<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-52197
SUBJECT TO COMPLETION, DATED JULY 9, 1998
PROSPECTUS SUPPLEMENT
, 1998
(TO PROSPECTUS DATED JUNE 17, 1998)
$400,000,000
USA WASTE SERVICES, INC.
% MANDATORILY TENDERED SENIOR NOTES DUE 2011
The $400,000,000 % Mandatorily Tendered Senior Notes due 2011 (the
"Notes") of USA Waste Services, Inc. (the "Company") will bear interest at a
rate of % per annum from , 1998 to but not including , 2001 (the
"Remarketing Date"). Interest on the Notes is payable semi-annually on
January and July of each year, commencing January , 1999. The Notes
constitute senior and unsecured obligations of the Company, ranking PARI PASSU
in right of payment with all other senior and unsecured obligations of the
Company. See "Description of Notes -- General."The Notes are subject to
mandatory tender on the Remarketing Date. If J.P. Morgan Securities Inc., as
Remarketing Dealer (the "Remarketing Dealer"), has elected to remarket the Notes
on the Remarketing Date as described herein, the Notes will be subject to
mandatory tender to the Remarketing Dealer at 100% of the principal amount
thereof for remarketing on the Remarketing Date. See "Description of the Notes
- -- Mandatory Tender of Notes; Remarketing." If the Remarketing Dealer elects not
to remarket the Notes on the Remarketing Date, or for any reason does not
purchase all of the Notes on the Remarketing Date, the Company will be required
to purchase on the Remarketing Date any Notes that have not been purchased by
the Remarketing Dealer at 100% of the principal amount thereof plus accrued
interest, if any. See "Description of the Notes -- Repurchase."
The Notes will be redeemable by the Company on and after the Remarketing
Date pursuant to the terms set forth in "Description of the Notes --
Redemption."The Notes are not subject to any sinking fund.
The Notes will be represented by one or more global securities registered in
the name of The Depository Trust Company ("DTC") or its nominee. Interests in
the global securities will be shown on, and transfers thereof will be effected
only through, records maintained by DTC and its participants. Purchasers of the
Notes will not have the right to receive physical certificates evidencing their
ownership of the Notes. The Notes will not be listed on any securities exchange.
Settlement for the Notes will be made in immediately available funds and the
Notes will trade in DTC's Same-Day Funds Settlement System until maturity.
Secondary market trading activity in the Notes will therefore settle in
immediately available funds. All payments of principal and interest will be made
by the Company in immediately available funds.
Concurrent with this Offering, the Company is offering (the "2028 Notes
Offering") pursuant to a separate Prospectus Supplement $400,000,000 aggregate
principal amount of % Senior Notes due 2028 (the "2028 Notes"). Consummation
of this Offering is not a condition to consummation of the 2028 Notes Offering,
and consummation of the 2028 Notes Offering is not a condition to consummation
of this Offering.
THESE SECURITIES 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 PROSPECTUS SUPPLEMENT OR PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING COMPANY
PUBLIC (1) DISCOUNT (2) (3)(4)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........................................... % % %
Total.............................................. $ $ $
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) PLUS ACCRUED INTEREST, IF ANY, FROM THE DATE OF ISSUANCE.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITING."
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $250,000.
(4) THE PROCEEDS TO THE COMPANY INCLUDE A PREMIUM PAID BY THE REMARKETING DEALER
PURSUANT TO THE REMARKETING AGREEMENT DESCRIBED HEREIN. SEE "DESCRIPTION OF
NOTES--MANDATORY TENDER OF NOTES; REMARKETING--THE REMARKETING DEALER" AND
"UNDERWRITING."
The Notes are offered by the several underwriters when, as and if delivered
to and accepted by them, subject to certain conditions, including their rights
to withdraw, cancel or reject orders in whole or in part. It is expected that
delivery of the Notes will be made in New York, New York, on or about July
, 1998, in book-entry form through the facilities of The Depository Trust
Company against payment therefor in immediately available funds.
JOINT BOOK-RUNNING MANAGERS
DONALDSON, LUFKIN & JENRETTE J.P. MORGAN & CO.
SECURITIES
CORPORATION
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES, INC.
DEUTSCHE BANK SECURITIES
<PAGE>
Information contained herein is subject to completion or amendment. This
Prospectus Supplement shall not constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of these securities in any State
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
SECURITIES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING AND MAY BID FOR AND PURCHASE THE OFFERED SECURITIES IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING THE USA WASTE SELECTED HISTORICAL FINANCIAL DATA, THE USA
WASTE AND WASTE MANAGEMENT SUMMARY COMBINED UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO, INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS. THE "COMPANY" AND "USA WASTE" REFER TO USA WASTE
SERVICES, INC. AND ITS SUBSIDIARIES AND PREDECESSORS, UNLESS OTHERWISE INDICATED
OR THE CONTEXT REQUIRES OTHERWISE.
THE COMPANY
USA Waste is the third largest integrated, nonhazardous solid waste
management company in North America, as measured by revenues for the 1997 fiscal
year, and currently serves commercial, industrial, municipal and residential
customers in various locations in the United States, Canada and Puerto Rico. The
Company's solid waste management services include collection, transfer and
disposal operations and, to a lesser extent, recycling and certain other waste
management services. As of March 31, 1998, USA Waste, through its subsidiaries,
owned or operated an extensive network of landfills, transfer stations and
collection operations and served in excess of eight million customers.
The Company believes that providing fully-integrated waste management
services gives it a competitive advantage in its markets and allows for a
relatively higher level of waste internalization and profitability. For the
three months ended March 31, 1998, approximately 64% of the Company's revenues
were attributable to collection operations, approximately 21% were attributable
to landfill operations, approximately 12% were attributable to transfer
operations, and approximately 3% were attributable to recycling and other waste
management services.
The Company operates on a decentralized basis through five geographic
regions with a diversified customer base. Based on collection revenues for the
three months ended March 31, 1998, the Company's customers were approximately
40% commercial, 30% industrial and 30% municipal and residential.
The Company's strategy includes the following key elements: (i) increasing
productivity and operating efficiencies in existing and acquired operations,
(ii) increasing revenues and enhancing profitability in its existing markets
through "tuck-in" acquisitions, and (iii) expanding into new markets through
acquisitions. The Company seeks to become the low-cost operator in each of its
markets by increasing productivity and operating efficiencies through
implementation of uniform administrative systems, consolidation of collection
routes, improvement of equipment utilization and increases in employee
productivity through incentive compensation and training programs. The Company
regularly pursues opportunities to expand its services through the acquisition
of additional solid waste management businesses and operations that can be
effectively integrated with the Company's existing operations. In addition, the
Company regularly pursues merger or acquisition transactions, some of which are
significant, in new markets where the Company believes it can strengthen its
overall competitive position as a national provider of integrated solid waste
management services.
USA Waste was incorporated under the laws of the State of Delaware in April
1995 to become the successor to USA Waste Services, Inc., an Oklahoma
corporation organized in 1987. The principal executive offices of USA Waste are
located at 1001 Fannin Street, Suite 4000, Houston, Texas 77002 and its
telephone number is (713) 512-6200.
RECENT DEVELOPMENTS
On March 10, 1998, the Company entered into a definitive agreement and plan
of merger pursuant to which a subsidiary of the Company will be merged with and
into Waste Management, Inc. ("Waste Management") and Waste Management will
become a wholly-owned subsidiary of the Company (the "Merger"). Waste Management
is a leading international provider of waste management and related services to
governmental, residential, commercial and industrial customers in the United
States and select international markets, and had revenues in 1997 of
approximately $9.2 billion. As of the effective time of
S-3
<PAGE>
the Merger, each outstanding share of Waste Management common stock ("Waste
Management Common Stock"), other than shares held in Waste Management's treasury
or owned by Waste Management, the Company or any wholly-owned subsidiaries of
either of them, will be converted into the right to receive 0.725 of a share of
the Company's common stock ("USA Waste Common Stock"). It is anticipated that
the Company will issue approximately 353 million shares of its common stock (not
including shares reserved for option and warrant exercises and convertible debt)
in connection with the Merger and that the Merger will be accounted for as a
pooling of interests. Following the Merger, the Company will be renamed "Waste
Management, Inc." ("New Waste Management"). The consummation of the Merger is
subject to a number of conditions, including obtaining all consents, approvals
and authorizations legally required to be obtained to consummate the Merger
(including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended) and approval by the stockholders of the Company and Waste Management.
It is expected that the Merger will be consummated shortly after the later of
(a) authorization from the Department of Justice and (b) approval by the
stockholders of the Company and Waste Management. The Company and Waste
Management each received a second request for information from the Department of
Justice, and they have each set July 15, 1998 as the date of their stockholders'
meeting to vote on the Merger. There can be no assurance that the conditions to
the Merger will be satisfied or waived, and therefore, there can be no assurance
that the Merger will be consummated.
Following the consummation of the Merger, John E. Drury, the current Chief
Executive Officer of the Company will remain in such position with New Waste
Management, and the current President and Chief Operating Officer, and Executive
Vice President and Chief Financial Officer of the Company are expected to remain
in such positions with New Waste Management. The current Chairman of the Board
and Chief Executive Officer of Waste Management will become non-executive
Chairman of the New Waste Management Board of Directors for a 12-month term,
after which Mr. Drury will become Chairman of the Board and will continue as
Chief Executive Officer of New Waste Management. The Board of Directors of New
Waste Management immediately following the effective time of the Merger will
consist of 14 members, seven of whom will be designated by the Company and seven
of whom will be designated by Waste Mangement.
Pursuant to the Merger, as a condition to receiving pooling of interests
accounting treatment, Waste Management was required to issue approximately 20
million shares of Waste Management Common Stock. This offering was completed on
June 15, 1998, resulting in net proceeds to Waste Management of approximately
$607.5 million. In addition, on May 15, 1998 Waste Management announced that its
Board of Directors has adopted a new dividend policy, reducing regular quarterly
dividends from $0.17 per share to $0.01 per share.
On June 29, 1998, Waste Management announced that it had reached an
agreement to acquire the publicly owned shares of its subsidiary, Waste
Management International plc. Waste Management has indicated that the
transaction is not expected to have a material impact on its future earnings.
Upon the consummation of the Merger, it is expected that New Waste
Management will enter into a revolving credit facility in the amount of $3.0
billion (the "New Credit Facility"), which will be in addition to the Company's
existing $2.0 billion revolving credit facility (the "Credit Facility"). It is
further expected that the New Credit Facility and the Credit Facility will each
be guaranteed by Waste Management, Inc., as a subsidiary of New Waste
Management. Further, upon the consummation of the Merger, New Waste Management
will unconditionally guarantee the outstanding senior indebtedness of Waste
Management, and Waste Management will unconditionally guarantee the outstanding
senior indebtedness of New Waste Management, including the 2028 Notes and the
Notes. As a consequence of such guarantees, the New Credit Facility, the Credit
Facility, the senior indebtedness of New Waste Management and the senior
indebtedness of Waste Management will be ranked on a PARI PASSU basis. Upon any
release by the lenders under the New Credit Facility and the Credit Facility (or
any replacement or new principal credit facility of New Waste Management) of the
Waste Management guarantee, Waste Management and New Waste Management shall each
be deemed automatically and unconditionally released and discharged from their
respective obligations under the guarantees of such senior indebtedness of the
other so guaranteed. See "Description of Notes--General."
S-4
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes in this Offering
are estimated to be $397.8 million (excluding the premium payment of $ to the
Company by J.P. Morgan Securities Inc. pursuant to the Remarketing Agreement
discussed herein), after deducting underwriting discounts and commissions and
estimated offering expenses.
The net proceeds of this Offering and the concurrent 2028 Notes Offering are
expected to be used to repay outstanding indebtedness under the Credit Facility.
At March 31, 1998, the aggregate outstanding balance of loans and letters of
credit under the Credit Facility was $1.8 billion ($483.3 million of which were
letters of credit). Borrowings under the Credit Facility bear interest at a rate
(currently 5.925%) equal to the Eurodollar rate plus an amount not in excess of
0.575% per annum and mature on August 7, 2002. Bank of America, an affiliate of
BancAmerica Robertson Stephens, expects to receive up to $19.5 million of
repayment under the Credit Facility from the proceeds of this Offering. Morgan
Guaranty Trust Company of New York, an affiliate of J.P. Morgan Securities Inc.,
expects to receive up to $19.5 million of repayment under the Credit Facility
from the proceeds of this Offering. Chase Bank, an affiliate of Chase
Securities, Inc., expects to receive up to $16.6 million of repayment under the
Credit Facility from the proceeds of this Offering. Deutsche Bank, an affiliate
of Deutsche Bank Securities, expects to receive up to $16.6 million of repayment
under the Credit Facility from the proceeds of this Offering. Amounts currently
outstanding under the Credit Facility were incurred to refinance existing
indebtedness and for capital expenditures and other general corporate purposes,
including acquisitions. Amounts repaid on the Credit Facility may be reborrowed
from time to time for capital expenditures and other general corporate purposes,
including possible future acquisitions.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the periods shown:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Actual..................................... 1.9x 1.1x 2.4x 2.3x 4.1x 5.0x
</TABLE>
The Company's consolidated ratios of earnings to fixed charges were computed
by dividing earnings available for fixed charges by fixed charges. For this
purpose, earnings available for fixed charges are the sum of income before
income taxes, undistributed earnings from affiliated companies minority
interest, cumulative effect of accounting changes and fixed charges, excluding
capitalized interest. Fixed charges are interest, whether expensed or
capitalized, amortization of debt expense and discount on premium relating to
indebtedness, and such portion of rental expense that can be demonstrated to be
representative of the interest factor in the particular case.
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the periods shown on a supplemental basis excluding
nonrecurring items:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Supplemental............................... 2.0x 2.4x 3.2x 4.5x 5.1x 5.0x
</TABLE>
Nonrecurring items in 1997 represent merger costs, primarily related to the
Company's merger with United Waste Systems, Inc. ("United") in August 1997, and
unusual items, primarily related to the closure of two transfer stations in
Minnesota, estimated losses related to the closure and abandonment of two
landfills in Massachusetts, and various other terminated projects. Nonrecurring
items in 1996 represent
S-5
<PAGE>
merger costs, primarily related to mergers with Sanifill, Inc. ("Sanifill") in
August 1996 and Western Waste Industries ("Western") in May 1996, and unusual
items, primarily related 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 Mexican operations, and
various other terminated projects. Nonrecurring items in 1995 primarily
represent merger costs related to the merger with Chambers Development Company,
Inc. ("Chambers") in June 1995 and nonrecurring interest related to extension
fees and other charges associated with the refinancing of Chambers' pre-merger
debt. Nonrecurring items in 1994 primarily represent shareholder litigation
costs incurred in connection with a settled class action of consolidated suits
on similar claims alleging federal securities law violations against Chambers,
certain of its officers and directors, its former auditors, and the underwriters
of its securities. Nonrecurring items in 1993 were not material.
The following table sets forth for the periods presented the ratios of
earnings to fixed charges on a pro forma combined basis giving effect to the
Merger and excluding nonrecurring items:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Pro Forma Combined......................... 3.5x 3.1x 3.3x 3.1x 2.7x 3.0x
</TABLE>
In addition to the nonrecurring items discussed above, the pro forma
combined ratios of earnings to fixed charges exclude asset impairment losses of
$1,480,262,000 and special charges of $145,990,000 for the year ended December
31, 1997, asset impairment losses of $64,729,000 and special charges of
$370,735,000 for the year ended December 31, 1996, asset impairment losses of
$53,772,000 and special charges of $335,587,000 for the year ended December 31,
1995, asset impairment losses of $33,970,000 for the year ended December 31,
1994, and asset impairment losses of $29,009,000 and special charges of
$524,767,000 for the year ended December 31, 1993.
S-6
<PAGE>
CAPITALIZATION
The following table sets forth the (i) actual consolidated cash and cash
equivalents and capitalization of the Company as of March 31, 1998; (ii) the
consolidated cash and cash equivalents and capitalization, as adjusted to give
effect to this Offering and the 2028 Notes Offering and the anticipated
application of the aggregate net proceeds of $794.0 million; and (iii) the pro
forma combined cash and cash equivalents and capitalization of the Company and
Waste Management as of March 31, 1998, giving effect to the Merger and as
adjusted in (ii) above for this Offering and the 2028 Notes Offering. See "Use
of Proceeds."
The pro forma combined as adjusted cash and cash equivalents and
capitalization reflects the sale of 20 million shares of Waste Management Common
Stock that occurred June 15, 1998. For the purposes of this table, net proceeds
from the Waste Management Common Stock offering were assumed to have been $614.4
million, as discussed in the pro forma financial information provided herein.
The actual proceeds from the Waste Management Common Stock offering did not
differ materially from the amounts assumed. A portion of the proceeds from the
Waste Management Common Stock offering were used to reduce Waste Management's
obligations to former stockholders of Wheelabrator Technologies, Inc. ("WTI").
This table should be read in conjunction with and is qualified by reference
to the Company's Consolidated Financial Statements and Notes thereto and the USA
Waste and Waste Management Combined Unaudited Pro Forma Condensed Financial
Statements included or incorporated by reference in this Prospectus Supplement
and the accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
--------------------------------------
COMPANY AND
WASTE MANAGEMENT
COMPANY PRO FORMA
COMPANY AS COMBINED
ACTUAL ADJUSTED AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.......................... $ 46,260 $ 46,260 $ 358,121
--------- --------- ----------------
--------- --------- ----------------
Long-term debt (including current maturities):
Credit facility.................................. $1,333,000 $ 539,000 $ 719,000
Commercial paper................................. -- -- 427,595
Obligation to former WTI stockholders............ -- -- 261,832
Existing Notes and debentures.................... 1,091,240 1,091,240 4,774,495
% Senior Notes due 2028........................ -- 400,000 400,000
% Mandatorily Tendered Senior Notes due 2011... -- 400,000 400,000
Convertible subordinated notes and
other subordinated notes....................... 799,775 799,775 1,249,312
WTI project debt................................. -- -- 784,146
Other............................................ 407,399 407,399 1,306,683
--------- --------- ----------------
Total long-term debt, including current
maturities................................... 3,631,414 3,637,414 10,323,063
--------- --------- ----------------
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized,
none issued.................................... -- -- --
Common stock, 500,000,000 shares authorized,
219,834,550 shares (572,269,938 pro forma
shares) issued................................. 2,198 2,198 5,723
Additional paid-in capital....................... 2,436,447 2,436,447 3,267,468
Retained earnings................................ 374,459 374,459 2,033,929
Accumulated other comprehensive income........... (37,498) (37,498) (316,298)
Treasury stock................................... (484) (484) (484)
Restricted stock unearned compensation........... -- -- (10,252)
Employee stock benefit trust..................... -- -- (335,436)
--------- --------- ----------------
Total stockholders' equity..................... 2,775,122 2,775,122 4,644,650
--------- --------- ----------------
Total capitalization........................... $6,406,536 $6,412,536 $ 14,967,713
--------- --------- ----------------
--------- --------- ----------------
</TABLE>
S-7
<PAGE>
SELECTED HISTORICAL AND SUMMARY COMBINED UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
The following selected historical financial information of USA Waste for
each of the five years in the period ended December 31, 1997 has been derived
from its audited historical financial statements. The following selected
historical financial information of USA Waste as of and for the three months
ended March 31, 1997 and 1998 has been derived from its unaudited historical
financial statements and reflects all adjustments management considers necessary
for a fair presentation of the financial position and results of operations for
these periods. The selected historical financial information should be read in
conjunction with the historical financial statements and notes thereto
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus.
The summary combined unaudited pro forma condensed financial information is
derived from the combined unaudited pro forma condensed financial statements,
appearing elsewhere herein, which give effect to the Merger by combining the
results of operations of USA Waste and Waste Management using the pooling of
interests method of accounting as if the Merger had been consummated as of the
beginning of the periods presented and as if Waste Management had issued 20
million shares of Waste Management Common Stock as of March 31, 1998, and should
be read in conjunction with such pro forma financial statements and notes
thereto included in this Prospectus Supplement. The combined unaudited pro forma
condensed financial statements as of March 31, 1998 and for the years ended
December 31, 1995, 1996 and 1997 and the three months ended March 31, 1998 were
prepared based on the respective historical financial statements of USA Waste
and Waste Management.
The combined unaudited pro forma condensed financial information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have been achieved had
the Merger been consummated as of the beginning of the periods presented, nor is
it necessarily indicative of the future operating results or financial position
of New Waste Management. The combined unaudited pro forma condensed financial
information does not give effect to any possible divestitures of business units
(including those which may be required by the antitrust regulatory authorities)
or to any cost savings which may result from the integration of USA Waste's and
Waste Management's operations nor does such information include the nonrecurring
costs directly related to the Merger which are expected to be included in
operations of New Waste Management within the 12 months following the Merger.
Such nonrecurring costs have yet to be determined; however, such costs are
expected to be significant.
