not adopt, enter into or amend any pension or
retirement plan, trust or fund, except as required to comply with changes in
applicable law and not adopt, enter into or amend in any material respect any
bonus, profit sharing, compensation, stock option, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust, fund
or arrangement for the benefit or welfare of any employees or retirees
generally, other than in the ordinary course of business, except (i) as
contemplated by (c), above, (ii) as required to comply with changes in
applicable law, (iii) to increase the number of shares of United Common Stock
available for grant under United's 1992 Stock Option Plan, as amended, and
United's 1992 Disinterested Director Stock Option Plan, as amended, (iv) any
of the foregoing involving any such then existing plans, agreements, trusts,
funds or arrangements of any company acquired after the date hereof or (v) as
required pursuant to an existing contractual arrangement or agreement; (i) use
commercially reasonable efforts to maintain with financially responsible
insurance companies insurance on its tangible assets and its businesses in
such amounts and against such risks and losses as are consistent with past
practice; and (j) not make, change or revoke any material tax election or make
any material agreement or settlement regarding taxes with any taxing
authority. Notwithstanding the foregoing, United will not (A) acquire or agree
to acquire any assets or business if such acquisition or agreement may
reasonably be expected to delay the consummation of the Merger, (B) acquire or
agree to acquire any assets or businesses if such assets or businesses are not
in industries in which United currently operates, unless such assets or
businesses are acquired incidental to an acquisition of businesses or assets
that are in industries in which United currently operates and it is reasonable
to acquire such incidental businesses or assets, or (C) acquire or agree to
acquire all or substantially all of the business, assets or properties or
capital stock of any entity with securities registered under the Securities
Act or the Exchange Act.
Pursuant to the Merger Agreement, USA Waste has agreed that, after the date
of the Merger Agreement and prior to the Closing Date or earlier termination
of the Merger Agreement, and except as otherwise agreed to in writing by
United, it shall, and shall cause each of its subsidiaries to: (a) conduct
their respective businesses in the ordinary and usual course of business and
consistent with past practice; (b) not (i) amend or propose to amend their
respective charters (except for any amendments by USA Waste of its Certificate
of Incorporation to increase the number of authorized shares of USA Waste
Common Stock so as to be able to consummate the Merger) or bylaws, (ii) split,
combine or reclassify (whether by stock dividend or otherwise) their
outstanding capital stock, or (iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except for the
payment of dividends or distributions to USA Waste by a wholly-owned
subsidiary of USA Waste; (c) not issue, sell, pledge, or dispose of, or agree
to issue, sell, pledge or dispose of, any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of their capital
stock of any class or any debt or equity securities convertible into or
exchangeable for such capital stock, except that (i) USA Waste may issue
shares upon conversion of convertible securities and exercise of options, (ii)
USA Waste may issue options with an exercise price per share of USA Waste
Common Stock no less than the fair market value of a share of USA Waste Common
Stock on the date of the grant thereof (and shares upon exercise of such
options) pursuant to its employee stock option plans in effect on the date of
the Merger Agreement with respect to up to an aggregate of 500,000 shares of
USA Waste Common Stock and (iii) USA Waste may issue shares of capital stock
(or warrants or options to acquire capital stock) in connection with
acquisitions of assets or businesses pursuant to the proviso set forth in
(d)(vii) below; (d) not (i) incur or become contingently liable with respect
to any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business or borrowings under the existing credit facilities
of USA Waste or any of its subsidiaries, (B) borrowings to refinance existing
indebtedness on terms which are reasonably acceptable to United or (C) as set
forth in the proviso in (d)(vii) below, (ii) redeem, purchase, acquire or
offer to purchase or acquire any shares of its capital
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stock or any options, warrants or rights to acquire any of its capital stock,
or any security convertible into or exchangeable for its capital stock, (iii)
take any action which would jeopardize the treatment of the Merger as a
pooling of interests under Accounting Principles Board Opinion No. 16, (iv)
take or fail to take any action which action or failure to take action would
cause USA Waste or its stockholders to recognize gain or loss for federal
income tax purposes as a result of the consummation of the Merger or would
otherwise cause the merger not to qualify as a reorganization under Section
368(a) of the Code, (v) pledge or encumber any material assets or businesses
other than pledges or encumbrances pursuant to existing credit facilities,
(vi) make any acquisition of any assets or businesses other than expenditures
for current assets in the ordinary course of business and expenditures for
fixed or capital assets in the ordinary course of business and other than as
set forth in the proviso in (d)(vii) below, or (vii) enter into any binding
contract, agreement, commitment or arrangement with respect to any of the
foregoing; provided that, notwithstanding the foregoing (other than
subsections (iii) and (iv) of this clause (d)), USA Waste shall not be
prohibited from acquiring any assets or businesses or incurring or assuming
indebtedness in connection with acquisitions of assets or businesses so long
as (A) such acquisitions are otherwise disclosed in the Merger Agreement, or
(B) the aggregate value of consideration paid in connection with all such
acquisitions (other than acquisitions otherwise disclosed in the Merger
Agreement), including any funded indebtedness assumed and any USA Waste Common
Stock issued in connection with such acquisitions (valued for purposes of this
limitation at a price per share equal to the price of USA Waste Common Stock
on the date the agreement in respect of any such acquisition is entered into)
does not exceed $375 million and the aggregate value of consideration paid or
payable for any one such acquisition (other than acquisitions otherwise
disclosed in the Merger Agreement), including any funded indebtedness assumed
and any USA Waste Common Stock issued in connection with such acquisition
(valued for purposes of this limitation at a price per share equal to the
price of USA Waste Common Stock on the date the agreement in respect of any
such acquisition is entered into), does not exceed $100 million. (For purposes
of the foregoing, any contingent, royalty and similar payments made in
connection with acquisitions of businesses or assets will be included as
acquisition consideration and will be deemed to have a value equal to their
present value assuming an 8% per annum discount rate and assuming that all
amounts payable for the first five years following consummation of the
acquisitions (but not thereafter) are paid); (e) use all reasonable efforts to
preserve intact their respective business organizations and goodwill, keep
available the services of their respective present officers and key employees,
and preserve the goodwill and business relationships with customers and others
having business relationships with them and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by the Merger Agreement; (f) subject to restrictions imposed by
applicable law, confer with one or more representatives of United to report
operational matters of materiality and the general status of ongoing
operations; and (g) use commercially reasonable efforts to maintain with
financially responsible insurance companies insurance on its tangible assets
and its businesses in such amounts and against such risks and losses as are
consistent with past practice. Notwithstanding anything in the Merger
Agreement to the contrary, USA Waste will not (A) acquire or agree to acquire
any assets or businesses if such acquisition or agreement may reasonably be
expected to delay the consummation of the Merger; (B) acquire or agree to
acquire any assets or businesses if such assets or businesses are not in
industries in which USA Waste currently operates, unless such assets or
businesses are acquired incidental to an acquisition of businesses or assets
that are in industries in which USA Waste currently operates and it is
reasonable to acquire such incidental businesses or assets in connection with
such acquisition; and (C) acquire or agree to acquire all or substantially all
of the business, assets, properties or capital stock of any entity with
securities registered under the Securities Act or the Exchange Act.
NO SOLICITATION OF ACQUISITION TRANSACTIONS
The Merger Agreement provides that after the date of the Merger Agreement
and prior to the Effective Time or earlier termination of the Merger
Agreement, United shall not, and shall not permit any of its subsidiaries to,
initiate, solicit, negotiate, encourage or provide confidential information to
facilitate, and United shall, and shall use its reasonable efforts to cause
any officer, director or employee of United, or any attorney, accountant,
investment banker, financial advisor or any other agent retained by it or any
of its subsidiaries, not to initiate, solicit, negotiate, encourage or provide
non-public or confidential information to facilitate, any Acquisition
Transaction; provided, however, that (i) United may, in response to a Superior
Proposal, furnish (subject to the
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execution of a confidentiality agreement substantially similar to the
confidentiality provisions of the Merger Agreement), confidential or non-
public information to a Potential Acquirer and negotiate with such Potential
Acquirer if the Board of Directors of United, after consulting with its
outside legal counsel, determines in good faith that the failure to provide
such confidential or non-public information to or to negotiate with such
Potential Acquirer would be reasonably likely to constitute a breach of its
fiduciary duty to its stockholders and (ii) United's Board of Directors may
take and disclose to United's stockholders a position contemplated by Rule
14e-2 under the Exchange Act. The Merger Agreement requires that United
immediately notify USA Waste after receipt of any Acquisition Proposal,
indication of interest or request for non-public information relating to
United or its subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of United or any subsidiary by any
person or entity that informs the Board of Directors of United or such
subsidiary that it is considering making, or has made, an Acquisition
Proposal. Such notice to USA Waste shall be made orally and in writing and
shall indicate in reasonable detail the identity of the offeror and the terms
and conditions of such proposal, inquiry or contact.
The Merger Agreement also provides that after the date of the Merger
Agreement and prior to the Effective Time or the earlier termination of the
Merger Agreement, USA Waste shall promptly notify United after receipt of any
proposal or offer to acquire all or any substantial part of the businesses,
properties or capital stock of USA Waste, whether by merger, purchase of
assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof (a "USA Waste Acquisition Transaction"),
and shall indicate in reasonable detail the identity of the offeror and the
terms and conditions of such proposal or offer.
CONDUCT OF THE BUSINESS OF THE COMBINED COMPANIES FOLLOWING THE MERGER
Following the Merger, United will be a wholly owned subsidiary of USA Waste.
Pursuant to the Merger Agreement, the Certificate of Incorporation and the
Bylaws of United, as in effect immediately prior to the Effective Time, will
be the Certificate of Incorporation and Bylaws of the Surviving Corporation
after the Effective Time, and (subject to certain provisions of the Merger
Agreement) thereafter may be amended in accordance with their terms as
provided in the DGCL, except that no amendment shall be made to, nor shall any
provision be included which is inconsistent with, the provisions of the
Certificate of Incorporation of United relating to indemnification of
directors and officers and elimination of personal liability of directors for
breach of fiduciary duty to the fullest extent permitted by the DGCL.
TERMINATION OR AMENDMENT
The Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after approval by the stockholders of USA Waste or
United, by the mutual written consent of United and USA Waste or as follows:
(a) by either USA Waste or United (i) upon a material breach of a
representation or warranty of the Non-Terminating Party contained in the
Merger Agreement which has not been cured in all material respects and which
has caused certain conditions to the obligation of the Terminating Party to
effect the Merger to be incapable of being satisfied by the Termination Date,
(ii) if the Merger is not completed by October 31, 1997 (unless due to a delay
or default on the part of the Terminating Party), (iii) if the Merger is
enjoined by a final, unappealable court order not entered at the request or
with the support of the Terminating Party and if the Terminating Party shall
have used reasonable efforts to prevent the entry of such order, (iv) if the
Non-Terminating Party (A) fails to perform in any material respect any of its
material covenants in the Merger Agreement and (B) does not cure such default
in all material respects within 30 days after written notice of such default
specifying such default in reasonable detail is given to the Non-Terminating
Party by the Terminating Party, or (v) if the stockholders of the Non-
Terminating Party fail to approve the Merger at a duly held meeting of such
stockholders called for such purpose or any adjournment or postponement
thereof, (b) by United (i) if United receives a Superior Proposal, resolves to
accept such Superior Proposal, and has given USA Waste two days' prior written
notice of its intention to terminate pursuant to such provision (provided that
such termination shall not be effective until such time as any termination
fees required to be paid by United pursuant to the Merger Agreement have been
received by USA Waste) or (ii) if (A) a tender or exchange offer is commenced
by a Potential Acquirer (excluding any affiliate of United or any group of
which any affiliate of United is a member)
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<PAGE>
for all outstanding shares of United Common Stock, (B) the Board of Directors
of United determines, in good faith and after consultation with an independent
financial advisor, that such offer constitutes a Superior Proposal and
resolves to accept such Superior Proposal or recommend to the stockholders
that they tender their shares in such tender or exchange offer and (C) United
shall have given USA Waste two days' prior written notice of its intention to
terminate pursuant to this provision (provided that such termination shall not
be effective until such time as any termination fees required to be paid by
United pursuant to the Merger Agreement have been received by USA Waste), and
(c) by USA Waste if the Board of Directors of United shall have resolved to
accept a Superior Proposal or shall have recommended to the stockholders of
United that they tender their shares in a tender or exchange offer commenced
by a third party (excluding any affiliate of USA Waste or any group of which
any affiliate of USA Waste is a member), provided that USA Waste may not so
terminate until three days after receipt of the notice of United of such
Superior Proposal. In the event of termination of the Merger Agreement
pursuant to its terms by either USA Waste or United, the Merger Agreement
shall forthwith become void and there shall be no liability or further
obligation on the part of United, USA Waste, Acquisition or their respective
officers or directors (except for certain obligations of the parties regarding
confidential information, return of non-public information following
termination, expenses and fees payable in connection with the Merger Agreement
and/or the termination thereof, assignment of the Agreement and the governing
law applicable to the Agreement, all of which shall survive the termination.
The Merger Agreement may not be amended except by action taken by the
parties' respective Boards of Directors or duly authorized committees thereof
and then only by an instrument in writing signed on behalf of each party and
in compliance with applicable law. Such amendment may take place at any time
prior to the Closing Date, and, subject to applicable law, whether before or
after approval by the stockholders of United, USA Waste or Acquisition.
TERMINATION FEES
United and USA Waste have each agreed to pay a termination fee to the other
party should certain of the termination rights described in "--Termination or
Amendment" above be exercised under certain circumstances. United has agreed
to pay USA Waste a fee equal to $50 million if (i) United terminates the
Merger Agreement pursuant to clauses (b)(i) or (b)(ii) of "--Termination or
Amendment" above or (ii) USA Waste terminates the Merger Agreement as
described in clause (c) of "--Termination or Amendment" above. In addition,
United has agreed to pay USA Waste a fee equal to $1 million if USA Waste
terminates the Merger Agreement pursuant to clause (a)(iv) of "--Termination
or Amendment" above. USA Waste has agreed to pay United a fee equal to $50
million if (i) the Merger Agreement is terminated for any reason at a time at
which United was not in material breach of its covenants contained in the
Merger Agreement and was entitled to terminate pursuant to clause (a)(v) of
"--Termination or Amendment" above, (ii) prior to the time of such termination
a proposal relating to a USA Waste Acquisition Transaction has been made, and
(iii) on or prior to the sixth month anniversary of the termination of the
Merger Agreement (x) USA Waste or any of its subsidiaries or affiliates enters
into an agreement or letter of intent (or resolves or announces an intention
to do) with respect to a USA Waste Acquisition Transaction or a merger,
acquisition or other business combination involving a person, entity or group
if such person, entity or group (or any member of such group, or any affiliate
of the foregoing) made a proposal with respect to a USA Waste Acquisition
Transaction on or after the date of, and prior to the termination of, the
Merger Agreement and such USA Waste Acquisition Transaction is consummated or
(y) a USA Waste Acquisition Transaction shall otherwise occur. Such fee shall
be payable upon the first occurrence of any such event. In addition, USA Waste
has agreed to pay United a fee equal to $1 million if United terminates the
Merger Agreement pursuant to clause (a)(iv) of "--Termination or Amendment,"
above.
EXPENSES
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such expenses, except that those expenses
incurred in connection with printing and filing this Joint Proxy Statement and
Prospectus shall be shared equally by USA Waste and United.
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INDEMNIFICATION
The Merger Agreement provides that the indemnification provisions of the
Certificate of Incorporation and Bylaws of the Surviving Corporation as in
effect at the Effective Time shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the
Effective Time were directors, officers, employees or agents of United. The
Merger Agreement further provides that USA Waste shall assume, be jointly and
severally liable for, and honor, and shall cause the Surviving Corporation to
honor, in accordance with their respective terms each of the indemnification
agreements listed in the Merger Agreement.
The Merger Agreement also provides that, without limiting the foregoing,
after the Effective Time, each of USA Waste and the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and
hold harmless, each present and former director, officer, employee and agent
of United or any of its subsidiaries (each, together with such person's heirs,
executors or administrators, an "indemnified Party " and collectively, the
"indemnified Parties ") against any costs or expenses (including attorneys
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any actual or threatened claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of, relating to or in connection with any action or
omission occurring or alleged to occur prior to the Effective Time (including,
without limitation, acts or omissions in connection with such persons serving
as an officer, director or other fiduciary in any entity if such service was
at the request or for the benefit of United) or arising out of or pertaining
to the transactions contemplated by the Merger Agreement. In the event of any
such actual or threatened claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) United or USA Waste
and the Surviving Corporation, as the case may be, shall pay the reasonable
fees and expenses of counsel selected by the indemnified Parties, which
counsel shall be reasonably satisfactory to USA Waste and the Surviving
Corporation, promptly after statements therefor are received and shall pay all
other reasonable expenses in advance of the final disposition of such action,
(ii) USA Waste and the Surviving Corporation will cooperate and use all
reasonable efforts to assist in the vigorous defense of any such matter, and
(iii) to the extent any determination is required to be made with respect to
whether an indemnified Party's conduct complies with the standards set forth
under the DGCL and USA Waste's or the Surviving Corporation's respective
charters or Bylaws, such determination shall be made by independent legal
counsel acceptable to USA Waste or the Surviving Corporation, as the case may
be, and the indemnified Party; provided, however, that neither USA Waste nor
the Surviving Corporation shall be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld) and,
provided further, that if USA Waste or the Surviving Corporation advances or
pays any amount to any person under this paragraph and if it shall thereafter
be finally determined by a court of competent jurisdiction that such person
was not entitled to be indemnified under the Merger Agreement for all or any
portion of such amount, to the extent required by law, such person shall repay
such amount or such portion thereof, as the case may be, to USA Waste or the
Surviving Corporation, as the case may be. The indemnified Parties as a group
may not retain more than one law firm to represent them with respect to each
matter unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
indemnified Parties.
In the event the Surviving Corporation or USA Waste or any of their
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or USA Waste shall assume the indemnification obligations of the
Surviving Corporation or USA Waste, as the case may be, set forth in the
Merger Agreement.
The Merger Agreement requires that for a period of six years after the
Effective Time, USA Waste shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by United
and its subsidiaries (provided that USA Waste may substitute therefor policies
of at least the same coverage and amounts containing terms and conditions that
are no less advantageous to the indemnified Parties and which coverages and
amounts shall be no less than the coverages and amounts provided at that time
for
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USA Waste's directors and officers) with respect to matters arising on or
before the Effective Time. USA Waste shall pay all reasonable expenses,
including reasonable attorneys' fees, that may be incurred by any indemnified
Party in enforcing the indemnity and other obligations provided in the
indemnification provisions of the Merger Agreement.
The rights of each indemnified Party under the Merger Agreement are in
addition to, and not in limitation of, any other rights such indemnified Party
may have under the charter or bylaws of United, any indemnification agreement,
under the DGCL or otherwise. The indemnification provisions of the Merger
Agreement shall survive the consummation of the Merger and expressly are
intended to benefit each of the indemnified Parties.
OTHER AGREEMENTS
The Merger Agreement provides that, at the Closing, USA Waste will offer to
enter into Consulting Agreements with each of Bradley S. Jacobs, John M. Milne
and Michael J. Nolan, such agreements to be effective at the Effective Time,
and it is expected that such individuals will enter into such Consulting
Agreements. Pursuant to the Consulting Agreements, USA Waste will agree to pay
annual compensation of $450,000 to Bradley Jacobs, annual compensation of
$300,000 to John Milne and annual compensation of $90,000 to Michael Nolan in
consideration of certain non-competition agreements of each Consultant and
each Consultant's performance of certain duties on USA Waste's behalf, in the
case of Messrs. Jacobs and Milne relating to identifying acquisitions and
market development prospects, negotiating such arrangements and leading and
directing related due diligence reviews, and in the case of Mr. Nolan,
relating to certain financial matters in connection with such acquisitions and
market development prospects.
The Consulting Agreements will contain non-competition provisions pursuant
to which each Consultant will agree not to, during the period of such
Consultant's engagement by or with USA Waste under his Consulting Agreement
(i) engage, within certain geographical limitations, in any solid waste
collection or disposal business in direct competition with United, USA Waste,
or any of their subsidiaries, or (ii) call upon any prospective acquisition
candidate in the solid waste collection or disposal business on such
Consultant's own behalf or on behalf of any competitor of USA Waste or any of
its subsidiaries, which candidate was called upon by either USA Waste or
United (including its subsidiaries) for the purpose of acquiring such entity.
Notwithstanding the above, each Consultant will not be prohibited from
acquiring, or acting as an analyst or advisor relating to the acquisition, as
an investment, of less than a control block of the capital stock of a business
in competition with USA Waste or any of its subsidiaries whose stock is traded
on a national securities exchange or over the counter.
The term of each Consulting Agreement entered into will be five years, and
each Consulting Agreement will be terminable by USA Waste for good cause.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF USA WASTE AND UNITED
GENERAL
As a result of the Merger, holders of United Common Stock will become
stockholders of USA Waste, and the rights of such former United stockholders
will thereafter be governed by the USA Waste Certificate, the USA Waste By-
laws and the DGCL. The rights of holders of United Common Stock are currently
governed by the United Amended and Restated Certificate of Incorporation (the
"United Certificate"), the United Bylaws and the DGCL. The following summary,
which does not purport to be a complete description of the differences between
the rights of the stockholders of USA Waste and the rights of the stockholders
of United, sets forth certain differences between the USA Waste Certificate
and the USA Waste By-laws, on the one hand, and the United Certificate and the
United Bylaws, on the other. This summary is qualified in its entirety by
reference to the full text of each of these documents and the DGCL. For more
information on how such documents may be obtained, see "Available
Information."
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CLASSIFIED BOARD OF DIRECTORS
The DGCL permits, but does not require, a classified board of directors. The
United Board of Directors is not classified; all of its directors serve one-
year terms and are subject to election at each annual meeting of the
stockholders of United. The USA Waste Board of Directors is classified; it is
divided into three classes, with each class elected for a term of three years
and consisting, as nearly as possible, of one-third of the total number of
directors on the Board. At each annual meeting of USA Waste stockholders, one
class of directors is elected for a three-year term.
The fact that the USA Waste Board of Directors is classified may have the
effect of making it more difficult to change the composition of the Board, and
thus may make effecting a change of control of USA Waste more difficult. At
least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in the majority of a classified board. Such a
delay may help ensure that incumbent directors, if confronted by a holder
attempting to force a proxy contest, a tender offer or other extraordinary
corporate transaction, would have sufficient time to review the proposal as
well as any available alternatives to the proposal and to act in what they
believe to be the best interests of stockholders. On the other hand, the
classification of directors may delay, defer or prevent a takeover attempt
that a stockholder might consider in its best interest.
NUMBER OF DIRECTORS; REMOVAL OF DIRECTORS; FILLING OF VACANCIES ON THE BOARD
OF DIRECTORS
The USA Waste Certificate and the USA Waste By-laws provide that, subject to
the rights of holders of any class or series of USA Waste Preferred Stock to
elect additional directors under specified circumstances, the number of
directors will be fixed from time to time by resolution of the USA Waste Board
of Directors; provided, however, that unless approved by at least two-thirds
of the incumbent directors, the number of directors which shall constitute the
whole USA Waste Board of Directors shall be no fewer than three and no more
than nine. The United Bylaws provide that the number of directors will be
fixed by the United Board of Directors. The Board of Directors of USA Waste
currently consists of 12 members, and the Board of Directors of United
currently consists of six members.
The USA Waste Certificate and the USA Waste By-laws provide that, subject to
the rights of holders of any class or series of USA Waste Preferred Stock to
elect additional directors under specified circumstances, any director may be
removed at any time, with cause, by its stockholders, but only upon the
affirmative vote of two-thirds of the total number of votes of the then
outstanding shares of capital stock of USA Waste; provided, that the notice of
the meeting at which such action is taken contained notice of such proposal to
remove a director. The United By-laws provide that, except as expressly
provided otherwise by law, any or all of the directors may be removed at any
time by vote of the stockholders.
The United Bylaws provide that vacancies in United's Board of Directors that
arise for any reason may be filled by a majority vote of the directors of
United in office (although less than a quorum), or by the stockholders of
United at any meeting thereof. The USA Waste Certificate and the USA Waste By-
laws provide that vacancies in USA Waste's Board of Directors, however caused,
and newly created directorships will be filled solely by a majority vote of
the USA Waste directors then in office, whether or not a quorum.
SPECIAL MEETINGS OF STOCKHOLDERS
The United Certificate and United Bylaws provide that special meetings of
the stockholders of United, for any purpose or purposes, may be called by the
Chairman, or by resolution of the Board of Directors, or at the request in
writing of stockholders owing not less than 40% of the entire capital stock of
United issued and outstanding and entitled to vote. The USA Waste By-laws
provide that special meetings of the stockholders of USA Waste, for any
purpose or purposes, may be called by the Chairman of the Board (if any), by
the Chief Executive Officer, or by written order of a majority of directors,
but such special meetings may not be called by any other person or persons.
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STOCKHOLDER NOMINATIONS AND PROPOSALS
The USA Waste By-laws establish advance notice procedures with regard to the
nomination (other than by or at the direction of the Board of Directors of USA
Waste or a committee thereof) of candidates for election as directors and with
regard to certain matters to be brought before an annual or special meeting of
the stockholders of USA Waste. These procedures provide that the notice of
proposed stockholder nominations for the election of directors must be timely
given in writing to the Secretary or the Board of Directors of USA Waste prior
to the meeting at which directors are to be elected. The procedures also
provide that at any meeting of the stockholders, and subject to any other
applicable requirements, only such business may be conducted as has been
brought before the meeting by, or at the direction of the Board of Directors
or by a stockholder who has timely given prior written notice to the Secretary
or the Board of Directors of USA Waste of such stockholder's intention to
bring such business before the meeting. To be timely, a notice given with
respect to the nomination of directors or any other matter to be considered at
an annual meeting of the stockholders must be received at the principal
executive offices of USA Waste not less than 120 days nor more than 150 days
in advance of the date on which USA Waste's proxy statement was released to
its stockholders in connection with the previous year's annual meeting of the
stockholders; provided, however, that if no annual meeting was held the
previous year or the date of the annual meeting has been changed by more than
30 days from the date contemplated at the time of the previous year's proxy
statement, such notice must be received by USA Waste at least 80 days prior to
the date that USA Waste intends to distribute its proxy statement with respect
to such annual meeting. To be timely, a notice given with respect to a special
meeting of the stockholders must be received at the principal executive
offices of USA Waste not less than 60 days nor more than 90 days prior to the
meeting; provided, however, that if less than 70 days' notice or prior public
disclosure of the meeting date is given or made by USA Waste, such notice must
be received by USA Waste not later than the fifth day following the day on
which the notice was mailed or such public disclosure was made. The notice
must contain certain specified information specified in the USA Waste By-laws.
The USA Waste By-laws further provide that USA Waste is not obligated to
include any stockholder proposal in its proxy materials if the Board of
Directors of USA Waste believes the proponent thereof has not complied with
Sections 13 and 14 of the Exchange Act and the rules and regulations
thereunder and that USA Waste is not required to include in its proxy
materials any stockholder proposal not required to be included therein under
the Exchange Act and the rules and regulations thereunder.
The United Bylaws do not provide for any special advance notice provisions
with regard to the nomination of candidates for election as directors or with
regard to matters to be brought before an annual or special meeting of the
stockholders of United.
AMENDMENT OF CERTAIN CHARTER PROVISIONS
The USA Waste Certificate requires the affirmative vote of the holders of at
least 66 2/3% of the outstanding shares of capital stock entitled to vote for
the approval of any amendment of the article of the USA Waste Certificate
providing for a classified Board of Directors, and then only if the notice of
the meeting at which such proposal is acted upon provides notice of such
proposed amendment.
The United Certificate of Incorporation does not provide for any special
charter amendment procedures, other than as provided in the DGCL.
VOTING
The USA Waste By-laws provide that all voting by stockholders must be taken
by written ballot. The United Bylaws provide that the vote upon any matter
before a meeting of stockholders need not be by ballot.
AMENDMENT OF BYLAWS
The United Bylaws may be amended or repealed, or new or additional Bylaws
adopted by the Board of Directors of United or by the vote of the stockholders
of United entitled to vote in the election of directors. The
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USA Waste Certificate and the USA Waste By-laws provide that the Board of
Directors is expressly authorized to adopt, amend or repeal the USA Waste By-
laws, or adopt new bylaws, without any action on the part of the stockholders
of USA Waste; provided, however, that no such adoption, amendment or repeal
shall be valid with respect to bylaw provisions which have been adopted,
amended or repealed by the stockholders of USA Waste; and further provided,
that bylaws adopted or amended by the directors of USA Waste and any powers
thereby conferred may be amended, altered or repealed by the stockholders of
USA Waste.
AUTHORIZED CAPITAL STOCK
The USA Waste Certificate provides that USA Waste has the authority to issue
300,000,000 shares of USA Waste Common Stock and 10,000,000 shares of its
preferred stock, par value $.01 per share (the "USA Waste Preferred Stock").
At the USA Waste Annual Meeting, the stockholders of USA Waste are being asked
to approve an amendment to the USA Waste Certificate to increase the number of
authorized shares of USA Waste Common Stock to 500,000,000, to be effective
only if the Merger is consummated. No shares of USA Waste Preferred Stock are
outstanding. The United Certificate provides that United has the authority to
issue 75,000,000 shares of United Common Stock, and 5,000,000 shares of its
preferred stock, par value $.001 per share (the "United Preferred Stock"). No
shares of United Preferred Stock are outstanding.