S-8
<PAGE>
USA WASTE SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues....................... $ 887,972 $1,043,687 $1,216,082 $1,649,131 $2,613,768 $ 460,484 $ 769,440
--------- --------- --------- --------- --------- --------- ---------
Costs and expenses:
Operating (exclusive of depreciation
and amortization shown below)........ 514,483 596,868 672,117 881,401 1,345,769 241,318 397,492
General and administrative............. 144,623 159,097 169,686 200,101 284,946 53,677 81,916
Depreciation and amortization.......... 108,024 127,108 143,878 191,044 303,241 56,178 86,110
Merger costs........................... -- 3,782 26,539 126,626 109,411 1,996 --
Unusual items.......................... 2,672 8,863 4,733 63,800 24,720 -- --
--------- --------- --------- --------- --------- --------- ---------
769,802 895,718 1,016,953 1,462,972 2,068,087 353,169 565,518
--------- --------- --------- --------- --------- --------- ---------
Income from operations................... 118,170 147,969 199,129 186,159 545,681 107,315 203,922
--------- --------- --------- --------- --------- --------- ---------
Other income (expenses):
Shareholder litigation settlement and
other litigation related costs....... (5,500) (79,400) -- -- -- -- --
Interest expense:
Nonrecurring......................... -- (1,254) (10,994) -- -- -- --
Other................................ (50,737) (54,102) (58,619) (60,497) (104,261) (16,098) (38,368)
Interest income........................ 5,072 5,085 6,682 6,699 7,634 2,053 1,799
Other income, net...................... 1,749 2,629 4,891 6,376 14,213 3,646 34,251
--------- --------- --------- --------- --------- --------- ---------
(49,416) (127,042) (58,040) (47,422) (82,414) (10,399) (2,318)
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and
extraordinary item..................... 68,754 20,927 141,089 138,737 463,267 96,916 201,604
Provision for income taxes............... 29,170 8,959 60,313 70,398 189,944 38,954 80,642
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary item......... 39,584 11,968 80,776 68,339 273,323 57,962 120,962
Extraordinary item related to early
retirement of debt, net of taxes....... -- -- -- -- (6,293) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................... $ 39,584 $ 11,968 $ 80,776 $ 68,339 $ 267,030 $ 57,962 $ 120,962
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Basic earnings per common share:
Income before extraordinary item....... $ 0.32 $ 0.08 $ 0.56 $ 0.39 $ 1.31 $ 0.30 $ 0.55
Extraordinary item..................... -- -- -- -- (0.03) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 0.32 $ 0.08 $ 0.56 $ 0.39 $ 1.28 $ 0.30 $ 0.55
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings per common share:
Income before extraordinary item....... $ 0.32 $ 0.08 $ 0.54 $ 0.37 $ 1.26 $ 0.29 $ 0.52
Extraordinary item..................... -- -- -- -- (0.03) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 0.32 $ 0.08 $ 0.54 $ 0.37 $ 1.23 $ 0.29 $ 0.52
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Dividends per common share............... $ -- $ -- $ -- $ -- $ -- $ -- $ --
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.......................... $ 37,565 $ 1,901 $ 26,134 $ 31,842 $ 86,736 $ 148,997 $ 177,910
Intangible assets, net................... 196,353 250,551 433,944 804,251 1,645,985 1,110,900 2,031,811
Total assets............................. 1,617,422 1,833,099 2,455,102 3,631,547 6,622,845 4,591,544 7,589,405
Long-term debt, including current
maturities............................. 711,014 759,123 909,050 1,504,888 2,763,729 1,732,825 3,631,414
Stockholders' equity..................... 623,510 688,603 1,149,885 1,473,990 2,628,976 2,118,698 2,775,122
</TABLE>
S-9
<PAGE>
- ------------------------
(1) The results of operations in 1997 include charges for merger costs that
primarily related to a pooling of interests with United and unusual items
for the closure and abandonment of certain landfills and transfer stations
and reserves for various other terminated projects.
(2) In 1996, USA Waste recorded merger costs primarily related to its poolings
of interests with Western and Sanifill, and unusual items primarily related
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 operations in Mexico,
and various other terminated projects.
(3) USA Waste's results of operations in 1995 include merger costs primarily
related to its merger with Chambers and nonrecurring interest related to
extension fees and other charges associated with the refinancing of
Chambers' pre-merger debt.
(4) The 1994 results of operations include nonrecurring charges primarily
related to shareholder litigation costs incurred in connection with a
settled class action of consolidated suits on similar claims alleging
federal securities law violations against Chambers, certain of its officers
and directors, its former auditors, and the underwriters of its securities.
S-10
<PAGE>
USA WASTE AND WASTE MANAGEMENT
SUMMARY COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------- -------------
1995 1996 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues................................... $ 10,316,307 $ 10,874,767 $ 11,802,350 $ 2,901,061
------------- ------------- ------------- -------------
Costs and expenses:
Operating (exclusive of depreciation and
amortization shown below)...................... 6,176,196 6,498,708 7,479,745 1,757,707
General and administrative....................... 1,260,192 1,294,471 1,413,244 345,581
Depreciation and amortization.................... 1,178,896 1,256,727 1,382,356 351,458
Merger costs..................................... 26,539 126,626 109,411 --
Unusual items.................................... 394,092 499,264 1,650,972 --
(Income) loss from continuing operations held for
sale, net of minority interest..................... (25,110) (315) 9,930 2,416
------------- ------------- ------------- -------------
9,010,805 9,675,481 12,045,658 2,457,162
------------- ------------- ------------- -------------
Income (loss) from operations........................ 1,305,502 1,199,286 (243,308) 443,899
------------- ------------- ------------- -------------
Other income (expense):
Interest expense:
Nonrecurring................................. (10,994) -- -- --
Other........................................ (522,480) (522,921) (551,149) (153,942)
Interest income.................................. 41,565 34,603 45,214 6,109
Minority interest................................ (81,367) (41,289) (45,442) (25,302)
Other income, net................................ 257,586 108,390 126,172 70,323
------------- ------------- ------------- -------------
(315,690) (421,217) (425,205) (102,812)
------------- ------------- ------------- -------------
Income (loss) from continuing operations before
income taxes....................................... 989,812 778,069 (668,513) 341,087
Provision for income taxes........................... 492,885 486,616 361,464 161,815
------------- ------------- ------------- -------------
Income (loss) from continuing operations............. $ 496,927 $ 291,453 $ (1,029,977) $ 179,272
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic earnings (loss) per common share from
continuing operations.............................. $ 1.00 $ 0.55 $ (1.88) $ 0.33
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted earnings (loss) per common share from
continuing operations.............................. $ 0.99 $ 0.54 $ (1.88) $ 0.32
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)............................ $(1,537,137)
Intangible assets, net............................... 5,651,426
Total assets......................................... 21,248,259
Long-term debt, including current maturities......... 10,317,063
Stockholders' equity................................. 4,644,650
</TABLE>
S-11
<PAGE>
DESCRIPTION OF THE NOTES
The Notes constitute a series of Senior Debt Securities described in the
accompanying Prospectus that will be issued under an indenture, dated as of
September 10, 1997 (the "Senior Indenture"), between the Company and Chase Bank
of Texas, National Association, as trustee (the "Trustee"). The following
description of the particular terms of the Notes offered hereby supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Senior Debt Securities set forth in the accompanying
Prospectus, to which reference is hereby made. Capitalized terms used but not
defined herein or in the accompanying Prospectus have the meanings given to them
in the Senior Indenture. As used in this section, the "Company" means USA Waste
Services, Inc., but not any of its subsidiaries, unless the context otherwise
requires. The following summary of the Senior Indenture and the Notes does not
purport to be complete and such summary is subject to the detailed provisions of
the Senior Indenture and the Notes to which reference is hereby made for a full
description of such provisions.
GENERAL
The Notes offered by this Prospectus Supplement will be limited in aggregate
principal amount to $400,000,000. The Notes constitute senior and unsecured
obligations of the Company, ranking PARI PASSU in right of payment with all
other senior and unsecured obligations of the Company.
The Notes will mature on , 2011 (the "Stated Maturity Date") and
will bear interest at an annual rate of % to but not including , 2001
(the "Remarketing Date"). Interest on the Notes will be payable semi-annually on
January and July of each year, commencing January , 1999 to the persons in
whose name the Notes are registered at the close of business on the and
immediately preceding the related Interest Payment Date. Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples thereof. There is no sinking fund
applicable to the Notes.
If the Remarketing Dealer elects to remarket the Notes on the Remarketing
Date, then the Notes will be subject to mandatory tender to the Remarketing
Dealer, for purchase at 100% of the principal amount thereof on the Remarketing
Date on the terms and subject to the conditions described herein (interest
accrued to but not including the Remarketing Date will be paid by the Company on
such date to holders on the immediately preceding Record Date). See "--
Mandatory Tender of Notes; Remarketing." If the Remarketing Dealer does not
elect to exercise its right to a mandatory tender of the Notes on the
Remarketing Date, if the Remarketing Dealer does not receive by the
Determination Date (as defined below) any firm committed bids to purchase all
the Notes from a Reference Corporate Dealer, as provided below, or if for any
reason the Remarketing Dealer does not purchase all of the Notes on the
Remarketing Date, then the Company is required to repurchase any Notes that have
not been purchased by the Remarketing Dealer from the holders thereof at 100% of
the principal amount thereof plus accrued interest, if any. See "-- Repurchase."
The Notes will be redeemable by the Company on and after the Remarketing Date
pursuant to the terms set forth in "-- Redemption."
If the Remarketing Dealer remarkets the Notes on the Remarketing Date, then,
as of the Remarketing Date, the interest rate on the Notes will be reset at a
fixed rate until the Stated Maturity Date, as determined by the Remarketing
Dealer based on bids requested from certain dealers in the Company's
publicly-traded debt securities. See "-- Mandatory Tender of Notes;
Remarketing."
The Notes will be issued in the form of one or more registered global
securities and will be deposited with, or on behalf of, DTC and registered in
the name of DTC or its nominee. See "-- Book-Entry, Delivery and Form."
Settlement for the Notes will be made in immediately available funds and the
Notes will trade on the DTC's Same-Day Funds Settlement System until maturity.
Secondary market trading activity in the Notes will therefore settle in
immediately available funds. All payments of principal and interest will be made
by the Company in immediately available funds.
Although the United States federal income tax treatment of the Notes is not
certain, the terms of the Notes provide that the Company and all holders of the
Notes agree to treat the Notes as fixed rate debt
S-12
<PAGE>
instruments that mature on the Remarketing Date for United States federal income
tax purposes. See "Certain United States Federal Income Tax Considerations."
The Company's obligations under the Credit Facility are currently guaranteed
by United and Sanifill, both wholly-owned subsidiaries of the Company. Upon
consummation of the Merger, it is expected that New Waste Management will enter
into the New Credit Facility, and that each of the Credit Facility and the New
Credit Facility will be guaranteed by Waste Management, Inc., as a subsidiary of
New Waste Management. Further, upon consummation of the Merger, it is expected
that New Waste Management will unconditionally guarantee the outstanding senior
indebtedness of Waste Management, and Waste Management will unconditionally
guarantee the outstanding senior indebtedness of New Waste Management, including
the Notes and the 2028 Notes. It is expected that as a consequence of such
guarantees, the New Credit Facility, the Credit Facility, the senior
indebtedness of New Waste Management and the senior indebtedness of Waste
Management will be ranked on a PARI PASSU basis. Upon any release by the lenders
under the New Credit Facility and the Credit Facility (or any replacement or new
principal credit facility of New Waste Management) of the Waste Management
guarantee, Waste Management and New Waste Management shall each be deemed
automatically and unconditionally released and discharged from their respective
obligations under the guarantees of such senior indebtedness of the other so
guaranteed. The Company is seeking, among other proposed amendments, to amend
the Credit Facility to have the guarantees provided by United and Sanifill
removed, although there can be no assurance such guarantees will be removed. If
such guarantees by United and Sanifill are removed, Waste Management, Inc. will
be the only subsidiary of New Waste Management guaranteeing the Credit Facility
and the New Credit Facility. In such event, the claims of creditors of United,
Sanifill and (with the exception of Waste Management assuming the Merger is
consummated and the Waste Management guarantee is entered into as described
hereinabove) the Company's other subsidiaries (including holders of the $150.0
million aggregate principal amount of outstanding 4% Convertible Subordinated
Debentures due June 1, 2001 of United, and $115.0 million aggregate amount of
outstanding 5% Convertible Subordinated Debentures due March 1, 2006 of
Sanifill) will effectively have priority with respect to the assets and earnings
of such subsidiaries, over the claims of creditors of the Company, including the
holders of the Notes. However, upon consummation of the Merger, the claims of
creditors of Waste Management will not have such priority as a consequence of
Waste Management's guarantee of the Company's senior indebtedness described
above during the period such guarantee is in effect.
MANDATORY TENDER OF NOTES; REMARKETING
The following description sets forth the terms and conditions of the
remarketing of the Notes on the Remarketing Date, if the Remarketing Dealer
elects to purchase the Notes on the Remarketing Date for remarketing.
MANDATORY TENDER
If the Remarketing Dealer gives notice to the Company and the Trustee on a
Business Day not later than fifteen Business Days prior to the Remarketing Date
(the "Notification Date") of its intention to purchase the Notes for remarketing
on the Remarketing Date, all outstanding Notes will be automatically tendered to
the Remarketing Dealer for purchase on the Remarketing Date. The purchase price
of the Notes will be equal in each case to 100% of the principal amount thereof.
When the Notes are tendered for remarketing, the Remarketing Dealer may remarket
the Notes for its own account at a price or prices to be determined by the
Remarketing Dealer at the time of each sale or may sell such Notes to the
Reference Corporate Dealer (defined below) submitting the lowest firm, committed
bid on the Determination Date (defined below), as described below.
If the Remarketing Dealer elects to remarket the Notes on the Remarketing
Date, then from and including the Remarketing Date to but excluding the Stated
Maturity Date, the Notes will bear interest at the Interest Rate to Maturity
(determined as provided below). If the Remarketing Dealer elects to remarket the
Notes on the Remarketing Date, the obligation of the Remarketing Dealer to
purchase the Notes on the Remarketing Date is subject to several conditions set
forth in a Remarketing Agreement
S-13
<PAGE>
between the Company and the Remarketing Dealer (the "Remarketing Agreement"). In
addition, the Remarketing Dealer may terminate the Remarketing Agreement upon
the occurrence of certain events set forth therein. See "-- The Remarketing
Dealer." If for any reason the Remarketing Dealer does not purchase all
outstanding Notes on the Remarketing Date, the Company will be required on the
Remarketing Date to repurchase any Notes that have not been purchased by the
Remarketing Dealer from the holders thereof at a price equal to 100% of the
principal amount thereof plus all accrued interest, if any. See "-- Repurchase."
The Remarketing Dealer shall determine the interest rate the Notes will bear
from and including the Remarketing Date to but excluding the Stated Maturity
Date (the "Interest Rate to Maturity") on the third Business Day immediately
preceding the Remarketing Date (the "Determination Date") by soliciting by 3:30
p.m., New York City time, on the Determination Date the Reference Corporate
Dealers (defined below) for firm, committed bids to purchase all outstanding
Notes at the Dollar Price (defined below), and by selecting the lowest such
firm, committed bid (regardless of whether each of the Referenced Corporate
Dealers actually submits a bid). Each bid shall be expressed in terms of the
Interest Rate to Maturity that the Notes would bear (quoted as a spread over
% per annum (the "Base Rate")) based on the following assumptions:
(i) the Notes would be sold to such Reference Corporate Dealer on the
Remarketing Date for settlement on the same day;
(ii) the Notes would mature on the Stated Maturity Date; and
(iii) the Notes would bear interest from and including the Remarketing
Date to but excluding the Stated Maturity Date at a stated rate equal to the
Interest Rate to Maturity bid by such Reference Corporate Dealer, payable
semi-annually on the Interest Payment Dates for the Notes.
The Interest Rate to Maturity announced by the Remarketing Dealer as a result of
such process will be quoted to the nearest one hundred-thousandth (0.00001) of
one percent per annum and, absent manifest error, will be binding and conclusive
upon the holders of the Notes, the Company and the Trustee. The Remarketing
Dealer shall have the discretion to select the time at which the Interest Rate
to Maturity is determined on the Determination Date.
"Dollar Price" means the discounted present value to the Remarketing Date of
the cash flows on a bond
(x) with a principal amount equal to the aggregate principal amount of
the Notes,
(y) maturing on the Stated Maturity Date, and
(z) bearing interest at a rate equal to the Base Rate,
using a discount rate equal to the Treasury Rate (defined below), payable
semi-annually (assuming a 360-day year consisting of twelve 30-day months) on
the Interest Payment Dates of the Notes from and including the Remarketing Date
to but excluding the Stated Maturity Date.
"Reference Corporate Dealer" means J.P. Morgan Securities Inc., Donaldson,
Lufkin & Jenrette Securities Corporation, BancAmerica Robertson Stephens, Chase
Securities, Inc., and Deutsche Bank Securities. If any of such persons shall
cease to be a leading dealer of publicly-traded debt securities of the Company,
then the Remarketing Dealer may replace, with the approval of the Company (not
to be unreasonably withheld), such person with any other leading dealer of
publicly-traded debt securities of the Company.
"Treasury Rate" means the annual rate equal to the semi-annual equivalent
yield to maturity or interpolated (on a 30/360 day count basis) yield to
maturity on the Determination Date of the Comparable Treasury Issue (defined
below) for value on the Remarketing Date, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price (as defined below).
S-14
<PAGE>
"Comparable Treasury Issue" means the United States Treasury security
selected by the Remarketing Dealer as having an actual maturity on the
Determination Date (or the United States Treasury securities selected by the
Remarketing Dealer to derive an interpolated maturity on the Determination Date)
comparable to the remaining term of the Notes.
"Comparable Treasury Price" means (a) the offer price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) on the
Determination Date, as set forth on Telerate Page 500 (as defined below),
adjusted to reflect settlement on the Remarketing Date if prices quoted on
Telerate Page 500 are for settlement on any date other than the Remarketing
Date, or (b) if such page (or any successor page) is not displayed or does not
contain such offer prices on such Business Day, (i) the average of five
Reference Treasury Dealer Quotations (as defined below) for the Remarketing
Date, excluding the highest and lowest of such Reference Treasury Dealer
Quotations (unless there is more than one highest or lowest quotation, in which
case only one such highest and/or lowest quotations shall be excluded) or (ii)
if the Remarketing Dealer obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated on "Telerate Page 500" on
Dow Jones Markets Limited (or such other page as may replace Telerate page 500
on such service) or such other service displaying the offer prices specified in
clause (a) of the definition of Comparable Treasury Price as may replace Dow
Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer, the offer price(s) for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) for settlement on the Remarketing Date
quoted in writing to the Remarketing Dealer by such Reference Treasury Dealer by
3:30 p.m., New York City time, on the Determination Date.
"Reference Treasury Dealer" means a primary U.S. Government securities
dealer in The City of New York (which may include the Remarketing Dealer)
selected by the Remarketing Dealer.
NOTIFICATION OF RESULTS; SETTLEMENT
If the Remarketing Dealer has elected to remarket the Notes on the
Remarketing Date as provided herein, then the Remarketing Dealer will notify the
Company, the Trustee and DTC by telephone, confirmed in writing by 5:00 p.m.,
New York City time on the Determination Date, of the Interest Rate to Maturity
applicable to the Notes effective from and including the Remarketing Date.
All outstanding Notes will be automatically delivered to the account of the
Trustee by book-entry through DTC, pending payment of the purchase price
therefor, on the Remarketing Date.
The Remarketing Dealer will make, or cause the Trustee to make, payment to
DTC by the close of business on the Remarketing Date, against delivery through
DTC of the tendered Notes, of the purchase price for all of the tendered Notes.
The purchase price of the tendered Notes will be equal to 100% of the principal
amount thereof and will be paid in immediately available funds. If the
Remarketing Dealer does not purchase all of the Notes on the Remarketing Date,
then the Company is obligated to make or cause to be made such payment for all
of the Notes not purchased by the Remarketing Dealer, as described below under
"-- Repurchase." In any case, the Company will make, or cause the Trustee to
make, payment of interest due on the Remarketing Date to holders of Notes as of
the Record Date by book entry through DTC by the close of business on the
Remarketing Date.
The tender and settlement procedures described above may be modified without
the consent of the holders of the Notes to the extent required by DTC or, if the
book-entry system is no longer available for the Notes at the time of the
remarketing, to the extent required to facilitate the tendering and remarketing
of Notes in certificated form. In addition, the Remarketing Dealer may modify
without any such consent the settlement procedures set forth above in order to
facilitate the settlement process.
S-15
<PAGE>
As long as DTC's nominee holds the certificates representing any Notes in
the book entry system of DTC, no certificates for such Notes will be delivered
by or to any selling beneficial owner to reflect any transfer of such Notes
effected in the remarketing. In addition, under and subject to the terms of the
Notes and the Remarketing Agreement, the Company (i) has agreed that it will use
its best efforts to maintain the Notes in book-entry form with DTC or any
successor thereto and to appoint a successor depositary to the extent necessary
to maintain the Notes in book-entry form and (ii) has waived any discretionary
right it otherwise has under the Senior Indenture to cause the Notes to be
issued in certificated form.
For further information with respect to transfers and settlement through
DTC, see "-- Book-Entry, Delivery and Form" below, and "Description of Debt
Securities -- Provisions Applicable to Both Senior and Subordinated Debt
Securities -- Global Debt Securities" in the accompanying Prospectus.
THE REMARKETING DEALER
On or prior to the date of issuance of the Notes, the Company and the
Remarketing Dealer will enter into the Remarketing Agreement which will provide
for the Notes to be remarketed substantially on the terms described below and in
"-- Mandatory Tender of Notes; Remarketing." The Remarketing Dealer will not
receive any fees from the Company in connection with the remarketing, but the
Company will reimburse the Remarketing Dealer's reasonable out-of-pocket
expenses under certain circumstances.
The Company will agree to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
arising out of or in connection with its duties under the Remarketing Agreement.
The Remarketing Dealer has the right under the Remarketing Agreement to
elect whether or not to remarket the Notes. If the Remarketing Dealer elects to
remarket the Notes on the Remarketing Date as described herein, the obligation
of the Remarketing Dealer to purchase Notes from holders thereof will be subject
to several conditions set forth in the Remarketing Agreement. In addition, the
Remarketing Agreement will provide for the termination thereof by the
Remarketing Dealer on or before the Remarketing Date upon the occurrence of
certain events, including events that customarily give underwriters the right to
terminate an underwriting agreement or would give rise to a failure to satisfy a
closing condition to an underwriting agreement in the Company's public debt
offerings.
As a result of these conditions and termination rights, holders of Notes
cannot be assured that their Notes will be purchased by the Remarketing Dealer
in connection with a mandatory tender. The Remarketing Dealer is not required to
purchase the Notes and no holder of any Notes shall have any rights or claims
under the Remarketing Agreement or against the Company or the Remarketing Dealer
as a result of the Remarketing Dealer not purchasing such Notes. If the
Remarketing Dealer does not purchase all of the Notes on the Remarketing Date,
the Company will be required to purchase on the Remarketing Date any Notes that
have not been purchased by the Remarketing Dealer on the Remarketing Date at
100% of the principal amount thereof plus accrued interest, if any. See "--
Repurchase."
The Remarketing Agreement will also provide that the Remarketing Dealer may
resign as Remarketing Dealer (i) at any time prior to its giving notice of its
intention to remarket the Notes, such resignation to be effective ten Business
Days after the delivery to the Company and the Trustee of notice of such
resignation or (ii) immediately upon termination of the Remarketing Agreement.
The Company shall have the right, but not the obligation, to appoint a successor
Remarketing Dealer.
The Remarketing Dealer, in its individual or any other capacity, may buy,
sell, hold and deal in any of the Notes. The Remarketing Dealer, as a holder or
beneficial owner of Notes may exercise any vote or join in any action which any
holder or beneficial owner of Notes may be entitled to exercise or take with
like effect as if it did not act in any capacity under the Remarketing
Agreement. The Remarketing Dealer, in its individual capacity, either as
principal or agent, may also engage in or have an interest in any financial or
S-16
<PAGE>
other transaction with the Company as freely as if it did not act in any
capacity under the Remarketing Agreement.
REPURCHASE
If the Remarketing Dealer for any reason does not purchase all of the Notes
on the Remarketing Date, the Company shall repurchase on the Remarketing Date,
at a price equal to 100% of the principal amount of the Notes plus all accrued
and unpaid interest, if any, on the Notes to (but excluding) the Remarketing
Date, any Notes that have not been purchased by the Remarketing Dealer on the
Remarketing Date.
REDEMPTION
ON THE REMARKETING DATE
If the Remarketing Dealer has elected to remarket the Notes on the
Remarketing Date, the Company shall have the right to redeem the Notes in whole
but not in part, from the Remarketing Dealer on the Remarketing Date by giving
written notice of such redemption to the Remarketing Dealer no later than the
later of:
(i) the Business Day immediately prior to the Determination Date or
(ii) if fewer than three Reference Corporate Dealers timely submit firm,
committed bids for all outstanding Notes to the Remarketing Dealer on the
Determination Date, immediately after the deadline set by the Remarketing Dealer
for receiving such bids has passed;
and by paying the amount equal to the greater of (x) 100% of the aggregate
principal amount of the Notes and (y) the Dollar Price with respect to such
Notes. In either such case, it shall pay such redemption price for the Notes in
same-day funds by wire transfer on the Remarketing Date to an account designated
by the Remarketing Dealer.
AFTER THE REMARKETING DATE
After the Remarketing Date, if the Remarketing Dealer has elected to
remarket the Notes on the Remarketing Date, the Notes will be redeemable (a
"Post-Remarketing Redemption"), in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon (not including
the portion of any such payments of interest accrued as of the redemption date)
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined
below) (determined on the third Business Day preceding such redemption date),
plus, in each case, accrued and unpaid interest thereon to (but excluding) the
redemption date.
Notice of any Post-Remarketing Redemption will be mailed at least 30 days
but not more than 60 days before the redemption date to each holder of the Notes
to be redeemed. Unless the Company defaults in payment of the redemption price,
on and after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption pursuant to a Post-Remarketing
Redemption.
"ADJUSTED TREASURY RATE" means (i) the arithmetic means of the yields under
the heading "Week Ending" published in the Statistical Release most recently
published prior to the date of determination under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to the maturity, as of the redemption date,
of the principal being redeemed plus (ii) %. If no maturity set forth under
such heading exactly corresponds to the maturity of such principal, yields for
the two published maturities most closely corresponding to the maturity of such
principal shall be calculated pursuant to the immediately preceding sentence,
and the Adjusted Treasury
S-17
<PAGE>
Rate shall be interpolated or extrapolated from such yields on a straight-line
basis, rounding in each of the relevant periods to the nearest month.
"STATISTICAL RELEASE" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively-traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the terms of the Notes,
then such other reasonably comparable index which shall be designated by the
Company.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Notes will initially be issued in the form of
one or more registered Notes in global form (the "Global Notes"). Each Global
Note will be deposited on the date of the closing of the sale of the Notes (the
"Closing Date") with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary.
The Company has been advised that the Depositary is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with it. The Depositary also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations ("Direct Participants"). The Depositary is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depository Trust Company system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable to
the Depositary and its Participants are on file with the Commission.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Underwriters with an interest in the
Global Notes and (ii) ownership of the Notes evidenced by the Global Notes will
be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the interests of
Participants), the Participants and the Indirect Participants.
So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Note for all purposes
under the Senior Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of certificated notes (the "Certificated Notes"), and
will not be considered the owners or holders thereof under the Senior Indenture
for any purpose, including with respect to the giving of any directions,
instructions or approvals to the Trustee thereunder. As a result, the ability of
a person having a beneficial interest in Notes represented by a Global Note to
pledge such interest to persons or entities that do not participate in the
Depositary's system, or to otherwise take actions with respect to such interest,
may be affected by the lack of a physical certificate evidencing such interest.
The Company understands that under existing practices, if the Company requests
any action of Holders or if an owner of a beneficial interest in a Global Note
desires to give any notice or take any action a Holder is entitled to give or
take under the Senior Indenture, the Depositary would authorize the Participants
to give such notice or take such action, and Participants would authorize
beneficial owners owning through such Participants to give such notice or take
such action or would
S-18
<PAGE>
otherwise act upon the instructions of beneficial owners owning through them.
Issuance of the Notes in book-entry form may reduce the liquidity of such Notes
in the secondary trading market because investors may be unwilling to purchase
Notes for which they cannot obtain physical certificates.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to the Notes.
Payments with respect to the principal of, premium, if any, and interest on,
any Note represented by a Global Note registered in the name of the Depositary
or its nominee on the applicable record date will be payable by the Trustee to
or at the direction of the Depositary or its nominee in its capacity as the
registered Holder of the Global Note representing the Notes under the Senior
Indenture. Under the terms of the Senior Indenture, the Company and the Trustee
may treat the persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes (including principal, premium, if
any, or interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Notes as
shown on the records of the Depositary. Payments by the Participants and the
Indirect Participants to the beneficial owners will be governed by standing
instructions and customary practice and will be the sole responsibility of the
Participants or the Indirect Participants.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor, (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Notes in definitive
form under the Senior Indenture or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Notes, then, upon surrender
by the Depositary of the Global Notes, Certificated Notes will be issued to each
person that the Depositary identifies as the beneficial owner of the Notes
represented by a Global Note. Upon any such issuance, the Trustee is required to
register such Certificated Notes in the name of such person or persons (or the
nominee of any thereof), and cause the same to be delivered thereto.
Certificated Notes may be presented for registration or exchange at the offices
of the Company required to be maintained under the Senior Indenture for such
purposes.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).
The information in this and the preceding section concerning the Depositary
and the Depositary's book-entry system has been obtained from sources that the
Company believes to be reliable. The Company will have no responsibility for the
performance by the Depositary, its Participants or the Indirect Participants of
their respective obligations as described hereunder or under the rules and
procedures governing their respective operations.
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
Payments in respect of the Notes represented by a Global Note (including
principal, premium, if any, and interest) will be made by wire transfer of
immediately available funds to the accounts specified by the Depositary. With
respect to Notes represented by Certificated Notes, all payments (including
principal, premium, if any, and interest) will be made at the office or agency
of the Company maintained for such
S-19
<PAGE>
purpose, which office or agency shall be maintained in the Borough of Manhattan,
The City of New York, except that, at the option of the Company, any payments of
interest may be made by mailing a check on or before the due date to the address
of the person entitled thereto as such address shall appear in the Security
Register. The Notes will trade in the Depositary's Same-Day Funds Settlement
System until maturity, or until the Notes are issued in certificated form, and
secondary market trading activity in the Notes will therefore be required by the
Depositary to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
S-20
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a general discussion of the principal U.S. federal income
tax consequences of the purchase, ownership and disposition of the Notes to
initial holders purchasing Notes at the "issue price." The "issue price" of a
Note will equal the first price to the public (not including bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers) at which a substantial amount of
the Note is sold for money. This summary is based upon laws, regulations,
rulings and decisions currently in effect, all of which are subject to change,
which change may be retroactive. Moreover, it deals only with purchasers who
hold Notes as "capital assets" (generally, property held for investment) within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"), and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, persons holding Notes
as a hedge against currency risk or as a position in a "straddle," "conversion"
or another integrated transaction for tax purposes, or U.S. Holders (as defined
below) whose functional currency is not the U.S. dollar. In addition, this
discussion only addresses the U.S. federal income tax consequences of the Notes
until the Remarketing Date.
As used herein, the term "U.S. Holder" means a beneficial owner of Notes
that is, for U.S. federal income tax purposes, (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a U.S.
person under any applicable Treasury regulations and certain partnerships that
have one or more partners who are not U.S. persons), (iii) an estate whose
income is subject to U.S. federal income tax regardless of its source, or (iv) a
trust if a court within the United States is able to exercise primary
supervision over the trust's administration and one or more U.S. fiduciaries
have the authority to control all its substantial decisions. As used herein, the
term "non-U.S. Holder" means a beneficial owner of a Note that is not a U.S.
Holder.
Because the Notes are subject to mandatory tender for purchase by the
Remarketing Dealer or purchase by the Company if not purchased by the
Remarketing Dealer on the Remarketing Date, the Company intends to treat the
Notes as maturing on the Remarketing Date for U.S. federal income tax purposes
and as being reissued on the Remarketing Date should the Remarketing Dealer
remarket the Notes. By purchasing the Notes a holder agrees to follow such
treatment for U.S. federal income tax purposes. Because no debt instrument
closely comparable to the Notes has been the subject of any Treasury regulation,
revenue ruling or judicial decision, the U.S. federal income tax treatment of
the Notes is not certain. Prospective purchasers should note that no rulings
have been or are expected to be sought from the Internal Revenue Service ("IRS")
with respect to any of the issues discussed herein, and no assurances can be
given that the IRS will not take contrary positions. Accordingly, significant
aspects of the U.S. federal income tax consequences of an investment in the
Notes are uncertain, and no assurance can be given that the IRS or the court
will agree that the Notes should be treated as maturing on the Remarketing Date.
Furthermore, no advice has been received or is expected to be sought from any
state, local or foreign taxing authority as to the income, franchise, personal
property or other taxation, or as to the treatment, of the Notes by any such
state, local or foreign jurisdiction. PROSPECTIVE PURCHASERS ARE STRONGLY URGED
TO CONSULT THEIR TAX ADVISERS REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES
OF AN INVESTMENT IN THE NOTES (INCLUDING ALTERNATIVE CHARACTERIZATIONS OF THE
NOTES). EXCEPT WHERE INDICATED TO THE CONTRARY, THE FOLLOWING DISCUSSION ASSUMES
THAT THE COMPANY'S TREATMENT OF THE NOTES WILL BE RESPECTED FOR U.S. FEDERAL
INCOME TAX PURPOSES. PROSPECTIVE PURCHASERS SHOULD ALSO CONSULT THEIR TAX
ADVISERS WITH RESPECT TO ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
S-21
<PAGE>
TAX TREATMENT OF U.S. HOLDERS
Assuming the characterization of the Notes set forth above, the following
tax consequences will result with respect to U.S. Holders.
INTEREST INCOME
Interest on the Notes will generally be taxable as ordinary income for U.S.
federal income tax purposes when received or accrued by a U.S. Holder in
accordance with its regular method of tax accounting. The Company does not
anticipate that the initial issuance of the Notes will result in original issue
discount ("OID"), generally defined as the excess of the stated redemption price
at the maturity of the Notes over its issue price. However, if a Note is issued
with OID, the holder of such debt instrument with OID generally will be required
to recognize as ordinary income the amount of OID on the debt instrument as such
discount accrued, in accordance with a constant yield market.
GAIN OR LOSS ON SALE OR REDEMPTION
When a Note is sold or redeemed, the U.S. Holder will recognize gain or loss
equal to the difference between the amount realized on the sale or redemption
(excluding any amount attributable to accrued interest not previously included
in income) and the adjusted basis in its Notes. The adjusted basis of the Notes
generally will equal the U.S. Holder's cost, increased by any OID previously
includable in the U.S. Holder's income with respect to the Notes and reduced by
the principal payment previously received with respect to the Notes gain or loss
on sale or redemption of a Notes will generally be capital gain or loss.
Capital gains of individuals derived with respect to capital assets held for
more than one year are eligible for reduced rates of taxation depending upon the
holding period of such capital assets. The deductibility of capital losses is
subject to certain limitations.
ALTERNATIVE U.S. FEDERAL INCOME TAX TREATMENT
There can be no assurance that the IRS will agree with, or that a court will
uphold, the Company's treatment of the Notes as maturing on the Remarketing Date
and as thereafter being reissued should the Notes be remarketed, and it is
possible that the IRS could assert another characterization. In particular, the
IRS could seek to treat the Notes as maturing on the Stated Maturity Date and
possibly also to treat the issue price of the Notes as including the value of
the mandatory tender rights. Because of the possible reset interest rate, if the
Notes were treated as maturing on the Stated Maturity Date, Treasury regulations
relating to contingent payment debt obligations (the "Contingent Payment Debt
Regulations") would apply. In such case, the timing and character of income on
the Notes would be significantly affected. Among other things, U.S. Holders,
regardless of their regular method of tax accounting, would be required to
accrue income annually as OID, subject to the adjustments described below, at a
"comparable yield" on the adjusted issue price, which could be higher than the
actual cash payments received on the Notes in a taxable year. Furthermore, any
gain realized with respect to the sale or redemption of the Notes would
generally be treated as ordinary income, and any loss realized would generally
be treated as ordinary loss to the extent of the U.S. Holder's ordinary income
inclusions with respect to the Notes. Any remaining loss generally would be
treated as capital loss. In particular, upon the sale of a Notes (other than
through the mandatory tender), the IRS could take the position that the gain or
loss with respect to the mandatory tender rights and the gain or loss with
respect to the debt obligation must be separately determined, in which case any
deemed loss with respect to the mandatory tender rights would be treated as a
capital loss, and a corresponding amount of additional ordinary income would
need to be recognized by the U.S. Holder with respect to the sale. The ability
to use capital losses to offset ordinary income in determining taxable income is
generally limited.
S-22
<PAGE>
PROSPECTIVE U.S. PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISERS
REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE
NOTES.
TREATMENT OF NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to U.S. federal income or withholding
tax on payments of principal, premium (if any) or interest (including original
issue discount and accruals under the Contingent Payment Debt Regulations, if
any) on a Note unless such non-U.S. Holder owns actually or constructively 10%
or more of the total combined voting power of the Company, is a controlled
foreign corporation related to the Company through stock ownership or is a bank
receiving interest described in Section 881(c)(3)(A) of the Code. Sections
871(h) and 881(c) of the Code, and applicable Treasury regulations, require
that, in order to obtain the exemption from withholding tax described above,
either the beneficial owner of the Notes or a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution") and that is
holding the Notes on behalf of such beneficial owner, file a statement with the
withholding agent to the effect that the beneficial owner of the Notes is not a
U.S. person. In general, such requirements will be fulfilled if the beneficial
owner of a Note certifies on IRS Form W-8, under penalties of perjury, that it
is not a U.S. person and provides its name and address, and any Financial
Institution holding the Notes on behalf of the beneficial owner files a
statement with the withholding agent to the effect that it has received such
statement from the Holder (and furnishes the withholding agent with a copy
thereof).
Generally, a non-U.S. Holder will not be subject to U.S. federal income tax
on any amount which constitutes gain upon retirement or disposition of a Note
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax adviser in this
regard.
If a non-U.S. Holder of a Note is engaged in a trade or business in the
United States, and if interest (including OID, if any) or gain on the Note is
effectively connected with the conduct of such trade or business, the non-U.S.
Holder, although exempt from the withholding tax discussed above, will generally
be subject to regular U.S. income tax on interest and on any gain realized on
the sale, exchange or other disposition of a Note in the same manner as if it
were a U.S. Holder. In lieu of the statement described above, such Holder will
be required to provide to the Company a properly executed Form 4224 (or
successor form) in order to claim an exemption from withholding tax. In
addition, if such non-U.S. Holder is a foreign corporation, it may be subject to
a branch profits tax equal to 30% (or such lower rate provided by an applicable
treaty) of its effectively connected earnings and profits for the taxable year,
subject to certain adjustments. For purposes of the branch profits tax, interest
on and any gain recognized on the sale, exchange or other disposition of a Note
will be included in the effectively connected earnings and profits of such
non-U.S. Holder if such interest or gain, as the case may be, is effectively
connected with the conduct by the non-U.S. Holder of a trade or business in the
United States.
The Notes will not be includable in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder may be subject to backup withholding at the rate of 31% of the
interest and other "reportable payments" (including, under certain
circumstances, principal payments and sales proceeds) paid with respect to the
Notes if, in general, the holder fails to comply with certain certification
procedures and is not an exempt recipient under applicable provisions of the
Code.
S-23
<PAGE>
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make modifications to the withholding, backup withholding
and information reporting rules described above. The New Regulations will
generally be effective for payments made after December 31, 1999, subject to
certain transition rules. Prospective purchasers are urged to consult their tax
advisers regarding the New Regulations.
SUMMARY
THIS DISCLOSURE IS INTENDED TO BE A GENERAL SUMMARY ONLY. DUE TO THE
COMPLEXITY OF THE RULES DESCRIBED ABOVE, THE CURRENT UNCERTAINTY AS TO THE
MANNER OF THEIR APPLICATIONS TO HOLDERS OF THE NOTES AND POSSIBLE CHANGES IN
LAW, IT IS PARTICULARLY IMPORTANT THAT PROSPECTIVE PURCHASERS CONSULT THEIR OWN
TAX ADVISERS REGARDING THE TAX TREATMENT OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NOTES UNDER THE LAWS OF THE UNITED STATES AND THOSE OF ANY
STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
S-24
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
relating to the Notes (the "Underwriting Agreement"), the Company has agreed to
sell to the several Underwriters named below (the "Underwriters"), and the
several Underwriters have agreed to purchase from the Company, the principal
amounts of Notes set forth opposite their names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.............................................
J.P. Morgan Securities Inc......................................................................
BancAmerica Robertson Stephens..................................................................
Chase Securities, Inc...........................................................................
Deutsche Bank Securities........................................................................
----------------
Total..................................................................................... $ 400,000,000
----------------
----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the Notes offered hereby are
subject to approval of certain legal matters by counsel and to certain other
conditions. If any of the Notes are purchased by the Underwriters pursuant to
the Underwriting Agreement, all the Notes must be purchased.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments that the Underwriters may be required to make in
respect hereof.
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers (who may
include the Underwriters) at such price, less a concession not in excess of %
of the principal amount of the Notes. The Remarketing Dealer will pay to the
Company, on the same date the Underwriters pay the purchase price for the Notes,
an amount equal to % of the principal amount of the Notes. The Underwriters
may allow, and such dealers may re-allow, discounts not in excess of % of the
principal amount of the Notes to any other Underwriter and certain other
dealers. After the initial offering, the offering price and other selling terms
of the Notes may be changed by the Underwriters.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Notes.
Specifically, the Underwriters may overallot the Offering, creating a syndicate
short position. Underwriters may bid for and purchase the Notes in the open
market to cover such a syndicate short position. In addition, the Underwriters
may bid for and purchase the Notes in the open market to stabilize the price of
the Notes. These activities may stabilize or maintain the market price of the
Notes above independent market levels. The Underwriters are not required to
engage in these activities and may end these activities at any time.
The Notes will constitute a new issue of securities with no established
trading market. The Notes will not be listed on any securities exchange and
there can be no assurance that there will be a secondary market for the Notes.
From time to time, one or more of the Underwriters may make a market in the
Notes; however, at this time no determination has been made as to whether any of
the Underwriters will make a market in the Notes. Accordingly, there can be no
assurance as to whether an active trading market for any of the Notes will
develop or as to the liquidity of any trading market for the Notes.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates have engaged, and in the future may engage, in
investment banking and commercial banking services for the Company. Donaldson,
Lufkin & Jenrette Securities Corporation served as financial advisor to the
Company in connection with the Merger and was paid customary fees in connection
therewith. Donaldson, Lufkin & Jenrette Securities Corporation was lead manager,
and J.P. Morgan Securities Inc. and Deutsche Bank Securities were co-managers in
a public offering of senior notes of the Company completed in
S-25
<PAGE>
December 1997. Donaldson, Lufkin & Jenrette Securities Corporation was lead
manager, and J.P. Morgan Securities Inc. and Deutsche Bank Securities were
co-managers in a public offering of senior notes of the Company completed in
September 1997. Affiliates of J.P. Morgan Securities Inc., BancAmerica Robertson
Stephens, Chase Securities, Inc. and Deutsche Bank Securities are lenders under
the Credit Facility and will receive repayment of certain amounts under the
Credit Facility from the proceeds of this Offering. As a result, this Offering
is subject to Rules 2710(c)(8) and 2720(c)(3)(C) of the Conduct Rules of the
National Association of Securities Dealers, Inc. An affiliate of J.P. Morgan
Securities Inc. serves as the agent under the Credit Facility and receives
customary compensation therefor. See "Use of Proceeds."