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USA WASTE AND UNITED
COMBINED UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS
The following combined unaudited pro forma condensed financial statements
are based upon the historical consolidated financial statements of USA Waste
and of United and should be read in conjunction with those consolidated
financial statements and related notes. Such financial statements, as
previously filed with the Commission under the Exchange Act are incorporated
by reference in this Joint Proxy Statement and Prospectus. These combined
unaudited pro forma condensed financial statements are not necessarily
indicative of the operating results that would have been achieved had the
Merger been consummated as of the beginning of the periods presented and
should not be construed as representative of future operating results. These
combined unaudited pro forma condensed financial statements give effect to the
Merger by combining the results of operations of USA Waste and United using
the "pooling of interests" method of accounting as if the companies had been
combined since their inception.
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USA WASTE AND UNITED
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1997
The following combined unaudited pro forma condensed balance sheet presents
the combined financial position of USA Waste and United as of March 31, 1997.
Such unaudited pro forma combined information is based on the historical
unaudited condensed consolidated balance sheets of USA Waste and United as of
March 31, 1997, after giving effect to the Merger using the "pooling of
interests" method of accounting and to the pro forma adjustments as described
in the notes to combined unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
PRO FORMA COMBINED
ASSETS USA WASTE UNITED ADJUSTMENTS PRO FORMA
------ ---------- -------- ----------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE
AMOUNTS)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents...... $ 23,441 $ 75,951 $ -- $ 99,392
Accounts receivable, net....... 266,782 56,279 -- 323,061
Notes and other receivables.... 32,636 -- -- 32,636
Deferred income taxes.......... 34,666 10,059 -- 44,725
Prepaid expenses and other..... 35,306 17,372 -- 52,678
---------- -------- -------- ----------
Total current assets.......... 392,831 159,661 -- 552,492
Notes and other receivables..... 45,399 -- -- 45,399
Property and equipment, net..... 2,260,151 405,093 -- 2,665,244
Excess of cost over net assets
of acquired businesses, net.... 721,318 298,415 -- 1,019,733
Other intangible assets, net.... 86,253 4,914 -- 91,167
Other assets.................... 180,843 36,666 -- 217,509
---------- -------- -------- ----------
Total assets.................. $3,686,795 $904,749 $ -- $4,591,544
========== ======== ======== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable............... $ 110,818 $ 21,304 $ -- $ 132,122
Accrued liabilities............ 152,356 41,983 (31,112)(a) 213,227
50,000 (b)
Deferred revenues.............. 27,992 12,432 -- 40,424
Current maturities of long-term
debt.......................... 31,025 5,584 -- 36,609
---------- -------- -------- ----------
Total current liabilities..... 322,191 81,303 18,888 422,382
Long-term debt, less current
maturities..................... 1,423,358 272,858 -- 1,696,216
Deferred income taxes........... 93,942 40,532 -- 134,474
Closure, post-closure and other
liabilities.................... 178,356 60,306 -- 238,662
---------- -------- -------- ----------
2,017,847 454,999 18,888 2,491,743
---------- -------- -------- ----------
Commitments and contingencies... -- -- -- --
Stockholders' equity:
Preferred stock:
USA Waste: $1.00 par value;
10,000,000 shares authorized;
none issued.................. -- -- -- --
United: $.001 par value;
5,000,000 shares authorized;
none issued.................. -- -- -- --
Common stock:
USA Waste: $.01 par value;
300,000,000 shares
authorized; historical
154,133,595 shares
(202,322,536 pro forma
shares) issued and
outstanding.................. 1,541 -- 19 (a) 2,023
463 (c)
United: $.001 par value,
75,000,000 shares authorized;
43,029,321 issued and
outstanding................... -- 43 (43)(c) --
Additional paid-in capital..... 1,720,326 370,768 31,093 (a) 2,121,767
(420)(c)
Retained earnings (accumulated
deficit)...................... (36,522) 78,939 (50,000)(b) (7,583)
Foreign currency translation
adjustment.................... (15,913) -- -- (15,913)
Less treasury stock at cost,
23,485 shares................. (484) -- -- (484)
---------- -------- -------- ----------
Total stockholders' equity.... 1,668,948 449,750 (18,888) 2,099,810
---------- -------- -------- ----------
Total liabilities and
stockholders' equity......... $3,686,795 $904,749 $ -- $4,591,544
========== ======== ======== ==========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
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USA WASTE AND UNITED
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the three months ended March 31, 1997 was prepared based on the historical
statement of operations of USA Waste and United for such period after giving
effect to the Merger using the "pooling of interests" method of accounting and
to the pro forma adjustments described in the notes to combined unaudited pro
forma condensed financial statements.
<TABLE>
<CAPTION>
USA WASTE UNITED
THREE MONTHS THREE MONTHS
ENDED ENDED PRO FORMA COMBINED
MARCH 31, 1997 MARCH 31, 1997 ADJUSTMENTS PRO FORMA
-------------- -------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues...... $364,905 $95,580 $ -- $460,485
-------- ------- ------ --------
Costs and expenses:
Operating (exclusive
of depreciation and
amortization shown
below)............... 187,723 61,862 (8,267)(d) 241,318
General and
administrative....... 42,794 15,202 (2,322)(d) 55,674
Depreciation and
amortization......... 45,589 -- 10,589 (d) 56,178
-------- ------- ------ --------
276,106 77,064 -- 353,170
-------- ------- ------ --------
Income from operations.. 88,799 18,516 -- 107,315
-------- ------- ------ --------
Other income (expense):
Interest expense...... (11,957) (4,141) -- (16,098)
Interest income....... 1,565 -- 488 (f) 2,053
Other income
(expense), net....... 3,472 662 (488)(f) 3,646
-------- ------- ------ --------
(6,920) (3,479) -- (10,399)
-------- ------- ------ --------
Income before income
taxes.................. 81,879 15,037 -- 96,916
Provision for income
taxes.................. 32,752 6,202 -- 38,954
-------- ------- ------ --------
Income available to
common shareholders.... $ 49,127 $ 8,835 $ -- $ 57,962
======== ======= ====== ========
Earnings per common
share.................. $ 0.32 $ 0.21 $ 0.29 (g)
======== ======= ========
Weighted average number
of common and common
equivalent shares
outstanding............ 159,472 42,707 3,203 (g) 205,382
======== ======= ====== ========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
70
<PAGE>
USA WASTE AND UNITED
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1996 was prepared based on the historical
statement of operations of USA Waste and United for such year after giving
effect to the Merger using the "pooling of interests" method of accounting and
to the pro forma adjustments described in the notes to combined unaudited pro
forma condensed financial statements.
<TABLE>
<CAPTION>
USA WASTE UNITED
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA COMBINED
1996 1996 ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues...... $1,313,388 $335,743 $ -- $1,649,131
---------- -------- ------- ----------
Costs and expenses:
Operating (exclusive
of depreciation and
amortization shown
below)............... 704,917 206,786 (30,302)(d) 881,401
General and
administrative....... 160,539 53,106 (7,574)(d) 200,101
(5,970)(e)
Depreciation and
amortization......... 153,168 -- 37,876 (d) 191,044
Merger costs.......... 120,656 -- 5,970 (e) 126,626
Unusual items......... 63,800 -- -- 63,800
---------- -------- ------- ----------
1,203,080 259,892 -- 1,462,972
---------- -------- ------- ----------
Income from operations.. 110,308 75,851 -- 186,159
---------- -------- ------- ----------
Other income (expense):
Interest expense...... (45,547) (14,950) -- (60,497)
Interest income....... 5,267 -- 1,432 (f) 6,699
Other income
(expense), net....... 8,060 (252) (1,432)(f) 6,376
---------- -------- ------- ----------
(32,220) (15,202) -- (47,422)
---------- -------- ------- ----------
Income before income
taxes.................. 78,088 60,649 -- 138,737
Provision for income
taxes.................. 45,142 25,256 -- 70,398
---------- -------- ------- ----------
Income available to
common shareholders.... $ 32,946 $ 35,393 $ -- $ 68,339
========== ======== ======= ==========
Earnings per common
share.................. $ 0.24 $ 0.89 $ 0.37 (g)
========== ======== ==========
Weighted average number
of common and common
equivalent shares
outstanding............ 139,740 39,944 2,996 (g) 182,680
========== ======== ======= ==========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
71
<PAGE>
USA WASTE AND UNITED
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1995 was prepared based on the historical
statement of operations of USA Waste and United for such year after giving
effect to the Merger using the "pooling of interests" method of accounting and
to the pro forma adjustments described in the notes to combined unaudited pro
forma condensed financial statements.
<TABLE>
<CAPTION>
USA WASTE UNITED
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA COMBINED
1995 1995 ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues...... $987,705 $228,377 $ -- $1,216,082
-------- -------- ------- ----------
Costs and expenses:
Operating (exclusive
of depreciation and
amortization shown
below)............... 551,305 140,814 (20,002)(d) 672,117
General and
administrative....... 140,051 34,841 (4,306)(d) 169,686
(900)(e)
Depreciation and
amortization......... 119,570 -- 24,308 (d) 143,878
Merger costs.......... 25,639 -- 900 (e) 26,539
Unusual items......... 4,733 -- -- 4,733
-------- -------- ------- ----------
841,298 175,655 -- 1,016,953
-------- -------- ------- ----------
Income from operations.. 146,407 52,722 -- 199,129
-------- -------- ------- ----------
Other income (expense):
Interest expense:
Nonrecurring......... (10,994) -- -- (10,994)
Other................ (48,558) (10,061) -- (58,619)
Interest income....... 5,482 -- 1,200 (f) 6,682
Other income, net..... 5,143 948 (1,200)(f) 4,891
-------- -------- ------- ----------
(48,927) (9,113) -- (58,040)
-------- -------- ------- ----------
Income before income
taxes.................. 97,480 43,609 -- 141,089
Provision for income
taxes.................. 44,992 15,321 -- 60,313
-------- -------- ------- ----------
Net income.............. 52,488 28,288 -- 80,776
Preferred dividends..... -- 373 -- 373
-------- -------- ------- ----------
Income available to
common shareholders.... $ 52,488 $ 27,915 $ -- $ 80,403
======== ======== ======= ==========
Earnings per common
share.................. $ 0.46 $ 0.82 $ 0.53 (g)
======== ======== ==========
Weighted average number
of common and
common equivalent
shares outstanding..... 113,279 34,694 2,602 (g) 150,575
======== ======== ======= ==========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
72
<PAGE>
USA WASTE AND UNITED
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1994 was prepared based on the historical
statement of operations of USA Waste and United for such year after giving
effect to the Merger using the "pooling of interests" method of accounting and
to the pro forma adjustments described in the notes to combined historical
unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
USA WASTE UNITED
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA COMBINED
1994 1994 ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues...... $ 897,644 $146,043 $ -- $1,043,687
--------- -------- ------- ----------
Costs and expenses:
Operating (exclusive
of depreciation and
amortization shown
below)............... 520,255 88,612 (11,999)(d) 596,868
General and
administrative....... 138,819 22,527 (2,249)(d) 159,097
Depreciation and
amortization......... 112,860 -- 14,248 (d) 127,108
Merger costs.......... 3,782 -- -- 3,782
Unusual items......... 8,863 -- -- 8,863
--------- -------- ------- ----------
784,579 111,139 -- 895,718
--------- -------- ------- ----------
Income from operations.. 113,065 34,904 -- 147,969
--------- -------- ------- ----------
Other income (expense):
Shareholder litigation
settlement and other
related costs........ (79,400) -- -- (79,400)
Interest expense:
Nonrecurring........ (1,254) -- -- (1,254)
Other............... (47,678) (6,424) -- (54,102)
Interest income....... 4,670 -- 415 (f) 5,085
Other income, net..... 2,570 474 (415)(f) 2,629
--------- -------- ------- ----------
(121,092) (5,950) -- (127,042)
--------- -------- ------- ----------
Income (loss) before
income taxes........... (8,027) 28,954 -- 20,927
Provision for income
taxes.................. 1,015 7,944 -- 8,959
--------- -------- ------- ----------
Net Income (loss)....... (9,042) 21,010 -- 11,968
Preferred dividends..... 565 1,275 -- 1,840
--------- -------- ------- ----------
Income (loss) available
to common shareholders. $ (9,607) $ 19,735 $ -- $ 10,128
========= ======== ======= ==========
Earnings (loss) per
common share........... $ (0.09) $ 0.76 $ 0.08 (g)
========= ======== ==========
Weighted average number
of common and common
equivalent shares
outstanding............ 103,422 26,076 1,956 (g) 131,454
========= ======== ======= ==========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
73
<PAGE>
USA WASTE AND UNITED
NOTES TO COMBINED UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The combined unaudited pro forma condensed financial statements assume the
issuance of USA Waste Common Stock in exchange for all outstanding United
Common Stock. Such financial statements also assume that the Merger will be
accounted for using the "pooling of interests" method of accounting pursuant
to Opinion No. 16 of the Accounting Principles Board. The "pooling of
interests" method of accounting assumes that the combining companies have been
merged from their inception, and the historical financial statements for
periods prior to consummation of the Merger are restated as though the
companies had been combined from their inception.
Pursuant to the rules and regulations of the Commission, the combined
unaudited pro forma condensed statements of operations exclude the results of
operations associated with discontinued businesses, extraordinary items and
cumulative effects of accounting changes. In addition, the combined unaudited
pro forma condensed balance sheet includes an adjustment for estimated
nonrecurring costs directly related to the Merger which are expected to be
included in operations of USA Waste within the twelve months succeeding the
consummation of the Merger. Such costs are currently estimated to be
approximately $50 million.
Certain reclassifications have been made to the historical financial
statements of USA Waste and United to conform to the pro forma presentation.
Such reclassifications are not material to the combined unaudited pro forma
condensed financial statements.
2. PRO FORMA ADJUSTMENTS
(a) In connection with the Merger, it is anticipated that all outstanding
options to purchase United Common Stock will be cancelled in exchange for a
number of shares of USA Waste Common Stock having a market value equal to the
fair value of such options at the time of consummation of the Merger, as
determined by an independent third party. This adjustment reflects the assumed
issuance of 1,932,421 shares of USA Waste common stock to accomplish this
exchange. United will receive a tax deduction for the fair market value of the
shares issued, and the estimated resulting benefit of $31,112,000 (40% of the
estimated market value of the shares issued of $77,780,000) is reflected as a
reduction in accrued liabilities. The estimated tax benefit to be realized,
net of the par value of the stock issued, is reflected as an increase in
additional paid-in capital.
(b) Reflects a charge to stockholders' equity and an increase in accrued
liabilities for the estimated nonrecurring costs of $50,000,000 related to the
Merger. Actual nonrecurring merger costs may vary from such estimates.
(c) The stockholders' equity accounts have been adjusted to reflect the
assumed issuance of 46,256,520 shares of USA Waste Common Stock for all issued
and outstanding shares of United Common Stock (based on the exchange ratio of
1.075 shares of USA Waste Common Stock for each share of United Common Stock
outstanding as of March 31, 1997). The actual number of shares of USA Waste
Common Stock to be issued pursuant to the Merger will be based upon the number
of shares of United Common Stock issued and outstanding immediately prior to
the consummation of the Merger.
(d) Adjustments have been made to reclassify United's depreciation and
amortization from operating expenses and general and administrative expenses
to a separate line item to conform to the presentation of USA Waste as if the
companies had been combined since their inception.
(e) Adjustments have been made to reclassify United's merger costs from
general and administrative expenses to a separate line item to conform to the
presentation of USA Waste as if the companies had been combined since their
inception.
74
<PAGE>
(f) Adjustments have been made to reclassify United's interest income from
other income (expense), net to a separate line item to conform to the
presentation of USA Waste as if the companies had been combined since their
inception.
(g) Pro forma earnings per common share for each period are based on the
combined weighted average number of common and common equivalent shares
outstanding, after giving effect to the issuance of 1.075 shares of USA Waste
Common Stock for each share of United Common Stock. Fully diluted earnings per
common share are considered equal to primary earnings (loss) per common share
for all periods presented because the addition of potentially dilutive
securities that are not common stock equivalents would have been either
antidilutive or not material.
75
<PAGE>
USA WASTE AND UNITED
SUPPLEMENTAL INFORMATION RELATING
TO THE COMBINED UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS
The combined unaudited pro forma condensed financial information as of and
for the three months ended March 31, 1997, and for the year ended December 31,
1996, gives effect to certain pro forma adjustments as described in the notes
to such information. The Supplemental Information--Pro Forma reflects, in
addition to the pro forma adjustments in the combined unaudited pro forma
condensed financial statements, the impact of certain acquisition and
financing transactions occurring in 1996 and 1997. The Supplemental
Information--Pro Forma earnings per common share and weighted average number
of common and common equivalent shares outstanding for the three months ended
March 31, 1997, includes the dilutive impact of USA Waste's 4% convertible
debt as if such debt was converted on January 1, 1997. These supplemental
adjustments do not include the impact of certain cost and expense savings and
other economic benefits that are expected to be realized as a result of the
Merger.
76
<PAGE>
USA WASTE AND UNITED
SUPPLEMENTAL BALANCE SHEET INFORMATION
MARCH 31, 1997
<TABLE>
<CAPTION>
INDIVIDUALLY
COMBINED INSIGNIFICANT SUPPLEMENTAL SUPPLEMENTAL--
ASSETS PRO FORMA ACQUISITIONS ADJUSTMENTS(A) PRO FORMA
------ ---------- ------------- -------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents........... $ 99,392 $ 56,918 $ (56,918) $ 99,392
Accounts receivable,
net................... 323,061 15,558 (590) 338,029
Notes and other
receivables........... 32,636 -- -- 32,636
Deferred income taxes.. 44,725 -- -- 44,725
Prepaid expenses and
other................. 52,678 3,311 (1,608) 54,381
---------- --------- --------- ----------
Total current assets. 552,492 75,787 (59,116) 569,163
Notes and other
receivables............ 45,399 7,350 (7,350) 45,399
Property and equipment,
net.................... 2,665,244 235,930 132,040 3,033,214
Excess of cost over net
assets of acquired
businesses, net........ 1,019,733 19,527 157,290 1,196,550
Other intangible assets,
net.................... 91,167 12,456 (5,997) 97,626
Other assets............ 217,509 46,868 (21,043) 243,334
---------- --------- --------- ----------
Total assets......... $4,591,544 $ 397,918 $ 195,824 $5,185,286
========== ========= ========= ==========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable....... $ 132,122 $ 8,860 $ (1,770) $ 139,212
Accrued liabilities.... 213,227 55,428 (33,381) 235,274
Deferred revenues...... 40,424 872 -- 41,296
Current maturities of
long-term debt........ 36,609 70 -- 36,679
---------- --------- --------- ----------
Total current
liabilities......... 422,382 65,230 (35,151) 452,461
Long-term debt, less
current maturities..... 1,696,216 314,486 111,607 2,122,309
Deferred income taxes... 134,474 5,073 1,927 141,474
Closure, post-closure,
and other liabilities.. 238,662 100,504 (50,497) 288,669
---------- --------- --------- ----------
2,491,734 485,293 27,886 3,004,913
---------- --------- --------- ----------
Commitments and
contingencies.......... -- -- -- --
Stockholders' equity:
Preferred stock:
USA Waste: $1.00 par
value; 10,000,000
shares authorized;
none issued.......... -- -- -- --
United: $.001 par
value; 5,000,000
shares authorized;
none issued.......... -- -- -- --
Common stock:
USA Waste: $.01 par
value; 300,000,000
shares authorized;
historical
154,133,595 shares
(202,322,536 pro
forma shares,
205,541,957
supplemental shares)
issued and
outstanding.......... 2,023 28,039 (28,007) 2,055
United: $.001 par
value; 75,000,000
shares authorized;
43,029,321 issued and
outstanding.......... -- -- -- --
Additional paid-in
capital............... 2,121,767 311,106 (230,575) 2,202,298
Retained earnings
(accumulated deficit). (7,583) (426,305) 426,305 (7,583)
Foreign currency
translation
adjustment............ (15,913) -- -- (15,913)
Less treasury stock at
cost, 23,485 shares... (484) (215) 215 (484)
---------- --------- --------- ----------
Total stockholders'
equity.............. 2,099,810 (87,375) 167,938 2,180,373
---------- --------- --------- ----------
Total liabilities and
stockholders'
equity.............. $4,591,544 $ 397,918 $ 195,824 $5,185,286
========== ========= ========= ==========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
77
<PAGE>
USA WASTE AND UNITED
SUPPLEMENTAL STATEMENT OF OPERATIONS INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PREACQUISITION
PERIODS
----------------------
INDIVIDUALLY
COMBINED ALLIED- INSIGNIFICANT SUPPLEMENTAL SUPPLEMENTAL-
PRO FORMA CANADA ACQUISITIONS ADJUSTMENTS PRO FORMA
--------- ------- ------------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating revenues...... $460,485 $51,531 $105,811 $ -- $617,827
-------- ------- -------- -------- --------
Costs and expenses:
Operating (exclusive
of depreciation and
amortization shown
below)............... 241,318 37,249 62,660 -- 341,227
General and
administrative....... 55,674 3,736 14,356 -- 73,766
Depreciation and
amortization......... 56,178 5,817 12,079 2,320 (b) 77,417
1,023 (c)
-------- ------- -------- -------- --------
353,170 46,802 89,095 3,343 492,410
-------- ------- -------- -------- --------
Income from operations.. 107,315 4,729 16,716 (3,343) 125,417
-------- ------- -------- -------- --------
Other income (expense):
Interest expense...... (16,098) (2,187) -- 2,187 (b) (25,074)
(6,674)(d)
(2,302)(e)
Interest income....... 2,053 -- -- -- 2,053
Other income, net..... 3,646 135 -- -- 3,781
-------- ------- -------- -------- --------
(10,399) (2,052) -- (6,789) (19,240)
-------- ------- -------- -------- --------
Income before income
taxes.................. 96,916 2,677 16,716 (10,132) 106,177
Provision for income
taxes.................. 38,954 1,349 6,397 (3,114)(f) 43,586
-------- ------- -------- -------- --------
Income available to
common shareholders.... $ 57,962 $ 1,328 $ 10,319 $ (7,018) $ 62,591
======== ======= ======== ======== ========
Earnings per common
share.................. $ 0.29 $ 0.30 (g)
======== ========
Weighted average number
of common and common
equivalent shares
outstanding............ 205,382 11,644 (g) 217,026
======== ======== ========
</TABLE>
See notes to supplemental information.
78
<PAGE>
USA WASTE AND UNITED
SUPPLEMENTAL STATEMENT OF OPERATIONS INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PREACQUISITION PERIODS
-----------------------
INDIVIDUALLY
COMBINED ALLIED- INSIGNIFICANT SUPPLEMENTAL SUPPLEMENTAL-
PRO FORMA CANADA ACQUISITIONS ADJUSTMENTS PRO FORMA
---------- -------- ------------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating revenues...... $1,649,131 $268,698 $605,821 $ -- $2,523,650
---------- -------- -------- -------- ----------
Costs and expenses:
Operating (exclusive
of depreciation and
amortization shown
below)............... 881,401 194,225 353,591 (658)(c) 1,428,559
General and
administrative....... 200,101 19,478 76,352 (325)(c) 295,606
Depreciation and
amortization......... 191,044 30,334 80,845 12,099 (b) 306,169
(8,153)(c)
Merger costs.......... 126,626 -- -- -- 126,626
Unusual items......... 63,800 -- -- -- 63,800
---------- -------- -------- -------- ----------
1,462,972 244,037 510,788 2,963 2,220,760
---------- -------- -------- -------- ----------
Income (loss) from
operations............. 186,159 24,661 95,033 (2,963) 302,890
---------- -------- -------- -------- ----------
Other income (expense):
Interest expense...... (60,497) (11,404) (36,660) 11,404 (b) (91,886)
36,660 (c)
(6,111)(d)
(25,278)(e)
Interest income....... 6,699 -- (203) -- 6,496
Other income, net..... 6,376 703 1,658 -- 8,737
---------- -------- -------- -------- ----------
(47,422) (10,701) (35,205) 16,675 (76,653)
---------- -------- -------- -------- ----------
Income before income
taxes.................. 138,737 13,960 59,828 13,712 226,237
Provision for income
taxes.................. 70,398 7,034 (85,364) 112,039 (f) 104,107
---------- -------- -------- -------- ----------
Income available to
common shareholders.... $ 68,339 $ 6,926 $145,192 $(98,327) $ 122,130
========== ======== ======== ======== ==========
Earnings per common
share.................. $ 0.37 $ 0.59 (g)
========== ==========
Weighted average number
of common and common
equivalent shares
outstanding............ 182,680 22,583 (g) 205,263
========== ======== ==========
</TABLE>
See notes to supplemental information.
79
<PAGE>
USA WASTE AND UNITED
NOTES TO SUPPLEMENTAL INFORMATION
1. BASIS OF PRESENTATION
The Supplemental Information--Pro Forma reflects, in addition to the pro
forma adjustments in the combined unaudited pro forma condensed financial
statements, the impact of certain acquisition and financing transactions
occurring in 1996 and 1997. The Supplemental Information--Pro Forma earnings
per common share and weighted average number of common and common equivalent
shares outstanding for the three months ended March 31, 1997 includes the
dilutive impact of USA Waste's 4% convertible debt as if such debt was
converted on January 1, 1997. These supplemental adjustments do not include
the impact of certain cost and expense savings and other economic benefits
that are expected to be realized as a result of the Merger.
2. SUPPLEMENTAL INFORMATION--PRO FORMA ADJUSTMENTS
(a) Reflects the adjustments to the historical balance sheets for the
purchase price allocation of the 27 individually insignificant purchase
acquisitions made subsequent to March 31, 1997 for an aggregate purchase price
of $366,014,000 cash, $67,325,000 in debt assumed, and 2,309,000 shares
issued, as if those transactions had occurred on March 31, 1997.
(b) Adjustments to the statement of operations information reflect the
results of operations for the preacquisition period for the individually
significant purchase of all of the Canadian solid waste subsidiaries of Allied
Waste Industries, Inc. consummated on March 12, 1997 for US $518,000,000, as
if that transaction had occurred on January 1, 1996. The acquired businesses
("Allied-Canada") include seven landfills, 41 collection operations, and eight
transfer stations. Such adjustments include an increase in depreciation and
amortization expense of $2,320,000 and $12,099,000 for the three months ended
March 31, 1997 and for the year ended December 31, 1996, respectively, which
is based on the allocation of the purchase price to assets acquired as
compared to the historical balances of property and equipment, other
intangible assets, and excess of costs over net assets of acquired businesses
and the estimated useful lives for the preacquisition periods. In addition,
interest expense has been reduced to eliminate the preacquisition period
interest allocated to Allied-Canada by its former parent of $2,187,000 and
$11,404,000 for the three months ended March 31, 1997 and for the year ended
December 31, 1996, respectively.
(c) Adjustments to the statement of operations information reflect the
results of operations for the preacquisition periods for individually
insignificant acquisitions accounted for as purchases made during 1996 and
1997 as if those transactions had occurred on January 1, 1996. In 1996, the
individually insignificant acquisitions included 159 acquisitions during the
year. The aggregate purchase price of acquisitions in 1996 was $392,160,000 in
cash, $11,201,000 in debt assumed, and 4,146,000 shares issued. In 1997, the
individually insignificant acquisitions included 56 acquisitions through June
6, 1997. The aggregate purchase price of acquisitions in 1997 was $522,509,000
in cash, $73,559,000 in debt assumed, and 3,772,000 shares issued.
Depreciation and amortization expense has been increased $1,023,000 for the
three months ended March 31, 1997 and decreased $8,153,000 for the year ended
December 31, 1996 which is based on the allocation of the purchase price to
assets acquired as compared to the historical balances of property and
equipment, other intangible assets, and excess of costs over net assets of
acquired businesses, and the estimated useful lives for the preacquisition
periods. The net decrease in depreciation and amortization expense for the
year ended December 31, 1996 includes a reduction of $14,298,000 as a result
of the impact of an asset write-down by Mid-American Waste Systems, Inc.
("MAW") of $186,000,000 in the quarter ended September 30, 1996 (USA Waste
acquired the assets of MAW on April 1, 1997) as part of MAW's evaluation of
operating assets for impairment. The adjustment of $325,000 to general and
administrative expense for the year ended December 31, 1996 relates to the
elimination of certain corporate accruals recorded by MAW in the quarter ended
September 30, 1996, which would not have been an expense to USA Waste, had the
transaction occurred on January 1, 1996. In addition, interest expense of
$36,660,000 has been eliminated for the preacquisition period interest related
to indebtedness not assumed as part of the acquisitions for the year ended
December 31, 1996.