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., Houston, Texas, and certain
legal matters will be passed upon for the Underwriters by McDermott, Will &
Emery, Chicago, Illinois.
S-26
<PAGE>
INDEX TO FINANCIAL STATEMENTS
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General.................................................................................................... F-2
Combined Unaudited Pro Forma Condensed Balance Sheet as of March 31, 1998.................................. F-3
Combined Unaudited Pro Forma Condensed Statement of Operations for the Three Months Ended March 31, 1998... F-5
Combined Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 1997........ F-6
Combined Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 1996........ F-7
Combined Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 1995........ F-8
Notes to Combined Unaudited Pro Forma Condensed Financial Statements....................................... F-9
</TABLE>
F-1
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following combined unaudited pro forma condensed financial statements
are based upon the historical financial statements of USA Waste and of Waste
Management and should be read in conjunction with those financial statements and
related notes. Such financial statements, as previously filed with the
Commission under the Exchange Act, are incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus. These combined unaudited
pro forma condensed financial statements give effect to the Merger by combining
the balance sheets and results of operations of USA Waste and Waste Management
using the pooling of interests method of accounting as if the companies had been
combined since their inception and as if Waste Management had issued 20 million
shares of Waste Management Common Stock as of March 31, 1998. The combined
unaudited pro forma condensed financial information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have been achieved had the Merger been
consummated as of the beginning of the periods presented, nor is it necessarily
indicative of the future operating results or financial position of New Waste
Management. The combined unaudited pro forma condensed financial information
does not give effect to any possible divestitures of business units which may be
required by the antitrust regulatory authorities or to any cost savings which
may result from the integration of USA Waste's and Waste Management's
operations, nor does such information include the nonrecurring costs directly
related to the Merger which are expected to be included in operations of New
Waste Management within the 12 months following the Merger. Such nonrecurring
costs have yet to be determined; however, such costs are expected to be
significant.
F-2
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1998
The following combined unaudited pro forma condensed balance sheet presents
the combined financial position of USA Waste and Waste Management as of March
31, 1998. Such unaudited pro forma combined condensed balance sheet is based on
the historical balance sheets of USA Waste and Waste Management as of March 31,
1998, 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 pro forma condensed financial statements.
<TABLE>
<CAPTION>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ ---------------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 46,260 $ 311,861 $ -- $ 358,121
Short-term investments.................................... -- 3,053 -- 3,053
Accounts receivable, net.................................. 468,619 1,448,797 -- 1,917,416
Notes and other receivables............................... 56,321 26,577 -- 82,898
Deferred income taxes..................................... 46,196 -- -- 46,196
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... -- 158,964 -- 158,964
Prepaid expenses and other................................ 58,891 230,374 -- 289,265
------------ ------------ ---------------- -----------
Total current assets.................................. 676,287 2,179,626 -- 2,855,913
Notes and other receivables................................. 22,951 100,044 -- 122,995
Property and equipment, net................................. 4,601,573 7,126,426 (10,922)(a) 11,617,441
(99,636)(b)
Excess of cost over net assets of acquired businesses,
net....................................................... 1,905,285 3,674,333 (66,464)(a) 5,513,154
Other intangible assets, net................................ 126,526 11,746 -- 138,272
Net assets of continuing businesses held for sale........... -- 137,995 -- 137,995
Other assets................................................ 256,783 633,830 (28,124)(c) 862,489
------------ ------------ ---------------- -----------
Total assets.......................................... $ 7,589,405 $13,864,000 $ (205,146) $21,248,259
------------ ------------ ---------------- -----------
------------ ------------ ---------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 196,735 $ 687,419 $ -- $ 884,154
Accrued liabilities....................................... 185,631 1,683,398 -- 1,869,029
Obligation to former Wheelabrator Technologies Inc.
shareholders............................................ -- 876,232 (614,400)(d) 261,832
Deferred revenues......................................... 69,484 236,339 -- 305,823
Current maturities of long-term debt...................... 46,527 1,025,685 -- 1,072,212
------------ ------------ ---------------- -----------
Total current liabilities............................. 498,377 4,509,073 (614,400) 4,393,050
Long-term debt, less current maturities..................... 3,584,887 5,398,132 -- 8,983,019
Deferred income taxes....................................... 323,320 216,797 (25,029)(a) 520,293
5,205(b)
Closure, post-closure, and other liabilities................ 407,699 1,645,663 (85,557)(b) 1,967,805
------------ ------------ ---------------- -----------
Total liabilities..................................... 4,814,283 11,769,665 (719,781) 15,864,167
------------ ------------ ---------------- -----------
Minority interest in subsidiaries........................... -- 739,442 -- 739,442
------------ ------------ ---------------- -----------
</TABLE>
F-3
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET (CONTINUED)
MARCH 31, 1998
<TABLE>
<CAPTION>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ ---------------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
<S> <C> <C> <C> <C>
Commitments and contingencies
Stockholders' equity:
Preferred stock:
USA Waste: $.01 par value; 10,000,000 shares authorized;
none issued........................................... -- -- -- --
Waste Management: $1 par value; 50,000,000 shares
authorized; none outstanding.......................... -- -- -- --
Common stock:
USA Waste: $.01 par value, 500,000,000 shares
authorized; historical 219,834,550 shares (572,269,938
pro forma shares) issued.............................. 2,198 -- 3,525(d) 5,723
Waste Management: $1 par value; 1,500,000,000 shares
authorized; 507,101,744 shares issued................. -- 507,102 (507,102)(d) --
Additional paid-in capital................................ 2,436,447 990,270 (11,250)(c) 3,267,468
(147,999)(d)
Retained earnings......................................... 374,459 1,730,516 (34,888)(a) 2,033,929
(19,284)(b)
(16,874)(c)
Accumulated other comprehensive income.................... (37,498) -- (278,800)(e) (316,298)
Foreign currency translation adjustment................... -- (253,938) (17,469)(a) --
271,407(e)
Treasury stock:
USA Waste: 23,485 shares, at cost....................... (484) -- -- (484)
Waste Management: 40,983,967 shares, at cost............ -- (1,265,976) 1,265,976(d) --
Restricted stock unearned compensation.................... -- (10,252) -- (10,252)
Employee stock benefit trust; 10,886,361 WMI shares, at
market (7,892,612 pro forma shares)..................... -- (335,436) -- (335,436)
Minimum pension liability................................. -- (7,393) 7,393(e) --
------------ ------------ ---------------- -----------
Total stockholders' equity.............................. 2,775,122 1,354,893 514,635 4,644,650
------------ ------------ ---------------- -----------
Total liabilities and stockholders' equity.............. $ 7,589,405 $13,864,000 $ (205,146) $21,248,259
------------ ------------ ---------------- -----------
------------ ------------ ---------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-4
<PAGE>
USA WASTE AND WASTE MANAGEMENT
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, 1998 was prepared based on the historical
statements of operations of USA Waste and Waste Management 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>
THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------------------------------
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ --------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues........................................ $ 769,440 $ 2,131,621 $ -- 2,901,061
------------ ------------ --------------- -----------
Costs and expenses:
Operating (exclusive of depreciation and amortization
shown below)............................................ 397,492 1,621,985 3,785(b) 1,757,707
(265,555)(f)
General and administrative................................ 81,916 263,882 (217)(f) 345,581
Depreciation and amortization............................. 86,110 -- (424)(a) 351,458
265,772(f)
Loss from continuing operations held for sale,
net of minority interest................................ -- 2,416 -- 2,416
------------ ------------ --------------- -----------
565,518 1,888,283 3,361 2,457,162
------------ ------------ --------------- -----------
Income from operations.................................... 203,922 243,338 (3,361) 443,899
------------ ------------ --------------- -----------
Other income (expenses):
Interest expense.......................................... (38,368) (115,574) -- (153,942)
Interest income........................................... 1,799 4,310 -- 6,109
Minority interest......................................... -- (25,302) -- (25,302)
Other income, net......................................... 34,251 64,196 (28,124)(c) 70,323
------------ ------------ --------------- -----------
(2,318) (72,370) (28,124) (102,812)
------------ ------------ --------------- -----------
Income before income taxes................................ 201,604 170,968 (31,485) 341,087
Provision for income taxes................................ 80,642 96,551 170(a) 161,815
(4,298)(b)
(11,250)(c)
------------ ------------ --------------- -----------
Net income................................................ $ 120,962 $ 74,417 $ (16,107) $ 179,272
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Basic earnings per common share........................... $ 0.55 $ 0.16 $ 0.33
------------ ------------ -----------
------------ ------------ -----------
Diluted earnings per common share......................... $ 0.52 $ 0.16 $ 0.32
------------ ------------ -----------
------------ ------------ -----------
Weighted average number of common shares outstanding...... 219,201 455,096 (125,151)(g) 549,146
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Weighted average number of common and dilutive potential
common shares outstanding............................... 244,250 455,296 (125,206)(g) 574,340
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-5
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1997 was prepared based on the historical
statements of operations of USA Waste and Waste Management 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>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ --------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues.......................................... $ 2,613,768 $ 9,188,582 $ -- $11,802,350
------------ ------------ --------------- -----------
Costs and expenses:
Operating (exclusive of depreciation and
amortization shown below)............................... 1,345,769 7,195,376 17,766(b) 7,479,745
(1,079,166)(f)
General and administrative................................ 284,946 1,129,237 (939)(f) 1,413,244
Depreciation and amortization............................. 303,241 -- (990)(a) 1,382,356
1,080,105(f)
Merger costs.............................................. 109,411 -- -- 109,411
Unusual items............................................. 24,720 1,626,252 -- 1,650,972
Loss from continuing operations held for sale,
net of minority interest.................................. -- 9,930 -- 9,930
------------ ------------ --------------- -----------
2,068,087 9,960,795 16,776 12,045,658
------------ ------------ --------------- -----------
Income (loss) from operations............................... 545,681 (772,213) (16,776) (243,308)
------------ ------------ --------------- -----------
Other income (expense):
Interest expense.......................................... (104,261) (446,888) -- (551,149)
Interest income........................................... 7,634 37,580 -- 45,214
Minority interest......................................... -- (45,442) -- (45,442)
Other income, net......................................... 14,213 173,290 (61,331)(a) 126,172
------------ ------------ --------------- -----------
(82,414) (281,460) (61,331) (425,205)
------------ ------------ --------------- -----------
Income (loss) from continuing operations before
income taxes.............................................. 463,267 (1,053,673) (78,107) (668,513)
Provision for income taxes.................................. 189,944 215,667 (25,199)(a) 361,464
(18,948)(b)
------------ ------------ --------------- -----------
Income (loss) from continuing operations.................... $ 273,323 $ (1,269,340) $ (33,960) $(1,029,977)
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Basic earnings (loss) per common share from
continuing operations..................................... $ 1.31 $ (2.72) $ (1.88)
------------ ------------ -----------
------------ ------------ -----------
Diluted earnings (loss) per common share from continuing
operations................................................ $ 1.26 $ (2.72) $ (1.88)
------------ ------------ -----------
------------ ------------ -----------
Weighted average number of common shares
outstanding............................................... 208,246 466,601 (128,315)(g) 546,532
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Weighted average number of common and dilutive potential
common shares outstanding................................. 233,371 466,601 (153,440)(g) 546,532
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-6
<PAGE>
USA WASTE AND WASTE MANAGEMENT
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
statements of operations of USA Waste and Waste Management 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>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ --------------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues.......................................... $ 1,649,131 $ 9,225,636 $ -- $10,874,767
------------ ------------ --------------- -----------
Costs and expenses:
Operating (exclusive of depreciation and amortization
shown below)............................................ 881,401 6,660,766 21,135(b) 6,498,708
(1,064,594)(f)
General and administrative................................ 200,101 1,095,459 (1,089)(f) 1,294,471
Depreciation and amortization............................. 191,044 -- 1,065,683(f) 1,256,727
Merger costs.............................................. 126,626 -- -- 126,626
Unusual items............................................. 63,800 435,464 -- 499,264
Income from continuing operations held for sale, net of
minority interest......................................... -- (315) -- (315)
------------ ------------ --------------- -----------
1,462,972 8,191,374 21,135 9,675,481
------------ ------------ --------------- -----------
Income from operations...................................... 186,159 1,034,262 (21,135) 1,199,286
------------ ------------ --------------- -----------
Other income (expense):
Interest expense.......................................... (60,497) (462,424) -- (522,921)
Interest income........................................... 6,699 27,904 -- 34,603
Minority interest......................................... -- (41,289) -- (41,289)
Other income, net......................................... 6,376 102,014 -- 108,390
------------ ------------ --------------- -----------
(47,422) (373,795) -- (421,217)
------------ ------------ --------------- -----------
Income from continuing operations before income taxes....... 138,737 660,467 (21,135) 778,069
Provision for income taxes.................................. 70,398 436,473 (20,255)(b) 486,616
------------ ------------ --------------- -----------
Income from continuing operations........................... $ 68,339 $ 223,994 $ (880) $ 291,453
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Basic earnings per common share from continuing
operations................................................ $ 0.39 $ 0.46 $ 0.55
------------ ------------ -----------
------------ ------------ -----------
Diluted earnings per common share from continuing
operations................................................ $ 0.37 $ 0.46 $ 0.54
------------ ------------ -----------
------------ ------------ -----------
Weighted average number of common shares outstanding........ 173,993 489,171 (134,522)(g) 528,642
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Weighted average number of common and dilutive potential
common shares outstanding................................. 182,680 490,029 (134,758)(g) 537,951
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-7
<PAGE>
USA WASTE AND WASTE MANAGEMENT
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
statements of operations of USA Waste and Waste Management 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>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ --------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues.......................................... $ 1,216,082 $ 9,100,225 $ -- $10,316,307
------------ ------------ --------------- -----------
Costs and expenses:
Operating (exclusive of depreciation and amortization
shown below)............................................ 672,117 6,514,932 22,924(b) 6,176,196
(1,033,777)(f)
General and administrative................................ 169,686 1,091,747 (1,241)(f) 1,260,192
Depreciation and amortization............................. 143,878 -- 1,035,018(f) 1,178,896
Merger costs.............................................. 26,539 -- -- 26,539
Unusual items............................................. 4,733 389,359 -- 394,092
Income from continuing operations held for sale, net of
minority interest......................................... -- (25,110) -- (25,110)
------------ ------------ --------------- -----------
1,016,953 7,970,928 22,924 9,010,805
------------ ------------ --------------- -----------
Income from operations...................................... 199,129 1,129,297 (22,924) 1,305,502
------------ ------------ --------------- -----------
Other income (expense):
Interest expense:
Nonrecurring............................................ (10,994) -- -- (10,994)
Other................................................... (58,619) (463,861) -- (522,480)
Interest income........................................... 6,682 34,883 -- 41,565
Minority interest......................................... -- (81,367) -- (81,367)
Other income, net......................................... 4,891 252,695 -- 257,586
------------ ------------ --------------- -----------
(58,040) (257,650) -- (315,690)
------------ ------------ --------------- -----------
Income from continuing operations before income taxes....... 141,089 871,647 (22,924) 989,812
Provision for income taxes.................................. 60,313 451,741 (19,169)(b) 492,885
------------ ------------ --------------- -----------
Income from continuing operations........................... $ 80,776 $ 419,906 $ (3,755) $ 496,927
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Basic earnings per common share from continuing
operations................................................ $ 0.56 $ 0.86 $ 1.00
------------ ------------ -----------
------------ ------------ -----------
Diluted earnings per common share from continuing
operations................................................ $ 0.54 $ 0.86 $ 0.99
------------ ------------ -----------
------------ ------------ -----------
Weighted average number of common shares outstanding........ 143,346 485,346 (133,470)(g) 495,222
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Weighted average number of common and dilutive potential
common shares outstanding................................. 150,575 500,312 (137,586)(g) 513,301
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-8
<PAGE>
USA WASTE AND WASTE MANAGEMENT
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 Waste
Management 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. The combined unaudited pro forma
condensed financial statements do not give effect to any cost savings which may
result from the integration of USA Waste's and Waste Management's operations,
nor do they include the nonrecurring costs directly related to the Merger which
are expected to be included in operations of New Waste Management within twelve
months succeeding the Merger. Such nonrecurring costs have yet to be determined;
however, such costs are expected to be significant.
Certain reclassifications have been made to the historical financial
statements of USA Waste and Waste Management 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 June 1997, Waste Management sold a majority of its Canadian solid
waste businesses to USA Waste and, as a result of such sale, recorded a pre-tax
gain of approximately $61,331,000. USA Waste accounted for this transaction as a
purchase business combination and allocated the purchase price to the assets
acquired and liabilities assumed accordingly. Assuming that USA Waste and Waste
Management had been combined since their inception, the gain recorded by Waste
Management in 1997 has been eliminated and the basis recorded by USA Waste for
assets acquired and liabilities assumed has been restored to Waste Management's
historical book value. In addition, the Combined Unaudited Pro Forma Condensed
Statement of Operations for the year ended December 31, 1997 and the three
months ended March 31, 1998 have been adjusted for the effect of lower
amortization as a result of restoring the book basis of the assets acquired and
liabilities assumed by USA Waste to the historical book value of Waste
Management.
(b) Adjustments have been made to conform the accounting for certain
landfill related issues as if the companies had been combined since their
inception. The net impact of those adjustments on income (loss) from continuing
operations was an increase of $1,182,000 and $513,000 for the year ended
December 31, 1997 and the three months ended March 31, 1998, respectively, and a
decrease of $3,755,000 and $880,000 for the years ended December 31, 1995 and
1996, respectively.
(c) In November 1997, USA Waste purchased a 49% limited partner interest in
a limited partnership, which was formed for the purpose of acquiring shares of
Waste Management Common Stock on the open market. The limited partnership
purchased shares of Waste Management Common Stock during November 1997 and sold
substantially all of such shares in March 1998. For the three months ended March
31, 1998, USA Waste recorded other income of $28,124,000 for its equity in the
earnings of the limited
F-9
<PAGE>
2. PRO FORMA ADJUSTMENTS (CONTINUED)
partnership. An adjustment has been made to reverse USA Waste's equity in the
earnings of the limited partnership to account for the transaction as if the
companies had been combined since their inception.
(d) The stockholders' equity accounts have been adjusted to reflect the
assumed issuance of 352,435,388 shares of USA Waste Common Stock for the
486,117,777 shares of Waste Management Common Stock issued and outstanding based
on an exchange ratio of 0.725 of a share of USA Waste Common Stock for each
outstanding share of Waste Management Common Stock. The assumed issuance of
shares considers the 507,101,744 shares of Waste Management Common Stock issued,
the 40,983,967 shares of Waste Management Common Stock held in treasury that
will be cancelled upon consummation of the Merger, and the 20 million shares of
Waste Management Common Stock that were issued to reverse certain share
repurchases effected by Waste Management. The 20 million shares of Waste
Management Common Stock were assumed to be issued through a public sale at an
offering price of $32 per share and net issuance costs of 4% with net proceeds
of $614,400,000 used to reduce the obligation to former WTI stockholders. The
actual proceeds from the Waste Management Common Stock offering did not differ
materially from the amounts assumed. See Note 3 below. 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 Waste Management Common Stock issued and
outstanding immediately prior to the consummation of the Merger.
(e) Adjustments have been made to reclassify Waste Management's foreign
currency translation adjustment and minimum pension liability to accumulated
other comprehensive income to conform to the presentation of USA Waste as if the
companies had been combined since their inception.
(f) Adjustments have been made to reclassify Waste Management'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.
(g) Pro forma basic earnings per common share for each period are based on
the combined weighted average number of common shares outstanding, after giving
effect to the issuance of 0.725 of a share of USA Waste Common Stock for each
share of Waste Management Common Stock. Pro forma diluted earnings per common
share for each period are based on the combined weighted average number of
common and dilutive potential common shares outstanding, after giving effect to
the issuance of 0.725 of a share of USA Waste Common Stock for each outstanding
share of Waste Management Common Stock. The combined weighted average shares
outstanding used in the pro forma basic and diluted earnings per share
calculations are net of the shares of Waste Management Common Stock that are
held by the Waste Management employee stock benefit trust and are treated
similar to treasury shares for earnings per share calculation purposes. The
combined pro forma diluted earnings per share for the year ended December 31,
1995 and the three months ended March 31, 1998 have been calculated assuming
conversion of certain convertible debt, and therefore interest, net of taxes, of
$9,100,000 and $5,014,000, respectively, has been added back to income from
continuing operations for this calculation. The USA Waste diluted earnings per
common share for the year ended December 31, 1997 includes 25,125,000 dilutive
potential common shares that become antidilutive for purposes of calculating the
combined pro forma diluted earnings per common share.
3. PRO FORMA EFFECT OF WASTE MANAGEMENT EQUITY OFFERING ON RESULTS OF OPERATIONS
As previously discussed, in order for the Merger to qualify as a pooling of
interests, approximately 20 million shares of Waste Management Common Stock were
issued to reverse certain share repurchases effected by Waste Management. The 20
million shares were assumed to be issued at an offering price of $32 per share,
with net issuance costs of 4% and net proceeds to Waste Management of
$614,400,000. The actual proceeds from the Waste Management Common Stock
offering did not differ materially from the
F-10
<PAGE>
3. PRO FORMA EFFECT OF WASTE MANAGEMENT EQUITY OFFERING ON RESULTS OF OPERATIONS
(CONTINUED)
amounts assumed. The assumed proceeds from the sale of stock of $614,400,000,
after payment of dividends on such stock based on the historical dividend rate,
were used to reduce outstanding indebtedness at an average borrowing rate of 6%.