80
<PAGE>
(d) The increase in interest expense related to the preacquisition periods
was $6,674,000 and $6,111,000 for the three months ended March 31, 1997 and
for the year ended December 31, 1996, respectively. The preacquisition period
interest is based on the amount of cash consideration related to the
acquisitions discussed in (b) and (c) above assumed to be financed from USA
Waste's revolving line of credit bearing interest at an average rate of 6%,
net of interest accrued subsequent to the acquisitions and the proceeds from
the sale of common stock and issuances of debt assumed to be used to reduce
the revolving credit facilities as of January 1, 1997 and January 1, 1996,
respectively, as follows:
<TABLE>
<S> <C>
For the three months ended March 31, 1997:
Cash consideration for acquisitions:
Allied-Canada (see (b) above)................................. $ 7,770,000
Less interest accrued subsequent to acquisition date of
Allied-Canada................................................ (1,290,000)
Other acquisitions (see (c) above)............................ 7,837,000
Less interest accrued subsequent to acquisition date of other
1997 acquisitions............................................ (425,000)
------------
13,892,000
------------
Less reduction in revolving credit facility as if net proceeds
were available January 1, 1997:
Sale of stock (see below):
$387,438,000 for 1.5 months................................. 2,905,000
$119,300,000 for 0.5 months................................. 298,000
Issuances of debt (see (e) below):
$521,275,000 for 1.5 months................................. 4,015,000
------------
7,218,000
------------
Increase to interest............................................ $ 6,674,000
============
For the year ended December 31, 1996:
Cash consideration for acquisitions:
Allied-Canada (see (b) above)................................. $ 31,080,000
Other acquisitions (see (c) above)............................ 54,880,000
Less interest accrued subsequent to acquisition date of 1996
acquisitions................................................. (12,646,000)
------------
73,314,000
------------
Less reduction in revolving credit facility as if net proceeds
were available January 1, 1996:
Sale of stock (see below):
$387,438,000 for 12 months.................................. 23,246,000
$119,300,000 for 12 months.................................. 7,158,000
Issuances of debt (see (e) below):
$521,275,000 for 12 months.................................. 31,277,000
$142,800,000 for 6 months................................... 4,284,000
$112,500,000 for 66 days.................................... 1,238,000
------------
67,203,000
------------
Increase to interest............................................ $ 6,111,000
============
</TABLE>
The impact of the refinancings of the revolving credit facilities in 1996
and 1997 is not material to this supplemental presentation. As noted above,
USA Waste and United raised $506,738,000 of proceeds from separate sales of
common stock in public offerings. USA Waste raised $387,438,000 of net
proceeds from the sale of 11,500,000 shares of its common stock in February
1997 and United raised $119,300,000 of net proceeds from the sale of 3,450,000
shares of its common stock in March 1997. For the purpose of this supplemental
presentation, these proceeds were used to reduce the revolving credit facility
assuming an average interest rate of 6%.
81
<PAGE>
(e) During 1996 and 1997, USA Waste, United, and Sanifill raised proceeds as
a result of various financing transactions, as noted in (d) above. Assuming
these debt financing transactions had occurred at the beginning of the
respective periods set forth below and such proceeds are assumed to be used to
reduce the revolving credit facility as noted in (d) above, the incremental
increase in interest expense as a result of these debt financing transactions
would have been $2,302,000 and $25,278,000 for the three months ended March 31,
1997 and for the year ended December 31, 1996, respectively, as follows:
<TABLE>
<CAPTION>
FOR THE
THREE FOR THE
MONTHS YEAR
ENDED ENDED
MARCH 31, DECEMBER
1997 31, 1996
---------- -----------
<S> <C> <C>
$535,275,000 of 4% Subordinated Debt due 2002 issued by
USA Waste on February 7, 1997.......................... $2,302,000 $21,411,000
$150,000,000 of 4 1/2% Subordinated Debt due 2001 issued
by United on June 5, 1996.............................. -- 2,813,000
$115,000,000 of 5% Subordinated Debt due 2006 issued by
Sanifill on March 4, 1996.............................. -- 1,054,000
---------- -----------
$2,302,000 $25,278,000
========== ===========
</TABLE>
(f) Reflects the income tax impact related to the operations of the
businesses acquired and the income tax effect of each of the above pro forma
adjustments using the measurement principles contained in Statement of
Financial Accounting Standards No. 109.
(g) Supplemental pro forma earnings per share for each period are based on
the combined weighted average number of common and common equivalent shares
outstanding, after giving effect to the issuance of 1.075 shares of USA Waste
Common Stock for each share of United Common Stock, include the effect of
shares issued in connection with acquisitions made in 1996 and 1997 assumed to
be issued at the beginning of the period presented, and include the effect of
additional average common and common equivalent shares outstanding for certain
1996 and 1997 financing transactions assumed to be issued at the beginning of
the period presented.
82
<PAGE>
USA WASTE AND UNITED
SUPPLEMENTAL INFORMATION--ADJUSTED
RELATING TO PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
The following Supplemental Information--Adjusted for the year ended December
31, 1996 adjusts the Supplemental Information--Pro Forma and reflects the pro
forma results of operations for the year ended December 31, 1996 exclusive of
merger costs and unusual items, which primarily represent charges to
operations for the estimated losses expected to be incurred as a result of the
disposition of duplicate or excess assets or certain non-core assets generally
accumulated through significant business combinations. The presentation of
results of operations exclusive of these nonrecurring items is not in
accordance with generally accepted accounting principles. However, the
Supplemental Information--Adjusted is included herein because USA Waste is
aware that such information is used by certain investors when analyzing USA
Waste's results of operations. USA Waste expects to continue to pursue
opportunities to expand through acquisitions and may incur similar charges to
operations in the future. These adjustments do not include additional cost
reductions relating to landfill and collection operations or additional
revenues that may result from volume or price increases.
<TABLE>
<CAPTION>
YEAR ENDED
SUPPLEMENTAL INFORMATION--ADJUSTED DECEMBER 31, 1996
---------------------------------- ---------------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C>
Operating revenues....................................... $2,523,650
Income from operations................................... $ 494,991
Income available to common shareholders.................. $ 249,998
Earnings per common share................................ $ 1.21
Weighted average number of common and common equivalent
shares outstanding...................................... 217,551
</TABLE>
The adjustments made to the Supplemental Information--Pro Forma to derive
the Supplemental Information--Adjusted are as follows:
. Removal of approximately $126.6 million in costs incurred in connection
with the merger transactions with Western, Grand Central Sanitation, the
Salinas Companies, and Sanifill consummated on May 7, 1996, May 15, 1996,
June 28, 1996, and August 30, 1996, respectively.
. Removal of other unusual and nonrecurring charges of $63.8 million
primarily relating to retirement benefits associated with Western's pre-
merger retirement plan, estimated future losses related to municipal
solid waste contracts in California as a result of the continuing decline
in prices of recyclable materials, estimated losses related to the
disposition of certain non-core business assets, project reserves related
to certain Mexican operations, and various other terminated projects.
. Adjustments to reflect USA Waste's effective tax rate of 40%, giving
effect to the exclusion of certain nondeductible merger costs using the
measurement principles contained in Statement of Financial Accounting
Standards No. 109.
. Earnings per common share and weighted average number of common and
common equivalent shares outstanding for the year ended December 31, 1996
include the dilutive impact of USA Waste's issuance of 4% convertible
debt as if such debt was converted on January 1, 1996.
83
<PAGE>
PRINCIPAL STOCKHOLDERS OF USA WASTE AND UNITED
The following tables set forth information with respect to the beneficial
ownership of USA Waste Common Stock and United Common Stock as of June 27, 1997
(except as otherwise indicated in the footnotes below), respectively by (1)
each owner of more than 5% of such common stock, (2) each director of USA Waste
and United, (3) certain executive officers of USA Waste and United, including
the Chief Executive Officers and the four most highly compensated officers
other than the Chief Executive Officer who were serving as officers at December
31, 1996, and (4) all executive officers and directors of USA Waste and United,
as the case may be, as a group. Except as otherwise indicated below, each of
the entities and persons named in the tables has sole voting and investment
power with respect to all shares of common stock beneficially owned. For
purposes of these tables, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date which such person has
the right to acquire within 60 days after such date. For purposes of computing
the percentage of outstanding shares held by each person or group of persons
named below on a given date, any security which such person or persons has the
right to acquire within 60 days after such date is deemed to be outstanding for
the purpose of computing the percentage ownership of such person or persons,
but is not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person. Unless otherwise indicated, the address for each
of the individuals or entities named in the tables below is the principal
executive offices of USA Waste or United, as applicable.
USA WASTE
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP
---------------------
PERCENTAGE PERCENTAGE
OF CLASS OF CLASS
NUMBER OF BEFORE THE AFTER THE
NAME SHARES MERGER MERGER(1)
---- ---------- ---------- ----------
<S> <C> <C> <C>
American Express Company and............. 7,953,335(2) 4.9% 3.8%
American Express Financial Corporation
200 Vessey Street
New York, New York 10285
Ralph F. Cox............................. 51,000(3) * *
John E. Drury............................ 1,670,079(4) 1.0% *
Donald F. Moorehead, Jr.................. 1,779,920(5) 1.1% *
David Sutherland-Yoest................... 320,691(6) * *
Earl E. DeFrates......................... 173,751(7) * *
Richard J. Heckmann...................... 12,439(8) * *
Larry J. Martin.......................... 1,577,415(9) * *
William E. Moffett....................... 8,665(10) * *
Rodney R. Proto.......................... 793,235(11) * *
John G. Rangos, Sr....................... 7,348,911(12) 4.6% 3.5%
Alexander W. Rangos...................... 2,012,131(13) 1.2% *
Kosti Shirvanian......................... 9,181,061(14) 5.6% 4.3%
Savey Tufenkian.......................... 899,056(15) * *
All directors and executive officers as a
group (16 persons)...................... 25,907,007 15.5% 11.6%
</TABLE>
- --------
* Less than 1%
(1) Assumes that 49,495,022 shares of USA Waste Common Stock will be issued in
connection with the Merger.
(2) As of December 31, 1996 according to a Schedule 13G filed with the
Securities and Exchange Commission by the named stockholder.
(3) Includes 42,500 shares issuable pursuant to options exercisable within 60
days.
84
<PAGE>
(4) Includes 580,965 shares issuable pursuant to options exercisable within
60 days and 5,176 shares owned by Mr. Drury's spouse.
(5) Includes 103,549 shares issuable pursuant to options exercisable within
60 days and 187,250 shares owned by Mr. Moorehead's spouse.
(6) Includes 93,678 shares issuable pursuant to options exercisable within 60
days and 5,000 shares owned by Mr. Sutherland-Yoest's daughter.
(7) Includes 135,997 shares issuable pursuant to options exercisable within
60 days.
(8) Includes 2,000 shares issuable pursuant to options exercisable within 60
days.
(9) Includes 21,250 shares issuable pursuant to options exercisable within 60
days and 7,820 shares owned by Mr. Martin's children.
(10) Includes 8,665 shares issuable pursuant to options exercisable within 60
days.
(11) Includes 731,136 shares issuable pursuant to options exercisable within
60 days.
(12) Includes 75,000 shares issuable pursuant to options exercisable within 60
days and 380,000 shares held in trust.
(13) Includes 285,709 shares issuable pursuant to options exercisable within
60 days and 1,210,008 shares held by John Rangos Development Corporation,
Inc.
(14) Includes 2,967,000 shares issuable pursuant to options exercisable within
60 days, 6,081,680 shares held in trust and 49,069 shares held in a
401(k) plan.
(15) Includes 512,144 shares issuable pursuant to options exercisable within
60 days and 386,912 shares held in trust.
UNITED
<TABLE>
<CAPTION>
UNITED COMMON USA WASTE
STOCK PERCENTAGE COMMON PERCENTAGE
BENEFICIALLY OF CLASS STOCK OF CLASS
OWNED BEFORE BEFORE THE AFTER THE AFTER THE
NAME THE MERGER MERGER MERGER MERGER (1)
---- ------------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Pilgrim Baxter & Associates..... 3,986,800(2) 9.01% 4,285,810 2.0%
1255 Drummers Lane
Wayne, PA 19087
Fred Alger Management, Inc...... 2,250,100(3) 5.09% 2,418,857 1.1%
75 Maiden Lane
New York, NY 10038
FMR Corp........................ 2,123,000(4) 4.80% 2,282,225 1.1%
82 Devonshire Street
Boston, MA 02109
Bradley S. Jacobs............... 920,461(5) 2.06% 908,216 *
Edward T. Sheehan............... 206,211(6) * 130,461 *
John N. Milne................... 327,666(7) * 277,929 *
Michael J. Nolan................ 127,667(6) * 113,468 *
Richard A. Volonino............. 92,049(6) * 78,401 *
G. Chris Andersen............... 85,000(6) * 38,952 *
Lawrence J. Twill............... 55,430(6) * 49,817 *
Christian Weyer................. 93,667(6) * 30,607 *
J. Bryan Williams, III.......... 119,141(6) * 49,524 *
All executive officers and
directors as a group
(10 persons)................... 2,118,890 4.62% 1,753,894 *
</TABLE>
85
<PAGE>
- --------
* Less than 1%
(1) Assumes that 49,495,022 shares of USA Waste Common Stock will be issued in
connection with the Merger.
(2) The information concerning the number of shares beneficially owned, is as
of December 31, 1996 and is based on a Schedule 13G filed by Pilgrim
Baxter & Associates with the Commission. Such Schedule 13G indicates that
Pilgrim Baxter & Associates has shared voting power and sole dispositive
power with respect to the indicated shares.
(3) The information concerning the number of shares beneficially owned, is as
of December 31, 1996 and is based on a Schedule 13G filed by Fred Alger
Management, Inc., and Mr. Fred Alger with the Commission. Such Schedule
13G indicates that Fred Alger Management, Inc. (and Mr. Fred Alger, who
controls such company) has sole voting power with respect to 21,200
shares, shared voting power with respect to 1,950,000 shares and sole
dispositive power with respect to 2,237,700 shares.
(4) The information concerning the number of shares beneficially owned, is as
of December 31, 1996 and is based on a Schedule 13G filed by FMR Corp.
with the Commission. Such Schedule 13G indicates that (i) Fidelity
Management Research Company ("Fidelity"), a wholly-owned subsidiary of FMR
Corp., is the beneficial owner of 1,866,000 shares as a result of acting
as an investment advisor to various investment companies (the "Funds") and
as the sub-adviser to a unit trust (the "Trust") and (ii) Fidelity
Management Trust Company ("Fidelity Trust"), a wholly-owned subsidiary of
FMR Corp., is the beneficial owner of 257,000 shares as a result of
serving as investment manager to various institutional accounts (the
"Institutional Accounts"). Such Schedule 13G further indicates that Edward
C. Johnson 3d (Chairman of FMR Corp.) and FMR Corp., through control of
Fidelity and Fidelity Trust, have (i) the sole power to dispose of the
1,859,600 shares owned by the Funds (but not the power to vote such
shares, since such power resides with the Funds' Boards of Trustees), (ii)
sole dispositive power with respect to the shares owned by the
Institutional Accounts, (iii) sole power to vote or direct the voting of
222,800 of the shares owned by the Institutional Accounts and (iv) no
power to vote or direct the voting of 34,200 of the shares owned by the
Institutional Accounts. Such Schedule 13G further indicates that FMR
Corp., through control of Fidelity, has the sole power to vote and dispose
of the 6,400 shares owned by the Unit Trust.
(5) Consists of 501,126 shares held by Mr. Jacobs and 419,335 shares
underlying currently exercisable options held by Mr. Jacobs. Does not
include 277,332 shares underlying options held by Mr. Jacobs that are not
exercisable within 60 days of June 27, 1997.
(6) Consists of shares underlying currently exercisable options held by the
indicated persons. Does not include 250,866 shares underlying options held
by the indicated persons that are not exercisable within 60 days of June
27, 1997.
(7) Consists of (i) 13,332 shares underlying currently exercisable warrants
held by Mr. Milne and (ii) 314,334 shares underlying currently exercisable
options held by Mr. Milne. Does not include 155,666 shares underlying
options held by Mr. Milne that are not exercisable within 60 days of June
27, 1997.
86
<PAGE>
MARKET PRICE DATA
MARKET INFORMATION
USA Waste Common Stock is traded on the NYSE under the symbol "UW." United
Common Stock is traded on the Nasdaq Stock Market under the symbol "UWST." The
following table sets forth the range of high and low per share sale prices for
the USA Waste Common Stock and the United Common Stock as reported on the NYSE
Composite Tape and the Nasdaq Stock Market, respectively, for the period from
January 1, 1995 through July 23, 1997.
<TABLE>
<CAPTION>
USA WASTE UNITED COMMON
COMMON STOCK STOCK
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1995
First Quarter.................................... $12.50 $10.00 $15.00 $11.50
Second Quarter................................... 16.63 11.50 18.00 13.63
Third Quarter.................................... 22.00 14.63 21.88 17.25
Fourth Quarter................................... 22.50 17.00 21.63 18.00
1996
First Quarter.................................... $25.63 $17.25 $25.75 $17.88
Second Quarter................................... 32.63 24.00 32.25 24.25
Third Quarter.................................... 34.13 22.75 35.50 23.75
Fourth Quarter................................... 34.25 28.63 38.75 28.75
1997
First Quarter.................................... $38.88 $28.63 $40.88 $31.50
Second Quarter................................... 39.12 29.50 41.75 30.38
Third Quarter (through July 23).................. 41.75 38.00 44.38 40.25
</TABLE>
On April 11, 1997, the last trading day prior to announcement by USA Waste
and United that they had reached an agreement concerning the Merger, the
closing sale price of USA Waste Common Stock as reported on the NYSE Composite
Tape was $35.25 per share, and the closing sale price of United Common Stock
as reported on the Nasdaq Stock Market was $37.63 per share. Assuming the
Merger had occurred on such date, the equivalent market value per share of
United Common Stock, calculated by multiplying the closing sale price of USA
Waste Common Stock by the Exchange Ratio, would have been $37.89.
On July 23, 1997, the closing sale price of USA Waste Common Stock as
reported on the NYSE Composite Tape was $41.13 per share, and the closing sale
price of United Common Stock as reported on the Nasdaq Stock Market was $43.75
per share. The market prices of shares of USA Waste Common Stock and United
Common Stock are subject to fluctuation. It is a condition to United's
obligation to effect the Merger that the USA Waste Trading Price is $31.50 or
more. See "The Plan of Merger and Terms of the Merger--Conditions to Closing."
Subject to this condition, the market price of USA Waste Common Stock on the
Closing Date, the date shares of USA Waste Common Stock are received by
holders of United Common Stock, or the date on which such shares of USA Waste
Common Stock are eventually sold, may be more or less than the price of USA
Waste Common Stock as of the date of this Joint Proxy Statement and
Prospectus. As a result, stockholders are urged to obtain current market
quotations.
Following the Merger, USA Waste Common Stock will continue to be traded on
the NYSE under the symbol "UW", and the listing of United Common Stock on the
Nasdaq Stock Market will be terminated.
DIVIDEND INFORMATION
USA Waste has never declared or paid cash dividends on its common stock. USA
Waste currently expects to retain its earnings for its business and does not
anticipate paying dividends on its common stock at any time in the foreseeable
future. The decision whether to apply legally available funds to the payment
of dividends on USA Waste Common Stock will be made by the USA Waste Board of
Directors from time to time in the exercise of its business judgment.
United has never paid cash dividends on its Common Stock. In addition,
payment of dividends on the United Common Stock is restricted by the terms of
United's bank credit agreement.
87
<PAGE>
DESCRIPTION OF USA WASTE CAPITAL STOCK
USA Waste is currently authorized to issue 300,000,000 shares of its Common
Stock, par value $.01 per share, of which 161,270,883 shares were outstanding
on the USA Waste Record Date, and 10,000,000 shares of Preferred Stock, none
of which are outstanding.
COMMON STOCK
Each holder of USA Waste Common Stock is entitled to one vote per share held
of record on each matter submitted to stockholders. Cumulative voting for the
election of directors is not permitted, and the holders of a majority of
shares voting for the election of directors can elect all members of the USA
Waste Board of Directors.
Subject to the rights of any holders of Preferred Stock, holders of record
of shares of USA Waste Common Stock are entitled to receive ratably dividends
when and if declared by the USA Waste Board of Directors out of funds of USA
Waste legally available therefor. In the event of a voluntary or involuntary
winding up or dissolution, liquidation or partial liquidation of USA Waste,
holders of USA Waste Common Stock are entitled to participate ratably in any
distribution of the assets of USA Waste, subject to any prior rights of
holders of any outstanding Preferred Stock.
Holders of USA Waste Common Stock have no conversion, redemption or
preemptive rights. All outstanding shares of USA Waste Common Stock are
validly issued, fully paid and nonassessable.
PREFERRED STOCK
The USA Waste Board of Directors is authorized, without further approval of
the stockholders, to issue the Preferred Stock in series and with respect to
each series, to fix its designations, relative rights (including voting,
dividend, conversion, sinking fund and redemption rights), preferences
(including with respect to dividends and upon liquidation), privileges and
limitations. The Board of Directors of USA Waste, without stockholder
approval, may issue Preferred Stock with voting and conversion rights, both of
which could adversely affect the voting power of the holders of USA Waste
Common Stock, and dividend or liquidation preferences that would restrict
Common Stock dividends or adversely affect the assets available for
distribution to holders of shares of Common Stock upon USA Waste's
dissolution.
AUTHORIZED BUT UNISSUED SHARES
Authorized but unissued shares of USA Waste Common Stock or Preferred Stock
can be reserved for issuance by the Board of Directors of USA Waste from time
to time without further shareholder action for proper corporate purposes,
including stock dividends or stock splits, raising equity capital and
structuring future corporate transactions, including acquisitions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the USA Waste Common Stock is Boston
EquiServe, Boston, Massachusetts.
INDEPENDENT ACCOUNTANTS
Representatives of Coopers & Lybrand L.L.P., USA Waste's independent
accountants, are expected to be present at the USA Waste Annual Meeting and
will have the opportunity to make a statement if they so desire. Such
representatives are also expected to be available to respond to appropriate
questions.
88
<PAGE>
Representatives of Ernst & Young LLP, United's independent auditors, are
expected to be present at the United Special Meeting and will have the
opportunity to make a statement if they so desire. Such representatives are
also expected to be available to respond to appropriate questions.
LEGAL MATTERS
The validity of the USA Waste Common Stock to be issued in connection with
the Merger and certain tax consequences of the Merger will be passed upon by
McDermott, Will & Emery, Chicago, Illinois. Certain tax consequences of the
Merger will be passed upon for United by Wachtell, Lipton, Rosen & Katz, New
York, New York.
EXPERTS
The consolidated balance sheets of USA Waste as of December 31, 1996 and
1995 and the consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996,
of USA Waste, incorporated by reference in this Joint Proxy Statement and
Prospectus, have been incorporated herein in reliance on the report of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
The consolidated financial statements of United appearing in United's Annual
Report (Form 10-K/A No. 2) for the year ended December 31, 1996 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
PROPOSALS OF STOCKHOLDERS FOR ANNUAL MEETING
The Board of Directors of USA Waste will consider proposals of stockholders
intended to be presented for action at USA Waste's 1998 annual meeting of
stockholders. A stockholder proposal must be submitted in writing and be
received at USA Waste's principal executive offices, First City Tower, 1001
Fannin, Suite 4000, Houston, Texas 77022, no later than March 25, 1998, to be
considered for inclusion in USA Waste's proxy statement and form of proxy
relating to the 1998 annual meeting of stockholders. Submission of a
stockholder proposal does not assure inclusion in the proxy statement or form
of proxy because proposals must meet certain Commission rules and USA Waste
By-law requirements.
OTHER MATTERS
The respective Boards of Directors of USA Waste and United do not know of
any other matters to be presented for action at the USA Waste Annual Meeting
or the United Special Meeting other than those listed in their respective
Notices of Meeting and referred to herein. If any other matter should properly
come before the USA Waste Annual Meeting or the United Special Meeting,
respectively, or any adjournment thereof, it is intended that the proxies
solicited hereby be voted with respect to such matters in accordance with the
judgment of the persons voting such proxies.
89
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 13, 1997
BY AND AMONG
USA WASTE SERVICES, INC.
RIVIERA ACQUISITION CORPORATION
AND
UNITED WASTE SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
ARTICLE I
The Merger
<S> <C>
SECTION 1.1 The Merger................................................. 1
SECTION 1.2 Effective Time of the Merger............................... 1
ARTICLE II
The Surviving and Parent Corporations
SECTION 2.1 Certificate of Incorporation............................... 1
SECTION 2.2 By-Laws.................................................... 1
SECTION 2.3 Directors.................................................. 2
SECTION 2.4 Officers................................................... 2
ARTICLE III
Conversion of Shares
SECTION 3.1 Conversion of Company Shares in the Merger................. 2
SECTION 3.2 Conversion of Subsidiary Shares............................ 2
SECTION 3.3 Exchange of Certificates................................... 2
SECTION 3.4 No Fractional Securities................................... 3
SECTION 3.5 Closing.................................................... 4
SECTION 3.6 Closing of the Company's Transfer Books.................... 4
ARTICLE IV
Representations and Warranties of Parent and Subsidiary
SECTION 4.1 Organization and Qualification............................. 4
SECTION 4.2 Capitalization............................................. 4
SECTION 4.3 Subsidiaries............................................... 5
SECTION 4.4 Authority; Non-Contravention; Approvals.................... 5
SECTION 4.5 Reports and Financial Statements........................... 6
SECTION 4.6 Absence of Undisclosed Liabilities......................... 7
SECTION 4.7 Absence of Certain Changes or Events....................... 7
SECTION 4.8 Litigation................................................. 7
SECTION 4.9 Registration Statement and Proxy Statement................. 8
SECTION 4.10 No Violation of Law....................................... 8
SECTION 4.11 Compliance with Agreements................................ 8
SECTION 4.12 Taxes..................................................... 9
SECTION 4.13 Employee Benefit Plans; ERISA............................. 9
SECTION 4.14 Labor Controversies....................................... 10
SECTION 4.15 Environmental Matters..................................... 11
SECTION 4.16 Non-competition Agreements................................ 11
SECTION 4.17 Title to Assets........................................... 12
SECTION 4.18 Reorganization and Pooling of Interests................... 12
SECTION 4.19 Parent Stockholders' Approval............................. 12
SECTION 4.20 Brokers and Finders....................................... 12
SECTION 4.21 Opinion of Financial Advisor.............................. 12
SECTION 4.22 Ownership of Company Common Stock......................... 13
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE NO.
--------
ARTICLE V
Representations and Warranties of the Company
<S> <C>
SECTION 5.1 Organization and Qualification............................ 13
SECTION 5.2 Capitalization............................................ 13
SECTION 5.3 Subsidiaries.............................................. 13
SECTION 5.4 Authority; Non-Contravention; Approvals................... 14
SECTION 5.5 Reports and Financial Statements.......................... 15
SECTION 5.6 Absence of Undisclosed Liabilities........................ 15
SECTION 5.7 Absence of Certain Changes or Events...................... 16
SECTION 5.8 Litigation................................................ 16
SECTION 5.9 Registration Statement and Proxy Statement................ 16
SECTION 5.10 No Violation of Law...................................... 16
SECTION 5.11 Compliance with Agreements............................... 17
SECTION 5.12 Taxes.................................................... 17
SECTION 5.13 Employee Benefit Plans; ERISA............................ 17
SECTION 5.14 Labor Controversies...................................... 19
SECTION 5.15 Environmental Matters.................................... 19
SECTION 5.16 Non-competition Agreements............................... 19
SECTION 5.17 Title to Assets.......................................... 19
SECTION 5.18 Reorganization and Pooling of Interests.................. 20
SECTION 5.19 Company Stockholders' Approval........................... 20
SECTION 5.20 Brokers and Finders...................................... 20
SECTION 5.21 Opinion of Financial Advisor............................. 20
ARTICLE VI
Conduct of Business Pending the Merger
SECTION 6.1 Conduct of Business by the Company Pending the Merger..... 20
SECTION 6.2 Specific Conduct of Business by Parent and Subsidiary
Pending the Merger................................................... 22
SECTION 6.3 Control of the Company's Operations....................... 24
SECTION 6.4 Control of Parent's Operations............................ 24
SECTION 6.5 Acquisition Transactions.................................. 24
ARTICLE VII
Additional Agreements
SECTION 7.1 Access to Information..................................... 25
SECTION 7.2 Registration Statement and Proxy Statement................ 26
SECTION 7.3 Stockholders' Approvals................................... 26
SECTION 7.4 Compliance with the Securities Act........................ 26
SECTION 7.5 Exchange Listing.......................................... 26
SECTION 7.6 Expenses and Fees......................................... 27
SECTION 7.7 Agreement to Cooperate.................................... 27
SECTION 7.8 Public Statements......................................... 28
SECTION 7.9 Option Plans.............................................. 28
SECTION 7.10 Notification of Certain Matters.......................... 28
SECTION 7.11 Directors' and Officers' Indemnification................. 28
SECTION 7.12 Corrections to the Joint Proxy Statement/Prospectus and
Registration Statement............................................... 29
SECTION 7.13 Supplemental Indenture................................... 30
SECTION 7.14 Employment Agreements.................................... 30
</TABLE>
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ARTICLE VIII
Conditions
<S> <C>
SECTION 8.1 Conditions to Each Party's Obligation to Effect the Merg-
er................................................................... 30
SECTION 8.2 Conditions to Obligation of the Company to Effect the
Merger............................................................... 31
SECTION 8.3 Conditions to Obligations of Parent and Subsidiary to Ef-
fect the Merger...................................................... 32
ARTICLE IX
Termination, Amendment and Waiver
SECTION 9.1 Termination............................................... 32
SECTION 9.2 Effect of Termination..................................... 33
SECTION 9.3 Amendment................................................. 33
SECTION 9.4 Waiver.................................................... 34
ARTICLE X
General Provisions
SECTION 10.1 Non-Survival of Representations and Warranties........... 34
SECTION 10.2 Notices.................................................. 34
SECTION 10.3 Interpretation........................................... 34
SECTION 10.4 Miscellaneous............................................ 35
SECTION 10.5 Counterparts............................................. 35
SECTION 10.6 Parties in Interest...................................... 35
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 13, 1997 (this
"Agreement"), is made and entered into by and among USA Waste Services, Inc.,
a Delaware corporation ("Parent"), Riviera Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Subsidiary"), and United
Waste Systems, Inc., a Delaware corporation (the "Company");
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Subsidiary and the Company have
approved the merger of Subsidiary with and into the Company on the terms set
forth in this Agreement (the "Merger"); and
WHEREAS, Parent, Subsidiary and the Company intend the Merger to qualify as
a tax-free reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
The Merger
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the General Corporation Law of the State of Delaware (the "DGCL"),
Subsidiary shall be merged with and into the Company and the separate
existence of Subsidiary shall thereupon cease. The Company shall be the
surviving corporation in the Merger and is hereinafter sometimes referred to
as the "Surviving Corporation."