The applicable tax rate is assumed to be 42%. The following table summarizes the
pro forma effect of the equity offering as if the offering has occurred at the
beginning of the periods presented in the Combined Unaudited Pro Forma Condensed
Statements of Operations:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------- ----------------
1995 1996 1997 1998
---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Pro forma income (loss) from continuing operations...... $ 496,927 $ 291,453 $ (1,029,977) $ 179,272
Decrease in interest expense as a result of equity
offering, net of tax benefit.......................... 20,964 20,943 20,915 5,316
---------- ---------- ------------- --------
Pro forma income (loss) from continuing operations after
equity offering....................................... $ 517,891 $ 312,396 $ (1,009,062) $ 184,588
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Pro forma basic earnings per common share from
continuing operations after equity offering........... $ 1.02 $ 0.58 $ (1.80) $ 0.33
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Pro forma diluted earnings per common share from
continuing operations after equity offering........... $ 1.00 $ 0.57 $ (1.80) $ 0.32
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Weighted average number of common shares outstanding
after equity offering................................. 509,722 543,142 561,032 563,646
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Weighted average number of common and potential dilutive
shares outstanding after equity offering.............. 527,801 552,451 561,032 588,840
---------- ---------- ------------- --------
---------- ---------- ------------- --------
</TABLE>
F-11
<PAGE>
PROSPECTUS
USA WASTE SERVICES, INC.
DEBT SECURITIES
COMMON STOCK
USA Waste Services, Inc. ("USA Waste" or the "Company") may offer and sell
from time to time, in one or more series, its unsecured debt securities
consisting of notes, debentures or other evidences of indebtedness (the "Debt
Securities"). The Company may also offer and sell from time to time shares of
its common stock, par value $.01 per share (the "Common Stock"). The aggregate
initial offering prices of the Debt Securities and the Common Stock offered by
the Company hereby (the "Securities") will not exceed $2,000,000,000 or, if
applicable, the equivalent thereof in any other currency or currency unit. The
Securities will be offered in amounts, at prices and on terms to be determined
at the time of sale and set forth in a supplement to this Prospectus (a
"Prospectus Supplement").
If the offering and sale of Securities in respect of which this Prospectus
is being delivered includes a series of Debt Securities, then the terms of such
series of Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, authorized denominations, ranking as
senior or subordinated Debt Securities, maturity, interest rate or rates (or
method of determining the same) and time or times of payment of any interest,
any terms for optional or mandatory redemption, which may include redemption at
the option of holders upon the occurrence of certain events, conversion into
Common Stock, or payment of additional amounts or any sinking fund provisions,
any covenants or events of default that are in addition to or different from
those described herein, any initial public offering price, the proceeds to the
Company and any other specific terms in connection with the offering and sale of
such series of Debt Securities will be set forth in a Prospectus Supplement. As
used herein, Debt Securities shall include securities denominated in United
States dollars or, at the option of the Company if so specified in an applicable
Prospectus Supplement, in any other currency or currency unit, or in amounts
determined by reference to an index.
The Securities may be sold directly by the Company to investors, through
agents designated from time to time or to or through underwriters or dealers.
See "Plan of Distribution." If any agents of the Company or any underwriters are
involved in the sale of any Securities in respect of which this Prospectus is
being delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to the Company from such sale also will be set forth in a Prospectus
Supplement. See "Use of Proceeds."
Debt Securities may be issued in registered form ("Registered Securities")
or bearer form ("Bearer Securities") with or without interest coupons attached,
or both. In addition, all or a portion of the Debt Securities of a series may be
issuable in temporary or permanent global form. Debt Securities in bearer form
are offered only to non-United States persons and to offices located outside the
United States of certain United States financial institutions.
The Common Stock is traded on the New York Stock Exchange under the symbol
"UW." Any Common Stock sold pursuant to a Prospectus Supplement will be listed
on such exchange, subject to official notice of issuance.
THESE SECURITIES 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 PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of the Securities unless
accompanied by a Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS JUNE 17, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information filed by the Company with the Commission can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the following Regional Offices of the Commission: Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and New York Regional Office, Seven World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains an
Internet Web site at http://www.sec.gov that contains reports, proxy and
information statements, and other information regarding registrants that file
electronically with the Commission. In addition, reports, proxy statements and
other information concerning the Company can be inspected at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005, on which exchange the
Common Stock is listed.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus omits certain of the
information contained in the Registration Statement in accordance with the rules
and regulations of the Commission. Reference is hereby made to the Registration
Statement and exhibits thereto for further information with respect to the
Company and the securities offered hereby. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under the
Exchange Act (File No. 1-12154) are incorporated by reference in this
Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended December 31,
1997;
(b) the Company's Current Report on Form 8-K dated March 10, 1998;
(c) the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998;
(d) the Company's Joint Proxy Statement and Prospectus, which is part of the
Company's Registration Statement on Form S-4 (Registration No. 333-56113)
filed on June 5, 1998; and
(e) the description of the Common Stock contained in the Registration
Statement on Form 8-A dated July 1, 1993, as amended by Form 8-B dated
July 13, 1995.
All documents filed by the Company pursuant to Section 13 (a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities pursuant hereto shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such document. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents that are incorporated by reference in this
Prospectus (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to the Corporate Secretary, USA Waste Services, Inc., First City Tower,
1001 Fannin Street, Suite 4000, Houston, Texas 77002, telephone number (713)
512-6200.
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THE COMPANY
USA Waste is the third largest integrated nonhazardous solid waste
management company in North America, as measured by revenues for the 1997 fiscal
year, and currently serves the full spectrum of commercial, industrial,
municipal and residential customers in 48 states, the District of Columbia,
Canada and Puerto Rico. 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. At December 31, 1997, USA Waste
owned or operated an extensive network of landfills, transfer stations and
collection operations and had a diversified customer base in excess of seven
million with no single customer accounting for more than 5% of USA Waste's
operating revenues during 1997. USA Waste employed more than 17,700 people as of
December 31, 1997. The principal executive offices of USA Waste are located at
First City Tower, 1001 Fannin Street, Suite 4000, Houston, Texas 77002 and the
telephone number is (713) 512-6200. The "Company" and "USA Waste" refer to USA
Waste Services, Inc. and its subsidiaries and predecessors, unless otherwise
indicated or the context requires otherwise.
RECENT DEVELOPMENTS
On March 10, 1998, USA Waste entered into a definitive agreement and plan of
merger pursuant to which a subsidiary of USA Waste will be merged with and into
Waste Management, Inc. ("Waste Management"), and Waste Management will become a
wholly owned subsidiary of USA Waste (the "Merger"). As of the effective time of
the Merger, each outstanding share of Waste Management, other than shares held
in Waste Management's treasury or owned by Waste Management, USA Waste or any
wholly owned subsidiaries of either of them, will be converted into the right to
receive 0.725 of a share of USA Waste Common Stock. Waste Management is a
leading international provider of waste management and related services to
governmental, residential, commercial and industrial customers in the United
States and select international markets and had revenues in 1997 of
approximately $9,188,582,000. This transaction, which is expected to close
during 1998, is subject to regulatory approval and approval of the stockholders
of the Company and Waste Management. It is anticipated that the Company will
issue up to 380,625,000 shares of its common stock related to this transaction
and that the Merger will be accounted for as a pooling of interests.
As part of the Merger, the Company's Board of Directors will be increased to
14 members, seven of whom will be designated by each of Waste Management's Board
of Directors and the Company's Board of Directors. Additionally, upon
consummation of the Merger, it is expected that the Company will change its name
to "Waste Management, Inc." ("New Waste Management"). The Corporate headquarters
of New Waste Management will be located in Houston, Texas, and John E. Drury,
the Company's Chairman of the Board and Chief Executive Officer, will remain as
Chief Executive Officer. It is also expected that Rodney R. Proto, the Company's
President and Chief Operating Officer, and Earl E. DeFrates, the Company's
Executive Vice President and Chief Financial Officer, will retain such positions
with New Waste Management.
USE OF PROCEEDS
Except as may otherwise be described in the Prospectus Supplement relating
to an offering of Securities, the net proceeds from the sale of the Securities
offered pursuant to this Prospectus and such Prospectus Supplement will be used
for general corporate purposes. Any specific allocation of the net proceeds of
an offering of Securities by the Company to a specific purpose will be
determined at the time of such offering and will be described in the related
Prospectus Supplement.
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RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the periods as shown:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1998
----- ----- ----- ----- ----- ------------------
<S> <C> <C> <C> <C> <C> <C>
Actual........................... 1.9x 1.1x 2.4x 2.3x 4.1x 5.0x
</TABLE>
The Company's consolidated ratios of earnings to fixed charges were computed
by dividing earnings by fixed charges. For this purpose, earnings are the sum of
income before taxes and extraordinary items and fixed charges, excluding
capitalized interest. Fixed charges are interest, whether expensed or
capitalized, amortization of debt expense and discount on premium relating to
indebtedness, and such portion of rental expense that can be demonstrated to be
representative of the interest factor in the particular case.
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the periods shown on a supplemental basis excluding
nonrecurring items:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1998
----- ----- ----- ----- ----- ------------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental..................... 2.0x 2.4x 3.2x 4.5x 5.1x 5.0x
</TABLE>
Nonrecurring items in 1997 represent merger costs, primarily related to the
Company's merger with United Waste Systems, Inc. in August 1997, and unusual
items, primarily related to the closure of two transfer stations in Minnesota,
estimated losses related to the closure and abandonment of two landfills in
Massachusetts, and various other terminated projects. Nonrecurring items in 1996
represent merger costs, primarily related to mergers with Sanifill, Inc. in
August 1996 and Western Waste Industries ("Western") in May 1996, and unusual
items, primarily related 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 Mexican operations, and
various other terminated projects. Nonrecurring items in 1995 primarily
represent merger costs related to the merger with Chambers Development Company,
Inc. ("Chambers") in June 1995 and nonrecurring interest related to extension
fees and other charges associated with the refinancing of Chambers' pre-merger
debt. Nonrecurring items in 1994 primarily represent shareholder litigation
costs incurred in connection with a settled class action of consolidated suits
on similar claims alleging federal securities law violations against Chambers,
certain of its officers and directors, its former auditors, and the underwriters
of its securities. Nonrecurring items in 1993 were not material.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either senior debt of the Company
("Senior Debt Securities") or subordinated debt of the Company ("Subordinated
Debt Securities"). Debt Securities may be issued from time to time under one or
more indentures, each dated as of a date on or prior to the issuance of the Debt
Securities to which it relates. Senior Debt Securities and Subordinated Debt
Securities may be issued pursuant to separate indentures (respectively, a
"Senior Debt Indenture" and a "Subordinated Debt Indenture"), in each case
between the Company and Texas Commerce Bank National Association, now known as
Chase Bank of Texas, National Association ("Chase Bank"), and in the form that
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, subject to such amendments or supplements as may be
adopted from time to time. The Company has previously entered into a Senior
Indenture dated as of September 10, 1997 with Chase Bank in the form filed as an
exhibit to the Company's Current Report on Form 8-K (file no. 1-12154) filed
with the Commission on September 24, 1997. The Company previously has entered
into a Subordinated Indenture dated as of February 1, 1997
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with Chase Bank in the form filed as an exhibit to the Company's Current Report
on Form 8-K (file no. 1-12154) filed with the Commission on February 7, 1997.
The Senior Debt Indenture and the Subordinated Debt Indenture, as amended or
supplemented from time to time, are sometimes hereinafter referred to
individually as an "Indenture" and collectively as the "Indentures." Chase Bank
(and any successors thereto as trustees under the respective Indentures) is
hereafter referred to as the "Trustee." The following summaries of actual or
anticipated provisions of the Indentures and the Debt Securities do not purport
to be complete and such summaries are subject to the detailed provisions of the
applicable Indenture to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein. Section
references in parentheses below are to sections in both Indentures unless
otherwise indicated. Wherever particular sections or defined terms of the
applicable Indenture are referred to, such sections or defined terms are
incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference. The Indentures are
substantially identical, except for certain covenants of the Company and
provisions relating to subordination and conversion.
The Debt Securities may be issued from time to time in one or more series.
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities of all series. The particular terms
of each series of Debt Securities offered by any Prospectus Supplement will be
described therein.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
GENERAL. The Debt Securities will be unsecured senior or subordinated
obligations of the Company and may be issued from time to time in one or more
series. The Indentures do not limit the amount of Debt Securities, debentures,
notes or other types of indebtedness that may be issued by the Company or any of
its subsidiaries nor, other than as may be set forth in any Prospectus
Supplement, do they restrict transactions between the Company and its affiliates
or the payment of dividends or other distributions by the Company to its
stockholders. The rights of the Company's creditors, including holders of Debt
Securities, will be limited to the assets of the Company and will not be an
obligation of any of its Subsidiaries. In addition, other than as may be set
forth in any Prospectus Supplement, the Indentures do not and the Debt
Securities will not contain any covenants or other provisions that are intended
to afford holders of the Debt Securities special protection in the event of
either a change of control of the Company or a highly leveraged transaction by
the Company.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Debt Securities (to the extent such terms are
applicable to such Debt Securities): (i) the title of the Debt Securities; (ii)
classification as either Senior Debt Securities or Subordinated Debt Securities;
(iii) whether the Debt Securities that constitute Subordinated Debt Securities
are convertible into Common Stock and, if so, the terms and conditions upon
which such conversion will be effected, including the initial conversion price
or conversion rate and any adjustments thereto in addition to or different from
those described herein, the conversion period and other conversion provisions in
addition to or in lieu of those described herein; (iv) any limit on the
aggregate principal amount of the Debt Securities; (v) whether the Debt
Securities are to be issuable as Registered Securities or Bearer Securities or
both, whether any of the Debt Securities are to be issuable initially in
temporary global form and whether any of the Debt Securities are to be in
permanent global form; (vi) the price or prices (expressed as a percentage of
the aggregate principal amount thereof) at which the Debt Securities will be
issued; (vii) the date or dates on which the Debt Securities will mature; (viii)
the rate or rates per annum (or the method by which such will be determined) at
which the Debt Securities will bear interest, if any, and the date from which
any such interest will accrue; (ix) the Interest Payment Dates on which any such
interest on the Debt Securities will be payable, the date on which payment of
such interest, if any, will commence and the Regular Record Dates for any
interest payable on any Debt Securities which are Registered Securities on any
Interest Payment Date and the extent to which, or the manner in which, any
interest payable on a temporary global Debt Security on an Interest Payment Date
will be paid; (x) any mandatory or optional sinking fund or
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analogous provisions; (xi) each office or agency where, subject to the terms of
the Indentures as described below under "Payment and Paying Agents," the
principal of and any premium and interest on the Debt Securities will be payable
and each office or agency where, subject to the terms of the Indentures as
described below under "Form, Exchange, Registration and Transfer," the Debt
Securities may be presented for registration of transfer or exchange; (xii) the
right, if any, or obligation, if any, of the Company to redeem the Debt
Securities at its option and the period or periods, if any, within which and the
price or prices at which the Debt Securities may, pursuant to any optional or
mandatory redemption provisions, be redeemed, in whole or in part, and the other
detailed terms and provisions of any such optional or mandatory redemption;
(xiii) the denominations in which any Debt Securities which are Registered
Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof, and the denomination or denominations in which any
Debt Securities which are Bearer Securities will be issuable, if other than the
denomination of $5,000; (xiv) the currency or currencies (including composite
currencies) in which payment of principal of and any premium and interest on the
Debt Securities is payable if other than United States dollars; (xv) any index
used to determine the amount of payments of principal of and any premium and
interest on the Debt Securities; (xvi) information with respect to book-entry
procedures, if any; (xvii) any deletions from, modification of or additions to
the Events of Default or covenants of the Company with respect to such Debt
Securities; and (xviii) any other terms of the Debt Securities not inconsistent
with the provisions of the Indentures. (Section 301) Any such Prospectus
Supplement will also describe any special provisions for the payment of
additional amounts with respect to the Debt Securities.
DEBT SECURITIES MAY BE ISSUED AS ORIGINAL ISSUE DISCOUNT SECURITIES. An
Original Issue Discount Security is a Debt Security, including any zero-coupon
security, which is issued at a price lower than the amount payable upon the
Stated Maturity thereof and which provides that upon redemption or acceleration
of the maturity thereof an amount less than the amount payable upon the Stated
Maturity thereof and determined in accordance with the terms of such Debt
Security shall become due and payable. Special United States federal income tax
considerations applicable to Debt Securities issued at an original issue
discount, including Original Issue Discount Securities, and special United
States tax considerations and other terms and restrictions applicable to any
Debt Securities which are issued in bearer form, offered exclusively to United
States Aliens or denominated in other than United States dollars, will be set
forth in a Prospectus Supplement relating thereto.
FORM, EXCHANGE, REGISTRATION AND TRANSFER. Debt Securities of a series may
be issuable in definitive form solely as Registered Securities, solely as Bearer
Securities or as both Registered Securities and Bearer Securities. Unless
otherwise indicated in an applicable Prospectus Supplement, Bearer Securities
will have interest coupons attached. The Indentures also provide that Debt
Securities of a series may be issuable in temporary or permanent global form.
(Section 201)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Debt Securities of
any series are issuable as both Registered Securities and Bearer Securities, at
the option of the Holder, and subject to the terms of the applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable for Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Bearer Securities surrendered in exchange
for Registered Securities between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest, and interest accrued as of
such date for payment of interest will not be payable in respect of the
Registered Security issued in exchange for such Bearer Security, but will be
payable only to the Holder of such coupon when due in accordance with the terms
of the applicable Indenture. Bearer Securities will not be issued in exchange
for Registered Securities. (Section 305)
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<PAGE>
Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Debt Securities and referred to in an
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indentures. Such
transfer or exchange will be effected upon the Security Registrar or such
transfer agent, as the case may be, being satisfied with the documents of title
and identity of the person making the request. Unless otherwise indicated in any
Prospectus Supplement, the Company will serve as Security Registrar. (Section
305) If a Prospectus Supplement refers to any transfer agents (in addition to
the Security Registrar) initially designated by the Company with respect to any
series of Debt Securities, the Company may at any time rescind the designation
of any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that, if Debt Securities of a series are
issuable solely as Registered Securities, the Company will be required to
maintain a transfer agent in each Place of Payment for such series and, if Debt
Securities of a series are also issuable as Bearer Securities, the Company will
be required to maintain (in addition to the Security Registrar) a transfer agent
in a Place of Payment for such series located outside the United States. The
Company may at any time designate additional transfer agents with respect to any
series of Debt Securities. (Section 1002)
Title to any Bearer Securities (including Bearer Securities in permanent
global form) and any coupons appertaining thereto will pass by delivery. The
Company, the Trustee and any agent of the Company or the Trustee may treat the
bearer of any Bearer Security and the bearer of any coupon and the registered
holder of any Registered Security as the owner thereof (whether or not such Debt
Security or coupon shall be overdue and notwithstanding any notice to the
contrary) for the purpose of making payment and for all other purposes. (Section
308)
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and ending on the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
date of the first publication of the relevant notice of redemption or, if
Securities of the series are also issuable as Registered Securities and there is
no publication, the mailing of the relevant notice of redemption; (ii) register
the transfer of or exchange any Registered Security, or portion thereof, called
for redemption, except the unredeemed portion of any Registered Security being
redeemed in part; or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 305)
REPLACEMENT OF SECURITIES AND COUPONS. Any mutilated Debt Security or a
Debt Security with a mutilated coupon appertaining thereto will be replaced by
the Company at the expense of the Holder upon surrender of such Debt Security to
the Trustee. Debt Securities or coupons that become destroyed, stolen or lost
will be replaced by the Company at the expense of the Holder upon delivery to
the Trustee of the Debt Security and coupons or evidence of destruction, loss or
theft thereof satisfactory to the Company and the Trustee; in the case of any
coupon which becomes destroyed, stolen or lost, such coupon will be replaced by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon, an indemnity satisfactory to the Trustee and the Company may be required
at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued. (Section 306)
PAYMENT AND PAYING AGENTS. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of principal of and any premium and interest on
Bearer Securities will be payable, subject to any applicable laws and
regulations, at the offices of such Paying Agents outside the United States as
the Company may designate from time to time, in the manner indicated in such
Prospectus Supplement.
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(Section 1002) Unless otherwise indicated in an applicable Prospectus
Supplement, payment of interest on Bearer Securities on any Interest Payment
Date will be made only against surrender to the Paying Agent of the coupon
relating to such Interest Payment Date. (Section 1001 ) No payment with respect
to any Bearer Security will be made at any office or agency of the Company in
the United States or by check mailed to any address in the United States or by
transfer to any account maintained with a bank located in the United States.
Notwithstanding the foregoing, payments of principal of and any premium and
interest on Bearer Securities denominated and payable in U.S. dollars will be
made at the office of the Company's Paying Agent in the Borough of Manhattan,
the City of New York, if (but only if) payment of the full amount thereof in
U.S. dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
(Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Registered Securities will be
made at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, except that at the option of the Company payment of
any interest may be made by check mailed on or before the due date to the
address of the Person entitled thereto as such address shall appear in the
Security Register. (Sections 307, 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Company, at its principal executive offices in Houston, Texas, will act as its
own Paying Agent for payments with respect to Debt Securities which are issuable
solely as Registered Securities and the Company will maintain a Paying Agent
outside the United States for payments with respect to Debt Securities (subject
to limitations described above in the case of Bearer Securities) which are
issuable solely as Bearer Securities or as both Registered Securities and Bearer
Securities. Any Paying Agents outside the United States and any other Paying
Agents in the United States initially designated by Company for the Debt
Securities will be named in an applicable Prospectus Supplement. The Company may
at any time designate additional Paying Agents or rescind the designation of any
Paying Agent or approve a change in the office through which any Paying Agent
acts, except that, if Debt Securities of a series are issuable solely as
Registered Securities, the Company will be required to maintain a Paying Agent
in each Place of Payment for such series and, if Debt Securities of a series are
issuable as Bearer Securities, the Company will be required to maintain (i) a
Paying Agent in the Borough of Manhattan, The City of New York for principal
payments with respect to any Registered Securities of the series (and for
payments with respect to Bearer Securities of the series in the circumstances
described above, but not otherwise), and (ii) a Paying Agent in a Place of
Payment located outside the United States where Debt Securities of such series
and any coupons appertaining thereto may be presented and surrendered for
payment. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Company, and the Holder of such Debt Security or any coupon will
thereafter look only to the Company for payment thereof. (Section 1003)
GLOBAL DEBT SECURITIES. Debt Securities of a series may be issued in whole
or in part in the form of one or more global Debt Securities that will be
deposited with, or on behalf of, a depository identified in the Prospectus
Supplement relating to such series. Global Debt Securities may be issued only in
fully registered form and in either temporary or permanent form. (Section 203)
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a global Debt Security may not be transferred
except as a whole by the depository for such global Debt Security to a nominee
of such depository or by a nominee of such depository to such depository or
another nominee of such depository or by the depository or any nominee to a
successor depository or any nominee of such successor.