SECTION 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective
at such time (the "Effective Time") as shall be stated in a certificate of
merger, in a form mutually acceptable to Parent and the Company, to be filed
with the Secretary of State of the State of Delaware in accordance with the
DGCL (the "Merger Filing"). The Merger Filing shall be made simultaneously
with or as soon as practicable after the closing of the transactions
contemplated by this Agreement in accordance with Section 3.5. The parties
acknowledge that it is their mutual desire and intent to consummate the Merger
as soon as practicable after the date hereof. Accordingly, the parties shall,
subject to the provisions hereof and to the fiduciary duties of their
respective boards of directors, use all reasonable efforts to consummate, as
soon as practicable, the transactions contemplated by this Agreement in
accordance with Section 3.5.
ARTICLE II
The Surviving and Parent Corporations
SECTION 2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of the Company as in effect immediately prior to the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, and thereafter may be amended in accordance with its terms and
as provided in the DGCL except that no amendment shall be made to, nor shall
any provision be included which is inconsistent with, Article IX or X of the
Certificate of Incorporation.
SECTION 2.2 BY-LAWS. The By-laws of the Company as in effect immediately
prior to the Effective Time shall be the By-laws of the Surviving Corporation
after the Effective Time and (subject to Section 7.11 hereof) thereafter may
be amended in accordance with their terms and as provided by the Certificate
of Incorporation of the Surviving Corporation and the DGCL.
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SECTION 2.3 DIRECTORS. The Board of Directors of Parent shall take such
action as may be necessary to cause two persons designated by the Company and
acceptable to Parent to be elected to Parent's Board of Directors as of a
mutually agreeable time after the Effective Time. Each of such directors shall
have a term of office expiring at the annual meeting of stockholders of Parent
held in 1998. The directors of the Surviving Corporation shall be as
designated in Section 2.3 of the Parent Disclosure Schedule (as defined in
Article IV), and such directors shall serve in accordance with the By-laws of
the Surviving Corporation until their respective successors are duly elected
or appointed and qualified.
SECTION 2.4 OFFICERS. The officers of Subsidiary in office immediately prior
to the Effective Time shall be the officers of the Surviving Corporation after
the Effective Time, and such officers shall serve in accordance with the By-
laws of the Surviving Corporation until their respective successors are duly
elected or appointed and qualified.
ARTICLE III
Conversion of Shares
SECTION 3.1 CONVERSION OF COMPANY SHARES IN THE MERGER. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of Parent or the Company:
(a) each share of the common stock, par value $.001 per share, of the
Company (the "Company Common Stock") shall, subject to Sections 3.3 and
3.4, be converted into the right to receive, without interest, 1.075 (the
"Exchange Ratio") shares of the common stock, par value $.01 per share, of
Parent ("Parent Common Stock");
(b) each share of capital stock of the Company, if any, owned by Parent
or any subsidiary of Parent or held in treasury by the Company or any
subsidiary of the Company immediately prior to the Effective Time shall be
canceled and no consideration shall be paid in exchange therefor and shall
cease to exist from and after the Effective Time; and
(c) each unexpired warrant to purchase Company Common Stock that is
outstanding at the Effective Time, whether or not exercisable, shall
automatically and without any action on the part of the holder thereof be
converted into a warrant to purchase a number of shares of Parent Common
Stock equal to the number of shares of Company Common Stock that could be
purchased under such warrant multiplied by the Exchange Ratio, at a price
per share of Parent Common Stock equal to the per share exercise price of
such warrant divided by the Exchange Ratio.
SECTION 3.2 CONVERSION OF SUBSIDIARY SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent as the sole
stockholder of Subsidiary, each issued and outstanding share of common stock,
par value $.01 per share, of Subsidiary ("Subsidiary Common Stock") shall be
converted into one share of common stock, par value $.001 per share, of the
Surviving Corporation.
SECTION 3.3 EXCHANGE OF CERTIFICATES. (a) From and after the Effective Time,
each holder of an outstanding certificate which immediately prior to the
Effective Time represented shares of Company Common Stock shall be entitled to
receive in exchange therefor, upon surrender thereof to an exchange agent
reasonably satisfactory to Parent and the Company (the "Exchange Agent"), a
certificate or certificates representing the number of whole shares of Parent
Common Stock to which such holder is entitled pursuant to Section 3.1(a).
Notwithstanding any other provision of this Agreement, (i) until holders or
transferees of certificates theretofore representing shares of Company Common
Stock have surrendered them for exchange as provided herein, no dividends or
other distributions shall be paid with respect to any shares represented by
such certificates and no payment for fractional shares shall be made and (ii)
without regard to when such certificates representing shares of Company Common
Stock are surrendered for exchange as provided herein, no interest shall be
paid on any dividends or other distributions or any payment for fractional
shares. Upon surrender of a certificate which immediately prior to the
Effective Time represented shares of Company Common Stock, there shall be paid
to
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the holder of such certificate the amount of any dividends or other
distributions which theretofore became payable, but which were not paid by
reason of the foregoing, with respect to the number of whole shares of Parent
Common Stock represented by the certificate or certificates issued upon such
surrender.
(b) If any certificate for shares of Parent Common Stock is to be issued in
a name other than that in which the certificate for shares of Company Common
Stock surrendered in exchange therefor is registered, it shall be a condition
of such exchange that the person requesting such exchange shall pay any
applicable transfer or other taxes required by reason of such issuance.
(c) Promptly after the Effective Time, Parent shall make available to the
Exchange Agent the certificates representing shares of Parent Common Stock
required to effect the exchanges referred to in paragraph (a) above and cash
for payment of any fractional shares referred to in Section 3.4.
(d) Promptly after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates that immediately prior to
the Effective Time represented outstanding shares of Company Common Stock (the
"Company Certificates") (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon actual delivery of the Company Certificates
to the Exchange Agent) and (ii) instructions for use in effecting the
surrender of the Company Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of Company
Certificates for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal and such other documents as the Exchange Agent
shall reasonably require, the holder of such Company Certificates shall be
entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock into which the shares of Company
Common Stock theretofore represented by the Company Certificates so
surrendered shall have been converted pursuant to the provisions of Section
3.1(a), and the Company Certificates so surrendered shall be canceled.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of shares of Company Common Stock for any shares
of Parent Common Stock or dividends or distributions thereon delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(e) Promptly following the date which is nine months after the Effective
Time, the Exchange Agent shall deliver to Parent all cash, certificates
(including any Parent Common Stock) and other documents in its possession
relating to the transactions described in this Agreement, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a Company
Certificate may surrender such Company Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the Parent Common Stock, without any
interest thereon. Notwithstanding the foregoing, none of the Exchange Agent,
Parent, Subsidiary, the Company or the Surviving Corporation shall be liable
to a holder of shares of Company Common Stock for any shares of Parent Common
Stock delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(f) In the event any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed Company
Certificate the Parent Common Stock deliverable in respect thereof determined
in accordance with this Article III. When authorizing such issuance in
exchange therefor, the Board of Directors of the Surviving Corporation may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Company Certificate to give the
Surviving Corporation such indemnity as it may reasonably direct as protection
against any claim that may be made against the Surviving Corporation with
respect to the Company Certificate alleged to have been lost, stolen or
destroyed.
SECTION 3.4 NO FRACTIONAL SECURITIES. Notwithstanding any other provision of
this Agreement, no certificates or scrip for fractional shares of Parent
Common Stock shall be issued in the Merger and no Parent Common Stock
dividend, stock split or interest shall relate to any fractional security, and
such fractional interests shall not entitle the owner thereof to vote or to
any other rights of a security holder. In lieu of any such fractional
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<PAGE>
shares, each holder of shares of Company Common Stock who would otherwise have
been entitled to receive a fraction of a share of Parent Common Stock upon
surrender of Company Certificates for exchange pursuant to this Article III
shall be entitled to receive from the Exchange Agent a cash payment equal to
such fraction multiplied by the average closing price per share of Parent
Common Stock on the New York Stock Exchange Composite Tape, as reported by the
Wall Street Journal, during the 10 trading days immediately preceding the
Effective Time.
SECTION 3.5 CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at a location mutually
agreeable to Parent and the Company as promptly as practicable (but in any
event within five business days) following the date on which the last of the
conditions set forth in Article VIII is fulfilled or waived, or at such other
time and place as Parent and the Company shall agree. The date on which the
Closing occurs is referred to in this Agreement as the "Closing Date."
SECTION 3.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At and after the
Effective Time, holders of Company Certificates shall cease to have any rights
as stockholders of the Company, except for the right to receive shares of
Parent Common Stock pursuant to Section 3.1 and the right to receive cash for
payment of fractional shares pursuant to Section 3.4. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time shall thereafter be made. If, after the Effective Time, subject
to the terms and conditions of this Agreement, Company Certificates formerly
representing shares of Company Common Stock are presented to the Surviving
Corporation, they shall be canceled and exchanged for shares of Parent Common
Stock in accordance with this Article III.
ARTICLE IV
Representations and Warranties of Parent and Subsidiary
Parent and Subsidiary each represent and warrant to the Company that, except
as set forth in the Disclosure Schedule dated as of the date hereof and signed
by an authorized officer of Parent (the "Parent Disclosure Schedule"), it
being agreed that disclosure of any item on the Parent Disclosure Schedule
shall be deemed disclosure with respect to all Sections of this Agreement if
the relevance of such item is reasonably apparent from the face of the Parent
Disclosure Schedule:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of Parent and Subsidiary is
qualified to do business and is in good standing in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure
to be so qualified and in good standing will not, when taken together with all
other such failures, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of Parent and its subsidiaries, taken as a whole. True, accurate
and complete copies of each of Parent's and Subsidiary's charters and By-laws,
in each case as in effect on the date hereof, including all amendments
thereto, have heretofore been delivered to the Company.
SECTION 4.2 CAPITALIZATION. (a) As of April 11, 1997, the authorized capital
stock of Parent consisted of 300,000,000 shares of Parent Common Stock and
10,000,000 shares of preferred stock, par value $.01 per share ("Parent
Preferred Stock"). As of March 25, 1997, (i) 154,110,368 shares of Parent
Common Stock were issued and outstanding, all of which were validly issued and
are fully paid, nonassessable and free of preemptive rights, (ii) no shares of
Parent Preferred Stock were issued and outstanding, (iii) 23,485 shares of
Parent Common Stock and no shares of Parent Preferred Stock were held in the
treasury of Parent, (iv) 18,620,205 shares of Parent Common Stock were
reserved for issuance pursuant to the exercise of outstanding options and
warrants to purchase Parent Common Stock and (v) 15,542,075 shares of Parent
Common Stock were reserved for issuance
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upon conversion of outstanding convertible debentures and outstanding
convertible notes. Assuming the conversion of all outstanding convertible
debentures and outstanding convertible notes of Parent and the exercise of all
outstanding options and warrants to purchase Parent Common Stock, as of March
25, 1997, there would be 188,272,648 shares of Parent Common Stock issued and
outstanding. In addition, as of March 25, 1997, no more than 47,817,778 shares
of Parent Common Stock were reserved and unissued pending conversion of shares
of acquired companies.
(b) The authorized capital stock of Subsidiary consists of 1,000 shares of
Subsidiary Common Stock, of which 100 shares are issued and outstanding, which
shares are owned beneficially and of record by Parent.
(c) Except as disclosed in the Parent SEC Reports (as defined in Section
4.5) or in Section 4.2(a) or as otherwise contemplated by this Agreement, as
of the date hereof, there are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any rights plan or
other anti-takeover agreement, obligating Parent or any subsidiary of Parent
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of Parent or obligating Parent or any
subsidiary of Parent to grant, extend or enter into any such agreement or
commitment. Except as otherwise disclosed in the Parent SEC Reports, there are
no voting trusts, proxies or other agreements or understandings to which
Parent or any subsidiary of Parent is a party or is bound with respect to the
voting of any shares of capital stock of Parent, other than voting agreements
executed in connection with this Agreement. The shares of Parent Common Stock
issued to stockholders of the Company in the Merger will be at the Effective
Time duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights.
SECTION 4.3 SUBSIDIARIES. Each direct and indirect corporate subsidiary of
Parent is duly organized,validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite power and authority
to own, lease and operate its assets and properties and to carry on its
business as it is now being conducted and each subsidiary of Parent is
qualified to do business, and is in good standing, in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary; except in all
cases where the failure to be so qualified and in good standing would not,
when taken together with all such other failures, have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other) or results of operations of Parent and its subsidiaries, taken as a
whole. All of the outstanding shares of capital stock of each corporate
subsidiary of Parent are validly issued, fully paid, nonassessable and free of
preemptive rights, and are owned directly or indirectly by Parent, free and
clear of any liens, claims or encumbrances, except that such shares are
pledged to secure Parent's credit facilities. There are no subscriptions,
options, warrants, rights, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, voting, transfer, ownership or other rights with respect to
any shares of capital stock of any corporate subsidiary of Parent, including
any right of conversion or exchange under any outstanding security, instrument
or agreement. As used in this Agreement, the term "subsidiary" shall mean,
when used with reference to any person or entity, any corporation,
partnership, joint venture or other entity of which such person or entity
(either acting alone or together with its other subsidiaries) owns, directly
or indirectly, 50% or more of the stock or other voting interests, the holders
of which are entitled to vote for the election of a majority of the board of
directors or any similar governing body of such corporation, partnership,
joint venture or other entity.
SECTION 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) Parent and
Subsidiary each have full corporate power and authority to enter into this
Agreement and, subject to the Parent Stockholders' Approval (as defined in
Section 7.3(b)) and the Parent Required Statutory Approvals (as defined in
Section 4.4(c)), to consummate the transactions contemplated hereby. This
Agreement has been approved by the Boards of Directors of Parent and
Subsidiary and the sole stockholder of Subsidiary, and no other corporate
proceedings on the part of Parent or Subsidiary are necessary to authorize the
execution and delivery of this Agreement or, except for the Parent
Stockholders' Approval, the consummation by Parent and Subsidiary of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Subsidiary, and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a
valid and
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legally binding agreement of each of Parent and Subsidiary enforceable against
each of them in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles. Without limitation of the
foregoing, each of the covenants and obligations of Parent set forth in
Sections 6.2, 6.5(d), 7.1, 7.2, 7.3(b), 7.6, 7.7, 7.8, 7.10 and 7.12 is valid,
legally binding and enforceable (subject as aforesaid) notwithstanding the
absence of the Parent Stockholders' Approval.
(b) The execution and delivery of this Agreement by each of Parent and
Subsidiary do not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Parent or any of its subsidiaries under any of the terms, conditions
or provisions of (i) the respective charters or by-laws of Parent or any of
its subsidiaries, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to Parent or any of its subsidiaries or any
of their respective properties or assets or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which Parent
or any of its subsidiaries is now a party or by which Parent or any of its
subsidiaries or any of their respective properties or assets may be bound or
affected. The consummation by Parent and Subsidiary of the transactions
contemplated hereby will not result in any violation, conflict, breach,
termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the
preceding sentence, subject (x) in the case of the terms, conditions or
provisions described in clause (ii) above, to obtaining (prior to the
Effective Time) the Parent Required Statutory Approvals and the Parent
Stockholder's Approval and (y) in the case of the terms, conditions or
provisions described in clause (iii) above, to obtaining (prior to the
Effective Time) consents required from commercial lenders, lessors or other
third parties as specified in Section 4.4(b) of the Parent Disclosure
Schedule. Excluded from the foregoing sentences of this paragraph (b), insofar
as they apply to the terms, conditions or provisions described in clauses (ii)
and (iii) of the first sentence of this paragraph (b) (and whether resulting
from such execution and delivery or consummation), are such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole.
(c) Except for (i) the filings by Parent required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
filing of the Registration Statement and Joint Proxy Statement/ Prospectus (as
such terms are defined in Section 4.9) with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration of the effectiveness thereof by the SEC
and filings with various state blue sky authorities, (iii) the making of the
Merger Filing with the Secretary of State of the State of Delaware in
connection with the Merger, and (iv) any required filings with or approvals
from the New York Stock Exchange, applicable state environmental authorities,
public service commissions and public utility commissions (the filings and
approvals referred to in clauses (i) through (iv) are collectively referred to
as the "Parent Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution
and delivery of this Agreement by Parent or Subsidiary or the consummation by
Parent or Subsidiary of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in
the aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole.
SECTION 4.5 REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1994, Parent
has filed with the SEC all forms, statements, reports and documents (including
all exhibits, post-effective amendments and supplements
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thereto) required to be filed by it under each of the Securities Act, the
Exchange Act and the respective rules and regulations thereunder, all of
which, as amended if applicable, complied when filed in all material respects
with all applicable requirements of the appropriate act and the rules and
regulations thereunder. Parent has previously delivered or made available to
the Company copies (including all exhibits, post-effective amendments and
supplements thereto) of its (a) Annual Reports on Form 10-K for the fiscal
year ended December 31, 1996 and for the immediately preceding fiscal year, as
filed with the SEC, (b) proxy and information statements relating to (i) all
meetings of its stockholders (whether annual or special) and (ii) actions by
written consent in lieu of a stockholders' meeting from January 1, 1995, until
the date hereof, and (c) all other reports, including quarterly reports, and
registration statements filed by Parent with the SEC since January 1, 1995
(other than registration statements filed on Form S-8) (the documents referred
to in clauses (a), (b) and (c) filed prior to the date hereof are collectively
referred to as the "Parent SEC Reports"). As of their respective dates, the
Parent SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements
of Parent included in the Parent's Annual Report on Form 10-K for the year
ended December 31, 1996 (collectively, the "Parent Financial Statements") have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of Parent and its
subsidiaries as of the dates thereof and the results of their operations and
changes in financial position for the periods then ended.
SECTION 4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
Parent SEC Reports or as heretofore disclosed to the Company in writing with
respect to acquisitions or potential transactions or commitments, neither
Parent nor any of its subsidiaries had at December 31, 1996, or has incurred
since that date and as of the date hereof, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except:
(a) liabilities, obligations or contingencies (i) which are accrued or
reserved against in the Parent Financial Statements or reflected in the notes
thereto or (ii) which were incurred after December 31, 1996, and were incurred
in the ordinary course of business and consistent with past practices; (b)
liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole, or (ii) have been discharged or
paid in full prior to the date hereof; and (c) liabilities and obligations
which are of a nature not required to be reflected in the consolidated
financial statements of Parent and its subsidiaries prepared in accordance
with generally accepted accounting principles consistently applied and which
were incurred in the ordinary course of business.
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the most
recent Parent SEC Report that contains consolidated financial statements of
Parent, there has not been any material adverse change in the business,
operations, properties, assets, liabilities, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole, except
for changes that affect the industries in which Parent and its subsidiaries
operate generally.
SECTION 4.8 LITIGATION. Except as disclosed in the Parent SEC Reports, there
are no claims, suits, actions or proceedings pending or, to the knowledge of
Parent, threatened against, relating to or affecting Parent or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seek to restrain or
enjoin the consummation of the Merger or which would reasonably be expected,
either alone or in the aggregate with all such claims, actions or proceedings,
to materially and adversely affect the business, operations, properties,
assets, condition (financial or other) or results of operations of Parent and
its subsidiaries, taken as a whole. Except as set forth in the Parent SEC
Reports, neither Parent nor any of its subsidiaries is subject to any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
which prohibits or restricts the consummation of the transactions contemplated
hereby or would have any material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole.
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SECTION 4.9 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by Parent or its subsidiaries for inclusion in (a)
the Registration Statement on Form S-4 to be filed under the Securities Act
with the SEC by Parent in connection with the Merger for the purpose of
registering the shares of Parent Common Stock to be issued in the Merger (the
"Registration Statement") or (b) the proxy statement to be distributed in
connection with the Company's and Parent's meetings of their respective
stockholders to vote upon this Agreement and the transactions contemplated
hereby (the "Proxy Statement" and, together with the prospectus included in
the Registration Statement, the "Joint Proxy Statement/Prospectus") will, in
the case of the Proxy Statement or any amendments thereof or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments
or supplements thereto, and at the time of the meetings of stockholders of the
Company and Parent to be held in connection with the transactions contemplated
by this Agreement, or, in the case of the Registration Statement, as amended
or supplemented, at the time it becomes effective and at the time of such
meetings of the stockholders of the Company and Parent, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The
Joint Proxy Statement/ Prospectus will, as of its mailing date, comply as to
form in all material respects with all applicable laws, including the
provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
Parent or Subsidiary with respect to information supplied by the Company or
the stockholders of the Company for inclusion therein.
SECTION 4.10 NO VIOLATION OF LAW. Except as disclosed in the Parent SEC
Reports, neither Parent nor any of its subsidiaries is in violation of, or has
been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance, or judgment (including, without
limitation, any applicable environmental law, ordinance or regulation) of any
governmental or regulatory body or authority, except for violations which, in
the aggregate, could not reasonably be expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other) or results of operations of Parent and its subsidiaries, taken as a
whole. Except as disclosed in the Parent SEC Reports, as of the date of this
Agreement, to the knowledge of Parent, no investigation or review by any
governmental or regulatory body or authority is pending or threatened, nor has
any governmental or regulatory body or authority indicated an intention to
conduct the same, other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole. Parent
and its subsidiaries have all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and
approvals necessary to conduct their businesses as presently conducted
(collectively, the "Parent Permits"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole. Parent and its subsidiaries are not in
violation of the terms of any Parent Permit, except for delays in filing
reports or violations which, alone or in the aggregate, would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole.
SECTION 4.11 COMPLIANCE WITH AGREEMENTS. Except as disclosed in the Parent
SEC Reports, Parent and each of its subsidiaries are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, could result in a default under (a) the respective charter, by-
laws or other similar organizational instruments of Parent or any of its
subsidiaries or (b) any contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which Parent or any of its subsidiaries is a party or by which any of them is
bound or to which any of their property is subject, other than, in the case of
clause (b) of this Section 4.11, breaches, violations and defaults which would
not have, in the aggregate, a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of Parent and its subsidiaries, taken as a whole.
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SECTION 4.12 TAXES. (a) Parent and its subsidiaries have (i) duly filed with
the appropriate governmental authorities all Tax Returns (as defined in
Section 4.12(c)) required to be filed by them for all periods ending on or
prior to the Effective Time, other than those Tax Returns the failure of which
to file would not have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole, and such Tax Returns are true,
correct and complete in all material respects and (ii) duly paid in full or
made adequate provision in accordance with generally accepted accounting
principles for the payment of all Taxes (as defined in Section 4.12(b)) for
all past and current periods. The liabilities and reserves for Taxes reflected
in the Parent balance sheet included in the latest Parent SEC Report to cover
all Taxes for all periods ending at or prior to the date of such balance sheet
have been determined in accordance with generally accepted accounting
principles and there is no material liability for Taxes for any period
beginning after such date other than Taxes arising in the ordinary course of
business. There are no material liens for Taxes upon any property or assets of
Parent or any subsidiary thereof, except for liens for Taxes not yet due or
Taxes contested in good faith and adequately reserved against in accordance
with generally accepted accounting principles. There are no unresolved issues
of law or fact arising out of a notice of deficiency, proposed deficiency or
assessment from the Internal Revenue Service (the "IRS") or any other
governmental taxing authority with respect to Taxes of the Parent or any of
its subsidiaries which, singly or in the aggregate, would reasonably be
expected to have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole. Neither Parent nor its
subsidiaries has waived any statute of limitations in respect of a material
amount of Taxes or agreed to any extension of time with respect to a material
Tax assessment or deficiency other than waivers and extensions which are no
longer in effect. Neither Parent nor any of its subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes with any entity
that is not, directly or indirectly, a wholly-owned corporate subsidiary of
Parent other than agreements the consequences of which are fully and
adequately reserved for in the Parent Financial Statements. Neither Parent nor
any of its corporate subsidiaries has, with regard to any assets or property
held, acquired or to be acquired by any of them, filed a consent to the
application of Section 341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
including, without limitation, income, gross receipts, excise, property,
sales, withholding, social security, occupation, use, service, license,
payroll, franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments imposed by the United States, or
any state, local or foreign government or subdivision or agency thereof,
whether computed on a separate, consolidated, unitary, combined or any other
basis, and such term shall include any interest, fines, penalties or
additional amounts and any interest in respect of any additions, fines or
penalties attributable or imposed or with respect to any such taxes, charges,
fees, levies or other assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall mean any
return, report or other document required to be supplied to a taxing authority
in connection with Taxes.
SECTION 4.13 EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as disclosed in the
Parent SEC Reports, at the date hereof, Parent and its subsidiaries do not
maintain or contribute to or have any obligation or liability to or with
respect to any material employee benefit plans, programs, arrangements or
practices, including employee benefit plans within the meaning set forth in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or other similar material arrangements for the provision of
benefits (excluding any "Multi-employer Plan" within the meaning of Section
3(37) of ERISA or a "Multiple Employer Plan" within the meaning of Section
413(c) of the Code) (such plans, programs, arrangements or practices of Parent
and its subsidiaries being referred to as the "Parent Plans"). The Parent
Disclosure Schedule lists all Multi-employer Plans to which any of them makes
contributions or has any obligation or liability to make material
contributions. Neither Parent nor any of its subsidiaries maintains or has any
material liability with respect to any Multiple Employer Plan. Neither Parent
nor any of its subsidiaries has any obligation to create or contribute to any
additional such plan, program, arrangement or practice or to amend any such
plan, program, arrangement or practice so as to increase benefits or
contributions thereunder, except as required under the terms of the Parent
Plans, under existing collective bargaining agreements or to comply with
applicable law.
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(b) Except as disclosed in the Parent SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Parent Plans that could
result in penalties, taxes or liabilities which, singly or in the aggregate,
could have a material adverse effect on the business, operations, properties,
assets, condition (financial or other) or results of operations of Parent and
its subsidiaries, taken as a whole, (ii) except for premiums due, there is no
outstanding material liability, whether measured alone or in the aggregate,
under Title IV of ERISA with respect to any of the Parent Plans, (iii) neither
the Pension Benefit Guaranty Corporation nor any plan administrator has
instituted proceedings to terminate any of the Parent Plans subject to Title
IV of ERISA other than in a "standard termination" described in Section
4041(b) of ERISA, (iv) none of the Parent Plans has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal
year of each of the Parent Plans ended prior to the date of this Agreement,
(v) the current present value of all projected benefit obligations under each
of the Parent Plans which is subject to Title IV of ERISA did not, as of its
latest valuation date, exceed the then current value of the assets of such
plan allocable to such benefit liabilities by more than the amount, if any,
disclosed in the Parent SEC Reports as of December 31, 1996, based upon
reasonable actuarial assumptions currently utilized for such Parent Plan, (vi)
each of the Parent Plans has been operated and administered in accordance with
applicable laws during the period of time covered by the applicable statute of
limitations, except for failures to comply which, singly or in the aggregate,
would not reasonably be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole, (vii)
each of the Parent Plans which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and such determination has not been
modified, revoked or limited by failure to satisfy any condition thereof or by
a subsequent amendment thereto or a failure to amend, except that it may be
necessary to make additional amendments retroactively to maintain the
"qualified" status of such Parent Plans, and the period for making any such
necessary retroactive amendments has not expired, (viii) with respect to
Multi-employer Plans, neither Parent nor any of its subsidiaries has made or
suffered a "complete withdrawal" or a "partial withdrawal ," as such terms are
respectively defined in Sections 4203, 4204 and 4205 of ERISA and, to the best
knowledge of Parent and its subsidiaries, no event has occurred or is expected
to occur which presents a material risk of a complete or partial withdrawal
under said Sections 4203, 4204 and 4205, (ix) to the best knowledge of Parent
and its subsidiaries, there are no material pending, threatened or anticipated
claims involving any of the Parent Plans other than claims for benefits in the
ordinary course, (x) Parent and its subsidiaries have no current material
liability under Title IV of ERISA, and Parent and its subsidiaries do not
reasonably anticipate that any such liability will be asserted against Parent
or any of its subsidiaries, and (xi) no act, omission or transaction
(individually or in the aggregate) has occurred with respect to any Parent
Plan that has resulted or could result in any material liability (direct or
indirect) of Parent or any subsidiary under Sections 409 or 502(c)(i) or (l)
of ERISA or Chapter 43 of Subtitle (A) of the Code. None of the Parent
Controlled Group Plans has an "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code) or is required to provide
security to a Parent Plan pursuant to Section 401(a)(29) of the Code.
(c) The Parent SEC Reports contain a true and complete summary or list of or
otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
SECTION 4.14 LABOR CONTROVERSIES. Except as disclosed in the Parent SEC
Reports, as of the date hereof (a) there are no significant controversies
pending or, to the knowledge of Parent, threatened between Parent or its
subsidiaries and any representatives of any of their employees and (b) to the
knowledge of Parent, there are no material organizational efforts presently
being made involving any of the presently unorganized employees of Parent and
its subsidiaries except for such controversies and organizational efforts
which, singly or in the aggregate, could not reasonably be expected to
materially and adversely affect the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole.