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The specific terms of the depository arrangement with respect to a series of
Debt Securities in the form of one or more global Debt Securities will be
described in the Prospectus Supplement relating to such series.
SATISFACTION AND DISCHARGE OF INDENTURE. Each Indenture provides that the
Company may discharge the Indenture (except as to any surviving rights of
registration of transfer or exchange of Debt Securities and any right to receive
additional amounts) with respect to all Debt Securities issued under the
Indenture, which Debt Securities have not already been delivered to the Trustee
for cancellation and which either have become due and payable or are by their
terms due and payable within one year (or are to be called for redemption within
one year) by depositing with the Trustee as trust funds an amount sufficient to
pay when due the principal of and premium, if any, and interest, if any, on all
outstanding Debt Securities when due. (Section 401).
DEFEASANCE AND DISCHARGE. Each Indenture provides that, if the Company so
elects by Board Resolution with respect to the Debt Securities of any series
issued under such Indenture (other than convertible Subordinated Debt
Securities), the Company will be discharged from any and all obligations in
respect of the Debt Securities of such series (except for certain obligations
relating to temporary Debt Securities and exchange of Debt Securities,
registration of transfer or exchange of Debt Securities of such series,
replacement of stolen, lost or mutilated Debt Securities of such series,
maintenance of paying agencies to hold moneys for payment in trust and payment
of additional amounts, if any, required in consequence of United States
withholding taxes imposed on payments to non-United States persons) upon the
deposit with the Trustee, in trust, of money and/or U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any), and each installment of interest on, the
Debt Securities of such series on the Stated Maturity of such payments in
accordance with the terms of such Indenture and the Debt Securities of such
series. (Sections 1302, 1304) Such a trust may only be established if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling, or (ii) since the date of such
Indenture there has been a change in applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of such series will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit, defeasance and
discharge, and will be subject to federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred. (Section 1304) In the event
of any such defeasance and discharge of Debt Securities of such series, Holders
of such series would be entitled to look only to such trust fund for payment of
principal of and any premium and any interest on their Debt Securities until
Maturity.
COVENANT DEFEASANCE. Each Indenture also provides that, if the Company so
elects by Board Resolution with respect to the Debt Securities of any series
issued thereunder, the Company may omit to comply with certain restrictive
covenants, including (in the case of the Senior Debt Indenture) the covenants
described under "--Provisions Applicable Solely to Senior Debt
Securities--Limitation on Liens" and "--Limitations on Sale and Leaseback
Transactions," but excluding (in the case of the Subordinated Debt Indenture)
any applicable obligation of the Company respecting the conversion of Debt
Securities of such series into Common Stock, and any such omission shall not be
an Event of Default with respect to the Debt Securities of such series, upon the
deposit with the Trustee, in trust, of money and/ or U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any), and each installment of interest on, the
Debt Securities of such series on the Stated Maturity of such payments in
accordance with the terms of such Indenture and the Debt Securities of such
series. The obligations of the Company under such Indenture and the Debt
Securities of such series other than with respect to such covenants shall remain
in full force and effect. (Section 1303) Such a trust may be
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established only if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of such series will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit and defeasance of certain obligations and will be subject to
federal income tax on the same amounts and in the same manner and at the same
time as would have been the case if such deposit and defeasance had not
occurred. (Section 1304)
Although the amount of money and U.S. Government Obligations on deposit with
the Trustee would be intended to be sufficient to pay amounts due on the Debt
Securities of such series at the time of their Stated Maturity, in the event the
Company exercises its option to omit compliance with the covenants defeased with
respect to the Debt Securities of any series as described above, and the Debt
Securities of such series are declared due and payable because of the occurrence
of any Event of Default, such amount may not be sufficient to pay amounts due on
the Debt Securities of such series at the time of the acceleration resulting
from such Event of Default. The Company shall in any event remain liable for
such payments as provided in the applicable Indenture.
FEDERAL INCOME TAX CONSEQUENCES. Under current United States federal income
tax law, defeasance and discharge would likely be treated as a taxable exchange
of Debt Securities to be defeased for an interest in the defeasance trust. As a
consequence, a holder would recognize gain or loss equal to the difference
between the holder's cost or other tax basis for such Debt Securities and the
value of the holder's interest in the defeasance trust, and thereafter would be
required to include in income the holder's share of the income, gain or loss of
the defeasance trust. Under current United States federal income tax law,
covenant defeasance would ordinarily not be treated as a taxable exchange of
such Debt Securities.
MEETINGS, MODIFICATION AND WAIVER. Modifications and amendments of either
Indenture may be made by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of the
Holder of each Outstanding Security affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of principal of or interest on,
any Debt Security, (b) change the Redemption Date with respect to any Debt
Security, (c) reduce the principal amount of, or premium or interest on, any
Debt Security, (d) change any obligation of the Company to pay additional
amounts, (e) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the Maturity thereof, (f) change the coin
or currency in which any Debt Security or any premium or interest thereon is
payable, (g) change the redemption right of any Holder, (h) impair the right to
institute suit for the enforcement of any payment on or with respect to any Debt
Security or any conversion right with respect thereto, (i) reduce the percentage
in principal amount of Outstanding Securities of any series, the consent of
whose Holders is required for modification or amendment of such Indenture or for
waiver of compliance with certain provisions of such Indenture or for waiver of
certain defaults, (j) reduce the requirements contained in such Indenture for
quorum or voting, (k) change any obligation of the Company to maintain an office
or agency in the places and for the purposes required by such Indenture, (l)
adversely affect the right to convert Subordinated Debt Securities, if
applicable, or (m) modify any of the above provisions. (Section 902)
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Subordinated Debt Securities without the
consent of each holder of Senior Indebtedness (as defined below under
"--Provisions Applicable Solely to Subordinated Debt Securities") then
outstanding that would be adversely affected thereby. (Section 907 of the
Subordinated Debt Indenture)
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series may, on behalf of all Holders of that series, waive,
insofar as that series is concerned, compliance by the Company with certain
restrictive provisions of the Indenture under which such series has been issued.
(Section 1007 of the Senior Debt Indenture; Section 1008 of the Subordinated
Debt Indenture) The Holders of a majority in aggregate principal amount of the
Outstanding Securities , of each series may, on
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behalf of all Holders of that series, waive any past default under the
applicable Indenture with respect to any Debt Securities of that series, except
a default (a) in the payment of principal of, or premium, if any, or any
interest on any Debt Security of such series or (b) in respect of a covenant or
provision of such Indenture which cannot be modified or amended without the
consent of the Holder of each Outstanding Security of such series affected.
(Section 513)
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder or are
present at a meeting of the Holders for quorum purposes, (i) the principal
amount of an Original Issue Discount Security that is deemed to be Outstanding
will be the amount of the principal that would be due and payable as of the date
of such determination upon acceleration of the Maturity thereof, and (ii) the
principal amount of a Debt Security denominated in a foreign currency or
currency units will be the U.S. dollar equivalent, determined on the date of
original issuance of such Debt Security, of the principal amount of such Debt
Security or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent, determined on the date of original issuance of such Security, of the
amount determined as provided in (i) above. (Section 101)
Each Indenture contains provisions for convening meetings of the Holders of
a series if Debt Securities of that series are issuable as Bearer Securities.
(Section 1401) A meeting may be called at any time by the Trustee, and also,
upon request, by the Company or the Holders of at least 10% in aggregate
principal amount of the Outstanding Securities of such series, in any such case
upon notice given in accordance with "Notices" below. (Section 1402) Except for
any consent which must be given by the Holder of each Outstanding Security
affected thereby, as described above, any resolution presented at a meeting (or
adjourned meeting at which a quorum is present) may be adopted by the
affirmative vote of the Holders of a majority in aggregate principal amount of
the Outstanding Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in aggregate
principal amount of the Outstanding Securities of a series may be adopted at a
meeting (or adjourned meeting duly reconvened at which a quorum is present) by
the affirmative vote of the Holders of such specified percentage in aggregate
principal amount of the Outstanding Securities of that series. Any resolution
passed or decision taken at any meeting of Holders of any series duly held in
accordance with the applicable Indenture will be binding on all Holders of that
series and related coupons. The quorum at any meeting, and at a reconvened
meeting, will be Persons holding or representing a majority in aggregate
principal amount of the Outstanding Securities of a series. (Section 1404).
NOTICES. Except as otherwise provided in an applicable Prospectus
Supplement, notices to Holders of Bearer Securities will be given by publication
at least twice in a daily newspaper in the City of New York and in such other
city or cities as may be specified in such Bearer Securities. Notices to Holders
of Registered Securities will be given by first-class mail to the addresses of
such Holders as they appear in the Security Register. (Section 106)
GOVERNING LAW. The Indentures, the Debt Securities and coupons will be
governed by, and construed in accordance with, the laws of the State of New
York. (Section 113)
REGARDING THE TRUSTEE. The Trustee appointed and serving as trustee
pursuant to each of the Senior Debt Indenture and the Subordinated Debt
Indenture is Chase Bank.
Each Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. (Section 613) The Trustee is
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest (as described in the Indentures), it must eliminate such
conflict or resign. (Section 608)
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The holders of a majority in principal amount of all outstanding Debt
Securities of a series (or if more than one series is affected thereby, all
series so affected, voting as a single class) will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy or
power available to the Trustee for such series or all such series so affected.
In case an Event of Default shall occur (and shall not be cured) under any
Indenture relating to a series of Debt Securities and is known to the Trustee
for such series, such Trustee shall exercise such of the rights and powers
vested in it by such Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs. Subject to such provisions, no Trustee will be
under any obligation to exercise any of its rights or powers under the
applicable Indenture at the request of any of the holders of Debt Securities
unless they shall have offered to such Trustee security and indemnity
satisfactory to it.
Pursuant to the Trust Indenture Act, a trustee under an indenture may be
deemed to have a conflicting interest, and may, under certain circumstances set
forth in the Trust Indenture Act, be required to resign as trustee under such
indenture, if the securities under such indenture are in default (as such term
is defined in such indenture) and the trustee is the trustee under another
indenture under which any other securities of the same obligor are outstanding,
subject to certain exceptions set forth in the Trust Indenture Act. In such
event, the obligor must take prompt steps to have a successor trustee appointed
in the manner provided in the indenture from which the trustee has resigned.
Accordingly, Chase Bank, as trustee under the Senior Debt Indenture and the
Subordinated Debt Indenture, could be required to resign as trustee under one of
such Indentures should a default occur under one of such Indentures. In such
event, the Company would be required to take prompt steps to have a successor
trustee or successor trustees appointed in the manner provided in the applicable
Indenture.
Chase Bank, as the trustee under the Senior Debt Indenture and the
Subordinated Debt Indenture, may be a depositary for funds of, may make loans to
and may perform other routine banking services for the Company and certain of
its affiliates in the normal course of business.
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
GENERAL. Senior Debt Securities will be issued under the Senior Debt
Indenture, and each series will rank pari passu as to the right of payment of
principal and any premium and interest with each other series issued thereunder
and will rank senior to all series of Subordinated Debt Securities issued and
outstanding and that may be issued from time to time.
CERTAIN DEFINITIONS. For purposes of the following discussion, the
following definitions are applicable (Section 1008 and 1009 of the Senior Debt
Indenture).
"Attributable Debt" shall mean, as of any particular time, the present
value, discounted at a rate per annum equal to (i) the implied lease rate of or
(ii) if the implied lease rate is not known to the Company, then the weighted
average interest rate of all Senior Debt Securities outstanding at the time
under the Senior Debt Indenture compounded semi-annually, in either case, of the
obligation of a lessee for rental payments during the remaining term of any
lease (including any period for which such lease has been extended or may, at
the option of the lessor, be extended); the net amount of rent required to be
paid for any such period shall be the total amount of the rent payable by the
lessee with respect to such period, but may exclude amounts required to be paid
on account of maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges; and, in the case of any lease which is terminable by
the lessee upon the payment of a penalty, such net amount shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
The term "Consolidated Net Tangible Assets" shall mean, at any date of
determination, the total amount of assets of the Company after deducting
therefrom (i) all the current liabilities (excluding (a) any
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current liabilities that by their terms are extendible or renewable at the
option of the obligor thereon to a time more than 12 months after the time as of
which the amount thereof is being computed, and (b) current maturities of long
term debt) and (ii) the value (net of any applicable reserves) of all intangible
assets such as excess of cost over net assets of acquired businesses, customer
lists, covenants not to compete, licenses, and permits, all as set forth on the
consolidated balance sheet of the Company and its consolidated Subsidiaries for
the Company's most recently completed fiscal quarter, prepared in accordance
with United States generally accepted accounting principles.
"Funded Debt" shall mean any Indebtedness which by its terms matures at or
is extendable or renewable at the sole option of the obligor without requiring
the consent of the obligee to a date more than twelve months after the date of
the creation of such Indebtedness.
"Guaranty" shall mean any agreement, undertaking or arrangement by which any
Person guarantees, endorses or otherwise becomes or is contingently liable upon
(by direct or indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise
to assure a creditor against loss) the debt, obligation or other liability of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of the obligor's obligation under any
Guaranty shall (subject to any limitation set forth therein) be deemed to be the
amount of such other Person's debt, obligation or other liability or the amount
of such dividends or other distributions guaranteed.
"Indebtedness" of any Person shall mean
(a) all obligations of such Person for borrowed money (including, without
limitation, all notes payable and drafts accepted representing extension
of credit and all obligations evidenced by bonds, debentures, notes or
other similar instruments) or on which interest charges are customarily
paid, all as shown on a balance sheet of such Person as of the date at
which Indebtedness is to be determined;
(b) all other items which, in accordance with generally accepted accounting
principles, would be included as liabilities on the liability side of a
balance sheet of such Person as of the date at which Indebtedness is to
be determined; and
(c) whether or not so included as liabilities in accordance with generally
accepted accounting principles,
(i) all indebtedness (excluding, however, prepaid interest thereon)
secured by a Security Interest in property owned or being purchased
by such Person (including, without limitation, indebtedness arising
under conditional sales or other title retention agreements) whether
or not such indebtedness shall have been assumed by such Person, and
(ii) all Guaranties of such Person.
"Principal Property" shall mean any waste processing, waste disposal or
resource recovery plant or similar facility located within the United States
(other than its territories and possessions and Puerto Rico) or Canada and owned
by, or leased to, the Company or any Restricted Subsidiary, except (a) any such
plant or facility (i) owned or leased jointly or in common with one or more
persons other than the Company and its Restricted Subsidiaries in which the
interest of the Company and its Restricted Subsidiaries does not exceed 50%, or
(ii) which the Board of Directors determines in good faith is not of material
importance to the total business conducted, or assets owned, by the Company and
its Subsidiaries as an entirety, or (b) any portion of such plant or facility
which the Board of Directors determines in good faith not to be of material
importance to the use or operation thereof.
"Restricted Subsidiary" shall mean any Subsidiary (other than any Subsidiary
of which the Company owns directly or indirectly less than all of the
outstanding Voting Stock) (a) principally engaged in, or
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whose principal assets consist of property used by the Company or any Restricted
Subsidiary in, the storage, collection, transfer, interim processing or disposal
of waste within the United States of America or Canada, or (b) which the Company
shall designate as a Restricted Subsidiary in an Officers' Certificate delivered
to the Trustee.
"Security Instrument" shall mean any security agreement, chattel mortgage,
assignment, financing or similar statement or notice, continuation statement,
other agreement or instrument, or amendment or supplement to any thereof,
providing for, evidencing or perfecting any Security Interest or lien.
"Security Interest" shall mean any interest in any real or personal property
or fixture which secures payment or performance of an obligation and shall
include any mortgage, lien, encumbrance, charge or other security interest of
any kind, whether arising under a Security Instrument or as a matter of law,
judicial process or otherwise.