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SECTION 4.15 ENVIRONMENTAL MATTERS. (a) Except as disclosed in the Parent
SEC Reports, (i) Parent and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws (defined in
Section 4.15(b)), including, without limitation, having all permits, licenses
and other approvals and authorizations necessary for the operation of their
respective businesses as presently conducted, (ii) none of the properties
owned by Parent or any of its subsidiaries contain any Hazardous Substance
(defined in Section 4.15(c)) as a result of any activity of Parent or any of
its subsidiaries in amounts exceeding the levels permitted by applicable
Environmental Laws, (iii) since January 1, 1994, neither Parent nor any of its
subsidiaries has received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity
indicating that Parent or any of its subsidiaries may be in violation of, or
liable under, any Environmental Law in connection with the ownership or
operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against Parent or any of its subsidiaries
relating to any violation, or alleged violation, of any Environmental Law, (v)
no Hazardous Substance has been disposed of, released or transported in
violation of any applicable Environmental Law from any properties owned by
Parent or any of its subsidiaries as a result of any activity of Parent or any
of its subsidiaries during the time such properties were owned, leased or
operated by Parent or any of its subsidiaries, and (vi) neither Parent, its
subsidiaries nor any of their respective properties are subject to any
liabilities or expenditures (fixed or contingent) relating to any suit,
settlement, court order, administrative order, regulatory requirement,
judgment or claim asserted or arising under any Environmental Law, except for
violations of the foregoing clauses (i) through (vi) that, singly or in the
aggregate, would not reasonably be expected to have a material adverse effect
on the business, operations, properties, assets, condition (financial or
other) or results of operations of Parent and its subsidiaries, taken as a
whole.
(b) As used herein, "Environmental Law" means any Federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any governmental entity relating to
(x) the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life or any
other natural resource) or to human health or safety or (y) the exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect on the Closing Date. The
term "Environmental Law" includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act,
the Federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal Act and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Occupational
Safety and Health Act of 1970, each as amended and as in effect on the Closing
Date, and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of,
effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental
Law. Hazardous Substance includes any substance to which exposure is regulated
by any government authority or any Environmental Law including, without
limitation, any toxic waste, pollutant, contaminant, hazardous substance,
toxic substance, hazardous waste, special waste, industrial substance or
petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos, or asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
SECTION 4.16 NON-COMPETITION AGREEMENTS. Neither Parent nor any subsidiary
of Parent is a party to any agreement which (i) purports to restrict or
prohibit in any material respect any of them from, directly or indirectly,
engaging in any business involving the collection, interim storage, transfer,
recovery, processing, recycling, marketing or disposal of rubbish, garbage,
paper, textile wastes, chemical or hazardous wastes, liquid
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and other wastes or any other material business currently engaged in by Parent
or the Company, or any corporations affiliated with either of them and (ii)
would restrict or prohibit the Company or any subsidiary of the Company (other
than the Company and its subsidiaries that are currently so restricted or
prohibited) from engaging in any such business. None of Parent's officers,
directors or key employees is a party to any agreement which, by virtue of
such person's relationship with Parent, restricts in any material respect
Parent or any subsidiary of Parent from, directly or indirectly, engaging in
any of the businesses described above.
SECTION 4.17 TITLE TO ASSETS. Parent and each of its subsidiaries has good
and marketable title in fee simple to all its real property and good title to
all its leasehold interests and other properties as reflected in the most
recent balance sheet included in the Parent Financial Statements, except for
such properties and assets that have been disposed of in the ordinary course
of business since the date of such balance sheet, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever,
except (i) the lien for current taxes, payments of which are not yet
delinquent, (ii) such imperfections in title and easements and encumbrances,
if any, as are not substantial in character, amount or extent and do not
materially detract from the value or interfere with the present use of the
property subject thereto or affected thereby, or otherwise materially impair
the Parent's business operations (in the manner presently carried on by the
Parent), or (iii) as disclosed in the Parent SEC Reports, and except for such
matters which, singly or in the aggregate, could not reasonably be expected to
materially and adversely affect the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole. All leases under which Parent leases any real
or personal property are in good standing, valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any
existing default or event which with notice or lapse of time or both would
become a default other than failures to be in good standing, valid and
effective and defaults under such leases which in the aggregate will not
materially and adversely affect the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole.
SECTION 4.18 REORGANIZATION AND POOLING OF INTERESTS. None of the Parent,
Subsidiary or, to their knowledge, any of their affiliates has taken or agreed
or intends to take any action or has any knowledge of any fact or circumstance
that would prevent the Merger from (a) constituting a reorganization within
the meaning of Section 368(a) of the Code or (b) being treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and the rules, regulations and interpretations
of the SEC (a "Pooling Transaction"). As of the date hereof, other than
directors and officers of Parent, to the knowledge of Parent, there are no
"affiliates" of Parent, as that term is used in paragraphs (c) and (d) of Rule
145 under the Securities Act.
SECTION 4.19 PARENT STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of Parent required for approval and adoption of this Agreement
and the Merger is a majority of the shares of Parent Common Stock present in
person or by proxy at a meeting of such stockholders and entitled to vote
thereat.
SECTION 4.20 BROKERS AND FINDERS. Except for the fees and expenses payable
to Donaldson, Lufkin & Jenrette Securities Corporation, which fees are
reflected in its agreement with Parent, Parent has not entered into any
contract, arrangement or understanding with any person or firm which may
result in the obligation of Parent to pay any finder's fees, brokerage or
agent commissions or other like payments in connection with the transactions
contemplated hereby. Except for the fees and expenses paid or payable to
Donaldson, Lufkin & Jenrette Securities Corporation, there is no claim for
payment by Parent of any investment banking fees, finder's fees, brokerage or
agent commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
SECTION 4.21 OPINION OF FINANCIAL ADVISOR. The financial advisor of Parent,
Donaldson, Lufkin & Jenrette Securities Corporation, has rendered an opinion
to the Board of Directors of Parent to the effect that the Exchange Ratio is
fair from a financial point of view to Parent; it being understood and
acknowledged by the Company that such opinion has been rendered for the
benefit of the Board of Directors of Parent and is not intended to, and may
not, be relied upon by the Company, its affiliates or their respective
subsidiaries.
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SECTION 4.22 OWNERSHIP OF COMPANY COMMON STOCK. Neither Parent nor any of
its subsidiaries beneficially owns any shares of Company Common Stock as of
the date hereof.
ARTICLE V
Representations and Warranties of the Company
The Company represents and warrants to Parent and Subsidiary that, except as
set forth in the disclosure schedule dated as of the date hereof and signed by
an authorized officer of the Company (the "Company Disclosure Schedule"), it
being agreed that disclosure of any item on the Company Disclosure Schedule
shall be deemed disclosure with respect to all Sections of this Agreement if
the relevance of such item is reasonably apparent from the face of the Company
Disclosure Schedule:
SECTION 5.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. The Company is qualified to do business and is in good
standing in each jurisdiction in which the properties owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified and in
good standing will not, when taken together with all other such failures, have
a material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole. True, accurate and complete copies of the
Company's Certificate of Incorporation and By-laws, in each case as in effect
on the date hereof, including all amendments thereto, have heretofore been
delivered to Parent.
SECTION 5.2 CAPITALIZATION. (a) The authorized capital stock of the Company
consists of 75,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, par value $.001 per share ("Company Preferred Stock"). As of
March 31, 1997, (i) 43,029,321 shares of Company Common Stock were issued and
outstanding, all of which were validly issued and are fully paid,
nonassessable and free of preemptive rights, and no shares of Company
Preferred Stock were issued and outstanding, (ii) no shares of Company Common
Stock and no shares of Company Preferred Stock were held in the treasury of
the Company, (iii) 3,673,898 shares of Company Common Stock were reserved for
issuance upon exercise of options issued and outstanding pursuant to the
Company's 1992 Stock Option Plan, as amended, the Company's 1992 Disinterested
Director Stock Option Plan and other stock option plans of the Company, (iv)
4,615,385 shares of Company Common Stock were reserved for issuance upon
conversion of outstanding convertible debentures of the Company, and (v)
1,607,334 shares of Company Common Stock were reserved for issuance upon
exercise of outstanding warrants. Assuming conversion of all outstanding
convertible debentures of the Company and the exercise of all outstanding
options, warrants or rights to purchase Company Common Stock, as of March 31,
1997, there would be 52,925,938 shares of Company Common Stock issued and
outstanding.
(b) Except as disclosed in the Company SEC Reports (as defined in Section
5.5) or in Section 5.2(a), as of the date hereof there were no outstanding
subscriptions, options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement and also including any rights plan or other anti-takeover agreement,
obligating the Company or any subsidiary of the Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the
capital stock of the Company or obligating the Company or any subsidiary of
the Company to grant, extend or enter into any such agreement or commitment.
Except as disclosed in the Company SEC Reports, there are no voting trusts,
proxies or other agreements or understandings to which the Company or any
subsidiary of the Company is a party or is bound with respect to the voting of
any shares of capital stock of the Company, other than voting agreements
executed in connection with this Agreement.
SECTION 5.3 SUBSIDIARIES. Each direct and indirect corporate subsidiary of
the Company is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the
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requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted and each
subsidiary of the Company is qualified to do business, and is in good
standing, in each jurisdiction in which the properties owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary; except in all cases where the failure to be so
qualified and in good standing will not, when taken together with all such
other failures, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole. All of the outstanding
shares of capital stock of each corporate subsidiary of the Company are
validly issued, fully paid, nonassessable and free of preemptive rights and
are owned directly or indirectly by the Company free and clear of any liens,
claims, encumbrances, security interests, equities, charges and options of any
nature whatsoever. There are no subscriptions, options, warrants, rights,
calls, contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting, transfer,
ownership or other rights with respect to any shares of capital stock of any
corporate subsidiary of the Company, including any right of conversion or
exchange under any outstanding security, instrument or agreement.
SECTION 5.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) The Company has
full corporate power and authority to enter into this Agreement and, subject
to the Company Stockholders' Approval (as defined in Section 7.3(a)) and the
Company Required Statutory Approvals (as defined in Section 5.4(c)), to
consummate the transactions contemplated hereby. The Board of Directors of the
Company has at a meeting duly called and held and at which a quorum was
present and acting throughout, by the requisite affirmative vote of the
directors of the Company, (i) determined that the Merger is in the best
interests of the Company and its stockholders and (ii) approved this Agreement
and the Merger. No other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement or, except
for the Company Stockholders' Approval, the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by Parent and Subsidiary, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that such enforcement may be subject to (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (b)
general equitable principles. Without limitation of the foregoing, each of the
covenants and obligations of the Company set forth in Sections 6.1, 6.5(a),
(b) and (c), 7.1, 7.2, 7.3(a), 7.6, 7.7, 7.8, 7.10 and 7.12 is valid, legally
binding and enforceable (subject as aforesaid) notwithstanding the absence of
the Company Stockholders' Approval.
(b) The execution and delivery of this Agreement by the Company do not
violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or
any of its subsidiaries under any of the terms, conditions or provisions of
(i) the respective charters or by-laws of the Company or any of its
subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to the Company or any of its subsidiaries or
any of their respective properties or assets, or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which the Company or any of its subsidiaries is now a party or by which the
Company or any of its subsidiaries or any of their respective properties or
assets may be bound or affected. The consummation by the Company of the
transactions contemplated hereby will not result in any violation, conflict,
breach, termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the
preceding sentence, subject (x) in the case of the terms, conditions or
provisions described in clause (ii) above, to obtaining (prior to the
Effective Time) the Company Required Statutory Approvals and the Company
Stockholders' Approval and (y) in the case of the terms, conditions or
provisions described in clause (iii) above, to obtaining (prior to the
Effective Time) consents required from commercial lenders, lessors or other
third parties as specified in Section 5.4(b) of the Company Disclosure
Schedule. Excluded from the foregoing
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sentences of this paragraph (b), insofar as they apply to the terms,
conditions or provisions described in clauses (ii) and (iii) of the first
sentence of this paragraph (b) (and whether resulting from such execution and
delivery or consummation), are such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests, charges
or encumbrances that would not, in the aggregate, have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other) or results of operations of the Company and its subsidiaries, taken
as a whole.
(c) Except for (i) the filings by the Company required by the HSR Act, (ii)
the filing of the Joint Proxy Statement/Prospectus with the SEC pursuant to
the Exchange Act, (iii) the making of the Merger Filing with the Secretary of
State of the State of Delaware in connection with the Merger and (iv) any
required filings with or approvals from applicable state environmental
authorities, public service commissions and public utility commissions (the
filings and approvals referred to in clauses (i) through (iv) are collectively
referred to as the "Company Required Statutory Approvals"), no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any governmental or regulatory body or authority is necessary for
the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be,
would not, in the aggregate, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Company and its subsidiaries, taken as a whole.
SECTION 5.5 REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1994, the
Company has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, post-effective amendments and supplements
thereto) required to be filed by it under each of the Securities Act, the
Exchange Act and the respective rules and regulations thereunder, all of
which, as amended if applicable, complied when filed in all material respects
with all applicable requirements of the appropriate act and the rules and
regulations thereunder. The Company has previously delivered or made available
to Parent copies (including all exhibits, post-effective amendments and
supplements thereto) of its (a) Annual Reports on Form 10-K for the year ended
December 31, 1996, and for the immediately preceding fiscal year, as filed
with the SEC, (b) proxy and information statements relating to (i) all
meetings of its stockholders (whether annual or special) and (ii) actions by
written consent in lieu of a stockholders' meeting from January 1, 1995, until
the date hereof, and (c) all other reports, including quarterly reports, and
registration statements filed by the Company with the SEC since January 1,
1995 (other than registration statements filed on Form S-8) (the documents
referred to in clauses (a), (b) and (c) filed prior to the date hereof are
collectively referred to as the "Company SEC Reports"). As of their respective
dates, the Company SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The audited consolidated financial
statements of the Company included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 (collectively, the "Company Financial
Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of their operations and changes in financial position for the periods
then ended.
SECTION 5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
Company SEC Reports or as heretofore disclosed to Parent in writing with
respect to acquisitions or potential transactions or commitments, neither the
Company nor any of its subsidiaries had at December 31, 1996, or has incurred
since that date and as of the date hereof, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Company Financial Statements or reflected in the notes thereto
or (ii) which were incurred after December 31, 1996, and were incurred in the
ordinary course of business and consistent with past practices, (b)
liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole or (ii) have been
discharged or paid in full prior to the date hereof, and (c) liabilities and
obligations which are of a nature not required to be reflected in the
consolidated financial
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statements of the Company and its subsidiaries prepared in accordance with
generally accepted accounting principles consistently applied and which were
incurred in the ordinary course of business.
SECTION 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the most
recent Company SEC Report that contains consolidated financial statements of
the Company, there has not been any material adverse change in the business,
operations, properties, assets, liabilities, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole,
except for changes that affect the industries in which the Company and its
subsidiaries operate generally.
SECTION 5.8 LITIGATION. Except as referred to in the Company SEC Reports,
there are no claims, suits, actions or proceedings pending or, to the
knowledge of the Company, threatened against, relating to or affecting the
Company or any of its subsidiaries, before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that seek
to restrain the consummation of the Merger or which would reasonably be
expected, either alone or in the aggregate with all such claims, actions or
proceedings, to materially and adversely affect the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole. Except as referred to in
the Company SEC Reports, neither the Company nor any of its subsidiaries is
subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator which prohibits or restricts the consummation of the
transactions contemplated hereby or would have any material adverse effect on
the business, operations, properties, assets, condition (financial or other)
or results of operations of the Company and its subsidiaries, taken as a
whole.
SECTION 5.9 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by the Company or its subsidiaries for inclusion in
(a) the Registration Statement or (b) the Proxy Statement will, in the case of
the Proxy Statement or any amendments thereof or supplements thereto, at the
time of the mailing of the Proxy Statement and any amendments or supplements
thereto, and at the time of the meetings of stockholders of the Company and
Parent to be held in connection with the transactions contemplated by this
Agreement or, in the case of the Registration Statement, as amended or
supplemented, at the time it becomes effective and at the time of such
meetings of the stockholders of the Company and Parent, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The
Joint Proxy Statement/Prospectus will comply, as of its mailing date, as to
form in all material respects with all applicable laws, including the
provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
the Company with respect to information supplied by Parent, Subsidiary or any
stockholder of Parent for inclusion therein.
SECTION 5.10 NO VIOLATION OF LAW. Except as disclosed in the Company SEC
Reports, neither the Company nor any of its subsidiaries is in violation of or
has been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the
aggregate, could not reasonably be expected to have a material adverse effect
on the business, operations, properties, assets, condition (financial or
other) or results of operations of the Company and its subsidiaries, taken as
a whole. Except as disclosed in the Company SEC Reports, as of the date of
this Agreement, to the knowledge of the Company, no investigation or review by
any governmental or regulatory body or authority is pending or threatened, nor
has any governmental or regulatory body or authority indicated an intention to
conduct the same, other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole.
The Company and its subsidiaries have all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted
(collectively, the "Company Permits"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of the
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Company and its subsidiaries, taken as a whole. The Company and its
subsidiaries are not in violation of the terms of any Company Permit, except
for delays in filing reports or violations which, alone or in the aggregate,
would not have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations of
the Company and its subsidiaries, taken as a whole.
SECTION 5.11 COMPLIANCE WITH AGREEMENTS. Except as disclosed in the Company
SEC Reports, the Company and each of its subsidiaries are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, could result in a default under, (a) the respective charter,
by-laws or similar organizational instruments of the Company or any of its
subsidiaries or (b) any contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which the Company or any of its subsidiaries is a party or by which any of
them is bound or to which any of their property is subject, other than, in the
case of clause (b) of this Section 5.11, breaches, violations and defaults
which would not have, in the aggregate, a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole.
SECTION 5.12 TAXES. The Company and its subsidiaries have (i) duly filed
with the appropriate governmental authorities all Tax Returns required to be
filed by them for all periods ending on or prior to the Effective Time, other
than those Tax Returns the failure of which to file would not have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, and such Tax Returns are true, correct and
complete in all material respects, and (ii) duly paid in full or made adequate
provision in accordance with generally accepted accounting principles for the
payment of all Taxes for all past and current periods. The liabilities and
reserves for Taxes reflected in the Company balance sheet included in the
latest Company SEC Report to cover all Taxes for all periods ending at or
prior to the date of such balance sheet have been determined in accordance
with generally accepted accounting principles and there is no material
liability for Taxes for any period beginning after such date other than Taxes
arising in the ordinary course of business. There are no material liens for
Taxes upon any property or asset of the Company or any subsidiary thereof,
except for liens for Taxes not yet due or Taxes contested in good faith and
adequately reserved against in accordance with generally accepted accounting
principles. There are no unresolved issues of law or fact arising out of a
notice of deficiency, proposed deficiency or assessment from the IRS or any
other governmental taxing authority with respect to Taxes of the Company or
any of its subsidiaries which, singly or in the aggregate, would reasonably be
expected to have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole. Neither the Company nor
its subsidiaries has waived any statute of limitations in respect of a
material amount of Taxes or agreed to any extension of time with respect to a
material Tax assessment or deficiency other than waivers and extensions which
are no longer in effect. Neither the Company nor any of its subsidiaries is a
party to any agreement providing for the allocation or sharing of Taxes with
any entity that is not, directly or indirectly, a wholly-owned corporate
subsidiary of Company other than agreements the consequences of which are
fully and adequately reserved for in the Company Financial Statements. Neither
the Company nor any of its corporate subsidiaries has, with regard to any
assets or property held, acquired or to be acquired by any of them, filed a
consent to the application of Section 341(f) of the Code.
SECTION 5.13 EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as disclosed in the
Company SEC Reports, at the date hereof, the Company and its subsidiaries do
not maintain or contribute to or have any obligation or liability to or with
respect to any material employee benefit plans, programs, arrangements or
practices, including employee benefit plans within the meaning set forth in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or other similar material arrangements for the provision of
benefits (excluding any "Multi-employer Plan" within the meaning of Section
3(37) of ERISA or a "Multiple Employer Plan" within the meaning of Section
413(c) of the Code) (such plans, programs, arrangements or practices of the
Company and its subsidiaries being referred to as the "Company Plans"). The
Company Disclosure Schedule lists all Multi-employer Plans to which any of
them makes contributions or has any obligation or liability to make material
contributions. Neither the Company nor any of its subsidiaries maintains or
has any material
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liability with respect to any Multiple Employer Plan. Neither the Company nor
any of its subsidiaries has any obligation to create or contribute to any
additional such plan, program, arrangement or practice or to amend any such
plan, program, arrangement or practice so as to increase benefits or
contributions thereunder, except as required under the terms of the Company
Plans, under existing collective bargaining agreements or to comply with
applicable law.
(b) Except as disclosed in the Company SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Company Plans that could
result in penalties, taxes or liabilities which, singly or in the aggregate,
could have a material adverse effect on the business, operations, properties,
assets, condition (financial or other) or results of operations of the Company
and its subsidiaries, taken as a whole, (ii) except for premiums due, there is
no outstanding material liability, whether measured alone or in the aggregate,
under Title IV of ERISA with respect to any of the Company Plans, (iii)
neither the Pension Benefit Guaranty Corporation nor any plan administrator
has instituted proceedings to terminate any of the Company Plans subject to
Title IV of ERISA other than in a "standard termination" described in Section
4041(b) of ERISA, (iv) none of the Company Plans has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal
year of each of the Company Plans ended prior to the date of this Agreement,
(v) the current present value of all projected benefit obligations under each
of the Company Plans which is subject to Title IV of ERISA did not, as of its
latest valuation date, exceed the then current value of the assets of such
plan allocable to such benefit liabilities by more than the amount, if any,
disclosed in the Company SEC Reports as of December 31, 1996, based upon
reasonable actuarial assumptions currently utilized for such Company Plan,
(vi) each of the Company Plans has been operated and administered in
accordance with applicable laws during the period of time covered by the
applicable statute of limitations, except for failures to comply which, singly
or in the aggregate, would not reasonably be expected to have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, (vii) each of the Company Plans which is
intended to be "qualified" within the meaning of Section 401(a) of the Code
has been determined by the Internal Revenue Service to be so qualified and
such determination has not been modified, revoked or limited by failure to
satisfy any condition thereof or by a subsequent amendment thereto or a
failure to amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status of such Company
Plans, and the period for making any such necessary retroactive amendments has
not expired, (viii) with respect to Multi-employer Plans, neither the Company
nor any of its subsidiaries has made or suffered a "complete withdrawal" or a
"partial withdrawal," as such terms are respectively defined in Sections 4203,
4204 and 4205 of ERISA and, to the best knowledge of the Company and its
subsidiaries, no event has occurred or is expected to occur which presents a
material risk of a complete or partial withdrawal under said Sections 4203,
4204 and 4205, (ix) to the best knowledge of the Company and its subsidiaries,
there are no material pending, threatened or anticipated claims involving any
of the Company Plans other than claims for benefits in the ordinary course,
(x) the Company and its subsidiaries have no current material liability under
Title IV of ERISA, and the Company and its subsidiaries do not reasonably
anticipate that any such liability will be asserted against the Company or any
of its subsidiaries, and (xi) no act, omission or transaction (individually or
in the aggregate) has occurred with respect to any Company Plan that has
resulted or could result in any material liability (direct or indirect) of the
Company or any subsidiary under Sections 409 or 502(c)(1) or (l) of ERISA or
Chapter 43 of Subtitle (A) of the Code. None of the Company Controlled Group
Plans has an "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code) or is required to provide security to a
Company Plan pursuant to Section 401(a)(29) of the Code.
(c) The Company SEC Reports contain a true and complete summary or list of
or otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
(d) There are no agreements which will or may provide payments to any
officer, employee, stockholder, or highly compensated individual which will be
"parachute payments" under Code Section 280G that are
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nondeductible to the Company or subject to tax under Code Section 4999 for
which the Company or any ERISA Affiliate would have withholding liability.
SECTION 5.14 LABOR CONTROVERSIES. Except as disclosed in the Company SEC
Reports as of the date hereof, (a) there are no significant controversies
pending or, to the knowledge of the Company, threatened between the Company or
its subsidiaries and any representatives of any of their employees and (b) to
the knowledge of the Company, there are no material organizational efforts
presently being made involving any of the presently unorganized employees of
the Company or its subsidiaries, except for such controversies and
organizational efforts, which, singly or in the aggregate, could not
reasonably be expected to materially and adversely affect the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Company and its subsidiaries, taken as a whole.
SECTION 5.15 ENVIRONMENTAL MATTERS. Except as disclosed in the Company SEC
Reports, (i) the Company and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws, including,
without limitation, having all permits, licenses and other approvals and
authorizations necessary for the operation of their respective businesses as
presently conducted, (ii) none of the properties owned by the Company or any
of its subsidiaries contain any Hazardous Substance as a result of any
activity of the Company or any of its subsidiaries in amounts exceeding the
levels permitted by applicable Environmental Laws, (iii) since January 1,
1994, neither the Company nor any of its subsidiaries has received any
notices, demand letters or requests for information from any Federal, state,
local or foreign governmental entity indicating that the Company or any of its
subsidiaries may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of their businesses, (iv) there are
no civil, criminal or administrative actions, suits, demands, claims,
hearings, investigations or proceedings pending or threatened, against the
Company or any of its subsidiaries relating to any violation, or alleged
violation, of any Environmental Law, (v) no Hazardous Substance has been
disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company or any of its
subsidiaries as a result of any activity of the Company or any of its
subsidiaries during the time such properties were owned, leased or operated by
the Company or any of its subsidiaries, and (vi) neither the Company, its
subsidiaries nor any of their respective properties are subject to any
material liabilities or expenditures (fixed or contingent) relating to any
suit, settlement, court order, administrative order, regulatory requirement,
judgment or claim asserted or arising under any Environmental Law, except for
violations of the foregoing clauses (i) through (vi) that, singly or in the
aggregate, would not reasonably be expected to have a material adverse effect
on the business, operations, properties, assets, condition (financial or
other) or results of operations of the Company and its subsidiaries, taken as
a whole.
SECTION 5.16 NON-COMPETITION AGREEMENTS. Except as disclosed in the Company
SEC Reports, neither the Company nor any subsidiary of the Company is a party
to any agreement which (i) purports to restrict or prohibit in any material
respect any of them or any corporation affiliated with any of them from,
directly or indirectly, engaging in any business involving the collection,
interim storage, transfer, recovery, processing, recycling, marketing or
disposal of rubbish, garbage, paper, textile wastes, chemical or hazardous
wastes, liquid and other wastes or any other material business currently
engaged in by Parent or the Company, or any corporations affiliated with
either of them and (ii) would restrict or prohibit Parent or any subsidiary of
the Parent (other than the Company and its subsidiaries that are currently so
restricted or prohibited) from engaging in such business. None of the
Company's officers, directors or key employees is a party to any agreement
which, by virtue of such person's relationship with the Company, restricts in
any material respect the Company or any subsidiary or affiliate of the Company
from, directly or indirectly, engaging in any of the businesses described
above.
SECTION 5.17 TITLE TO ASSETS. The Company and each of its subsidiaries has
good and marketable title in fee simple to all its real property and good
title to all its leasehold interests and other properties, as reflected in the
most recent balance sheet included in the Company Financial Statements, except
for properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever,
except (i) the lien for current
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taxes, payments of which are not yet delinquent, (ii) such imperfections in
title and easements and encumbrances, if any, as are not substantial in
character, amount or extent and do not materially detract from the value, or
interfere with the present use of the property subject thereto or affected
thereby, or otherwise materially impair the Company's business operations (in
the manner presently carried on by the Company) or (iii) as disclosed in the
Company SEC Reports, and except for such matters which, singly or in the
aggregate, could not reasonably be expected to materially and adversely affect
the business, operations, properties, assets, condition (financial or other)
or results of operations of the Company and its subsidiaries, taken as a
whole. All leases under which the Company leases any real or personal property
are in good standing, valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default or
event which with notice or lapse of time or both would become a default other
than failures to be in good standing, valid and effective and defaults under
such leases which in the aggregate will not materially and adversely affect
the business, operations, properties, assets, condition (financial or other)
or results of operations of the Company and its subsidiaries, taken as a
whole.
SECTION 5.18 REORGANIZATION AND POOLING OF INTERESTS. Neither the Company
nor, to the knowledge of the Company, any of its affiliates has taken or
agreed or intends to take any action or has any knowledge of any fact or
circumstance that would prevent the Merger from (a) constituting a
reorganization within the meaning of Section 368(a) of the Code or (b) being
treated for financial accounting purposes as a Pooling Transaction. As of the
date hereof, other than directors and officers of the Company, to the
knowledge of the Company, there are no "affiliates" of the Company, as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act.
SECTION 5.19 COMPANY STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of the Company required for approval and adoption of this
Agreement and the Merger is a majority of the outstanding shares of Company
Common Stock entitled to vote thereon.
SECTION 5.20 BROKERS AND FINDERS. Except for the fees and expenses payable
to Goldman, Sachs & Co., which fees are reflected in its agreement with the
Company, the Company has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
the Company to pay any finder's fees, brokerage or agent commissions or other
like payments in connection with the transactions contemplated hereby. Except
for the fees and expenses paid or payable to Goldman, Sachs & Co., there is no
claim for payment by the Company of any investment banking fees, finder's
fees, brokerage or agent commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 5.21 OPINION OF FINANCIAL ADVISOR. The financial advisor of the
Company, Goldman, Sachs & Co., has rendered an opinion to the Board of
Directors of the Company to the effect that, as of the date thereof, the
Exchange Ratio is fair to the holders of Company Common Stock; it being
understood and acknowledged by Parent and Subsidiary that such opinion has
been rendered for the benefit of the Board of Directors of the Company and is
not intended to, and may not, be relied upon by Parent, its affiliates or
their respective subsidiaries.
ARTICLE VI
Conduct of Business Pending the Merger
SECTION 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Except as
otherwise contemplated by this Agreement or disclosed in Section 6.1 of the
Company Disclosure Schedule, after the date hereof and prior to the Closing
Date or earlier termination of this Agreement, unless Parent shall otherwise
agree in writing, the Company shall, and shall cause its subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual course of
business and consistent with past practice;
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(b) not (i) amend or propose to amend their respective charter or by-laws
(except that the Company may amend its charter to increase the number of
authorized shares of Company Common Stock, (ii) split, combine or
reclassify their outstanding capital stock or (iii) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise, except for the payment of dividends or distributions to the
Company by a wholly-owned subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that (i) the Company may issue shares upon
conversion of convertible securities and exercise of options and warrants,
(ii) the Company may issue shares of Company Common Stock (or warrants or
options to acquire Company Common Stock) in connection with acquisitions of
assets or businesses pursuant to the proviso of Section 6.1(d), and (iii)
the Company may grant options with an exercise price per share of Company
Common Stock no less than the closing price of a share of Company Common
Stock on the day prior to grant of such option with respect to up to an
aggregate of 200,000 shares of Company Common Stock; provided that such
grants may not be made to any current executive officer or director of the
Company and may only be made to (i) persons who have not held and do not
hold other options to purchase Company Common Stock or (ii) in the ordinary
course of business, to existing employees of the Company and its
subsidiaries;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business (other than pursuant to credit facilities) or borrowings
under the existing credit facilities of the Company or any of its
subsidiaries as such facilities may be amended in a manner that does not
have a material adverse effect on the Company (the "Existing Credit
Facilities") up to the existing borrowing limit on the date hereof (B)
borrowings to refinance existing indebtedness on terms which are reasonably
acceptable to Parent or (C) borrowings in connection with acquisitions as
set forth in the proviso in this Section 6.1(d), (ii) redeem, purchase,
acquire or offer to purchase or acquire any shares of its capital stock or
any options, warrants or rights to acquire any of its capital stock or any
security convertible into or exchangeable for its capital stock, (iii) take
any action that would jeopardize the treatment of the Merger as a pooling
of interests under Opinion No. 16 of the Accounting Principles Board ("APB
No. 16"), (iv) take or fail to take any action which action or failure to
take action would cause the Company or its stockholders (except to the
extent that any stockholders receive cash in lieu of fractional shares and
except to the extent of Stockholders in special circumstances) to recognize
gain or loss for federal income tax purposes as a result of the
consummation of the Merger or would otherwise cause the Merger not to
qualify as a reorganization under Section 368(a) of the Code, (v) make any
acquisition of any assets or businesses other than expenditures for current
assets in the ordinary course of business and expenditures for fixed or
capital assets in the ordinary course of business and other than as set
forth in the proviso in this Section 6.1(d), (vi) sell, pledge, dispose of
or encumber any material assets or businesses other than (a) sales of
businesses or assets in the ordinary course of business, (b) sales of
businesses or assets disclosed in Section 6.1 of the Company Disclosure
Schedule, (c) sales of businesses or assets with aggregate 1996 revenues
less than $5.0 million, and (d) pledges or encumbrances pursuant to
Existing Credit Facilities or other permitted borrowings, or (vii) except
as contemplated by the following proviso, enter into any binding contract,
agreement, commitment or arrangement with respect to any of the foregoing;
provided, however, that notwithstanding the foregoing (other than
subsections (iii) and (iv) of this Section 6.1(d)), the Company shall not
be prohibited from acquiring any assets or businesses or incurring or
assuming indebtedness in connection with acquisitions of assets or
businesses so long as (A) such acquisitions are disclosed in Section 6.1 of
the Company Disclosure Schedule, or (B) the aggregate value of
consideration paid in connection with all such acquisitions (other than
those acquisitions disclosed in Section 6.1 of the Company Disclosure
Schedule) including any funded indebtedness assumed and any Company Common
Stock issued in connection with such acquisitions (valued for purposes of
this limitation at a price per share equal to the price of the Company
Common Stock on the date the agreement in respect of any such acquisition
is entered into) does not exceed $150 million and the aggregate value of
consideration paid or payable for any one such acquisition (other than
those acquisitions disclosed in Section
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6.1 of the Company Disclosure Schedule), including any funded indebtedness
assumed and any Company Common Stock issued in connection with such
acquisition (valued for purposes of this limitation at a price per share
equal to the price of the Company Common Stock on the date the agreement in
respect of such acquisition is entered into) does not exceed $40 million.
For purposes of the foregoing, any contingent, royalty and similar payments
made in connection with acquisitions of businesses or assets shall be
included as acquisition consideration and shall be deemed to have a value
equal to their present value assuming a 8% per annum discount rate and
assuming that all amounts payable for the first five years following
consummation of the acquisitions (but not thereafter) are paid.
Notwithstanding anything herein to the contrary (A) the Company will not
acquire or agree to acquire any assets or businesses if such acquisition or
agreement may reasonably be expected to delay the consummation of the
Merger, (B) the Company will not acquire or agree to acquire any assets or
businesses if such assets or businesses are not in industries in which the
Company currently operates, unless such assets or businesses are acquired
incidental to an acquisition of businesses or assets that are in industries
in which the Company currently operates and it is reasonable to acquire
such incidental businesses or assets in connection with such acquisition,
and (C) the Company will not acquire or agree to acquire all or
substantially all of the business, assets, properties or capital stock of
any entity with securities registered under the Securities Act or the
Exchange Act.
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement.
(f) subject to restrictions imposed by applicable law, confer with one or
more representatives of Parent to report operational matters of materiality
and the general status of ongoing operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice; provided,
however, that the Company and its subsidiaries shall in no event enter into
or amend any written employment agreement providing for annual base salary
in excess of $75,000 per annum;
(h) not adopt, enter into or amend any pension or retirement plan, trust
or fund, except as required to comply with changes in applicable law and
not adopt, enter into or amend in any material respect any bonus, profit
sharing, compensation, stock option, deferred compensation, health care,
employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employees or retirees
generally, other than in the ordinary course of business, except (i) as
contemplated by Section 6.1(c), (ii) as required to comply with changes in
applicable law, (iii) to increase the number of shares of Company Common
Stock available for grant under the Company's 1992 Stock Option Plan, as
amended, and the Company's 1992 Disinterested Director Stock Option Plan,
as amended, (iv) any of the foregoing involving any such then existing
plans, agreements, trusts, funds or arrangements of any company acquired
after the date hereof or (v) as required pursuant to an existing
contractual arrangement or agreement;
(i) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are
consistent with past practice; and
(j) not make, change or revoke any material Tax election or make any
material agreement or settlement regarding Taxes with any taxing authority.
SECTION 6.2 CONDUCT OF BUSINESS BY PARENT AND SUBSIDIARY PENDING THE MERGER.
Except as otherwise contemplated by this Agreement, after the date hereof and
prior to the Closing Date or earlier termination of this Agreement, unless the
Company shall otherwise agree in writing, Parent shall, and shall cause its
subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice;
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(b) not (i) amend or propose to amend their respective charter (except
for any amendments by Parent of its Certificate of Incorporation to
increase the number of authorized shares of Parent Common Stock so as to be
able to consummate the Merger) or by-laws, (ii) split, combine or
reclassify (whether by stock dividend or otherwise) their outstanding
capital stock, or (iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except for the
payment of dividends or distributions to Parent by a wholly-owned
subsidiary of Parent;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that (i) Parent may issue shares upon conversion
of convertible securities and exercise of options (ii) Parent may issue
options with an exercise price per share of Parent Common Stock no less
than the fair market value of a share of Parent Common Stock on the date of
grant thereof (and shares upon exercise of such options) pursuant to its
employee stock option plans in effect on the date hereof with respect to up
to an aggregate of 500,000 shares of Parent Common Stock and (iii) Parent
may issue shares of capital stock (or warrants or options to acquire
capital stock) in connection with acquisitions of assets or businesses
pursuant to the proviso of Section 6.2(d);
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business or borrowings under the existing credit facilities of
Parent or any of its subsidiaries, (B) borrowings to refinance existing
indebtedness on terms which are reasonably acceptable to the Company, or
(C) as set forth in the proviso in this Section 6.2(d), (ii) redeem,
purchase, acquire or offer to purchase or acquire any shares of its capital
stock or any options, warrants or rights to acquire any of its capital
stock or any security convertible into or exchangeable for its capital
stock, (iii) take any action that would jeopardize the treatment of the
Merger as a pooling of interests under APB No. 16, (iv) take or fail to
take any action which action or failure to take action would cause Parent
or its stockholders to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger or would otherwise
cause the Merger not to qualify as a reorganization under Section 368(a) of
the Code, (v) pledge or encumber any material assets or businesses other
than pledges or encumbrances pursuant to existing credit facilities, (vi)
make any acquisition of any assets or businesses other than expenditures
for current assets in the ordinary course of business and expenditures for
fixed or capital assets in the ordinary course of business and other than
as set forth in the proviso of this Section 6.2(d) or (vii) enter into any
binding contract, agreement, commitment or arrangement with respect to any
of the foregoing; provided, however, that notwithstanding the foregoing
(other than subsections (iii) and (iv) of this Section 6.2(d)), Parent
shall not be prohibited from acquiring any assets or businesses or
incurring or assuming indebtedness in connection with acquisitions of
assets or businesses so long as (A) such acquisitions are disclosed in
Section 6.2 of the Parent Disclosure Schedule, or (B) the aggregate value
of consideration paid in connection with all such acquisitions (other than
those acquisitions disclosed in Section 6.2 of the Parent Disclosure
Schedule) including any funded indebtedness assumed and any Parent Common
Stock issued in connection with such acquisitions (valued for purposes of
this limitation at a price per share equal to the price of the Parent
Common Stock on the date the agreement in respect of any such acquisition
is entered into) does not exceed $375 million and the aggregate value of
consideration paid or payable for any one such acquisition (other than
those acquisitions disclosed in Section 6.2 of the Parent Disclosure
Schedule), including any funded indebtedness assumed and any Parent Common
Stock issued in connection with such acquisition (valued for purposes of
this limitation at a price per share equal to the price of the Parent
Common Stock on the date the agreement in respect of such acquisition is
entered into) does not exceed $100 million. For purposes of the foregoing,
any contingent, royalty and similar payments made in connection with
acquisitions of businesses or assets shall be included as acquisition
consideration and shall be deemed to have a value equal to their present
value assuming a 8% per annum discount rate and assuming that all amounts
payable for the first five years following consummation of the acquisition
(but not thereafter) are paid. Notwithstanding anything herein to the
contrary (A) Parent will not acquire or agree to acquire any assets or
businesses if such acquisition or agreement may reasonably be expected to
delay the consummation of the Merger; (B) Parent will not acquire or agree
to acquire any assets or
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businesses if such assets or businesses are not in industries in which
Parent currently operates, unless such assets or businesses are acquired
incidental to an acquisition of businesses or assets that are in industries
in which Parent currently operates and it is reasonable to acquire such
incidental businesses or assets in connection with such acquisition; and
(C) Parent will not acquire or agree to acquire all or substantially all of
the business, assets, properties or capital stock of any entity with
securities registered under the Securities Act or the Exchange Act.
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement.
(f) subject to restrictions imposed by applicable law, confer with one or
more representatives of the Company to report operational matters of
materiality and the general status of ongoing operations; and
(g) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are
consistent with past practice.
SECTION 6.3 CONTROL OF THE COMPANY'S OPERATIONS. Nothing contained in this
Agreement shall give to Parent, directly or indirectly, rights to control or
direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
SECTION 6.4 CONTROL OF PARENT'S OPERATIONS. Nothing contained in this
Agreement shall give to the Company, directly or indirectly, rights to control
or direct Parent's operations prior to the Effective Time. Prior to the
Effective Time, Parent shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
SECTION 6.5 ACQUISITION TRANSACTIONS. (a) After the date hereof and prior to
the Effective Time or earlier termination of this Agreement, the Company shall
not, and shall not permit any of its subsidiaries to, initiate, solicit,
negotiate, encourage or provide confidential information to facilitate, and
the Company shall, and shall use its reasonable efforts to cause any officer,
director or employee of the Company, or any attorney, accountant, investment
banker, financial advisor or other agent retained by it or any of its
subsidiaries, not to initiate, solicit, negotiate, encourage or provide non-
public or confidential information to facilitate, any proposal or offer to
acquire all or any substantial part of the business or properties of the
Company or any capital stock of the Company, whether by merger, purchase of
assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof (any such transactions being referred to
herein as an "Acquisition Transaction").
(b) Notwithstanding the provisions of paragraph (a) above, (i) the Company
may, in response to an unsolicited written offer or proposal with respect to a
potential or proposed Acquisition Transaction ("Acquisition Proposal") which
the Company's Board of Directors determines, in good faith and after
consultation with its independent financial advisor, would result (if
consummated pursuant to its terms) in an Acquisition Transaction more
favorable to the Company's stockholders than the Merger (any such offer or
proposal being referred to as a "Superior Proposal"), furnish (subject to the
execution of a confidentiality agreement substantially similar to the
confidentiality provisions of this agreement), confidential or non-public
information to a financially capable corporation, partnership, person or other
entity or group (a "Potential Acquirer") and negotiate with such Potential
Acquirer if the Board of Directors of the Company, after consulting with its
outside legal counsel, determines in good faith that the failure to provide
such confidential or non-public information to or negotiate with such
Potential Acquirer would be reasonably likely to constitute a breach of its
fiduciary duty to the Company's stockholders and (ii) the Company's Board of
Directors may take and disclose to the Company's stockholders a position
contemplated by Rule 14e-2 under the Exchange Act. It is understood
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and agreed that negotiations and other activities conducted in accordance with
this paragraph (b) shall not constitute a violation of paragraph (a) of this
Section 6.5.
(c) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal, indication of interest or request for nonpublic
information relating to the Company or its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company or any subsidiary by any person or entity that informs the Board of
Directors of the Company or such subsidiary that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent shall be made orally
and in writing and shall indicate in reasonable detail the identity of the
offeror and the terms and conditions of such proposal, inquiry or contact.
(d) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Parent shall promptly notify the Company
after receipt of any proposal or offer to acquire all or any substantial part
of the business, properties or capital stock of Parent, whether by merger,
purchase of assets, tender offer or otherwise, whether for cash, securities or
any other consideration or combination thereof (any such transactions being
referred to herein as a "Parent Acquisition Transaction") and shall indicate
in reasonable detail the identity of the offeror and the terms and conditions
of such proposal or offer.
ARTICLE VII
Additional Agreements
SECTION 7.1 ACCESS TO INFORMATION. (a) Subject to applicable law, the
Company and its subsidiaries shall afford to Parent and Subsidiary and their
respective accountants, counsel, financial advisors and other representatives
(the "Parent Representatives") and Parent and its subsidiaries shall afford to
the Company and its accountants, counsel, financial advisors and other
representatives (the "Company Representatives") full access during normal
business hours with reasonable notice throughout the period prior to the
Effective Time to all of their respective properties, books, contracts,
commitments and records (including, but not limited to, Tax Returns) and,
during such period, shall furnish promptly to one another (i) a copy of each
report, schedule and other document filed or received by any of them pursuant
to the requirements of federal or state securities laws or filed by any of
them with the SEC in connection with the transactions contemplated by this
Agreement and (ii) such other information concerning their respective
businesses, properties and personnel as Parent or Subsidiary or the Company,
as the case may be, shall reasonably request; provided, however, that no
investigation pursuant to this Section 7.1 shall amend or modify any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Parent and its
subsidiaries shall hold and shall use their reasonable best efforts to cause
the Parent Representatives to hold, and the Company and its subsidiaries shall
hold and shall use their reasonable best efforts to cause the Company
Representatives to hold, in strict confidence all nonpublic documents and
information furnished to Parent and Subsidiary or to the Company, as the case
may be, in connection with the transactions contemplated by this Agreement,
except that (i) Parent, Subsidiary and the Company may disclose such
information as may be necessary in connection with seeking the Parent Required
Statutory Approvals and Parent Stockholders' Approval, the Company Required
Statutory Approvals and the Company Stockholders' Approval and (ii) each of
Parent, Subsidiary and the Company may disclose any information that it is
required by law or judicial or administrative order to disclose.
(b) In the event that this Agreement is terminated in accordance with its
terms, each party shall promptly redeliver to the other all nonpublic written
material provided pursuant to this Section 7.1 and shall not retain any
copies, extracts or other reproductions in whole or in part of such written
material. In such event, all documents, memoranda, notes and other writings
prepared by Parent or the Company based on the information in such material
shall be destroyed (and Parent and the Company shall use their respective
reasonable best efforts to cause their advisors and representatives to
similarly destroy their documents, memoranda and notes), and such destruction
(and reasonable best efforts) shall be certified in writing by an authorized
officer supervising such destruction.
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SECTION 7.2 REGISTRATION STATEMENT AND PROXY STATEMENT. Parent and the
Company shall file with the SEC as soon as is reasonably practicable after the
date hereof the Registration Statement and shall use all reasonable efforts to
have the Registration Statement declared effective by the SEC as promptly as
practicable. Parent shall also take any action required to be taken under
applicable state blue sky or securities laws in connection with the issuance
of Parent Common Stock pursuant hereto. Parent and the Company shall promptly
furnish to each other all information, and take such other actions, as may
reasonably be requested in connection with any action by any of them in
connection with the preceding sentence. The information provided and to be
provided by Parent and the Company, respectively, for use in the Joint Proxy
Statement/Prospectus shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
SECTION 7.3 STOCKHOLDERS' APPROVALS. (a) Subject to the fiduciary duties of
the Board of Directors of the Company under applicable law, the Company shall,
as promptly as practicable, submit this Agreement and the transactions
contemplated hereby for the approval of its stockholders at a meeting of
stockholders and shall use its reasonable best efforts to obtain stockholder
approval and adoption (the "Company Stockholders' Approval") of this Agreement
and the transactions contemplated hereby. Subject to the fiduciary duties of
the Board of Directors of the Company under applicable law, such meeting of
stockholders shall be held as soon as practicable following the date upon
which the Registration Statement becomes effective. Subject to the fiduciary
duties of the Board of Directors of the Company under applicable law, the
Company shall, through its Board of Directors, recommend to its stockholders
approval of the transactions contemplated by this Agreement.
(b) Subject to the fiduciary duties of the Board of Directors of Parent
under applicable law, Parent shall, as promptly as practicable, submit this
Agreement and the transactions contemplated hereby for the approval of its
stockholders at a meeting of stockholders and shall use its reasonable best
efforts to obtain stockholder approval and adoption (the "Parent Stockholders'
Approval") of this Agreement and the transactions contemplated hereby. Such
meeting of stockholders shall be held as soon as practicable following the
date on which the Registration Statement becomes effective. Parent shall,
through its Board of Directors (i) subject to the fiduciary duties of the
members thereof, recommend to its stockholders approval of the transactions
contemplated by this Agreement and (ii) authorize and cause an officer of
Parent to vote Parent's shares of Subsidiary Common Stock for adoption and
approval of this Agreement and the transactions contemplated hereby and shall
take all additional actions as the sole stockholder of Subsidiary necessary to
adopt and approve this Agreement and the transactions contemplated hereby.
SECTION 7.4 COMPLIANCE WITH THE SECURITIES ACT. Parent and the Company shall
each use its commercially reasonable efforts to cause each officer, each
director and each other person who is an "affiliate," as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act, of Parent or the
Company, as the case may be, to deliver to Parent and the Company on or prior
to the Effective Time a written agreement (an "Affiliate Agreement") to the
effect that such person will not offer to sell, sell or otherwise dispose of
any shares of Parent Common Stock issued in the Merger, except, in each case,
pursuant to an effective registration statement or in compliance with Rule
145, as amended from time to time, or in a transaction which, in the opinion
of legal counsel satisfactory to Parent, is exempt from the registration
requirements of the Securities Act and, in any case, until after the results
covering 30 days of post-Merger combined operations of Parent and the Company
have been filed with the SEC, sent to stockholders of Parent or otherwise
publicly issued. Promptly following the Effective Time, Parent shall cause
such registration statements under the Securities Act to be declared effective
and to remain in effect as may be necessary to permit the conversion, exchange
or exercise of the Convertible Notes (as defined in Section 7.13), options,
warrants and other rights to acquire Company Common Stock for shares of Parent
Common Stock in accordance with their respective terms and to permit the sale
of such shares of Parent Common Stock.
SECTION 7.5 EXCHANGE LISTING. Parent shall use its reasonable best efforts
to effect, at or before the Effective Time, authorization for listing on the
New York Stock Exchange Inc. (the "NYSE"), upon official
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notice of issuance, of the shares of Parent Common Stock to be issued pursuant
to the Merger or to be reserved for issuance upon exercise of stock options or
warrants or the conversion of convertible securities.
SECTION 7.6 EXPENSES AND FEES. (a) All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, except that those expenses
incurred in connection with printing and filing the Joint Proxy
Statement/Prospectus shall be shared equally by Parent and the Company.
(b) The Company agrees to pay to Parent a fee equal to $50 million if:
(i) the Company terminates this Agreement pursuant to clause (iv) or (v)
of Section 9.1(a); or
(ii) Parent terminates this Agreement pursuant to clause (iv) of Section
9.1(b);
(c) The Company agrees to pay Parent a fee equal to $1 million if Parent
terminates this Agreement pursuant to clause (v) of section 9.1(b).
(d) Parent agrees to pay to the Company a fee equal to $50 million if (i)
this Agreement is terminated for any reason at a time at which the Company was
not in material breach of its covenants contained in this Agreement and was
entitled to terminate this Agreement pursuant to clause (vii) of Section
9.1(a), (ii) prior to the time of such termination a proposal relating to a
Parent Acquisition Transaction had been made, (iii) on or prior to the sixth
month anniversary of the termination of this Agreement (x) Parent or any of
its subsidiaries or affiliates enters into an agreement or letter of intent
(or resolves or announces an intention to do) with respect to a Parent
Acquisition Transaction or a merger, acquisition or other business combination
involving a person, entity or group if such person, entity, group (or any
member of such group, or any affiliate of any of the foregoing) made a
proposal with respect to a Parent Acquisition Transaction on or after the date
hereof and prior to the termination of this Agreement and such Parent
Acquisition Transaction is consummated or (y) a Parent Acquisition Transaction
shall otherwise occur. Such fee shall be payable upon the first occurrence of
any such event.
(e) Parent agrees to pay the Company a fee equal to $1 million if the
Company terminates this Agreement pursuant to clause (vi) of Section 9.1(a).
SECTION 7.7 AGREEMENT TO COOPERATE. (a) Subject to the terms and conditions
herein provided and subject to the fiduciary duties of the respective boards
of directors of the Company and Parent, each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable efforts to
obtain all necessary or appropriate waivers, consents or approvals of third
parties required in order to preserve material contractual relationships of
Parent and the Company and their respective subsidiaries, all necessary or
appropriate waivers, consents and approvals and SEC "no-action" letters to
effect all necessary registrations, filings and submissions and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed
with the Merger as expeditiously as possible).
(b) Without limitation of the foregoing, each of Parent and the Company
undertakes and agrees to file as soon as practicable, and in any event prior
to 15 days after the date hereof, a Notification and Report Form under the HSR
Act with the FTC and the Antitrust Division. Each of Parent and the Company
shall (i) respond as promptly as practicable to any inquiries received from
the FTC or the Antitrust Division for additional information or documentation
and to all inquiries and requests received from any State Attorney General or
other governmental authority in connection with antitrust matters and (ii) not
extend any waiting period under the HSR Act or enter into any agreement with
the FTC or the Antitrust Division not to consummate the transactions
contemplated by this Agreement, except with the prior written consent of the
other parties hereto. Parent shall take all reasonable steps necessary to
avoid or eliminate impediments under any antitrust, competition, or trade
regulation law that may be asserted by the FTC, the Antitrust Division, any
State Attorney General or any other
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governmental entity with respect to the Merger so as to enable the Closing to
occur as soon as reasonably possible. Without limiting the foregoing, Parent
shall propose, negotiate, commit to and effect, by consent decree, hold
separate order, or otherwise, the sale, divestiture or disposition of such
assets or businesses of Parent or, effective as of the Effective Time, the
Surviving Corporation as may be required in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining order or
other order in any suit or proceeding, which would otherwise have the effect
of preventing or delaying the Closing; provided however that Parent shall not
be required to sell, divest, dispose of, or hold separate assets or businesses
with aggregate 1996 revenues in excess of $30 million, not including any
assets or businesses that are required to be sold, divested, disposed of, or
held separate as a result of acquisitions of assets or businesses by the
Parent or any of its subsidiaries after the date hereof. Each party shall
promptly notify the other party of any communication to that party from the
FTC, the Antitrust Division, any State Attorney General or any other
governmental entity and permit the other party to review in advance any
proposed communication to any of the foregoing.
(c) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, including any
Acquisition Transaction, Parent shall have the right, at its own expense, to
participate therein, and the Company will not settle any such litigation
without the consent of Parent, which consent will not be unreasonably
withheld.
SECTION 7.8 PUBLIC STATEMENTS. The parties shall consult with each other
prior to issuing any press release or any written public statement with
respect to this Agreement or the transactions contemplated hereby and shall
not issue any such press release or written public statement prior to such
consultation.
SECTION 7.9 OPTION PLANS. The Company shall use commercially reasonable
efforts to ensure that, at the Effective Time, all rights with respect to the
Company Common Stock pursuant to each stock option ("Company Options") granted
under stock option plans of the Company or otherwise which is outstanding on
the Effective Date, whether or not such Company Option has previously vested
or become exercisable, shall be cancelled in exchange for a number of shares
of Parent Common Stock equal in market value (based upon the Parent Trading
Price computed with respect to the Closing Date (as defined in Section 8.2(c))
to the fair value of such Company Option as determined by Price Waterhouse,
LLP., independent third party experts, or any other party mutually agreed upon
by Parent and the Company. The parties hereto have agreed that the value
determined using the methodology proposed by such independent third party
experts will represent the fair value of the Company Options as of the
Effective Time.
SECTION 7.10 NOTIFICATION OF CERTAIN MATTERS. Each of the Company, Parent
and Subsidiary agrees to give prompt notice to each other of, and to use
commercially reasonable efforts to remedy, (i) the occurrence or failure to
occur of any event which occurrence or failure to occur would be likely to
cause any of its representations or warranties in this Agreement to be untrue
or inaccurate in any material respect at the Effective Time and (ii) any
material failure on its part to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 7.10 shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
SECTION 7.11 DIRECTORS' AND OFFICERS' INDEMNIFICATION. (a) The
indemnification provisions of the Certificate of Incorporation and By-Laws of
the Surviving Corporation as in effect at the Effective Time shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, employees
or agents of the Company. Parent shall assume, be jointly and severally liable
for, and honor, and shall cause the Surviving Corporation to honor, in
accordance with their respective terms each of the indemnification agreements
listed on Section 7.11 of the Company Disclosure Schedule without limit as to
time.
(b) Without limiting Section 7.11(a), after the Effective Time, each of
Parent and the Surviving Corporation shall, to the fullest extent permitted
under applicable law, indemnify and hold harmless, each present and former
director, officer, employee and agent of the Company or any of its
subsidiaries (each, together with such person's
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heirs, executors or administrators, an "indemnified Party" and collectively,
the "indemnified Parties") against any costs or expenses (including attorneys
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any actual or threatened claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of, relating to or in connection with any action or
omission occurring or alleged to occur prior to the Effective Time (including,
without limitation, acts or omissions in connection with such persons serving
as an officer, director or other fiduciary in any entity if such service was
at the request or for the benefit of the Company) or arising out of or
pertaining to the transactions contemplated by this Agreement. In the event of
any such actual or threatened claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) the Company or
Parent and the Surviving Corporation, as the case may be, shall pay the
reasonable fees and expenses of counsel selected by the indemnified Parties,
which counsel shall be reasonably satisfactory to the Parent and the Surviving
Corporation, promptly after statements therefor are received and shall pay all
other reasonable expenses in advance of the final disposition of such action,
(ii) the Parent and the Surviving Corporation will cooperate and use all
reasonable efforts to assist in the vigorous defense of any such matter, and
(iii) to the extent any determination is required to be made with respect to
whether an indemnified Party's conduct complies with the standards set forth
under the DGCL and the Parent's or the Surviving Corporation's respective
charters or by-laws such determination shall be made by independent legal
counsel acceptable to the Parent or the Surviving Corporation, as the case may
be, and the indemnified Party; provided, however, that neither Parent nor the
Surviving Corporation shall be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld) and,
provided, further , that if Parent or the Surviving Corporation advances or
pays any amount to any person under this paragraph (b) and if it shall
thereafter be finally determined by a court of competent jurisdiction that
such person was not entitled to be indemnified hereunder for all or any
portion of such amount, to the extent required by law, such person shall repay
such amount or such portion thereof, as the case may be, to Parent or the
Surviving Corporation, as the case may be. The indemnified Parties as a group
may not retain more than one law firm to represent them with respect to each
matter unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
indemnified Parties.
(c) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Parent shall assume the obligations of the Surviving
Corporation or the Parent, as the case may be, set forth in this Section 7.11.
(d) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company and its subsidiaries (provided
that Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are no less advantageous to the
indemnified Parties and which coverages and amounts shall be no less than the
coverages and amounts provided at that time for Parent's directors and
officers) with respect to matters arising on or before the Effective Time.
(e) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any indemnified Party in enforcing
the indemnity and other obligations provided in this Section 7.11.
(f) The rights of each indemnified Party hereunder shall be in addition to,
and not in limitation of, any other rights such indemnified Party may have
under the charter or bylaws of the Company, any indemnification agreement,
under the DGCL or otherwise. The provisions of this Section 7.11 shall survive
the consummation of the Merger and expressly are intended to benefit each of
the indemnified Parties.