CONSOLIDATION, MERGER, SALE. The Senior Debt Indenture provides that the
Company may not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, unless (1) the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety shall be a corporation, partnership or trust which shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the principal
of and any premium and interest (including all additional amounts, if any,
payable pursuant to the Senior Debt Indenture) on all the Senior Debt Securities
and the performance or observance of every other covenant of the Senior Debt
Indenture on the part of the Company to be performed or observed; and (2)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Company or a Subsidiary as a
result of such transaction as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing. Upon any consolidation of the Company
with, or merger of the Company into, any other Person or any, conveyance,
transfer or lease of the properties and assets of the Company substantially as
an entirety, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Senior Debt Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of all obligations
and covenants under the Senior Debt Indenture and the Senior Debt Securities and
coupons and may liquidate and dissolve. (Sections 801, 802 of the Senior Debt
Indenture)
EVENT OF DEFAULT. Unless otherwise specified in the applicable Prospectus
Supplement, an Event of Default is defined under the Senior Debt Indenture with
respect to the Senior Debt Securities of any series issued under such Senior
Debt Indenture as being one or more of the following events:
(1) default in the payment of any interest upon any Senior Debt Security of
that series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any, on) any
Senior Debt Security of that series as and when the same becomes due and payable
whether at Stated Maturity, by declaration of acceleration, call for redemption
or otherwise; or
(3) default in the deposit of any sinking fund payment, when and as due by
the terms of a Senior Debt Security of that series; or
(4) default in the performance, or breach, of any other covenant or warranty
of the Company in the Senior Debt Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in Section 501 of the
Senior Debt Indenture specifically dealt with or which has expressly been
included in the Senior Debt Indenture solely for the benefit of a series of
Senior Debt
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Securities other than that series), and continuance of such default or breach
for a period of 60 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding Senior Debt
Securities of that series a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under the Senior Debt Indenture; or
(5) the entry by a court having jurisdiction in the premises of (A) a decree
or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 90 consecutive days; or
(6) the commencement by the Company of a voluntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order for relief in
respect of the Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law or
the commencement of any bankruptcy or insolvency case or proceeding against it,
or the filing by it of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company in furtherance of any such action;
or
(7) any other Event of Default provided with respect to Senior Debt
Securities of that series. (Section 501 of the Senior Debt Indenture)
If an Event of Default with respect to Senior Debt Securities of any series
at the time Outstanding occurs and is continuing, then in every such case,
either the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Senior Debt Securities of that series may declare the principal
amount (or, if any of the Senior Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount of such Senior
Debt Securities as may be specified in the terms thereof) of all of the Senior
Debt Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. At any time after such a declaration of
acceleration with respect to the Senior Debt Securities of any series has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee, the Holders of a majority in principal amount of the
Outstanding Senior Debt Securities of that series, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if: (1) the Company has paid or deposited with the Trustee a sum
sufficient to pay (A) all overdue interest on all Senior Debt Securities of that
series, (B) the principal of (and premium, if any, on) any Senior Debt
Securities of that series which has become due otherwise than by such
declaration of acceleration and any interest thereon at the rate or rates
prescribed therefor in such Senior Debt Securities, (C) to the extent that
payment of such interest is lawful, interest upon overdue interest at the rate
or rates prescribed therefor in such Senior Debt Securities, and (D) all sums
paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Senior Debt Securities of that series,
other than the non-payment of the principal of Senior Debt Securities of that
series which has become due solely by such
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declaration of acceleration, have been cured or waived as provided in the Senior
Debt Indenture. No such rescission shall affect any subsequent default or impair
any right consequent thereon. (Section 502 of the Senior Debt Indenture) If the
Trustee or any Holder of a Senior Debt Security or coupon has instituted any
proceeding to enforce any right or remedy under the Senior Debt Indenture and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the Trustee
and the Holders of Senior Debt Securities and coupons shall be restored
severally and respectively to their former positions under the Senior Debt
Indenture and the Senior Debt Securities and thereafter all rights and remedies
of the Trustee and the Holders shall continue as though no such proceeding had
been instituted. (Section 509 of the Senior Debt Indenture)
The Senior Debt Indenture provides that, subject to the duty of the Trustee
during default to act with the required standard of care, the Trustee is under
no obligation to exercise any of its rights or powers under such Indenture at
the request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Sections 601, 603 of the Senior
Debt Indenture) No Holder of any Senior Debt Security of any series or any
related coupons shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Senior Debt Indenture, or for the appointment of
a receiver or trustee, or for any other remedy thereunder, unless (1) such
Holder has previously given written notice to the Trustee of a continuing Event
of Default with respect to the Senior Debt Securities of that series; (2) the
Holders of not less than 25% in principal amount of the Outstanding Senior Debt
Securities of that series shall have been made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee under the Senior Debt Indenture; (3) such Holder or Holders have offered
to the Trustee reasonable indemnity against the costs, expenses and liabilities
to be incurred in compliance with such request; (4) the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity has failed to
institute any such proceeding; and (5) no direction inconsistent with such
written request has been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding Senior Debt
Securities of that series. (Section 507 of the Senior Debt Indenture)
Notwithstanding any other provisions in the Senior Debt Indenture, the right of
any Holder of any Senior Debt Security or coupon to receive payment of the
principal of and any premium and any interest on such Senior Debt Security or
payment of such coupon on the Stated Maturity or Maturities expressed in such
Senior Debt Security or coupon, or to institute suit for the enforcement of any
such payment on or after such respective dates shall not be impaired or affected
without the consent of such Holder. (Sections 508, 902 of the Senior Debt
Indenture)
The Holders of a majority in principal amount of the Outstanding Senior Debt
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Senior Debt Securities of such series, provided that (1) such direction shall
not be in conflict with any rule of law or with the Senior Debt Indenture; (2)
the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction; and (3) the Trustee shall not be obligated to
take any action unduly prejudicial to Holders not joining in such direction or
involving the Trustee in personal liability. (Section 512 of the Senior Debt
Indenture) The Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of any series may on behalf of the Holders of all the
Senior Debt Securities of such series waive any past default under the Senior
Debt Indenture with respect to the Senior Debt Securities of such series and its
consequences, except a default in the payment of the principal of or any premium
or interest on any Senior Debt Security of such series or in respect of a
covenant or provision of the Senior Debt Indenture which, pursuant to the Senior
Debt Indenture, cannot be modified or amended without the consent of the Holder
of each Outstanding Senior Debt Security of such series affected. Upon any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of the Senior
Debt Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon. (Sections 513, 902 of the Senior
Debt Indenture)
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If a default occurs under the Senior Debt Indenture with respect to Senior
Debt Securities of any series, the Trustee shall give the Holders of Senior Debt
Securities of such series notice of such default as and to the extent provided
by the Trust Indenture Act; provided, however, that in the case of any default
or breach of certain covenants or warranties with respect to Senior Debt
Securities of such series, no such notice to Holders shall be given until at
least 30 days after the occurrence thereof (the term "default" for purposes of
these provisions being defined as any event which is, or after notice or lapse
of time or both would become, an Event of Default with respect to the Senior
Debt Securities of such series). (Section 602 of the Senior Debt Indenture)
In any case in which Senior Debt Securities are Outstanding that are
denominated in more than one currency and the Trustee is directed to make
ratable payments under the Senior Debt Indenture to Holders of such Senior Debt
Securities, unless otherwise provided with respect to any series of Senior Debt
Securities, the Trustee shall calculate the amount of such payments as follows:
(i) as of the day the Trustee collects an amount under the Senior Debt
Indenture, the Trustee shall, as to each Holder of a Senior Debt Security to
whom an amount is due and payable under the Senior Debt Indenture that is
denominated in a foreign currency, determine that amount in Dollars that would
be obtained for the amount owing such Holder, using the rate of exchange at
which in accordance with normal banking procedures the Trustee could purchase in
the City of New York Dollars with such amount owing; (ii) calculate the sum of
all Dollar amounts determined under (i) and add thereto any amounts due and
payable in Dollars; and (iii) using the individual amounts determined in (i) or
any individual amounts due and payable in Dollars, as the case may be, as a
numerator, and the sum calculated in (ii) as a denominator, calculate as to each
Holder of a Senior Debt Security to whom an amount is owed under the Senior Debt
Indenture the fraction of the amount collected under the Senior Debt Indenture
payable to such Holder. Any expenses incurred by the Trustee in actually
converting amounts owing Holders of Senior Debt Securities denominated in a
currency other than that in which any amount is collected under the Senior Debt
Indenture shall be likewise (in accordance with the foregoing) borne ratably by
all Holders of Senior Debt Securities to whom amounts are payable under the
Senior Debt Indenture. (Sections 506, 902 of the Senior Debt Indenture)
To the fullest extent allowed under applicable law, if for the purpose of
obtaining judgment against the Company in any court it is necessary to convert
the sum due in respect of the principal of, or premium, if any, or interest on,
the Senior Debt Securities of any series (the "Required Currency") into a
currency in which a judgment will be rendered (the "Judgment Currency"), the
rate of exchange used shall be the rate at which in accordance with normal
banking procedures the Trustee could purchase in the City of New York the
Required Currency with the Judgment Currency on the Business Day in the City of
New York next preceding that on which final judgment is given. Neither the
Company nor the Trustee shall be liable for any shortfall nor shall either of
them benefit from any windfall in payments to Holders of Senior Debt Securities
under this provision of the Senior Debt Indenture caused by a change in exchange
rates between the time the amount of a judgment against the Company is
calculated as above and the time the Trustee converts the Judgment Currency into
the Required Currency to make payments under the foregoing provisions of the
Senior Debt Indenture to Holders of Senior Debt Securities, but payment of such
judgment shall discharge all amounts owed by the Company on the claim or claims
underlying such judgment. (Section 506 of the Senior Debt Indenture)
The Company is required to furnish to the Trustee annually a statement as to
the compliance by the Company with all conditions and covenants under the Senior
Debt Indenture. (Section 1006)
LIMITATION ON LIENS. Unless provided otherwise in the applicable Prospectus
Supplement, the provisions of this covenant shall apply to each series of Senior
Debt Securities issued under the Senior Debt Indenture:
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist, directly or
indirectly, any Indebtedness secured by a Security Interest upon any
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Principal Property of the Company or of a Restricted Subsidiary, whether owned
as of the date of this Indenture or hereafter acquired, without making effective
provision (and the Company hereby covenants that in any such case it shall make
or cause to be made effective provision) whereby the Senior Debt Securities of
that series then outstanding and any other Indebtedness of the Company or any
Restricted Subsidiary then entitled thereto shall be secured by such Security
Interest equally and ratably with (or, in the case of the Senior Debt Securities
of that series and if the Company shall so determine, prior to) any and all
other Indebtedness of the Company or any Restricted Subsidiary thereby secured
for so long as any such other Indebtedness of the Company or any Restricted
Subsidiary shall be so secured; provided, that nothing in the Senior Debt
Indenture shall prevent, restrict or apply to Indebtedness secured by:
(1) (a) Any Security Interest upon property or assets which is created
prior to or contemporaneously with, or within 360 days after, (i) in the case of
the acquisition of such property or assets, the completion of such acquisition
and (ii) in the case of the construction, development or improvement of such
property or assets, the later to occur of the completion of such construction,
development or improvement or the commencement of operation or use of the
property or assets, which Security Interest secures or provides for the payment,
financing or refinancing, directly or indirectly, of all or any part of the
acquisition cost of such property or assets or the cost of construction,
development or improvement thereof; or (b) any Security Interest upon property
or assets existing at the time of the acquisition thereof, which Security
Interest secures obligations assumed by the Company or any Restricted
Subsidiary; or (c) any conditional sales agreement or other title retention
agreement with respect to any property or assets acquired by the Company or any
Restricted Subsidiary, or (d) any Security Interest existing on the property or
assets or shares of stock of a corporation or firm at the time such corporation
or firm is merged into or consolidated with the Company or any Restricted
Subsidiary or at the time of a sale, lease or other disposition of the property
or assets of such corporation or firm as an entirety or substantially as an
entirety to the Company or any Restricted Subsidiary or at the time such
corporation becomes a Restricted Subsidiary; or (e) any Security Interest
existing on the property, assets or shares of stock of any successor which shall
have become the Company in accordance with the provisions of the covenant
described in
"--Provisions Applicable Solely to Senior Debt Securities--Consolidation, Merger
and Sale of Assets"; provided, in each case, that any such Security Interest
described in the foregoing clauses (b), (c), (d) or (e) does not attach to or
affect property or assets owned by the Company or any Restricted Subsidiary
prior to the event referred to in such clauses; or
(2) Mechanics', materialmen's, carriers' or other like liens arising in the
ordinary course of business (including construction of facilities) in respect of
obligations which are not due or which are being contested in good faith; or
(3) Any Security Interest arising by reason of deposits with, or the giving
of any form of security to, any governmental agency or any body created or
approved by law or governmental regulation, which is required by law or
governmental regulation as a condition to the transaction of any business or the
exercise of any privilege, franchise or license (including, without limitation,
any Security Interest arising by reason of one or more letters of credit in
connection with any international waste management contract to be performed by
the Company or any of its Subsidiaries or their respective affiliates); or
(4) Security Interests for taxes, assessments or governmental charges or
levies not yet delinquent or Security Interests for taxes, assessments or
governmental charges or levies already delinquent but the validity of which is
being contested in good faith; or
(5) Security Interests (including judgment liens) arising in connection with
legal proceedings so long as such proceedings are being contested in good faith
and, in the case of judgment liens, execution thereon is stayed; or
(6) Landlords' liens on fixtures located on premises leased by the Company
or any Restricted Subsidiary in the ordinary course of business; or
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(7) Any Security Interest in favor of any governmental authority in
connection with the financing of the cost of construction or acquisition of
property; or
(8) Any Security Interest arising by reason of deposits to qualify the
Company or any Restricted Subsidiary to conduct business, to maintain
self-insurance, or to obtain the benefit of, or comply with, laws; or
(9) Any Security Interest that secures any Indebtedness of a Restricted
Subsidiary owing to the Company or another Restricted Subsidiary or by the
Company to a Restricted Subsidiary, or
(10) Any Security Interest incurred in connection with pollution control,
sewage or solid waste disposal, industrial revenue or similar financing; or
(11) Any Security Interest created by any program providing for the
financing, sale or other disposition of trade or other receivables qualified as
current assets in accordance with United States generally accepted accounting
principles entered into by the Company or by any Restricted Subsidiary, provided
that such program is on terms comparable for similar transactions, or any
document executed by the Company or any Restricted Subsidiary in connection
therewith, and provided that such Security Interest is limited to the trade or
other receivables in respect of which such program is created or exists and the
proceeds thereof, or
(12) Any extension, renewal or refunding (or successive extensions, renewals
or refundings) in whole or in part of any Indebtedness secured by any Security
Interest referred to in the foregoing clauses (1) through (11), inclusive,
provided that the Security Interest securing such Indebtedness shall be limited
to the property or assets which, immediately prior to such extension, renewal or
refunding, secured such Indebtedness and additions to such property or assets.
Notwithstanding the foregoing provisions, the Company or any of its
Restricted Subsidiaries may create, incur, assume or suffer to exist any
Indebtedness secured by a Security Interest without so securing the Senior Debt
Securities of that series if, at the time such Security Interest becomes a
Security Interest upon any Principal Property of the Company or such Restricted
Subsidiary and after giving effect thereto, the aggregate outstanding principal
amount of all Indebtedness of the Company and its Restricted Subsidiaries
secured by Security Interests permitted by this sentence (excluding Indebtedness
secured by a Security Interest existing as of the date of the Senior Debt
Indenture, but including the Attributable Debt in respect of Sale and Leaseback
Transactions, other than Sale and Leaseback Transactions which, if the
Attributable Debt in respect thereof had been Indebtedness secured by a Security
Interest, would have been permitted by clause (1) (a) above, other Sale and
Leaseback Transactions the proceeds of which have been applied or committed to
be applied in accordance with the covenant described in "--Provisions Applicable
Solely to Senior Debt Securities--Limitations on Sale and Leaseback
Transactions" and other than Sale and Leaseback Transactions between the Company
and any Restricted Subsidiary) does not exceed 15% of Consolidated Net Tangible
Assets. (Section 1008 of the Senior Debt Indenture)
(b) If, upon any consolidation or merger of any Restricted Subsidiary with
or into any other corporation, or upon any consolidation or merger of any other
corporation with or into the Company or any Restricted Subsidiary or upon any
sale or conveyance of the Principal Property of any Restricted Subsidiary as an
entirety or substantially as an entirety to any other Person, or upon any
acquisition by the Company or any Restricted Subsidiary by purchase or otherwise
of all or any part of the Principal Property of any other Person, any Principal
Property theretofore owned by the Company or such Restricted Subsidiary would
thereupon become subject to any Security Interest not permitted by the terms of
the foregoing covenant, the Company, prior to such consolidation, merger, sale
or conveyance, or acquisition, will, or will cause such Restricted Subsidiary
to, secure payment of the principal of and interest, if any, on the Senior Debt
Securities of that series (equally and ratably with or prior to any other
Indebtedness of the Company or such Restricted Subsidiary then entitled thereto)
by a direct lien on all such Principal Property
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prior to all liens other than any liens theretofore existing thereon by a
supplemental indenture or otherwise. (Section 1008 of the Senior Debt Indenture)
LIMITATIONS ON SALE AND LEASEBACK TRANSACTIONS. Unless provided otherwise
in the applicable Prospectus Supplement, the provisions of this covenant shall
apply to each series of Senior Debt Securities issued under the Senior Debt
Indenture:
The Company will not, and will not permit a Restricted Subsidiary to, enter
into any arrangement with any Person (other than with any Restricted Subsidiary)
providing for the leasing to the Company or any Restricted Subsidiary of any
Principal Property owned or hereafter acquired by the Company or such Restricted
Subsidiary (except for temporary leases for a term, including any renewal
thereof, of not more than three years and except for leases between the Company
and a Restricted Subsidiary or between Restricted Subsidiaries), which Principal
Property has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such person (a "Sale and Leaseback Transaction") unless
(a) the Company or such Restricted Subsidiary would be entitled, pursuant to the
covenant described in "--Provisions Applicable Solely to Senior Debt
Securities--Limitation on Liens," to incur Indebtedness secured by a Security
Interest on the property to be leased without equally and ratably securing the
Senior Debt Securities of that series, or (b) the Company shall, and in any such
case the Company covenants that it will, within 180 days after the effective
date of any such arrangement, apply an amount equal to the fair value (as
determined by the Board of Directors) of such property to the redemption of
Senior Debt Securities that, by their terms, are subject to redemption, or to
the purchase and retirement of Senior Debt Securities, or to the payment or
other retirement of funded debt for money borrowed, incurred or assumed by the
Company which ranks senior to or pari passu with the Senior Debt Securities of
that series or of funded debt for money borrowed, incurred or assumed by any
Restricted Subsidiary (other than, in either case, funded debt owed by the
Company or any Restricted Subsidiary), or (c) the Company shall within 180 days
after entering into the Sale and Leaseback Transaction, enter into a bona fide
commitment or commitments to expend for the acquisition or capital improvement
of a Principal Property an amount at least equal to the fair value (as
determined by the Board of Directors) of such property. (Section 1009 of the
Senior Debt Indenture)
Notwithstanding the foregoing, the Company may, and may permit any
Restricted Subsidiary to, effect any Sale and Leaseback Transaction that is not
acceptable pursuant to clauses (a) through (c), inclusive, of the foregoing
covenant, provided that the Attributable Debt associated with such Sale and
Leaseback Transaction, together with the aggregate principal amount of
outstanding debt secured by Security Interests upon Principal Property not
acceptable pursuant to clauses (1) through (12) of the covenant described in
"--Provisions Applicable Solely to Senior Debt Securities--Limitation on Liens,"
inclusive, do not exceed 15% of Consolidated Net Tangible Assets. (Section 1009
of the Senior Debt Indenture)
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
CONSOLIDATION, MERGER, SALE. The Subordinated Debt Indenture provides that
the Company may not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, unless (1) the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety shall be a corporation, partnership or trust, organized and validly
existing under the laws of the United States of America, any State thereof or
the District of Columbia and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal of and any premium and
interest (including all additional amounts, if any, payable pursuant to the
Subordinated Debt Indenture) on all the Subordinated Debt Securities and the
performance or observance of every other covenant of the Subordinated Debt
Indenture on the part of the Company to be performed or observed; and (2)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Company or a Subsidiary as a
result of such transaction as having been
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incurred by the Company or such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing. Upon
any consolidation of the Company with, or merger of the Company into, any other
Person or any conveyance, transfer or lease of the properties and assets of the
Company substantially as an entirety, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Subordinated Debt
Indenture with the same effect as if such successor Person had been named as the
Company herein, and thereafter, except in the case of a lease, the predecessor
Person shall be relieved of all obligations and covenants under the Subordinated
Debt Indenture and the Subordinated Debt Securities and coupons and may
liquidate and dissolve. (Sections 801, 802 of the Subordinated Debt Indenture)
EVENT OF DEFAULT. Unless otherwise specified in the applicable Prospectus
Supplement, an Event of Default is defined under the Subordinated Debt Indenture
with respect to the Subordinated Debt Securities of any series issued under such
Subordinated Debt Indenture as being one or more of the following events:
(1) default in the payment of any interest upon any Subordinated Debt
Security of that series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any, on) any
Subordinated Debt Security of that series as and when the same becomes due and
payable, whether at Stated Maturity or by declaration of acceleration, call for
redemption or otherwise; or
(3) default in the deposit of any sinking fund payment, when and as due by
the terms of a Subordinated Debt Security of that series; or
(4) default in the performance, or breach, of any other covenant or warranty
of the Company in the Subordinated Debt Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in Section
501 of the Subordinated Debt Indenture specifically dealt with or which has
expressly been included in the Subordinated Debt Indenture solely for the
benefit of a series of Subordinated Debt Securities other than that series), and
continuance of such default or breach for a period of 90 days after there has
been given, by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in principal amount
of the Outstanding Subordinated Debt Securities of that series a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the Subordinated Debt Indenture;
or
(5) the entry by a court having jurisdiction in the premises of (A) a decree
or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 90 consecutive days; or
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(6) the commencement by the Company of a voluntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order for relief in
respect of the Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law or
the commencement of any bankruptcy or insolvency case or proceeding against it,
or the filing by it of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company in furtherance of any such action;
or
(7) any other Event of Default provided with respect to Subordinated Debt
Securities of that series. (Section 501 of the Subordinated Debt Indenture)
If an Event of Default with respect to Subordinated Debt Securities of any
series at the time Outstanding occurs and is continuing, then in every such
case, the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Subordinated Debt Securities of that series may declare the
principal amount (or, if any of the Subordinated Debt Securities of that series
are Original Issue Discount Securities, such portion of the principal amount of
such Subordinated Debt Securities as may be specified in the terms thereof) of
all of the Subordinated Debt Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable. At any time after such a
declaration of acceleration with respect to the Subordinated Debt Securities of
any series has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of a majority in
principal amount of the Outstanding Subordinated Debt Securities of that series,
by written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if: (1) the Company has paid or deposited with
the Trustee a sum sufficient to pay (A) all overdue interest on all Subordinated
Debt Securities of that series, (B) the principal of (and premium, if any, on)
any Subordinated Debt Securities of that series which has become due otherwise
than by such declaration of acceleration and any interest thereon at the rate or
rates prescribed therefor in such Subordinated Debt Securities, (C) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate or rates prescribed therefor in such Subordinated Debt Securities,
and (D) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; and (2) all Events of Default with respect to Subordinated Debt
Securities of that series, other than the non-payment of the principal of
Subordinated Debt Securities of that series which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Subordinated Debt Indenture. No such rescission shall affect any subsequent
default or impair any right consequent thereon. (Section 502 of the Subordinated
Debt Indenture) If the Trustee or any Holder of a Subordinated Debt Security or
coupon has instituted any proceeding to enforce any right or remedy under the
Subordinated Debt Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders of Subordinated Debt
Securities and coupons shall be restored severally and respectively to their
former positions under the Subordinated Debt Indenture and the Subordinated Debt
Securities and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted. (Section 509 of
the Subordinated Debt Indenture)
The Subordinated Debt Indenture provides that, subject to the duty of the
Trustee during default to act with the required standard of care, the Trustee is
under no obligation to exercise any of its rights or powers under such Indenture
at the request or direction of any of the Holders, unless such Holders shall
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have offered to the Trustee reasonable indemnity. (Sections 601, 603 of the
Subordinated Debt Indenture) No Holder of any Subordinated Debt Security of any
series or any related coupons shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Subordinated Debt Indenture, or for
the appointment of a receiver or trustee, or for any other remedy thereunder,
unless (1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Subordinated Debt Securities of
that series; (2) the Holders of not less than 25% in principal amount of the
Outstanding Subordinated Debt Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee under the Subordinated Debt Indenture; (3)
such Holder or Holders have offered to the Trustee reasonable indemnity against
the costs, expenses and liabilities to be incurred in compliance with such
request; (4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and (5) no
direction inconsistent with such written request has been given to the Trustee
during such 60-day period by the Holders of a majority in principal amount of
the Outstanding Subordinated Debt Securities of that series. (Section 507 of the
Subordinated Debt Indenture) Notwithstanding any other provisions in the
Subordinated Debt Indenture, but subject to the subordination provisions of the
Subordinated Debt Indenture, the right of any Holder of any Subordinated Debt
Security or coupon to receive payment of the principal of and any premium and
any interest on such Subordinated Debt Security or payment of such coupon on the
Stated Maturity or Maturities expressed in such Subordinated Debt Security or
coupon and, if applicable, to convert such Subordinated Debt Security as
provided in the conversion provisions of the Subordinated Debt Indenture and to
institute suit for the enforcement of any such payment or conversion right shall
not be impaired without the consent of such Holder. (Sections 508, 902 of the
Subordinated Debt Indenture)
The Holders of a majority in principal amount of the Outstanding
Subordinated Debt Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Subordinated Debt Securities of such series, provided that (1)
such direction shall not be in conflict with any rule of law or with the
Subordinated Debt Indenture; (2) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction; and (3) the
Trustee shall not be obligated to take any action unduly prejudicial to Holders
not joining in such direction or involving the Trustee in personal liability.