SECTION 7.12 CORRECTIONS TO THE JOINT PROXY STATEMENT/PROSPECTUS AND
REGISTRATION STATEMENT. Prior to the date of approval of the Merger by their
respective stockholders, each of the Company, Parent and Subsidiary shall
correct promptly any information provided by it to be used specifically in the
Joint Proxy
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Statement/Prospectus and Registration Statement that shall have become false
or misleading in any material respect and shall take all steps necessary to
file with the SEC and have declared effective or cleared by the SEC any
amendment or supplement to the Joint Proxy Statement/Prospectus or the
Registration Statement so as to correct the same and to cause the Joint Proxy
Statement/Prospectus as so corrected to be disseminated to the stockholders of
the Company and Parent, in each case to the extent required by applicable law.
SECTION 7.13 SUPPLEMENTAL INDENTURE. The Company shall, and Parent shall
cause the Surviving Corporation to, execute a supplemental indenture,
effective as of the Effective Time, by which there shall be made the
adjustments in the conversion provisions of the Indenture (the "Indenture")
dated as of June 5, 1996 relating to the 4 1/2% convertible subordinated notes
issued by the Company (the "Convertible Notes") which are required to be made
as a result of the Merger in order to provide for the Convertible Notes to be
convertible from and after the Merger into shares of Parent Common Stock (and
cash in lieu of fractional shares), in the manner and to the extent required
by the Indenture, including without limitation Section 12.11 thereof.
SECTION 7.14 EMPLOYMENT AND CONSULTING AGREEMENTS. From and after the
Effective Time, Parent shall, and shall cause the Surviving Corporation and
its subsidiaries to, honor in accordance with their terms, the employment,
severance, and other compensation contracts listed in Section 7.14 of the
Company Disclosure Schedule between the Company or one of its subsidiaries and
certain current or former directors, officers or employees thereof (true and
correct copies of which have been delivered by the Company to the Parent).
Parent, Subsidiary and the Company each hereby acknowledge and agree that: (i)
upon the consummation of the Merger, each of the executives listed in Section
7.14 of the Company Disclosure Schedule will be deemed to have terminated his
employment with the Company; (ii) each such executive will be entitled to
receive the severance pay and benefits set forth in Section 7.14 of the
Company Disclosure Schedule, which severance pay and benefits are required by
the contracts listed in Section 7.14 of the Company Disclosure Schedule, and
(iii) any cash payments to which such executives are entitled shall be made at
Closing and simultaneously therewith. At the Closing, Parent shall offer to
enter into consulting agreements with Bradley S. Jacobs, John M. Milne and
Michael J. Nolan in the form set forth in Section 7.14 of the Parent
Disclosure Schedule.
ARTICLE VIII
Conditions
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of the
Company and Parent under applicable law and applicable listing
requirements;
(b) the shares of Parent Common Stock issuable in the Merger and those to
be reserved for issuance upon exercise of stock options or warrants or the
conversion of convertible securities shall have been authorized for listing
on the NYSE upon official notice of issuance;
(c) the waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated;
(d) the Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending
such effectiveness shall have been issued and remain in effect and no
proceeding for that purpose shall have been instituted by the SEC or any
state regulatory authorities;
(e) no preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect (each party agreeing to use its
reasonable efforts to have any such injunction, order or decree lifted);
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(f) no statute, rule or regulation shall have been enacted by any state
or federal government or governmental agency in the United States which
would prevent the consummation of the Merger or make the Merger illegal.
(g) all governmental waivers, consents, orders and approvals legally
required for the consummation of the Merger and the transactions
contemplated hereby, and all consents from lenders required to consummate
the Merger, shall have been obtained and be in effect at the Effective
Time, except where the failure to obtain the same would not be reasonably
likely, individually or in the aggregate, to have a material adverse effect
on the business, operations, properties, assets, liabilities, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, following the Effective Time;
(h) Coopers & Lybrand L.L.P., certified public accountants for Parent,
shall have delivered a letter, dated the Closing Date, addressed to Parent,
in form and substance reasonably satisfactory to Parent, to the effect that
the Merger will qualify for a pooling of interests accounting treatment if
consummated in accordance with this Agreement; and
(i) each of the parties to the Agreement shall have received a letter
dated the Closing Date, addressed to the Company, from Ernst & Young LLP
regarding such firm's concurrence with the Company's management's
conclusions that no conditions exist related to the Company that would
preclude the Parent's accounting for the Merger with the Company as a
pooling of interests under Accounting Principles Board Opinion No. 16 if
closed and consummated in accordance with this Agreement.
SECTION 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
Unless waived by the Company, the obligation of the Company to effect the
Merger shall be subject to the fulfillment at or prior to the Closing Date of
the following additional conditions:
(a) Parent and Subsidiary shall have performed their agreements contained
in this Agreement required to be performed on or prior to the Closing Date
and the representations and warranties of Parent and Subsidiary contained
in this Agreement shall be true and correct on and as of the date made and
(except to the extent that such representations and warranties speak as of
an earlier date) on and as of the Closing Date as if made at and as of such
date except for such failures to perform or to be true and correct that
would not reasonably be expected to have a material adverse effect on the
business operations, properties, assets, condition (financial or other) or
results of operations of Parent and its subsidiaries considered as a whole,
and the Company shall have received a certificate of the Chairman of the
Board and Chief Executive Officer, the President or a Vice President of
Parent and of the President and Chief Executive Officer or a Vice President
of Subsidiary to that effect;
(b) the Company shall have received an opinion of Wachtell, Lipton, Rosen
& Katz, in form and substance reasonably satisfactory to the Company, dated
the Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, which are
consistent with the state of facts existing at the Effective Time: (i) the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, (ii) no gain or loss will be recognized by Parent, the
Company or Subsidiary as a result of the Merger, and (iii) no gain or loss
will be recognized by the holders of Company Common Stock upon the exchange
of their Company Common Stock solely for shares of Parent Common Stock
(except with respect to cash received in lieu of fractional shares of
Parent Common Stock). In rendering such opinion, such counsel may rely upon
representations contained in certificates of officers and certain
stockholders of Parent, the Company and Subsidiary; and
(c) the average of the daily closing prices per share of Parent Common
Stock (as reported on the NYSE Composite Transactions reporting system)
during the 20 consecutive trading days ending on the second trading day
prior to any then scheduled Closing Date (the "Parent Trading Price") is
$31.50 per share or more (such amount to be appropriately adjusted for any
stock split or stock dividend or distribution, combination or other change
in Parent Common Stock).
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SECTION 8.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUBSIDIARY TO EFFECT THE
MERGER. Unless waived by Parent and Subsidiary, the obligations of Parent and
Subsidiary to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of the Company contained in this Agreement
shall be true and correct on and as of the date made and (except to the
extent that such representations and warranties speak as of an earlier
date) on and as of the Closing Date as if made at and as of such date,
except for such failures to perform and to be true and correct that would
not reasonably be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of the Company and its subsidiaries considered as a
whole, and Parent shall have received a Certificate of the President and
Chief Executive Officer or of a Vice President of the Company to that
effect;
(b) Parent shall have received an opinion of McDermott, Will & Emery, in
form and substance reasonably satisfactory to Parent, dated the Closing
Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, which are
consistent with the state of facts, existing at the Effective Time: (i) the
Merger will constitute a reorganization within the meaning of Section 368
of the Code and (ii) Parent and Subsidiary will recognize no gain or loss
for federal income tax purposes as a result of consummation of the Merger.
In rendering such opinion, such counsel may rely upon representations
contained in certificates of officers and certain stockholders of Parent,
the Company and Subsidiary;
(c) at least 60 days prior to the Closing, the Company shall have
delivered to the Parent a complete copy of each agreement which requires
the Company to register any shares of Company Common Stock under the
Securities Act and which would require the Parent to register any shares of
Parent Common Stock under the Securities Act upon or after the Closing.
ARTICLE IX
Termination, Amendment and Waiver
SECTION 9.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date, whether before or after approval by the stockholders of
the Company or Parent, by the mutual written consent of the Company and Parent
or as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) upon a material breach of a representation or warranty of Parent
contained in this Agreement which has not been cured in all material
respects and which has caused any of the conditions set forth in
section 8.2(a) to be incapable of being satisfied by the Termination
Date;
(ii) if the Merger is not completed by October 31, 1997 (the
"Termination Date") (unless due to a delay or default on the part of
the Company);
(iii) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of the Company and if
the Company shall have used reasonable efforts to prevent the entry of
such order;
(iv) if the Company receives a Superior Proposal, resolves to accept
such Superior Proposal, and the Company shall have given Parent two
days' prior written notice of its intention to terminate pursuant to
this provision; provided, however, that such termination shall not be
effective until such time as the payment required by Section 7.6(b)
shall have been received by Parent;
(v) if (A) a tender or exchange offer is commenced by a Potential
Acquirer (excluding any affiliate of the Company or any group of which
any affiliate of the Company is a member) for all outstanding
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shares of Company Common Stock, (B) the Company's Board of Directors
determines, in good faith and after consultation with an independent
financial advisor, that such offer constitutes a Superior Proposal and
resolves to accept such Superior Proposal or recommend to the
stockholders that they tender their shares in such tender or exchange
offer and (C) the Company shall have given Parent two days' prior
written notice of its intention to terminate pursuant to this
provision; provided, however, that such termination shall not be
effective until such time as the payment required by Section 7.6(b)
shall have been received by Parent;
(vi) if Parent (A) fails to perform in any material respect any of
its material covenants in this Agreement and (B) does not cure such
default in all material respects within 30 days after written notice of
such default specifying such default in reasonable detail is given to
Parent by the Company; or
(vii) if the stockholders of Parent fail to approve the Merger at a
duly held meeting of stockholders called for such purpose or any
adjournment or postponement thereof.
(b) Parent shall have the right to terminate this Agreement:
(i) upon a material breach of a representation or warranty of the
Company contained in this Agreement which has not been cured in all
material respects and which has caused any of the conditions set forth
in Section 8.3(a) to be incapable of being satisfied by the Termination
Date;
(ii) if the Merger is not completed by October 31, 1997, (unless due
to a delay or default on the part of Parent);
(iii) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of Parent and if Parent
shall have used reasonable efforts to prevent the entry of such order;
(iv) if the Board of Directors of the Company shall have resolved to
accept a Superior Proposal or shall have recommended to the
stockholders of the Company that they tender their shares in a tender
or an exchange offer commenced by a third party (excluding any
affiliate of Parent or any group of which any affiliate of Parent is a
member); provided that the Parent may not so terminate until three days
after receipt of the notice of the Company of such Superior Proposal;
(v) if the Company (A) fails to perform in any material respect any
of its material covenants in this Agreement and (B) does not cure such
default in all material respects within 30 days after written notice of
such default specifying such default in reasonable detail is given to
the Company by Parent; or
(vi) if the stockholders of the Company fail to approve the Merger at
a duly held meeting of stockholders called for such purpose or any
adjournment or postponement thereof.
(c) As used in this Section 9.1, (i) "affiliate" has the meaning assigned
to it in Section 7.4 and (ii) "group" has the meaning set forth in Section
13(d) of the Exchange Act and the rules and regulations thereunder.
SECTION 9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company pursuant to the provisions of
Section 9.1, this Agreement shall forthwith become void and there shall be no
liability or further obligation on the part of the Company, Parent, Subsidiary
or their respective officers or directors (except this Section 9.2, in the
second sentence of Section 7.1(a) and in Sections 7.1(b), 7.6 and 10.4 all of
which shall survive the termination). Nothing in this Section 9.2 shall
relieve any party from liability for any willful and intentional breach of any
covenant or agreement of such party contained in this Agreement.
SECTION 9.3 AMENDMENT. This Agreement may not be amended except by action
taken by the parties' respective Boards of Directors or duly authorized
committees thereof and then only by an instrument in writing signed on behalf
of each of the parties hereto and in compliance with applicable law. Such
amendment may take
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place at any time prior to the Closing Date, and, subject to applicable law,
whether before or after approval by the stockholders of the Company, Parent or
Subsidiary.
SECTION 9.4 WAIVER. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE X
General Provisions
SECTION 10.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No
representations, warranties or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, and
after effectiveness of the Merger neither the Company, Parent, Subsidiary or
their respective officers or directors shall have any further obligation with
respect thereto except for the representations, warranties and agreements
contained in Articles II, III and X, Section 7.9, Section 7.11, Section 7.13
and Section 7.14.
SECTION 10.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile
to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) If to Parent or Subsidiary to:
USA Waste Services, Inc.
1001 Fannin Street
Suite 4000
Houston, Texas 77002
Attn: Gregory T. Sangalis
with a copy to:
Thomas J. Murphy, P.C.
McDermott, Will & Emery
227 W. Monroe Street
Chicago, Illinois 60606
(b) If to the Company, to:
United Waste Systems, Inc.
Four Greenwich Office Park
Greenwich, CT 06830
Attn: Bradley S. Jacobs
with a copy to:
Oscar A. Folger
521 Fifth Avenue, 24th Floor
New York, New York 10175
SECTION 10.3 INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary
intention appears, (i) the words "herein", "hereof" and "hereunder" and other
words of similar import
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refer to this Agreement as a whole and not to any particular Article, Section
or other subdivision and (ii) reference to any Article or Section means such
Article or Section hereof. No provision of this Agreement shall be interpreted
or construed against any party hereto solely because such party or its legal
representative drafted such provision. For purposes of determining whether any
fact or circumstance involves a material adverse effect on the results of
operations of a party, the following shall not be considered: (i) any special
transaction charges incurred by such party as a result of the consummation of
acquisitions accounted for under the pooling of interests method of accounting
and (ii) any non-cash, non-recurring charges resulting from (A) the write-down
of non-material assets, the value of which are impaired as the result of an
order of a governmental or regulatory body or authority, or (B) the sale of
non-material assets. Notwithstanding anything to the contrary herein or in the
Parent Disclosure Schedule, no representation or warranty or covenant or
agreement of Parent contained herein shall be deemed qualified by any of the
matters set forth in the Parent's Current Report on Form 8-K dated January 13,
1997 or any matter arising out of, resulting from or relating to any such
matter, regardless of whether any provision hereof is otherwise qualified by
reference to the Parent SEC Reports, the Parent Disclosure Schedule or
otherwise.
SECTION 10.4 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof, (b) shall not be assigned by operation of law or otherwise, except
that Subsidiary may assign this Agreement to any other wholly-owned subsidiary
of Parent. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING
VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
THE EXCLUSIVE VENUE FOR THE ADJUDICATION OF ANY DISPUTE OR PROCEEDING ARISING
OUT OF THIS AGREEMENT OR THE PERFORMANCE THEREOF SHALL BE THE COURTS LOCATED
IN THE STATE OF DELAWARE AND THE PARTIES HERETO AND THEIR AFFILIATES EACH
CONSENT TO AND HEREBY SUBMIT TO THE JURISDICTION OF ANY COURT LOCATED IN THE
STATE OF DELAWARE.
SECTION 10.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 10.6 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except as set forth in
Sections 2.1, 2.2, 3.3, 7.9, 7.11 and 7.14 (which are intended to and shall
create third party beneficiary rights if the Merger is consummated), nothing
in this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement. The rights of any third party beneficiary hereunder are not
subject to any defense, offset or counterclaim.
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IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers and attested to as of the
date first written above.
USA WASTE SERVICES, INC.
Attest:
/s/ Gregory T. Sangalis /s/ John E. Drury
- ------------------------------------- By: _________________________________
Secretary Name:John E. Drury
Title:Chairman of the Board and
Chief Executive Officer
RIVIERA ACQUISITION CORPORATION
Attest:
/s/ Gregory T. Sangalis /s/ John E. Drury
- ------------------------------------- By: _________________________________
Secretary Name:John E. Drury
Title:President
UNITED WASTE SYSTEMS, INC.
Attest:
/s/ John N. Milne /s/ Bradley S. Jacobs
- ------------------------------------- By: _________________________________
Secretary Name:Bradley S. Jacobs
Title:Chairman of the Board and
Chief Executive Officer
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APPENDIX B
DONALDSON, LUFKIN & JENRETTE
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
277 PARK AVENUE, NEW YORK, NEW YORK 10172 (212) 892-3000
April 13, 1997
Board of Directors
USA Waste Services, Inc.
1001 Fannin, Suite 4000
Houston, Texas 77002
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to USA Waste Services, Inc. ("USA Waste" or the "Company") of the
Exchange Ratio (as defined below) provided for in the Agreement and Plan of
Merger (the "Agreement") to be entered into by and among USA Waste, Riviera
Acquisition Corporation and United Waste Systems, Inc. ("United") pursuant to
which Riviera Acquisition Corporation will be merged (the "Merger") with and
into United.
Pursuant to the Agreement, each share of common stock, $.001 par value per
share, of United ("United Common Stock") will be converted into the right to
receive 1.075 shares (the "Exchange Ratio") of common stock, $.01 par value
per share, of the Company ("Company Common Stock").
In arriving at our opinion, we have reviewed the draft of the Agreement
dated April 13, 1997 as well as financial and other information that was
publicly available or furnished to us by the Company and United including
information provided during discussions with their respective managements.
Included in the information provided during discussions with the respective
managements were certain financial projections of the Company prepared by the
management of the Company and certain financial projections of United prepared
by the management of United. In addition, we have compared certain financial
and securities data of the Company and United with various other companies
whose securities are traded in public markets, reviewed the historical stock
prices and trading volumes of the Company Common Stock and United Common
Stock, reviewed prices and premiums paid in other business combinations and
conducted such other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that
was available to us from public sources, that was provided to us by the
Company and United and their respective representatives or that was otherwise
reviewed by us. In particular, we have relied upon the estimates of the
managements of the Company and United of the operating synergies achievable as
a result of the proposed merger and upon our discussion of such synergies with
the managements of the Company and United. With respect to the financial
projections supplied to us, we have assumed that they have been reasonably
prepared on the basis reflecting the best currently available estimates and
judgments of the management of the Company and United as to the future
operating and financial performance of the Company and United.
We have not assumed any responsibility for making any independent evaluation
of assets or liabilities of the Company or United or for independently
verifying any of the information reviewed by us. In rendering our opinion, we
did not perform any procedures or analysis regarding potential environmental
liabilities of either the Company or United, nor did we consider the impact of
changes in the regulatory environment in which the Company and United operate.
We have relied as to all legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as
of, the date of this letter and does not represent an opinion as to the
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price at which shares of the Company Common Stock will trade following the
consummation of the Merger. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion addresses only the fairness of
the Exchange Ratio to the Company from a financial point of view. Our opinion
does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
DLJ has performed investment banking and other services for the Company in the
past, including (i) acting as USA Waste's financial advisor in connection with
USA Waste's merger with Chambers Development Co., Inc. completed in June 1995;
(ii) acting as the lead manager in a public offering of USA Waste common stock
completed in October 1995; (iii) acting as USA Waste's financial advisor in
connection with USA Waste's merger with Western Waste Industries completed in
May 1996; (iv) acting as USA Waste's financial advisor in connection with USA
Waste's merger with Sanifill, Inc. completed in September 1996; and (v) acting
as the lead manager in a public offering of USA Waste common stock and
convertible subordinated notes completed in February 1997. In addition, in the
ordinary course of our business, we trade the securities of the Company and
United for our own account and for the accounts of customers, and,
accordingly, may at any time hold a long or short position in such securities.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the Company from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
/s/ Mark A. Pytosh
------------------------------------
Mark A. Pytosh
Senior Vice President
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GOLDMAN, SACHS & CO.
APPENDIX C
PERSONAL AND CONFIDENTIAL
July 24, 1997
Board of Directors
United Waste Systems, Inc.
Four Greenwich Office Park
Greenwich, Connecticut 06830
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $.001 per share (the "Shares"),
of United Waste Systems, Inc. (the "Company") of the Exchange Ratio (as
hereinafter defined) pursuant to the Agreement and Plan of Merger dated as of
April 13, 1997 by and among USA Waste Services, Inc. ("USA Waste"), Riviera
Acquisition Corporation ("Riviera"), a wholly-owned subsidiary of USA Waste,
and the Company (the "Merger Agreement"). The Merger Agreement provides for
the merger of Riviera with and into the Company (the "Merger"), with the
Company surviving as a wholly-owned subsidiary of USA Waste. As a result of
the Merger, each Share outstanding immediately prior to the effective time of
the Merger (other than Shares owned by USA Waste or any of its wholly owned
subsidiaries) will be exchanged into the right to receive 1.075 shares of
Common Stock, par value $0.01 per share (the "USA Waste Common Stock"), of USA
Waste (the "Exchange Ratio").
Goldman, Sachs & Co. ("Goldman Sachs"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. We are familiar with the Company having acted as lead
underwriter of Shares in March 1997 and July 1995, as lead manager of an
issuance of 5-year convertible subordinated notes in May 1996, as underwriter
of a municipal bond offering in May 1995 and having acted as financial advisor
in connection with, and having participated in certain of the negotiations
leading to, the Merger Agreement. We also have provided certain investment
banking services from time to time to USA Waste, including having acted as co-
manager and underwriter of 5-year convertible subordinated notes and as an
underwriter of USA Waste Common Stock in February 1997. Goldman Sachs may
provide investment banking services to USA Waste and its subsidiaries in the
future. Goldman Sachs is a full service securities firm and, in the course of
normal trading activities may from time to time effect transactions and hold
positions in the securities of the Company and USA Waste for its own account
or for the accounts of customers. As of July 17, 1997, Goldman Sachs, for its
own account, had a $7,785,000 long position in 4.5% convertible subordinated
notes of the Company, a short position of 205,550 Shares and a short position
of 6,400 shares of USA Waste Common Stock.
In connection with this opinion, we have reviewed, among other things, the
Merger Agreement; the Registration Statement on Form S-4, including the Joint
Proxy Statement/Prospectus relating to the Special Meeting of Stockholders of
the Company and the Annual Meeting of Stockholders of USA Waste to be held in
connection with the Agreement; Annual Reports to Stockholders and Annual
Reports on Form 10-K of the Company and USA Waste for the five years ended
December 31, 1996; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q for the Company and USA Waste; certain other
communications from the Company and USA Waste to their respective
stockholders; and certain internal financial analyses and forecasts for the
Company and USA Waste prepared by their respective managements. We have also
held discussions with members of the senior managements of the Company and USA
Waste regarding the strategic rationale for, and potential benefits of, the
Merger and the past and current business operations, financial condition and
future prospects of their respective companies. In addition, we have reviewed
the reported price and trading activity for the Shares and USA Waste Common
Stock, compared certain financial and stock market information for the Company
and USA Waste with similar information for certain other companies the
securities of which are
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publicly traded, reviewed the financial terms of certain recent business
combinations in the waste management industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us, including, without limitation, the
representations set forth in the Merger Agreement, and have assumed such
accuracy and completeness for purposes of rendering this opinion. In that
regard, we have relied upon the managements of the Company and USA Waste as to
the reasonableness and achievability of the financial forecasts (and the
assumptions and bases therefor) provided to us, and with your consent we have
assumed that such forecasts, including, without limitation, projected cost
savings and operating synergies resulting from the Merger, reflect the best
currently available estimates and judgments of such respective managements and
that such forecasts will be realized in the amounts and times contemplated
thereby. In addition, we have not made an independent evaluation or appraisal
of the assets and liabilities of the Company or USA Waste or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal. Our advisory services and the opinion expressed herein are provided
for the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Merger Agreement and such opinion does not constitute a recommendation as to
how any holder of Shares should vote with respect to the Merger.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Merger Agreement is fair to the holders of
Shares.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
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APPENDIX D
USA WASTE SERVICES, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
USA Waste Services, Inc. hereby establishes the USA Waste Services, Inc.
1997 Employee Stock Purchase Plan (the "Plan"), the terms of which are as set
forth below.
1. Definitions.
As used in the Plan the following terms shall have the meanings set forth
below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee appointed by the Board to administer
the Plan as described in Section 4 below.
(d) "Common Stock" means the common stock, $0.01 par value, of the
Company.
(e) "Company" means USA Waste Services, Inc., a Delaware corporation, or
any successor.
(f) "Continuous Employment" means the absence of any interruption or
termination of service as an Eligible Employee with the Company and/or its
Participating Subsidiaries. Continuous Employment shall not be considered
interrupted in the case of an authorized leave of absence, provided that
such leave is for a period of not more than 90 days or reemployment upon
the expiration of such leave is guaranteed by contract or statute.
(g) "Eligible Compensation" means, with respect to each Participant for
each pay period, the regular base earnings paid to the Participant by the
Company or one or more Participating Subsidiaries during the Offering
Period, plus any elective salary deferral contributions made therefrom
pursuant to Code Section 125 or Section 401(k).
(h) "Eligible Employee" means an employee of the Company or one of its
Participating Subsidiaries who is customarily employed for at lease 20
hours per week and more than five months in a calendar year.
(i) "Enrollment Date" means the first day of each Offering Period.
(j) "Exercise Date" means the last day of each Offering Period.
(k) "Exercise Price" means the price per share of the shares of Common
Stock offered in a given Offering Period determined as provided in Section
10 below.
(l) "Fair Market Value" means, with respect to a share of Common Stock as
of any Enrollment Date or Exercise Date, the closing price of such Common
Stock on the New York Stock Exchange on such date, as reported in The Wall
Street Journal. In the event that such a closing price is not available for
an Enrollment Date or an Exercise Date, the Fair Market Value of a share of
Common Stock on such date shall be the closing price of a share of the
Common Stock on the New York Stock Exchange on the last business day prior
to such date or such other amount as may be determined by the Committee by
any fair and reasonable means.
(m) "Offering Period" means each six-month period commencing on January 1
and terminating on the following June 30 or commencing on July 1 and
terminating on the following December 31; provided, however, the initial
Offering Period shall commence on the later of (i) [April 1,] 1997 or (ii)
the effective date of the S-8 Registration Statement covering the shares of
Common Stock issuable under the Plan and ending on the first June 30 or
December 31 to occur thereafter.
(n) "Participant" means an Eligible Employee who has elected to
participate in the Plan by filing an enrollment agreement with the Company
as provided in Section 7 below.
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(o) "Participating Subsidiary" means any Subsidiary not excluded from
participation in the Plan by the Committee, in its sole discretion.
(p) "Subsidiary" means any corporation, domestic or foreign, of which the
Company owns, directly or indirectly, not less than 50% of the total
combined voting power of all classes of stock or other equity interests and
that otherwise qualifies as a "subsidiary corporation" within the meaning
of Section 424(f) of the Code or any successor thereto.
2. Purpose of the Plan.
The purpose of the Plan is to provide an incentive for present and future
employees of the Company and its Participating Subsidiaries to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. It is the intention of the
Company that the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code. Accordingly, the provisions of the Plan shall be
administered, interpreted and construed in a manner consistent with the
requirements of that section of the Code.
3. Shares Reserved for the Plan.
There shall be reserved for issuance and purchase by Participants under the
Plan an aggregate of shares of Common Stock, subject to adjustment as
provided in Section 15 below. Shares of Common Stock subject to the Plan may
be newly issued shares or treasury shares. If and to the extent that any
option to purchase shares of Common Stock shall not be exercised for any
reason or if such right to purchase shares shall terminate as provided herein,
the shares that have not been so purchased hereunder shall again become
available for the purposes of the Plan unless the Plan shall have been
terminated.
4. Administration of the Plan.
(a) The Plan shall be administered by a Committee appointed by, and which
shall serve at the pleasure of, the Board. The Committee shall have authority
to interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to correct any defect or rectify any omission in this
Plan or to reconcile any inconsistency in this Plan or any Option, and to make
all other determinations necessary or advisable for the administration of the
Plan, all of which actions and determinations shall be final, conclusive and
binding on all persons. The act or determination of a majority of the members
of the Committee shall be deemed to be the act or determination of the
Committee.
(b) The Committee may request advice or assistance or employ such other
persons as it in its discretion deems necessary or appropriate for the proper
administration of the Plan, including, but not limited to employing a
brokerage firm, bank or other financial institution to assist in the purchase
of shares, delivery of reports or other administrative aspects of the Plan.
5. Eligibility to Participate in the Plan.
Subject to limitations imposed by Section 423(b) of the Code, any Eligible
Employee who is employed by the Company or a Participating Subsidiary on an
Enrollment Date shall be eligible to participate in the Plan for the Offering
Period beginning on that Enrollment Date.
6. Offering Periods.
The Plan shall consist of consecutive Offering Periods until the Plan is
terminated.
7. Election to Participate in the Plan.
(a) Each Eligible Employee may elect to participate in the Plan by
completing an enrollment agreement in the form provided by the Company and
filing such enrollment agreement with the Company prior to the applicable
Enrollment Date, unless another time for filing the enrollment form is set by
the Committee for all Eligible Employees with respect to a given Offering
Period.
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(b) Payroll deductions for a Participant shall commence on the first payroll
date following the Enrollment Date and shall end on the last payroll date in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the Participant as provided in Section 12.
(c) Unless a Participant elects otherwise prior to the Enrollment Date of
the immediately succeeding Offering Period, an Eligible Employee who is
participating in an Offering Period as of the Exercise Date of such Offering
Period shall be deemed (i) to have elected to participate in the immediately
succeeding Offering Period and (ii) to have authorized the same payroll
deduction for such immediately succeeding Offering Period as was in effect for
such Participant immediately prior to the succeeding Offering Period.
8. Payroll Deductions.
(a) All Participant contributions to the Plan shall be made only by payroll
deductions. At the time a Participant files the enrollment agreement with
respect to an Offering Period, the Participant shall authorize payroll
deductions to be made on each payroll date during the Offering Period in an
amount of from 1% to [10%] of the Eligible Compensation which the Participant
receives on each payroll date during such Offering Period. The amount of such
payroll deductions shall be a whole percentage (i.e., 1%, 2%, 3%, etc.) of the
Participant's Eligible Compensation.
(b) All payroll deductions made for a Participant shall be deposited in the
Company's general corporate account and shall be credited to the Participant's
account under the Plan. No interest shall accrue or be credited with respect
to the payroll deductions of a Participant under the Plan. A Participant may
not make any additional payments into such account. All payroll deductions
received or held by the Company under the Plan may be used by the Company for
any corporate purpose, and the Company shall not be obligated to segregate
such payroll deductions.
(c) Except as provided in Section 12, a Participant may not change his
contribution election during an Offering Period.
(d) Notwithstanding the foregoing, no Participant may make payroll
deductions during any year in excess of $21,250.
9. Grant of Options.
(a) On the Enrollment Date of each Offering Period, subject to the
limitations set forth in Sections 3 and 9(b) hereof, each Eligible Employee
shall be granted an option to purchase on the Exercise Date for such Offering
Period (at the Exercise Price determined as provided in Section 10 below) up
to a number of shares of the Company's Common Stock determined by dividing
such Eligible Employee's payroll deductions accumulated during the Offering
Period ending on such Exercise Date by 85% of the fair market value of a share
of the Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower.
(b) Notwithstanding any provision of the Plan to the contrary, no Eligible
Employee shall be granted an option under the Plan (i) if, immediately after
the grant, such Eligible Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own
stock and/or hold outstanding options to purchase stock possessing 5% or more
of the total combined voting power or value of all classes of stock of the
Company or of any Subsidiary of the Company, or (ii) which permits such
Eligible Employee's rights to purchase stock under all employee stock purchase
plans of the Company and its Subsidiaries to accrue at a rate which exceeds
$25,000 of fair market value of such stock (determined at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
10. Exercise Price.
The Exercise Price of each of the shares offered in a given Offering Period
shall be the lower of: (i) 85% of the Fair Market Value of a share of the
Common Stock on the Enrollment Date, or (ii) 85% of the Fair Market Value of a
share of the Common Stock on the applicable Exercise Date.
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11. Exercise of Options.
Unless a Participant withdraws from the Plan as provided in Section 12, the
Participant's option for the purchase of shares will be exercised
automatically on each Exercise Date, and the maximum number of full shares
subject to the option will be purchased for the Participant at the applicable
Exercise Price with the accumulated payroll deductions in the Participant's
account. Any amount remaining in the Participant's account after an Exercise
Date shall be refunded to the Participant.
12. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all but not less than all of the payroll
deductions credited to the Participant's account under the Plan at any time by
giving written notice to the Company. All of the Participant's payroll
deductions credited to the Participant's account will be paid to him promptly
after receipt of the Participant's notice of withdrawal, the Participant's
participation in the Plan will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made. Payroll deductions
will not resume on behalf of a Participant who has withdrawn from the Plan
unless written notice is delivered to the Company within the enrollment period
preceding the commencement of a new Offering Period directing the Company to
resume payroll deductions.
(b) Upon termination of the Participant's Continuous Employment prior to the
Exercise Date of the Offering Period for any reason, including retirement or
death, the payroll deductions credited to the Participant's account will be
returned to the Participant or, in the case of death, to the Participant's
estate, and the Participant's options to purchase shares under the Plan will
be automatically terminated.
(c) In the event a Participant ceases to be an Eligible Employee during an
Offering Period, the Participant will be deemed to have elected to withdraw
from the Plan, the payroll deductions credited to the Participant's account
will be returned to the Participant, and the Participant's options to purchase
shares under the Plan will be terminated.
(d) A Participant's withdrawal from an Offering Period will not affect the
Participant's eligibility to participate in a succeeding Offering Period.
13. Transferability.
Options to purchase Common Stock granted under the Plan are not transferable
by a Participant and are exercisable only by the Participant.
14. Reports.
Individual accounts will be maintained for each Participant in the Plan.
Statements of account will be given to participating Employees semi-annually
promptly following each Exercise Date, which statements will set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
15. Adjustments Upon Changes in Capitalization.
(a) If the outstanding shares of Common Stock are increased or decreased, or
are changed into or are exchanged for a different number or kind of shares, as
a result of one or more reorganizations, restructurings, recapitalizations,
reclassifications, stock splits, reverse stock splits, stock dividends or the
like, upon authorization of the Committee, appropriate adjustments shall be
made in the number and/or kind of shares, and the per share option price
thereof, which may be issued in the aggregate and to any Participant upon
exercise of options granted under the Plan.
(b) In the event of the proposed dissolution or liquidation of the Company,
each Offering Period will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the
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Committee. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Committee determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, that the Participant shall have the right to exercise the option
as to all of the optioned stock, including shares as to which the option would
not otherwise be exercisable. If the Committee makes an option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the committee shall notify the Participant that the option
shall be fully exercisable for a stated period, which shall not be less than
10 days from the date of such notice, and the option will terminate upon the
expiration of such period.
(c) In all cases, the Committee shall have full discretion to exercise any
of the powers and authority provided under this Section 15, and the
Committee's actions hereunder shall be final and binding on all Participants.
No fractional shares of stock shall be issued under the Plan pursuant to any
adjustment authorized under the provisions of this Section 15.
16. Amendment of the Plan.
The Board may at any time, or from time to time, amend the Plan in any
respect; provided, however, that the Plan may not be amended in any way that
will cause rights issued under the Plan to fail to meet the requirements for
employee stock purchase plans as defined in Section 423 of the Code or any
successor thereto, including, without limitation, shareholder approval if
required.
17. Termination of the Plan.
The Plan and all rights of Eligible Employees hereunder shall terminate:
(a) on the Exercise Date that Participants become entitled to purchase a
number of shares greater than the number of reserved shares remaining
available for purchase under the Plan; or
(b) at any time, at the discretion of the Board.
In the event that the Plan terminates under circumstances described in
Section 17(a) above, reserved shares remaining as of the termination date
shall be sold to Participants on a pro rata basis.
18. Notices.
All notices or other communications by a Participant to the Company under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the
person, designated by the Company for the receipt thereof.
19. Shareholder Approval.
The Plan shall be subject to approval by the shareholders of the Company
within twelve months after the date the Plan is adopted by the Board of
Directors. If such shareholder approval is not obtained prior to the first
Exercise Date, the Plan shall be null and void and all Participants shall be
deemed to have withdrawn on such Exercise Date pursuant to Section 12.
20. Conditions Upon Issuance of Shares.
(a) The Plan, the grant and exercise of options to purchase shares of Common
Stock under the Plan, and the Company's obligation to sell and deliver shares
upon the exercise of options to purchase shares shall be subject to all
applicable federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may, in the opinion of
counsel for the Company, be required.
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(b) The Company may make such provisions as it deems appropriate for
withholding by the Company pursuant to all applicable tax laws of such amounts
as the Company determines it is required to withhold in connection with the
purchase or sale by a Participant of any Common Stock acquired pursuant to the
Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by the corporation of stock or any
transaction from which the director derived an improper personal benefit. USA
Waste's Restated Certificate of Incorporation provides that USA Waste's
directors are not liable to USA Waste or its stockholders for monetary damages
for breach of their fiduciary duty, subject to the described exceptions
specified by Delaware law.
Section 145 of the Delaware General Corporation Law grants to a corporation
the power to indemnify each of its officers and directors against liabilities
and expenses incurred by reason of the fact that he is or was an officer or
director of such corporation if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of such
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The By-laws of USA Waste
provide for indemnification of each officer and director of USA Waste to the
fullest extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law also empowers a
corporation to purchase and maintain insurance on behalf of any person who is or
was an officer or director of such corporation against liability asserted
against or incurred by him in any such capacity, whether or not such corporation
would have the power to indemnify such officer or director against such
liability under the provisions of Section 145. USA Waste has purchased and
maintains a directors' and officers' liability policy for such purposes.
USA Waste has entered into Indemnification Agreements with each of its
directors and executive officers. Such Indemnification Agreements provide that
such persons (the "Indemnitees") will be indemnified and held harmless from all
expenses, including (without limitation) reasonable fees and expenses of
counsel, and all liabilities, including (without limitation) the amount of any
judgments, fines, penalties, excise taxes and amounts paid in settlement,
actually incurred by an Indemnitee with respect to any threatened, pending or
completed claim, action (including any action by or in the right of USA Waste),
suit or proceeding (whether formal or informal, or civil, criminal,
administrative, legislative, arbitrative or investigative) in respect of which
such Indemnitee is, was or at any time becomes, or is threatened to be made, a
party, witness, subject or target, by reason of the fact that such Indemnitee is
or was a director, officer, agent or fiduciary of USA Waste or serving at the
request of USA Waste as a director, officer, employee, fiduciary or
representative of another enterprise. Such Indemnification Agreements also
provide that USA Waste, if requested to do so by an Indemnitee, will advance to
such Indemnitee, prior to final disposition of any proceeding, the expenses
actually incurred by the Indemnitee subject to the obligation of the Indemnitee
to refund if it is ultimately determined that such Indemnitee was not entitled
to indemnification.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
2.1 - Agreement and Plan of Merger, dated as of April 13, 1997, by and among
USA Waste, Acquisition and United [Incorporated by reference to
Exhibit 2 of USA Waste's Current Report on Form 8-K dated
April 17, 1997].
5.1 - Opinion of McDermott, Will & Emery [filed herewith].
8.1 - Opinion of McDermott, Will & Emery regarding certain tax matters
[filed herewith].
8.2 - Opinion of Wachtell, Lipton, Rosen & Katz regarding certain tax
matters [filed herewith].
23.1 - Consent of McDermott, Will & Emery [included in Exhibit 5.1 and
Exhibit 8.1].
23.2 - Consent of Wachtell, Lipton, Rosen & Katz [included in Exhibit 8.2].
23.3 - Consent of Coopers & Lybrand L.L.P. [filed herewith].
23.4 - Consent of Ernst & Young LLP [filed herewith].
23.5 - Consent of DLJ [filed herewith].
23.6 - Consent of Goldman Sachs & Co. [filed herewith].
24.1 - Powers of Attorney [included on signature page].
99.1 - Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
[attached as Appendix B to Joint Proxy Statement and Prospectus].
99.2 - Opinion of Goldman, Sachs & Co. [attached as Appendix C to Joint Proxy
Statement and Prospectus].
99.3 - Form of USA Waste Proxy Card [filed herewith].
99.4 - Form of United Proxy Card [filed herewith].
99.5 - Consent of Prospective Director [filed herewith].
99.6 - Consent of Prospective Director [filed herewith].
(b) Financial Statement Schedules:
All schedules have been omitted either as inapplicable or because the
required information is included in the financial statements or notes
thereto.
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ITEM 22. UNDERTAKINGS.
(a) USA Waste hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) USA Waste hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of USA Waste's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) (1) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), USA Waste hereby undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) USA Waste hereby undertakes that every prospectus (i) that is
filed pursuant to paragraph (b)(1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to this registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of USA Waste pursuant to the foregoing provisions, or otherwise, USA Waste has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by USA Waste for expenses incurred or paid
II-3
<PAGE>
by a director, officer or controlling person of USA Waste in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, USA
Waste will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(e) USA Waste hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) USA Waste hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, USA WASTE
CERTIFIES THAT IS HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS ON JULY 22, 1997.
USA WASTE SERVICES, INC.
By: /s/ JOHN E. DRURY
-----------------------------------
John E. Drury,
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John E. Drury, Earl E. DeFrates and
Gregory T. Sangalis and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities (including his capacity as a
director and/or officer of USA Waste Services, Inc.) to sign any or all
amendments (including pre-effective and post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of USA Waste Services, Inc. and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JOHN E. DRURY Chief Executive Officer and July 22, 1997
- ------------------------------ Chairman of the Board
John E. Drury (Principal Executive Officer)
/s/ RODNEY R. PROTO President, Chief Operating July 22, 1997
- ------------------------------ Officer and Director
Rodney R. Proto and Director
/s/ DONALD F. MOOREHEAD, JR. Chief Development Officer and July 22, 1997
- ------------------------------
Donald F. Moorehead, Jr. Director
/s/ EARL E. DEFRATES Executive Vice President and July 22, 1997
- ------------------------------ Chief Financial Officer
Earl E. DeFrates (Principal Financial Officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ BRUCE E. SNYDER Vice President and July 22, 1997
- ------------------------------ Chief Accounting Officer
Bruce E. Snyder
/s/ KOSTI SHIRVANIAN Director July 22, 1997
- ------------------------------
Kosti Shirvanian
/s/ DAVID SUTHERLAND-YOEST Director July 22, 1997
- ------------------------------
David Sutherland-Yoest
/s/ RICHARD J. HECKMANN Director July 22, 1997
- ------------------------------
Richard J. Heckman
/s/ WILLIAM E. MOFFETT Director July 22, 1997
- ------------------------------
William E. Moffett
/s/ ALEXANDER W. RANGOS Director July 22, 1997
- ------------------------------
Alexander W. Rangos
/s/ JOHN G. RANGOS, SR. Director July 22, 1997
- ------------------------------
John G. Rangos, Sr.
/s/ SAVEY TUFENKIAN Director July 22, 1997
- ------------------------------
Savey Tufenkian
/s/ LARRY J. MARTIN Director July 22, 1997
- ------------------------------
Larry J. Martin
/s/ RALPH F. COX Director July 22, 1997
- ------------------------------
Ralph F. Cox
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
5.1 - Opinion of McDermott, Will & Emery.
8.1 - Opinion of McDermott, Will & Emery regarding certain tax matters.
8.2 - Opinion of Wachtell, Lipton, Rosen & Katz regarding certain tax
matters.
23.1 - Consent of McDermott, Will & Emery [included in Exhibit 5.1 and
Exhibit 8.1].
23.2 - Consent of Wachtell, Lipton, Rosen & Katz [included in Exhibit 8.2].
23.3 - Consent of Coopers & Lybrand L.L.P.
23.4 - Consent of Ernst & Young LLP.
23.5 - Consent of DLJ.
23.6 - Consent of Goldman Sachs.
24.1 - Powers of Attorney [included on signature page].
99.3 - Form of USA Waste Proxy Card.
99.4 - Form of United Proxy Card.
99.5 - Consent of Prospective Director.
99.6 - Consent of Prospective Director.
<PAGE>
EXHIBIT 5.1
[MW&E LETTERHEAD]
July 24, 1997
USA Waste Services, Inc.
First City Tower
1001 Fannin, Suite 4000
Houston, Texas 77002
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with the above-referenced
registration statement on Form S-4 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), for the registration of up to an aggregate of
54,750,000 shares of Common Stock, (the "Common Stock"), par value $.01 per
share, of USA Waste Services, Inc., a Delaware corporation ("USA Waste").
We have acted as counsel to USA Waste in connection with the issuance of
the shares of Common Stock pursuant to an Agreement and Plan of Merger (the
"Merger Agreement") dated as of April 13, 1997, by and among USA Waste, Riviera
Acquisition Corporation and United Waste Systems, Inc.
In arriving at the opinion expressed below, we have examined the
Registration Statement, the Merger Agreement, the Restated Certificate of
Incorporation of USA Waste, as amended, the Bylaws of USA Waste and such other
documents as we have deemed necessary to enable us to express the opinion
hereinafter set forth. In addition, we have examined and relied, to the extent
we deemed proper, on certificates of officers of USA Waste as to factual
<PAGE>
USA Waste Services, Inc.
July 24, 1997
Page 2
matters, and on originals or copies certified or otherwise identified to our
satisfaction, of all such corporate records of USA Waste and such other
instruments and certificates of public officials and other persons as we have
deemed appropriate. In our examination, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the original documents
of all documents submitted to us as copies, the genuineness of all signatures on
documents reviewed by us and the legal capacity of natural persons.
We express no opinion as to the applicability of, compliance with or effect
of, the law of any jurisdiction other than the General Corporation Law of the
State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that the
shares of Common Stock to be issued pursuant to the Merger Agreement are duly
authorized and, when issued in accordance with the terms of the Merger
Agreement, will be validly issued, fully paid and non-assessable.
We hereby consent to the references to our firm under the caption "Legal
Matters" in the Registration Statement and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act, as amended, or the rules and regulations
of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ McDERMOTT, WILL & EMERY
<PAGE>
EXHIBIT 8.1
[MW&E LETTERHEAD]
July 24, 1997
USA Waste Services, Inc.
First City Tower
1001 Fannin, Suite 4000
Houston, Texas 77002
Re: USA Waste Services, Inc./United Waste Systems, Inc.
---------------------------------------------------
Ladies and Gentlemen:
You have requested our opinion as to certain Federal income tax
consequences of the merger (the "Merger") of Riviera Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of USA Waste Services, Inc., a
Delaware corporation ("USA Waste") with and into United Waste Systems, Inc.
("United"), a Delaware corporation, pursuant to an Agreement and Plan of Merger
dated as of April 13, 1997 (the "Agreement"). Capitalized terms not otherwise
defined herein shall have the meaning set forth in the Agreement.
In formulating our opinion, we have examined the Agreement, the Joint
Proxy Statement and Prospectus of USA Waste and United substantially in the form
to be delivered to their stockholders (the "Proxy Statement") and such other
documents as we deemed relevant for purposes of this opinion. In addition, we
have assumed that (i) the Merger will be consummated in the manner contemplated
by the Proxy Statement and in accordance with the provisions of the Agreement,
(ii) the statements concerning the Merger set forth in the Proxy Statement,
including the purposes of the parties for consummating the Merger, are accurate
and complete, and (iii) the representations made to us by USA Waste
<PAGE>
USA Waste Services, Inc.
July 24, 1997
Page 2
and United in connection with the Merger (in the form of officers' certificates
dated July 23, 1997) are accurate.
Based upon the foregoing, we are of the opinion that, for Federal
income tax purposes:
(i) The Merger will constitute a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended; and
(ii) USA Waste and Sub will recognize no gain or loss as a result of
the consummation of the Merger.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement on Form S-4
filed by USA Waste under the Securities Act of 1933, as amended, and to the
reference to our firm under the heading "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" in the Proxy Statement that constitutes a part of the Registration
Statement.
Very truly yours,
/s/ McDERMOTT, WILL & EMERY
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF WACHTELL, LIPTON, ROSEN & KATZ]
July 24, 1997
United Waste Systems, Inc.
Four Greenwich Office Park
Greenwich, Connecticut 06830
Ladies and Gentlemen:
We have acted as special counsel to United Waste Systems, Inc., a Delaware
corporation ("United"), in connection with the proposed merger of Riviera
Acquisition Corporation, a Delaware corporation ("Acquisition") and a
wholly-owned subsidiary of USA Waste Services, Inc. ("USA Waste"), with and into
United (the "Merger").
In connection with this opinion, we have assumed that the Merger (i) will
be effected pursuant to the Agreement and Plan of Merger among USA Waste,
Acquisition and United, dated as of April 13, 1997 (the "Agreement") and (ii)
will qualify as a merger under Delaware law.
In rendering our opinion, we have reviewed and relied on the statements,
representations and warranties made in the Agreement and on certain
representations delivered and made to us by USA Waste, United and
Acquisition, without having independently confirmed or verified the accuracy
thereof. We have assumed that such statements, representations and warranties
are true, correct and complete and will continue to be so through the effective
time of the Merger, that no actions that are inconsistent with such statements,
representations and warranties will be taken and that all representations made
to the knowledge of any person or entity or with similar qualification are and
will be true and correct as if made without such qualification. Any inaccuracy
in, or breach of, the aforementioned statements, representations, warranties and
assumptions or any change after the date hereof in applicable law could
adversely effect our opinion.
Based upon and subject to the foregoing, it is our opinion, under presently
applicable federal income tax law, that:
<PAGE>
(i) the Merger will constitute a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended,
(ii) no gain or loss will be recognized by USA Waste, United or
Acquisition as a result of the Merger, and
(iii) no gain or loss will be recognized by the holders of United
common stock upon the exchange of their United common stock solely for
shares of USA Waste common stock (except with respect to cash received in
lieu of fractional shares of USA Waste common stock).
This opinion relates solely to the federal income tax consequences of the
Merger and no opinion is expressed as to the tax consequences under any foreign,
state or local tax law. Furthermore, our opinion is based on current federal
income tax law and administrative practice, and we do not undertake to advise
you as to any changes after the date hereof in federal income tax law or
administrative practice that may affect our opinion.
We are furnishing this opinion to you solely in connection with the Merger
and this opinion is not to be relied upon, circulated, quoted or otherwise
referred to other than in connection with the Merger.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-4 registering shares of USA Waste common stock
in connection with the Merger (the "Registration Statement") and further consent
to the use of our name in the Registration Statement in connection with
references to this opinion and the federal income tax consequences of the
Merger. In giving this consent, however, we do not hereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
/s/ WACHTELL, LIPTON, ROSEN & KATZ
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement of USA Waste Services, Inc. on Form S-4, related to the merger with
United Waste Systems, Inc. of our report dated March 21, 1997, on our audits of
the consolidated financial statements of USA Waste Services, Inc. and
subsidiaries as of December 31, 1996 and 1995, and for the years ended December
31, 1996, 1995, and 1994, which is included in the USA Waste Services, Inc.
Annual Report on Form 10-K. We also consent to the reference to our firm under
the caption "Experts."
Coopers & Lybrand L.L.P.
Houston, Texas
July 22, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 33-00000), Joint Proxy Statement and
related Prospectus of USA Waste Services, Inc. and United Waste Systems, Inc.
for the proposed merger of the two companies and to the incorporation by
reference therein of our report dated February 21, 1997, (except for Note 13, as
to which the date is March 25, 1997) with respect to the financial statements
and schedule of United Waste Systems, Inc. included in its Annual Report of
Form 10-K/A #2 for the year ended December 31, 1996, filed with the Securities
and Exchange Commission on June 24, 1997.
MetroPark, New Jersey
July 23, 1997
/s/ ERNST & YOUNG LLP
<PAGE>
EXHIBIT 23.5
DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172 (212) 892-3000
July 21, 1997
Board of Directors
USA Waste Services, Inc.
1001 Fannin, Suite 4000
Houston, Texas 77002
Re: Registration Statement of USA Waste Services, Inc. ("USA Waste") relating
to the Common Stock, par value $0.01 per share, of USA Waste (the "Shares")
being registered in connection with the proposed Merger among USA Waste,
Riviera Acquisition Corp., a direct wholly-owned subsidiary of the Company
("Acquisition"), and United Waste Systems, Inc. ("United")
Ladies and Gentlemen:
Reference is made to our opinion letter dated April 13, 1997 with respect
to the fairness to USA Waste of the exchange ratio of 1.075 Shares to be
exchanged for each outstanding share of Common Stock, par value $0.001 per
share, of United pursuant to the Agreement and Plan of Merger dated as of
April 13, 1997 by and among USA Waste, Acquisition and United.
The foregoing opinion letter is provided for the information and assistance
of the Board of Directors of USA Waste in connection with its consideration of
the transaction contemplated therein and is not to be used, circulated, quoted
or otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that USA Waste has determined to include our
opinion in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our
Firm under the captions "Summary--Opinions of Financial Advisor," "The Merger
and Related Transaction--Background of the Merger," "--USA Waste's Reasons for
the Merger," "--Recommendations of the Board of Directors of USA Waste" and "--
Opinion of Financial Advisor to USA Waste" and to the inclusion of the foregoing
opinion in the Joint Proxy Statement/Prospectus included in the above-mentioned
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
/s/ MARK A. PYTOSH
By: ___________________________
Mark A. Pytosh
Senior Vice President
<PAGE>
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
EXHIBIT 23.6
PERSONAL AND CONFIDENTIAL
July 24, 1997
Board of Directors
United Waste Systems, Inc.
Four Greenwich Office Park
Greenwich, Connecticut 06830
Re: Registration Statement of USA Waste Services, Inc. ("USA Waste") relating
to the Common Stock, par value $0.01 per share, of USA Waste, being
registered in connection with the proposed merger among USA Waste, Riviera
Acquisition Corp., a direct wholly-owned subsidiary of USA Waste and United
Waste Systems, Inc.
Gentlemen:
Reference is made to our opinion letter dated the date hereof with respect to
the fairness to the holders of the outstanding shares of Common Stock, par value
$.001 per share of United Waste Systems, Inc. (the "Company") of the Exchange
Ratio (as defined in such opinion letter) pursuant to the Agreement and Plan of
Merger dated as of April 13, 1997 by and among USA Waste, Riviera Acquisition
Corporation, a wholly-owned subsidiary of USA Waste, and the Company.
The foregoing opinion letter is provided for the information and assistance of
the Board Directors of the Company in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that the Company has determined to include our
opinion in the above referenced Registration Statement.
<PAGE>
United Waste Systems, Inc.
July 24, 1997
Page Two
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary--The Merger--Opinions of Financial Advisors," "The
Merger and Related Transactions--Background of the Merger," "--United's Reasons
for the Merger," "--Recommendation of the Board of Directors of United" and
"--Opinion of Financial Advisor to United" and to the inclusion of the foregoing
opinion in the Joint Proxy Statement/Prospectus included in the above-mentioned
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
<PAGE>
USA WASTE SERVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS OF USA WASTE SERVICES, INC.
The undersigned hereby appoints John E. Drury, Earl E. DeFrates and Gregory
T. Sangalis as proxies, and each of them with full power of substitution, to
vote all shares of Common Stock, par value $.01 per share, of USA Waste
Services, Inc. that the undersigned is entitled to vote at the Annual Meeting
of Stockholders thereof to be held on August 26, 1997, or at any adjournment
thereof, as follows:
Any executed proxy which does not designate a vote shall be deemed to grant
authority for any item not designated.
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND UNLESS OTHERWISE DIRECTED
WILL BE VOTED "FOR" ITEMS 1, 3, 4 AND 5 AND "FOR ALL NOMINEES" IN ITEM 2. YOU
MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO A VOTE THEREON.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE SIDE
[X] PLEASE MARK YOUR
VOTES AS IN THIS EXAMPLE.
1. To approve and adopt the Agreement and Plan of Merger dated as of April 13,
1997, by and among USA Waste, Riviera Acquisition Corporation
("Acquisition"), a wholly owned subsidiary of USA Waste and United Waste
Systems, Inc. ("United") providing for, among other things, the merger of
Acquisition with and into United (the "Merger") and the conversion of each
outstanding share of United common stock, par value $.001 per share, into
1.075 shares of USA Waste common stock, par value $.01 per share ("USA Waste
Common Stock").
FOR AGAINST ABSTAIN
[_] [_] [_]
2. Election of Directors To elect four members of the Board of Directors of
USA Waste to serve as Class II directors for a
FOR WITHHELD three-year term expiring at the USA Waste annual
[_] [_] meeting of stockholders to be held in the year
2000.
Nominees: John E. Drury, William E. Moffett,
John G. Rangos, Sr., and Jerome B. York
For, except vote withheld from the following nominee(s):
- ------------------------------
3. To approve and adopt the USA Waste Services, Inc. 1997 Employee Stock
Purchase Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To approve an amendment to the Restated Certificate of Incorporation of USA
Waste to increase the number of authorized shares of USA Waste Common Stock
from 300,000,000 to 500,000,000 to be effective only if the Merger is
consummated.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for the ensuing year.
FOR AGAINST ABSTAIN
[_] [_] [_]
SIGNATURE(S) __________________________ DATE ___________________________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
<PAGE>
UNITED WASTE SYSTEMS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Bradley S. Jacobs, John N. Milne, Michael J.
Nolan or any of them with full power of substitution, proxies to vote at the
Special Meeting of Stockholders of United Waste Systems, Inc. (the "Company")
to be held on August 26, 1997 at 11:00 a.m., local time, and at any
adjournments or postponements thereof, hereby revoking any proxies heretofore
given, all shares of Common Stock of the Company held or owned by the
undersigned as directed below, and in their discretion upon such other matters
as may come before the meeting.
The Board of Directors of the Company recommends a vote "FOR" Proposal No. 1
1. Approval and adoption of the Agreement and Plan of Merger, dated as of April
13, 1997, by and among the Company, USA Waste Services, Inc., a Delaware
corporation, ("USA Waste"), and Riviera Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of USA Waste ("Acquisition"),
providing for, among other things, the merger of Acquisition with and into
the Company and the conversion of each outstanding share of common stock,
par value $.001 per share, of the Company into 1.075 shares of USA Waste
common stock, par value $.01 per share.
[_] FOR [_] AGAINST [_] ABSTAIN
(TO BE SIGNED ON REVERSE SIDE)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO A PROPOSAL, THIS PROXY
WILL BE VOTED FOR SUCH PROPOSAL.
SIGNATURE(S) _______________________________
DATE _______________________________________
NOTE: Please sign exactly as name appears
hereon, joint owners should each
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such.
<PAGE>
EXHIBIT 99.5
CONSENT OF PROSPECTIVE DIRECTOR
I hereby consent to (i) being named as a nominee as a director of USA
Waste Services, Inc. ("USA Waste") in the Joint Proxy Statement and Prospectus
of USA Waste and United Waste Systems, Inc. (the "Joint Proxy Statement") and
the Registration Statement on Form S-4 (the "Form S-4") of which such Joint
Proxy Statement forms a part, (ii) to this Consent being filed as an exhibit to
the Form S-4 and (iii) the use of my name and biographical information in the
Joint Proxy Statement.
Very truly yours,
/s/ Jerome B. York
------------------------------
Jerome B. York
July 23, 1997
<PAGE>
EXHIBIT 99.6
CONSENT OF PROSPECTIVE DIRECTOR
I hereby consent to (i) being named as a nominee as a director of USA
Waste Services, Inc. ("USA Waste") in the Joint Proxy Statement and Prospectus
of USA Waste and United Waste Systems, Inc. (the "Joint Proxy Statement") and
the Registration Statement on Form S-4 (the "Form S-4") of which such Joint
Proxy Statement forms a part, (ii) to this Consent being filed as an exhibit to
the Form S-4 and (iii) the use of my name and biographical information in the
Joint Proxy Statement.
Very truly yours,
/s/ Richard D. Kinder
------------------------------
Richard D. Kinder
July 23, 1997