(Section 512 of the Subordinated Debt Indenture) The Holders of a majority in
principal amount of the Outstanding Subordinated Debt Securities of any series
may on behalf of the Holders of all the Subordinated Debt Securities of such
series waive any past default under the Subordinated Debt Indenture with respect
to the Subordinated Debt Securities of such series and its consequences, except
a default in the payment of the principal of or any premium or interest on any
Subordinated Debt Security of such series or in respect of a covenant or
provision of the Subordinated Debt Indenture which, pursuant to the Subordinated
Debt Indenture, cannot be modified or amended without the consent of the Holder
of each Outstanding Subordinated Debt Security of such series affected. Upon any
such waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of the
Subordinated Debt Indenture; but no such waiver shall extend to any subsequent
or other default or impair any right consequent thereon. (Sections 902, 513 of
the Subordinated Debt Indenture)
If a default occurs under the Subordinated Debt Indenture with respect to
Subordinated Debt Securities of any series, the Trustee shall give the Holders
of Subordinated Debt Securities of such series notice of such default as and to
the extent provided by the Trust Indenture Act; provided, however, that in the
case of any default or breach of certain covenants or warranties with respect to
Subordinated Debt Securities of such series, no such notice to Holders shall be
given until at least 30 days after the occurrence thereof (the term "default"
for purposes of these provisions being defined as any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to the Subordinated Debt Securities of such series). (Section 602 of the
Subordinated Debt Indenture)
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In any case in which Subordinated Debt Securities are Outstanding that are
denominated in more than one currency and the Trustee is directed to make
ratable payments under the Subordinated Debt Indenture to Holders of such
Subordinated Debt Securities, unless otherwise provided with respect to any
series of Subordinated Debt Securities, the Trustee shall calculate the amount
of such payments as follows: (i) as of the day the Trustee collects an amount
under the Subordinated Debt Indenture, the Trustee shall, as to each Holder of a
Subordinated Debt Security to whom an amount is due and payable under the
Subordinated Debt Indenture that is denominated in a foreign currency, determine
that amount in Dollars that would be obtained for the amount owing such Holder,
using the rate of exchange at which in accordance with normal banking procedures
the Trustee could purchase in the City of New York Dollars with such amount
owing; (ii) calculate the sum of all Dollar amounts determined under (i) and add
thereto any amounts due and payable in Dollars; and (iii) using the individual
amounts determined in (i) or any individual amounts due and payable in Dollars,
as the case may be, as a numerator, and the sum calculated in (ii) as a
denominator, calculate as to each Holder of a Subordinated Debt Security to whom
an amount is owed under the Subordinated Debt Indenture the fraction of the
amount collected under the Subordinated Debt Indenture payable to such Holder.
Any expenses incurred by the Trustee in actually converting amounts owing
Holders of Subordinated Debt Securities denominated in a currency other than
that in which any amount is collected under the Subordinated Debt Indenture
shall be likewise (in accordance with the foregoing) borne ratably by all
Holders of Subordinated Debt Securities to whom amounts are payable under the
Subordinated Debt Indenture. (Section 506 of the Subordinated Debt Indenture)
To the fullest extent allowed under applicable law, if for the purpose of
obtaining judgment against the Company in any court it is necessary to convert
the sum due in respect of the principal of, or premium, if any, or interest on,
the Subordinated Debt Securities of any series (the "Required Currency") into a
currency in which a judgment will be rendered (the "Judgment Currency"), the
rate of exchange used shall be the rate at which in accordance with normal
banking procedures the Trustee could purchase in the City of New York the
Required Currency with the Judgment Currency on the Business Day in the City of
New York next preceding that on which final judgment is given. Neither the
Company nor the Trustee shall be liable for any shortfall nor shall it benefit
from any windfall in payments to Holders of Subordinated Debt Securities under
the Subordinated Debt Indenture caused by a change in exchange rates between the
time the amount of a judgment against the Company is calculated as above and the
time the Trustee converts the Judgment Currency into the Required Currency to
make payments under the foregoing provisions of the Subordinated Debt Indenture
to Holders of Subordinated Debt Securities, but payment of such judgment shall
discharge all amounts owed by the Company on the claim or claims underlying such
judgment. (Section 506 of the Subordinated Debt Indenture)
The Company is required to furnish to the Trustee annually a statement as to
the compliance by the Company with all conditions and covenants under the
Subordinated Debt Indenture. (Section 1007 of the Subordinated Debt Indenture)
SUBORDINATION. The Subordinated Debt Securities will be subordinate and
junior in right of payment, to the extent set forth in the Subordinated Debt
Indenture, to all Senior Indebtedness (as defined below) of the Company. If the
Company should default in the payment of any principal of or premium or interest
on any Senior Indebtedness when the same become due and payable, whether at
maturity or a date fixed for prepayment or by declaration of acceleration or
otherwise, then, upon written notice of such default to the Company by the
holders of such Senior Indebtedness or any trustee therefor and subject to
certain rights of the Company to dispute such default and subject to proper
notification of the Trustee, unless and until such default has been cured or
waived or ceases to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) will be made or agreed to be made for
principal or premium, if any, or interest, if any, on the Subordinated Debt
Securities, or in respect of any redemption, retirement, purchase or other
acquisition of the Subordinated Debt Securities other than those made in capital
stock of the Company (or cash in lieu of fractional shares thereof) pursuant to
any conversion right of the
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Subordinated Debt Securities or otherwise made in capital stock of the Company.
(Sections 1601, 1604 and 1605 of the Subordinated Debt Indenture)
"Senior Indebtedness" is defined in Section 101 of the Subordinated Debt
Indenture as Indebtedness (as defined below) of the Company outstanding at any
time except (a) any Indebtedness as to which, by the terms of the instrument
creating or evidencing the same, it is provided that such Indebtedness is not
senior in right of payment to the Subordinated Debt Securities, (b) the
Subordinated Debt Securities, (c) any Indebtedness of the Company to a
wholly-owned Subsidiary of the Company, (d) interest accruing after the filing
of a petition initiating certain bankruptcy or insolvency proceedings unless
such interest is an allowed claim enforceable against the Company in a
proceeding under federal or state bankruptcy laws, (e) obligations under
performance guarantees, support agreements and other agreements in the nature
thereof relating to the obligations of any Subsidiary of the Company, and (f)
trade accounts payable. "Indebtedness" is defined in Section 101 of the
Subordinated Debt Indenture as, with respect to any Person, (a) (i) the
principal of and interest and premium, if any, on indebtedness for money
borrowed of such Person evidenced by bonds, notes, debentures or similar
obligations, including any guaranty by such Person of any indebtedness for money
borrowed of any other Person, whether any such indebtedness or guaranty is
outstanding on the date of the Subordinated Debt Indenture or is thereafter
created, assumed or incurred, (ii) the principal of and premium and interest, if
any, on indebtedness for money borrowed, incurred, assumed or guaranteed by such
Person in connection with the acquisition by it or any of its subsidiaries of
any other businesses properties or other assets and (iii) lease obligations
which such Person capitalizes in accordance with Statement of Financial
Accounting Standards No. 13 promulgated by the Financial Accounting Standards
Board or such other generally accepted accounting principles as may be from time
to time in effect, (b) any other indebtedness of such Person, including any
indebtedness representing the balance deferred and unpaid of the purchase price
of any property or interest therein, including any such balance that constitutes
a trade account payable, and any guaranty, endorsement or other contingent
obligation of such Person in respect of any indebtedness of another, which is
outstanding on the date of the Subordinated Debt Indenture or is thereafter
created, assumed or incurred by such Person and (c) any amendments,
modifications, refundings, renewals or extensions of any indebtedness or
obligation described as Indebtedness in clause (a) or (b) above.
If (i) without the consent of the Company a court having jurisdiction shall
enter (A) an order for relief with respect to the Company under the United
States federal bankruptcy laws, (B) a judgment, order or decree adjudging the
Company a bankrupt or insolvent, or (C) an order for relief for reorganization,
arrangement, adjustment or composition of or in respect of the Company under the
United States federal bankruptcy laws or state insolvency laws or (ii) the
Company shall institute proceedings for the entry of an order for relief with
respect to the Company under the United States federal bankruptcy laws or for an
adjudication of insolvency, or shall consent to the institution of bankruptcy or
insolvency proceedings against it, or shall file a petition seeking, or seek or
consent to reorganization, arrangement, composition or similar relief under the
United States federal bankruptcy laws or any applicable state law, or shall
consent to the filing of such petition or to the appointment of a receiver,
custodian, liquidator, assignee, trustee, sequestrator or similar official in
respect of the Company or of substantially all of its property, or the Company
shall make a general assignment for the benefit of creditors as recognized under
the United States federal bankruptcy laws, then all Senior Indebtedness
(including any interest thereon accruing after the commencement of any such
proceedings) will first be paid in full before any payment or distribution,
whether in cash, securities or other property, may be made to any Holder of
Subordinated Debt Securities on account thereof. In such event, any payment or
distribution, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in the subordination provisions with respect to the
Subordinated Debt Securities, to the payment of all Senior Indebtedness then
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), which would otherwise (but for the
subordination provisions) be payable or deliverable in respect of Subordinated
Debt Securities of any series will be paid or delivered directly to
26
<PAGE>
the holders of Senior Indebtedness in accordance with the priorities then
existing among such holders until all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) has
been paid in full. If any payment or distribution of any character, whether in
cash, securities or other property (other than securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in the
subordination provisions with respect to the Subordinated Debt Securities, to
the payment of all Senior Indebtedness then outstanding and to any securities
issued in respect thereof under any such plan of reorganization or
readjustment), shall be received by the Trustee or any holder of any
Subordinated Debt Securities in contravention of any of the terms of the
Subordinated Debt Indenture, such payment or distribution will be received in
trust for the benefit of, and will be paid over or delivered and transferred to,
the holders of the Senior Indebtedness then outstanding in accordance with the
priorities then existing among such holders for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full. In the event of the failure of the Trustee or
any holder to endorse or assign any such payment, distribution or security, each
Holder of Senior Indebtedness is irrevocably authorized to endorse or assign the
same. In the event of any such proceeding, after payment in full of all sums
owing with respect to Senior Indebtedness, the holders of Subordinated Debt
Securities, together with the holders of any other obligations of the Company
ranking on a parity with the Subordinated Debt Securities, will be entitled to
be repaid from the remaining assets of the Company the amounts at that time due
and owing on account of unpaid principal of and any premium and interest on the
Subordinated Debt Securities and such other obligations before any payment or
other distribution, whether in cash, property or otherwise, shall be made on
account of any capital stock or obligations of the Company ranking junior to the
Subordinated Debt Securities and such other obligations. (Section 1601 of the
Subordinated Debt Indenture)
The Subordinated Debt Indenture provides that Senior Indebtedness shall not
be deemed to have been paid in full unless the holders thereof shall have
received cash, securities or other property equal to the amount of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness, the holders of Subordinated Debt Securities of each series shall
be subrogated to all rights of any holders of Senior Indebtedness to receive any
further payments or distributions applicable to such Senior Indebtedness until
the indebtedness evidenced by the Subordinated Debt Securities of such series
shall have been paid in full, and such payments or distributions received by
such Holders, by reason of such subrogation, of cash, securities or other
property that otherwise would be paid or distributed to the holders of Senior
Indebtedness, shall, as between the Company and its creditors other than the
holders of such Senior Indebtedness, on the one hand, and such Holders, on the
other hand, be deemed to be a payment by the Company on account of such Senior
Indebtedness, and not on account of the Subordinated Debt Securities of such
series. (Section 1601 of the Subordinated Debt Indenture)
The Prospectus Supplement respecting any series of Subordinated Debt
Securities's will set forth any subordination provisions applicable to such
series in addition to or different from those described above.
By reason of such subordination, in the event of a liquidation, bankruptcy,
reorganization, insolvency, receivership or similar proceeding involving the
Company or an assignment for the benefit of creditors of the Company or any of
its Subsidiaries or a marshaling of assets or liabilities of the Company and its
Subsidiaries, holders of Senior Indebtedness and holders of other obligations of
the Company that are not subordinated to Senior Indebtedness may receive more,
ratably, than holders of the Subordinated Debt Securities. Such subordination
will not prevent the occurrence of any Default or Event of Default or limit the
rights of the Trustee or any Holder, subject to the other provisions of the
Subordinated Debt indenture, to pursue any other rights or remedies with respect
to the Subordinated Debt Securities.
CONVERSION. The Subordinated Debt Indenture may provide for a right of
conversion of Subordinated Debt Securities into Common Stock (or cash in lieu
thereof). (Sections 301 and 1501 of the Subordinated Debt Indenture) The
following provisions will apply to Debt Securities that are convertible
27
<PAGE>
Subordinated Debt Securities unless otherwise provided in the applicable
Prospectus Supplement for such Debt Securities.
The holder of any convertible Subordinated Debt Securities will have the
right exercisable at any time prior to maturity, unless previously redeemed or
otherwise purchased by the Company, to convert such Subordinated Debt Securities
into shares of Common Stock at the conversion price or conversion rate set forth
in the applicable Prospectus Supplement, subject to adjustment. (Section 1502 of
the Subordinated Debt Indenture) The holder of convertible Subordinated Debt
Securities may convert any portion thereof which is $1,000 in principal amount
or any integral multiple thereof. (Section 1502 of the Subordinated Debt
Indenture)
In certain events, the conversion price or conversion rate will be subject
to adjustment as set forth in the Subordinated Debt Indenture. Such events
include the issuance of shares of Common Stock of the Company as a dividend or
distribution on the Common Stock; subdivisions, combinations and
reclassifications of the Common Stock; the issuance to all holders of Common
Stock of rights or warrants entitling the holders thereof (for a period not
exceeding 45 days) to subscribe for or purchase shares of Common Stock at a
price per share less than the then current market price per share of Common
Stock (as determined pursuant to the Subordinated Debt Indenture); and the
distribution to substantially all holders of Common Stock of evidences of
indebtedness, equity securities (including equity interests in the Company's
Subsidiaries) other than Common Stock, or other assets (excluding cash dividends
paid from surplus) or rights or warrants to subscribe for securities (other than
those referred to above). No adjustment of the conversion price or conversion
rate will be required unless an adjustment would require a cumulative increase
or decrease of at least 1% in such price or rate. (Section 1504 of the
Subordinated Debt Indenture) The Company has been advised by its counsel,
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., that certain adjustments in the
conversion price or conversion rate in accordance with the foregoing provisions
may result in constructive distributions to either holders of the Subordinated
Debt Securities or holders of Common Stock which would be taxable pursuant to
Treasury Regulations issued under Section 305 of the Internal Revenue Code of
1986, as amended. The amount of any such taxable constructive distribution would
be the fair market value of the Common Stock which is treated as having been
constructively received, such value being determined as of the time the
adjustment resulting in the constructive distribution is made.
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based on the then
current market price for the Common Stock. (Section 1503 of the Subordinated
Debt Indenture) Upon conversion, no adjustments will be made for accrued
interest or dividends, and therefore convertible Subordinated Debt Securities
surrendered for conversion' between an Interest Payment Date and on or prior to
the record date pertaining to the subsequent Interest Payment Date will not be
considered Outstanding and no interest will be paid on the related Interest
Payment Date. Convertible Subordinated Debt Securities (except convertible
Subordinated Debt Securities called for redemption on a redemption date during
such period) surrendered for conversion during the period between the close of
business on any record date for an Interest Payment Date for such convertible
Subordinated Debt Security and the opening of business on the related Interest
Payment Date shall be considered Outstanding for purposes of payment of
interest, and, therefore, must be accompanied by payment of an amount equal to
the interest payable thereon on such Interest Payment Date. (Sections 1504 and
1502 of the Subordinated Debt Indenture)
In the case of any consolidation or merger of the Company (with certain
exceptions) or any conveyance, transfer or lease of the properties and assets of
the Company substantially as an entirety to any Person, each holder of
convertible Subordinated Debt Securities, after the consolidation, merger,
conveyance, transfer or lease, will have the right to convert such convertible
Subordinated Debt Securities only into the kind and amount of securities, cash
and other property which the holder would have been entitled to receive upon or
in connection with such consolidation, merger, conveyance, transfer or lease, if
the holder had held the Common Stock issuable upon conversion of such
convertible Subordinated Debt
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<PAGE>
Securities immediately prior to such consolidation, merger, conveyance, transfer
or lease. (Section 1505 of the Subordinated Debt Indenture)
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is currently authorized to issue 500,000,000 shares of its
Common Stock, par value $.01 per share, of which 219,811,065 shares were
outstanding on March 31, 1998 and 10,000,000 shares of Preferred Stock, par
value $.01 per share (the "Preferred Stock"), none of which were outstanding on
such date.
COMMON STOCK
Each holder of 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 Board of Directors.
Subject to the rights of any holders of Preferred Stock, holders of record
of shares of Common Stock are entitled to receive ratably dividends when and if
declared by the Board of Directors out of funds legally available therefor. In
the event of a voluntary or involuntary winding up or dissolution, liquidation
or partial liquidation of the Company, holders of Common Stock are entitled to
participate ratably in any distribution of the assets of the Company, subject to
any prior rights of holders of any outstanding Preferred Stock.
Holders of Common Stock have no conversion, redemption or preemptive rights.
All outstanding shares of Common Stock are, and the Common Stock to be issued
hereunder will be, validly issued, fully paid and nonassessable.
PREFERRED STOCK
The 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, 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 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 the
Company's dissolution.
AUTHORIZED BUT UNISSUED SHARES
Authorized but unissued shares of Common Stock or Preferred Stock can be
reserved for issuance by the Board of Directors from time to time without
further stockholder 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 Common Stock is Boston EquiServe,
Boston, Massachusetts.
DELAWARE ANTI-TAKEOVER LAW
Section 203 of the DGCL ("Section 203") generally provides that a person
who, together with affiliates and associates owns, or within three years did
own, at least 15% but less than 85% of the
29
<PAGE>
outstanding voting stock of a corporation subject to the statute (an "Interested
Stockholder") may not engage in certain business combinations with the
corporation for a period of three years after the date on which the person
became an Interested Stockholder unless (i) prior to such date, the
corporation's board of directors approved either the business combination or the
transaction in which the stockholder became an Interested Stockholder or (ii)
subsequent to such date. the business combination is approved by the
corporation's board of directors and authorized at a stockholders' meeting by a
vote of at least two-thirds of the corporation's outstanding voting stock not
owned by the Interested Stockholder. Section 203 defines the term "business
combination" to encompass a wide variety of transactions with or caused by an
Interested Stockholder, including mergers, asset sales, and other transactions
in which the Interested Stockholder receives or could receive a benefit on other
than a pro rata basis with other stockholders.
The provisions of Section 203, combined with the Board of Directors'
authority to issue Preferred Stock without further stockholder action, could
delay or frustrate a change in control of the Company. The provisions also could
discourage, impede or prevent a merger, tender offer or proxy contest, even if
such event would be favorable to the interests of stockholders. The Company's
stockholders, by adopting an amendment to the Restated Certificate of
Incorporation, may elect not to be governed by Section 203 which election would
be effective 12 months after such adoption. Neither the Company's Restated
Certificate of Incorporation nor its Bylaws exclude the Company from the
restrictions imposed by Section 203.
PLAN OF DISTRIBUTION
GENERAL
The Company may sell Securities to or through underwriters or dealers, and
also may sell Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company, or purchasers of Securities for whom they may act
as agents in the form of discounts, concessions or commissions. Underwriters,
dealers and agents that participate in the distribution of Securities may be
deemed to be underwriters, and any discounts or commissions received by them
from the Company or the purchasers of Securities, as the case may be, and any
profit on the resale of Securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such person who may be
deemed to be an underwriter will be identified, and any such compensation
received from the Company will be described, in the applicable Prospectus
Supplement.
Debt Securities, when first issued, will have no established trading market.
Any underwriters or agents to or through whom Debt Securities are sold by the
Company for public offering and sale may make a market in such Debt Securities,
but such underwriters or agents will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any Debt Securities.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Securities may be
entitled to indemnification by the Company against or contribution toward
certain liabilities, including liabilities under the Securities Act.
DELAYED DELIVERY ARRANGEMENT
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Debt Securities from the
Company pursuant to contracts providing for payment and delivery on a future
date.
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<PAGE>
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases will be
subject to the approval of the Company. The obligations of any purchaser under
any such contract will be subject to the condition that the purchase of the Debt
Securities shall not at the time of delivery be prohibited under the laws of any
jurisdiction to which such purchaser is subject. The underwriters and such
agents will not have any responsibility in respect of the validity or
performance of such contracts.
VALIDITY OF SECURITIES
The validity of the Offered Securities, as well as certain tax matters in
connection therewith, will be passed upon for the Company by Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P., Houston, Texas and certain legal matters will be
passed upon for any agents, dealers or underwriters by McDermott, Will & Emery,
Chicago, Illinois.
EXPERTS
The consolidated balance sheets of USA Waste as of December 31, 1997 and
1996 and the consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997,
incorporated by reference in this 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.
31
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE TO ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PROSPECTUS SUPPLEMENT PAGE
Prospectus Supplement Summary.................. S-3
Use of Proceeds................................ S-5
Ratios of Earnings to Fixed Charges............ S-5
Capitalization................................. S-7
Selected Historical and Summary Combined
Unauditied Pro Forma Condensed Financial
Information.................................. S-8
Description of the Notes....................... S-12
Certain United States Federal Income Tax
Considerations............................... S-21
Underwriting................................... S-25
Legal Matters.................................. S-26
Index to Financial Statements.................. F-1
<CAPTION>
PROSPECTUS
<S> <C> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 3
The Company.................................... 4
Recent Developments............................ 4
Use of Proceeds................................ 4
Ratios of Earnings to Fixed Charges............ 5
Description of Debt Securities................. 5
Description of Capital Stock................... 29
Plan of Distribution........................... 30
Validity of Securities......................... 31
Experts........................................ 31
</TABLE>
$400,000,000
USA WASTE
SERVICES, INC.
% MANDATORILY TENDERED
SENIOR NOTES DUE 2011
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN & CO.
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES, INC.
DEUTSCHE BANK SECURITIES
, 1998
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